Mr Quinlan's evidence
106 According to Mr Quinlan, as at Friday, 6 February 1998 there was an agreement in place between himself, Mr Brady and Mr O'Sullivan. In his affidavit he summarised that "partnership agreement" as being:
"1. Bernie and I would each receive 3% of the profits earned by the Brady Group from the Fairfield Views project and Empire apartments project.
2. Tony, Bernie and I would each be entitled to a one third share of the profits from future projects.
3. Each of Tony, Bernie and I would work exclusively as partners.
4. I would hold the position of development manager, Bernie that of operations manager and Tony that of sales and administration manager.
5. Tony, Bernie and I would each draw a monthly advance of $10,000 to be deducted from the profit share when profit was realised.
6. Bernie and I would provide an amount of $500,000 as a loan to the Brady Group if and when requested by the Brady Group.
7. Tony, Bernie and I would provide guarantees and other security to secure finance for future Brady Group developments if and when requested by the [Brady] Group."
107 In cross-examination Mr Quinlan readily acknowledged that in the three years he worked for the Brady Group he never signed any agreement in relation to this alleged partnership agreement. He also agreed that he had not at any stage lodged a tax return as a partner.
108 When asked with whom he thought he was entering into a partnership, Mr Quinlan responded Mr Brady personally and not any of the Brady companies:
"Then we get to the 2 February meeting where we're basically looking at setting up a new entity. Tony had said, well, I've already got A&J Brady already own Empire. Brady Constructions already exists, it's got the licenses forever, whatever so we were basically the partnership. We were sitting above these corporate entities."
109 Mr Quinlan also stated that he could not recall when agreement was reached regarding the contribution of $500,000. He maintained that the issue had been discussed at the Radisson Hotel meeting despite the fact that there was no reference to it in either the first or second diagram. However, in later cross-examination he agreed that there had been no agreement on that issue at the Radisson Hotel meeting. In addition, he stated that the issue was never talked about at the meeting at the Hudson apartments.
110 Mr Quinlan could not recall the following matters being discussed at either of those meetings:
· how Mr Quinlan would finance the contribution of $500,000;
· whether that contribution of $500,000 would take the form of a loan or an equity contribution; and
· if called upon, how long Mr Quinlan had to contribute the $500,000.
111 As demonstrated by the following passage of cross-examination, Mr Quinlan was also unsure about what was discussed in relation to the issue of security or cross-guarantees:
"Well let's do it step by step. You accept that at the Radisson dinner no agreement about $500,000. You accept that?‑‑‑At that point we would have another meeting. I wasn't sort of saying, well we've agreed this, this and this, until we sorted the whole thing in a whole.
Let's just deal with the question. You accept that at the conclusion of the Radisson meeting there was no agreement about you contributing $500,000 as and when called on?‑‑‑Yes.
You agree with me?‑‑‑Yes.
You also say that you have no recollection of the matter being discussed at the 2 February meeting?‑‑‑Yes.
Where did this term come from? Where did the term that you would contribute $500,000 as and when called upon, when was that agreed?‑‑‑I cannot recall whether it was between those meetings or when it was agreed.
But it wasn't agreed, was it? You didn't have an agreement with Mr Brady whereby you, that Mr Brady said: I can call on you to contribute $500,000 as and when I wish, to the Brady Group. That was never agreed?‑‑‑It was agreed but ‑ ‑ ‑
How? Tell his Honour how you say that was agreed?‑‑‑I can't recall. I wish - if I could recall I - I would certainly be telling your Honour but I cannot recall.
Tell his Honour, well, was it agreed at the end of the Radisson meeting that you would - you personally, Mr Quinlan - would provide security for any new venture?‑‑‑I don't believe it was discussed at the Radisson. I - I can't recall.
I beg your pardon. Was it discussed at the 2 February meeting that you would provide security for the new venture?‑‑‑I can't recall what it would be but it would be probable that that would be the case.
Because there's a note on your piece of paper?‑‑‑Yes.
So the only basis for you saying that the matter was discussed is a note on the right-hand corner of the piece of paper saying, "Cross guarantee for any security"?‑‑‑Yes.
But you don't know what was said or who said it or if anything was said?‑‑‑I just can't recall it.
Well do you say, do you say - I don't know - do you say that at the end of the 2 February meeting, there was an agreement between you and Mr Brady in relation to security for any future development?‑‑‑There - there would have been.
Well, what was the term?‑‑‑That we were equal partners and we were going to be jointly and severally liable for whatever ventures we went into.
Yes but what about security?‑‑‑All I could put up, as I said, was the $500,000.
