Plaintiffs v First Defendant

TRADE PRACTICES - Whether first defendant engaged in misleading and deceptive conduct - Terms and scope of retainer - Whether solicitor acted in trade or commerce - Section 18 Australian Consumer Law - Dual Homes Pty Ltd v Moores Legal Pty Ltd and anor (2016) 306 FLR 227 and LT King Pty Ltd and anor v Besser and anor [2002] VSC 354; (2002) 172 FLR 140 referred to and followed.

NEGLIGENCE - Terms of retainer between plaintiffs and their solicitors - Whether there was a breach of retainer and/or duty of care on the part of solicitors.

1 The three current plaintiffs in this proceeding, Mr Nikolaos ('Nick') Konstandellos, Mr Alkiviadis ('Alex') Konstandellos, and Ms Lambrini Dounias ('plaintiffs'), are siblings. The third plaintiff and the fourth plaintiff[1] (the son of the third plaintiff) are the registered proprietors of properties at 42 Arunta Crescent, Clarinda ('Arunta Crescent') and 32 Springs Road, Clarinda ('Springs Road') respectively.

2 Mr Nick Konstandellos is engaged in the business of property development, with the assistance of his brother Alex. Mr Nick Konstandellos gave evidence that from time to time, he has procured other family members to make available their properties to secure loans for the purpose of funding his business activities. It is common ground that all dealings between the plaintiffs and each of the defendants and the first defendant's solicitors were conducted through Mr Nick Konstandellos.

3 The first defendant, Harplex Pty Ltd ('Harplex'), is an investment vehicle for an unnamed person. A principal of the firm of solicitors acting for Harplex, Mr Peter Szanto of Trumble Szanto Lawyers ('Trumble Szanto') is a director of Harplex, although his evidence is that he owns no shares in Harplex.

4 Messrs Nick and Alex Konstandellos have had other business dealings with Harplex. In 2010, they guaranteed a loan made by Harplex to Gardenia Lakes Shopping Centre Pty Ltd ('Gardenia Lakes') in the sum of $4.8 million, and a further loan of $700,000 made in November 2010. Apparently, Gardenia Lakes defaulted on these loans, and sums remain outstanding.

5 The second defendant, Kelly & Chapman, are a firm of solicitors based in Bentleigh. Mr David Denby of Kelly & Chapman was engaged by Mr Konstandellos in June 2013 to represent the plaintiffs in their dealings with Harplex concerning two loans secured by Arunta Crescent and Springs Road ('Clarinda loans'). Mr Denby died in early 2016.

The recovery proceeding and the settlement agreement

6 Turning to the chronology of events relevant to this proceeding, on 19 May 2011, the plaintiffs, including the fourth plaintiff, entered into Clarinda loans. There were two loans, one for $680,000, and one for $185,000, both secured by two mortgages over each of Arunta Crescent and Springs Road. The plaintiffs ceased servicing the Clarinda loans in late 2011.

7 On 11 September 2012, Harplex issued proceeding S CI 2012 05213 ('recovery proceeding') against the plaintiffs and the fourth plaintiff. On 21 December 2012, Harplex obtained judgment in default in the sum of $865,000 on account of the principal sum due, interest in the sum of $188,034.61, and costs of $4,200, totalling $1,057,234.60. The judgment also provided for Harplex to take possession of Arunta Crescent and Springs Road. A warrant for possession was issued on 9 January 2013 ('first warrant').

8 Following the issue of the first warrant, Mr Konstandellos commenced holding discussions with Trumble Szanto concerning the debt owed by the plaintiffs pursuant to the judgment obtained by Harplex on 21 December 2012 ("judgment debt"), initially with Mr Simon Tan, a solicitor under the supervision of Mr Szanto. On 27 March 2013, Trumble Szanto wrote to the plaintiffs as follows:

Dear Nick, Alex, Frank and Lambrini

re: Debt to Harplex Pty Ltd

Properties at 32 Springs Road and 42 Arunta Crescent

We refer to the above matter and recent communications. We confirm that on immediate payment of the sum of $20,000 in reduction of the above debt we will instruct the Sheriff of Victoria to hold the enforcement proceedings in abeyance for one month.

We further confirm that the mortgages on the two properties will be discharged on payment of the sum of $910,000, being $480,000 for Springs Road and $430,000 for Arunta Crescent. It is to be noted that these are not payout figures.

9 Following the receipt of this letter, three payments of $20,000 were credited to the plaintiffs' loan account, on 4 April 2013, 10 May 2013, and 27 June 2013. In early June 2013, the plaintiffs engaged Kelly & Chapman to represent them in their dealings with Trumble Szanto concerning Arunta Crescent and Springs Road.[2] On 11 June 2013, Ms Georgia Diamantopoulos of Kelly & Chapman wrote to Mr Tan as follows:

Further to our earlier telephone conversation, I confirm that we should hopefully be in a position to effect settlement of the above matter by Monday next week. Kindly advise:-

1. A venue for settlement. A CBD settlement would be preferable; and
2. The amount required to discharge the Mortgage as at Monday next, 17 June, 2013.

1. We would propose the venue for settlement at our offices, 10 Cecil Place, Prahran.
2. I will calculate the amount outstanding as at Monday June 27, 2013 and advise you accordingly in due course.

10 On 13 June 2013, Mr Tan sent an email to Ms Diamantopolous, as follows:

We provided a letter to your client in March which outlined the outstanding amount at that time as $910k.

Interest has been accruing on this amount and your client has also made a couple of payments in consideration for that interest.

As such, the $910k figure is a good estimate of the outstanding however there will be need [sic] added to that any further interest accrued and legal costs which you [sic] client it [sic] responsible for.

Once a date for settlement is finalised we will provide a 'to the dollar' figure your client owes taking into consideration the above.

Please also note and ensure your client is aware, that the amount requested is solely to discharge the mortgages in relation to the 2 properties and is not in settlement of the debts owed to my client by your clients, which are over and above the $910k.

Please advise as to a firm settlement date.

11 Notwithstanding the above, at this stage it appears that the parties were negotiating to discharge the mortgages over Arunta Crescent only. On 17 June 2013, Ms Diamantopoulos wrote to Mr Tan, as follows:

Further to our telephone conversation, I confirm as follows:-

1. Our client's lender is now ready to settle insofar as the property situate and known as 42 Arunta Crescent, Clarinda is concerned. I understand that an amount in the vicinity of $430,000 is outstanding with respect to that property.
2. A separate loan is being obtained with respect to the property situate at and known [sic] 32 Springs Road, Clayton and I am instructed that that loan should be proceeding to settlement in approximately two weeks.

Kindly obtain your client's instructions that it is in order to discharge the mortgage over the Arunta Crescent property and we shall then lock in settlement for, say, Thursday next, 20 June, 2013.

I await your further advice before arranging settlement with our client's lender.

Thank you for the information.

Our client will agree to settle on Thursday, June 20, 2013 at 10.30am at our offices on the following basis. Taking into consideration that only one property (42 Arunta Crescent) is being settled, the accrued interest and the settlement date, our client requires;

a) $450,000

b) $1375 for legal costs.

In return we will provide the title for the property and a discharge of mortgage.

Please make all monies payable to Trumble Szanto Lawyers.

13 Also on 17 June 2013, Mr Tan wrote to Ms Diamantopoulos regarding Springs Road, as follows:

Further to my previous email and in reference to the other property (32 Springs Road). We have possession of the property and have been holding off on selling it to give your client opportunity to make the relevant payment and retake possession of the property.

We have not received an 'interest' payment from your client for an extension of time for the month of June to settle the property. As such, in absence of a further payment or a settlement date being set, we will be proceeding to sell the property.

Your client has also just now, contact [sic] me by telephone to discuss the details of my previous email, disputing the figure of $450,000. I have discussed with my client who is willing to accept $430,000 in that regard.

1. we can proceed to settle Arunta Crescent this Thursday, on the basis of a settlement figure of $430,000, plus your costs of $1,375.00; and
2. you will be proceeding to a mortgagee sale of the Springs Road property if the June interest payment is nor [sic] received, or, alternatively a settlement date set for discharge of that property.

15 Mr Tan replied confirming that Ms Diamantopoulos' understanding of the proposed transaction was correct.

16 On the following day, 18 June 2013, Ms Diamantopoulos wrote to Mr Tan regarding the arrangements for settlement for the discharge of the mortgages over Arunta Crescent, as follows:

Further to yesterday's communications, I have been instructed to advise as follows:-

1. Our client proposes effecting settlement of the Discharge of Mortgage over 42 Arunta Crescent to take place Monday afternoon, 24 June, 2013 at say 3.00 pm on the basis of payment to your office an amount of $430,000.00, plus your costs of $1,375.00. Kindly confirm this arrangement and we will arrange settlement accordingly with our client's lender.
2. With respect to 32 Springs Road, our client is currently waiting on formal loan approval and then proposes settlement to take place immediately that loan is ready to settle.

We await your further advice with respect to this matter.

I would prefer a morning settlement, however if that is not suitable 3pm is ok with us. Please confirm.

In relation to 32 Springs Road, without a payment or a settlement date our efforts to sell the property are continuing.

18 Later that day, Mr Tan wrote to Ms Diamantopoulos, as follows:

Hi Georgia,

I am sorry for the recent misunderstanding and have instructions in relation to settlement, as follows:

1. Our client will accept settlement no later than 2pm on Monday June 24, 2013. This is on the basis of the sum of $430,000 being paid with legal costs in the sum of $1705.
2. If settlement does not occur before this time on the specified date then we rescind all offers to accept payment and we will proceed with the seizure and sale of both properties.

Hi Simon

Settlement has been changed to 2pm on Monday, with your additional costs of $1705.00 being agreed upon.

I shall advise further when finance has been approved with respect to the Springs Road property.

19 However, settlement did not proceed on 24 June 2013. On that day, Trumble Szanto wrote to Kelly & Chapman, as follows:

re: Harplex Pty Ltd

42 Arunta Crescent and 32 Springs Road, Clarinda.

We refer to the above matter and to your telephone call this morning.

We acknowledge your advice that your client is not in a position to settle the mortgages on 42 Arunta Crescent this afternoon as had been agreed. Our position in relation to this was made clear in an email dated June 18, 2013.

As such, we write to confirm the following:

1. All previous agreements for settlement are withdrawn;

1. We will be proceeding with the seizure and sale of 42 Arunta Crescent, Clarinda and with the sale of 32 Springs Road, Clarinda; and
2. Any offers from your client in relation to the settlement of the four mortgages on the properties will only be considered on a global basis, that is to say an all in figure for discharge of the mortgages on both properties.

20 Notwithstanding the above, on 25 June 2013 Mr Tan replied to Ms Diamantopoulos' email of 18 June 2013, confirming the time for the settlement of Arunta Crescent (which did not take place), as follows:[3]

Dear Georgia

Further to my conversation with Liz I provide the relevant cheque details for settlement tomorrow below;

1. check in the sum of $912,500.00 payable to Trumble Szanto Lawyers that is made up of $910,000 for the mortgage repayments and $2500 for legal costs.

21 On 25 and 26 June 2013, there were a number of telephone conversations between Mr Denby and Mr Szanto regarding the matter. By this time, Trumble Szanto had instructed the Sheriff's office to resume execution of the warrant. What was said during these conversations is somewhat contentious. However, Mr Szanto's evidence is that he told Mr Denby that if the plaintiffs could pay $40,000 by 3.30pm on the follow day, Harplex may consider that as 'an indication of their bona fide intentions', and accordingly, Harplex 'may be induced to forebear further execution of the warrant for up to six weeks.' Mr Szanto deposed that Mr Denby telephoned him later that day and agreed to this proposal. However, later that evening, Mr Denby sent an email to Mr Tan, as follows:

Following my conversations with Peter, I tried to call him at 6 p.m. As I don't have his email address to hand I am sending this to you.

My client is understandably concerned about handing over $K40 tomorrow without any certainty as to the final payout figure. He has therefore instructed me to put the following proposition:

(1) He will pay $K20 [sic] tomorrow by 3 p.m. being the usual monthly instalment;

(2) Your client will agree to take no further action in relation to both properties until 10 July;

(3) On or before 10 July your client will accept $K910 plus legal costs in full and final settlement.

(4) If not settled in full by 10 July, my client will not resist any enforcement proceedings.

I would be grateful if you would discuss this with Peter and revert to us as early as possible in the morning. I won't be in the office but you can communicate with Georgia, who can contact me if necessary.

22 On 26 June 2013, Mr Szanto provided his response to Mr Denby's proposal. His responses are highlighted (in bold italics) below:

Following my conversations with Peter, I tried to call him at 6 p.m. As I don't have his email address to hand I am sending this to you.

My client is understandably concerned about handing over $K40 tomorrow without any certainty as to the final payout figure. He has therefore instructed me to put the following proposition:

As is the usual practice, a final figure will be given when the arrangements for settlement are firmly fixed, not before.

He has therefore instructed me to put the following proposition:

(1) He will pay $K20 [sic] tomorrow by 3 p.m. being the usual monthly instalment;

(2) Your client will agree to take no further action in relation to both properties until 10 July;

(3) On or before 10 July your client will accept $K910 plus legal costs in full and final settlement.

(4) If not settled in full by 10 July, my client will not resist any enforcement proceedings.

I would be grateful if you would discuss this with Peter and revert to us as early as possible in the morning. I won't be in the office but you can communicate with Georgia, who can contact me if necessary.

My client will not be bound by a figure agreed for discharge three months ago and it is unreasonable of the borrowers to demand otherwise. The proposal is rejected.

If the $40,000 is received by 3:30pm today, we will call off the sheriff, otherwise he will proceed to obtain possession tomorrow morning.

23 Later on 26 June 2013, Ms Diamantopoulos wrote to Mr Szanto and Mr Tan, as follows:

We have just received notification from our client's banker that unconditional finance with respect to the property at 32 Springs Road, Clayton has now been approved. That means that finance for both the Arunta Crescent and Springs Road properties has been approved.

The bank anticipates being in a position to proceed to settle both properties on 10 July next.

On the basis of the above loan approvals our client is prepared to attend your office tomorrow morning to pay $20,000, being interest through to 10 July, 2013, being the date anticipated to settle on both properties with your client.

Kindly therefore:-

1. Advise that your client is agreeable to proceed to settlement of both properties on 10 July next and advise us settlement figures as at that date; and
2. Confirm that the sheriff will be called off, pending full settlement taking place on 10 July, 2013.

The copy of this email on Kelly & Chapman's file contained the following handwritten notation:[4]

4.05pm

T/A Simon Tan

- $20,000 cash by 6pm today

- settle $960,000 plus legals

T/A David - Agree - speak with Nick

T/A Nick - can't get money to them b/4 10 tom.

The copy of this email on Trumble Szanto's file has the following notation in Mr Szanto's handwriting:

24 About forty minutes later, Ms Diamantopoulos wrote again:

Following Simon's call earlier, I have spoken with our client who agrees to the following:-

1. He will have a bank cheque for $20,000 to your office by 10 am tomorrow. He cannot make it this afternoon.
2. He accepts settlement for 10 July, 2013 on the basis of a payout figure of $960,000, plus your fees.

Our client will agree to the below offer. Please ensure your client is here tomorrow to make the payment.

26 As it happened, settlement did not take place until 17 July 2013, but nothing seems to turn upon that. On 15 July 2013, Ms Diamantopoulos wrote to Mr Tan, as follows:

Good afternoon Simon.

Hope that you are well. Fingers crossed, but we should be in a position to settle this one on Wednesday, 17 July next - say 2pm at your office.

Kindly confirm the settlement fig.

Previous settlement figures apply with an increase to the legal costs of $300

So $960K for the principle (sic), $3,050 for the Legal Costs.

Please write to confirm the date for sure and I will have the relevant documentation prepared.

Finally, on 23 July 2013, Mr Tan wrote to Mr Denby's assistant, as follows:

Hi Pam,

We can confirm that the warrants have been recalled. We are currently arranging for the keys to be provided to our office at which time we will notify you they are available for pick up.

27 On 14 August 2013, Trumble Szanto wrote to Kelly & Chapman as follows (omitting the attached spreadsheet):

re: Harplex Pty Ltd

42 Arunta Crescent and 32 Springs Road, Clarinda.

We refer to the above matter and to previous correspondence.

We confirm that settlement was effected on July 17, 2013.

As a result of settlement the first mortgage loan was paid out.

Subsequent to settlement, you have requested an update as to the second mortgage loan, we enclose a spreadsheet in relation to this and can confirm that the amount outstanding as on August 19 2013 will be $169,112.63.

Please advise, within the next seven days, as to your client's position in relation to the payment of the outstanding amount, failing which our client intends to institute proceedings to recover such amount.

We can also confirm that we are currently holding one further key for 32 Springs Road, Clarinda which can be picked up by your clients by prior appointment.

28 Trumble Szanto received no reply to this letter. They wrote again on 4 December 2013, as follows:

re: Mortgage Loan - Harplex Pty Ltd to Nicolaos Konstandellos, Alkiviadis Konstandellos, Lambrini Dounias and Frank Dounias.

We refer to the above matter in which we have had previous dealings and confirm that we act on behalf of Harplex Pty Ltd.

Following the payment received on July 19, 2013, the mortgage loan dated May 19, 2011 for the initial amount of $680,000.00, has been fully satisfied. The mortgage loan dated May 19, 2011 for the initial amount of $185,000.00 remains in default and currently has an outstanding balance of $182,157.28 (in accordance with the attached statement).

We hereby demand from all abovementioned debtors the sum of $182,157.28 to be paid within the next 14 days, failing which we will proceed to enforce the Supreme Court Order dated December 21, 2012 in relation to this debt.

In relation to Nicolaos and Alkiviadis Konstandellos they are named guarantors on a further mortgage loan between our client and Gardenia Lakes Shopping Centre Pty Ltd, dated June 11, 2010. This loan is also in default and we hereby demand from those guarantors a further sum of $638,790.42 (in accordance with the statement attached) to be paid to us within 14 days, failing which court proceedings will be instituted to recover such debt.

29 On 10 December 2013, Kelly & Chapman replied to Trumble Szanto, stating as follows:

We acknowledge receipt of your fax of the 4th inst. We have forwarded it on to our former clients, but at this stage hold no current instructions in respect of the matter.

30 On 20 January 2014, Harplex applied to the Court in the recovery proceeding for a warrant of seizure and sale ('second warrant'). The application was supported by an affidavit sworn by Mr Tan. At paragraphs 17 and 18 of his affidavit, Mr Tan deposed, as follows:

O[n] July 17, 2013, the defendants paid the sum of $963,050.00 in settlement of the first, second, third and fourth mortgages, but not in settlement of the first and second agreement, held by the plaintiff on the security properties.

As a result of the payments received from the defendants, the amount owing under the first agreement has been satisfied in full. In relation to the second agreement, there remains a sum of $185,572.72 owing to the plaintiff. The attached schedules A and B in relation to the first and second agreements respectively show the relevant transactions over the period of each agreement.

31 The second warrant was issued on 6 February 2014. The amount said to be outstanding was $185,575.72, plus $1,200 costs. On 8 April 2014, the plaintiffs including the fourth plaintiff, the defendants in the recovery proceeding, issued an application to set aside the second warrant, or, alternatively, for an injunction restraining the Sheriff's office from executing the second warrant. Mr Konstandellos swore an affidavit in support of the application, where he deposed as follows:

I say that on 7 July 2013 the Defendants paid to the Plaintiff the sum of $963,050.00 in full and final satisfaction of all liabilities to the Plaintiff thus extinguishing the judgment debt.

I refer to the affidavit of SIMON KIM TAN sworn 5 February 2014 and filed herein which claims that the said sum was paid in settlement of the mortgages held by the Plaintiff over various properties but not in satisfaction of all debts. I say that is not correct and that the moneys were paid and accepted in satisfaction of all moneys owing by the Defendants and any of them to the Plaintiff.

In the premises I say that the Warrant ought not to have been issued as there was no outstanding moneys under the judgment debt at the time of issue.

32 The summons was dismissed by Mukhtar AsJ on 5 May 2014. His Honour described the affidavit in support as 'manifestly unsatisfactory', and there was no evidence that Harplex had been served with the summons. The plaintiffs filed a further summons on 12 May 2014, accompanied by an affidavit sworn by Mr Konstandellos in the same terms as his affidavit sworn on 8 April 2014. The summons was returnable on 5 June 2014, but it is unclear from the court file as to what occurred on that day. In any event, on 25 June 2014, Harplex issued a summons seeking to amend the second warrant, on the basis that it contained an incorrect sum on account of interest. However, this summons was withdrawn, and on 9 July 2014 the Court issued a further warrant of seizure and sale ('third warrant'), with the amount levied by the third warrant being $131,852.48 plus interest and costs.

33 On 15 July 2014, the plaintiffs issued a further summons seeking a stay of execution upon the third warrant, or alternatively, that the third warrant be set aside.

34 On 27 November 2014, Mukhtar AsJ ordered that execution of the third warrant be stayed subject to the plaintiffs issuing a proceeding by 11 December 2014, and paying the sum of $24,000 into Court. His Honour made the following relevant procedural orders:

For the procedural conduct of the proceeding to be commenced by the defendants:

(a) the trial of that proceeding shall be by affidavit, subject to the right to cross examine any deponent;

(b) there shall be no discovery of documents unless the Court otherwise orders on application of either party for discovery of specific documents;

(c) the defence shall be filed and served by 20 January 2015;

(d) the parties shall be entitled to rely upon the affidavits that were filed by them in this stay application, subject to any objections as to admissibility or on cross examination, at the trial of the defendant's separate proceeding;

(e) any further affidavit upon which the defendants seek to rely shall be filed and served by 28 January 2015; and

(f) any further affidavit upon which the plaintiff seeks to rely be filed and served by 11 February 2015.

