Plaintiffs v Defendants

The Issues in the Proceeding

1 This proceeding involves a number of disputes which arose out of a property development on Lots 1 and 7 Allenby Road, Hillside ("the Hillside land"). Very broadly, these disputes can be grouped into four separate but related issues.

2 The first issue was whether an agreement alleged by the first plaintiff, Timothy Keith Maxwell, to have been made between himself and the second defendant, David John Scott, or the first defendant, Moorabool Developments Pty Ltd ("Moorabool") in late June 2001 was an agreement jointly to purchase, subdivide, develop and sell the Hillside land with each party entitled to a half share of the profits. It was pleaded in the Further Amended Statement of Claim filed on 28 October 2003 that the terms of the alleged joint venture agreement were that Mr Maxwell would negotiate the purchase of the Hillside land, project manage the development and subdivision and conduct the marketing and sale of what became the 80 lots in the development and that Mr Scott would be totally responsible for the provision of all necessary finance to enable the purchase, development and subdivision of the land in question and that the parties would share the profit equally. It was further pleaded that in addition Mr Maxwell would be entitled to a commission of $2,000 for each lot sold by him. In order to assist Mr Scott to raise the necessary finance, Mr Maxwell said that it was agreed that the Hillside land could be purchased in the name of Mr Scott or his nominee but that Mr Maxwell would be entitled to secure his interest in the joint venture by lodging a caveat. As the first defendant Moorabool Developments Pty Ltd ("Moorabool"), subsequently became the registered proprietor of the Hillside land on the nomination of Mr Scott, it was pleaded that it thereby became a party to the joint venture agreement.

3 In the Second Amended Defence and Counterclaim filed on 31 October 2003, the defendants denied the existence of such an agreement. However, Moorabool pleaded that by an agreement made between it and Mr Maxwell between July and December 2001, Moorabool agreed to engage Mr Maxwell to provide management and sales services for Moorabool in connection with the subdivision, development and sale of the Hillside land acquired or to be acquired by Moorabool and that Moorabool would pay to Mr Maxwell 10% of the net profits of the development payable on completion of the sale of the last of the subdivided lots forming part of the development and $2,000 per lot on the completion of the sale of each lot sold by Mr Maxwell to a party not related to him.

4 In this proceeding, Mr Maxwell sought an account of profits in the sum of 50% of the total profits of the development.

5 Mr Maxwell also sought judgment for the sum of $126,000, being $2,000 per lot for each of the 63 lots in the 80 lot development which had been sold by him to third parties. The second issue was whether by reason of s.50 of the Estate Agents Act 1980 Mr Maxwell was not entitled to sue for or recover or retain his commission or agreed selling fee because he did not hold a written engagement as required by s.49A of that Act.

6 The third issue concerned 17 contracts of sale allegedly entered into by Moorabool whereby it sold 17 lots in the development to the second plaintiff, Medley Close Pty Ltd ("Medley Close"), 15 at a price of $90,000 per lot and two at a price of $92,000 per lot. Medley Close was the trustee of Mr Maxwell's family trust. It was pleaded on behalf of Medley Close that the 15 contracts of sale were signed by Mr Scott on behalf of Moorabool on 7 June 2002 whilst sitting in Mr Maxwell's car in Geelong, and the other two some weeks later at Mr Scott's office. Mr Scott denied signing the 17 contracts of sale and pleaded that his purported signature on the 17 copy contracts produced by Mr Maxwell were forgeries. The original 17 contracts, which Mr Maxwell said he gave to Mr Scott, were not produced.

7 However, it was admitted that Mr Scott on behalf of Moorabool did execute nine original contracts of sale to Medley Close, which were produced. Mr Scott said that these nine contracts were signed by him at the request of Mr Maxwell to be used as evidence of sales in a forthcoming meeting with representatives of the National Australia Bank Ltd ("the NAB"), a potential financier of the development. Mr Scott said the contracts were not shown to the NAB representatives and he subsequently agreed with Mr Maxwell that they were no longer operative. The nine lots the subject of the nine contracts of sale were part of the 17 lots allegedly sold to Medley Close. The purchase price in each of the nine contracts of sale was $90,000.

8 Medley Close sought an order for specific performance of the 17 contracts of sale, alternatively the nine contracts of sale. Apart from the question of whether or not the 17 contracts ever existed, the third issue involved questions of whether, as pleaded by the defendants, the nine contracts had been terminated by agreement or by acceptance by Moorabool of Medley Close's repudiation or whether the nine contracts were not enforceable by reason of breaches by Mr Maxwell of his fiduciary obligations, of which breaches Medley Close was aware.

9 The fourth issue concerned caveats lodged by Mr Maxwell over the Hillside land and by Medley Close over the 17 lots. In its counterclaim, Moorabool sought orders for the removal of the caveats and compensation from Mr Maxwell and Medley Close for the damage suffered by Moorabool as a result of the lodging of the caveats.

10 It was agreed that this was a trial on liability only.

The Factual Background

11 The following is a summary of the evidence of the 14 witnesses called at the hearing. Although all of the proposed witnesses had sworn affidavits, I ruled that the two most critical parts of the evidence should be given orally by Mr Maxwell and Mr Scott. They were the initial negotiations leading to the so called joint venture agreement and the circumstances surrounding the signing of the 17 contracts of sale. I will therefore ignore the parts of these witnesses' affidavits which deal with those topics and refer only to their oral evidence.

The Evidence of Timothy Maxwell

12 Both Mr Maxwell and Mr Scott played veterans Super Rules for a football club in Geelong. Mr Maxwell was a real estate agent and property developer. Mr Scott was a chartered accountant. In 2001 Mr Maxwell was working as a consultant or project manager of a subdivision development of Lots 8 and 9 in Allenby Road, Hillside, which was a new suburb on the western side of Melbourne.

13 In 2001 Mr Maxwell mentioned to Mr Scott at football training that he had a further development coming up at Hillside. Mr Scott expressed interest in being involved. Mr Maxwell told Mr Scott that he might be looking for venture finance for a less than half share, but that he had other acquaintances interested with whom he preferred to deal. Mr Scott offered to provide the funds for a less than half share and to provide Mr Maxwell with easy funding for this and other property developments.

14 About a week or so later at training Mr Maxwell told Mr Scott that if Mr Scott could provide the finance, he would be happy with a joint venture equal share. After training Mr Scott and Mr Maxwell went to a hotel to meet Mr Maxwell's partner, Ms Melissa Connoley, and her cousin. The proposed development was discussed at the hotel and Mr Scott then followed Mr Maxwell home to continue the discussion. It was agreed at that meeting that they would enter into a joint venture to purchase and develop Lots 1 and 7 Allenby Road, Hillside. The gross profit, which Mr Maxwell estimated would be about $2.4 million or $30,000 per lot, prior to the costs of funding, would be shared equally. Mr Maxwell explained to Mr Scott that gross profit meant sales revenue less the cost of purchasing and developing the land and a fee of $2,000 per lot to Mr Maxwell for each lot sold. The cost of funding was to be Mr Scott's responsibility. Mr Maxwell's partner, Ms Melissa Connoley, was present at this meeting and heard the conversations.

15 Mr Maxwell told Mr Scott that he would do all of the negotiating to acquire the land, project manage the development through surveyors, engineers and civil contractors, organise the subdivisional approvals and handle the sales of the lots right though to settlement. All Mr Scott had to do was to take care of funding. Mr Scott readily agreed that Mr Maxwell would be paid a fee of $2,000 per lot in respect of the sale of each of the lots. Mr Maxwell told Mr Scott that he would nominate him as the purchaser on the contracts he was negotiating to facilitate his obligation to provide the funding, and that he would caveat to protect his interest later on. He advised Mr Scott that in his experience it was possible to obtain purchase and development funding of about half of the cost if the land had been put up as equity, but that more might be able to be borrowed depending on how many sales were made off the plan. Mr Maxwell told Mr Scott that he was dealing with the owners of both Lots 1 and 7 and that he believed that each one could be purchased for about $800,000 to $900,000. He also told Mr Scott that the development costs could be about another $2 million.

16 According to Mr Maxwell, Mr Scott agreed that these would be the terms of their agreement which they had reached that night. They were subsequently confirmed on a number of occasions with Mr Scott in his office and on the telephone.

17 Mr Maxwell agreed in cross-examination that he had sent various property development proposals to Mr Scott. He agreed that he had not done any of these developments himself. He said that it would not have been possible at that time. Mr Maxwell agreed that he was continually trying to persuade Mr Scott and others to invest money in property deals.

18 Mr Maxwell also said in cross-examination that Mr Scott only inspected the Hillside land in July 2001. He agreed that this meant that the inspection occurred after agreement had been reached in June.

19 A contract of sale dated 22 August 2001 for the purchase of Lot 1 for a price of $907,500 was entered into by T A Maria Pty Ltd as vendor and Mr Scott "and/or nominee" as purchaser ("the T A Maria contract"). A deposit of $310,000 was payable by the sum of $10,000 on the signing of the contract and the balance of $300,000 within 30 days of obtaining planning approval for a multi-lot residential subdivision. The remainder of the purchase price was due on 22 June 2002.

20 Lot 7 was owned by two different groups each with an undivided half share. One half share in Lot 7 was purchased for $405,900 pursuant to a contract of sale dated 5 August 2001 between Mr Scott "and/or nominee" and Laurence and Georgina Micallef and Charles and Grace Attard. The purchase price was payable by a deposit of $10,000 with the balance due on 20 January 2002.

21 Mr Maxwell had orally agreed with John Vassallo, who with his wife, Victoria, owned the other half share of Lot 7, to purchase their interest. However, on 27 July 2001 the Vassallos sold their interest to Mr Mohamed Fouz for $397,000, who in turn sold it in December 2001 to Marner Pty Ltd ("Marner") "and/or nominee" for $575,000. Settlement was due on 31 March 2002. There was an adverse possession problem between Lots 7 and 8 in Allenby Road. Marner was developing Lots 8 and 9 and Mr Maxwell arranged with Marner to settle the adverse possession claim in return for it nominating Mr Scott as the purchaser under its contract with Mr Fouz. However, this step cost the developers at least an extra $100,000. Although this was Mr Maxwell's estimate, it seems that it was in fact considerably more because presumably Mr Maxwell offered both sets of owners of Lot 7 the same price of $405,900 or thereabouts. Mr Maxwell said that he could not remember the exact amount agreed with Mr Vassallo. Nevertheless, Mr Maxwell still considered the total amount paid for Lot 7 of $980,900 to be an "exceptionally good price." Mr Maxwell denied that he knew about the sale to Mr Fouz before Mr Scott entered into the contract to purchase the other undivided half share of Lot 7 from the Micallefs and the Attards.

22 From July 2001 Mr Maxwell carried out his project management role of the joint venture agreement as agreed with Mr Scott. Using his business name, Platinum Properties Australia, he engaged surveyors, Carson Simpson Pty Ltd, and engineers, Earth Tech Engineering Pty Ltd. Mr Maxwell agreed, however, that the fees charged by both of these companies were paid by Moorabool.

23 Mr Maxwell confirmed the joint venture agreement with Mr Scott by a letter dated 21 September 2001. However, Mr Scott denied receiving this letter. Like much of his correspondence which I will be quoting verbatim in this judgment, Mr Maxwell's letter was written in his unusual and often difficult to understand manner of expression. It read as follows:

I refer to the above and our conversations pursuant the joint venture since you visited me at home in June.

Given other parties I have now notified of non involvement were agreeable to equal share terms based on funding, I can only emphasize your need for such provision with bank endorsement ASAP.

Your indication the bank would be more receptive through your business security - and thence maybe you personally involving John - and if a number of early contracts are signed, is no problem as I am already significantly advanced in attaining sales, and am available to meet with the bank at any time.

You are aware of my allowance for you to pursue and advance finance on (sole) security of tenure, and further, if still necessary, your name on title at settlement, but if this becomes the case, as agreed, my equal share will then have to secured by caveat. This follows our discussion that you sign contracts on primary land in recent weeks with nomination clause, to allow us further time on the entity, given the funding objectives.

As discussed, the terms I negotiated on the contracts were exceptionally favourable, and I will have sold numerous blocks prior to full settlement, providing income in advance of costs.

I am presently progressing schedule of quantities in relation to costs with all very much as expected in line with previous developments, and my surveyor, Cliff Carson has been engaged to undertake preliminary plans of subdivision.

It is important however, finance is finalised in consideration of your shareholding, given my agreed equity contribution of project management etc is well progressed.

The reference to "John" was a reference to Mr John Cleary, Mr Scott's accountancy partner. Mr Maxwell denied in cross-examination that this letter was typed much later than September 2001. He said that he had typed it himself on an old computer he had at home. In about July 2003 he had disposed of that computer at the Geelong tip because it had completely broken down. He had not asked anyone to try to fix his computer. He had not yet bought a replacement computer. Mr Maxwell agreed that in September 2001 there were still problems about acquiring the third title and that this was not resolved until December 2001 at the earliest when Marner purchaser the interest from Mr Fouz. Yet no mention was made of this problem in his letter. He also agreed that preliminary plans of the subdivision were not forwarded to Mr Maxwell by Mr Carson until 12 October 2001. It was put to Mr Maxwell that without a dealing number, which had not been obtained, it was not possible to sell lots off the plan. Yet he said in his letter that he was "significantly advanced in attaining sales".

24 In re-examination Mr Maxwell said that he believed he took this letter into Mr Scott's office and they discussed it. It was agreed that they had a deal.

25 Mr Maxwell gave evidence that, in December 2001 Mr Scott told Mr Maxwell that he would probably have to finance the development through a company and/or his business. In January 2002 Mr Scott mentioned that the company would be Moorabool Developments Pty Ltd. In February 2002 Mr Scott started complaining that he was having difficulty achieving funding and that he wanted Mr Maxwell to start selling lots in the subdivision to assist in persuading the NAB to provide finance. Contrary to what he said in his September 2001 letter that he will have sold "numerous blocks prior to full settlement", Mr Maxwell said in his affidavit that he told Mr Scott that early sales would be "a huge disadvantage" given the increase in value that would occur over the duration of the development. However, in cross-examination he agreed that it was always intended that lots at the Hillside development would be pre-sold if they could.

26 By a letter dated 3 March 2002 Mr Maxwell sent to Mr Scott what appears to be the first of his "project management appraisals." It is unnecessary to refer to the detail of this letter as most of it was repeated verbatim in a subsequent letter dated 23 March 2002, to which I refer below. In order to assist Mr Scott with his negotiations with the bank, Mr Maxwell also sent to Mr Scott a "property appraisal re lots 1 and 7 Allenby Road, Hillside" from a real estate and business broker, Mr Daniel Colman. Of later interest were Mr Colman's comments upon achievable sales in the proposed subdivision:

"Average price expectation of lots 501 sq mtrs to 588 sq mtrs would be conservatively $74,000; 618 sq mtrs to 688 sq mtrs would average $77,000, and the 700 and 812 sq mtr lots (given dual occupancy potential) would return $86,000."

27 When Mr Scott first mentioned Moorabool to him, Mr Maxwell searched that company and found that Mr Scott was the sole director. He did not find out until 2003 that Mr Scott's accountancy partner, Mr John Cleary, and his brother, Mr Robert Scott, had been appointed directors of Moorabool in March 2002.

28 The planning permit for the development was issued on 8 March 2002. Mr Maxwell agreed that sales of the block only commenced in earnest after that date.

29 Mr Maxwell also sent two letters both dated 23 March 2002 to Mr Scott at a time when Mr Scott was having difficulties in raising the necessary finance of about $3.7 million. Only one of those letters was acknowledged by Mr Scott as having been received by him ("the first letter dated 23 March 2002"). Mr Scott's copy of this letter had a handwritten note by Mr Maxwell which said that he had typed it "a time ago" and thought he had sent it. Mr Maxwell said that he took it to Mr Scott's office in about April 2002 although Mr Scott said this did not occur until the following month. The handwritten note concluded:

However, Mr Scott did not talk to Mr Maxwell about the contents of this letter. Mr Maxwell's copy of this letter had the following handwritten note on it:

30 The letter itself commenced with Mr Maxwell saying that "in due diligence" he was making "the following project management appraisal" in relation to the costings on the Allenby Road development. Mr Maxwell pointed out that because of the similarity of the development he had "undertaken adjoining this development", his estimates were "accurate." He then set out figures for the anticipated 80 lots of $50,000 per lot for the purchase and development costs and $80,000 per lot for the average sale price, including "12 x 700 sq mtrs, (dual oc)," at $89,000 each. The letter continued:

"The profit before interest and tax is therefore expected to be about $2,400,000 in a turnaround timetable of nine months (before Xmas) settlement.

My requirement for services which commenced some six months ago is 10 (ten) percent of cost or 17.5 (seventeen and a half) percent of profit, or alternatively in this case, simply $400,000.

This leaves a profit of $2 million, unheard for 'idle' investment in a one year turnaround, and consistent with my initial overture to you for such project.

As always, I am pursuant our general concensus [sic] to thus formulate a proper agreement forthwith."

The last three paragraphs were new. They were not in the earlier letter of 3 March.

31 The other letter dated 23 March 2002 ("the second letter dated 23 March 2002") which Mr Scott denied receiving was headed "Allenby Road Land Development Joint Venture Agreement" and read as follows:

"I refer to the above and final paragraph of today's estimate on schedule of quantities projection re formulating a proper agreement.

As emphasized in my letter of September last year while negotiating and achieving contracts on primary land to accommodate the development this was a joint share undertaking, but given our conversations since I have now reduced to a lessor [sic] share as specified today due to your seemingly greater equity requirement through your business which involves John in association.

I reiterate my recourse could be to proceed the project alone in my own right, but given your keenness and having already contributed funds, but more particularly my nomination already of you on primary land contracts to assure the (development) finance for you, I am satisfied to undertake the joint venture on the basis of the 17.5 percent of GROSS PROFIT prior to commission and taxable deductions.

Critical to this however, as agreed, is your attainment of full funding for the development, after which I would then caveat my interest at Lands Titles prior to subdivisional registration, which has now been certified, and of which I had earlier proceeded with sales subject to this.

As discussed, I will progress sales and am happy to further assist with meetings and presentation to the bank in overcoming your funding difficulties.

If you have any comments or concerns re the enclosed please do not hesitate to reflect same.

Mr Maxwell said that he gave both letters to Mr Scott at the same time.

32 In his affidavit Mr Maxwell said that prior to writing these letters he was not happy with Mr Scott failing to fulfil his obligation to raise the finance, which was compelling lots to be sold earlier than they should have been. He told Mr Scott of his objections. Mr Scott retaliated by telling him that he believed that Mr Maxwell had misrepresented the amount he would need as equity and the amount he would need to raise. Because Mr Scott had his name on the contracts, Mr Maxwell thought it "best to attempt to appease and assist him in trying to raise finance." He therefore offered the "compromise reduction to 17.5% of gross profit, conditional on him achieving full funding without any further contribution from me or any delay or further problems."

33 In April or May 2002 Mr Maxwell said to Mr Scott that they needed some sort of a letter to show potential purchasers stating "what we were doing in selling the lots as a private development, as opposed to a real estate agent's authority." He prepared what he called "the letter of authority" which was dated 26 May 2002. Mr Scott signed it at the same time as he signed 15 contracts of sale to Medley Close or when he signed the later two contracts of sale to Medley Close. Mr Scott held on to "the original letter of authority". Mr Maxwell received one or more copies on one or more occasions "much later in the development." He said in evidence that "As far as I recall it [the original] was left with him" and that he believed that he "picked that up" off the boardroom table in Mr Scott's office in November or December. The letter of authority was on Platinum Properties Australia letterhead and stated as follows:

As all land lots in plan of subdivision Nos PS 502 922D & PS 502 923B are a designated private land development, all lots are to be privately sold by Mr Tim Maxwell in full authority, except for the 17 lots his company, Medley Close Pty Ltd purchase, of which I hereby sign.

34 In response to a question from me, Mr Maxwell explained the purpose of this document:

"I didn't have an exclusive authority and basically it was on account to someone questioning the subdivision and I had back up and it's the normal course of a real estate agent - agency or form - you would at least be able to go to the real estate office. At least I had a back up and that was David in respect to this, and - who was the entity which was Moorabool. And it was all I had basically in respect to the sales."

