Rafeletos v Great Wall Resources Pty Ltd

Federal Court of Australia|2009-06-19|Before: Emmett J

INTRODUCTION 1 In this proceeding, the applicant, Mr George Rafeletos, claims relief in respect of an agreement made by him in March 2002 with the first respondent, Great Wall Resources Pty Ltd (Great Wall). The agreement was made on behalf of Great Wall by the second respondent, Mr Frank Capocchiano. The substance of the agreement was that, in return for providing $200,000 towards the purchase by Great Wall of a property known as 10 Yallah Road, Yallah (the Yallah Property), Mr Rafeletos would become a 20% shareholder of Great Wall and would be appointed as a director of Great Wall. It is common ground that an agreement was made, although its precise terms may be unclear. Mr Rafeletos seeks relief in the nature of specific performance of the agreement or, in the alternative, damages for its repudiation. However, the respondents say that, on 29 March 2002, Mr Rafeletos resiled from the agreement and that the agreement that was made is no longer operative. Mr Rafeletos disputes that assertion. 2 Ms Daniella Capocchiano, Mr Capacchiano's daughter, was originally joined as a respondent, apparently because she was, at the time of the making of the arrangements that are in issue, a shareholder of Great Wall. However, no relief was sought against her and on 30 April 2009, the proceeding was dismissed as against her. 3 As I have said, Great Wall and Mr Capocchiano admitted that an agreement along the lines described above was made. Accordingly, the proceeding has been conducted on the basis that the primary evidentiary burden is borne by the respondents. That is to say, the respondents have the burden of establishing that the agreement of March 2002 came to an end consensually on 29 March 2002. However, Mr Rafeletos continues to bear the onus of establishing any entitlement to relief, assuming that the respondents fail to establish that the agreement came to an end consensually.

THE HEARING 13 The manner in which the hearing took place is by no means ideal. The hearing was adjourned on several occasions to enable additional evidence to be called. On 2 May 2008, the proceeding was fixed for hearing on 18 and 19 August 2008 on the basis that it would take two days. The hearing began on 18 August 2008 and continued on 19 August 2008, when it was adjourned part heard to 14 October 2008. The hearing was adjourned to 16 October 2008 and continued part heard on 17 October 2008. The hearing was then adjourned for further hearing on 4 and 6 November 2008. On 4 November 2008 the hearing was adjourned to 28 November 2008 for directions when it became apparent that further relevant witnesses may be called. The hearing resumed on 28 April 2009 and continued on 29 and 30 April 2009. The net effect is that the time from the commencement of the hearing until the evidence and submissions finally ended was inordinately long. Such delays make it difficult not only for the parties but also for decision making.