35 Further, his Honour made the following remarks in 'other matters':

The question is whether under that agreement, and despite the discharge of the mortgages, the defendants remain liable for a residual amount of the loan due, unsecured. That is whether the payment was only consideration for a discharge of the mortgages but not the greater liability under the loan agreements. The plaintiff issued a warrant of seizure and sale to enforce that residual part of the default judgment. The mortgagors sought a stay.

The Court has made procedural orders to try and minimise the cost and delay of separate proceedings to decide the question of the intended scope or effect of the agreement.

36 Unfortunately, the minimisation of cost and delay has proven to have been an unachievable aspiration. The period of the validity of the third warrant has been extended on two occasions, by Ierodiaconou AsJ on 7 July 2015, and by me on 25 August 2016. Attempts by Harplex to lift the stay of execution in the meantime have been unsuccessful.

37 The following section provides a summary of the rather protracted path this proceeding has followed since the stay of the third warrant on 27 November 2014:

(a) a writ and statement of claim was filed in this proceeding by the plaintiffs on 11 December 2014;

(b) an amended statement of claim was filed on 8 April 2015 pursuant to the orders of Mukhtar AsJ of 27 March 2015, which also joined Kelly & Chapman as a defendant to the proceeding;

(c) directions hearings were held before Mukhtar AsJ on 27 March 2015 and 4 June 2015;

(d) Harplex filed a summons on 28 July 2015, seeking that the proceeding be dismissed for noncompliance with the orders made on 4 June 2015;

(e) on 4 August 2015 Derham AsJ made orders requiring the plaintiffs to file better particulars pursuant to orders of Mukhtar AsJ made on 4 June 2015, failing which the stay of the third warrant would be discharged. He also ordered the plaintiffs to file and serve an affidavit of documents with respect to certain classes of documents;

(f) the plaintiffs filed further and better particulars on 18 August 2015;

(g) on 26 August 2015, Mukhtar AsJ dismissed Harplex's summons filed 28 July 2015 seeking summary dismissal of the proceeding, and referred the proceeding to me for pretrial directions;

(h) on 6 October 2015, I made orders that the proceeding be fixed for trial on 9 March 2016;

(i) a summons was filed by Harplex on 5 November 2015 seeking dismissal of the proceeding based on the plaintiffs' non-compliance with orders, and seeking the discharge of the stay of the third warrant;

(j) on 19 November 2015, I made orders for the examination of the plaintiffs pursuant to s 57 of the Civil Procedure Act 2010 (Vic), and gave Harplex leave to issue a subpoena directed at Kelly & Chapman compelling production of their file, as the plaintiffs had not sought to obtain their file, there were no orders for general discovery, and Kelly & Chapman had not participated in the proceeding, save for the filing of a defence on 28 July 2015;

(k) the oral examinations of the first and second plaintiffs with respect to the adequacy of the plaintiffs' discovery were held and concluded on 3 February 2016;

(l) on 25 February 2016, the current solicitors for Kelly & Chapman, Obst Legal, filed a Notice of Change of Solicitor on behalf of Kelly & Chapman;

(m) on 1 March 2016, Harplex filed a summons seeking, among other things, dismissal of the proceeding against Harplex, and that the stay of the third warrant be discharged on the basis of the plaintiffs' failure to comply with orders;

(n) in his affidavit sworn in support of Harplex's summons on 29 February 2016, Mr Szanto deposed, among other things, that Harplex had reached an agreement with the fourth plaintiff, Mr Frank Dounias ('2016 settlement agreement'). On 1 March 2016, Mr Dounias swore an affidavit that he had become aware that Mr Darroll Nelson had entered an appearance on his behalf in the recovery proceeding. He deposed that he never instructed Mr Nelson to represent him in the recovery proceeding, nor Mr Hone (the plaintiffs' then solicitor) to act for him in this proceeding. He deposed as follows:

The terms of the [2016 settlement agreement] were that Harplex Pty Ltd would agree to release me from any further enforcement of the judgment debt in the related proceeding

(o) on 3 March 2016, I made selfexecuting orders regarding the filing of a notice of trial, the filing and service of 'proper basis' certificates by the plaintiffs,[5] and a court book. These orders were duly complied with;

(p) on 8 March 2016, I made orders vacating the 9 March 2016 trial date, on the application of Kelly & Chapman, owing to the illhealth of Mr Denby, and fixing the proceeding for trial on 9 May 2016;

(q) on 14 April 2016, I gave leave for Kelly & Chapman to file an amended defence, and referred the proceeding to judicial mediation. The mediation was held before Judicial Registrar Ware on 3 May 2016; and

(r) on 9 May 2016, the first day of the trial of the proceeding, the plaintiffs applied for an adjournment in order to replead their claim. This application was granted, and the plaintiffs were ordered to pay the costs thrown away by reason of the adjournment. I ordered that any application by the plaintiffs to amend their statement of claim, along with the question of the quantification of the costs thrown away by reason of the adjournment, be returnable on 23 May 2016.

38 After the adjournment of the trial on 9 May 2016, the following took place:

(a) on 18 May 2016, Russell Kennedy, the current solicitors for the plaintiff, filed a Notice of Change of Solicitor;

(b) on 25 May 2016, the scheduled return date of the plaintiffs' foreshadowed application to amend their statement of claim, I fixed the costs payable to the defendants by reason of the vacation of the trial date, ordered that if they were not paid within sixty days, this proceeding be stayed, and the stay upon execution of the third warrant be lifted, and adjourned the plaintiffs' application to amend their statement of claim to a date to be fixed (in the event that the costs were paid);

(c) the costs were duly paid, and on 23 August 2016, after receiving further written submissions concerning the plaintiffs' proposed further amended statement of claim, I made orders allowing the plaintiffs to file and serve a further amended statement of claim, subject to certain conditions concerning the provision of further and better particulars;

(d) the first to third plaintiffs filed a further amended statement of claim on or about 7 September 2016;

(e) on the first day of trial, on 2 November 2016, I made orders giving leave for the first to third defendants to file a Second Further Amended Statement of Claim ('SFASOC') and removing the fourth plaintiff as a party to the proceeding; and

(f) the trial of the proceeding was concluded on 4 November 2016, with some further brief submissions filed by Harplex and the plaintiffs on 7 and 10 November 2016 respectively.

39 Prior to turning to the pleadings in some detail, the issues in this proceeding were neatly encapsulated by the solicitor for the plaintiffs in his opening address at trial, being:

(a) what was the nature of the agreement between the parties: that is, whether the payment made by the plaintiffs on 17 July 2013 discharged in full the debts owing by the plaintiffs to Harplex pursuant to the Clarinda loans, or was the payment merely consideration for the discharge of the mortgages held by Harplex over Arunta Crescent and Springs Road;

(b) if there was an agreement of the nature contended for by the plaintiffs, is it enforceable, or does it fail for lack of consideration;

(c) if the agreement contended for by the plaintiffs is enforceable, what is the appropriate remedy;

(d) if the agreement contended for by the plaintiffs is not enforceable, is Harplex liable for having engaged in misleading and deceptive conduct; and

(e) in relation to the position of Kelly & Chapman, if the plaintiffs are unsuccessful in their claims against Harplex:

(i) what was the scope of Kelly & Chapman's retainer; and

(ii) if Kelly & Chapman breached their duties to the plaintiffs, does any loss flow from that?

40 A further issue in the proceeding is the impact of the 2016 settlement agreement upon the liability of the plaintiffs to Harplex, or the quantum of any such liability.

41 In the SFASOC, the plaintiffs, insofar as they make claims against Harplex, allege, in summary, the following:

(a) the plaintiffs deny that Harplex was entitled to judgment in the recovery proceeding, or entitled to possession of Arunta Crescent and Springs Road;[6]

(b) on or about 17 July 2013 the plaintiffs and Harplex agreed that Harplex would:

(i) not enforce the judgment in the recovery proceeding;

(ii) discharge the mortgages over Arunta Crescent and Springs Road; and

(iii) discharge the plaintiffs from any further liability under the Clarinda loans;[7]

(c) in the particulars to paragraph 14 of the SFASOC, the plaintiffs said that: 'The agreement was partly in writing, partly oral, and partly to be implied';

(d) insofar as the agreement was said to have been in writing, 'it comprised, or is evidenced by' sixteen itemised emails and letters sent between 27 March 2013 and 15 July 2013;

(e) insofar as the agreement was said to be oral, it was said to have been comprised by four telephone conversations between Mr Szanto and Mr Denby during the course of 25 and 26 June 2013;

(f) insofar as it was said to be implied, the implication arose from:

(1) the first defendant discharging the first, second, third and fourth mortgages upon the payment of the sum of $963,050;

(2) to give business effect to the agreement;

(3) by necessary implication; and/or

(4) from the course of dealings between the parties, including:

(a) the emails and conversations referred to above;

(b) the existence of an alleged guarantee given by the first and second plaintiff to the first defendant in respect of a first mortgage loan between the first defendant and Gardenia Lakes Shopping Centre Pty Ltd dated 11 June 2000 pursuant to which the first defendant continued to allege (and the first and second plaintiff denied) the first and second plaintiff owed the first defendant moneys

(g) the plaintiffs claim an entitlement to the following orders and/or declarations:

(a) a declaration that the obligations upon the plaintiffs to make payments to the first defendant pursuant to the first agreement and the second agreement alternatively pursuant to the judgment obtained by the first defendant against the plaintiffs in Supreme Court proceeding no SCI 2012 05213, were discharged by the entry of the plaintiffs into the settlement agreement and/or upon the payments made by the plaintiffs to the first defendant consequent upon the settlement agreement;

(b) an order that the first defendant cease taking any step to enforce any alleged debt by the plaintiffs to the first defendant under the first agreement and the second agreement, alternatively pursuant to the judgment obtained by the first defendant against the plaintiffs in Supreme Court proceeding no SCI 2012 05213;

(c) an order that the first defendant take all necessary steps to discharge any warrants of seizure and sale on the titles for the Arunta Crescent Property and the Springs Road Property.

(h) the legal effect of the 2016 settlement agreement, as set out in the Particulars at paragraphs 17D and 17E of the SFASOC, was to:

... discharge the first to third plaintiffs from any further obligations to the first defendant under the first agreement and the second agreement, alternatively to discharge the first to third plaintiffs from any further obligations to make payment pursuant to the judgment obtained by the first defendant against them in Supreme Court proceeding no SCI 2012 05213.

Alternatively to paragraph 17D, the payment by the fourth plaintiff to the first defendant has reduced the quantum of any outstanding liability from the first to third plaintiffs to the first defendant.

(i) the sending of the emails referred to in the particulars under paragraph 14 of the SFASOC, in particular the email from Trumble Szanto to Kelly & Chapman dated 26 June 2013, and the conversations between Mr Denby and Mr Szanto, amounted to representations which, if no settlement agreement was reached, were false. In particular:

... that when a final figure was given for the settlement sum Mr Szanto's client would accept that sum plus legal costs 'in full and final settlement' of any indebtedness of the plaintiffs to the first defendant pursuant to the first agreement and the second agreement, and that in consequence thereof, the first defendant would cease any enforcement action against the plaintiffs.

(j) in reliance upon those representations, which were made when Harplex was acting in trade or commerce, the plaintiffs acted to their detriment, as follows:

Making payment of $963,500 to the First Defendant

The plaintiffs re-mortgaged the Arunta Crescent and the Springs Road properties, and in doing so, incurred refinancing charges in the order of $20,359.95, including:

1. Keogh & Co legal fees of $1,677.76

2. Keogh & Co legal fees of $1,615.16

3. Kelly & Chapman legal fees of $2,750.00

4. Interest of $1,522.24

5. Interest of $4,854.79

6. Withdrawal of Caveats of $440

7. RMP Real Estate Valuation fee of $2,500

8. J Chrapot - Solicitor Procuration fee of $1,000

9. Balmain Finance fees of $4,000

The plaintiffs will provide further details of the balance of the refinancing charges.

(k) the plaintiffs have suffered loss and damage,[8] including:

(i) Legal expenses incurred by the plaintiffs in attempting to have the judgment in proceeding SCI 2012 5213 set aside.

(ii) From mid 2014 the first and second plaintiffs have sought to remortgage the Arunta Crescent property in order to pay debts they had incurred and to regularise their financial affairs. The first and second plaintiffs informed Mr Szanto of these attempts to mortgage the Arunta Crescent property during several conversations that they had with Mr Szanto during mid 2014 at Mr Szanto's office. By reason of the first defendant seeking to enforce its judgment and in so doing wrongfully effecting the registration of warrants of seizure and sale on title they were unable to do so and have incurred further expense by reason thereof.

(iii) Refinancing charges referred to in the particulars subjoined to paragraph 19 hereof paid and/or incurred by the first plaintiff.

(iv) If the plaintiffs had sold the Arunta Crescent property and the Springs Road property (alternatively if they had acquiesced to their sale by the first defendant) in 2013, the proceeds of sale of the properties would have been sufficient to discharge the debts owed by the plaintiffs to the first defendant pursuant to the first agreement and the second agreement (or such lesser sum payable by the plaintiffs to the first defendant pursuant to any alternative settlement agreement reached by them). If the plaintiffs had sold the Arunta Crescent property and the Springs Road property (alternatively if they had acquiesced to their sale by the first defendant) in 2013:

(i) The re-financing charges in sub-paragraph (c) would not have been incurred.

(ii) The moneys owed by the plaintiffs to the first defendant under the first agreement and the second agreement (or such lesser sum payable by the plaintiffs to the first defendant pursuant to any alternative settlement agreement reached by them) would have been paid in full, and no further moneys would have been owed by the plaintiffs to the first defendant pursuant to the first agreement and the second agreement. In consequence thereof, the plaintiffs would not have incurred the first defendant's enforcement costs, and the plaintiffs would not have been exposed to the first defendant's claims against it under the first agreement and the second agreement for additional interest and costs. The first to third plaintiffs are not aware of the precise calculation by the first defendant of the moneys allegedly owed by them to the first defendant pursuant to the first agreement and the second agreement. By a 'without prejudice' letter dated 18 April 2016 from the first defendant to the plaintiffs and the second defendant, the first defendant alleged that the amounts payable by the plaintiffs to the first defendant pursuant to the judgment in proceeding S CI 2012 5213 was $128,441.54 as at that date (with interest continuing to accrue) plus costs which the first defendant estimated to be approximately $22,672.31. The calculation appears to be incorrect, because, amongst other matters, it does not make any credit for the payment made by the fourth plaintiff to the first defendant of $60,000 referred to in paragraph 17C hereof. Updated particulars will be provided prior to trial when revised calculations are received by the first to third plaintiffs from the first defendant.

(v) Any amount that the plaintiffs are liable to pay to the first defendant pursuant to the judgment in proceeding SCI 2012 5213. If the plaintiffs had sold the Arunta Crescent property and the Springs Road property (alternatively if they had acquiesced to their sale by the first defendant) in 2013, the net proceeds of sale of the properties would have been sufficient to discharge any liability pursuant to the judgment in proceeding S CI 2012 5213, and the plaintiffs would have paid that amount to the first defendant. As a consequence thereof, no further moneys would have been owed by the plaintiffs to the first defendant pursuant to the judgment, the plaintiffs would not have incurred the first defendant's enforcement costs, and the plaintiffs would not have been exposed to the first defendant's claims against it under the judgment for additional interest. The amount owing on or about 17 July 2013 was $98,562.59, comprising the judgment debt of $63,177.34 less payments of $61,849.36 less payments made by the plaintiffs from refinancing Arunta Crescent and Spring Road of $960,000. Interest has been accruing on the judgment debt of $98,562.59 pursuant to s 101 of the Supreme Court Act 1986. The first defendant has also claimed the costs relating to execution, precise details of which are not known by the first to third plaintiffs. The first defendant has not, but should allow the sum of $60,000 referred to in paragraph 17C hereof. Updated particulars will be provided prior to trial when revised calculations are received by the first to third plaintiffs from the first defendant.

42 Harplex defends the claims made against it on the following bases:

(a) in relation to the plaintiffs' denial that Harplex was entitled to judgment in the recovery proceeding, it objects to the allegations

on the basis that the judgment remains extant and the plaintiffs herein, and each of them, are bound by the same. It says further proceedings to impeach the judgment of this Honourable Court are not justiciable.

(b) it denies the allegations concerning the nature of the agreement between it and the plaintiffs, and says:

... further that by a series of emails between its solicitors and the solicitor acting for the plaintiffs at the time, it agreed to accept the sum of $963,050.00, being $950,000.00[9] by way of partial payment of the debt due on the said judgment and $3,050.00 for the costs of and incidental to enforcement of the judgment and for the costs of discharge of its mortgages secured over the properties.

(c) in relation to the plaintiffs' allegations that Harplex has asserted that further sums are owing to it pursuant to the terms of the loan agreements and/or mortgages:

1. a balance remains outstanding to it under the judgment after taking into account the payment of $963,050.00 (of which the sum of $960,000.00 was in partial satisfaction of the said judgment) on 17 July 2013;
2. i[t] has issued execution on the judgment for the balance due thereunder; and

1. it does not make any allegation that any sum is due to it under the terms of the first and second loan agreements and/or the first, second, third and fourth mortgages and says that its claims are under the judgment.

(d) in relation to the 2016 settlement agreement, it says as follows:

(i) it admits the 2016 settlement agreement;

(ii) it admits that there were terms of the settlement agreement that the fourth plaintiff agreed to pay Harplex the sum of $60,000, that the fourth plaintiff agreed to discontinue its claim against Harplex in this proceeding, that Harplex agreed not to enforce the judgment in the recovery proceeding against the fourth plaintiff, and that the fourth plaintiff and Harplex released each other from any further claims against each other;

(iii) it admits that the fourth plaintiff paid Harplex the sum of $60,000; and

(iv) it denies the conclusions asserted by the plaintiffs with respect to the legal effect of the 2016 settlement agreement;

(e) in relation to the alleged representations made by Harplex, it said as follows:

a) admits the email identified as CB29;[10]

1. denies that the subject matter of the agreement was the debt owing under the first and second agreements as that debt had merged in the judgment obtained in proceeding S CI 2012 5213;

1. says that the monies to be paid were to discharge the extant mortgages over the said properties;

1. says that the monies paid were to obtain the release of the properties from the operation of a Warrant for Possession, which was then extant in the hands of the Sheriff of this Honourable Court for execution;
2. says that the monies paid were in reduction of the judgment debt owing under proceeding S CI 2012 5213; and
3. otherwise denies the allegations made therein.

(f) as to the allegation that Harplex's negotiations with the plaintiffs was conduct by Harplex in 'trade or commerce', it denied those allegations, and stated:

1. that being a plaintiff in a proceeding before this Honourable Court is not conduct in trade or commerce; and
2. correspondence between solicitors acting on behalf of parties to any litigation before any Court is not conduct in trade or commerce on behalf of the solicitors or on behalf of the parties that they represent.

43 As for the claims by the plaintiffs against Kelly & Chapman, the plaintiffs make, in summary, the following allegations:

(a) at the time the plaintiffs and Harplex entered the settlement agreement in the terms contended for by the plaintiffs, the plaintiffs had retained Kelly & Chapman to act as their solicitor to negotiate with Harplex on behalf of the plaintiffs, and to document a binding settlement agreement between the plaintiffs and Harplex upon the terms asserted by the plaintiffs, or upon such other terms as Kelly & Chapman might be instructed by the plaintiffs from time to time to offer on their behalf to Harplex ('the retainer');

(b) the retainer, and the terms of the retainer, were said to be partly in writing, partly oral, and partly to be implied. To the extent they were said to have been in writing they are constituted or evidenced by twelve enumerated emails between Mr Nick Konstandellos and either Mr Denby or Mrs Diamantopoulos between 18 June 2013 and 16 July 2013;

(c) to the extent that they are oral, they are comprised of or evidenced by conversations between Mr Nick Konstandellos on behalf of the plaintiffs and Mr Denby and Ms Diamantopoulos on behalf of Kelly & Chapman, which took place in or about June 2013, the substance of the conversations being that the plaintiffs instructed Kelly & Chapman to attempt to effect the settlement agreement on the terms asserted by the plaintiffs, and to document a binding settlement agreement on the terms asserted by the plaintiffs, and Mr Denby agreed. In the particulars, the plaintiffs refer to sixteen itemised telephone conversations between 17 June 2013 and 16 July 2013 between either Mr Konstandellos and Ms Diamantopoulos, or Mr Konstandellos and Mr Denby.

(d) to the extent that they are implied, they are implied to give business efficacy to the retainer between the plaintiffs and Kelly & Chapman and/or by necessary implication and/or by the course of conduct between the plaintiffs and Kelly & Chapman in the period between March 2013 and July 2013 (both inclusive) and which was evidenced by the following:

(i) a file opening record dated 26 March 2013 re sale of 32 Springs Road, Clayton;[11] and.