35 Mr Maxwell was also asked what the point was of putting in this document the reference to the 17 lots purchased by Medley Close. He did not really explain why it was necessary, but he did say "it was for David and me as much as that - as a dual purpose thing."

36 Mr Maxwell ended up not even using this letter. He was never asked a question that required him to show it to a prospective purchaser. The letter was dated 26 May 2002 because, although it had been prepared before that date, he planned to see Mr Scott on that day. Instead, they did not get together until 6 June.

37 By a letter dated 16 May 2002 Mr Maxwell wrote to a developer, Mr Sam Chiodo, advising that "my consortium will provide 40 land lots to your company for singular dwelling house/land investments." He also stated in the letter:

"5/ Pivotal to the land allocation is our dual occupancy joint venture involving another 17 lots and agreeance on each 'build' cost and guaranteed sale/investment price is required forthwith to satisfy our commitment to the agreement.

6/ All planning approvals will be attained by myself, and any responsibilities to dual occupancy sites that that[sic] do not get approval are naturally voided."

38 In February or March 2002, Mr Maxwell told Mr Scott that he was keen to buy at least 12 lots to develop. Mr Scott agreed. By June 2002, Mr Maxwell had had several discussions with Mr Scott in which it was agreed that Mr Maxwell would buy more than 12 lots at a price of $90,000 each, which Mr Maxwell said to Mr Scott was $10,000 more than all of the sales so far made. Mr Scott was happy with this because it advanced the overall sales which would help with obtaining funding. Mr Maxwell said in his affidavit that the purchase of these lots was another reason he was prepared "to revise my position down to 17.5% share of gross profit."

39 After Mr Scott agreed to the sale of the lots to Medley Close, in about May and June 2002 Mr Maxwell prepared 15 contracts of sale in duplicate over a few weeks. Originally he intended to buy 16 lots but he was only able to prepare 15 contracts. The 15 lots were Lots 1, 2, 10, 12, 26, 30, 31, 35, 38, 46, 49, 56, 59, 71 and 80. Mr Maxwell arranged to meet Mr Scott on or about 6 June 2002 at their townhouse development at 48 Queen's Park Road, Geelong, which was near where Mr Scott was living. They both signed the 15 duplicate contracts in a car outside the Queen's Park Road development. He had pre-dated the contracts with various approximate dates leading up to the meeting because he was not sure when he would catch up with Mr Scott. When Mr Maxwell went to get his cheque book out to write out the cheque for $30,000 for payment of the 15 deposits of $2,000 each, Mr Scott said to him that they could not do anything with the money until "settlement of the blocks" and that the deposit could be taken out of his $2,000 commission. Mr Scott said that he was quite happy with that arrangement.

40 A couple of weeks later Mr Maxwell and Mr Scott signed another two contracts of sale at Mr Scott's office. As previously agreed in telephone conversations, the lots the subject of these contracts (Lots 52 and 53) were priced at $92,000 each.

41 On both occasions Mr Maxwell kept all of the signed contracts. He did not initially give Mr Scott a copy of the signed contracts because "it was a natural course" to hang on to them. "I was it ... it was my development." He kept one set of the 17 contracts at home and the other set in his car to discuss them with his friend Mr Simon O'Keefe, who was a director of Medley Close. None of the 17 contracts had a guarantee form attached. Mr Maxwell told Mr Scott that he would definitely get a guarantee signed by Mr O'Keefe. No such form had been part of the other contracts of sale to that date. Later, Mr Maxwell asked Mr Scott "to get one made up" for the other contracts. He also handed a guarantee dated 6 June 2002 and signed by him and Mr O'Keefe to Mr Scott in his office at a later time. Mr Maxwell said that this guarantee had probably been signed "around about the first occasion" of the signing by Mr Scott of the Medley Close contracts. He thought that he had seen Mr O'Keefe sign the guarantee in Mr O'Keefe's office.

42 In June 2002 Mr Maxwell faxed to Mr Scott a letter dated 20 June 2002 which he had written to Mr David Milsome, a manager with the NAB, to satisfy its request to Moorabool for a "sales projection and marketing program" and a handwritten summary of lot sales. In his letter to the bank manager, which he faxed to Mr Scott for his use, Mr Maxwell described himself as wearing three caps:

"as qualified real estate agent, project management and property procurement."

He did not describe himself as one of the developers. The handwritten list showed Medley Close as the purchaser of only 13 lots. Lot 12 was said to have been sold to another entity (and a deposit paid) and Lots 38, 52 and 53 were said not to have been sold. Mr Maxwell could not explain why this was the case. Overall, 74 out of the 80 lots were said to be sold with deposits paid. When queried about this in cross-examination, Mr Maxwell said that a large number of lots were left in which he knew were not sold. The purchaser "AFG" had not gone ahead. He said that the list was "just a adopted list", to help Mr Scott with the bank. He also said that the list was prepared "well before 20 June", although it contained a sale date of 15 June. He agreed that the reference to a deposit in respect of the sale of each lot to AFG could not have been to a deposit which had been received.

43 In late June 2002 Mr Maxwell told Mr Scott that as he had not obtained finance, Mr Maxwell would try to arrange it, because finance was becoming critical. Mr Maxwell told Mr Scott that his share would be returning to 50%. Mr Scott agreed because the joint venture "was about to fall over." By a letter dated 7 July 2002, Mr Maxwell wrote to Messrs Porto and Parth of Nova West Construction Pty Ltd ("Nova West") seeking funding of $3.75 million. In the letter Mr Maxwell referred to "62 contracts finalized."

44 Having received verbal offers of funding from Nova West and Ing, Mr Maxwell sent a facsimile dated 10 July 2002 to Mr Scott advising him of the offer from Nova West. Part of his facsimile read:

"Two fundamental pre-requisites, first mortgage, and 10 per cent (on drawdown) interest, I have agreed to. Please prepare to withdraw from Nat Aust Bank."

45 Funding was finalised on 2 August 2002 by Moorabool entering into an agreement with Rosslare Properties Pty Ltd ("Rosslare"), an associated company of Nova West, which was also engaged as the civil contractor for the development. Mr Maxwell said that shortly after this, he had a further discussion with Mr Scott in which Mr Scott agreed that Mr Maxwell's share of the joint venture would go back to 50% because he, Mr Scott, had not kept his side of the agreement.

46 Mr Maxwell said in his affidavit that he left one set of the original 17 contracts with Mr O'Keefe. He took them to Mr O'Keefe on one day. "I had them in me car and I took them in and had a chat to him about them, and he took them." When asked why he gave the contracts to Mr O'Keefe, Mr Maxwell said that Mr O'Keefe was a director of Medley Close. The other set of 17 original contracts sat at his home "in a pile in a box." He said that he showed them to Ms Connoley and other parties. Mr Maxwell said that subsequently he left this set with Mr Scott "for conveyancing purposes with other contracts I had signed as vendor for the development." He said that he also dropped off at Mr Scott's office the set which he had collected from Mr O'Keefe. When asked why he did that, he first answered:

"Conveyancing or just that somewhere to leave them."

He then suggested that perhaps he left them at Mr Scott's office "inadvertently on a day when I left other contracts ..." He felt that this was his office as well.

47 Mr Maxwell said that he had made "copies of some of the front pages and some of the particulars pages" of the 17 contracts, before leaving both sets of the originals with Mr Scott, which he kept in the back of his car. He tossed out a whole lot of documents, including these pages in about April 2003.

48 Mr Maxwell discussed the question of dual occupancies with Mr O'Keefe and with another friend Mr Raymond Muller. He was proposing to do a joint venture with Mr Muller, in relation to a dual occupancy of one of the lots or possibly a child care centre. Mr Maxwell said that he got the contracts out to show Mr Muller the subdivisional plans and the lots on which he had obtained or was obtaining dual occupancies. They chose Lot 80, but also considered Lot 2 in combination with Lot 1. Mr Maxwell commenced to apply for dual occupancy permits in about late August 2002. Mr Maxwell said that he had no idea by how much the dual occupancy permit would increase the value of the lot. Although he said that he discussed the 17 lots with Mr Scott on several occasions he did not mention the question of dual occupancies to him until "later as things progressed."

49 At some time between June and September 2002, according to Mr Maxwell, Mr Scott came to his house. Mr Maxwell got the set of 17 contracts out and they discussed them and other issues in the development. Ms Connoley was also present.

50 In late October or early November 2002 Mr Maxwell told Mr Scott on the telephone that he wanted to pick up one of each of the original 17 contracts. Mr Scott asked whether he or Mr O'Keefe had copies. Mr Maxwell said that he needed originals. When he went to Mr Scott's office, he was told that Mr Scott did not have them but that they would be there in a day or two. Mr Maxwell said that Mr Scott asked him questions about how much he was making out of the lots. Mr Maxwell replied that he could not say as it was speculative but he needed to make at least $20,000 to cover his costs.

51 In late November or early December 2002 Mr Maxwell said to Mr Scott that he would definitely have to get the originals the following night "for Council approvals." Mr Scott said yes, but when Mr Maxwell called, Mr Scott said he had not brought them in and he asked Mr Maxwell "haven't you got yours?" Mr Maxwell said that he said that he had not and that he thought he said: "Simon may have some." Mr Maxwell said he would collect them from Mr Scott after work the next day. Mr Maxwell said that when he went to Mr Scott's office the next day, Mr Scott had "a copy of each of the 17 front pages of what appeared to be the contracts and a copy of the signed page of one vendor's statement", which Mr Scott gave him. Mr Scott said that he was keeping the originals together as much as possible and that they were not there. Mr Maxwell said Mr Scott told him to use these pages to add to what contracts Mr Maxwell had "to make up your own."

52 This is what Mr Maxwell did, as he stated in his affidavit:

"At home I eventually put together my copies of what the 17 contracts comprised according to my memory of the originals. I had full contracts, part contracts and loose pages of contracts in my home office and in the boot of my car, which came from previous changes, mistakes and aborted contracts and I used these to compile my copies. I had been selling lots from the boot of my car and some balance pages of contracts were in blank, other parts of the contracts had markings or numbers which I whited out and changed. The original 17 contracts in duplicate (that is 34 contracts in total), remained in the possession of David Scott with whom I had earlier left them for eventual conveyancing. I regularly did this in respect of many of the sales relating to the developments."

53 This evidence conflicted with what Mr Maxwell had stated in his affidavit sworn 5 September 2003 about the 17 contracts of sale. In that affidavit he said Mr Scott had given him photocopies of some of the contracts and that these photocopies, together with copies of some of the contracts which he already had, made up the 17 copy contracts of sale which he produced. Mr Maxwell referred to the statement in an affidavit of Mr Neil Holland that "white out has been used on some of the 17 copies" and stated that he had "no knowledge of white out being used on them."

54 Mr Maxwell said that his solicitors at the time this affidavit was prepared had misunderstood his instructions. He had told his solicitor that he simply picked up copies of the front pages.

55 Mr Maxwell said that he had a conversation with Mr Scott in November 2002 in which he told Mr Scott that he wanted his joint venture share secured and that if it was not worked out he would have to put the caveat on the land which was part of their agreement. They had another conversation in December 2002 which ended in an argument, so Mr Maxwell decided to lodge the caveat. On 13 December 2002 he signed a caveat, although his then solicitor did not lodge it until March 2003. This caveat ("the first caveat") claimed "an equitable interest as chargee ... pursuant to terms and conditions of a joint venture agreement dated 23 March 2002 containing a charging clause from the caveator to the registered proprietor of the land." Although the details in the first caveat were in Mr Maxwell's handwriting, which he said was what his then solicitor told him to write, the date of the joint venture agreement was left blank. It was later added in someone else's handwriting.

56 Mr Maxwell said that in January 2003 he and Mr Scott had "a big blue." Mr Maxwell said that Mr Scott claimed that it was his development and that all Mr Maxwell was getting was his 17.5% and his commission. In a later discussion, according to Mr Maxwell, Mr Scott told him that he would be right with the 17 lots he was buying.

57 By a letter dated 28 February 2003, Mr Maxwell wrote to Mr Scott concerning the three property developments in which, by then, they were both involved. After referring to the fact that the Allenby Road, Hillside development was nearing completion, Mr Maxwell continued:

"As I indicated, after the considerable variables in the process of the project, the final profit figure of about $2.4 million will well exceed that indicated when I invited you into the project and is in line with my later development quantity survey and proposal to you of about $2.4 million profit (March 23, 2002).

This would have exceeded $3,000,000 if I was not pressed to have contracts to satisfy the banks very early in our selling timetable, given the capitalisation since.

Securing the consequent funding source, Nova West, was thus in no way my responsibility. But in attaining same the significant factoring of this provision and the flexibility/benefits it has created above all the acquiring, purchasing, management and sales responsibilities would unquestionably see me exceeding a half share in other joint ventureship. Such shareholding has regularly been proposed to me, before and since on prospective developments.

Given I value our business association and your difficulties encountered that were not anticipated in the funding of other projects, I stand loyally by the much lessor [sic] share offered in the earlier submission of 17.5 percent of gross profit, plus $2,000 per sale.

However, as I indicated, I am in agreeance with no such fee on Lots purchased by myself @ 17 = $34,000. This would see sales commission at $126,000. Please note all sales were made without marketing costs (usually at least $20,000).

This will thus see my venture profit probably slightly under $400,0000, less $22,000 management expenses (refer below herewith) already paid to me, and your venture profit slightly under $2,000,000, an extraordinarily generous joint venture, in light of funding and sales, initiatives which should well have seen an exchange for equal share, but nonetheless to remain unchanged.

I await your response in lieu of the drawing up of a legal agreement pursuant the respective share distribution ASAP."

Mr Maxwell agreed that the restriction of the sales commission to the 63 lots meant that he still owed the $2,000 deposit on each of the 17 lots. The two were no longer being set off, as previously agreed with Mr Scott.

58 Following a meeting with Mr Scott on 10 or 11 March 2003, Mr Maxwell wrote another letter to him about their three property developments. This letter, which was dated 15 March 2003, relevantly contained the following:

"Allenby Road Hillside has achieved (against some odds) above my own original projections on this development and the $2.2 million minimum gross is not an amount any fair minded investor would find unsatisfactory, then or now. I cannot and would not be responsible for further profitability accounting etc, especially given the can of worms interpreting GST reconciliations.

I have never altered any requirement on my shareholding (as per letter), a very minor share independent of sales/marketing which would have been costs in any case.

You can subtract $60,000 off this for revisiting signed contracts which no other agent would have attempted, but a further return to you.

Even after achieving another developer to pay for the $150,000 primary pipeline through your property (which was totally out of left field) and getting finance for you, when that source would have funded me alone, unfortunately it is felt by David that I have manipulated this deal.

The funding came after satisfying your (non funder) bank with contracts that cost us a gross $3 million profit, given capitalization, eg $10,000 per block in the subject months following signing, which explains the inadvertent variables that can apply, for better or worse.

Initially I wished an advancement of sales by signing for some lots, but in hindsight it appears perception of me manipulating as a benefactor.

Unlike my own principals on security of shareholding re title registration, I have done all without this need which is incomprehensible to even the most inexperienced business person/investors.

I do so based on a vulnerable trait of excessive trust but David now sees me as non trusting.

Please be advised I have now registered a caveat on the subject properties for our respective consideration, but I have done so with total commitment to its cancellation in lieu of our proper and mutual undertakings.

I have included further advice herewith (of positive costs nature) from engineer but you should understand my regular dealings/duties to bring this development to finalisation, as have been my own securities, are also severely compromised.

Nonetheless, I remain, as always diligently for your better interests."

59 Mr Scott also wrote a letter following the meeting. By a letter dated 12 March 2003 to Mr David White of Real Estate on Pakington, the estate agent who held the contracts of sale to purchasers of the lots pending the finalisation of the development, Mr Scott gave the following instructions to Mr White:

"As a result of meeting with Tim Maxwell, it has come to my attention that he has taken it upon himself to execute contracts of sale for Moorabool Developments Pty Ltd and has signed as vendor.

Tim has never been given authority by Moorabool Developments Pty Ltd to be able to sign contracts on its behalf. Furthermore it is disturbing to me and I would also think unethical that Tim would sign as vendor without authority on contracts to persons or entities associated with him.

In light of the above actions I hereby advise that Tim has no authority to sign contracts on behalf of Moorabool Developments Pty Ltd and no contracts or deposits executed by Tim and forwarded to your company should be accepted or acknowledged as legitimate contracts of sale.

We are seeking legal advice in respect to contracts already so executed."

60 Mr White attempted to mediate the dispute between Mr Maxwell and Mr Scott. On 7 April 2003 the three men met at the Sheraton Hotel in Geelong to discuss their differences. Mr Maxwell said that the 17 lots purchased by Medley Close were discussed at some length. He said that Mr Scott said that he wanted Mr Maxwell to concede some of the lots and that Mr Scott also said that Mr Maxwell's joint venture share should be only $300,000 not $400,000 and that he should only receive commission on 63 lots and not for those lots being purchased by Medley Close. Mr Maxwell said that he rejected these demands. In particular, he pointed out that Mr Scott had already said the commission on the 17 lots would "substitute" as the $2,000 deposit for them and that it was for this reason that he did make out a cheque for $30,000 at the time of the first signing. Mr Maxwell said that Mr Scott "nodded his head to this." The meeting finished without there being any resolution.

61 On 8 April 2003, Mr Scott wrote a "without prejudice" letter to Mr White which read as follows:

"Further to discussions yesterday with Tim, and in an effort to find a mutually acceptable resolution, I would agree to the following arrangements as part of a total settlement of all matters:-

•

Pay sales commission to Tim at the rate of $2000 per block sold to third parties (ie 63 x $2000) $126,000 less paid $20,000 balance due $106,000.

•

Agree to pay a project management fee to Tim as discussed totalling $300,000.

•

Agree to authorise the sale of 10 blocks from the venture to be sold to Tim and or a nominated entity at a sale price of $90,000. I note Tim mentioned that he had an arrangement with a builder for the development of 10 blocks on a profit share arrangement. Rather than cause a problem with this arrangement, and the fact this builder was on a 1/3rd profit share, and not ½ profit share, as offered to me, I believe it would be more beneficial for Tim to enter into this arrangement with the builder, ie his profit share would be greater. (As way of satisfying the payment of this project arrangement fee, I would be agreeable to reducing the sale price on these 10 blocks to $60,000 each ie, a reduction of $30,000 each times 10 blocks which would result in stamp duty savings.

•

Would agree to Tim being able to select which 10 blocks he wants to acquire under this arrangement.

•

The balance of the blocks in question namely 7 blocks are returned to the property venture.

The agreement on any one of the above items is mutually dependent on all items being accepted in total. If no agreement, then none of these items are in any way agreeing to the fact that any monies are payable, or that these are my intentions in any one matter."

Mr Maxwell said that he received a copy of this letter from Mr White and Mr Mann after the Heads of Agreement (referred to below) had been signed and after he had been told by Mr White that Mr Scott "had pulled out of the Heads of Agreement." Although in his evidence Mr Scott expressed some dissatisfaction with this letter having become available, no objection was raised to it being received into evidence.

62 On 9 April 2003 Mr Maxwell faxed to Mr Cleary a copy of his letter to Nova West dated 7 July 2002 seeking funding of $3.75 million for the project. Part of the financial information in the second page of that letter stated the amount of "owner equity ... to date" to be $538,481. Mr Maxwell wrote the following message to Mr Cleary on the top of the first page of the faxed copy of the letter to Nova West:

Have a look at equity at rear. $538,000 between 3 dividing a $2,600,000 profit. I achieved all your finance and considerable financial benefits, and you are to rip this man off. We are ready like you've never known."

63 Further negotiations between Mr Maxwell and Mr Scott followed the meeting at the Sheraton Hotel. Subsequently, a solicitor, Mr Peter Mann, was instructed to prepare Heads of Agreement in respect of the three developments involving Mr Maxwell and Mr Scott. This document between the four parties to this proceeding was signed on 5 May 2003. Recitals B1 and B5 stated as follows:

"B1 Moorabool is the owner and developer of the property known between the parties as Allenby Road ('the Allenby Road development'). Moorabool and Maxwell have an agreement under which Maxwell is to be paid a project management fee and other moneys in relation to the Allenby Road development.

B5 The partners have agreed to reorganise their respective arrangements and agreements in relation to the Allenby Road development, Queen's Park Road development and LaTrobe Boulevard development in the terms and conditions set out in this Heads of Agreement."