But did you leave the meeting thinking: I'm under an obligation when called on to guarantee all these arrangements?‑‑‑Yes.
But you don't recall any discussion about it, do you?‑‑‑I can't recall the discussion."
112 Mr Glick SC, senior counsel for the respondents, elicited from Mr Quinlan that his financial capacity to contribute $500,000 was dependant on assets Mr Quinlan owned jointly with his then wife. Mr Quinlan also acknowledged that his half interest in the principal joint asset, being the matrimonial home, was transferred to his wife in March or April 1998. He said he did this, however, on the advice of his accountant, because he was going into partnership with Mr Brady and Mr O'Sullivan and he wanted to make himself "litigation proof".
113 It is worth noting that the transfer of Mr Quinlan's half interest in the matrimonial home to his wife actually occurred on 22 March 1999.
114 Mr Quinlan agreed that his ability to contribute any money to the "partnership" therefore depended on his wife providing her consent. Mr Quinlan also agreed that his wife had been of the view that her interest in the matrimonial home was not to be mortgaged unless and until:
· Mr Quinlan had a written agreement with one or other of the Brady Group entities; and
· that written agreement had been signed off and approved by a solicitor acting in her interests.
115 Mr Quinlan also agreed that his wife was not prepared to give any guarantee. In later cross-examination relating to this issue, the following exchange took place:
"So you were not able to put up the $500,000, do you agree, without your wife's consent?‑‑‑Well, she was a party to the - the house.
You agree with me?‑‑‑Yes, I agree with you.
It is all you have to say is yes?‑‑‑Sorry, yes.
And your wife never indicated to you, on your evidence, at any stage before 2 February that she would agree?‑‑‑It wasn't discussed with her.
And the first time it was discussed she said no?‑‑‑I don't recall whether it was the first time but I - and I don't know where it was discussed.
She never said yes, did she?‑‑‑She never said yes, no. Sorry.
And, Mr Quinlan, you are saying, are you, to his Honour that Mr Brady could have required you to put up the $500,000 without a sheet of paper being signed?‑‑‑No, we would have - we'd have to have something in writing.
So you ‑ ‑ ‑?‑‑‑From - like, I would want to put in writing what we've agreed.
What would you want to put in writing?‑‑‑Agree that 3 per cent for a - Fairfield and Empire.
Right, yes?‑‑‑The $10,000 a month against future profits.
Yes, yes?‑‑‑A third of the future profits.
Yes. What about the loan and ‑ ‑ ‑?‑‑‑The $500,000 contribution."
116 Other issues that Mr Quinlan acknowledged had not been discussed, or about which he could not recall the detail of the discussion, included:
· what would happen in the event that there were losses;
· how votes would be cast in the new entity;
· the terms of any loan made by Mr Brady to the new entity;
· whether any such loan would be secured or unsecured;
· the rate of interest to be paid on any such loan to the new entity;
· if it was to be secured, what type of security it would be;
· the term of the loan;
· how to extract any money out of the business that corresponded to profits;
· how cost overruns were to be dealt with;
· the duration of the partnership; and
· what roles Mr Quinlan, Mr Brady and Mr O'Sullivan would take on in the new entity.
117 In relation to the alleged implied term regarding the provision of guarantees and other security, which is set out at [4(g)] above, Mr Quinlan gave the following evidence:
"You don't recall the discussion. It's a curious thing to imply, that you would each provide guarantees and security, but you accept, don't you, that to the extent that each of you would provide guarantees and securities yours would be - I don't say this pejoratively - worthless because you had no assets?‑‑‑True.
So why was that an essential term so far as you were concerned? It was a worthless term?‑‑‑At 2 February it was, but as the business grew there was a substantial amount of money that I'd still be risking.
HIS HONOUR: How would you be risking it?‑‑‑Well, I haven't drawn it as profit share. It's still in the business.
You'd have to get the money out of the relevant entity or successful business venture?‑‑‑Well, if we made, say - your Honour, if we made $50 million, went into another project and lost $50 million, things like that can happen, so I'd be risking the money that I'd earned by leaving it in the venture. As the venture grew, the greater the risk became, and hence, you know, you're providing guarantees and security in that respect.
MR GLICK: If this venture is to work according to your case, somebody has got to put up the money?‑‑‑Yes.
You're not going to put it up, are you?‑‑‑Only to the extent of 500,000.
Yes, but we're not talking about 500,000, are we? We're talking millions and millions, aren't we?‑‑‑We are talking millions and millions today if we paint the scenario back in February 1998.