(ii) an email from Georgia Diamantopoulos of Kelly & Chapman Lawyers, to Marina Stavrou of the Commonwealth Bank dated 5 June 2013

and, among other things, various emails between Trumble Szanto and Kelly & Chapman, and file notes of conversations between solicitors from Kelly & Chapman and representatives of Trumble Szanto, representatives of and the Commonwealth Bank;

(e) shortly after 17 July 2013, Mr Denby informed Mr Konstandellos that the settlement agreement contended for on behalf of the plaintiffs had been entered;

(f) if the plaintiffs are found to remain liable to Harplex on the basis contended for either by Harplex or Kelly & Chapman in this proceeding, then Kelly & Chapman will have breached its retainer with the plaintiffs, and/or its duty of care to the plaintiff;

(g) the plaintiffs allege the following breaches of duty on the part of Kelly & Chapman:

(i) Kelly & Chapman was retained to attempt to agree to a settlement with the terms asserted by the plaintiffs;

(ii) Kelly & Chapman failed to make a clear offer on behalf of the plaintiffs to Harplex in the terms asserted by the plaintiffs

(iii) Kelly & Chapman failed to clarify with the plaintiffs about the basis upon which Harplex was prepared to settle with the plaintiffs, and whether or not they accorded with the terms asserted by the plaintiffs;

(iv) Kelly & Chapman failed to communicate to the plaintiffs that the basis upon which Harplex was prepared to settle with the plaintiffs differed from the terms asserted by the plaintiffs;

(v) Kelly & Chapman communicated to the plaintiffs that Harplex was prepared to settle upon the terms asserted by the plaintiffs;

(vi) Kelly & Chapman communicated to Harplex that the plaintiffs accepted Harplex's settlement offer notwithstanding that Harplex's settlement offer differed from the terms asserted by the plaintiffs;

(vii) Kelly & Chapman failed to ensure that the terms of settlement were recorded in a Deed or were otherwise drawn in a manner in which Harplex could not later argue that the settlement terms were unenforceable upon the basis that part payment of a judgment debt is insufficient consideration to discharge the judgment debt;

(viii) Kelly & Chapman failed to advise the plaintiffs that Harplex's promises were unenforceable upon the basis that part payment of a judgment debt is insufficient consideration to discharge the judgment debt;

(ix) Kelly & Chapman failed to advise the plaintiffs that Harplex could continue to claim moneys from them under the first and second agreement notwithstanding any payment made by them to Harplex if they accepted the Harplex's offer;

(x) Kelly & Chapman failed to inform the plaintiffs that Harplex was not willing to settle upon the terms asserted by the plaintiffs, and that they could therefore make a further offer to Harplex upon different terms, or that they could instead simply allow Harplex to exercise its rights as mortgagee to sell the two properties; and

(xi) Kelly & Chapman failed to document the terms of the settlement agreement in a manner in which the parties' obligations thereunder were clear, certain and enforceable, so that Harplex and the plaintiffs properly understood their obligations thereunder. That failure has necessitated this proceeding; and

(h) the plaintiffs claim the following by way of loss and damage against Kelly & Chapman:

(i) The First to Third Plaintiffs refer to and repeat the particulars subjoined to paragraph 22 hereof.[12]

(ii) Any amounts payable by the First to Third Plaintiffs to the First Defendant for legal costs of this proceeding.

(iii) The Plaintiffs lost the chance to negotiate a settlement on different, but nonetheless favourable terms, (as to quantum and/or timing in relation to any repayments) with the first Defendant.

44 In its defence dated 12 September 2016, Kelly & Chapman responded, in summary, as follows:

(a) it denies that the plaintiffs had suffered loss and damage as a result of the conduct of Harplex, and says further that:

... if (which is denied) the Second Defendant had been instructed to obtain a final payout figure in respect of both agreements, the payout figure would have been the same as the amount paid together with the additional amount now claimed by the First Defendant (with appropriate adjustment for interest depending on the repayment date). Accordingly, the Plaintiff cannot demonstrate any loss.

(b) as for the alleged retainer, it said that to the extent that Kelly & Chapman was retained to act on behalf of any of the plaintiffs, its instructions were limited to facilitating the refinancing of the Arunta Crescent property and the Springs Road property on the best possible terms so as to avoid mortgagee sales of those properties, and did not require Kelly & Chapman to negotiate and/or document a binding settlement agreement upon the terms asserted by the plaintiffs, or otherwise negotiate and/or document a full and final discharge of amounts owing under the Clarinda loan agreements.

(c) further, if the plaintiffs and Harplex entered into a settlement agreement in the terms contended for by the plaintiffs:

(i) the terms of the 'settlement agreement' agreement did not constitute accord and satisfaction as between those parties, there having been no consideration or no sufficient consideration given by the First Defendant in exchange for the compromise of its rights pursuant to the judgment; and

(ii) in the premises, the judgment remains extant and enforceable.

(d) Kelly & Chapman admits that it owed the plaintiffs a duty to act with reasonable skill, care and diligence in the performance of its retainer, and says that it discharged that duty; and

(e) Kelly & Chapman says that if it breached the terms of its retainer or, alternatively, acted in breach of the duty owed by it, then it denies that the plaintiffs have suffered or will suffer any loss and damage as a consequence of the alleged breach.

45 The plaintiff did not file and serve any reply to the defences filed and served by the defendants.[13] Given some of the contentions advanced on behalf of the plaintiffs at trial, in particular, that consideration did pass from the plaintiffs for the alleged compromise with Harplex of the amount owing under the judgment debt, this omission is significant.

46 The trial proceeded by way of affidavit, with a number of the objections to the admissibility of some of the plaintiffs' affidavit evidence having been dealt with at a separate hearing prior to the trial. The plaintiffs relied upon the following affidavits:

(a) affidavit of Mr Nick Konstandellos sworn in the recovery proceeding on 15 July 2014;

(b) the supplementary affidavit of Mr Nick Konstandellos sworn in this proceeding on 26 July 2016;

(c) the further supplementary affidavit of Mr Nick Konstandellos sworn on 29 September 2016;

(d) an affidavit sworn by Mr Denby in the recovery proceeding sworn 16 July 2014;

(e) an affidavit sworn by Mr Alex Konstandellos on 5 October 2016;

(f) an affidavit sworn by Ms Lambrini Dounias sworn on 5 October 2016; and

(g) an affidavit sworn by Mr Rodney Morley on 5 October 2016.

47 The plaintiffs also tendered into evidence a number of letters and file notes sent or made by Mr Szanto, and a number of documents from the file of Kelly & Chapman produced by them upon subpoena. The critical correspondence has been extracted at paragraphs 8 to 29 above.

48 In his affidavit sworn on 15 July 2014 in the recovery proceeding, Mr Nick Konstandellos deposed, in summary, as follows:

(a) he was authorised to swear this affidavit on behalf of all of the plaintiffs;

(b) he confirmed the evidence of Mr Simon Tan in the recovery proceeding concerning the Clarinda loans;

(c) he deposed that after judgment was entered against the plaintiffs, he wanted to ensure that Arunta Crescent and Springs Road would be retained by his family members to live there. His sister lived in one house, and two of his nephews lived in another house;

(d) he was advised by the sheriff's office to contact Mr Tan, and he had a number of telephone conversations with Mr Tan in early 2013. In those conversations he sought a payout figure to finalise his dealings with Harplex. He initially sought to refinance Arunta Crescent alone, but he was told that Harplex required both properties to be refinanced;

(e) in June 2013, he arranged for Mr Denby to conduct negotiations for him and arrange for settlement;

the properties were refinanced and the sum of $963,050 was paid to [Harplex] in full settlement of its claim against the [plaintiff];

(g) it was to his 'great surprise' that in August 2013 he was told by Mr Denby that Harplex was seeking the sum of $169,112.63 in relation to the second mortgage loan; and

(h) he instructed Mr Denby to deny that he or any of the other plaintiffs owed any money to Harplex, and he sought orders that the execution of the third warrant should be stayed, or alternatively, the third warrant should be set aside.

49 In his supplementary affidavit sworn on 26 July 2016, Mr Nick Konstandellos deposed, in summary, as follows:

(a) he had prior dealings with Harplex: in particular, he and Mr Alex Konstandellos were guarantors for a loan to Gardenia Lakes. Gardenia Lakes defaulted on the repayment of the loans, and Harplex exercised its rights as first mortgagee to sell the shopping centre owned by Gardenia Lakes;

(b) he deposed as to the communications between him and Mr Alex Konstandellos and Trumble Szanto in relation to the dispute between them and Harplex concerning the Gardenia Lakes loans;

(c) he exhibited correspondence between Trumble Szanto and Kelly & Chapman in June and July of 2013, and correspondence between him and Kelly & Chapman in July 2013;

(d) during this period, he had a number of telephone conversations with Mr Denby and Ms Diamantopoulos of Kelly & Chapman;

(e) as to these conversations, he deposed as follows:

My instructions to Mr Denby and Ms Diamantopoulos at all times were that the Plaintiffs were seeking a full and final settlement with the First Defendant and they were to attempt to negotiate a full and final settlement on behalf of the Plaintiffs with the First Defendant, the precise quantum of which, and exact terms of which would be negotiated, but which would have the effect that the First Defendant could not enforce its judgments against the Plaintiffs, that the mortgages referred to in paragraphs 5 and 6 of the Statement of Claim ('the Mortgages') would be discharged with the Plaintiffs would be discharged from any further liability under the loan agreements referred to in paragraph 2 of the Statement of Claim ('Loan Agreements'). I never informed any representative of the Second Defendant that it would [sic] sufficient for the Plaintiffs to merely obtain a discharge of the Mortgages which would leave the First Defendant to continue to seek the balance of the amount owed under the Loan agreements. I gave the instructions on behalf of the Plaintiffs to David Denby as to the parameters of any settlement, which were reflected in the email from him to Simon Tan on 25 June 2013 at 6.30pm (ACB 29), including that any deal had to be in full and final settlement.

I, on my own behalf, and on behalf of the Plaintiffs, relied upon the Second Defendant following my instructions to its representatives.

I refer to paragraph 3(d) of my Affidavit sworn 15 July 2014.[14] The understanding I refer to in that paragraph came from my conversations with Mr Denby and Georgina Diamantopoulos, and in particular conversations between me and Mr Denby on or about 25 and 26 June 2013, and with Georgina Diamantopoulos on or about 26 June 2013. The substance of the conversations were to the effect that I was informed that if the agreed payments were made, there would be full and final settlement, the mortgages would be released, and the First Defendant would not take possession of the two properties, and the Plaintiffs would not owe further moneys to the First Defendant under the loan agreements.

(f) Mr Konstandellos deposed as follows concerning his dealings with Kelly & Chapman:

None of the representatives of the second defendant informed me that if the First Defendant's settlement offer was accepted then:

(a) the settlement reached with the First Defendant was not a binding settlement;

(b) that it was not a full and final settlement;

(c) that the settlement left the First Defendant free to enforce its judgments against the Plaintiffs;

(d) that under the settlement, the Plaintiffs were not discharged from any further liability under the Loan Agreements;

(e) that the first defendant's promises were not or might not be enforceable upon the basis that part payment of a judgment debt is insufficient consideration to discharge the judgment debt;

(f) that the first defendant was not willing to settle upon the terms sought by the Plaintiffs;

(g) that the Plaintiffs could or should not make a further offer to the first defendant upon different terms (for example, as to quantum) which would or might achieve the result that the Plaintiffs were seeking;

(h) that following the communications between Trumble Szanto and the Second Defendant on 25 and 26 June 2013, an option available to the Plaintiffs, if the First Defendant was unwilling to settle on the terms sought by the Plaintiffs, was to simply allow the first defendant to exercise its rights as mortgagee to sell the two properties.

(g) Mr Konstandellos deposed that on or about 14 May 2013, the plaintiffs organised valuations of Arunta Crescent and Springs Road, which showed that the two properties had a combined value of $1.2 million. He exhibited copies of these valuations, which were in fact provided to Westpac. He deposed that one option was for him to allow Harplex to take possession of the properties pursuant to the third warrant, but instead he refinanced the properties, and incurred approximately $30,000 in refinancing charges; and

(h) he deposed as to his understanding as to the terms of the 2016 settlement agreement.

50 In his supplementary affidavit sworn on 29 September 2016, Mr Nick Konstandellos deposed, in summary, as follows:

(a) he exhibited further documents evidencing communications between him and Kelly & Chapman;

(b) he deposed as to the substance of the telephone conversations between him and Mr Denby and Ms Diamantopoulos of Kelly & Chapman during the course of June and July of 2013, being that:

the plaintiffs instructed [Kelly & Chapman] to attempt to effect the settlement agreement on the terms referred to in paragraph 14 of the Further Amended Statement of Claim and to document a binding settlement agreement on the terms referred to in paragraph 14 thereof, and Mr Denby agreed;

(c) he deposed that when he instructed Mr Denby to accept Harplex's offer to accept payment of $20,000 on 27 June 2013, and for settlement to take place on 10 July 2013 with the payment of $960,000 plus legal fees, he relied upon the prior communications between the parties, as communicated to him by Kelly & Chapman, and the advice to him of Kelly & Chapman that the effect of the proposed settlement was as contended for by the plaintiffs; and

In relation to paragraph 27 thereof - I organised the refinance of the Two Properties to enable the settlement to take place after having relied on the representations made by the first defendant to the effect that when a final figure was given for the settlement sum, the first defendant would accept the sum plus legal costs 'in full and final settlement' of any indebtedness of the plaintiffs to the first defendant pursuant to the first agreement and the second agreement, and that in consequence thereof, the first defendant would cease an enforcement action against the plaintiffs.

51 At trial, Mr Konstandellos gave brief evidence-in-chief, concerning which family members lived in the house at Arunta Crescent and Springs Road. He gave evidence and tendered documents concerning the loans connected with the Gardenia Lakes Shopping Centre, and the negotiations between him and Mr Szanto concerning the Gardenia Lakes Shopping Centre. He gave evidence that he made three or four payments in respect of the loans which are the subject of this proceeding, sourced from family, friends, and other businesses operated by him.

52 Mr Konstandellos was crossexamined by counsel for Harplex and counsel for Kelly & Chapman. Under crossexamination by counsel for Harplex, Mr Konstandellos gave the evidence, in summary, as follows:

(a) he has been a property developer for twenty-plus years, and has often had family members assist him by providing security for his borrowings. His sister provided Arunta Crescent as security for the loans which are the subject of this proceeding. It was never intended that she be out of pocket. She has paid nothing towards these loans because she does not work. He said his nephew (the former fourth plaintiff) was lying when he denied that Mr Konstandellos and the plaintiffs' former solicitors had authority to act for him;

(b) he believes he spoke to Mr Denby a couple of weeks after settlement. Mr Denby called him after Mr Szanto had claimed another $169,000. Mr Denby said 'what is all this about?', and Mr Konstandellos replied 'listen, you have clear instructions';

(c) Mr Konstandellos was taken to Mr Denby's file note of 22 July 2013, which referred to a conversation with Mr Alex Konstandellos to the effect that 'sheriff came again!', and a file note of a conversation with Mr Szanto, to the effect that 'he'll see to it'. He recalls there was an issue with the sheriff still making demands, and him asking Alex to deal with it by calling Mr Denby. He could not comment upon the reference in the file note to 'debt still owing though', saying 'but it's something that's got nothing to do with me';

(d) he was aware that Mr Denby had put an 'all-in' offer on his behalf to Harplex on 24 June 2013, but he was not aware that it had been rejected;

(e) he gave evidence that when he received the Trumble Szanto letter of 14 August 2013 (see paragraph 27 of these reasons), which was emailed to him on 15 August 2013, he called Mr Denby and told him 'David, this is bullshit' and said he was no longer to act for him. When taken to a file note of Mr Denby's dated 29 August 2013, which referred to a conversation between him and Mr Denby, he said the reference to 'don't do anything' referred to what was said to him by Mr Denby, as was the reference to 'understood $960 was full settlement'. He said that Mr Denby said 'Yes, Nick, 960 is clear cut';

(f) when taken to Mr Szanto's file note of 27 March 2012,[15] he accepted that the reference to 'arrears for Glenview' had nothing to do with the loans secured by Arunta Crescent and Springs Road; and

(g) he does not recall having any discussions with Mr Szanto directly concerning these transactions between 1 June 2013 and 17 July 2013.

53 Mr Konstandellos was subject to extensive crossexamination by counsel for Kelly & Chapman. His evidence, in summary, is as follows:

(a) he was questioned about his experience with litigation, and agreed that he was no stranger to commercial negotiations;

(b) he approached Mr Denby, because he was upset with Mr Szanto, and also because Mr Szanto asked him to get a lawyer. He did not engage Mr Denby to represent him in disputes concerning the Gardenia Lakes Shopping Centre;

(c) when taken to the letter from Trumble Szanto to the plaintiffs dated 27 March 2013 (see paragraph 8 of these reasons), he at first did not recall seeing this letter, but then did recall the letter. He accepted that it stated: 'These are not payout figures';

(d) his main objective was not to avoid a mortgagee sale: rather, his aim was to pay the debt. The value of the properties would not be sufficient to cover the debt, perhaps not even $900,000;

(e) he agreed that he wanted his family members to be able to live at Arunta Crescent and Springs Road, and he told Mr Denby this. He knew at the time that Mr Szanto could sell the properties on behalf of Harplex, and he had already given him the keys;[16]

(f) he gave evidence that Westpac valued the properties at $1.1-$1.19 million as at April 2013. However, if Mr Szanto sold the properties, the plaintiffs would incur extra costs;

(g) Mr Denby was acting for him to negotiate a settlement. He did not discuss selling the properties himself with Mr Denby: his main goal was to stop the sheriff 'turfing' his sister out of Arunta Crescent, and he wanted to do the right thing by Mr Szanto as well; and

(h) he said that Mr Denby told him that Harplex had changed its position, and would discharge the mortgages and forgive the loans. He referred to Trumble Szanto's letter to Kelly & Chapman of 24 June 2013, where Trumble Szanto stated, among other things: 'All previous agreements for settlement are withdrawn', and 'Any offers ... will only be considered on a global basis, that is to say an all-in figure for discharge of the mortgages on both properties'.

54 Counsel for Kelly & Chapman took Mr Konstandellos to a number of documents in evidence. Mr Konstandellos gave evidence in summary, as follows:

(a) he agreed that he had been told about the email from Simon Tan to Georgia Diamantopoulos of 13 June 2013 (see paragraph 10 above), where Mr Tan stated that 'the amount requested is solely to discharge the mortgages in relation to the 2 properties', and agreed that this shows there had been no change in Harplex's position from March 2013;

(b) he was taken to the exchange of emails on 17 and 18 June 2013 concerning the settlement of Arunta Crescent. He agreed that he called Simon Tan to dispute the requested figure of $450,000, because Trumble Szanto was 'changing the goal posts';

(c) he was taken to a file note of Mr Denby's dated 18 June 2013, and agreed that he had instructed Kelly & Chapman to secure a discharge of the mortgage over Arunta Crescent while waiting for a loan to refinance Springs Road;

(d) he gave evidence that he could not settle on Arunta Crescent, because Mr Szanto said he had to settle on both properties, and the finance was not ready for Springs Road. However, when taken to Mr Denby's affidavit, where Mr Denby said that settlement could not take place for Arunta Crescent, because the finance was not ready for that property either, he did not disagree that this is what torpedoed the deal concerning Arunta Crescent;

(e) he gave evidence that once he had received Trumble Szanto's letter of 24 June 2013 stating that all previous arrangements had been withdrawn, he decided he had to get Mr Denby back involved;

(f) he recalled Trumble Szanto's proposal that he pay $40,000 immediately. He instructed Mr Denby to settle upon Arunta Crescent for $430,000. He agreed that he did not have a lot of negotiating power, as his sister was a day away from being evicted from Arunta Crescent;

(g) he was taken to a file note of Mr Denby's where Mr Szanto told Mr Denby that $910,000 was 'off the table'. He told Mr Konstandellos about this, and Mr Denby advised him to pay $40,000. He instructed Mr Denby to offer to pay $20,000, not just to keep the sheriff away, but to buy time to enable him to organise finance on both properties;

(h) it was put to Mr Konstandellos that the email from Mr Denby to Simon Tan of 25 June 2013 (see paragraph 21 above) was the only correspondence which referred to 'full and final settlement';

(i) Mr Konstandellos was taken to an email sent to him by Mr Denby on the evening of 25 June 2013, which stated as follows:

Yasu Brother,

Re: Arunta

As instructed I have put the proposition below to Szabo....fingers crossed! If it is rejected, it is still my recommendation that you pay the $K40. We'll worry about the pay-out figure later on. I stress that if we don't sort this out, the Sheriff will be evicting your sister on Thursday morning.

Re: Redpath

I remind you that Notice of Default has been served and expires on Monday 1 July. What are we doing about this? You are at risk of losing your house, your deposit and damages.

Re: Glenvue

Orders will be made on Thursday for the timetable of this matter. I have spoken to Miles Snow who is unable to help. It is his belief that the property was properly advertised and brought the best price available at the time of sale. He is happy to discuss this with you, but at the end of the day, if he gives us an opinion in writing, he may have to give evidence to back it up! What is our defence? We are running up huge costs here (on both sides).

Brother, get your f....ing act together!

(j) he agreed that Mr Denby was acting for him in two other disputes, and that he was 'under siege' on a number of fronts. He agreed that Mr Denby's offer of 24 June 2013 was rejected by Mr Szanto, and that Mr Denby called him to discuss this; and

(k) he was taken to a file note of Mr Denby's dated 26 June 2013 where Mr Szanto said he would not budge, and explained why. Mr Konstandellos said the finance for Springs Road had been approved that day, and he instructed Mr Denby to offer to pay $20,000 tomorrow, with settlement on both properties on 10 July 2013. He gave evidence that Ms Diamantopoulos told him that the offer made by Kelly & Chapman on 26 June 2013 (see paragraph 0 above) was an offer made in full and final settlement, notwithstanding that he made no reference to this conversation in his affidavits. He considered the reference to 'pay out figures' meant that the sum to be paid at settlement would 'pay out everything';

55 Mr Konstandellos was taken to a chain of emails between Mr Denby and Ms Diamantopoulos on 26 June 2013.[17] The first email in the chain is the email from Mr Szanto to Ms Diamantopoulos with Mr Szanto's responses to Mr Denby's offer of 25 June 2013 (see paragraph 22 above). The next email is the email sent by Georgia Diamantopoulos to Mr Szanto and Mr Tan telling them that finance for Springs Road had been approved (see paragraph 23 above). This email chain was sent to both Mr Denby and Mr Konstandellos at 3.51pm. At 4.38pm, Mr Denby wrote to Ms Diamantopoulos, as follows:

Unbelievable! I have been telling Szabo [sic] all day that he has a bank cheque for $K20 in his pocket. This makes us all look like dills! Anyway I just spoke to Nick and told him to get on his bike and pay today. "Too drunk"! I said for god's sake get a f...ing cab and get down there. I will do it by 10 tomorrow.