THE WITNESSES 14 According to records of the Australian Securities and Investments Commission (the Commission), the principal place of business of Great Wall recorded with the Commission is the address of Mr Capocchiano's home at Albion Park Rail. The Commission's records show that Mr Capocchiano was the only director of Great Wall at all relevant times, having been appointed in September 1997. In March 2002 Mr Capocchiano was 69. He had three daughters and lived with his wife on a property at Albion Park Rail. He conducted a tiling business from premises situated at Port Kembla. 15 The records of the Commission show that, at relevant times, the issued share capital of Great Wall was 20 shares, which were held, as to 16, by Mr Capocchiano beneficially, and, as to four, by Daniella beneficially. Daniella's address in the Commission's records is the same as her father's. There was no evidence as to the circumstances in which Daniella became a shareholder of Great Wall. The character and personality of Mr Capocchiano are such that it is more likely than not that Daniella became a shareholder because her father wanted her to be a shareholder and that she acted as a shareholder in accordance with her father's directions. 16 The essential issue in the proceeding is whether or not there was a consensual abandonment of the agreement made in March 2002 between Mr Rafeletos and Great Wall. The only direct evidence relevant to that issue was the evidence of Mr Capocchiano, which was given in chief by affidavit and in cross-examination. It is undesirable to have written evidence as to oral communications that are in dispute. However, since the events in question, Mr Capocchiano has suffered a stroke, which has rendered him partly immobile and otherwise caused him some disability. For that reason, counsel for Mr Rafeletos did not object to the reading of an affidavit sworn by Mr Capocchiano as to the critical matters. There was, however, extended cross-examination of Mr Capocchiano. Mr Rafeletos also gave evidence on that question, denying any abandonment of the agreement. His evidence was given entirely orally. 17 Daniella also gave evidence, as did non-party witnesses called by the parties. The evidence of those other witnesses is relevant only to the extent that it tends to corroborate or undermine the respective versions of events advanced by Mr Capocchiano and Mr Rafeletos. None of the evidence was directly corroborative of the evidence of Mr Capocchiano or Mr Rafeletos as to the abandonment of the agreement. 18 Much of the further evidence adduced related to the conduct of the parties after March 2002 in relation to the development of the Yallah Property. In short, Mr Rafeletos argued that, pursuant to the agreement, he had a significant involvement in the development of the Yallah Property. Mr Capocchiano, on the other hand, vehemently denied that Mr Rafeletos had anything to do with the Yallah Property after March 2002. While it is common ground that an agreement relating to the acquisition by Mr Rafeletos of 20% of the issued capital of Great Wall was made, it has been necessary to explore the evidence concerning the making of the agreement. The conflicting evidence may have a bearing on the credibility of Mr Rafeletos and Mr Capocchiano. 19 As I have indicated, Mr Capocchiano suffers from a disability. English is not his first language and his English is not perfect. However, I have no reason to doubt that he comprehends English perfectly well and, although his disability may have affected his speech, he had no difficulty in understanding questions and in making himself understood in the course of cross-examination. Mr Capocchiano was regularly belligerent and offensive in the course of giving evidence. On a number of occasions, it was necessary to direct him to control his outbursts. Lack of self control is not, of itself, a matter that would necessarily go to the discredit of a witness. However, his evidence in cross-examination and his demeanour generally displayed a distinct reluctance to give frank and forthright answers. I am not confident that I can accept any evidence given by Mr Capocchiano that is not corroborated. 20 Mr Rafeletos observed greater decorum than Mr Capocchiano in giving his evidence. However, a singular aspect of his case casts doubt upon his credibility. As I have indicated, Mr Rafeletos first claimed that there was an agreement that he be given 50% of the share capital of Great Wall. After defences had been filed admitting an agreement relating to 20% of the share capital of Great Wall, Mr Rafeletos amended the statement of claim to allege in the alternative an agreement involving 20%. Ultimately, he abandoned his claim for 50%. 21 In his evidence in chief, Mr Rafeletos gave evidence that the proposal that was put to him by Mr Capocchiano was for Mr Rafeletos to make an investment of $300,000 in return for becoming a director and a 50% shareholder in Great Wall. He made no mention in his evidence of an agreement concerning a 20% share. Mr Rafeletos also said that he originally applied to St George Bank for a line of credit of $300,000 and filled out an application accordingly. His evidence was that, following a discussion with his father, he decided to limit his investment to $200,000 and that he then revised his application to St George Bank. However, the only material produced on subpoena by St George Bank indicated only an application for $200,000 and no application for $300,000. 22 I shall describe in more detail the evidence relating to St George Bank and the circumstances relating to an advance made by it to Mr Rafeletos. However, the significance of that matter, in assessing the credibility of Mr Rafeletos, is that none of the evidence corroborates his assertion that the initial discussion that he engaged in with Mr Capocchiano involved the acquisition of 50% of the share capital of Great Wall. There is nothing to corroborate any reference to 50% or to providing $300,000 towards the purchase of the Yallah Property. As I have said, Mr Rafeletos subsequently abandoned any claim to 50% and relied on the admission made by Great Wall and Mr Capocchiano. In the circumstances, I would not be disposed to accept the uncorroborated evidence of Mr Rafeletos. 23 Great Wall and Mr Capocchiano relied upon the evidence of Mr David Yates, a surveyor, as corroborating Mr Capocchiano's assertions that, after the alleged withdrawal of Mr Rafeletos from the arrangement in March 2002, Mr Rafeletos had very little to do with the development of the Yallah Property. Mr Rafeletos, on the other hand, relied upon the evidence of Mr Michael Le Serve, a real estate agent, who acted for Great Wall in connection with the proposed sale of lots in the subdivision of the Yallah Property. Neither witness was impressive. 24 Mr Yates gave the impression of being deliberately uncooperative and that he would not offer any assistance to the case advanced by Mr Rafeletos if he could avoid it. He has a continuing relationship with Great Wall and Mr Capocchiano that casts some doubt on his objectivity and reliability. I would not regard his evidence as in any way disinterested. Mr Le Serve, on the other hand, has been involved in a litigious dispute with Great Wall and Mr Capocchiano, such that it is likely that he would be reluctant to give any assistance that might advance their case. In addition, Mr Le Serve has been under medical care in circumstances that may cast some doubt on the reliability of his recollection. 25 Mr Rafeletos also relied upon the evidence of his father, Mr Costa Rafeletos, to rebut the case advanced on behalf of Great Wall and Mr Capocchiano that Mr Rafeletos wished to withdraw from the proposed arrangement because of advice given by his father. Mr Costa Rafeletos could not be treated as a disinterested witness. 26 It is highly significant that Mr Murray Reid, a chartered accountant, who acted for Grant Wall, was not called to give evidence. Mr Capocchiano confirmed that Mr Reid is still practising and could have given evidence if required. Mr Reid might have given evidence as to the instructions he received from Mr Capocchiano, or someone else for that matter, pursuant to which he prepared documentation intended to give effect to the arrangements between Great Wall and Mr Rafeletos. He could also have given evidence as to any instructions he might have been given not to proceed with the proposed documentation. 27 More significantly, Mr Reid could have given evidence concerning a discussion that Mr Rafeletos claimed to have had with him in 2007. Mr Rafeletos says that he first ascertained that he had not been made a director and shareholder of Great Wall when he had a discussion with Mr Capocchiano following Mr Capocchiano's stroke in December 2006. I shall return to that matter later. However, I consider that an inference can be drawn from the failure by Great Wall and Mr Capocchiano to call Mr Reid that his evidence would not have assisted their case.