We're talking for the next ventures millions as well, aren't we? For the future developments we're talking millions of dollars?‑‑‑That's right. When we went into Wills Street and ‑ ‑ ‑
What I'm saying to you is that sitting in your chair on 2 February you knew that these future developments weren't the construction of a unit in Balwyn, these were major city constructions ‑ ‑ ‑?‑‑‑That's right.
‑ ‑ ‑ involving millions of dollars?‑‑‑That's right.
Tens of millions of dollars perhaps?‑‑‑It would depend on the project.
Yes, but the contribution that the owners would have to put in would be in the millions?‑‑‑That's right.
Now, you weren't going to put in more than half a million dollars at most?‑‑‑That's correct.
Mr Brady was to put the rest in, was he?‑‑‑That's right.
By a loan?‑‑‑That's right.
Is that right? Where is that pleaded?‑‑‑It's not.
Because, Mr Quinlan, it didn't ever happen, did it? That was never the agreement?‑‑‑Well, I believe it was the agreement.
The reason that this pleading has taken the form that it has is as follows. The lawyers have taken your instruction and drawn it and amended it and have never thought fit to plead that there was an obligation on the part of Mr Brady to do anything other than provide security along with you and Mr O'Sullivan. No-one has ever pleaded that Mr Brady was required to lend money to this venture. Do you agree?‑‑‑Well, it's not pleaded. I can't say ‑ ‑ ‑
Without that obligation on the part of Mr Brady, this partnership would never work, would it?‑‑‑That's right. It wouldn't work. It definitely needed the capital contribution.
Definitely needed the capital contribution?‑‑‑Yes."
118 Mr Quinlan later elaborated on the importance of Mr Brady's capital contribution:
"Now, all you remember about Brady making a loan to the new entity is that it was mentioned that you will need to come to some agreement with Brady about the way you deal with his contribution to fund the venture?‑‑‑Yes.
The need for funding was critical to the viability of this new venture, was it not?‑‑‑Yes.
No funding by Brady, no venture at all?‑‑‑No.
Do you agree?‑‑‑I agree.
How Brady was to fund it, whether he would do it through the Brady group, through the companies in the Brady group?‑‑‑Yes.
Or via a superannuation company that Mr Brady had was left up in the air?‑‑‑I don't recall whether it was left up in the air, I just don't know what was agreed on that point. I can't recall.
…
The amount of contribution by Mr Brady to the new venture was not agreed upon?‑‑‑I don't recall, I don't recall. I can only recall what I recall.
You do not say that it was agreed upon, do you?‑‑‑I say I can't recall.
How Mr Brady was to fund it was not agreed upon?‑‑‑It may have been discussed but I can't recall it.
What Mr Brady would receive in return, and I mean Mr Brady generically, whether it was the Brady Group or the Brady superannuation or Mr Brady, what the Brady interest was to receive in return for this loan was not resolved?‑‑‑It was going to receive interest.
Was that interest alone? What degree of interest, what percentage of interest? Payable when?‑‑‑I can't remember, I can't recall that.
You don't even know if it was discussed?‑‑‑It would have been discussed, because it's on the sheet here for discussion.
Yes. It may have been discussed but you can't recall what was said in that discussion?‑‑‑Well, it was discussed because as I said before, I've circled loan and then put capital injection, so we discussed - we discussed something with respect to that relationship.
My question to you was, you can't recall what was said in this discussion?‑‑‑That's correct.
You can't recall whether any conclusion had been reached by way of an agreement about interest?‑‑‑Well, that's correct.
Now, if it was to be not Mr Brady but a company in the Brady Group or considerably, the superannuation fund which was to make the loan, plainly, you would have contemplated that these external companies would require security?‑‑‑We did discuss the aspect of security again, I can't recall the detail.
But you agree with me, do you not, that if it is contemplated that Mr Brady himself or through any company is going to make a loan to the venture, that loan would need to be supported by security?‑‑‑Yes.
It would not be, under any circumstances, an unsecured loan?‑‑‑No and I that's why I think we've got - we had the discussion about security. I don't know what the detail again of that was.
But it was plainly a critical matter for everyone to understand that this loan, if it was to happen, would need to be secured?‑‑‑I would imagine, yes. It makes - it's logical that that would be the case.
Yes. Yet there was no agreement whether the loan by the Brady interests to the venture would be ranking equally with the bank finance or behind the bank finance or whether it would be a debenture charge second ranking or a mortgage security. None of that discussion happened?‑‑‑I don't - that discussion didn't happen."
119 When asked whether Mr Brady could go into future projects with others, Mr Quinlan replied that in his view that could not happen.