I told him we have done all we can do and have pulled off a miracle. If he wants to play games it's on his head.

56 Ms Diamantopoulos replied at 4.44pm, as follows:

Just send you another email.

He is so bloody lucky - he better not fu-k this up tomorrow!!!

57 Mr Konstandellos agreed that Mr Denby called him on the afternoon of 26 June 2013 and told him to pay that day, and that he told Mr Denby that he would not be able to pay that day. He agreed that Mr Denby told him they had 'pulled off a miracle', but was noncommittal when it was put to him that the miracle was that Harplex was going to call off the sheriff. Mr Konstandellos was also noncommittal when taken to an email from Ms Diamantopoulos forwarding Mr Tan's email accepting the plaintiffs' offer[18] (see paragraph 25 above). The email stated as follows:

Nick

All that I can say is that you are bloody lucky ...

Get that bank cheque to Szabo's (sic) office BEFORE 10AM TOMORROW.

58 Counsel for Kelly & Chapman took Mr Konstandellos to the bill rendered by Kelly & Chapman dated 27 June 2013. The covering letter, signed by Mr Denby, stated as follows:

I confirm that an extension has been secured in this matter upon terms previously communicated to you. Please advise Georgia Diamantopoulos as soon as your funds are available and you are able to settle, so that she can make the necessary settlement arrangements.

59 The relevant narration states: 'Attendances over three days on you and Trumble Szanto Lawyers to obtain extension of loan and to postpone sheriff taking possession of Arunta Crescent property'. He agreed that this narration made no reference to 'full and final settlement';

60 Mr Konstandellos agreed that settlement had to be postponed, and Ms Diamantopoulos told him when it took place. Mr Denby told him that the visit by the sheriff on 22 July 2013 was 'just a stuff up'. Mr Denby did not tell him that Harplex was asserting that he still owed money. Nothing happened until August 2013, when Harplex made another demand. He gave no instructions to Mr Denby about this matter.

61 In reexamination, Mr Konstandellos gave the following evidence:

(a) after receiving Trumble Szanto's letter of 14 August 2013 from Mr Denby, he asked Mr Denby to ask for details and documents concerning payments. Mr Denby told him 'you don't have to worry, we'll fix it', but he never did;

(b) he had not had any valuations of Arunta Crescent and Springs Road, but he was aware of comparable sale prices; and

(c) he gave evidence that after receiving Trumble Szanto's letter of 24 June 2013, he spoke to Mr Tan, and told him that the plaintiffs' offer (it is not clear which offer) was a good offer, because even if Harplex sold the properties, it would not recover its money.

62 The plaintiffs also relied upon an affidavit sworn by Mr Denby on 16 July 2014 in the recovery proceeding. Mr Denby deposed, in summary, as follows:[19]

(a) he deposed as to his role at Kelly & Chapman, and the instructions he received from the plaintiffs in June 2013;

(b) together with Ms Diamantopoulos, he sought to arrange loans from the Commonwealth Bank to 'pay out the indebtedness under the two agreements and to protect the two properties from the Mortgagee's sales which were threatened by [Harplex]';

The principal difficulties I had with resolving this case were obtaining a payout figure to finalise the settlement. I understood the position to be that before Kelly & Chapman were retained to act for the defendants an approximate figure had been suggested in or about April 2013. However, interest was accruing on the loans and in order to prevent the Sheriff obtaining possession it was necessary for 'holding' payments on account of interest to be made by or on behalf of the [plaintiffs] or one or other of them as negotiations proceeded. Any such payments obviously reflected on the final sum to be paid by my clients.

(d) he exhibited the communications between Kelly & Chapman and the Commonwealth Bank, and the communications between Kelly & Chapman and Trumble Szanto between 5 June 2013 and 18 June 2013;

(e) he deposed that although by June 2013 it appeared that an agreement had been reached concerning the refinancing of Arunta Crescent and the discharge of the mortgages over that property, his clients were unable to finalise the settlement by 24 June 2013, as required by Harplex;

(f) he exhibited the letter of 24 June 2013 (see paragraph 18 above);

At this time I commenced negotiations with Trumble Szanto directly and on 25 June I telephoned Mr Szanto of that firm. He informed me that if the sum of $40,000 was paid on the following day (26 June) his client would give us six weeks to arrange finance to pay out the two mortgages. He told me that as at the 19th June 2013 the total of $1,165,000 was owing in respect of both properties - on the first mortgage $900,000 and on the second mortgage $265,000. He informed me that the Sheriff was going to evict the occupants at the Arunta Crescent property on the following Thursday morning. He said that an earlier offer to pay out the two mortgages for $930,000 was no longer available.

In the conversation Mr Szanto informed me that his client was in Holland and he could not get final instructions as to what 'the balance' would be. He said it would 'definitely be more than $900,000 but it would not be the full $1,165,000'.

(h) he exhibited the correspondence between the parties extracted at paragraphs 19 to 23 above;

(i) he deposed that, subsequently, settlement was arranged for 16 July 2013 on the terms of correspondence between Mr Tan and Ms Diamantopoulos on 15 and 16 July 2013. He closed his file on 22 July 2013; and

In the circumstances I was surprised to receive about a month later a letter from Simon Tan suggesting that the sum of $169,112.63 was still outstanding from my clients.[20] This was clearly contrary to the understanding I had with Mr Szanto. As noted above, I was informed by Mr Szanto in my conversations with him referred to above that although a total debt owing was in the region of $1,650,000[21] a compromise figure in full settlement of the outstanding claims by [Harplex] against the [plaintiffs] would be fixed. This figure was fixed at $960,000 and included the $20,000 payment referred to above. Since that date I have not received any accounting to show how the new alleged claim is made up or calculated and whether all the proper deductions had been made from my clients' account for payments they have made.

63 Mr Denby was of course unavailable for crossexamination, having died earlier in 2016.

64 The affidavits of Mr Alex Konstandellos and Mrs Lambrini Dounias can be dealt with quite briefly: they both depose as follows:

I have read the Affidavit of Nikolaos Konstandellos sworn 15 July 2014, the Supplementary Affidavit of Nikolaos Konstandellos sworn 26 July 2016 and the Further Supplementary Affidavit of Nikolas Konstandellos dated 29 September 2016.

In so far as those affidavits refer to matters involving me or that I informed him about, I confirm that those matters are true and correct.

65 The affidavit of Mr Robert Morley, a real estate agent, was also brief. He deposed that he, Maeven Property Pty Ltd, and Selwyn Meltzer provided second mortgage finance on the security of the Arunta Crescent and Springs Road properties in order to effect settlement with Harplex in or around July 2013. The funds were approved within two days of application owing to the urgency of the matter. The legal and brokerage costs, including prepaid interest, associated with this loan totalled $16,358.95.

66 Neither of Mr Alex Konstandellos, Ms Dounias, or Mr Morley were required to attend trial for crossexamination.

67 In addition to the affidavits and exhibits tendered on behalf of the plaintiffs, the plaintiffs relied in their written outline of submissions upon the following documents in evidence concerning the dispute between them and Harplex not already referred to in paragraphs 8 to 29 above:

(a) the acknowledgement of indebtedness executed by each of the plaintiffs on 3 September 2012, which showed the amount owing under the Clarinda loans as at 19 September 2012 as being $782,712.46, with interest accumulating at approximately $10,000 per month;

(b) the valuations of Arunta Crescent and Springs Road prepared by Westpac, which shared the combined value of the properties as at 14 May 2013 as being approximately $1.1 to $1.2 million;

(c) a file note of Mr Denby's dated 25 June recording a conversation between him and Mr Szanto. The file note records the amount outstanding under the Clarinda loans as being $1,165,000. Mr Szanto told him he had possession of the Spring Road property, and the sheriff was going to Arunta Crescent on Thursday morning. He was not prepared to accept $430,000 to discharge the mortgages over Arunta Crescent, as there would be insufficient security for the balance, and he wouldn't put the sheriff off again, as he would lose eight weeks. He stated the deal for $930,000 was no longer available, and he would take $475,000 plus costs tomorrow (presumably to discharge the mortgages over Arunta Crescent) and call off the sheriff, and wait to sell the other property;

(d) a file note of Mr Denby's, also dated 26 June 2013, which includes references to Mr Konstandellos instructing him to settle Arunta Crescent for $430,000 plus $2,500 costs, with Harplex leaving a second mortgage on Arunta Crescent; Mr Szanto offering to accept $40,000 tomorrow and giving the plaintiffs six weeks; a note to the effect that he told Mr Konstandellos of this offer; a record of Mr Szanto saying $910,000 was off the table, and he cannot give a quote; and a record of him advising Mr Konstandellos to pay $40,000;

(e) an email from Mr Denby to Ms Diamantopoulos on 25 June 2013, which stated as follows:

Szabo's final position is that if Nick pays $40,000 by 3 tomorrow (Wednesday) they will hold off all action for 6 weeks. This will come off the loan balance. The problem is that he can't tell me what the "balance" will be. His client is in Holland and he can't get instructions. It will definitely be more than $910,000 but won't be the full $1,185,000.

I conveyed this to Nick. He has the $40 but is loath to hand it over without knowing what the balance will be. If it is much more than $910 he won't have funds to settle and will have "wasted" the $40!

I told him this is the best we can do and advised him to pay and at least buy time, otherwise his sister will be kicked out by the sheriff Thursday morning.

He understands the consequences and is thinking about it!

In any event, cancel CBA for tomorrow. If Nick decides to cough up the $40, please email Szabo confirming that it to be paid on agreed basis that for 6 weeks he will not take any further steps to occupy/sell either property.

Also add at least another $1,000 to your bill to account for my time, plus your own stuffing around.

(f) a file note of Ms Diamantopoulos dated 26 June 2013 at 4.05pm, which referred to a conversation between her and Mr Tan. '$20,000 cash by 6pm today, settle $960,000 plus legals,' a conversation between her and Mr Denby, where he said 'Agree - speak with Nick', and a call by her to Mr Konstandellos where he said 'can't get money to them before 10 tomorrow'; and

(g) a file note of Mr Szanto's of 26 June 2013 to the effect '$20k today, $960k on 10/7/13'.

68 Harplex relied upon the affidavit of its solicitor, Mr Peter Szanto, sworn in the recovery proceeding on 2 September 2014. Mr Szanto deposed, in summary, as follows:[22]

(a) he is the senior partner of Trumble Szanto and a director of Harplex. He deposed that 'at all relevant times I have had ultimate supervision and control of [Harplex's] conduct of management of the loans and as well as its part in this proceeding;

(b) he deposed, uncontroversially, as to the background to the recovery proceeding, including the loans, the mortgages, the defaults, and the issue of the recovery proceeding;

On November 29, 2012 I was contacted by telephone by the [plaintiff] who told me that he was executing a contract of sale on a property in Pakenham that we were both familiar with, and that settlement will take place the following week at which time he will be in a position to pay the arrears under the first agreement and the second agreement. He also stated that he is sorry but he must put in an appearance in response to the writ, in this proceeding, which was served on his sister, the [third plaintiff]. He invited me to contact Laki Tassiopoulos who I knew to be a solicitor representing the [plaintiffs] at that time.

I reminded him about certain acknowledgments of the indebtedness of the [plaintiffs] which they executed earlier, on September 3, 2012 and questioned how they can defend the writ when the money was clearly owing and there was no possible reason to dispute it. The [plaintiff] apologised again, told me again that the arrears will be paid the following week and repeated that I should contact Mr Tassiopoulos. On the basis of this conversation I formed the view that the writ will most likely be defended notwithstanding that there was no proper basis for any such defence.

(d) he deposed as to the filing of an appearance by the plaintiffs, his interactions with Mr Darroll Nelson, the solicitor then acting for the plaintiffs in the recovery proceeding, the failure of the plaintiffs to file and serve a defence in the recovery proceeding, the entry of judgment against the plaintiffs, and the issue of the first warrant;

(e) he deposed that the plaintiffs made three payments of $20,000, on 8 February 2013, 4 April 2013, and 27 June 2013, each of which were credited against the judgment debt;

on July 17, 2013 the [plaintiffs] paid to Trumble Szanto Lawyers an amount of $963,050 in consideration of discharge of the first, second, third and fourth mortgages and release of the certificates of title but not in settlement of the judgment debt due and payable by the [plaintiffs] to [Harplex] as at that date.

(g) he deposed as to the application of the funds paid on 17 July 2013, and the amounts said to be outstanding under the judgment debt;

(h) in response to the contentions of the plaintiffs concerning the nature of the agreement between them and Harplex, Mr Szanto deposed as follows:

At all times during the course of the [plaintiffs'] negotiations with [Harplex] giving rise to any payments in reduction of the judgment sum, the [plaintiffs] dealt with me or solicitors under my supervision and in the employ of Trumble Szanto Lawyers. At all relevant times I was fully aware of the state of negotiations for same and oversaw and made decisions on behalf of [Harplex] in response to any of the [plaintiffs'] proposals.

Following the issuing of the Warrant of Possession on January 9, 2013 there were negotiations between [Harplex] represented by me or solicitors in my employ and the [plaintiffs] who were usually represented by the first [plaintiff] Nicolaos Konstandellos.

These negotiations reached a stage whereby in late March 2013 the [plaintiffs] offered to provide a payment in the sum of $20,000, which was eventually paid as set out in paragraph 28 hereof, in reduction of the judgment debt which was continuing to accrue, on the basis that on receipt of same by bank cheque [Harplex] would instruct the Sheriff's Office of Victoria ('the Sheriff') to forebear the enforcement of the warrant for a period of one month.

However at all times it was made completely clear to the [plaintiffs] - both in the course of telephone communications, emails or by letter correspondence - that any such forbearance in enforcement by [Harplex] was to be only temporary and that the judgment sum continued to incur interest and cost associated with it and its enforcement. Moreover, it was made quite clear and unequivocal on behalf of [Harplex] that the full sum of the judgment debt (including costs and interest accruing thereon from time to time) would remain fully repayable notwithstanding that the securities may be discharged on payment a sum considered appropriate by [Harplex] for doing so.

Accordingly, on March 27, 2013 I caused to be forwarded to the [plaintiffs] by letter duly received by them details of the terms upon which the payment of $20,000 at or about that time it would be received. That letter included the following which was consistent with the discussions between [Harplex's] solicitors and the [plaintiffs'] solicitors:

We further confirm that the mortgages on the two properties will be discharged on payment of the sum of $910,000, being $480,000 for Springs Road and $430,000 for Arunta Crescent. It is to be noted that these are not payout figures.

...

On April 4, 2013 I received from the [first plaintiff] a Commonwealth Bank cheque in an amount of $20,000 made payable to [Harplex's] solicitors.

Thereafter, Mr Tan or myself from time to time dealt with the [plaintiffs] through the first [plaintiff], Mr Konstandellos, or solicitors on their behalf including Mr Denby regarding the [plaintiff's] progress and arrangements for refinancing the security properties so as to enable a substantial payment to be made to [Harplex] in reduction of the judgment debt.

On May 8, 2013 Mr Konstandellos informed us that the [plaintiffs] were expecting to make a further payment within the two to three weeks following, which he believed at that time to be of the order of $30,000.

It should be made clear that at no time between the date of the warrant and around midJune 2013 had the [plaintiffs] or anyone on their behalf offered any real or substantial payment of the judgment sum let alone payment of it in full. Until receipt of the [plaintiffs'] payment in the sum of $963,050 on July 17, 2013 the payments negotiated with or received from the [plaintiffs] were made in order for the [plaintiffs] to obtain [Harplex's] temporary forbearance in execution of the warrant.

(i) he deposed, in relation to the assertion by Mr Nick Konstandellos in his first affidavit that the plaintiffs paid the sum of $963,500 in full and final settlement of the liabilities of the plaintiffs to Harplex pursuant to the judgment debt, as follows:

At no time in any correspondence or conversation with the [plaintiffs] or any of them or with their representatives from time to time, was there any such representation made by or behalf [sic] of [Harplex] which could possibly give rise to such a belief.

(j) he deposed, in response to the evidence in Mr Denby's affidavit, as to the correspondence between Trumble Szanto and Kelly & Chapman concerning the proposed discharge of the mortgage over Arunta Crescent. When this did not proceed, Trumble Szanto instructed the sheriff's office to resume the execution of the third warrant;

(k) in relation to his discussions with Mr Denby, he deposed as follows:

On June 25, 2013 I spoke by telephone with David Denby who advised me that he acted on behalf of the [plaintiffs] and that they were unable to refinance or otherwise obtain any more than $430,000 toward settlement of the judgment debt. Discussion ensued regarding proposals to allow the [plaintiffs] more time to make attempts to arrange refinance or other funding to the full extent of the judgment debt owing to [Harplex] and I suggested to Mr Denby that I may recommend to [Harplex[ that if the [plaintiffs] could pay an amount of $40,000 by 3.30pm the following day June 26, 2013 [Harplex] may consider that as a genuine attempt on part [sic] of the [plaintiffs] and an indication of their bona fide intentions and that therefore [Harplex] may be inclined to forbear further in execution of the warrant for up to six weeks.

Mr Denby and I agreed that we would obtain instructions in relation to that proposal and he and I would speak again as soon as possible.

Later that day I was contacted by telephone again by Mr Denby who informed me that the [plaintiffs] would agree to pay the amount of $40,000 by 3.30pm on June 26, 2013 in return for [Harplex's] forbearance in execution of the warrant as aforesaid.

However, on return to the office on Wednesday June 26, 2013 I received from Mr Tan a copy of an email to him from Mr Denby received after close of business on June 25, 2013 which gave notice of the [plaintiff's] withdrawal of the aforesaid proposal and provided a fresh one on different terms. ...

[Harplex] was quite concerned at the [plaintiffs'] departure from the terms agreed by myself and Mr Denby and refused to accept the latest proposal. Accordingly, on Wednesday June 26, 2013 I emailed to Mr Denby [Harplex's] responses, as insertions in dark red in the proposals set out in Mr Denby's email of June 25, 2013. ...

Later in the day on June 26, 2013 I spoke by telephone to Mr Denby at which time:

(a) He advised that a 'loan on the other property had been approved';

(b) The [plaintiffs] wished to proceed to enable discharge of mortgage over the Arunta Crescent and Springs Road properties, respectively, on July 10, 2013; and

(c) The [plaintiffs] want [Harplex] to provide the 'payout figure' to enable discharge of the mortgages.

In response, I explained to Mr Denby that in view of the tortuous history of [Harplex's] negotiations with the [plaintiffs] and their erratic behaviour regarding arrangements for payments allowing for discharge of the mortgages, [Harplex's] position as set out in my email responses to Mr Denby on June 26, 2013 would be maintained.

On June 26, 2013 at 3.40pm we received from Ms Diamantopoulos of Kelly & Chapman Lawyers an email setting out the [plaintiffs'] fresh proposal. This was followed later that day with an email exchange between Ms Diamantopoulos and Mr Tan. ...

Accordingly, shortly thereafter and on the basis of the [plaintiffs] making the payments of $20,000 and $960,000 in return for [Harplex's] agreement to discharge the mortgages and release the certificates of title, we arranged once again for the Sheriff's Office to forebear for the time being in execution of the warrant. This incurred further fees payable by [Harplex] to the Sheriff's Office.

On June 27, 2013, we received from the second [plaintiff], Alex Konstandellos by delivery to our office a Commonwealth Bank cheque made payable to Trumble Szanto Lawyers in the sum of $20,000 and dated that day.

(l) he deposed as to the changes in the arrangements for settlement, which ultimately took place on 17 July 2013, and that his firm had arranged for the sheriff's office to resume execution upon the warrant in the event that the settlement did not take place;

On July 22, 2013 I received a telephone call from Mr Denby who informed me and I believe that earlier that day an officer of the Sheriff's Office had attended at a property being the subject of the mortgage security in an attempt to take possession of thereof.

I agreed that our instructions to the Sheriff's Office were not to take possession of the properties given receipt of the [plaintiffs'] payment as agreed in consideration for [Harplex's] discharge of the mortgages and release of the certificates of title notwithstanding that there was a balance of the judgment debt which remained payable by the [plaintiffs].

I expressly stated to Mr Denby that I wanted to reiterate again that the payment made on July 17, 2013 did not repay the debt and that it only allowed the [plaintiffs] to refinance the security properties by the [Harplex] discharging the mortgages and handing over the certificates of title. Mr Denby did not seem surprised by this, nor did he disagree with it or query it in any way. He merely asked that I provide him with a statement of what remained owing and I said I would send him a statement of the outstanding balance remaining payable following application of the monies received on July 17, 2013.

(n) as for further communications between him and Kelly & Chapman, he deposed as follows:

As foreshadowed in my telephone conversation with Mr Denby, I drew a spreadsheet setting out a complete accounting of the sums originally advanced by [Harplex] under the loans and all interest and costs accruing thereon and all payments made by or on behalf of the [plaintiffs].