In respect of the Allenby Road development the parties agreed as follows:

1.1.1.1 the sum of $2,000.00 per lot sold by Maxwell to any parties not in any way related to Maxwell less the amount of $20,000.00.

1.1.1.2 a project management fee of $300,000.00 on satisfactory completion.

1.1.2 to sell to Maxwell 11 lots in the subdivision being lots 1, 2, 71, 46, 59, 35, 30, 31, 80, 52 and 38 as prepared, exchanged and contracted by Peter Mann Pty Ltd.

1.2 Maxwell agrees to immediately, upon the execution hereof, arrange for the withdrawal of the caveat lodged over the Allenby Road property."

64 The Heads of Agreement were executed by Mr Maxwell and Medley Close. Mr O'Keefe signed as director/secretary witnessing the affixing of the seal of Medley Close. Mr Maxwell said that Mr O'Keefe was not very happy about signing the Heads of Agreement but he did. Mr Maxwell saw Mr O'Keefe sign the duplicate originals of the document. He could not say where he signed the document or where Mr O'Keefe was when he signed it. He could have been in Geelong or Melbourne.

65 Mr Maxwell said that he knew when he signed the Heads of Agreement that it referred to him being paid "a project management fee." He said that the dispute had been going on for so long that he did not care how it was put. He was happy to receive $300,000 for his contribution, however it was described.

66 Mr Maxwell said that he reluctantly signed the Heads of Agreement because, contrary to the agreement reached, the document did not include the price at which the 11 lots were to be purchased. He said that he had reached agreement with Mr Scott through the medium of Mr White that in return for giving up six lots the purchase price on 10 of the 11 lots would be reduced from $90,000 to $60,000. However, the Heads of Agreement very quickly fell into abeyance. Mr Maxwell did not remove his caveat and Mr Scott did not agree to Medley Close purchasing any, let alone 11, lots. Neither side sought to enforce the Heads of Agreement in this proceeding.

67 On 8 or 9 May 2003 Mr Maxwell faxed a letter to Mr Scott in which he "again" advised that:

"all lots, including lots 12, 49, 10, 56, 26 and 53 are sold and contracts completed pursuant normal process."

The letter went on to state that "smaller lot 12 with permit" had been sold for $130,000, "larger lot 53 with permit" for $135,000 and the remaining four lots without permits for $125,000. When asked in cross-examination whether he had copies of these contracts, Mr Maxwell said that he did not. The contracts "fell over" and he threw out the contracts. He then referred to letters of intent from builders with respect to these lots. Mr Maxwell complained that Mr Scott continually upped the price that he wanted on these blocks. Every time Mr Maxwell got agreement to the new price, Mr Scott changed his mind and wanted more.

68 By a letter dated 9 May 2003 Mr Scott wrote to Mr Maxwell as follows

In reference to your fax today I advise that there has been no agreement or authority for you to sell lots 12, 49, 10, 56, 26 and 53.

We have organised our own contracts for sale of these blocks at proper market value not the values you have tried to give them away at.

You can't sell someone else's land and you can't sell property twice.

The six lots referred to in the letter were the balance of the 17 lots apart from the 11 lots specified in the Heads of Agreement.

69 Mr Maxwell wrote a number of further letters to Mr Scott including a very abusive and aggressive letter dated 10 May 2003. Much of the correspondence revolved around the price at which the remaining lots were able to be sold. Mr Maxwell said that by this time he was "absolutely frustrated with David Scott's attitude", because he kept increasing the price which he wanted for these lots before he would agree.

70 Mr Maxwell said that at a meeting with Mr Scott on 13 June 2003, Mr Scott told him to take the 17 contracts at $90,000 and the sales commission in full settlement. Mr Maxwell rejected this. He said that Mr Scott then said that if he did not take the 17 contracts he might find out that they were not legal. Mr Maxwell said that when he asked Mr Scott what he meant by that, he smirked and said nothing. Mr Maxwell also said that Mr Scott again told him to take the 17 contracts in a subsequent telephone conversation.

71 Mr Maxwell sent two further letters dated 15 June 2003 hoping to resolve the dispute. However, it should be noted that in one of these letters Mr Maxwell said:

"I do urge our best efforts as the current caveat is only registered as a dealing tool, and if we proceed without a settlement to me a further one can be instigated (on now 80 lots) to ensure all proceeds from sales withheld in lieu of."

72 Mr Maxwell produced invoices which purportedly showed that Medley Close had paid for town planning drawings, development overlay plans and landscape plans in respect of virtually all of the 17 lots in the twelve months or so following August 2002. Some of the correspondence from the Shire of Melton was tendered in evidence. Receipt by the Shire of an application by Medley Close for a town planning permit for a dual occupancy at Lot 49 was acknowledged by a letter dated 29 August 2002 and at Lot 2 by a letter dated 30 August 2002. Approval by the Shire of a development plan for two dwellings on Lot 12 was notified to Medley Close by a letter dated 21 October 2002. The issue of planning permits for dual occupancy for Lots 1, 30, 31, 52 and 53 was notified to Medley Close by letters from the Shire in December 2002. Planning permits were issued on 8 July 2003 for Lots 79 and 80.

73 Mr Maxwell said in his affidavit that he mentioned to Mr Scott on several occasions in 2002 and 2003 that he was developing the 17 lots and later, as things progressed, that he was obtaining dual occupancies for a number of the lots. He said that a company related to Medley Close, Bellview Constructions Pty Ltd purchased Lot 79 for $125,000 in order to provide extra car parking so that Council permission was obtained to proceed with the proposal to put a childcare centre on Lots 79 and 80.

74 Mr Maxwell also said that Medley Close had entered into a contract for the sale of Lot 2 on 16 May at a price of $160,000 and contracts for the sale of Lots 35 and 46 each on 2 June 2003 at a price of $164,000. These three contracts were tendered as exhibits at the hearing.

75 Mr Maxwell repeated several times his complaint that Mr Scott had undervalued his contribution. At one stage in cross-examination he said that he had "worked full on" for the last three years whereas Mr Scott had "sat in his office" and not "done a thing." The funding was Mr Scott's obligation and he had not got that. Mr Maxwell said that he did "begrudge the under estimation of what it takes to do property procurement."

76 Part of the defendants' case was that Mr Maxwell had followed the tactic he had previously used in respect of the development of Lots 8 and 9 in Allenby Road, Hillside to extract money from the developer. An agreement dated 1 August 2001 between Marner Pty Ltd ("Marner") and Mr Maxwell was tendered in evidence by the defendants. That agreement recited that Marner had contracted to purchase land at Allenby Road, Hillside for the purpose of subdivision and sale and that Mr Maxwell had provided and would continue to provide advice and assistance with the development and marketing of the proposed subdivision. It provided that Mr Maxwell would continue to provide his services on an "as required" basis and that he would be paid an amount of 5% of the net profit (as defined) of the subdivision venture and an amount of $2,000 in respect of each lot of subdivision sold "in which the consultant has had a significant role in the marketing and sale of the particular lot." The defendants also tendered another agreement between Marner and Mr Maxwell dated 19 September 2002. The recital stated in part that Marner had entered into contracts of sale of lots in the development and that to secure payment of his financial entitlements under the agreement dated 1 August 2001 Mr Maxwell had lodged a caveat over the land. The agreement provided that in consideration of Mr Maxwell agreeing to withdraw his caveat Marner agreed to pay him $55,000 for his consultancy services and $110,000 for the sale of 55 lots. Although he denied any improper conduct or pressure, Mr Maxwell said that this payment represented about 35% of the profit. The caveat lodged by Mr Maxwell was dated 12 June 2002 and claimed an interest by virtue of a constructive trust. Mr Maxwell said he had no understanding of what a constructive trust was.

77 Finally, before leaving Mr Maxwell's evidence it is necessary to note a dramatic development which occurred on the eighth day of the hearing. On 6 November 2003, while Mr Scott was still being cross-examined, Mr Maxwell's counsel sought leave to recall him immediately so that he could make a statement. In all the circumstances, it seemed best to allow this highly unusual step to occur. Mr Maxwell then read a lengthy statement containing a considerable amount of irrelevant and incomprehensible material. However, it also contained very important admissions.

78 Mr Maxwell admitted in the statement that parts of his evidence and affidavit were not correct. He said that Mr Scott did not give him the front pages of the 17 contracts nor a page of the vendor statement. The "reproductions" he made were to induce Mr Scott to come forward with the original 17 contracts which he was withholding. Otherwise, as I understood the statement, he reiterated that his evidence had been entirely truthful.

79 Mr Maxwell was asked by his counsel whether he wanted to say anything about the letter of authority dated 26 May 2002 allegedly signed by Mr Scott. Mr Maxwell said that he was "uncertain". He said:

"whether I got that actually signed, but it would show now that that is possibly also in the same vein."

80 On a later day, just before Mr Maxwell was cross-examined on this statement, he was asked by his counsel to identify which parts of his affidavit were not correct. He said, in respect of the statement in his affidavit that he received one or more copies of the letter of authority from Mr Scott, that "in essence it's not true." He then went on to say that he believed Mr Scott signed the letter of authority when he signed two copies of each of the 15 contracts "but I can't say for sure."

81 In the further cross-examination, Mr Maxwell admitted that:

(a) his statements in his affidavit about the letter of authority and Mr Scott giving him 17 front pages and the signed page from the vendor's statement were false;

(b) his statement in his earlier affidavit about being given photocopies of some of the contracts by Mr Scott was incorrect;

(c) his relevant instructions to his first firm of solicitors were incorrect;

(d) his relevant instructions to his second firm of solicitors were incorrect;

(e) he knew when he heard his counsel opening the case that what was said about the handing over of these pages was incorrect;

(f) his evidence about picking up a copy of the letter of authority from the boardroom table was a lie;

(g) prior to the commencement of, and during the course of giving, his evidence he had had the opportunity to correct his false statements;

(h) his evidence that the pieces of paper he had collected from Mr Scott sat in his car for some time was incorrect;

(i) his evidence that he remembered getting those pieces of paper out of his car was a lie;

(j) his evidence that these pieces of paper were then in his office for some time was a lie;

(k) his evidence that some of these pieces of paper he had got from Mr Scott could be the front page of some of the 17 contracts was incorrect;

(l) he and Mr Raymond Muller in about June 2003 had cut and pasted and copied Mr Scott's genuine signature into the 17 copy contracts of sale;

(m) his evidence that he had not made any alterations to any of the copy front pages he received from Mr Scott was incorrect;

(n) his denial in his evidence that he had created 17 contracts in order to pass them off as copies of the original contracts of sale was incorrect;

(o) "everything in respects [sic] to these 17 copies of which I said Mr Scott gave me is untrue"; and

(p) he believed that the appearance of Mr Scott's signature on the copy of the letter of authority which he had was false. It was a re-creation.

82 Mr Maxwell said that he had produced the false copies of the 17 contracts of sale in an attempt to get Mr Scott "to finally settle on the truth." He said that it had worked to the extent that Mr Scott produced the nine contracts.

83 Mr Maxwell denied that the reason why he had admitted that this evidence was false was because he had read the latest report of an expert forensic document examiner, Mr Neil Holland, in which Mr Holland identified the Heads of Agreement document as being the source of signatures on the front pages of the 17 copy contracts. However, he agreed that some of the signatures had come from the Heads of Agreement. Others came from correspondence. Mr Maxwell agreed that Mr Holland's report "chrystalised" why he should "come up and tell the truth."

84 It was put to Mr Maxwell that his statement in his letter dated 10 May 2003, that his 17 signed contracts had been with a lawyer ever since Mr Scott signed them, was not true and he agreed. It was also pointed out to Mr Maxwell that this letter contained no complaint about Mr Scott refusing to return the contracts to him. His only explanation for this omission was that he thought "the best thing to do was just go softly softly and let it all happen."

85 When asked about the development at Deer Park, about which Mr Scott had given evidence[1], Mr Maxwell agreed that he lodged a caveat over land purchased by another party, that there was litigation in which he claimed to be a joint venturer and that he got a good settlement out of it.

The Evidence of Melissa Connoley

86 Ms Connoley was a hairdresser. She was Mr Maxwell's partner and the mother of their very young child. In her two affidavits sworn 8 September and 23 October 2003 respectively, Ms Connoley said that she was present when Mr Scott came to her house in about June or July 2001. She said that she was present during the discussion between Mr Maxwell and Mr Scott about the proposed development project at Allenby Road, Hillside. She heard them agree to "a partnership of equal shares." Mr Maxwell was to do everything required to complete the subdivision, while Mr Scott had to provide all the funds at no cost to the partnership. Mr Scott was adamant that he could get the funding.

87 Ms Connoley also said that she was present at other meetings between Mr Maxwell and Mr Scott at her home when they discussed the lots Medley Close was buying. At one meeting Mr Maxwell was talking about what he planned to do with the blocks. In her evidence she said that the pile of contracts was on the kitchen table or the dining room table. When Mr Scott left, she put the contracts away. Each contract was about 20 to 30 pages thick. They had Mr Maxwell's signature on them and what she assumed was Mr Scott's signature. The signatures were in different pens - one blue, one black. The figures in the contracts were $86,000 or $88,000 and $90,000. She did not count the contracts in the pile but she knew that Mr Maxwell and Mr Scott had spoken about 17 contracts. She said that Mr Maxwell showed her the contracts in mid 2002. She went through the contracts. She remembered that several were for the same price of $90,000.

88 In cross-examination Ms Connoley said she had no knowledge of Mr Maxwell being involved in Lots 8 and 9 at Hillside. She did not know the total number of lots in the development being done by Mr Maxwell and Mr Scott. She estimated that the pile of Medley Close contracts would have been about 20 inches high. She said that she flicked through one of the contracts because she was interested to see what it was about. She denied recent invention when asked why her evidence about this second meeting at her home between Mr Maxwell and Mr Scott had not been set out in either of her affidavits.

The Evidence of Francis Welsford

89 Mr Welsford was a hotel proprietor. He had known Mr Maxwell since Mr Maxwell was a small boy. He said that in 2001 Mr Maxwell approached him about a subdivision at Hillside. The deal was that Mr Welsford was to supply the finance and "Tim was to do the leg work." They were to go "halves in the process." The potential profit was to be about $2 million. Mr Welsford said that he would not have had to borrow much money to fund the $4 million required for the development, perhaps 25%. Mr Welsford said that he discussed the proposal several times with Mr Maxwell. He wanted to think about it. Subsequently Mr Maxwell said to Mr Welsford that he was going to do the deal with "a chap he had met through Super Rules." Mr Welsford also said that he was prepared to lend Mr Maxwell "a bit over a million dollars" to fund the purchase of the 17 lots. He would not charge any interest.

90 In cross-examination, Mr Welsford said that he had looked at two possible developments with Mr Maxwell but he had not proceeded with either one. He said that he had made his money from buying and selling hotels.

The Evidence of Simon O'Keefe

91 Mr O'Keefe was a Team Manager within the Investigations Office of the State Revenue Office. He was an old school friend of Mr Maxwell. Mr O'Keefe had been a Director and the Secretary of Medley Close for approximately three years. He had never had any meetings with Mr Carr, the other director of Medley Close. Mr O'Keefe described his role within Medley Close as that of a bookkeeper keeping track of the costs on a spreadsheet. He put the financial information together for the accountant. He kept the bank statements and the loan agreements which Medley Close had entered into in respect of the Queen's Park Road development. Both he and Mr Maxwell had to sign cheques drawn on behalf of Medley Close.

92 In his affidavit sworn on 8 September 2003 Mr O'Keefe said that in about June 2002 Mr Maxwell handed him 15 original contracts where Medley Close had purchased lots within the Allenby Road subdivision. "Several weeks later" Mr Maxwell handed him another two contracts. The contracts were left with him "for safe-keeping". He had the contracts in his possession for approximately five to six weeks. In about early August 2002, Mr Maxwell collected the contracts because they were "required for conveyancing matters and to assist him in planning approvals and other related matters."

93 Mr O'Keefe said that he had signed the Heads of Agreement on behalf of Medley Close. He believed that he had signed the document at Mr Maxwell's place in Geelong one Monday morning. He had come to Geelong to pick up a child who had stayed with grandparents for the weekend. Mr Maxwell had given him the document. He also signed cheques at that time. He did not remember signing the solicitor's authority. Mr O'Keefe maintained that all of the challenged signatures were his, although he acknowledged that there appeared to be some differences in the signatures.

The Evidence of Christopher Carr

94 Mr Carr was a senior constable in the Victorian Police stationed at Warrnambool. Previously he had been stationed at Geelong. Mr Carr had known Mr Maxwell for about seven years. They had been involved in a number of property purchases and developments together. Mr Maxwell's partner and Mr Carr's wife were "very good friends."

95 Mr Carr said that he had sighted some original contracts relating to the purchase of lots at the Hillside development at Mr Maxwell's home in about mid 2002. He said that he could not recall the exact number "but it was in the area of well over a dozen and I just picked them up and glanced through them as a pile of contracts." He said Mr Maxwell had "lots of paperwork and things at his house." When shown the bundle of nine original contracts, Mr Carr said that he thought there were a few more in the pile he saw. He thought there was "a thicker pile on the day."

96 In cross-examination, Mr Carr agreed that he had never been to a directors' meeting or annual general meeting of Medley Close. He said that he was not familiar with the provisions of the Corporations Act governing directors' duties. He did not really understand the structure of Medley Close or its business. He had not seen any financial statements of Medley Close. Things were "pretty much left in" Mr Maxwell's hands.

97 Mr Carr said that he did not recognise the signatures on the front page of the bundle of nine contracts. He said that he did not remember if he ever tried to read the signatures on the pile of contracts he had seen at Mr Maxwell's house. He thought he had picked them up, looked through them or poked through them, without specifically looking at the front page.

The Evidence of Gregory Crawford

98 Mr Crawford was a financial planner who had known Mr Maxwell for about eight years. Ms Connoley was Mr Crawford's wife's cousin, Mr Crawford said in his affidavit sworn on 22 October 2003 that he visited the Allenby Road site in the middle of 2001. Mr Maxwell asked him whether he could assist Mr Maxwell to find development finance to subdivide the land or alternatively whether he would be interested in going halves in the project. Mr Crawford made some inquiries but was unable to source any meaningful development finance for Mr Maxwell.

99 Mr Crawford said that he and his wife had regular contact with Mr Maxwell and Ms Connoley on a social basis. Mr Crawford said that he maintained a casual interest in the project by way of informal discussion about it from time to time. On one occasion, Mr Maxwell produced a pile of original contracts, something in the order of 15 to 20. They related to the subdivision and were signed "by and on behalf of David Scott's company and Tim's company and provided for a purchase price of $90,000." He said that this occurred in mid 2002. The signatures were on the front page. Each of the contracts was about "three or four pages." Mr Crawford said that the bundle of nine original contracts was similar in size to the pile of contracts he looked at. He believed that these contacts were what he had looked at.

100 In cross-examination, Mr Crawford conceded that the nine contracts were many pages more than the three or four pages he had estimated. He said that he "had just a quick flick at the first couple" of pages. He did not read the documents in any detail. He saw from the front page that it was a contract of sale. He opened the first contract, "had a quick look inside the second one, that was it." He did not read who the vendor was or who the purchaser was. He did not recognise the signatures on the front page. He did not "identify the signatures other than we discussed whose the signatures were." Mr Crawford said that what he knew about these contracts was gained from his conversation with Mr Maxwell.

The Evidence of Raymond Muller

101 Mr Muller was an emergency response officer. He knew both Mr Maxwell and Mr Scott through his involvement in Super Rules veterans' football. He was currently involved in joint venture projects with Mr Maxwell.

102 Mr Muller said in his affidavit sworn on 20 October 2003 that in the middle of 2002 he had discussions with Mr Maxwell about the possibility of developing some of the allotments at the Hillside development as dual occupancy premises or as a childcare venture. He said that he saw Medley Close contracts relating to the 17 lots in Mr Maxwell's car. He looked at the contracts as he was interested in seeing the allotments available for development. The contracts were originals. They were executed by both the vendor and the purchaser in different coloured inks. Mr Muller said that in about September 2002 at Mr Maxwell's home, he was shown a pile of contracts relating to the 17 lots. He recalled examining the contracts in relation to Lot 1, Lot 2 and Lot 80. He later agreed to develop Lot 80 with Mr Maxwell. Lot 79 was purchased so that the two lots could be developed together.