On August 14, 2013 the spreadsheet was provided to Mr Denby under cover of our letter of that dated forwarded to him by facsimile transmission. ...

There being no response whatsoever to our letter nor any further payments by the [plaintiffs], on December 4, 2013 I caused to be delivered to the [plaintiffs] care of Mr Denby our letter with updated spreadsheets. The spreadsheets were provided to Mr Denby by facsimile transmission that day under cover of our letter of that date. ...

(o) and, in relation to the plaintiffs' contentions regarding the nature of the agreement reached on 26 June 2013, he deposed as follows:

At all times it was made clear to the [plaintiffs] and their legal representatives that [Harplex] was prepared to discharge the mortgages and release the certificates of title if there was a substantial reduction in the judgment debt. At no time was there anything said on behalf of [Harplex] nor anything in the conduct of [Harplex] or anyone acting on its behalf which could reasonably allow for the [plaintiffs] or their representatives to believe that the cheque payments received by us on July 19, 2013 were in full and final settlement of all monies to which [Harplex] was entitled under the loan agreements and mortgages.

For the reasons aforesaid I reject, as having no foundation at all, the allegations made in in the Konstandellos affidavit and the Denby affidavit to the extent that they assert that there has been full land final settlement of the judgment debt or that the balance of same outstanding as at this the date of my affidavit (as set out at paragraph 34, and described in Exhibit 'PSZ 1' hereto) is not due and payable by the [plaintiffs] to [Harplex].

69 Mr Szanto was cross-examined by both the solicitor for the plaintiffs and counsel for Kelly & Chapman.

70 During the course of his crossexamination by the solicitor for the plaintiffs, Mr Szanto gave evidence, in summary, as follows:

(a) he confirmed that he was a director of Harplex, having been appointed in his professional capacity as a solicitor. He is not a shareholder in Harplex, the sole shareholder is an Australian currently resident in Thailand. The shareholder was not in Holland in 2013, as referred to by Mr Denby in his affidavit;

(b) Harplex is an investment vehicle for its shareholder. Mr Szanto could not say what proportion of its business comprised of loan advances. Between 2010 and 2013 Harplex may have made four to five loans, possibly six to eight, totalling about $6.5 million. All loans are made on a commercial basis, to arm's length borrowers. Most of Harplex's communications with its borrowers would be through Mr Szanto in his capacity as Harplex's solicitor;

(c) the first loan was made to the plaintiffs (or an entity associated with them) in respect of the Gardenia Lakes Shopping Centre;

(d) it is his practice to enquire of borrowers as to the purpose of any loan made by Harplex, but it was not an inviolable practice. He could not recall for what purpose the plaintiffs wanted to use the funds raised by the Clarinda loans. He believes he spoke to each of the borrowers of the loans which are the subject of this proceeding;

(e) when taken to a file note he made in early 2012,[23] he noted that the reference to arrears owing to 'Glenview' was not a reference to loans advanced by Harplex;

(f) he agreed that Harplex engaged in what Mr Warren described as 'asset lending'. Mr Szanto preferred the term 'security based lending';

(g) when taken to another file note made by him,[24] he confirmed no payments had been made by the plaintiffs with respect to the Clarinda loans between late 2011 and March 2012;

(h) he was taken to a file note made by him on 2 April 2012,[25] concerning the proposed restructure of the loans made by Harplex to Gardenia Lakes, but said that this proposal was not accepted by Harplex;

(i) he was taken to a letter from Trumble Szanto to another solicitor engaged by the plaintiffs dated 23 May 2012 regarding the Gardenia Lakes Shopping Centre,[26] which in effect stated that Harplex would not forebear any longer. There was never any dispute concerning the Gardenia Lakes loans, as neither of Mr Nick or Mr Alex Konstandellos disputed their liability to Harplex with respect to the shortfall;

(j) Mr Szanto confirmed Harplex commenced the recovery proceeding on 11 September 2012. Shortly after that, he obtained an acknowledgment of the amounts outstanding on the Clarinda loans by the plaintiffs.[27] The plaintiffs did not resist giving this acknowledgment. He considered any resistance to the recovery proceeding was unmeritorious;

(k) he gave evidence that Mr Tan reports to him, and while Mr Tan would not report every conversation to him, he would report all significant conversations to him; and

(l) he does not recall a conversation with Mr Tan about obtaining a payout figure for the Clarinda loans. Harplex did not require the Clarinda loans to be refinanced: it required the plaintiffs' debt to it to be repaid. He agreed that there was no reason why Mr Tan could not attend to give evidence.

71 Turning now to the events leading up to 24 June 2013, Mr Szanto gave evidence, in summary, as follows:

(a) he could not recall any conversations between him and Mr Nick Konstandellos between January and March 2013. However, he gave evidence that Mr Konstandellos told him many times that he wanted to refinance 'the houses'. The Clarinda loans were a peripheral matter, because Mr Konstandellos owed millions on other loans;

(b) he made no investigations of the financial capacity of either of Messrs Nick and Alex Konstandellos to repay the Clarinda loans: Mr Nick Konstandellos told him that he did not have any money, and there was no reason to doubt him. The Clarinda loans were security based lending, and Mr Konstandellos always had 'a deal around the corner'. They had a large number of conversations along these lines; and he believed what Mr Konstandellos told him;

(c) he had arranged for valuations of Arunta Crescent and Springs Road in 2014;

(d) when taken to Trumble Szanto's letter of 27 March 2013 (see paragraph 8 above), he said that the figure of $910,000 to discharge the mortgages was a negotiated figure, but he could not recall whether it was negotiated with Mr Konstandellos or his solicitors;

(e) he agreed that he never told either Mr Konstandellos or his lawyers that if the sums payable for the discharge of the mortgages were paid, and the mortgages discharged it was Harplex's intention to issue a warrant of seizure and sale and sell the properties anyway. Mr Szanto said that it was always Harplex's intention to collect the full amount of the debt owing by whatever legal means were available to it;

(f) he recalls telling Mr Konstandellos that there was not enough value in the houses to repay the entirety of the debt. Mr Konstandellos told him that it did not matter, he would come up with the money;

(g) Mr Szanto gave evidence that Mr Konstandellos asked Trumble Szanto to send the letter of 27 March 2013. Mr Konstandellos told him that he needed this letter to confirm that the sheriff would be called off, and to indicate what would be required to discharge the mortgages. Mr Konstandellos was concerned to ensure that Harplex not take possession of the properties; and

(h) Mr Szanto was questioned also to whether an arrangement which left open the issue of a fresh warrant would achieve Mr Konstandellos' commercial objectives. Mr Szanto replied that this was not his concern. Mr Konstandellos had assured him that he would come up with the money, and Harplex gave him considerable time before the issue of a fresh warrant.

72 Mr Szanto was taken to a number of documents in the court book, and gave evidence, in summary, as follows:

(a) when taken to Mr Tan's email of 13 June 2013 (see paragraph 0 above), he said that Mr Tan's language in that email was rather 'loose'. He agreed that Mr Tan's reference to the amount 'outstanding' was inconsistent with Harplex's position in this proceeding;

(b) he agreed that there were moneys outstanding with respect to the loans regarding the Gardenia Lakes Shopping Centre, but this was not at all relevant to his dealings with the plaintiffs regarding the Clarinda loans;

(c) when taken to Trumble Szanto's letter of 24 June 2013 (see paragraph 18 above), he cannot recall whether he had a conversation with Mr Denby concerning the contents of this letter, but confirmed that this letter confirmed that the four mortgages referred to were the mortgages which were the subject of this proceeding, and not anything to do with the Gardenia Lakes Shopping Centre;

(d) he does not recall seeing Ms Diamantopoulos' email of 17 June 2013 (see paragraph 14 above), but he knew that at one stage the parties were considering a payment of $430,000 to discharge the mortgage over Arunta Crescent;

(e) there was no arrangement for the plaintiffs to pay interest each month. The sum of $450,000 referred to in Mr Tan's email of 17 June 2013 (see paragraph 12 above) was the amount that Harplex would accept to discharge the mortgage over Arunta Crescent;

(f) when taken to the email of Ms Diamantopoulos to Mr Tan of 17 June 2013, he said the reference to 'interest' did not refer to interest charges, but represented amounts Harplex would accept to forbear from executing upon its warrant;

(g) he was taken to the statement of account exhibited to his affidavit,[28] which showed the payments made by the plaintiffs in April, May and June of 2013, and the balance owing as at 19 July 2013 as being $1,059,969.71;

(h) he agreed that Mr Tan sent the email of 18 June 2013 (see paragraph 19 above) on his instructions, as well as the letter of 24 June 2013 advising Kelly & Chapman that all previous offers had been withdrawn; and

(i) he stated that he believed that the reference by Mr Tan to the figure of $910,000 in his email of 25 June 2013 was incorrect. He has no recollection of having seen this email.

73 Mr Szanto gave evidence that he held a number of conversations with Mr Denby over a number of days. The purpose of these discussions, as expressed to him, was to stop the sheriff proceeding with the sale of the properties. He agreed with the contents of paragraph 8 of Mr Denby's affidavit regarding his first telephone conversation on 25 June 2013, where Mr Denby referred to what Mr Szanto had told him (see paragraph 62(g) above). He denied that he had told Mr Denby that his client was in Holland, and does not recall discussing with him the final balance outstanding on the Clarinda loans. He denied that there was any conversation between him and Mr Denby to compromise the full amount of the debt. When taken to Mr Denby's file note of their telephone conversation on 25 June 2013, he agreed that Harplex would not be prepared to accept $430,000 for the discharge of the mortgage over Arunta Crescent, because there would not be sufficient security for the balance of the debt. He did not think that the two properties covered the entire debt, although he could not recall what was the value of the two properties.

74 Mr Szanto was taken to paragraph 16 of Mr Denby's affidavit, where Mr Denby expressed surprise when about a month after settlement he received a letter of demand for $169,000 plus. He denied that he told Mr Denby that the total debt was in the range of $900,000 to $1,165,000, or that there would be a final settlement sum of $960,000. He did not tell Mr Denby that the $40,000 payment he suggested the plaintiffs make would come off the loan balance, but of course, it would have been accounted for. He did tell Mr Denby that all previous offers were off the table.

75 Mr Szanto did not recall when he first saw Mr Denby's email of 25 June 2013 (see paragraph 21 above). He noted that the reference in this email to full and final settlement 'were not his words, and that his client would not be bound by a figure agreed for discharge of the mortgages three months prior'. He believes he personally agreed the figure of $960,000 with Mr Denby. He agreed that Harplex made no express reservation of its rights to issue a warrant of seizure and sale and to sell the properties in the course of Trumble Szanto's correspondence with Kelly & Chapman on 26 June 2013.

76 Mr Szanto rejected the contention that Harplex obtained a benefit from this settlement that it would not have obtained had it enforced the judgment debt. He agreed that Harplex would have incurred the expenses of a mortgagee sale, but said that Harplex might have recovered these expenses in a sale. He agreed that Harplex may have recovered money more quickly, but characterised this as a convenience, rather than a benefit. He accepted that the settlement avoided the risk of receiving a lesser amount on a mortgagee sale.

77 It was put to Mr Szanto that a full and final settlement of the balance owing under the Clarinda loans made sense, because it was unlikely there would be any recovery outside the security. Mr Szanto rejected this contention, as it was contrary to what he was promised by Mr Konstandellos.

78 Mr Szanto gave evidence that he did not know how the payments made by the plaintiffs on 17 July 2013, because the payments were made by way of bank cheque. There may well have been payments made by third parties. When it was put to him that if no settlement had taken place, Harplex might not have received funds from third parties, he responded 'but the balance would still be owing', and, in any event, there were other debt recovery options available to Harplex.

79 Mr Szanto was also crossexamined by counsel for Kelly & Chapman.[29] Mr Szanto gave evidence, in summary, as follows:

(a) he agreed that he held discussions with Mr Nick Konstandellos about the judgment debt from about late 2012 until Mr Denby was retained in June 2013. These discussions were conducted on the basis that the mortgages over the properties could be discharged to enable Mr Konstandellos and his family to refinance the properties. He never had a discussion with Mr Konstandellos where he offered on behalf of Harplex to release the full amount of the debt in return for payment of a lesser sum;

(b) he agreed that he suggested to Mr Konstandellos that he retain a solicitor, as he thought it was the proper thing to do. Mr Konstandellos called him often, and dropped in to see him unannounced. He felt that when sensitive issues were discussed, Mr Konstandellos should have legal representation;

(c) he agreed that Mr Tan was largely dealing with this matter until he spoke to Mr Denby. They knew each other, and Mr Denby called him to 'knock it on the head'. At this time, being Tuesday, 25 June 2013, Harplex had possession of Springs Road, and the sheriff would be attending at Arunta Crescent on the Thursday. Mr Denby told him that all the finance Mr Konstandellos had was $430,000. Mr Szanto gave evidence that he did not want to put the sheriff off because it would take too long to get him back, and he was not prepared to accept $430,000 to discharge the mortgage over Arunta Crescent.

80 Mr Szanto gave evidence that he told Mr Denby that if the plaintiffs paid $40,000 the following day, Harplex would give the plaintiffs six weeks to seek to refinance the properties. Mr Denby asked him if the figure of $910,000 was still on the table: he replied that all offers were off the table.

81 Mr Szanto was taken to paragraph 58 of his affidavit, where he deposed that Mr Denby telephoned him again and informed him that the plaintiffs would pay the sum of $40,000 by 3.00pm the following day. Mr Szanto said that Mr Denby never proposed that Harplex would release the full amount of the debt in exchange for payment of a lesser sum, and he repeated his evidence that Harplex never made such an offer.

82 Mr Szanto was taken to Mr Denby's email of 25 June 2013 (see paragraph 21 above), where Mr Denby withdrew the offer to pay $40,000, and referred to an offer to pay $910,000 'in full and final settlement'. Mr Szanto did not take those words to mean what the plaintiffs now contend they mean, and he does not believe that is what was meant by Mr Denby. Mr Szanto said that Harplex was concerned about the plaintiffs' departure from what was agreed on 25 June 2013.

83 Mr Szanto gave evidence that on 26 June 2013, Mr Denby telephoned him and told him that finance for Springs Road had been approved, and the plaintiffs wanted to proceed with the discharge of the mortgages. Mr Szanto told him that he wanted to firm up arrangements before he gave Mr Denby a final figure: once again, he gave evidence that he did not offer to release the full amount owing under the judgment debt in return for payment of a lesser sum.

84 Mr Szanto was taken to email exchanges between Mr Tan and Ms Diamantopoulos on 26 June 2013 where Ms Diamantopoulos refers to 'settlement of both properties' and 'full settlement' taking place. He gave evidence that he did not understand those emails to be changing the nature of the agreement between the plaintiffs and Harplex.

85 Mr Szanto gave evidence that he had a discussion with Mr Denby that there was still a debt outstanding to Harplex: he could not recall how it came up, or who raised it, but he recalls Mr Denby saying 'Well, how much is still owing?' and he responded 'I will have to calculate it and get back to you'. Mr Szanto was taken to a file note of Mr Denby's of 22 July 2013, which refers to a telephone conversation between him and Mr Szanto, and includes a note 'Debt still owing though'. Mr Szanto believed that this conversation took place closer to settlement, but accepted the accuracy of the file note.

86 Mr Szanto reiterated that Harplex would not have entertained a proposal to release the full amount of the loan in return for payment of a lesser sum, or release the balance for a lesser amount of money.

87 Mr Szanto was asked why the arrangement was not documented as an agreement, or as a deed? Mr Szanto said that the matter was not seen as being controversial. He discussed the Clarinda loans with Mr Konstandellos in a peripheral way: Mr Konstandellos had a far larger debt to Harplex, with far larger arrears, and that debt was usually the focus of their discussions. Mr Szanto gave evidence that every so often he would ask Mr Konstandellos 'what about the other loan?' and Mr Konstandellos would reply 'I'm not worried, I will refinance it, I will get housing loans'. Mr Szanto said words to the effect that 'you can't get enough money, because no bank will lend you enough money to pay out what is owing', and Mr Konstandellos would respond 'it doesn't matter, I will come up with the money, it is not important'. Mr Szanto gave evidence that the matter was always pushed to one side, as Mr Konstandellos was always concerned about the larger debts, but it was clearly stated that 'we are not going to let this go, and not going to accept less than what is owing', especially when hundreds of thousands of dollars was owing on the other loan, and remains owing to this day.

88 Mr Szanto confirmed that Mr Denby asked him to let him know about the outstanding debt, and he sent the letter of 14 August 2013 (see paragraph 27 above) in response. He did not hear back from Mr Denby, or anyone, for many months, and in December 2013 Mr Denby wrote to him and told him he had no instructions.

89 In reexamination, Mr Szanto gave evidence, in summary, as follows:

(a) he referred to a file note of an attendance of Mr Tan upon Mr Konstandellos on 25 March 2013,[30] which recorded a telephone conversation between Mr Konstandellos and Mr Tan. The file note records Mr Konstandellos saying that he could pay $20,000 that Friday, and the balance within two to three months;

(b) he was taken to the letter of 27 March 2013, and confirmed that the plaintiffs had acknowledged the amount of the debt prior to the issue of the writ in September 2013, not afterwards; and

(c) he confirmed the accuracy of Mr Denby's file note of 22 July 2013, which referred to 'debt still owing', which was consistent with what was recorded in his file note of the same date,[31] which stated "Agreed that we don't take possession though part of the debt is still owing. We to send statement of the debt".

90 Kelly & Chapman did not file and serve any affidavit evidence on its behalf. However, at trial, it tendered into evidence documents from the Kelly & Chapman file not put into evidence by the plaintiffs or Harplex. Kelly & Chapman also relied upon the 'proper basis certificate' signed by Mr Denby and filed by Kelly & Chapman along with their defence filed on 24 July 2015.

91 Four issues arise concerning the evidence before the Court:

(a) the extent to which extrinsic evidence is admissible to ascertain the terms of the agreement between the parties;

(b) the credibility of the deponents: in particular, Mr Konstandellos, Mr Denby, and Mr Szanto;

(c) whether any Jones v Dunkel[32] inferences can be drawn from the failure of any party to call any witnesses; and

(d) the impact of any gaps in the documentary evidence available to the parties.

92 In relation to (a) above, extrinsic evidence of the surrounding circumstances leading up to the making of the agreement is admissible to establish the objective background facts known to the parties to an agreement in writing where there is some ambiguity in the terms of the relevant agreement.[33] However, relevantly, in the current case, evidence which post-dates the making of an agreement is not admissible for the purposes of construing the terms of an agreement, and of course, neither is evidence concerning the subjective intentions or 'understandings' of the parties. It is trite law, but relevant in the current case, to focus upon what the parties said and did, not what they thought and wished for.

93 In the current case, there is sufficient ambiguity in the correspondence leading up to and surrounding the making of the agreement between the parties to render admissible extrinsic evidence concerning the surrounding circumstances. In particular, the reference in some of the correspondence to 'full and final settlement', 'full settlement', 'amount outstanding', 'payout figure', and 'final figure' is sufficiently ambiguous to justify the admission of extrinsic evidence. That much seems to have been presumed by the parties.

94 What no party did at trial was to definitively identify when the agreement was reached between the parties regarding the discharge of the mortgages over Arunta Crescent and Springs Road. In the SFASOC, the plaintiffs contend that the agreement as contended for by the plaintiffs was reached on 17 July 2013, the date upon which payment was made and the mortgages discharged. However, I do not consider that is correct. The better view of the evidence is that the agreement was reached between Trumble Szanto and Kelly & Chapman on 26 June 2013, and evidenced by the email exchange between Ms Diamantopoulos and Mr Tan on that day (see paragraphs 23 to 26 of these reasons).

95 My view that any agreement was concluded on 26 June 2013, and all steps taken after that date were in performance of the agreement is significant in only one respect: evidence of what transpired after that date is not admissible for the purpose of construing the terms of the agreement. That said, evidence which post-dates 26 June 2013 may be relevant to the credibility of a witness, as contended for by counsel for Harplex and Kelly & Chapman. In the current case, the impact of postcontractual conduct upon the credibility of a witness, in particular, Mr Denby, lessens the practical impact of the distinction.

96 As for the question of whether I should draw any adverse inferences from the failure of Harplex to call Mr Tan, and the failure of Kelly & Chapman to call Ms Diamantopoulos, I could, but decline to do so in the context of the manner in which the proceeding has been conducted, and the failure of the plaintiffs to identify the issue upon which I might be able to make an adverse finding. First (and this observation is relevant to the question of credit as well), ultimately the issues in the proceeding will turn largely upon the construction of the written correspondence between the parties, being the correspondence extracted at paragraphs 8 to 26 above. Secondly, the trial, by reasons of the orders of Mukhtar AsJ on 27 November 2014, has been conducted by affidavit, such that all of the parties have had advance notice of the manner in which the other parties have decided to present their case. No specific allegation was made by Mr Konstandellos in his affidavits concerning conversations he had with Mr Tan which are said to be relevant to the question of the proper construction of the terms of the agreement between Harplex and the plaintiffs, or any conversation he had with Ms Diamantopoulos which is relevant to the terms of the retainer between the plaintiff and Kelly & Chapman. Further, it was suggested by the solicitor for the plaintiff that I should somehow discount the evidence relied upon by Harplex because no evidence has been given by the real decision maker, being Harplex's shareholder and Mr Szanto's client. I see no cause to do so. All of the relevant correspondence and conversations were between the parties' solicitors. Further, while I do not need to and could not make a positive finding to this effect, the speed with which Mr Szanto was able to make and respond to offers suggests that he had been given considerable latitude by his client to negotiate on behalf of Harplex.

97 Turning now to the issue of credit, credit is not, save for the direct challenge to the credibility of Mr Denby's evidence, an issue which has loomed terribly large in this trial. In the end, the construction of the terms of the agreement between the plaintiffs and Harplex turns upon the proper reading of the correspondence between Trumble Szanto and Kelly & Chapman, particularly the correspondence between 24 June 2013 (when Trumble Szanto stated 'all previous agreements are off the table') and 26 June 2013, when agreement was reached between the parties. As for the other significant factual issue in the proceeding, being the terms of the retainer between the plaintiff and Kelly & Chapman, the paucity of evidence is such that resolution of the issue will not really turn upon the credibility of the witnesses, but rather the question of whether the plaintiffs have discharged their burden of proof in that regard. However, to the extent that credit is an issue in the proceeding, my observations follow.

98 First, in relation to Mr Konstandellos, I would not make any particularly adverse findings as to his credit, save to say that some of his evidence seemed a little self-serving, particularly his references to him wanting to finalise all matters concerning the Clarinda loans, and what he told and was told by Kelly & Chapman. However, by reason of the manner in which most of the communications were conducted (largely correspondence between Trumble Szanto and Kelly & Chapman), Mr Konstandellos' evidence could not really add much of great forensic value to the resolution of the issues in dispute in the proceeding. This is not a criticism: just a statement of the situation. As for Mr Konstandellos' evidence about what he believed was the true nature of the agreement between the parties, and what he hoped could be achieved by the negotiations between Trumble Szanto and Kelly & Chapman, this evidence was largely consistent with the position of the other parties to the proceeding (that is, his primary objective was to stop the sheriff from taking possession of Arunta Crescent), but even to that extent, it was largely irrelevant.

99 However, I do have some difficulties accepting unreservedly the evidence in his affidavits: it is clear from the language used in his affidavits, compared with the manner in which he gave evidence at trial, that his affidavits were drawn by solicitors, and did not contain his own words. Accordingly, I have some reservations about accepting evidence such as:

the substance of the conversations being 'that the plaintiffs instructed the second defendant to attempt to effect the settlement agreement on the terms referred to in paragraph 14 of the Further Amended Statement of Claim'[34]

as being his direct evidence. Further, while this is perhaps understandable given the passage of time, he was unable to give evidence concerning his conversations with Mr Denby and others in anything other than vague and general terms,. His evidence was conclusionary rather than descriptive.

100 As for Mr Szanto, despite the best efforts of the solicitor for the plaintiffs, his credibility emerged largely, if not completely unshaken by cross-examination. He is clearly a careful solicitor: he did not give definitive answers when he did not believe he was in a position to do so, and he remained resolute in his evidence that he did not make an offer to Mr Denby in the terms contended for by the plaintiffs. He was quite frank that Harplex engaged in 'asset based lending', or 'security based' lending (that is, funds were advanced without regard to the borrowers' capacity to repay), and that the plaintiffs' commercial objectives in their dealings with Harplex were of no concern to him (and, by extension, Harplex). To the extent that I was intended to draw from these exchanges an inference that Mr Szanto was untruthful in his evidence, I do not, and as no claim for unconscientious conduct was pleaded (and, in the case of Mr Nick Konstandellos at least, could not have been made), the insinuations on the part of the solicitor for the plaintiffs that the plaintiffs have been harshly dealt with by Harplex is irrelevant. Finally, I do not accept the submission by the solicitor for the plaintiff to the effect that Mr Szanto was not a disinterested party because he might be facing a suit from his own client concerning the transaction between the plaintiffs and Harplex. To suggest that a solicitor has manufactured or modified his or her sworn evidence in order to protect themselves from litigation is a serious allegation, which ought not be made lightly, and, in my view, in the current case, is without foundation.

101 As for Mr Denby, I accept the submissions advanced on behalf of both Harplex and Kelly & Chapman to the effect that where there is a conflict of evidence between that of Mr Szanto and that of Mr Denby, I should prefer the evidence of Mr Szanto. First, Mr Denby's and Mr Szantos's file notes of 22 July 2013, which referred to 'debt still owing' are fundamentally inconsistent with the evidence in his affidavit that he was 'surprised' to receive Trumble Szanto's letter of 14 August 2013, as is his failure to respond to that letter. If it had been such a surprise, and Mr Denby believed an agreement had been reached in the terms contended for by the plaintiffs, one would have expected Kelly & Chapman to have sent off a prompt response in protest. Further, I accept that his signing of the 'proper basis' certificate accompanying Kelly & Chapman's defence, while not determinative of the matter, does suggest that the factual matters pleaded in the defence, such as the terms of the retainer between the plaintiffs and Kelly & Chapman, had been the subject of some reflection and careful consideration. Finally, Mr Szanto's affidavit was prepared in part in response to Mr Denby's affidavit, in circumstances where it is most unlikely that Mr Szanto would have known that Mr Denby would not be available to give evidence in support of his version of events. This is not to suggest that Mr Szanto would have given different evidence if he had known that, but rather, that Mr Szanto made his affidavit in circumstances in which it was reasonably foreseeable that his version of events might well be contested by Mr Denby.

102 Finally, during the course of Mr Szanto giving evidence at trial it became evident that some relevant (and quite possibly not privileged) documents have not been discovered, and the solicitor for the plaintiffs made something of that during the course of his final submissions. In particular, Harplex has not discovered file notes of conversations between representatives of Trumble Szanto on the one hand, and either Mr Konstandellos or representatives of Kelly & Chapman on the other hand. As it turned out, disclosure of these documents may well have aided the fact finding exercise I have been required to undertake. However, on 27 November 2014, Mukhtar AsJ ordered that 'there shall be no discovery of documents unless the Court otherwise orders on application by either party for discovery of specific documents'. Despite being foreshadowed on occasions, the plaintiffs made no application for either specific or general discovery by Harplex, so I draw no adverse inferences from Harplex's failure to produce relevant documents from Trumble Szanto's file, notwithstanding the submissions advanced to that effect by the solicitor for the plaintiffs.

What were the terms of the agreement between the plaintiffs and Harplex?

103 The issue here is whether the plaintiffs have established that the terms of the agreement were as contended for by them: that is, upon payment by the plaintiffs of the sum of $960,000 plus legal costs, Harplex would discharge the mortgages over Arunta Crescent and Springs Road, and release the plaintiffs from any liability under the judgment debt.

104 The plaintiffs contended in their written outline of submissions that the following evidence supports the version of the agreement contended for by the plaintiffs:

(a) in the period between 27 March 2013 to 25 June 2013 Harplex was willing to accept $910,000 for the discharge of the mortgages over Arunta Crescent and Springs Road, subject to the plaintiffs making regular payments in respect of 'interest', which they did;

(b) the explanation for the jump from $910,000 as being the amount Harplex was prepared to accept on 25 June 2013 to $960,000 on 26 June 2013 is that Harplex agreed to accept the latter amount as full and final settlement of the judgment debt;

(c) the contention in (b) above is supported by the following evidence:

(i) Mr Konstandellos' evidence in his affidavit of 18 July 2014 that he wanted a final payout figure;

(ii) in its letter of 24 June 2013, Trumble Szanto stated that Harplex required the plaintiffs to make an offer on a 'global' basis;

(iii) Mr Denby's evidence to the effect that Mr Szanto told him that while the total debt owing was $1,650,000,[35] a compromise figure in full settlement of the outstanding claims could be fixed and was supported by Mr Denby's file notes and his email to Mr Konstandellos on 25 June 2013, referred to by Mr Konstandellos in his affidavit of 29 September 2016;

(iv) Mr Denby's email of 25 June 2013 referred to the plaintiffs' offer to pay $20,000 being the usual monthly instalment of interest, plus $910,000 in 'full and final settlement'; and

(v) the only difference between the terms of this email and the position finally agreed on 26 June 2013 was the fixing of the sum of $960,000, and there was no challenge to the use of the term 'full settlement', or any express reservation of rights by Harplex with respect to any balance owing upon the judgment debt.

105 The plaintiffs submitted that an agreement in the terms contended for by the plaintiffs represented a sensible commercial outcome for both parties, in that:

(a) the plaintiffs did not want the properties sold by Harplex, an outcome which could only be achieved had the plaintiffs' liability under the judgment debt been released; and

(b) the arrangement was sensible from Harplex's perspective as well, as the Clarinda loans were substantially in arrears, Mr Szanto had been told by Mr Konstandellos, and believed, that the plaintiffs had no ability to service or repay the loans, such that the potential for recovery outside the security properties was limited. Further, the net amount which could be recoverable by a mortgagee sale of Arunta Crescent and Springs Road was unknown, and may well not have covered the amount of the judgment debt.

106 In the course of his oral submissions at trial, the solicitor for the plaintiffs submitted that what happened prior to 25 June 2013 (such as Trumble Szanto's letter of 27 March 2013) was not particularly relevant to ascertaining the terms of the agreement, given that in its letter of 24 June 2013, Trumble Szanto stated that all previous offers had been withdrawn. He submitted that there was no reason why I should not accept Mr Denby's evidence: his evidence was consistent with what he told his client on 25 June 2013. Mr Szanto freely conceded in his evidence that the full amount of the judgment debt was unlikely to be recovered, so it made good commercial sense to compromise the judgment debt, particularly given the amounts owed to Harplex by Gardenia Lakes.

107 The solicitor for the plaintiffs noted that the express reservation in Trumble Szanto's letter of 27 March 2013 was not repeated in later correspondence. This, the plaintiffs submitted, along with references in the correspondence to 'full and final settlement', Mr Szanto's evidence that Mr Konstandellos wanted a final payout figure, and Trumble Szanto's letter of 24 June 2013, to the effect that Harplex wanted a 'global' settlement, is consistent with the evidence in Mr Denby's affidavit, Mr Denby's file notes of 25 June 2013, and Mr Konstandellos' evidence as to what Mr Denby told him. The reference in Mr Denby's file note of 22 July 2013 to "debt still owing" is not necessarily inconsistent with his affidavit. Further, the reference in Ms Diamantopoulos' email to Mr Konstandellos of 26 June 2013 to him being 'bloody lucky' is consistent with the plaintiffs' version of events: that is, the plaintiffs were fortunate to have reached an agreement with Harplex that discharged their liability under the judgment debt.

108 The solicitor for the plaintiffs reiterated his submissions that the agreement in the terms contended for by the plaintiffs made commercial sense to both parties. The plaintiffs wanted to make sure their houses were safe: this could not be achieved if a fresh warrant in respect of any outstanding debt could be issued the day after settlement. Further, the payment of $960,000 represented a modest compromise on Harplex's part: Harplex was being repaid its principal plus a substantial proportion of interest charges calculated on penalty rates.

109 Counsel for Harplex submitted that the credibility of Mr Denby's evidence concerning his 'surprise' at receiving Trumble Szanto's letter of 14 August 2013 has been damaged by the clear evidence that on 22 July 2013 he was told by Mr Szanto that there was an outstanding balance payable pursuant to the judgment debt. Further, Mr Denby's conduct in failing to respond to the letter of 14 August 2013 is inconsistent with there being an agreement in the terms contended for by the plaintiffs. He noted that this was the only real conflict of evidence in this proceeding: the plaintiffs have not led any evidence which contradicts the evidence in Mr Szanto's affidavit, which was sworn more than two years before the trial. Rather, the plaintiffs' response was to join Kelly & Chapman as a defendant to the proceeding. That is understandable, given that all communications after Kelly & Chapman's engagement were between them and Trumble Szanto. The plaintiffs did not contest the entitlement of Harplex to enter judgment, or seriously challenge Mr Szanto's evidence at trial. Rather, Mr Konstandellos' evidence was, to the extent that it was relevant, more targeted at the plaintiffs' claims against Kelly & Chapman.

110 Counsel for Harplex submitted that the agreement between the parties had to be construed in the context of Trumble Szanto's letter of 27 March 2013, which made it clear that the sum that Harplex would accept for the discharge of the mortgages over Arunta Crescent and Springs Road was not the sum required to pay out the Clarinda loans. This position did not change throughout the course of correspondence and negotiations between the parties.

111 Counsel for Kelly & Chapman confirmed that it was Kelly & Chapman's contention that the agreement between the plaintiffs and Harplex was in the terms contended for by Harplex. She submitted that upon the evidence, this Court could not safely find upon the balance of probabilities that the terms of the agreement were as contended for by the plaintiffs.

112 Counsel for Kelly & Chapman relied upon the following matters in support of her contentions as to the terms of the agreement between the plaintiffs and Harplex:

(a) before the plaintiffs retained Kelly & Chapman, the parties' dealings were always about refinancing the properties, not paying out the Clarinda loans;

(b) once Kelly & Chapman was retained, the correspondence between the solicitors was directed at securing discharge of the mortgages, or delaying the sale of Springs Road and the execution of the warrant upon Arunta Crescent until such time as the plaintiffs were in a position to refinance the mortgages over the two properties;

(c) she submitted that the references in the correspondence to "settlement" should be taken as being references to settlement of the new loans which were to be taken by the plaintiffs, which required the discharge of Harplex's mortgages. While in his email of 25 June 2013 Mr Denby proposed that there be a 'full and final' settlement, this proposal was emphatically rejected by Mr Szanto;

(d) Mr Szanto's evidence is consistent with the evidence of Mr Konstandellos' purpose for entering into negotiations with Harplex, being to stop the sheriff taking possession of Arunta Crescent. The only relevant evidence to the contrary was Mr Denby's evidence, which was in turn contradicted by the 'proper basis' certificate signed by him;

(e) counsel for Kelly & Chapman submitted that where Mr Denby's evidence is in conflict with Mr Szanto's evidence, Mr Szanto's evidence should be preferred; and

(f) finally, I can draw an inference concerning the terms of the agreement between the plaintiffs and Harplex from the fact that the parties did not document the agreement with a deed. This supports the proposition that no release of the balance of the judgment debt was intended: it is a basic step which could have been taken to document an agreement of that nature, and there was ample time between 26 June 2013 and settlement to have done so.

113 In my view, the plaintiffs have not established to the requisite degree of satisfaction that on the balance of probabilities that the agreement between them and Harplex was in the terms contended for by the plaintiffs. The plaintiffs have pleaded that the terms of the agreement were 'oral, or in writing, or to be implied'. The only witness who could give evidence at trial concerning what was said on 25 and 26 June 2013 was Mr Szanto: he was unshakeable in his evidence that in his conversations with Mr Denby he did not offer to release the plaintiffs from their obligations under the judgment debt in exchange for any sum other than that owing under the judgment debt. As to whether the terms asserted by the plaintiffs could be implied to give business efficacy to the agreement, the plaintiffs did not satisfy, and no really serious attempt was made to satisfy, the requirements for the implication of terms into a contract.[36]

114 Therefore, what remains is the exercise of construing the terms of the written correspondence between the parties, and in particular, the emails exchanged between the parties on 26 June 2013.

115 While the matter is not free of doubt, I consider that the following matters are relevant to determining what was described as 'settlement' in the correspondence between the parties:

(a) Harplex had a judgment debt in its favour, and was ready, as it was entitled, to take possession of Arunta Crescent and sell it and Springs Road. As at 25 June 2013, the sheriff, if not at the doorstep, was not far away;

(b) the letter of 27 March 2013 made it clear that the sum of $910,000 was only for the purpose of discharging the mortgages, not to extinguish the judgment debt, which at this time, was, by Mr Szanto's calculations, $1,083,187.07. This was repeated in Mr Tan's email of 13 June 2013 (see paragraph 10 above). Accordingly, Harplex was willing to take the risk of holding an unsecured debt of approximately $173,000, which is consistent with Mr Szanto's evidence that Mr Konstandellos told him that the plaintiffs would repay the debt;

(c) while it is true that the later correspondence between the parties did not contain such an express reservation of rights on the part of Harplex, the better view of the position is that the negotiations continued on the basis that any agreement was for the discharge of the mortgages alone, not for the extinguishment of the judgment debt. This was certainly the basis upon which the parties conducted their negotiations concerning the possible refinancing of Arunta Crescent: if settlement on that property proceeded as planned, it could not possibly have been contended that Harplex had intended to release the plaintiffs from the balance of the judgment debt. There was no change in the language used by the parties in the correspondence leading up to 24 June 2013 concerning 'settlement' of Arunta Crescent, and from 26 June 2013 concerning 'settlement' of Arunta Crescent and Springs Road. Indeed, viewed in its proper context, both Ms Diamantopoulos and Mr Tan appear to use the term 'settlement' as representing the occasion upon which documents would be exchanged and payments made, rather than as representing a compromise or accord and satisfaction. Therefore, the absence of any express reservations of rights on the part of Harplex carries far less weight than the plaintiffs contend ought to be given; and

(d) while there were references to 'final figures' and 'payout figures' in the correspondence, the use of such terms largely, although not completely, emanated from communications authored by Kelly & Chapman. In Trumble Szanto's letters of 24 June 2013 and 26 June 2013, Trumble Szanto, while not expressly maintaining a reservation of rights, referred to 'discharge' or 'discharge of the mortgages', not the discharge of the Clarinda loans, or any release of liability under the judgment debt.

116 As for the question of whether an agreement in the terms contended for by the plaintiffs was commercially beneficial to both the plaintiffs and Harplex, this is somewhat beside the point. Certainly the agreement made on 26 June 2013, even in the terms contended for by Harplex, was more beneficial to Harplex than if the plaintiffs had accepted the offer made by Harplex on 27 March 2013: the outstanding balance on the judgment debt fell from approximately $173,000 to $119,000. However, that is the nature of commercial bargains, and, as noted by counsel for Kelly & Chapman, the plaintiffs' bargaining position by this time was poor at best.

117 As for the contentions of the plaintiffs that the only explanation for the increase in the sum demanded from the plaintiffs on 25 June 2013 ($910,000, as stated in Mr Tan's email of that date) and on 26 June 2013 of $960,000 is that Harplex agreed to forgive the balance of the judgment debt, there is something rather odd about Mr Tan's email, sent the day after the letter of 24 June 2013, when Trumble Szanto stated that all offers had been withdrawn.

118 Mr Tan's email was sent in response to Ms Diamantopoulos' email of 18 June 2013, at 2.42pm on 25 June 2013. There is no evidence as to what times Mr Szanto and Mr Denby spoke on the two occasions they spoke that day, but the evidence concerning those conversations is at odds with what Mr Tan states in his email: certainly at some time during the course of 25 June 2013 Mr Denby was told in no uncertain terms that the sum of $930,000, let alone $910,000, was 'off the table'. While ultimately this was not an issue which had to be resolved, if there had been an issue as to the terms of any offer made by Harplex on that day, one would expect that the evidence of the discussions between Mr Szanto and Mr Denby, given their seniority within their respective firms, would carry more weight than correspondence between Mr Tan and Ms Diamantopoulos.

119 Finally, for completeness, the contention advanced on the part of plaintiffs, which was only faintly pressed at trial, that somehow the agreement between the plaintiffs and Harplex concerning the discharge of the mortgages over Arunta Crescent and Springs Road was somehow tied up with negotiations between Messrs Nick and Alex Konstandellos concerning Harplex's loans to Gardenia Lakes: the point, if there was one to be made, was never articulated in the plaintiffs' pleadings and submissions. I agree with counsel for Harplex that the matter went nowhere.

Is an agreement in the terms contended for by the plaintiffs enforceable?

120 The position of Harplex and Kelly & Chapman in relation to this issue is put simply: even if, contrary to their submissions, an agreement was reached in the terms contended for by the plaintiffs, part payment of a judgment debt is not good consideration for the release of the full amount of the judgment debt. Accordingly, even if I were to find in favour of the plaintiffs as to the terms of the agreement contended by them, given that the agreement in the terms contended for by the plaintiffs was not, even if it was made, documented and executed as a deed, any agreement in the terms contended for by the plaintiffs is unenforceable because of a failure of consideration.

121 The plaintiffs contend that there was good consideration for Harplex's agreement to release the plaintiffs from the balance of the judgment debt. First, the plaintiffs agreed to pay Harplex's legal costs, fixed in a sum certain. Secondly, the plaintiffs gave up the option of selling the properties themselves, or allowing Harplex to sell the properties. Thirdly, the plaintiffs incurred costs of refinancing the properties, and funds sourced from third parties were also paid to Harplex at settlement.

122 The solicitor for the plaintiffs submitted that even nominal consideration is sufficient consideration for the extinguishment of the balance of a debt, as long as it is some act that the debtor was not otherwise bound to perform.[37] The obtaining of a benefit or the avoidance of a 'disbenefit' may be consideration, as may be the debtors incurring a detriment.[38] Here, it was said, the plaintiffs:

(b) borrowed money from third parties to pay Harplex; and

(c) incurred financing charges to refinance the mortgages over Arunta Crescent and Springs Road.

123 Counsel for Harplex objected to these submissions being advanced on the basis that the plaintiffs had not pleaded, by way of reply, or at all, their allegations that consideration had passed from the plaintiffs to Harplex, such as to overcome the established legal principle that part payment of a debt is not good consideration. To address this submission, it is necessary to return to the history of the pleadings in this matter.

124 On 20 January 2015, Harplex filed its defence in this proceeding. In response to paragraph 19 of the plaintiffs' original statement of claim, whereby the plaintiffs alleged that it had relied upon representations said to have been made by Harplex, and 'paid [Harplex] those sums and otherwise noted to their detriment' (the reference to 'noted' was a reference to 'acted', and was corrected in a later version of the pleading), Harplex stated as follows (after denying the allegation):

part payment of a judgment debt is insufficient consideration to discharge the judgment debt.

125 This version of the defence remained in place until 8 September 2016, when Harplex filed its defence to the further amended statement of claim filed on 7 September 2016.