103 Contrary to what he had said in his affidavit, in his evidence Mr Muller said that he did not examine the contracts he saw in the car. They were in the back seat of the car in folders. He also said that on the September occasion he saw contracts for Lots 1, 2, 79 and 80. He did not examine every contract but he did remember seeing those four contracts. The contracts all looked the same. There were two signatures "on the bottom." He assumed one was Mr Scott's signature, but he did not know. Each of the contracts was about a quarter of an inch thick. He probably flicked through the first contract but not the others because they looked the same. He did not recall the prices. The contracts were in a pile about ten or eleven inches high on Mr Maxwell's desk.

104 In cross-examination, Mr Muller conceded that he did not actually scrutinise each of the contracts relating to Lots 1, 2, 79 and 80. Mr Maxwell told him that they were in the bundle of 17 contracts. When asked why he looked at the contracts, he said that:

"They were out on his desk and it was just a perusal through them, that's all. ... Purely out of interest, that's all. I wasn't scrutinising the contracts in any way. I was merely there just generally looking over them."

He also agreed that he had made a mistake in saying Lot 79 was part of the 17 contracts. He did not actually count the contracts in the pile which he saw. He assumed it was 17 because of what Mr Maxwell had said.

The Evidence of David White

105 Mr White was a representative of the agency, Real Estate on Pakington, which was asked to act as a stakeholder for the purchase of the lots at the Hillside development. Mr Scott signed an authority to allow the agent to act. It took a copy of any contract of sale of one of the lots, received the deposit, issued the receipt and sent it directly to the purchaser. This was done in respect of each of the 63 lots sold. Each of those contracts stated in the particulars of sale that the "Vendor's Representative" was Moorabool Developments "Ref: Tim Maxwell." Mr Maxwell had signed all of the contracts on behalf of the vendor.

106 According to Mr White, he received the facsimile letter dated 12 March 2003 from Mr Scott at a time when Mr Maxwell was in his office. He gave Mr Maxwell a copy. Shortly after that, at the request of one or other of them he set up the meeting at the Sheraton Hotel. A few days later Mr White received the facsimile letter dated 8 April 2003 from Mr Scott. He rang Mr Maxwell and read it to him "word for word at least twice." Mr White then acted as the go-between conveying the offers and counter-offers made by Mr Maxwell and Mr Scott to the other. Later that day they agreed that Mr Maxwell would purchase eleven blocks, ten at $60,000 each and one at $90,000. At their request, Mr White referred the matter to a solicitor, Mr Peter Mann, to draw up an agreement. Mr White gave Mr Mann a copy of Mr Scott's letter of 8 April 2003 and told him that the price of the eleventh lot would be $90,000. It took nearly a month before the Heads of Agreement was finalised. The differences in respect of the other two developments had to be agreed.

107 Mr White said in evidence:

"Mr Scott made it very clear that he couldn't sign or agree to anything in writing until this was sorted out otherwise we would be selling blocks at least twice."

108 Mr White said that at the end of 5 May 2003 Mr Maxwell came to his office and he gave him a copy of the Heads of Agreement. He told Mr Maxwell that he had not read the document. Mr Maxwell signed the originals of the Heads of Agreement and then took them away for about ten or 15 minutes. When he brought them back Mr O'Keefe had signed. Mr White then took the documents to Mr Scott's office, where he signed. Mr White distributed the signed Heads of Agreement to Mr Scott, Mr Maxwell and Mr Mann.

109 In cross-examination, Mr White said that Mr Maxwell brought in the signed contracts and deposits for the 63 lots sold. A photocopy was made of the relevant portions of the contract and placed on a file. Every time there was a new contract, Mr Cleary was notified that the lot had been sold and a deposit received. Mr White said that he had nothing to do with the other 17 lots.

110 Mr White said that it was only after the Heads of Agreement had fallen through that he heard Mr Maxwell use the words "joint venture." According to Mr White, at the meeting at the Sheraton Hotel the main discussion was that Mr Maxwell said that he was entitled to 17.5% of the gross profit of the project and Mr Scott argued that it was 10% of the net profit. There was also discussion that some of the contracts that had been signed were signed for the purpose of obtaining finance from the NAB and that both Mr Maxwell and Mr Scott had agreed that contracts had been signed for the NAB.

111 It was Mr White's evidence that the Heads of Agreement were signed at the end of the day on 5 May 2003 - at "maybe four o'clock, four thirty." He was at Mr Scott's office at "probably 5.30 quarter to six."

112 Mr White said that when it was noticed that the contracts for the 63 lots did not have a guarantee attached, he gave a copy of a form of guarantee which his firm had used to both Mr Maxwell and Mr Cleary.

113 In re-examination, Mr White spoke about an occasion on 16 October 2002 when Mr Maxwell and Mr Cleary came to his office at "about 7.30." The three of them went through the 63 contracts checking the details with a list of sales. Mr White said that he saw Medley Close's name on the list, more than once, but he did not know how many times.

114 Mr White was subsequently recalled because of concerns he had raised with the plaintiff's solicitor about some of what he had said in his evidence. He wanted to clarify the evidence he had given about a draft of the Heads of Agreement. He also said that on reflection he was not sure that Mr Maxwell had agreed with what Mr Scott had said about contracts being signed for the NAB. Mr White also stated that he had omitted to mention that when things were running smoothly between the parties, Mr Scott and Mr Cleary had both said to him that "Mr Maxwell had purchased blocks."

The Evidence of David Scott

115 I turn then to the evidence given on behalf of the defendants. Mr Scott said in his affidavit sworn on 25 October 2003 that he first met Mr Maxwell in about April 1999 when Mr Maxwell joined the Geelong Super Rules Football Club. He said that in the following six months Mr Maxwell continually spoke to him about property deals, seeking to persuade him to buy property. Eventually, in November 1999 he did purchase four blocks of land in the Hidden Valley development on the outskirts of Melbourne. He sold them in October 2000.

116 Mr Scott gave evidence that from about April 2001, when football training resumed, he and Mr Maxwell had discussions in passing about property developments. Mr Maxwell would fax him documents in relation to different property scenarios and projections. He would follow up with telephone calls to Mr Scott's office or drop into his office. A seven page fax from Mr Maxwell to Mr Scott dated 12 June 2001 contained details on four different developments, including Lots 8 and 9 at Allenby Road, Hillside.

117 Mr Scott said that, after he split up with his de facto partner, for a short time he spent more time drinking after training at the football club. It was during this period that he did go to Mr Maxwell's home on one occasion in June 2001 for drinks, after some drinks at the football club after training and more drinks at the hotel where they met Ms Connoley and a friend of hers. Mr Scott said various potential investments in property were discussed on that evening but only at a very superficial level. The development at Hillside was definitely mentioned. Mr Maxwell was really keen for Mr Scott to look at the property, but Mr Scott was more interested in the LaTrobe Boulevard property because it was in Geelong. They talked mostly about this property.

118 In July 2001 Mr Maxwell contacted Mr Scott some ten or twelve times about the Hillside property development. Mr Maxwell told Mr Scott that he was acting as the project manager for the development at Hillside and that there was a potential for future subdivision of adjoining property. Mr Scott said that in late July 2001 he drove to Melbourne to inspect Lots 1 and 7. He met Mr Maxwell on site. After the inspection he told Mr Maxwell that he would buy the land. He knew that there would be three contracts because Lot 7 had two titles, each for an undivided half interest in the property. Mr Maxwell said that he would be willing to act as project manager and sales agent. He said that he would be prepared to be engaged on a fee of 10% of net profit and $2,000 sales commission on blocks of land sold, which was said to be his arrangement on the adjoining subdivision. This was the first time this proposal was mentioned. This conflicted with what Mr Scott had said in his affidavit which was that Mr Maxwell made his offer before Mr Scott decided to buy. However, Mr Scott said in evidence that until he saw the land and decided to buy there was no point in having any such arrangement.

119 Mr Scott said that he signed the contract with the Micallefs and the Attards on 3 August 2001 although it was dated 5 August 2001, and the contract with T.A. Maria Pty Ltd on 16 August 2001, although it was dated 22 August 2001. He said that he always intended to use a company vehicle. As an accountant he did not want to have assets in his name. There was never any suggestion that Mr Maxwell would be a purchaser.

120 Mr Scott said that after signing the first contract for Lot 7 Mr Maxwell told him that there might be a problem with the other title. After signing the T A Maria contract Mr Maxwell told him that the other title for Lot 7 had been bought by someone else. He denied receiving the letter from Mr Maxwell dated 21 September 2001.

121 In late October 2001 Mr Scott agreed with his accounting partner Mr John Cleary that Mr Cleary would invest in the project. They agreed that when the land was acquired Mr Cleary would become a director and shareholder of the corporate vehicle used to buy the land. In February 2002, Mr Scott's brother, Mr Robert Scott, also agreed to invest in the project.

122 On 1 March 2002 Mr Scott, Mr Cleary and Mr Maxwell met with Marner's representatives, Mr Baldwin and Mr Mauger. Marner agreed to nominate Moorabool as the purchaser under its contract. Shortly after this meeting Mr Scott received from Mr Maxwell the letter dated 3 March 2002.

123 The two contracts relating to Lot 7 were settled on 1 March and 4 April 2003 respectively. Mr Scott funded the purchase of this part of the Hillside land using 30 day bank bills from the NAB for $805,000. As further security Moorabool gave a debenture and the Scott brothers and Mr Cleary each gave a personal guarantee. Further funding had been hindered by the problem with the other title for Lot 7.

124 Mr Scott arranged to meet representatives of the NAB at his office on 11 June 2002. Mr Maxwell was to attend to make a sales presentation. On the morning of 6 June Mr Maxwell rang Mr Scott to ask him if he could sign some contracts. Mr Maxwell could not come to his office, so Mr Scott agreed to call in to 48 Queen's Park Road to see Mr Maxwell on his way to visit a client. They sat in the front of Mr Maxwell's car. Mr Maxwell told Mr Scott that he needed these nine contracts signed to get the number of sales up for the meeting with the bank. Sales were less than he had anticipated and contracts were coming back slower than expected. Mr Scott saw that the contracts were for purchases by Medley Close. Mr Maxwell agreed that these contracts were not intended to be permanent, they were only for the purpose of showing them to the NAB. Mr Maxwell did say that he would probably like to buy some lots but he had not worked out which lots and how many. Mr Scott told Mr Maxwell that perhaps four lots would be acceptable but he did not want to be in a position where he was exposed by being too reliant upon one purchaser if that purchaser could not settle. If the sales were at market price, he could not see a problem. Mr Scott signed nine original contracts and left them with Mr Maxwell. The contracts were dated before Mr Scott signed them. The nine lots were 1, 10, 26, 35, 46, 49, 56, 59 and 71.

125 The meeting with the NAB was postponed until 14 June. Mr Maxwell presented what was supposed to be the sales and marketing plan, but it mainly consisted of him telling the NAB that there would not be any problems with this good subdivision. Mr Scott said he was embarrassed about the presentation.

126 Mr Maxwell brought the nine original contracts to the meeting, but they were not shown to the NAB. Afterwards, they were left in a photocopy paper box on the boardroom table at Mr Scott's office. Mr Scott then put them in his filing cabinet. He spoke to Mr Maxwell later in the next week, after receiving a copy of Mr Maxwell's letter to the NAB. He told him that he was unimpressed with Medley Close being listed as a purchaser in the letter to the NAB and instructed him that he did not want the letter sent because it was not correct. He also told him that the nine contracts were now finished. Mr Maxwell did not object. The nine original contracts remained in Mr Scott's filing cabinet until he took them to his solicitors in July or August 2003.

127 Mr Scott said that, when litigation commenced, he inspected the copies of the 17 contracts relied on by Mr Maxwell. He had not signed these documents. His initials were not on the particulars of sale page and the contracts had directors' guarantees which he knew had not been in any of the contracts. He denied signing 17 contracts of sale. He only signed the nine as described above. He also denied signing the letter of authority dated 26 May 2002. He did not see this letter until after litigation commenced.

128 Prior to signing the nine contracts there had been no discussion between Mr Maxwell and Mr Scott about developing some of the lots as dual occupancies. Mr Scott had only recently seen the letter from Mr Maxwell to Mr Chiodo dated 16 May 2002. Mr Scott said that some time after February 2003 he became aware that dual occupancy permits had been lodged in respect of the 17 lots which were unsold. However, he agreed in cross-examination that Mr Maxwell's letter of 3 March 2002 and the appraisal from Mr Colman dated 11 March 2003 both referred to lots as "dual occupancy potential" and that he was aware of this.

129 After the meeting with the NAB, Mr Scott and Mr Cleary decided to seek finance elsewhere. They approached several finance brokers, including Mr Justin Taylor, who put them in touch with the eventual financier, Nova West and Rosslare. It was Mr Maxwell who introduced Mr Taylor to Mr Scott.

130 In May 2002 Mr Scott received what I have called, the first letter dated 23 March 2002. He denied receiving the second letter dated 23 March 2002. The first letter was left at his office. He read the letter but did not speak to Mr Maxwell about it until July 2002 when Mr Maxwell telephoned him. He saw the letter as an attempt by Mr Maxwell to change their agreement. He decided to wait until Mr Maxwell raised the topic with him. When Mr Maxwell called, Mr Scott told him that he did not see any need to change the original arrangement for his fee. Mr Maxwell said that it was a great project and that Mr Scott was going to get a lot of money from it and he should get more. Mr Scott did not agree. The matter was again raised by Mr Maxwell in a telephone conversation in early December 2002, which ended in an argument. They did not talk again until February 2003.

131 Following a call from Mr Maxwell, Mr Scott agreed to go to Mr Maxwell's house on 18 February 2003 to attempt to resolve things between them. They discussed a number of issues but did not reach any resolution. Mr Maxwell told Mr Scott that if he did not agree with his demands he would ruin Mr Scott by sabotaging the project and tying the funds up in legal proceedings for two years. He referred to another development in Deer Park where he had "screwed" the guy who had purchased it. Mr Scott subsequently received Mr Maxwell's letter dated 28 February 2003. There were further meetings and correspondence and discussions which ended with the signing of the Heads of Agreement. Mr Scott said that he signed four copies of the Heads of Agreement at around 5.30 p.m. They had already been signed by Mr Maxwell and Mr O'Keefe. Mr White signed straight after Mr Scott signed. Notwithstanding the Heads of Agreement, Mr Maxwell did not remove his caveat.

132 Two or three weeks after 5 May 2003, Mr Maxwell telephoned Mr Scott and claimed to be entitled to a half share of the profits. This was the first time, according to Mr Scott, that Mr Maxwell mentioned "joint venture" or claimed half of the profits. Mr Scott told Mr Maxwell that he was not a joint venturer.

133 In cross-examination, Mr Scott said that Mr Maxwell's initial approach was that he had land for sale on attractive vendor terms which Mr Scott should look at and purchase. Mr Scott believed Mr Maxwell was acting as a sales agent for the vendors. All of Mr Scott's dealings with Mr Maxwell up to this time were in regards to Mr Scott buying land. This proposal was no different. Mr Scott agreed that Mr Maxwell told him that other people were interested in being involved with Hillside. The figures Mr Maxwell put before Mr Scott varied between $1.5 million and $2.5 million gross profit. Mr Maxwell told Mr Scott that the time before settlement in the proposed contracts should enable sufficient time for a planning permit to be issued on the property so that when Mr Scott applied for finance to purchase the property it could be based on the increased valuation of the property not the purchase price.

134 Mr Scott said that there was no mention of a caveat being lodged by Mr Maxwell until 8 December 2002, when Mr Maxwell rang him seeking to increase his share from 10% to 17.5%. When Mr Scott said that there was no reason to increase it, Mr Maxwell threatened to put a caveat on the property if he did not agree with what Mr Maxwell wanted.

135 According to Mr Scott, the time for completion of the project more than doubled. Originally the expectation was that it would be completed around June 2002. After the problem with the third contract was resolved, completion was recalculated at 31 October. Then when contactors were engaged it was pushed back to 31 December, then 28 February 2003, then 15 May and finally early June 2003.

136 Mr Scott denied receiving the letter from Mr Maxwell dated 21 September 2001 either in the mail or personally from Mr Maxwell. There was no discussion about that letter.

137 When cross-examined about his letter to Mr White dated 8 April 2003, Mr Scott said that "the venture" referred to in the letter was a venture between Mr Cleary, Mr Robert Scott and himself through Moorabool. He denied that the reference to "a half profit share as offered to me" referred to the overall development. He said that it related to a proposal with respect to the 10 blocks put by Mr Maxwell the previous day.

138 Mr Scott rejected the suggestion that the work done by Mr Maxwell (such as negotiating away a fee for public space or negotiating about the payment of an upfront fee of $150,000 for a pipeline) went beyond that expected of a project manager. He denied that Mr Maxwell was a joint venture partner. He said that Mr Maxwell did not take the risk which he took in acquiring the properties.

139 It was agreed by Mr Scott that his brother's contribution of about $400,000 was needed to settle the Micallef/Attard contract. He also agreed that as at June 2002 he was under financial pressure both to settle the T A Maria contract and to get development finance. Whilst he reluctantly accepted that Mr Maxwell assisted in arranging finance for the development, Mr Scott did agree that this was not part of project management or sales duties.

140 Mr Scott said that he told Mr Maxwell after he received the letter dated 23 March 2002 that he would not agree to Mr Maxwell's request to increase his fee to 17.5% of net profit. He saw no reason to change the initial agreement. The episode with the second Lot 7 contract had cost him over $175,000 more than originally planned when he first decided to buy the land. Mr Scott denied that Mr Maxwell later told him in a telephone conversation that as Mr Scott had not performed his part of the agreement, Mr Maxwell was returning from 17.5% to 50% for his share.

141 According to Mr Scott, around September or early October 2002 he told Mr Maxwell not to sell any more lots. Costs had been covered by the sale of the other 63 lots and Mr Scott was hoping that the price would go up. That was when Mr Cleary went to Mr White's office to check sales.

142 It was emphatically denied by Mr Scott that he went to Mr Maxwell's house in about July or August 2002 to talk about the 17 contracts. He said that he only went to his house twice in 2002, in about May and it was a during the day to meet a finance broker. Mr Scott said Ms Connoley's evidence about a meeting at their house must relate to a meeting on 18 February 2003. At this meeting Mr Maxwell said that his share should be increased. Mr Scott rejected this. Mr Maxwell then said he had a right to take 17 lots from the venture. Mr Scott disagreed. Mr Scott said that at this meeting this development was discussed less than the other two Mr Scott and Mr Maxwell were involved in. Mr Scott said that it was not a coincidence that the nine contracts were part of the 17 remaining lots because Mr Maxwell had been instructed in about July 2002 to hold back the bigger, and better, blocks.

143 Mr Scott was asked about the list which Mr Maxwell sent to him with the letter to the NAB dated 20 June 2002. Medley Close's name appeared in the list 13 times not nine. Mr Scott agreed that he had seen that Medley Close's name appeared. Mr Scott was also asked about other lists which had been prepared by one or other of the parties. He said that he only worked from one list on his computer. There were 17 lots unsold on this list and Medley Close's name did not appear as a purchaser. Another list, produced by the plaintiffs on discovery, had Medley Close's name appearing as purchaser of the 17 lots in question. Fifteen times the name was typed, but for Lots 12 and 38 it was handwritten. A third list, produced by the defendants on discovery, had Medley Close's typed name appearing as purchaser of 15 of the 17 lots, but there was a blank for Lots 12 and 38. In addition, with Lot 52, the typed name of Medley Close had been crossed out and replaced in handwriting with the name "Delaware Nominees", which was one of Mr Scott's companies. Mr Scott thought that it was Mr Cleary's handwriting. Mr Scott said the lists prepared in his office would have been typed from information provided by Mr Maxwell. He did not see any of these lists at the time.

144 Mr Scott denied that at the mediation he talked about Mr Maxwell conceding some of the 17 lots. It was not about "getting back blocks." If he wanted to resolve the dispute on a business basis he needed to find out how many blocks he would have to give up. Mr Scott said that there was no mention of Mr Maxwell's profit share. There was discussion about his 10% project management fee which Mr Maxwell wanted to increase to 17.5%. Because it was becoming an issue, Mr Scott said that he tried to define it in dollar terms. They came to some sort of agreement on $300,000. Mr Scott said that there had never been any dispute about the $2,000 commission on each of the 63 lots sold by Mr Maxwell.

145 His use of the phrase "7 blocks are returned to the property venture" in his without prejudice letter to Mr White dated 8 April 2003 did not mean anything, Mr Scott said, other than "we were to take seven." Mr Maxwell was to take ten not the 17 that he was claiming.

146 According to Mr Scott, the prices of the 11 blocks, which he eventually agreed to offer to Mr Maxwell, were never agreed even though the Heads of Agreement were drawn up and signed. He thought Mr Maxwell had not been honest with him in telling him those blocks were worth somewhere between $110,000 and $120,000 when they were actually worth $150,000. When he found this out, he felt that he had been conned by Mr Maxwell. He refused to continue talking, particularly as Mr Maxwell had not removed his caveat.

147 Mr Scott said that the original settlement negotiations concerned nine lots. Then in his letter of 8 April 2003 he suggested ten lots. Eventually there was a proposal on 11 lots. There were numerous discussions about price. If the Heads of Agreement had contained prices he may not have signed. It would have depended on the prices. Mr Scott denied that he kept putting up the prices on the unsold lots.

148 The last meeting between Mr Maxwell and Mr Scott, according to Mr Scott, took place on 16 June 2003. Mr Scott said all sorts of possible resolutions were discussed. He denied saying to Mr Maxwell that he might find out that the 17 contracts were not legal.

149 Mr Scott agreed that his statement in his letter to Mr Maxwell dated 9 May 2003 that "lots 12, 49, 10, 56, 26 and 53" had been sold was not correct. Nevertheless, that explained his reference to not selling the lots twice.

The Evidence of John Cleary

150 In his affidavit sworn on 25 October 2002 Mr Cleary said that he was an accountant in partnership with Mr Scott. He was also director of Moorabool.

151 Mr Cleary gave evidence that he had made several approaches for development funding. It was eventually obtained from Rosslare. Moorabool gave it a mortgage over the Allenby Road property and a debenture charge. Mr David Scott, Mr Robert Scott and Mr Cleary signed guarantees of the loan from Rosslare to Moorabool.

152 Mr Cleary said that he was responsible for the administration of the project. A printed table or list was created in Scott & Co's office and given in blank to Mr Maxwell in about April 2002 to fill in details of sales. He also created his own file or list to help with conveyancing. It recorded details of contracts received and deposits paid to Real Estate on Pakington and, later, matters such as settlement dates, adjustments and penalty interest were added.

153 According to Mr Cleary, he was aware that Medley Close's name appeared on Mr Maxwell's list and the list prepared by Scott & Co staff. In about September or October 2002 he spoke to Mr Maxwell about blocks remaining for sale and Mr Maxwell said that he was thinking of buying some of the unsold lots or the lots with Medley Close's name on them to put houses on.

154 Mr Cleary recalled an evening meeting in late October 2002 at Mr White's office where Mr Maxwell was also present. The three of them went through the list of sales, filling in any gaps, checking what deposits had been paid, and clarifying the identity of purchasers. He agreed that Medley Close's name appeared 15 times on the list they went through. Mr Cleary could not explain why Medley Close's name had not been deleted during this process when the intention was to try to obtain an accurate list. He did say, however, that he did not believe at that time that they had valid contracts or that those lots were in fact sold.

155 In cross-examination, Mr Cleary said that he had not seen either the letter from Mr Maxwell dated 21 September 2001 or the second letter dated 23 March 2002 before the litigation commenced.

156 Although Mr Cleary acknowledged seeing the faxed letter from Mr Maxwell dated 20 June 2002 and the enclosed list naming Medley Close as the purchaser of 13 lots at the time, he said that he did not think Medley Close was purchasing any lots. It was possibly going to be sent to the NAB. Mr Cleary knew nothing about the nine contracts signed by Mr Scott.

157 Mr Cleary agreed that obtaining finance was not one of Mr Maxwell's duties as project manager. He denied that Mr Maxwell obtained the finance, although he agreed he assisted by putting Moorabool in touch with Nova West. Thereafter, Mr Cleary did a lot of liaising with the financier and its solicitors.

158 When pressed about the fact that Medley Close's name appeared on the lists, Mr Cleary pointed out that 53 of the names on the list when first typed up did not finish up as the purchasers. The names constantly changed. He assumed Medley Close's name was left over from the original list or that it had been inserted on the instructions of Mr Maxwell.

The Evidence of Robert Scott

159 In his affidavit sworn on 25 October 2003, Mr Robert Scott said that he was a director of Moorabool. He had been a registered builder for 12 years and had been involved in a number of construction and development projects.

160 Mr Robert Scott said that in late January or early February 2002 he met Mr Maxwell at a subdivision in Allenby Road, Hillside where Mr Maxwell was then working to talk about some property which Mr Maxwell was trying to sell him. When they were driving to meet the owner of the property, Mr Maxwell suggested Mr Robert Scott should get involved in the development of the adjoining land in Allenby Road which was owned by Mr Robert Scott's brother. Mr Maxwell told Mr Robert Scott that his role was to project manage the development through to completion and to sell the subdivided lots. His payment was to be $2,000 per lot sold and 10% of the profit after expenses.

161 As a result of the conversation with Mr Maxwell, Mr Robert Scott spoke to his brother about the project, investigated it and decided to invest. He requested that his involvement be structured formally. By a letter dated 26 February 2002, Mr David Scott confirmed that in return for Mr Robert Scott contributing $400,000 he would be appointed a director of Moorabool and allocated one third of the issued share capital. The letter concluded by stating that:

"The profits generated by the company on development of the land will be split between the shareholders pro rata to shareholding outlined above."

162 In cross-examination, Mr Robert Scott denied that it was his brother who first told him the terms of the agreement between Mr David Scott and Mr Maxwell.

The Evidence of Paul Jackson

163 Mr Jackson gave evidence that he was a loan broker who had attempted to find development finance for Mr Scott and Mr Cleary. In July 2002 Mr Chris Dowd of Australian Finance Solutions Pty Ltd indicated that he could arrange suitable finance, but Mr Scott and Mr Cleary then told Mr Jackson that they had another source of funding.

164 Mr Jackson made a note of his understanding of the development to give to potential lenders. That note stated that 74 lots had been pre-sold. It also referred to Mr Maxwell being the person "controlling the development." He said that he meant by those words that Mr Maxwell "was going to be the overseer of the development."

The Evidence of Trevor Baldwin

165 In his affidavit sworn on 5 November 2003, Mr Baldwin stated that he had a one third interest in Lots 8 and 9 Allenby Road, Hillside through Marner. He said that at a mediation on 3 December 2001 between Marner and Mr Fouz about the boundary between Lots 7 and 8, Mr Maxwell suggested that Mr Scott might be interested in acquiring the half interest in Lot 7 if Marner bought Mr Fouz out. Marner did do that and Mr Baldwin then spoke to Mr Scott and Mr Cleary about Lot 7 which led to the meeting at the office of Scott & Co on 1 March 2002. At that meeting Mr Baldwin negotiated with Mr Scott about Marner substituting Moorabool as the purchaser from Mr Fouz.

The Evidence of Neil Holland

166 Mr Holland was a forensic document examiner with an impressive curriculum vitae going back over 25 years. Mr Holland prepared a number of reports concerning the issues in this proceeding.

167 In his report dated 3 November 2003, which was exhibited to his affidavit sworn on 6 November 2002, he stated that his examination of the relevant documents revealed that various original "David Scott" signatures written on the original Heads of Agreement document had been copied to produce the "David Scott" signature imaged on the first page of various of the 17 copy contracts of sale produced by Mr Maxwell and the "David Scott" signature on the letter of authority dated 26 May 2002.

168 Mr Holland also discussed in his latest report the "S. O'Keefe" signatures. He gave evidence that all of what he called "the questioned signatures" were signed by the same writer and that that was a different writer to the person who had written "the standard signatures." "The questioned signatures" were from the various original Heads of Agreement dated 5 May 2003 tendered in evidence and the acknowledgment re Mr White's and Mr Mann's role purportedly signed by the four parties to this proceeding on 5 May 2003. "The standard signatures" included the "S. O'Keefe" signature on the guarantee and indemnity document dated 6 June 2002, two signatures from a mediation document, the signature on the O'Keefe affidavit sworn on 8 September 2003, the five signatures provided by Mr O'Keefe when he was in the witness box giving evidence and the signature on the O'Keefe affidavit sworn on 21 October 2003. Mr Holland gave a lengthy analysis of the differences with respect to each letter in the "S. O'Keefe" signature between "the standard signatures" and "the questioned signatures." It is not necessary to go into the details of that analysis at this stage.

Other Relevant Evidence

169 It was common ground between the parties that Mr Maxwell withdrew the first caveat on or about 23 June 2003 pursuant to an order by this Court in another proceeding between the parties. On or about 18 June 2003, however, Mr Maxwell lodged caveat number AC 139857V and caveat number AC 139866U over the Hillside land ("the second caveats"), in which he claimed that Moorabool, the registered proprietor, held the land "as trustee for itself and the caveator pursuant to a Constructive Trust."

170 It was also common ground that on or about 26 June 2003 the parties agreed that Mr Maxwell would remove the second caveats insofar as was necessary to allow completion of the sale of the 63 lots and that certain monies, comprising the estimated net profits on the sale of each of the 63 lots ("the quarantined funds"), would be held in an interest bearing trust account by Clayton Utz, the defendants' then solicitors, pending the hearing and determination of this proceeding.

171 Settlement of the 63 lots took place between 26 June and 18 July 2003, with most settling between 2 and 4 July 2003.

172 On or about 7 August 2003 Medley Close lodged four caveats, numbers AC 250436A, AC 250448S, AC 250472U and AC 250514G, over the 17 remaining lots. The four caveats claimed an interest as purchaser pursuant to one contract of sale dated 6 June 2002, twelve contracts of sale dated 7 June 2002, two contracts of sale dated 9 June 2002 and two contracts of sale dated 21 July 2002 respectively.

173 There was an exchange of correspondence between the parties' then solicitors concerning the amount of the quarantined funds. Although it is not necessary at this stage to examine this dispute, the correspondence referred to other relevant matters. In a facsimile dated 10 July 2003, the plaintiffs' then solicitors, Anderson Rice, asked Clayton Utz to:

"advise whether the purchase of the 17 lots by Medley Close Pty Ltd is a matter of dispute, and if, so [sic] the legal basis upon which your client disputes the purchase of the lots."

174 Clayton Utz replied by facsimile dated the same day querying why clarification of this was needed in order to finalise the statement of claim which the parties had agreed the plaintiffs would deliver. The facsimile continued:

"Having said that, we confirm that our client disputes the existence of legally enforceable contracts regarding the 17 remaining lots."

175 By a facsimile dated 14 July 2003, Anderson Rice responded as follows:

"Would you please provide us with an explanation as to the legal basis upon which your client now disputes the legal enforceability of the 17 contracts. Would you also please clarify your clients' intentions regarding the sale of these 17 lots. You will appreciate that our client has already entered contracts for the sale of a number of the lots on the basis that enforceable contracts were in place with Moorabool Developments Pty Ltd."

176 On 16 July 2003, Clayton Utz acknowledged receipt of the writ. In respect of the issue of the 17 lots, the facsimile stated:

"Your client has made various allegations in relation to these lots. Our clients will respond to those allegations in their Defence."

A day later Clayton Utz wrote following up a verbal request to inspect the original documents referred to in the statement of claim. On 18 July 2003, Clayton Utz again wrote to Anderson Rice querying the statement in a telephone conversation that the plaintiffs' solicitors did not have any original documents and only a copy of one of the alleged contracts. It would appear from a further letter from Clayton Utz dated 23 July 2003 that they had been informed by Anderson Rice that they now had original documentation. On the following day Clayton Utz wrote to say that inspection of the bundle of 17 contracts of sale had revealed that although they were said to be copies of the 17 contracts "some of the documents contain white out and original pen markings."

177 Finally, in a facsimile dated 22 August 2003, Clayton Utz returned to this issue. They reiterated that "there were no legally enforceable contracts in respect of any of the remaining lots." However, they then referred to "9 contracts signed by David Scott and Tim Maxwell on or about 7 and 9 June 2002" and identified the lot numbers. The facsimile concluded:

"To avoid any misunderstanding, we confirm that the 9 Contracts are at an end, alternatively are hereby terminated pursuant to Special Condition 8 of each of the 9 Contracts."

Findings

178 Most of the disputed issues in this proceeding depend on factual findings, often involving a conflict between Mr Maxwell's evidence and Mr Scott's evidence. Mr Maxwell's credit was severely damaged by his extraordinary admission that he had lied about a critical part of his evidence concerning what he had received from Mr Scott when he allegedly asked for one or both of the duplicate copies of the 17 original contracts to be returned to him and how he came to have copies of the 17 contracts to produce to the Court. As the cross-examination by Mr Northrop of counsel, who appeared on behalf of the defendants, revealed, this episode was not simply a case of a one off false statement in the witness box. On the contrary, it consisted of a series of falsehoods over a period of time, including the creation of false documents by the insertion of an image of Mr Scott's signature on to the contracts. Moreover, this process had begun in June 2003 at the latest because the contracts of sale dated 2 June 2003 entered into by Medley Close in respect of Lots 35 and 46 each contained a false copy of the contract whereby it purportedly purchased that lot from Moorabool. Neither matched the contract of sale which had been entered into by Moorabool and Medley Close as part of the nine original contracts of sale, which Mr Scott subsequently produced. Further, as Mr Northrop pointed out, by the time Mr Maxwell gave his first account on oath of how he had obtained from Mr Scott the photocopies of certain pages from the 17 contracts of sale, when he swore his affidavit dated 5 September 2003, he knew that Mr Scott had admitted the existence of the nine original contracts of sale. Nevertheless, Mr Maxwell's claimed partial success in "flushing out" the nine original contracts of sale by the use of false copies did not stop him from embarking on a course of repeatedly lying on oath about these events. I consider that Mr Maxwell had more than enough opportunity over a couple of months to confess that the documents were not what they were represented to be, but instead he repeated his false evidence.

179 I was, therefore, left with the impression, as Mr Northrop submitted, that Mr Maxwell's admission that some of his evidence was false was brought about not by any genuine change of heart but by the fact that Mr Holland in his last report had correctly identified a, or the, source of the copied signature and a recognition by Mr Maxwell that this meant that it was probable that his relevant evidence would be found to be untrue. The way in which the admission was made smacked, in my opinion, of an attempt to deflect the effect of an unfavourable finding in order to try to bolster the rest of his evidence which inevitably would be looked at more critically in light of the unfavourable finding. I have to say that this sorry episode means that I have very little confidence in Mr Maxwell's truthfulness.

180 Even by his own account Mr Maxwell's confession of past wrongdoing was not complete. He showed a strange reluctance to admit that the letter of authority dated 26 May 2002 was also a fabrication. Whilst eventually admitting that he had never received a signed copy of the letter of authority from Mr Maxwell, he still maintained that Mr Scott had signed it probably when he signed the 30 copies of the contracts in Mr Maxwell's car. This evidence cannot be correct. At the time Mr Maxwell said the letter of authority was signed there were not 17 contracts prepared for signature, yet the letter of authority referred to "the 17 lots" Mr Maxwell's company Medley Close "purchase" [sic]. Mr Maxwell's evidence was that he had only prepared 15 contracts over a few weeks preceding the signing on or about 6 June 2002, although he had intended purchasing 16 lots (but his letter to Mr Chiodo referred to 17 lots). Furthermore, there seems to be absolutely no reason to include a reference to Medley Close purchasing 17 lots in a letter purportedly giving Mr Maxwell authority to sell the other 63 lots. I therefore conclude that this letter of authority was falsely created by Mr Maxwell in an attempt to bolster his claim that Mr Scott had agreed that Medley Close had purchased 17 lots.

181 Further, even apart from the extraordinary admission, I found Mr Scott to be a more impressive witness than Mr Maxwell. Generally, Mr Scott's recollection appeared to be precise, his evidence was consistent despite lengthy cross-examination and he readily owned up to wrong statements or conduct. On the other hand, Mr Maxwell's evidence was often vague, confused, argumentative, contradictory and implausible, even allowing for his unusual manner of speaking and writing. The following are two examples of Mr Maxwell contradicting himself. Initially, he said that he had never seen a caveat form prior to the one dated 13 December 2002. Later, he agreed that he had signed the caveat affecting Marner's land in June 2002 and that he had previously signed about half a dozen caveats. Secondly, Mr Maxwell seemed unable to decide whether or not the Hillside project was speculative. Initially, he said that it was, but later when it seemed to be more in his interest to say that it was not a risky venture, he described it as "an absolute no loss situation."

182 My description of Mr Scott as a more impressive witness than Mr Maxwell does not mean that I accept everything Mr Scott said in his evidence. For example, I do not accept Mr Scott's evidence that he told Mr Maxwell not to sell the larger lots.

183 Moreover, there are instances of conduct by Mr Scott which do not reflect well on him. The episode with the nine contracts of sale to show the NAB is perhaps the best illustration of this point. And despite his expressed regret at this conduct, it would appear that a false list of lot sales was later given by Mr Scott to Mr Jackson to use in his endeavours to raise finance. Further, it was submitted by Mr Heaton QC, who appeared with Mr Nunns of counsel for the plaintiffs, that there were other examples of Mr Scott not being truthful in his dealings with others. Mr Scott did not tell his own partner, Mr Cleary, about the nine contracts. In the discussion with Mr Maxwell and Mr White at the Sheraton Hotel, Mr Scott falsely denied that any contracts had been signed. Mr Scott falsely asserted in his letter to Mr White dated 12 March 2003 that Mr Maxwell had never been given authority to sign contracts on behalf of Moorabool and falsely asserted in his letter to Mr White dated 9 May 2003 that six of the 17 lots had been sold. Mr Scott also admitted that initially he told his then solicitors, Clayton Utz, that there were no contracts or possibly no legally enforceable contracts.

The Agreement between Mr Maxwell and Mr Scott or Moorabool

184 The first question to be considered is whether Mr Maxwell's claim that there was a joint venture agreement between himself and Mr Scott or Moorabool to purchase, subdivide, develop and sell the Hillside land with each party entitled to a half share of the profits was made out. If not, was the agreement that alleged by Mr Scott, that Moorabool engaged Mr Maxwell to provide management and sales services for Moorabool in connection with the subdivision, development and sale of the Hillside land for a fee of 10% of the net profit of the development and $2000 per lot sold by Mr Maxwell to a party not related to him.

185 I reject the claim by Mr Maxwell that there was a joint venture agreement whereby he was a half owner of the Hillside land entitled to an equal share of the profits. First, it is worth noting that the land was not purchased in joint names but in the sole name of Moorabool. This followed Mr Scott entering into two contracts of sale in his name "and/or nominee" and subsequently nominating Moorabool as the purchaser, and him negotiating with Marner for Moorabool to be nominated as the purchaser from Mr Fouz. As the purchase of the La Trobe Boulevard property showed, Mr Maxwell and Mr Scott were prepared to purchase in joint names when that was their agreement. Moreover, there was no reason why Mr Maxwell could not have become a half owner of the shares in Moorabool if the parties had felt that it was preferable to have a company as the purchaser/developer. The purported justification in the second letter dated 23 March 2002 that Mr Scott was named as purchaser "to assure the (development) finance for you" does not make sense, in my opinion, when it was clearly contemplated from the start that a company might be nominated as the purchaser. No reason was given why Mr Maxwell's shareholding in that company would have impeded the obtaining of finance.

186 Secondly, the evidence concerning the early discussions between Mr Maxwell and Mr Scott suggests to me that Mr Maxwell was acting as an agent attempting to interest Mr Scott in a development rather than Mr Maxwell approaching Mr Scott to see whether they might do a joint venture development together. Certainly, the way in which Mr Maxwell corresponded with Mr Scott at this time supports this view. Mr Scott appears to have been bombarded by Mr Maxwell with opportunities for him to purchase and develop properties.

187 Mr Maxwell placed great reliance on the fact that he would have had lots of other people who would have entered into a joint venture agreement with him if Mr Scott had not, and of course Mr Welsford gave evidence that he was considering just such an arrangement when Mr Maxwell told him that he was going to do the deal with "a chap he had met through Super Rules." Mr Welsford was a very wealthy hotel proprietor who had known Mr Maxwell since he was a small boy. It seems to me quite incredible, if Mr Welsford had been seriously considering a precisely formulated offer of a joint venture deal with Mr Maxwell, that Mr Maxwell would not wait for a response from his friend but instead enter into an agreement with Mr Scott, who was a relatively recent acquaintance and an unknown quantity in terms of wealth and character. There may have been some vague discussions between Mr Welsford and Mr Maxwell, but beyond that I am not prepared to accept the evidence concerning Mr Welsford's alleged involvement in a proposal for an equal sharing joint venture agreement.