126 As noted in paragraph 45 above, there is on the Court file a document headed 'Reply', and dated 9 May 2016, being the first day of the aborted trial ('proposed reply'). It seems that any application by the plaintiffs to file and serve the proposed reply (which did not appear to be in final form, as it contained handwritten amendments, not made by me) was overtaken by the plaintiffs' application for an adjournment of the trial, the reason for which was said to be to enable the plaintiffs to re-plead their statement of claim to include allegations concerning the loans made by Harplex to Gardenia Lakes.

127 The proposed reply stated relevantly, as follows:

If, which is alleged in paragraph 20(a) thereof but which is denied by the first to third plaintiffs, part payment of a judgment debt is insufficient consideration to discharge the judgment debt, in the circumstances pertaining in the present case the first defendant:

(a) is estopped from relying on such a doctrine; or

(b) is unable to rely upon such doctrine by reason of its unconscionable conduct.

Particulars

(a) The first defendant represented on several occasions in the emails referred to in paragraph 14 of the statement of claim that he payment to be made, when agreed, would be a "global settlement" "in full and final settlement" of any indebtedness to the first defendant.

(b) In reliance on those representations the third and fourth plaintiffs re-mortgaged their properties the subject of the present proceeding in order to effect the payment of the sum required to be paid to the first defendant and did not pursue their claim for $67,557.33 which could have been made in respect of the Clarinda property.

(c) Having made the payment as agreed with knowledge that the agreement referred to in paragraph 14 of the statement of claim was unenforceable in the circumstances disclosed above, or in any event, it was unconscionable on the part of the first defendant to require payment of what was alleged to be the balance due either -

(i) at all; or

(ii) in one lump sum;

at a time the first defendant knew the plaintiffs had just re-mortgaged the properties the subject of this proceeding and would be unable to pay the debt without being required to sell those properties.

As to the allegations made in paragraph 20(a) thereof they state further that in any event there was consideration sufficient to support the part payment of the judgment debt in that the plaintiffs forewent the opportunity to take proceedings to have the default judgment in the first proceeding set aside and that proceeding defended on its merits.

128 Save for the correction of a typographical error, and the provision of particulars, paragraph 19 of the further amended statement of claim dated 7 September 2016 (and of the SFASOC) reproduced the allegations in the plaintiffs' original statement of claim. However, in its defence filed on 8 September 2016, Harplex did not repeat the allegations made in paragraph 20 of its original defence. However, by this time, the assertion to the effect that 'part payment is not good consideration' had made its way into the defence of Kelly & Chapman. At paragraph 23A of Kelly & Chapman's amended defence dated 13 April 2016, and as amended in their defence to the Further Amended Statement of Claim dated 12 September 2016, in response to the plaintiffs' allegation that they retained Kelly & Chapman to, among other things, negotiate and document a binding settlement agreement in the terms contended for by the plaintiffs, Kelly & Chapman contended as follows:

If (which is expressly denied) the Plaintiffs and [Harplex] entered into the so called "settlement agreement" as alleged, then:

(a) the terms of the "settlement agreement" agreement did not constitute accord and satisfaction as between those parties, there having been no consideration given by[39] [Harplex] in exchange for the compromise of its rights pursuant to the judgment; and

(b) in the premises, the judgment remains extant and enforceable.

129 Thus, the enforceability of any agreement in the terms contended for by the plaintiffs was raised squarely as an issue by Kelly & Chapman in its defence. However, in my view, counsel for Harplex was correct in submitting that the plaintiffs should not be permitted to advance at the trial a positive case in opposition to this allegation, to the effect that the plaintiffs had provided good consideration to Harplex, in the absence of any positive pleading to that effect. No such allegation is contained within the SFASOC, and the proposed reply, even if it had any formal status, is responsive to an earlier version of Harplex's defence, not the allegations in Kelly & Chapman's defence. While allowances can sometimes be made in not strictly confining a party to its pleadings, this is not the occasion for doing so: the plaintiffs have been represented at all times, and there was ample time between the filing of Kelly & Chapman's defence on 12 September 2016 and the commencement of the trial on 2 November 2016 to prepare and file and serve a reply. Harplex and Kelly & Chapman were entitled to be put on notice of the case the plaintiffs intended to advance at trial, to enable them to lead evidence and make submissions to the effect that no consideration had in fact passed.[40] Accordingly, the plaintiffs fail on this argument, and I decline to consider the matter further. In any event, without considering the matter in any detail, I doubt that any serious injustice to the plaintiffs arises, in that the evidence relied upon to support the plaintiffs' contentions that there was good consideration was thin indeed, and the plaintiffs' submissions in that regard were somewhat speculative.

Did Harplex engage in misleading and deceptive conduct?

130 The plaintiffs claim that, if there was no binding agreement between the plaintiffs and Harplex, in the terms contended for by the plaintiffs, then the plaintiffs were misled into believing there was. The plaintiffs submitted that Harplex was acting in trade and commerce; and Harplex should have made it clear to the plaintiffs that their payments of $960,000, plus $20,000, plus legal costs was not in full and final settlement of Harplex's claims under the judgment debt, that there was still a balance owing under the judgment debt, and that Harplex intended to take enforcement action with respect to the balance of the judgment debt.

131 The plaintiffs submitted that both Harplex and Trumble Szanto were acting in trade and commerce when negotiating with the plaintiffs and Kelly & Chapman concerning Arunta Crescent and Springs Road. Harplex was engaged in the business of making loans for profit, and these negotiations were incidental to that activity. They cannot be deprived of their commercial character by reason of them being conducted through Harplex's solicitors. If the plaintiffs had not been so misled, they could have simply allowed Harplex to take possession of and sell the properties, and they would not have incurred the costs of refinancing the properties.

132 Counsel for Harplex noted that the allegations of misleading and deceptive conduct were wholly unparticularised, and that all of the negotiations were conducted through solicitors. The question is not whether Harplex's conduct was in trade or commerce, but whether Trumble Szanto, which is the only party which could have made any representations, was acting in trade and commerce. Counsel for Harplex relied upon the decisions of this Court in Little v Law Institute of Victoria (No 3),[41] LT King Pty Ltd and anor v Besser and anor,[42] and Goddard Elliott v Fritsch[43] as authority for the proposition that in making statements to other parties in the course of litigation, a solicitor is not acting in trade and commerce for the purpose of s 18 of the Australian Consumer Law or its predecessors or state equivalents.

133 In my view, Trumble Szanto, as Harplex's agent, was acting in trade and commerce. As stated by Dixon J in Dual Homes Pty Ltd v Moores Legal Pty Ltd and anor:[44]

...a mere connection to a judgment debt or a prospective challenge to a debt recovery procedure is not sufficient to characterise the conduct as being in the course of litigation. The purpose of the conduct best identified its character: to assist Dual Homes in its management of a trading or commercial relationship, a dispute over the payment of a debt. McKellar's conduct bore the requisite trading or commercial character and was conduct in trade or commerce.[45]

134 The current case is on all fours with the position in Dual Homes, and the matter before Osborn J (as he then was) in L T King, where his Honour stated:

Nevertheless despite the fact that there are core activities of the legal profession which do not constitute trade or commerce, there are many circumstances where solicitors undertake a significant role in the actual conduct or completion of commercial transactions. In such cases it is in my view clearly open to conclude that the specific conduct is in trade or commerce.[46]

135 Notwithstanding the above, while the conduct of Trumble Szanto in conducting negotiations with the plaintiffs was conduct in trade or commerce, I am unable to be satisfied, on the evidence, that Trumble Szanto engaged in misleading or deceptive conduct. The principles governing whether conduct is likely to mislead or deceive, as summarised in the plaintiffs' written outline of submissions, are not controversial, but in my view, the evidence does not establish the causal link between the statements made by Trumble Szanto (whether in correspondence or in oral conversations) and Mr Konstandellos' apparent belief that the payment of the sum of $960,000 plus costs discharged the plaintiffs' obligations under the judgment debt. As noted by counsel for Harplex, the allegations of misleading and deceptive conduct are unparticularised, in that the plaintiffs in the SFASOC rely upon the entirety of the correspondence between the parties to support their contention that Trumble Szanto and/or Harplex's conduct was misleading or deceptive. It is unclear from the evidence of Mr Konstandellos as to why he believed that the judgment debt had been extinguished, although there was some evidence that he was told this by Mr Denby. This evidence falls far short of attributing liability to Trumble Szanto and/or Harplex. Mr Denby's evidence in his affidavit was to the effect that he believed that the plaintiffs' liability for the judgment debt had been extinguished, but his credibility concerning this aspect of his evidence has been seriously called into question. The highest that the plaintiffs' submissions reached at trial was that:

[Harplex] ought to have made clear that the payment of $960,000 plus $20,000 plus legals was not in full and final settlement, that there was still a balance owing and the judgment debt, and that [Harplex] intended to enforce that balance.

136 This submission falls well short of supporting a finding that the conduct of Trumble Szanto and/or Harplex induced either Mr Konstandellos or Mr Denby to have a mistaken belief about the terms and effect of the agreement reached on 26 June 2013.

137 Finally, for completeness, there is a real question mark as to whether conduct of Trumble Szanto and/or Harplex caused any loss to the plaintiffs. I accept that if there was conduct to that effect that was relied upon by the plaintiffs, the plaintiffs acted to their detriment by refinancing Arunta Crescent and Springs Road, in that there is evidence that Mr Konstandellos at least incurred refinancing charges. But the evidence concerning what the plaintiffs would have done if they knew the true position is extremely opaque. Mr Konstandellos' evidence did not directly address the question of what alternative course of conduct he would have taken had he known that the payment made by the plaintiffs only discharged the mortgages over Arunta Crescent and Springs Road: indeed, he gave evidence that he did not want to sell the properties. Accordingly, the plaintiffs' claim in this regard fails.

Did the 2016 settlement agreement release the plaintiffs from their liability under the judgment debt?

138 The plaintiffs contend that, by reason of the terms of the 2016 settlement agreement, and the absence of any evidence advanced by Harplex to the effect that it expressly reserved the rights of Harplex to recover the balance of the judgment debt from the plaintiffs, Harplex has released the plaintiffs from liability to pay the balance of the judgment debt. The plaintiffs relied upon the decision of Kyrou J (as he then was) in Associated Retailers Ltd v Toys Unlimited Pty Ltd and ors ("Associated Retailers"),[47] where his Honour stated, referring to the decision of the High Court in Walker v Bowry:[48]

At common law, a release of one of a number of co-debtors who are jointly, or jointly and severally, liable for the same debt 'releases all of them'. Similarly, if a creditor, without having received full payment or performance by the debtor, agrees to release the debtor, any guarantor will also be released.

This rule does not apply where the creditor enters into a covenant not to sue a debtor because such a covenant does not affect the underlying liabilities of the codebtor or the guarantors.

The question of whether a contractual term operates as a release or as a covenant not to sue must be determined by construing the term in the context of the contract as a whole. If it appears that the term, properly construed, was intended by the parties to the contract not to operate as a release of all codebtors or guarantors, then the term should be construed only as a covenant not to sue the debtor purportedly released by the contract.[49]

139 The plaintiffs' written outline of submissions noted that Harplex has admitted in its defence that the 2016 settlement agreement contains a release of the fourth plaintiff, and said further that:

It is not alleged in [Harplex's] defence and no evidence has been led by it that the [2016] settlement agreement contains any intention to reserve rights against codebtors or guarantors.

140 Counsel for Harplex was granted leave to file a further written submission on this point. On 7 November 2016, counsel for Harplex sent the following note to the Court:

Footnote 14 - Associated Retailers Ltd v Toys Unlimited at [183] is said to be the authority, wherein His Honour cited Walker v Bowery (1924) CLR 48 at page 58.

Walker does not stand for that proposition. Walker is concerned with the effect of obtaining a judgment in an action against one of several joint and several guarantors, and then releasing that judgment debtor. It was concerned with the merger of the contractual liability in the judgment thereby affecting rights of indemnity and contribution of the others who were not sued. The judgment effected the release of the others.

The present case does not involve any release (either by pleading or by evidence) as it is for a joint and several judgment. Issues of merger of the original action in the judgment do not arise.

141 On 10 November 2016, the solicitor for the plaintiffs filed a submission in reply, stating, among other things (omitting citations):

[Harplex] seeks to draw an irrelevant distinction between a judgment against only one of several joint and several debtors, and a joint and several judgment against joint and several borrowers. The case law makes it clear that the underlying principle is the sum in both instances: where there is a release of one of joint or joint and several debtors (whether they are debtors under the loan agreement or judgment debtors), the release to one operates to release all the other debtors

and, further:

There was no deed of settlement, and hence [Harplex] cannot allege that the settlement agreement contained an express reservation of any right to sue the other plaintiffs.

142 As I see it, there are two issues which need to be considered in resolving this question:

(a) first, whether the principle in Walker v Bowry[50] (which, as far as my researches show, is still good law) applies without distinction to contractual debts, and debts arising under a judgment; and

(b) secondly, if the principle in Walker v Bowry does apply to a debtor's liability under a judgment debt, whether, on the limited information available to me about the form and terms of the 2016 settlement agreement, the 2016 settlement agreement can be construed not as a release, but merely as a covenant not to sue.

143 In relation to the first issue above, while the authorities I have reviewed touch on this only in passing, I consider that the better view is that there is no material distinction between contractual debts and judgment debts for the purposes of applying the principle in Walker v Bowry. In Dorgal Holdings Pty Ltd v Buckley and ors[51] ('Dorgal Holdings'), one of the authorities referred to by Kyrou J in Associated Retailers, McLelland CJ in Eq, observed that while the principle in Walker v Bowry seems 'impossible to justify', it remained good law, and went on to say as follows:

I do not think that the circumstances that the liability there was contractual and the liability in the current case is statutory provides a sufficient basis for distinguishing that decision.[52]

144 In Pollack v National Australia Bank[53] ("Pollack"), the Full Court of the Federal Court was concerned with the question of whether the release by a bank of one debtor against whom a judgment had been obtained had the effect of releasing the other judgment debtor. The Full Court did not expressly consider whether the principle in Walker v Bowry applied to judgment debts as well as contractual debts, but rather proceeded on the basis that it did, and found, as a matter of contractual construction, that the relevant settlement agreement did not operate as a release. Despite reasonably extensive researches conducted upon my instructions, it appears that there are no authorities to the contrary, and that the principle applies to guarantors as well as codebtors. In Modern Contract of Guarantee,[54] the learned author, after referring to Pollack, summarised the position as follows (omitting citations):

In every case, the precise nature of the creditor's agreement with the guarantor needs to be analysed in order to ascertain if it amounts to a covenant not to sue or otherwise falls short of an absolute release. If any express or implied intention to reserve rights against the other coguarantors is found in the document containing the release, then it is likely that the parties intended a covenant not to sue. The court may also have regard to the surrounding circumstances to determine whether the parties intended a release or a covenant not to sue. It is a question of construction whether a covenant operates as a release or a covenant not to sue. If, upon its proper construction in the context of the document as a whole, the covenant shows an intention not to release all joint and several guarantors, that will point to a covenant not to sue. In that case, the co-guarantors will not be discharged from liability, and they will still be entitled to contribution from the guarantor who is entitled to the benefit of the creditor's covenant not to sue. In an appropriate case the terms of a settlement with one co-surety properly construed in the light of the surrounding circumstances can constitute a covenant not to sue rather than a release, even though there is no express reservation of the creditor's rights against the co-sureties.[55]

145 The authorities make it clear that the subjective intentions of the parties are irrelevant to the question of construction. In Pollack, the Court referred with approval to the following statement of the Full Court of the Supreme Court of South Australia in Murray-Oates v Jjadd Pty Ltd:[56]

The question of whether we are concerned with a release or covenant not to sue should be approached as being one of construction having regard to the words used. At the same time one has to bear in mind the possibility of an implied reservation of rights. The fact that the plaintiff might not have intended to release the defendant, or did not realise the legal consequence of a release to one joint debtor, is not of itself of any particular significance ... [57]

146 Accordingly, in the current case, the task facing me is to determine, on the limited information available to me, whether the effect of the 2016 settlement agreement was to release the plaintiffs, or whether it merely contained a covenant not to sue the fourth plaintiff.

147 Once again, it is necessary to return to the history of this proceeding and the pleadings of the parties. The 2016 settlement agreement first came to the attention of the Court on about 2 March 2016, when Harplex filed an affidavit sworn by the then fourth plaintiff, Mr Frank Dounias. While this affidavit is not formally in evidence at trial, it is necessary to refer to this affidavit to put into context how this issue arose in the proceeding. Mr Dounias deposed as follows:

On or about December 8, 2015, I instructed my solicitors, S Kourkoulis & Associates to reach an agreement with Harplex Pty Ltd in relation to the settlement of the related proceeding.[58]

The terms of the agreement were that Harplex Pty Ltd would agree to release me from any further enforcement of the judgment debt in related proceeding in consideration of receiving payment of a stipulated sum.

148 On 17 March 2016, I made orders that any application by any party be filed and served by 7 April 2016, returnable on 14 April 2016. On 21 March 2016, the solicitors for Kelly & Chapman wrote to the Court foreshadowing the following application:

(a) Harplex produce for inspection of the parties pursuant to s 26(1) of the Civil Procedure Act 2010 (Vic) all documents evidencing the settlement of the proceeding as between the fourth plaintiff and Harplex; and

(b) Harplex provide particulars of the amount alleged to be owed by the plaintiffs to Harplex pursuant to the judgment debt including details as to how such sum is calculated.

149 A summons to this effect was issued by the solicitors for Kelly & Chapman on 24 March 2016. On 14 April 2016, I made orders that the solicitors for Harplex to provide, on a without prejudice basis for the purpose of the forthcoming mediation, a statement of what Harplex contended remained owing under the judgment debt, without prejudice to Kelly & Chapman's rights to press for further discovery in the terms above after the mediation. However, ultimately this application was not pressed by Kelly & Chapman, and on 26 May 2016, I made orders dismissing the proceeding as between the fourth plaintiff and Kelly & Chapman.

150 On 23 May 2016, the solicitors for the plaintiffs filed and served a proposed Further Amended Statement of Claim. This proposed pleading contained, relevantly, the following allegations:

17A In or about February 2016, the fourth plaintiff and the first defendant entered into a settlement agreement ('the 2016 settlement agreement').

PARTICULARS

17B The First to Third Plaintiffs are unable to give further particulars prior to discovery being given by the first defendant.

(a) the Fourth Plaintiff agreed to pay the First Defendant the sum of $60,000;

(b) the Fourth Plaintiff agreed to discontinue its claim against the First Defendant in this proceeding;

(c) the First Defendant agreed not to enforce the judgment in Supreme Court proceeding no. S CI 2012 of 05213 against the Fourth Plaintiff;

(d) the Fourth Plaintiff released the First Defendant from any further claims against it; and

(e) the First Defendant released the Fourth Plaintiff from any further claims against him.

PARTICULARS

The First to Third Plaintiffs are unable to give further particulars prior to discovery being given by the first defendant.

17C In performance of his obligations under the 2016 settlement agreement, the fourth plaintiff paid the first defendant the sum of $60,000.

17D The legal effect of entry into the 2016 settlement agreement is to discharge the first to third plaintiffs from any further obligations to the first defendant under the first agreement and the second agreement.

17E Alternatively to paragraph 17D, the payment by the fourth plaintiff to the first defendant has reduced the quantum of any outstanding liability from the first to third plaintiffs to the first defendant.

151 The allegations in paragraph 17D above were amended in the SFASOC to add the words:

alternatively to discharge the first to third plaintiffs from any further obligations to make payment pursuant to the judgment obtained by the first defendant against them in Supreme Court proceeding no S CI 2012 05213.

152 Accordingly, while the plaintiffs' allegations concerning the legal effect of the 2016 settlement agreement were put more precisely in the SFASOC, Harplex has been on notice of the contentions of the plaintiffs in that regard since, at the latest, 23 May 2016. Further, on 2 November 2016, when I granted the plaintiffs leave to file and serve the SFASOC, I directed that the defendants file and serve any defences to that pleading by the following day. Neither of Harplex or Kelly & Chapman elected to file a defence to the SFASOC.

153 On 24 May 2016, a solicitor from Russell Kennedy, the solicitors for the plaintiffs, Mr David Kazatsky, affirmed an affidavit in which he deposed, among other things, as follows:

I am also informed by the First Plaintiff, and believe, that the First Defendant has not given discovery of its dealings with the Fourth Plaintiff.

154 Notwithstanding the above, no application was made by or on behalf of the plaintiffs for further discovery by Harplex. Save for a permissive order I made on 29 August 2016 (that the parties file any supplementary affidavits of documents), I made no orders directing Harplex to discover documents concerning the 2016 settlement agreement.

155 On or about 31 October 2016, days before the scheduled commencement of the trial (noting the trial commenced the day after Melbourne Cup Day, so in effect the last business day before the commencement of the trial), the solicitors for the plaintiffs served a Notice to Produce upon the solicitors for Harplex, seeking, among other things:

The settlement agreement referred to at paragraph 17A (of the Further Amended Statement of Claim) entered into by the fourth plaintiff and the first defendant in or around February 2016.

156 At the commencement of the trial, counsel for Harplex applied to set aside the Notice to Produce, on the basis that, as had been stated on behalf of Harplex on previous occasions, the 2016 settlement agreement was not relevant to the issues in dispute in the proceeding, as Harplex had, in its defence dated 8 September 2016, admitted the relevant factual matters, as follows:

17A It admits the allegations in paragraph 17A thereof.

17B It admits the allegations in paragraph 17B thereof.

17C It admits the allegations in paragraph 17C thereof.

17D It denies the conclusion of law expressed in paragraph 17D thereof.

17E it denies the conclusion of law expressed in paragraph 17E thereof.

157 On 2 November 2016, I stated that it was not necessary for the plaintiffs to expressly plead that the release of the fourth plaintiff by Harplex in the 2016 settlement agreement released the plaintiffs from liability under the judgment debt as the point was made sufficiently clear in paragraph 17D of the SFASOC,[59] and made orders deferring my determination of Harplex's application to a time 'not before the close of evidence at trial'. On the last day of the trial, I heard further argument on the matter, and, upon indicating that I was likely to order production of the 2016 settlement agreement pursuant to the Notice to Produce, counsel for Harplex stated words to the effect that there was no such agreement that had been put in writing, save for an exchange of correspondence between solicitors, thus rendering the Notice to Produce redundant.

158 I have rehearsed the history above in some detail, because it highlights the following relevant matters:

(a) that Harplex has been on notice since May 2016 that the plaintiffs intended to rely upon the 2016 settlement agreement as affecting their liability to Harplex, in the event they failed on their primary contention that there was an agreement between them and Harplex in the terms contended for by the plaintiffs;

(b) while the plaintiffs did not plead until the first day of trial their contentions concerning the precise legal effect of the 2016 settlement agreement, Harplex had an opportunity to adduce evidence of the terms of the 2016 settlement agreement to support any contention by it that the 2016 settlement agreement did not release the fourth plaintiff, but merely contained a covenant not to sue the fourth plaintiff. It would have been a relatively straightforward matter, given that Mr Szanto was due to attend for crossexamination at trial, for Harplex to seek leave to adduce additional evidence from Mr Szanto concerning the circumstances in which the 2016 settlement agreement was made, the terms of the 2016 settlement agreement, and to tender into evidence any documents in support of Harplex's contention that the legal effect of the 2016 settlement agreement was not as contended for by the plaintiffs in the SFASOC; and

(c) the principle in Walker v Bowry, while criticised in later authorities, is settled law in Australia, and the principles of construction summarised by Kyrou J in Associated Retailers are also well established, such that counsel for Harplex could be presumed to be aware of the issues which might arise from the plaintiffs' allegations concerning the effect of the 2016 settlement agreement upon the liability of the plaintiffs pursuant to the judgment debt.

159 Accordingly, in embarking upon the construction exercise referred to in Associated Retailers, Pollack, Dorgal Holdings, and James v Surf Road Nominees Pty Ltd[60] (also referred to in Associated Retailers), all I have before me are the plaintiffs' allegations in the SFASOC, Harplex's admissions concerning the existence and the terms of the 2016 settlement agreement, and Harplex's submission to the effect that Walker v Bowry does not apply in the current case. I could form the view, based upon the fact that Harplex continued to vigorously defend this proceeding, including after mediation after the 2016 settlement agreement was entered into, that Harplex had no intention of releasing the plaintiffs from their liability under the judgment debt. However, Harplex's subjective intention, even if there was direct evidence of its intention, is of limited, if any, relevance to my determination of this matter. However, in the absence of any evidence (or even submissions) to support a contention that the 2016 settlement agreement should be construed as including a covenant not to sue rather than a release, then in accordance with the wellestablished authority, I must find for the plaintiffs on this question. The submissions of Harplex to the effect that the plaintiffs and the fourth plaintiff were jointly and severally liable for the judgment debt is of no particular assistance, particularly given the statement in Walker v Bowry that:

At common law the release of one of a number of co-debtors jointly or jointly and severally liable for the same debt released all.[61]

160 By reason of my findings in relation to the release of the agreement between the plaintiffs and Harplex, the plaintiffs' claims against Kelly & Chapman largely, but not entirely, fall away. It could be argued that, given that I have found that the agreement between the parties was in the terms contended by Harplex, if in fact the retainer between the plaintiffs and Kelly & Chapman was in the terms contended for by the plaintiffs, and Kelly & Chapman had breached its retainer, that Kelly & Chapman might well be liable for the costs of this proceeding, and the recovery proceeding (at least, after 26 June 2013), insofar as they are not recoverable by the plaintiffs against Harplex.

161 The plaintiffs relied upon the evidence of Mr Konstandellos and Mr Denby, along with internal file opening documents and the correspondence between Mr Konstandellos and Kelly & Chapman to support their contention that Kelly & Chapman was retained to reach full and final settlement between the plaintiffs and Harplex. The solicitor for the plaintiffs noted in his submissions that Ms Diamantopoulos had not been called to give evidence to contradict the evidence in Mr Konstandellos' affidavit of 26 July 2016.

162 Counsel for Kelly & Chapman submitted that I could not be satisfied, on the basis of the evidence, that the retainer between the plaintiffs and Kelly & Chapman was in the form contended for by the plaintiff. She submitted:[62]

the Court should find as a matter of fact that [Kelly & Chapman], through Mr Denby, was retained to achieve the best possible outcome for the plaintiffs, so as to ensure that the houses, Arunta Crescent and Springs Road, were not sold by the sheriff, and could be used as security in the proposed refinancing. Further to that, the duty of care owed by [Kelly & Chapman] to the plaintiffs was limited by that;

163 Counsel for Kelly & Chapman submitted that Mr Konstandellos' evidence was consistent with the terms of the retainer asserted by Kelly & Chapman, in that Mr Konstandellos stated that his objective was to prevent Harplex from selling the properties, particularly Arunta Crescent. Further, even if the Court found that the retainer was in the terms contended for by the plaintiffs, it was not open to make a finding that Kelly & Chapman had breached its retainer. Mr Konstandellos retained Mr Denby when he and his family had little or no negotiating power: it was not a question of doing a better deal, but rather it was doing the best deal in all of the circumstances.

164 Counsel for Kelly & Chapman submitted that the various proposals put by Kelly & Chapman to Trumble Szanto all had a common theme, being to facilitate the refinancing of Arunta Crescent and Springs Road, which required Harplex's mortgages to be discharged. Mr Denby, in his email of 25 June 2013, tried to secure a full and final settlement, but this was against the weight of the history of the negotiations, and was comprehensively rejected by Mr Szanto. It was evident from the documents on Kelly & Chapman's file that Mr Konstandellos was copied in and kept fully informed of developments, and his principal goal, which was to avert a forced sale of the properties, was achieved. That is what Ms Diamantopoulos was referring to when she told Mr Konstandellos that he was 'bloody lucky'.

165 Further, counsel for Kelly & Chapman submitted that in any event, regardless of the terms of the retainer and any breach of the retainer, the Court could not be satisfied that the plaintiffs had suffered any loss. At the time of the commencement of the retainer, the plaintiffs were liable for the full amount of the judgment debt. Mr Szanto's unequivocal evidence was that Harplex was not prepared to compromise, and the Court could not be satisfied that the plaintiffs lost the opportunity to achieve a better outcome. Mr Konstandellos gave evidence that he was not planning to sell the properties himself, and there was no evidence that the plaintiffs would have been better off had there been a forced sale. As for the fact that the plaintiffs incurred refinancing charges: that was the only way the plaintiffs could have the capacity to pay Harplex. Finally, the plaintiffs' costs of this proceeding are not a compensable head of loss and damage.

166 The critical issue as between the plaintiffs and Kelly & Chapman is the terms of the retainer between them. Kelly & Chapman admits that it owed a duty of care to the plaintiffs. Further, if I found in favour of the plaintiffs in relation to the terms of the retainer, a finding that Kelly & Chapman had breached its duty of care under that retainer might follow. Given my findings concerning the terms of the agreement between the plaintiffs and Harplex, Kelly & Chapman did not procure a binding and enforceable agreement in the terms contended for by the plaintiffs, and there is no evidence they gave any advice to the plaintiffs on that point.

167 However, given Mr Szanto's evidence to the effect that Harplex would never have agreed to release the plaintiffs from liability for the full amount of the judgment debt, a real issue arises as to whether any breach by Kelly & Chapman of its retainer would have caused any loss, save perhaps the costs thrown away by reason of the plaintiffs' refinancing of the mortgages over Arunta Crescent and Springs Road. Taking this point further, if on 25 or 26 June 2013 Mr Denby had put to Mr Szanto a clear and unequivocal proposal that Harplex release the plaintiffs from any liability pursuant to the judgment debt in exchange for a payment of $960,000, the evidence overwhelmingly leads to the conclusion that such a proposal would have been flatly rejected. There was no evidence that the plaintiffs could have paid the outstanding debt, and the evidence is equivocal at best as to whether the plaintiffs would have simply walked away and allowed Harplex to take possession of and sell the properties. That much was suggested by the plaintiffs in the SFASOC, and in the plaintiffs' submissions, but Mr Konstandellos' evidence was equivocal on that matter. He accepted that Harplex could take possession and sell the properties, but his evidence was that he wanted to prevent the houses being sold. Whether or not another agreement could have been reached on terms more favourable to the plaintiffs than the agreement actually reached on 26 June 2013 is a matter of speculation, not evidence.

168 The above discussion is, however, somewhat academic, as I am not satisfied, on the balance of probabilities, that the terms of the retainer were those contended for by the plaintiffs. The documents referred to in the particulars of the SFASOC and relied upon by the plaintiffs to support their contentions concerning the terms of the retainer establish nothing more than that Kelly & Chapman were engaged in negotiating with Trumble Szanto to buy time for the plaintiffs to obtain loans to refinance Arunta Crescent and Springs Road, which they did. The documents, other than the critical exchanges referred to at paragraphs 8 to 26 above, and the communications between Kelly & Chapman and Mr Konstandellos on 25 and 26 June 2013, largely concerned matters of machinery, with Ms Diamantopolous making arrangements with the plaintiffs' lenders and Mr Tan to arrange the refinancing of the mortgages over Arunta Crescent and Springs Road and settlement.

169 The file opening records referred to in the plaintiffs' written outline of submissions do not shed any particular light upon the question of the terms of the retainer between the plaintiffs and Kelly & Chapman, and provides little support for the plaintiffs' contentions. The first, dated 28 March 2013, records the client as Mr Frank Dounias, for "Sale of 32 Springs Road, Clayton", and the type of file as "Conveyancing". The second, dated 17 June 2013, records the client (erroneously) as Mr Lambrini Dounias, c/- Mr Nick Konstandellos, for "Refinance-42 Arunta Crescent, Clarinda, Vic, 3169", and the type of file as "Conveyancing". The third, dated 27 June 2013, records the client as Mr Konstandellos, for "Harplex-loan", and the type of file as "Common Law".

170 Mr Denby's affidavit does not descend to any detail concerning the terms of the retainer. He deposed:

In June 2013 my firm received instructions from the [plaintiffs] to resolve a claim brought by [Harplex] as a result of judgment being entered in that proceeding.

Together with Georgina Diamantopoulos, my firm's senior conveyancer, we sought to arrange the settlement of loans from the Commonwealth Bank to pay out the indebtedness under the two agreements and to protect the two properties from the mortgagee's sales which were threatened by [Harplex].

171 The above statement is the closest Mr Denby comes to describing his retainer in the terms contended for by the plaintiffs. I note that the evidence in this affidavit largely concerned the plaintiffs' application to stay the third warrant, such that Mr Denby, at least at that time, may well not have turned his mind to the question of the precise nature of the retainer between his firm and the plaintiffs. Mr Konstandellos' evidence provided little assistance: the evidence in his affidavit was formulaic, and did not descend to any particulars as to what he said to Mr Denby and what Mr Denby told him. At trial, his evidence was vague, and largely to the effect that he wanted Mr Denby to 'fix things' or 'clean everything'. This evidence could be interpreted in a number of ways, but it is clear from the evidence that the immediate problem which needed to be 'fixed' was the imminent attendance by the sheriff at Arunta Crescent.

172 The contemporaneous documentary evidence supports the retainer being in the terms advanced by Kelly & Chapman in its defence being, that 'its instructions were limited to facilitating the refinancing of the Arunta Crescent property and the Springs Road property on the best possible terms so as to avoid mortgagee sales of these properties'. Perhaps the best evidence of the retainer is Mr Denby's letter to Mr Konstandellos of 27 June 2013 (the date the last file was opened), and the accompanying bill, which referred to

Attendances over three days on you and Trumble Szanto Lawyers to obtain extension of loan and postpone Sheriff taking possession of Arunta Cres property.

173 What was set out in the above narration was clearly achieved. This was confirmed by a letter from Mr Denby to Mr Konstandellos dated 22 July 2013, which stated as follows:

Dear Nick

Re: 32 Springs Road, Clayton and 42 Arunta Crescent, Clarinda

We are pleased to advise that the re-finance of the above properties has now been settled. Georgia Diamantopoulos will write to you separately regarding the conveyancing aspects of the matters.

We will now obtain confirmation from Trumble Szanto that the Warrants have been recalled.

We thank you for your further instructions in the matter and enclose our further account for your attention.

174 Accordingly, given that I am not satisfied that the terms of the retainer were those contended for by the plaintiff, there could have been no breach on the part of Kelly & Chapman. Further, I accept the submissions advanced by counsel for Kelly & Chapman to the effect that, even if the terms of the retainer were as contended for by the plaintiffs, there was no breach of retainer, as the evidence clearly establishes that the plaintiffs would have been unable to obtain a discharge of their liability pursuant to the judgment debt without making a payment in full to Harplex. For the same reason, the plaintiffs were unable to establish that any loss was caused by the conduct of Kelly & Chapman.

175 Accordingly, in summary, I make the following findings:

(a) the terms of the agreement between the plaintiffs and Harplex were in the terms contended for by Harplex: that is, the payment made by the plaintiffs on 17 July 2013 was in consideration for Harplex discharging the mortgages over Arunta Crescent and Springs Road, and did not release the plaintiffs from their liability for the balance of the judgment debt;

(b) while in negotiating with the plaintiffs and Kelly & Chapman concerning the proposed discharge of the mortgages over Arunta Crescent and Springs Road, Harplex and Trumble Szanto had engaged in conduct in trade and commerce, Harplex had not engaged in misleading and deceptive conduct within the meaning of s 18 of the Australian Consumer Law;

(c) the effect of the 2016 settlement agreement, given the admissions made by Harplex in its defence, and the absence of any evidence to enable me to find that the 2016 settlement agreement was merely a covenant not to sue, rather than a release, was to release the plaintiffs from any outstanding liabilities under the judgment debt from the time that Harplex entered into the 2016 settlement agreement; and

(d) the terms of the retainer between the plaintiffs and Kelly & Chapman are those contended for by Kelly & Chapman, and there has been no breach of retainer or duty of care on the part of Kelly & Chapman.

176 In the prayer for relief in their SFASOC, the plaintiffs seek the following relief against Harplex:

1. A declaration that they are not indebted to the first defendant pursuant to -

(a) the first agreement;

(b) the second agreement;

(c) the first mortgage;

(d) the second mortgage;

(e) the third mortgage;

(f) the fourth mortgage;

(g) the judgment obtained by the first defendant against the plaintiffs in Supreme Court proceeding No S CI 2012 05213

or at all.

1. Costs.
2. Such relief under Schedule 2 of the Competition and Consumer Act 2010 as the Court shall consider fit.
3. The orders and/or other relief sought in paragraph 17 hereof.

177 In paragraph 17 of the SFASOC, the plaintiffs claim the following relief:

The plaintiffs deny the first defendant's allegations and maintain that they are not indebted to the first defendant in respect of the sums claimed or at all, and claim an entitlement to the following orders and/or declarations:

(a) a declaration that the obligations upon the plaintiffs to make payments to the first defendant pursuant to the first agreement and the second agreement alternatively pursuant to the judgment obtained by the first defendant against the plaintiffs in Supreme Court proceeding No S CI 2012 05213, were discharged by the entry of the plaintiffs into the settlement agreement and/or upon the payments made by the plaintiffs to the first defendant consequent upon the settlement agreement;

(b) an order that the first defendant cease taking any step to enforce any alleged debt by the plaintiffs to the first defendant under the first agreement and the second agreement, alternatively pursuant to the judgment obtained by the first defendant against the plaintiffs in Supreme Court proceeding No S CI 2012 05213;

(c) an order that the first defendant take all necessary steps to discharge any warrants of seizure and sale on the titles for the Arunta Crescent Property and the Springs Road Property.

178 Given my findings that the agreement was in the terms contended for by Harplex, but that the plaintiffs were released from their liability under the judgment debt in or about February 2016, the plaintiffs' claims for damages cannot be made out, as their damages claim was premised on the basis that the terms of the agreement were as contended for by the plaintiffs, or, alternatively, that Harplex was liable to the plaintiffs for misleading and deceptive conduct. In any event, while the plaintiffs have established that they (or at least, Mr Konstandellos) incurred refinancing charges in the course of June and July of 2013, their contentions that they lost the opportunity to sell the properties themselves, or lost the opportunity to negotiate a different agreement with Harplex were speculative at best, and unsupported by the evidence. Accordingly, the only relief available to the plaintiffs is a declaration that the plaintiffs are not liable to Harplex under the judgment debt, and consequential orders in the recovery proceeding.

179 Accordingly, I will make the following orders in this proceeding:

1. There be judgment for the plaintiffs against the first defendant.

2. There be judgment for the second defendant against the plaintiffs.

3. The question of the parties' costs of the proceeding be reserved. In all of the circumstances, given my findings and the ultimate outcome of this proceeding, subject to hearing from the parties, I am inclined to refer the question of costs to judicial mediation.

4. There be consequential orders staying or setting aside the third warrant in the recovery proceeding.

5. The orders in paragraphs 1 and 4 above will be stayed for thirty days, or further order.

[1] The fourth plaintiff filed a Notice of Discontinuance with respect to Harplex on 22 February 2016, and he was formally removed as a party to the proceedings on 2 November 2016.

[2] The exact nature and terms of the retainer is a significant issue in dispute in this proceeding.

[3] This communication does not gel with the evidence of other communications on this day.

[4] While there was no evidence to the effect, the handwriting was almost certainly that of Ms Diamantopoulos.

[5] As required by s 42 of the Civil Procedure Act 2010 (Vic).

[6] Paragraph 13 of the SFASOC. This issue was not pressed at trial.

[8] See the particulars to paragraph 22 of the SFASOC.

[9] The reference to '$950,000' rather than '$960,000' is clearly an error.

[10] Being the email from Trumble Szanto to Kelly & Chapman dated 26 June 2013, reproduced at paragraph 22 of these reasons. The court book references in the pleadings and the affidavits refer to the plaintiff's court book prepared prior to the abortive trial in May 2016, which has now been supplanted by a later version.

[11] However, notwithstanding the opening of this file, it appears that Kelly & Chapman were not directly involved in this matter until June 2013.

[12] Being the loss and damage claimed against Harplex, and reproduced at paragraph 38(k) of these reasons.

[13] The Court file contains an unstamped document dated 9 May 2016 signed by the then counsel for the plaintiffs, and headed 'Reply of the first to third defendants'. However, no leave was granted to file this document, which was referrable to an earlier version of Harplex's defence (being the defence dated 20 January 2015). The consequences of the plaintiffs' failure to file and serve a reply are discussed in more detail later in these reasons.

[14] Mr Konstandellos refers here to a statement in his affidavit (which was struck out) to the effect that the payment of $963,500 was in full and final settlement of Harplex's claims with respect to the loans and the mortgages.

[16] This must be a reference to Springs Road alone.

[19] As this affidavit was filed in the recovery proceeding, where Harplex was the plaintiff and the plaintiffs were defendants, the extracts of Mr Denby's affidavit in these reasons have been edited to reflect the nomenclature of the parties in this proceeding.

[20] Being Trumble Szanto's letter of 14 August 2013, reproduced at paragraph 25 above.

[21] This figure cannot be correct, rather, the correct figure is $1,165,000.

[22] As this affidavit was filed in the recovery proceeding, where Harplex was the plaintiff, and the plaintiffs were defendants, extracts from Mr Szanto's affidavit have been edited to reflect the nomenclature of the parties in this proceeding.

[29] The solicitor for the plaintiffs objected to Ms Hannon leading evidence from Mr Szanto, but I ruled this could take place, because Harplex's and Kelly & Chapman's interests in the proceeding were not identical.

[33] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.

[34] Paragraph 2(b) of his affidavit sworn 29 September 2016.

[35] This must have been a mistake, the sum of $1,165,000 was referred to in Mr Denby's file note.

[36] See BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 271.

[37] See Shepparton Projects Pty Ltd v Cave Investments Pty Ltd [2013] VSCA 152, [78]; MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553, [44].

[38] Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723.

[40] During the course of his objections to the solicitor for the plaintiffs making submissions on this point, counsel for Harplex said that if he had had proper notice of this point, he would have been able to rely upon documents not in evidence, such as the terms of the mortgages between the plaintiffs and Harplex.

[41] (1990) 2 VR 257.

[42] [2002] VSC 354; (2002) 172 FLR 140 ('LT King').

[43] [2012] VSC 87.

[44] (2016) 306 FLR 227 ('Dual Homes').

[47] [2011] VSC 297.

[48] [1924] HCA 28; (1924) 35 CLR 48, 58.

[49] Associated Retailers [183]-[185].

[50] Walker v Bowry (1924) 34 CLR 48.

[51] (1996) 22 ACSR 164.

[53] [2002] FCAFC 55.

[54] O'Donovan J, Modern Contract of Guarantee (Thomson Reuters, subscription service) at [8.300], http://www.westlaw.com.au viewed 25 February 2017).

[55] Ibid [8.300] (at 15 February 2017).

[56] (1999) 76 SASR 8.

[60] [2004] NSWCA 475.

[61] [1924] HCA 28; (1924) 35 CLR 48, 58.