188 The third, and most important, reason for rejecting the claim to equal shares is the contemporaneous evidence that Mr Maxwell was changing or attempting to change his remuneration to 17.5% of the profits. His evidence was that this was a reduction from 50%, whereas Mr Scott's evidence, which I accept, was that it was an attempt to increase his fee from 10% of the net profit. I cannot accept Mr Maxwell's evidence that, when Mr Scott was allegedly in default of his obligation to provide the funding, with the risk that the whole project would thereby fall over, he, Mr Maxwell, agreed to a significant reduction in his own profit share. Not even the suggestion that this was done to placate Mr Scott, who was complaining about misrepresentation over the amount of funding required, causes me to alter my view.

189 In fact, in the Further Amended Statement of Claim it was pleaded the reduction offer was made "in view of the difficulties Scott had had in obtaining funding for the Joint Venture and as a result of a representation by Scott (the "Contribution Representation") that he would personally make a substantial contribution to the Joint Venture." In my view, the evidence simply does not support the allegation of the Contribution Representation.

190 In the second letter dated 23 March 2002 the offer of a reduced share was purportedly justified by Mr Maxwell to Mr Scott on the basis of "your seemingly greater equity requirement through your business which involves John in association". Why the fact that Mr Scott had chosen to introduce Mr Cleary into the project should result in Mr Maxwell reducing his share to even 33.33%, let alone 17.5%, was not explained.

191 Further, I am not satisfied that the second letter dated 23 March 2002 was written on or about that date or that it was ever sent by Mr Maxwell. The same applies to Mr Maxwell's letter dated 21 September 2001. I accept Mr Scott's evidence that he received neither letter. While it is a very harsh finding that Mr Maxwell created these letters after the event in order to try to bolster his case, such conduct is not that different from creating false copies of contracts of sale which Mr Maxwell belatedly admitted he had done. Mr Maxwell's evidence about throwing out his broken down computer was not convincing. (If it had still been in his possession probably it could have been searched to ascertain the dates on which documents were produced).

192 The wording of these two letters supports the finding that they are recent creations. As previously mentioned, the failure to refer to the problem of obtaining the third title in the September 2001 letter was surprising given that one would have expected this to be the most pressing issue at that time. Instead, the letter picks up a number of the possibly contentious issues in a way which supports Mr Maxwell's case. Yet it was not referred to in the caveat signed by Mr Maxwell in December 2002. In respect of the second letter dated 23 March 2002, whilst it was not unknown for Mr Maxwell to write two letters on the same day, it does seem to me to be quite unusual for Mr Maxwell to have done so when the first letter went beyond the topic of "project management appraisal" and embarked on the topic of Mr Maxwell's share of the profits. There was no satisfactory explanation for why the contents of the second letter did not then immediately follow the reference to a 17.5% share in the first letter. Perhaps more importantly, one might have expected that, when in May 2002 Mr Maxwell took the first letter dated 23 March 2002 to Mr Scott's office, because he realised that it may not have been sent at the time it was written, he would also have taken a copy of the second letter allegedly written on that day. Mr Maxwell's reliance on the existence of these two letters, which Mr Scott said he did receive, was just too convenient, in my opinion.

193 I consider that it is quite implausible that Mr Maxwell would offer to reduce his profit share from 50% to 17.5% at a time when Mr Scott was in default of his only obligation under the joint venture agreement. In my opinion, it just does not make the slightest sense. Mr Maxwell is not a wealthy individually prone to waiving his right to potentially hundreds of thousands of dollars. On the contrary, he struck me as a person who sought to squeeze the last dollar out of every opportunity. Nevertheless, I would be prepared to accept that on this occasion he might have acted out of character if his version of events fitted in with the surrounding circumstances, but in my opinion it did not.

194 My fourth reason is that the relevant wording of the first letter dated 23 March 2002 is quite damaging to Mr Maxwell's claim. He referred in that letter to "my requirement for services" and not to a profit share. That he was viewing his remuneration as a fee, albeit possibly calculated by reference to profit, is made clear, in my opinion, by the deduction of his final calculation of his remuneration at $400,000 from the expected profit on the development of $2.4 million, leaving a profit of $2 million. There was no suggestion that this $2 million was to be shared by Mr Maxwell and Mr Scott. It was not even mentioned that Mr Maxwell had purportedly reduced his entitlement from 50% to 17.5%. Rather he complained that Mr Scott's profit of $2 million was "unheard for 'idle' investment in a one year turnaround." Although Mr Maxwell said that he had discussed this reduction from 50% to 17.5% with Mr Scott before the first letter dated 23 March 2002 was sent, he stated that the reason why he suggested in his handwritten note that Mr Scott should call him once he had read the letter was "if there was a worry with it." Why Mr Scott would be worried about Mr Maxwell reducing his share to such an extent was not explained.

195 Fifthly, Mr David Scott's evidence concerning the nature of his agreement with Mr Maxwell was supported by his brother's evidence about what Mr Maxwell told him about his role in the development. Mr Robert Scott obviously has an interest in the outcome of this proceeding so I must treat his evidence with caution. Nevertheless, I agree with Mr Northrop's submission that Mr Robert Scott was not seriously challenged on this evidence during cross-examination. The minor errors in his recollection of meeting Mr Maxwell and other men at the Hillside property are understandable and do not really detract from his denial that he was first told about the agreement by Mr David Scott and not Mr Maxwell. I reject Mr Maxwell's denial of this discussion with Mr Robert Scott. In earlier evidence he said that he had been unable to recall. I therefore accept Mr Robert Scott's evidence as a further reason for rejecting Mr Maxwell's claim to a half share of the profits of the development.

196 Sixthly, Mr White's evidence was also supportive of this part of Mr Scott's case. Mr White was, in my opinion, an honest witness, who had been deeply upset by being caught up in the crossfire between two bitterly opposed men and was therefore concerned to ensure that he was fair to both parties. As noted above, Mr White said that it was only after the Heads of Agreement had fallen through that he heard Mr Maxwell use the words "joint venture". This was consistent with his evidence that at the meeting at the Sheraton Hotel Mr Maxwell was asserting his right to 17.5% of the gross profit and Mr Scott was arguing that it was 10% of the net profit. It was also consistent with Mr Scott's evidence that a claim to a half share of the profits of the joint venture was not made by Mr Maxwell until a few weeks after 5 May 2003.

197 Next, there is my conclusion that some of the correspondence from Mr Maxwell following his falling out with Mr Scott does not support his claim. Although his letter to Mr Scott dated 28 February 2003 may not have been unequivocal, his reference to his efforts on the project which "would unquestionably see me exceeding a half share in other joint ventureship" but that he stood "loyally by the much lessor [sic] share offered in the earlier submission of 17.5 percent of gross profit" does not read to me as though Mr Maxwell was asserting that he had reduced his 50% share to a 17.5% share. His letter to Mr Scott dated 15 March 2003 was perhaps clearer when he wrote that:

"I have never altered any requirement on my shareholding (as per letter), a very minor share ..."

A 50% share cannot be described as a "minor" let alone "very minor" share.

198 Perhaps the most damaging item of correspondence from Mr Maxwell is his handwritten note faxed to Mr Cleary on 9 April 2003 in which he aggressively complained about a $2.6 million profit being divided between "3" when the three had contributed so little in the way of equity and he had done so much in achieving their finance and other benefits. The three persons being criticised can only mean the Scott brothers and Mr Cleary. Mr Maxwell's complaint about being "ripped off" was clearly not that he was being denied his half share as a joint venturer but that his efforts were not being adequately regarded when the partners stood to make so much out of the development.

199 On the other hand, there was Mr Scott's letter to Mr White dated 8 April 2003. Counsel for Mr Maxwell submitted that Mr Scott's reference in his letter to "the venture" and to the builder being "on a 1/3rd profit share, and not ½ profit share, as offered to me" was confirmation that Mr Maxwell and Mr Scott were equal partners in the Hillside development venture. I disagree. I accept Mr Scott's evidence that "the venture" being referred to was that between Mr Cleary, Mr Robert Scott and himself through Moorabool and that the half profit share offered to him referred not to the overall development but to a proposal with respect to the 10 blocks put by Mr Maxwell the previous day. That is how the letter reads, in my opinion.

200 Another relevant matter is Mr Maxwell's failure to describe himself as one of the developers of the Hillside land when he wrote his letter to the NAB in June 2002. Instead, he described himself as wearing three caps:

"as qualified real estate agent, project management and property procurement."

Mr Heaton submitted that Mr Maxwell may have only been concerned to refer to these roles in order to qualify himself to give his opinions to the NAB about the likely success of the development. Nevertheless, if he were a joint venture partner it might have been expected that that would also have been stated to the bank's representatives.

201 Counsel for the plaintiffs drew attention to the fact that in other correspondence Mr Maxwell did make the claim that he was one of the developers. For example, in his letter dated 16 May 2002 to Mr Chiodo he referred to "my consortium", and in his letter dated 12 July 2002 to the solicitors acting for Nova West he referred to Mr Scott as "a business partner of mine by separate agreements." (This may have been a correct description of the relationship between them in respect of other developments even if it was not appropriate in this case.) Also, in two applications for electricity services he described himself as "partner" and "joint venture partner." I do not consider that much weight can be placed on these documents because in the normal course of events they would never have been seen by Mr Scott. That is, they may simply have resulted from Mr Maxwell "big noting" himself to outsiders. There is a further point to note about the electricity applications. Only photocopies of these applications were tendered and without seeing the originals it was not possible to tell whether all of the words had been written at the same time. This was important because in both applications the placement of the words "partner" and "joint venture partner" on the line above the original description of Mr Maxwell as "project manager" suggested to me that they had been added later. That is, that copies of the documents had been altered after the originals had been sent in an attempt to present a false picture.

202 An eighth reason is that I find it very difficult to accept that Mr Scott would have agreed to the joint venture, with the obligation that he provide all of the funding for the project, without even seeing the land in question. Yet that is what he did, according to Mr Maxwell's evidence. Mr Scott did not strike me as that sort of person likely to take such a spontaneous and hastily considered step.

203 Finally, Mr Northrop submitted, with some justification in my opinion, that if the agreement had been reached in June 2001, as claimed by Mr Maxwell, one might have expected that the contracts of sale would have been executed in June or July rather than August 2001, which might also have prevented the sale by the Vassallos to Mr Fouz on 27 July 2001. All of this supported Mr Scott's evidence that it was not until after he visited the Hillside site in late July 2001 that he decided to purchase.

204 Counsel for the plaintiffs submitted that Ms Connoley's evidence supported Mr Maxwell's evidence about the joint venture agreement. However, I cannot accept Ms Connoley's purported recollection of these critical meetings. She clearly had little or no understanding about what Mr Maxwell or Medley Close did, yet she claimed to be able to remember precisely what was discussed by Mr Maxwell and Mr Scott late one evening over two years before when she was "exhausted" and had only sat down and thought about these events shortly before she swore her affidavits in September 2003. The fact that Ms Connoley first met Mr Scott on the night of the June meeting at a hotel in Geelong where he and Mr Maxwell consumed further drinks before the three of them went to Ms Connoley's home for further drinks was not mentioned in either of Ms Connoley's (or Mr Maxwell's) affidavits. This suggested her recollection of the events of that night was not as good as she claimed. Her reliability was also cast into doubt by her claimed good recollection of a number of other specific events, such as the meeting between Mr Maxwell and Mr Scott in August 2002, which were not included in either of her affidavits.

205 Much of Mr Maxwell's case in support of his claim that he was an equal partner in the development was based on his evidence that he performed many tasks well beyond what would be normally expected of a project manager and selling agent. It was said that this dedication on the part of Mr Maxwell started with the favourable terms he negotiated with the vendors of Lots 1 and 7 and continued through his arranging of the funding for the development, his negotiation of the waiver of the land or monetary requirement for public open space, his negotiation of the pipeline funding issue and ended with his signing the 63 contracts of sale on behalf of Moorabool. I have no doubt that Mr Maxwell did make a significant contribution to this project, but even if he did perform above and beyond the call of duty it does not mean that what was initially agreed between the parties can be varied simply because Mr Maxwell thinks his remuneration is less than it should be compared with what Mr Scott and his partners were likely to receive. On balance, I do not consider that these factors advanced on behalf of Mr Maxwell outweigh the indications to the contrary which I have discussed above.

206 I therefore find that Mr Maxwell was not a half owner of the Hillside land entitled to an equal share of the profits resulting from its development. On the contrary, I find that Mr Maxwell is, pursuant to his agreement with Moorabool to provide management and sales services for it in connection with the subdivision, development and sale of the Hillside land, entitled to a fee of 10% of the net profit resulting from its development.

Mr Maxwell's Claim for Commission on Sales

207 The second question to be considered is whether Mr Maxwell is also entitled to be paid his agreed commission of $2,000 per lot sold, making a total of $126,000 in respect of the 63 lots sold by Moorabool to purchasers other than Medley Close. Counsel for the defendants submitted that Mr Maxwell was not so entitled because of his failure to comply with the requirements of the Estate Agents Act 1980 ("the Estate Agents Act").

208 At the relevant time, s.50 of the Estate Agents Act stated as follows:

"(1) Subject to sub-section (2) an estate agent shall not be entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless -

(a) at all material times in relation to the transaction he is the holder of an estate agent's licence; and

(b) the agent has complied with section 49A(1) with respect to the engagement or appointment to undertake the transaction and is not in breach of section 49A(2) with respect to the engagement or appointment."

Section 50(2) had been repealed. Section 49A of the Act provided that:

"(1) An estate agent must not obtain, or seek to obtain, any payment from a person in respect of work done by, or on behalf of, the agent or in respect of any outgoings incurred by the agent unless -

(a) the agent holds a written engagement or appointment that is signed by the person (or the person's representative); and

(b) before obtaining the person's signature to the engagement or appointment, the agent (or an agent's representative employed by the agent) informed the person (or the person's agent or representative) that the commission to be paid to the agent under the engagement or appointment and any money to be paid by the person in respect of outgoings were subject to negotiation; and

(i) details of the commission and outgoings that have been agreed; and

(ii) if a fee is to be calculated on a percentage basis, a statement of that fee expressed as both a percentage and as the dollar amount that would be payable on the reserve price or any other relevant amount set out in the engagement or appointment; and

(iii) a statement identifying the source and the estimated amount of any rebate, discount or commission that the agent may receive in respect of any advertising expenses or other outgoings that the agent may incur on behalf of the person; and

(iv) a statement in a form approved by the Director as to where a complaint concerning any commission or outgoings in the engagement or appointment can be made; and

(d) the agent (or an agent's representative employment by the agent) gave the person a copy of the signed engagement or appointment.

(2) An estate agent or agent's representative must not destroy any document required by this section and must retain any such document for the prescribed period.

The term "estate agent" is defined in s.4 of the Estate Agents Act as follows:

" 'estate agent' or 'agent' means any person (whether or not he carries on any other business) who exercises or carries on or advertises or notifies or states that he exercises or carries on or that he is willing to exercise or carry on or in any way holds himself out to the public as ready to undertake the business of -

(a) selling buying exchanging letting or taking on lease of or otherwise dealing with or disposing of;

(b) negotiating for the sale purchase exchange letting or taking on lease of or any other dealing with or disposition of;

(d) compiling information or preparing reports on the sale purchase exchange letting taking on lease of or otherwise dealing with or disposing of -

any real estate or business on behalf of any other person."

209 Mr Northrop submitted that Mr Maxwell clearly was an estate agent carrying on the business of selling real estate on behalf of another person and that as such he was caught by the prohibition on suing for, recovering or retaining any commission unless he held the required written appointment. This was regardless of whether Mr Maxwell was entitled to a fee of 10% of the profits for project management or to a half share of the profits as a joint venturer. Mr Northrop submitted that there was a clear demarcation between the roles of project manager (which is what I have found Mr Maxwell to be) and seller of the lots. The remuneration for the selling was always treated separately by the parties. This meant that the commission was an entitlement above and beyond any other entitlement and was to be earned by performing the task of selling the lots. This work was part of his business of selling property on behalf of Moorabool.

210 It was submitted on behalf of the defendants that, although there was no dispute that it had been agreed that Mr Maxwell would be paid $2,000 for every lot sold by him, the provisions of the Estate Agents Act were quite explicit in preventing an estate agent from suing for, recovering or retaining any commission when s.49A(1) had not been complied with. The wording of the prohibition could not have been wider or stronger. Mr Northrop referred to the decision of Beach J in Sevastopoulos v Spanos[2] by way of analogy in submitting that Mr Maxwell could not even make a claim based on the well known principles concerning restitution and unjust enrichment outlined by the High Court of Australia in Pavey & Matthews Pty Ltd v Paul ("Pavey")[3]. In the former case, his Honour rejected the submission that the plaintiffs had brought their action in indebitatus assumpsit rather than pursuant to a domestic building work contract. However, his Honour went on to consider whether Pavey would have been applicable if the action had been based in indebitatus assumpsit. Beach J held that it would not, because of the difference in wording between the two statutory provisions. In Pavey there was s.45 of the Builders Licensing Act 1971 (NSW) which made the contract in question "not enforceable against any other party to the contract." In Sevastopoulos there was s.19(1) of the House Contracts Guarantee Act 1987 which provided that "the builder is not entitled to recover in any court the cost of any work performed or materials supplied under the variation." His Honour held that the latter provision was "far wider" and that it "specifically exclude[d] any claim whether founded on contract or otherwise."[4]

211 Mr Northrop submitted that the wording of the Estate Agents Act was even stronger as it even extended to a prohibition on the estate agent "retaining" any commission unless he held the required written appointment. I agree that if the relevant provisions of the Estate Agents Act are applicable then Mr Maxwell's claim for his fee of $126,000 must fail.

212 However, Mr Heaton submitted that there was no breach of s.49A of the Estate Agents Act because Mr Maxwell was not carrying on the business of selling real estate on behalf of any other person and therefore was not caught by the definition of estate agent. He submitted that where, as in this case, Mr Maxwell was a joint venture partner of Moorabool, or given my findings in respect of Mr Maxwell's role, he was an employee or contractor of the developer, then he was not carrying on the business of selling real estate on behalf of any other person. Rather, Mr Maxwell was acting in and for the business of the vendor, Moorabool, which was selling the lots to the public. This close relationship between Mr Maxwell and Moorabool, which meant that Mr Maxwell was not independently carrying on the business of selling real estate on behalf of another person, was exemplified by the unusual fact that Mr Maxwell signed all 63 sales contracts on behalf of Moorabool.

213 I consider that Mr Heaton's argument is correct. It seems to me that the relationship between Mr Maxwell and Moorabool should not be seen as one where Mr Maxwell was carrying on the business of selling real estate on behalf of any other person. He was engaged to assist Moorabool in its business of selling the lots to the public.

214 This means that Mr Maxwell has succeeded in his claim for his fee of $2,000 per lot sold. Whether this outstanding amount totals $126,000 depends on whether or not the suggestion that Mr Maxwell had already been paid $20,000 or some other part of his fee is made out.

Medley Close's Claim for Specific Performance of Seventeen Contracts of Sale

215 I turn then to the issue of whether or not there were 17 contracts of sale entered into by Moorabool and Medley Close and whether there should be an order for specific performance of those contracts. As both parties recognised, the divergence between the evidence of Mr Maxwell, who said that 34 original contractual documents were signed by Mr Scott on two separate occasions, and the evidence of Mr Scott, who said that he signed nine original contracts in circumstances where they were not intended to have contractual effect, cannot be reconciled. Either Mr Maxwell or Mr Scott is not telling the truth. There can be no question of a mistake about the number of contracts and contractual documents signed. After thinking long and hard about this issue I have concluded that, for the reasons set out below, there were only nine contracts signed as Mr Scott said.

216 First, there is Mr Maxwell's admission that he produced false copies of the contracts of sale and that he lied about the circumstances in which he obtained those copies. I have already said sufficient about this extraordinary episode to indicate why it is severely damaging to Mr Maxwell's credit, particularly in respect of this issue. I recognise, of course, that just because Mr Maxwell lied about this part of the dispute, it does not mean that the rest of his evidence was false. Nevertheless, it is an important factor to take into account.

217 Secondly, the fact that Mr Scott produced the nine original contracts of sale, albeit possibly a little belatedly, does run counter to the basis of Mr Maxwell's position, which was that Mr Scott had wrongly withheld the 34, and then the 25, missing original contractual documents from Mr Maxwell and later the Court. It seems to me that if Mr Scott was as dishonest or unscrupulous as Mr Maxwell maintained, it would be most unlikely that he would produce the nine original contracts of sale. This step only complicated matters when Mr Scott had Mr Maxwell on the ropes because of the latter's inability to prove the existence of the 17 contacts of sale. Secondly, this step also exposed Mr Scott to justified criticism of his conduct in agreeing to sign the nine contracts of sale in order to mislead the NAB as to the current state of the development, even if he subsequently did not proceed with that proposed deception. In the circumstances, it seems to me that it would have been a lot simpler for Mr Scott, if he were dishonest, to deny falsely that any contracts had been signed by him knowing that Mr Maxwell would not be able to prove to the contrary if he did not produce the nine original contracts of sale. Therefore, in my opinion, the production of the nine original contracts of sale lends credit to Mr Scott's account.

218 Thirdly, Mr Maxwell's evidence about what happened after the contracts were signed was, in my opinion, inherently improbable. Having gone to the trouble of preparing two copies of 15 contracts of sale before the meeting at the Queen's Park Road property, it seems quite strange that Mr Maxwell did not retain 15 signed duplicate originals and give the other 15 signed duplicate originals to Mr Scott for his use. Instead, according to Mr Maxwell, he kept all 30 copies. That this same procedure was followed on the signing of the extra two contracts of sale is even more extraordinary when the signing allegedly took place in Mr Scott's office. The "natural course" would surely have been to leave two duplicate originals with Mr Scott.

219 Mr Maxwell allegedly divided his original contracts into two groups, keeping one group in his house and the other group in his car. He eventually left the second group with Mr O'Keefe for a period of time. Later, according to Mr O'Keefe, Mr Maxwell took another two original contracts to Mr O'Keefe. Then without any request from Mr Scott, Mr Maxwell took the group of contacts from his home and on another occasion the group of contracts held by Mr O'Keefe to Mr Scott's office. Mr Maxwell's explanation for these various steps was, in my opinion, quite unconvincing, particularly why he left one set of contracts with Mr O'Keefe and why he subsequently took both sets to Mr Scott. As previously noted, Mr Maxwell seemed to change between three different explanations for leaving the contracts with Mr Scott - conveyancing, "somewhere to leave them" and "inadvertently" leaving them there with other third party contracts. Mr O'Keefe gave two explanations for Mr Maxwell taking the contracts back - conveyancing and planning approvals.

220 As Mr Northrop submitted, all of this effort by Mr Maxwell in creating, signing, separating, distributing, regathering and taking the contracts to Mr Scott took place even though Mr Maxwell said in evidence that as far as he was concerned because of the relationship between the parties there was no need for these contracts.

221 Fourthly, it is quite significant, in my opinion, that in none of his correspondence did Mr Maxwell ever ask Mr Scott to return to him a set of the 17 duplicate original contracts of sale. On the contrary, in his strongly worded letter dated 10 May 2003 instead of accusing Mr Scott of not returning a set of contacts to him Mr Maxwell falsely stated that:

"my 17 signed contracts have been with a lawyer ever since you signed them."

Mr Northrop submitted that if, as Mr Maxwell now claimed, Mr Scott held all 34 duplicate original contracts then Mr Scott would have immediately known that this statement was false. On the other hand, he submitted that, even though Mr Scott would have known that he had not signed 17 contracts of sale, Mr Maxwell was attempting to bluff him into agreeing to sell some lots.

222 Fifthly, it should be noted that the handwritten list of lot sales sent in June 2002 to Mr Scott by Mr Maxwell with his proposed letter to the bank manager dated 20 June 2002 showed Medley Close as the purchaser of only 13 lots. Yet by that time, according to Mr Maxwell, he had at least 15 signed contracts of sale. The fact that the extra two contracts were not signed until at or about this time may explain why lots 52 and 53 were not recorded as sold to Medley Close. But it seems to me to be an extraordinary omission that lot 38 was not recorded by Mr Maxwell as sold to Medley Close and an even more extraordinary fact that lot 12 was said to have been sold to another entity and a deposit paid. I consider that these omissions cast serious doubt on the claim that by that time Mr Scott had signed at least the 15 contracts of sale. The veracity of the list is also damaged by Mr Maxwell's evidence that the list was just something prepared to help Mr Scott with the NAB. I see no reason to doubt Mr Scott's evidence that he told Mr Maxwell that he was not impressed with Medley Close being listed as a purchaser.

223 There were other lists of lot sales, including Mr Maxwell's own handwritten list, which did not completely fit in with his version of events. Mr Maxwell's handwritten list did not have Medley Close named as the purchaser of Lots 52 and 53. Another mainly typed list, which had some handwritten alterations in red by Mr Cleary, had no one named as the purchaser of Lots 12 and 38 and in respect of Lot 52 the typed words "Medley Close" had been crossed out and replaced with the words "Delaware Nominees" in handwriting. Mr Cleary said that he handwrote Delaware Nominees' name on the list as purchaser of Lot 52 because Mr Scott's company was going to purchase it. He denied speaking to Mr Maxwell about Medley Close purchasing Lot 52. Mr Maxwell's copy of the typed list had the handwritten words "Medley Close (signed contracts)" inserted in respect of Lots 12 and 38, and in respect of Lot 52 the words "Delaware Nominees" had been whited out and replaced with a further reference to "Medley Close" in handwriting using a blue and a black pen. Mr Maxwell agreed that probably he had whited out the words "Delaware Nominees." He said that he did this because he had a signed contract for Lot 52.

224 Of course, the fact that Medley Close's name appeared many times on these lists also did not completely fit in with Mr Scott's and Mr Cleary's version of events. It seems quite strange that Medley Close's name appeared on the lists. Nevertheless, it seems to me to be likely that, because there had been discussions with Mr Maxwell about Medley Close possibly buying some lots, the entries were left uncorrected in the various drafts of the lists being used by the parties. I accept Mr Scott's and Mr Cleary's evidence that the formal list kept on their computer from which they finally worked contained no entry in respect of Medley Close. In the final analysis, the onus is on Medley Close to establish on the balance of probabilities that there were 17 contracts of sale signed by Mr Scott on behalf of Moorabool and given the discrepancies in the lists prepared by Mr Maxwell himself I am satisfied that the various lists, although they remain a bit of a mystery, do not assist Medley Close.

225 Sixthly, it is interesting to note that it would appear that from an early date Mr Maxwell had his eye on 17 of the larger lots with their potential for development as dual occupancies but that he was keeping his options open until approval for dual occupancies was obtained. Mr Northrop submitted that this conclusion could be drawn from the reference to "our dual occupancy joint venture involving another 17 lots", in Mr Maxwell's letter to Mr Chiodo dated 16 May 2002, which would be "naturally voided" in respect of any sites that did not get approval. Mr Northrop noted that it was in about December 2002 that Mr Maxwell started to receive the permits for dual occupancy and that it was at this time that Mr Maxwell raised with Mr Scott the question of increased remuneration and the lodging of a caveat. This, he submitted, was consistent with Mr Maxwell's interest in the 17 lots only if they could be developed as dual occupancies.

226 Another reason for doubting Mr Maxwell's version of events is that on occasions he seemed to be suggesting that even if there were not 17 contracts of sale in existence, there were 13 or 15 such contracts of sale. This inconsistency did not engender confidence in the veracity of Mr Maxwell's evidence.

227 Counsel for the plaintiffs advanced a number of arguments in support of the submission that I should find that there were 17 contracts of sale signed by Mr Scott. First, there was the rather coy response by Mr Scott's then solicitors when asked by Mr Maxwell's then solicitors in July 2003 "to advise whether the purchase of the 17 lots by Medley Close Pty Ltd is a matter of dispute." Rather than denying outright that Moorabool had ever entered into 17 contracts of sale to Medley Close, Clayton Utz replied that their client "disputes the existence of legally enforceable contracts regarding the 17 remaining lots." On its own, this response might have suggested that there had been 17 contracts of sale but that they were not "legally enforceable." However, it appears that the wording was based on Mr Scott's specific instructions given at a time when he had not revealed to his solicitors the existence of the nine original contracts of sale. Moreover, Mr Northrop submitted that the correspondence between the solicitors needed to be read as a whole. He pointed out that nowhere in the correspondence did the plaintiffs' then solicitors refer to the allegation that Mr Maxwell had given all 34 duplicate originals to Mr Scott or to the allegation that Mr Scott had refused to return any of the contracts to Mr Maxwell. Instead there was confusion over whether or not the documents held by the plaintiffs' solicitors were originals or copies. All of this suggested, Mr Northrop submitted, that Mr Maxwell's initial instructions to his first solicitors were not consistent with his later evidence. Thus, neither side can gain much comfort, in my opinion, from this exchange of correspondence between solicitors.

228 Secondly, Mr Heaton submitted that the best evidence that the 17 lots were sold to Medley Close is that unlike the other 63 lots they were not sold to third parties. Mr Heaton described this as "strong and compelling evidence." I do not agree. One reason why the 17 lots were not sold to third parties is that Mr Maxwell, who was in charge of sales, simply kept these lots back because they were the ones he planned to buy if the dual occupancy approvals came through. It would have been very easy for Mr Maxwell to put off any approaches by potential purchasers of these 17 lots. As I have previously said, I do not accept Mr Scott's evidence that he told Mr Maxwell not to sell those lots, particularly given that Mr Cleary thought they were for sale. But neither Mr Scott nor Mr Cleary would have been aware of what Mr Maxwell was telling potential purchasers about which lots were for sale.

229 Next, there was the evidence which the plaintiffs contend establishes that these 17 contracts of sale were seen by persons other than Mr Scott and Mr Maxwell. Ms Connoley, Mr O'Keefe, Mr Carr, Mr Crawford and Mr Muller all gave evidence more or less to this effect, but most of this evidence was heavily qualified after cross-examination. No satisfactory or credible explanation could be given by any of Mr Carr, Mr Crawford or Mr Muller as to why he was looking at a bundle of Medley Close contracts in the first place. When pressed, it became apparent that at best what each one of them might have looked at was not necessarily one of the 17 contracts of sale because each of them was not familiar with Mr Scott's signature, had not really read the contract or done more than flick through it, did not know exactly how many contracts were in the bundle he claimed to have seen, and was really proceeding on the basis that what they had looked at was what Mr Maxwell had said it was. There were other minor but different discrepancies in each of these witness' evidence, including Mr Muller wrongly stating that he had seen a contract for Medley Close to purchase lot 79. In no way could the evidence of these witnesses be regarded as a reliable basis for finding that the 17 contracts of sale had existed. Moreover, Mr Muller's reliability was thrown into doubt by Mr Maxwell's reluctant statement that it was Mr Muller who had helped him create the false contracts.

230 Ms Connoley would have had opportunity to look at a bundle of Medley Close contracts, but particularly given her lack of knowledge about Mr Maxwell's and Medley Close's activities, I found her explanation as to why, how and when she had looked at the documents both vague and unconvincing. For example, from her estimate of the height of the bundle it would appear that she had looked at over 80 contracts. Even if she had looked at contracts lying around the house, I cannot be satisfied that they were part of the 17 Medley Close contracts because she was not familiar with Mr Scott's signature. Like other witnesses, much of what she said about the features of the contracts could have come from Mr Maxwell.

231 Mr O'Keefe's evidence stood in a different position. His evidence about receiving from Mr Maxwell 15 and later another two original contracts of sale in which Medley Close was the purchaser was such that I cannot find that he was mistaken or confused or misled about what he received, counted and read. He was either telling the truth and Mr Scott was not or Mr Scott was telling the truth and Mr O'Keefe was not. Apart from Mr Maxwell's statement that he took the contracts to Mr O'Keefe because he was a director of Medley Close, the only explanation for this unusual conduct was Mr O'Keefe's suggestion that the contracts were given to him "for safe-keeping." I find this to be most unlikely. On balance I cannot accept Mr O'Keefe's evidence that he received the 17 contracts of sale. I have reached this conclusion without having regard to other disputed evidence given by Mr O'Keefe.

232 Nevertheless, it is appropriate to refer at this stage to this other evidence of Mr O'Keefe. Counsel for the plaintiffs objected to this evidence about the signing of the Heads of Agreement as a collateral attack on credit. It seems to me, however, that it was admissible given that the plaintiffs had pleaded in the particulars to paragraph 8A(c) of their Further Amended Reply and Defence to Counterclaim dated 3 November 2003 that the Heads of Agreement constituted affirmation by the defendants of the 17 contracts of sale. Mr Heaton argued that it was only relevant to know that Mr Scott and Moorabool had signed the Heads of Agreement, not whether Mr Maxwell and Medley Close had done so. I do not agree. Given Mr White's evidence that Mr Scott had said he would only sign if the other parties had signed, it is important to know whether the Heads of Agreement was a genuine document or whether it was presented to Mr Scott on a false basis. I consider that Mr O'Keefe's very detailed account about the signing of the Heads of Agreement was not simply mistaken but false. That document cannot have been executed by him at Mr Maxwell's home in Geelong on the morning of 5 May 2003 as Mr O'Keefe claimed. I accept Mr White's evidence, which was supported by Mr Scott's evidence, that the Heads of Agreement were executed in the late afternoon when Mr O'Keefe on his own evidence was not in Geelong. Thus, even without Mr Holland's persuasive analysis of the signatures, I find that it is not Mr O'Keefe's signature on the Heads of Agreement, despite his claim that it was his signature. The Heads of Agreement therefore becomes another document falsified by Mr Maxwell because he returned it to Mr White, 15 to 20 minutes after it had been given to him, having purportedly been signed by Mr O'Keefe as a director of Medley Close. Mr Maxwell's evidence that he saw Mr O'Keefe sign the Heads of Agreement was also false. It also follows that Mr Scott's and Moorabool's execution of that document was obtained on a false basis. I return to the question of affirmation below.

233 None of the witnesses who allegedly saw the 17 contracts of sale could be described as independent as they were all friends of Mr Maxwell. Further, it could be said that Mr O'Keefe, Mr Muller and Ms Connoley all have a financial interest in the outcome of this ongoing dispute with Mr Scott. Interestingly, Mr White, who could have been regarded as independent, was named in the particulars given in the Further Amended Statement of Claim as having seen the 17 contracts of sale, when they were in the possession of Mr Maxwell and Mr O'Keefe, whereas Ms Connoley, Mr Carr, Mr Crawford and Mr Muller were not mentioned. However, Mr White denied ever seeing any such contracts.

234 Counsel for the plaintiffs submitted that Mr Maxwell would not have spent money in having plans drawn up and making application for dual occupancy permits unless he already held signed contracts of sale. I do not agree. As Mr Northrop submitted, Mr Maxwell was wanting to keep his options open in case approval was not obtained. I have no doubt that the question of Medley Close purchasing some lots was discussed between the parties and that Mr Maxwell deliberately held back from sale what he considered to be the best lots for dual occupancies. I believe that he considered or hoped that Mr Scott would be prepared or persuaded to sell to Medley Close whichever of these lots it wanted when the time came.

235 Counsel for the plaintiffs also pointed to the joint purchase of Lot 79 by Mr Maxwell and Mr Muller through another company Bellvue Constructions Pty Ltd, in anticipation of developing Lots 79 and 80 as a child care centre. But it would appear that this purchase was made in 2003 well after the dispute between Mr Maxwell and Mr Scott had broken out and at a time when Mr Maxwell knew that Mr Scott was denying the existence of the 17 contracts of sale and that he did not have any documentary proof to contradict Mr Scott. To me this illustrates that Mr Maxwell was a person who was prepared to take risks, rather than confirming the existence of the 17 contracts of sale. The same can be said about the sale in May and June 2003 by Medley Close to third parties of three of the lots (2, 35 and 46). This was after the Heads of Agreement had fallen through and Medley Close had no documentary proof that it had purchased these lots other than falsified contracts.

236 In passing I note that the plaintiffs appear to me to have missed an opportunity to strengthen their claim about the 17 contracts of sale. Given that Medley Close had applied for town planning permits for at least Lots 2 and 49 by the end of August 2002, it was surprising to me that more of the documentation supporting these applications was not produced even if it had to be by way of subpoena to the Shire of Melton. According to Mr Maxwell's evidence, the original 17 contracts of sale were probably still in his possession in August 2002. I would have expected that Medley Close would have had to provide the Shire with some evidence of its right to develop the various lots and the best way that this could have been done would be by attaching a copy of the relevant contract of sale to each application. In the absence of such documentation, one can only speculate what the Shire records would have revealed.

237 Mr Maxwell gained some support from Mr White's evidence that when things were running smoothly between the parties, Mr Scott and Mr Cleary had both said to him that "Mr Maxwell had purchased blocks." I accept that Mr White was an honest witness but it does appear to me that in the circumstances he may have been mistaken in remembering discussions with Mr Scott or Mr Cleary about the possibility of Mr Maxwell purchasing blocks or about the fact that Mr Maxwell had indicated an interest in purchasing blocks as a statement by Mr Scott and Mr Cleary that Mr Maxwell had purchased blocks. It should also be remembered that Mr White could not recall any claim being made by Mr Maxwell at the meeting at the Sheraton Hotel that Medley Close had purchased 17 lots or that Mr Scott had refused to return any of the 34 contractual documents which he had signed on behalf of Moorabool.

238 Mr Maxwell relied heavily on the fact that during the negotiations between the parties, Mr Scott had offered in his letter dated 8 April 2003 to sell to Mr Maxwell "10 blocks from the venture" on the basis that "the balance of the blocks in question namely 7 blocks are returned to the property venture." Reference was also made to the Heads of Agreement which provided for Medley Close to purchase 11 lots. This was evidence, Mr Maxwell said, supporting the existence of the 17 contracts of sale. In my opinion, this position fundamentally misunderstands the nature of negotiations and compromises. The fact that Mr Scott agreed to settle this wide-ranging, costly and disruptive dispute with Mr Maxwell involving three separate developments in part on the basis of accepting that Medley Close could purchase 10 or 11 of the 17 lots does not mean, in my opinion, that there had ever been 17 contracts of sale signed. Negotiating and reaching a settlement often requires parties to compromise by shifting their stance. It would be a mistake, in my opinion, to read too much into the terms of Mr Scott's without prejudice letter of 8 April 2003 or the Heads of Agreement. I say this notwithstanding the use of the phrase in the 8 April 2003 letter that seven lots were to be "returned to the property venture." Despite the strong submission that this was a recognition that 17 lots had come out of the venture when they were sold to Medley Close, I do not read the letter in this way. To me it is simply referring to the fact that of the 17 lots in dispute, 10 were to be sold to Mr Maxwell/Medley Close and the remaining seven were to be retained by Moorabool.

239 I therefore reject Mr Maxwell's evidence that there were 34 duplicate original contracts signed by Mr Scott on behalf of Moorabool. Even if I had found that Mr Maxwell was correct in saying that 17 contracts of sale had been entered into by Moorabool and Medley Close, there would remain very real issues about whether Medley Close could enforce those contracts. I turn then to a consideration of these issues on the assumption that Mr Scott had signed the 17 contracts of sale.

240 First, there is the defendants' argument that Mr Maxwell, to Medley Close's knowledge, breached his fiduciary duty to Moorabool. As Moorabool's project manager and sales agent, Mr Maxwell owed it fiduciary obligations. Mr Northrop submitted that in breach of his fiduciary obligations, Mr Maxwell had identified each of the 17 lots as suitable for future dual occupancy development with the resultant increase in the value of those lots but that he had not disclosed that he had taken or would be taking steps to obtain approval for dual occupancy development or that he had entered into a dual occupancy joint venture arrangement with Mr Chiodo prior to the execution of the 17 contracts. At 700 or more square metres 15 of the 17 lots were some of largest lots. At least 11 of the lots (including all nine lots the subject of the contracts prepared for the NAB) were on a corner. Thus, the 17 lots had the potential to be developed as a dual occupancy. Mr Northrop relied upon Mr Maxwell's own handwritten list of lot sales as further evidence that Mr Maxwell had early on identified each of the 17 lots as suitable for dual occupancy. The first thing written against each of the 17 lots are the words "Dual Occ." It would appear that the word "Medley" was subsequently added to each of the relevant lines apart from Lots 52 and 53. This was the list which Mr Maxwell initially said he continually updated but when the references to dual occupancies were pointed out to him he said that the list was not prepared until much later in 2002 when all the buyers were known. Given the untidy and uneven appearance of the list, including many entries crossed out and even a few gaps in the naming of a purchaser, I have no doubt that Mr Maxwell's first statement was correct - it was a continually updated record.

241 Initially Mr Maxwell said that he did not disclose to Mr Scott his intentions regarding the lots he was interested in purchasing. Indeed, he described his joint venture arrangement with Mr Chiodo as a "hidden incentive." I reject Mr Maxwell's later change in his evidence that he "would have discussed" his dual occupancy applications with Mr Scott. This is important because I do not think it was sufficient disclosure for Mr Maxwell to forward to Mr Scott in March 2002 the "property appraisal" prepared by Mr Colman which did refer to the "dual occupancy potential" of the lots 700 square metres and above and his own letters dated 3 and 23 March 2002 with their cryptic reference to "12 x 700 sq mtrs, (dual oc)" obtaining a price of $89,000 per lot. It should be noted that in fact neither of these references fully disclosed the extent of the dual occupancy potential. Mr Colman referred to lots 700 square metres and above, whereas two of the 17 lots (12 and 38) were less than that size. Mr Maxwell referred only to 12 lots at 700 square metres and did not mention the five lots of greater size (2, 30, 31, 52 and 53) and the two lots of lesser size which later formed part of 17 lots purportedly purchased by Medley Close. There was some additional disclosure in that Mr Scott said that he had received a plan with possible dual occupancies marked on it at about the time the sale of the lots started.

242 However, as Mr Northrop submitted, my finding that Mr Maxwell did not tell Mr Scott at or before the time the 17 contracts of sale were signed that he was intending to seek approval for dual occupancy development of these 17 lots and that he had entered into a dual occupancy joint venture arrangement with Mr Chiodo meant that Mr Scott was not fully informed when it came to assessing whether the price offered by Medley Close was reasonable. This is sufficient to constitute a breach of fiduciary duty whether or not the resultant sales were at a proper value. Although there is no evidence that the 17 lots were sold at an undervalue, it is worth noting that the three lots (2, 35 and 46) sold by Medley Close, almost a year after each had been "purchased" for $90,000, were respectively sold for $160,000, $164,000 and $164,000.

243 In my opinion, Mr Maxwell has failed to discharge the onus of showing that as the agent of Moorabool the purchases by his company, Medley Close, were made "at arm's length" and "after a full disclosure of all that he knew with respect to the property."[5] I am not satisfied that Mr Maxwell furnished "his employer with all the knowledge he himself possessed" or that he gave as much information and advice to Moorabool about the potential value of these 17 lots as he would have done if Moorabool had been dealing with a third person.[6]

244 It was pleaded in the Further Amended Reply and Defence to Counterclaim that even if there had been breaches of fiduciary duty, Moorabool had, with full knowledge of dual occupancy approvals and increased value of the lots, affirmed one or more of the 17 contracts of sale. The affirmation was said to be found in a variety of conversations between Mr Maxwell and Mr Scott, which I do not accept took place, and in Mr Scott's without prejudice letter of 8 April 2003 containing his offer of settlement of all three disputes between Mr Scott and Mr Maxwell, and in the Heads of Agreement or in the discussions containing the negotiations which resulted in that document. I fundamentally disagree with the argument that affirmation of these 17 contracts can be constituted by either the negotiations between the parties in an attempt to compromise their dispute or the document containing the terms of the settlement of their dispute. I repeat what I said earlier about a misunderstanding of the nature of negotiations and compromises.

245 In all the circumstances, I would not be prepared to enforce the 17 contracts of sale as Medley Close was aware of the breaches by Mr Maxwell of his fiduciary duty to Moorabool.

246 A second reason why Medley Close cannot succeed in its claim in respect of the 17 contracts of sale, even if they were entered into by Moorabool, is that Medley Close repudiated the contracts by failing to pay, or offering to pay, the required deposit of $2,000 in respect of each contract. I do not accept Mr Maxwell's evidence that Mr Scott told him not to draw a cheque for $30,000 at the time of the signing of 15 contracts of sale, because each of the deposits could be taken out of his $2,000 commission. Although the parties may not have expressly discussed the question, it seems to me to be a ludicrous proposition that Mr Maxwell could earn a commission on a sale of one or more of the lots to himself or his company. The agreement about the payment of commission to Mr Maxwell in respect of each sale made by him must, in my opinion, be treated as applying only to a sale to a third person.

247 Strong confirmation of this situation is to be found in Mr Maxwell's letter to Mr Scott of 28 February 2003 where he referred to his agreement that there would be no fee payable on the 17 lots purchased by him. The omission of any mention that it had also been agreed that the fee otherwise payable would be treated as the deposit is telling.

248 The situation is, therefore, that no deposit was ever paid in respect of any of the 17 contracts of sale. The date for payment of the deposit of $2,000 was left blank in the Particulars of Sale page and the relevant provisions of the contracts of sale (general conditions 6.2 and 6.3) do not fill the gap. In my opinion, this meant that the deposit was payable immediately. Even if this not be correct, and the deposit was only payable on demand, I consider that the false stance taken by Mr Maxwell on behalf of Medley Close that no deposit at all was payable because it had been set-off against his commission constituted a repudiation of the 17 contracts of sale, which Moorabool has accepted by its conduct in resisting Medley Close's claim. Alternatively, in respect of the nine contracts of sale, the letter from Moorabool's solicitors, Clayton Utz, dated 22 August 2002 constituted acceptance of Medley Close's repudiation.

249 Mr Heaton submitted that there had been neither a request for payment of the deposit nor any refusal to pay the deposit. Whilst the former point is correct, the latter point is met by the fact that Medley Close purported to set-off Mr Maxwell's commission against the deposit. As I have said, in my opinion that constituted a repudiation by Medley Close. It was submitted that repudiation is not to be lightly inferred and reference was made to the decision of Gibbs CJ in Shevill v the Builders Licensing Board[7]. However, I find nothing in that case to suggest that the conclusion that Medley Close repudiated the contracts is not correct. In my opinion, Medley Close clearly evinced an intention no longer to be bound by the contract or showed that it intended to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way[8], when it claimed that the deposit was not payable because it had been set-off against the commission.

250 Finally, it was submitted by the defendants that the Court should decline to make an order for specific performance on the basis that Mr Maxwell and Medley Close do not come to Court with clean hands. The conduct constituting the unclean hands on the part of the plaintiffs is directly and immediately related to the relief sought.[9] Of course, on the present hypothesis, Mr Scott would also not have clean hands because he would have falsely denied the existence of the 17 contracts of sale. Nevertheless, in my view, the Court should not reward the plaintiffs by ordering specific performance in circumstances where Mr Maxwell has been found to have falsified a number of documents and given false evidence about critical events. Medley Close would therefore be left to its remedies at common law.

251 Two other grounds were relied on by the defendants in support of their submission that the plaintiffs should not succeed, even if I found that there had been 17 contracts of sale entered into between Moorabool and Medley Close. I have left these grounds to last because I do not consider them to have any merit.

252 Mr Northrop submitted that Medley Close failed to provide a directors' guarantee as required by special condition 8 of each contract of sale. However, that condition required a corporate purchaser to "procure the execution by each of its directors of the Guarantee annexed to that part of this Contract to be held by the Vendor", and no guarantee was annexed. This meant, in my opinion, that there was no breach by Medley Close in not procuring a guarantee signed by the directors because the requirement by the vendor simply did not arise. The situation may well have been different if Moorabool had later presented a form of guarantee to be signed by the directors, but this was never done. This situation is to be contrasted with other corporate purchasers which were apparently sent a letter in about December 2002 requesting that an enclosed guarantee be signed by the directors. Further, it is therefore irrelevant, in my opinion, that the guarantee subsequently produced by Medley Close was not signed by "each of its directors." Mr Carr, who was a director, did not sign whereas Mr Maxwell, who was not a director, did sign the guarantee together with the other director, Mr O'Keefe. It is also irrelevant that this guarantee was only one document, so that there was no guarantee in respect of every one of the 17 contracts of sale.

253 The second unsuccessful ground advanced by the defendants was that even if Mr Scott had signed the 17 contracts of sale on behalf of Moorabool, he was an agent who was not authorised in writing to sign on behalf of his principal. Therefore, s.126 of the Instruments Act 1958 had not been complied with. I disagree. In my opinion, written authority is not required where a contract is executed not by an individual, Mr Scott, as an agent of the company, but by the company, its execution being authenticated by Mr Scott's signature.[10] I have no doubt that as a director and major shareholder Mr Scott had the authority of Moorabool to sign on its behalf.

254 Given my rejection of the defendants' submission concerning s.126 of the Instruments Act 1958, it is not necessary to consider whether the plaintiffs have established the estoppel pleaded in response to that defence.

Medley Close's Alternative Claim for Specific Performance of Nine Contracts of Sale

255 Having rejected Mr Maxwell's evidence about the signing of 17 contracts of sale, I turn to consider the status of the nine contracts of sale admittedly signed by Mr Scott in Mr Maxwell's car. Mr Scott's evidence was that these contracts were not intended to have legal effect. They were signed at Mr Maxwell's request as a temporary measure to be used in support of the presentation to the NAB pending receipt of other contracts.

256 Mr Northrop made the valid point that the circumstances of the signing of the contracts in Mr Maxwell's car suggested the need for something to be done quickly, which was to have them ready for the impending meeting with the NAB. They did not suggest that the signing was a culmination of negotiations between Mr Maxwell and Mr Scott about Medley Close purchasing a number of the lots. If that were the case there would have been no urgency about the signing of these contracts. They could just as easily have been signed at some convenient time in one of Mr Maxwell's frequent visits to Mr Scott's office.

257 Mr White's initial evidence about the meeting at the Sheraton Hotel was that both Mr Maxwell and Mr Scott had agreed that some contracts had been signed for the purpose of obtaining finance from the NAB. When he returned to clarify his evidence, one of the matters he qualified was that he was not sure whether Mr Maxwell had agreed with what Mr Scott had said about contracts being signed for the NAB.

258 I accept Mr Scott's evidence about the circumstances in which the nine contracts were signed and in particular that he and Mr Maxwell did not intend the temporary contracts to have legal effect. I agree with Mr Northrop's submission that this evidence of subjective intention can contradict the prima facie position resulting from the existence of the nine executed contracts. In Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd[11], Mahoney JA stated:

"... if A, notwithstanding what he said, had the actual subjective intention that no contract should result, a binding contract may not be held to exist. If the terms of A's promise were such that B, as a reasonable man, would take it to involve a legal commitment and B did not know that A did not intend that there be a binding contract, then a binding contract would result. A would not be permitted to set up, against such a meaning of what he had said, a contrary subjective intention.

But the result would not, I think, be the same if B knew of A's actual subjective intention. The law would not, I think, impose the relationship of contract where, eg. A though [sic] he was play-acting and B knew of that fact, A's actual subjective intention would be effective to prevent the contract arising. A fortiori, if both A and B had the intention that no contract should result, and each knew of it, then none would be imposed. And, I think, this notwithstanding that a reasonable bystander would take from what they said and did that there was an exchange of congruent promises and a mutual purpose to contract. I put aside for this purpose special cases, of estoppel, third party rights, and the like.

The result is therefore that intention to contract, in the subjective sense, is relevant to but not determinative of the existence of a binding contract. It acts, in a sense, as a limiting factor, that is, as a reason for not giving to what on the face of it is an exchange of congruent promises, the legal consequences which would otherwise be given to it And on this basis it is, in principle, relevant to know what was the actual subjective intention of each party, in the example that I have given, in order to determine whether the legal relationship of contract is to be held to exist. More correctly, it is relevant to know the intention of the one party where it is the intention of or known to the other."[12]

Admission of such evidence does not breach the parol evidence rule. As Mahoney JA said:

"The basis of the rule, so understood, would not prevent the admission of evidence to show that, whatever be the terms or the meaning or effect of them, it was intended that they should not have contractual operation. Parties may, for example, be prevented from establishing by evidence that it was not the intention of one or perhaps both that the terms mean what they say but that, I think, does not go to the intention to contract at all ... But there is, in general, a considerable body of authority for the view that extrinsic evidence may be admitted to disprove contractual intention ..."[13]

Moorabool has therefore discharged what has been said to be the heavy onus of disproving an intention to contract.[14]

259 There is a further argument about the nine contracts of sale which needs to be considered. Mr Heaton submitted that Mr Scott should not be permitted to put forward the fraudulent purpose for which he says the contracts were executed by way of a defence to Medley Close's claim. He referred to the decision of Lawrence and Lush JJ in Gascoigne v Gascoigne[15] where a husband who had put property in his wife's name in an attempt to defeat creditors, with her knowledge and connivance, was not allowed, in an action by him for a declaration that his wife held the property as trustee for him, to set up his own fraudulent design to rebut the presumption that the conveyance was intended as a gift to her notwithstanding that she was a party to the fraud. I do not consider that this case applies to the present situation. Here, on the basis of my finding, both Moorabool and Medley Close have agreed to sign nine contracts in order to mislead the NAB. Moorabool is not seeking to enforce those contracts or any other relief in respect of them. Rather, it is Medley Close which is seeking to enforce the nine contracts despite the fraudulent purpose for which they were signed. In my opinion, Medley Close should not be permitted to do so when it was a party to the scheme.

260 As the nine contracts of sale were never shown to the NAB and no third parties were misled it is unnecessary to consider arguments about what the position would then have been.

261 If I am wrong about submissions based on the issue of the lack of intention to create legal relations then I do not consider that Mr Scott's subsequent conversation with Mr Maxwell can be regarded as constituting an agreement to terminate the contracts. In my opinion, Mr Maxwell's failure to object to Mr Scott's statement could not be treated as evidence of his consenting to that course. Nevertheless, the nine contracts of sale cannot be enforced by Medley Close for the reasons discussed above in respect of the 17 contracts of sale, namely breach of fiduciary duty and repudiation by purporting to set off the commission against the deposit. Again, I would not be prepared to order specific performance.

Moorabool's Claim for Removal of the Caveats and Compensation

262 Despite the fact that the second caveats, which had been lodged by Mr Maxwell on or about 18 June 2003, were removed by agreement on or about 26 June 2003 in order to allow completion of the sale of the 63 lots, Moorabool sought compensation under s.118 of the Transfer of Land Act 1958 ("the TLA") for the losses it suffered as a result of the lodging of the caveat without reasonable cause. The second caveats claimed that Moorabool held the Hillside land as trustee for itself and Mr Maxwell pursuant to a constructive trust. This claim was not pursued by Mr Maxwell. In any event, I do not consider that his entitlement to be paid a fee of 10% of the net profits of the development gave him any caveatable interest. He was not a joint venturer. Rather, he was engaged as a project manager at a fee fixed by reference to a percentage of profits instead of a specified amount.

263 However, I consider that the decision of Hayne J in Commonwealth Bank of Australia v Baranyay[16] makes it clear that to defeat a claim under s.118 the caveator does not need to establish that there was a caveatable interest. The claimant is required to show more than that there was no caveatable interest. Hayne J held that, without seeking to give "an exhaustive definition of the circumstances covered by the very general expression 'without reasonable cause'",[17] the foundation for reasonable cause would often be in the words of Wootten J in Bedford Properties Pty Ltd v Surgo Pty Ltd[18]:

"not the actual possession of a caveatable interest but an honest belief based on reasonable grounds that the caveator has such an interest."

Hayne J also held that the authorities made it clear that the onus was on the claimant to show that the caveator acted without reasonable cause.[19]

264 Part of the explanation for the disputes in this proceeding lies, in my opinion, in Mr Maxwell's feeling that his contribution to the apparent success of the development had been undervalued by Mr Scott and that it should have been recognised by an increased remuneration and/or opportunity to purchase some of the lots at a discount. I have previously referred to Mr Maxwell's complaints in his evidence that Mr Scott had not taken into account all of the work he had done throughout the project for little financial return, whereas Mr Scott had "sat in his office" and not "done a thing" and had continued to earn income as an accountant. Mr Maxwell appeared to be particularly upset by the fact that Mr Cleary and Mr Robert Scott stood to benefit greatly from his efforts when they had merely "bought in for the ride." Mr Maxwell aptly described himself, in his own words, as "a bit bitter and twisted." His grievance led him, I believe, to attempt to force Mr Scott into giving him a greater share by threatening to bring the development to a standstill by the lodging of caveats. This tactic appears to have worked well for him once (with Marner), if not twice (the Deer Park development) before. This view is borne out by Mr Maxwell's own statements that the first caveat had been lodged "with total commitment to its cancellation in lieu of our proper and mutual undertakings" (Mr Maxwell's letter dated 15 March 2003) and, more significantly, that "the current caveat is only registered as a dealing tool" and that if there was no settlement to him "a further one can be instigated (on now 80 lots) to ensure all proceeds from sales withheld in lieu of" (Mr Maxwell's letter dated 15 June 2003). In my opinion, the practice of lodging caveats as bargaining chips should not be encouraged.[20]

265 Therefore, I consider that Moorabool has shown that Mr Maxwell did not have an honest belief based on reasonable grounds that he had a caveatable interest when he lodged the first caveat, let alone the second caveats.

266 Moorabool also sought compensation under s.118 of the TLA for the losses it suffered as a result of Medley Close lodging its four caveats over the 17 remaining lots. I have found that there were no such contracts of sale as claimed by Medley Close and that the nine contracts of sale which were signed were not intended to have legal effect. In the circumstances it follows that Moorabool has also shown that Medley Close did not have an honest belief or reasonable grounds that it had a caveatable interest in respect of any of the 17 lots.

267 Moorabool's entitlement to an order for the removal of the Medley Close caveats and to claim damages under s.118 of the TLA against Mr Maxwell in respect of the second caveats and against Medley Close in respect of the Medley Close caveats has therefore been established.

Orders

268 Once the parties have had the opportunity to consider these reasons, I will hear submissions on the form of the orders or directions which should now be made.

[1] See paragraph [131] below.

[2] [1991] VicRp 59; [1991] 2 VR 194

[3] [1987] HCA 5; (1987) 162 CLR 221

[4] [1991] VicRp 59; [1991] 2 VR 194 at 202

[5] McKenzie v McDonald [1927] VicLawRp 19; [1927] VLR 134 at 145 per Dixon AJ

[6] Haywood v Roadknight [1927] VicLawRp 74; [1927] VLR 512 at 521 per Cussen, McArthur and Lowe JJ

[7] [1982] HCA 47; (1982) 149 CLR 620

[8] [1982] HCA 47; (1982) 149 CLR 620 at 625-626 per Gibbs CJ

[9] Dewhirst v Edwards [1983] 1 NSWLR 34 at 51 per Powell J

[10] Richardson v Landecker (1950) 50 SR(NSW) 250 at 259 per Street CJ; Black v Smallwood [1966] HCA 2; (1966) 117 CLR 52 at 60 per Barwick CJ, Kitto, Taylor and Owen JJ and at 61 per Windeyer J; MYT Engineering Pty Ltd v Mulcon Pty Ltd [1999] HCA 24; (1999) 195 CLR 636.

[11] (1985) 2 NSWLR 309

[12] (1985) 2 NSWLR 309 at 330-331

[13] (1985) 2 NSWLR 309 at 333

[14] Edwards v Skyways Ltd [1964] 1 WLR 349 at 355 per Megaw J

[15] [1917] 1 KB 223

[16] [1993] VicRp 43; [1993] 1 VR 589

[17] [1993] VicRp 43; [1993] 1 VR 589 at 600

[18] [1981] 1 NSWLR 106 at 108

[19] [1993] VicRp 43; [1993] 1 VR 589 at 600 citing Kaihu Valley Reailway Co Ltd v Kauri Timber Co Ltd (1889) NZLR 403 and Young v Rydalmere Credits Pty Ltd (1963) 80 WN(NSW) 1463 at 1472.

[20] Goldstraw v Goldstraw [2002] VSC 491 at [39] and [42] per Dodds-Streeton J