THE EVIDENCE AS TO THE ARRANGEMENTS BETWEEN THE PARTIES 28 There are several aspects of the arrangements between Mr Rafeletos, on the one hand, and Great Wall, on the other, that are unclear. Ultimately, as I understand the position, it is common ground that any agreement made by Mr Rafeletos was made with Great Wall. That is the primary position adopted by Mr Rafeletos and that is the admission made by Great Wall and Mr Capocchiano in their defence. 29 I propose to say something about the contract between Great Wall and Tobiano for the purchase of the Yallah Property. Next it will be necessary to examine the evidence as to the arrangements made in the discussions between Mr Rafeletos and Mr Capocchiano. A significant matter relevant to the resolution of the dispute is the way in which the parties treated the sum of $200,000 that was in fact provided by Mr Rafeletos in connection with the payment of the deposit under the contract for the purchase of the Yallah Property by Great Wall.

The Contract to Buy the Yallah Property 30 As at January 2002, the Yallah Property was owned by Tobiano. On 25 January 2002, Thomas & Bisley, solicitors, wrote to Great Wall enclosing a draft contract for the sale and purchase of the Yallah Property by Tobiano to Great Wall for the sum of $1,600,000. The contract provided for the payment of a deposit of $300,000. The letter said that, on exchange of contracts, a bank cheque for $300,000 payable to Tobiano would be required. 31 On 3 March 2002, ANZ Bank wrote to Great Wall outlining an indicative proposal for a term loan facility of $1,800,000 for the purpose of purchasing the Yallah Property and assisting in development costs. The security for the facility was to be a registered first mortgage over the Yallah Property, a fixed and floating charge over the assets of Great Wall, an unlimited guarantee by Mr Capocchiano and a charge over an unidentified term deposit of $175,000. There was no evidence that that proposal was pursued. It may be that the terms of the security were unacceptable to Mr Capocchiano. However, that is a matter of speculation. 32 On 12 March 2002, Nigel Duncan & Associates, solicitors, who were acting for Great Wall, wrote to Thomas & Bisley. After referring to correspondence that is not in evidence, the letter said that Great Wall would proceed with the purchase "as originally negotiated and amended as per" another letter that is not in evidence. The letter of 12 March 2002 also referred to an application to Wollongong City Council concerning the Yallah Property that was "presently on foot" and asked whether Tobiano was agreeable to a special condition authorising Great Wall to proceed with that application. 33 Thomas & Bisley responded on 15 March 2002, attaching a concept subdivision proposal and saying that Tobiano understood that that proposal had been initiated by consultation with Wollongong City Council. They said, however, that no development application had yet been lodged in respect of the Yallah Property. The letter requested exchange of contracts immediately, if the matter was to proceed.

Mr Rafeletos meets Mr Capocchiano 34 Mr Rafeletos first met Mr Capocchiano through Daniella Capocchiano. Mr Rafeletos met Daniella in 2000, when she was working as a waitress at a nightclub. At that time, Daniella lived in Caringbah and was about to move to Mortdale. Mr Rafeletos and Daniella developed a close personal relationship, which lasted until 2007. 35 Mr Rafeletos said that Daniella told him in early March 2002 that her father was interested in investing in a property on the South Coast and that he was looking for a partner to go in with him 50/50 to buy the property. Mr Rafeletos replied that he would be happy to go and inspect the property. 36 Mr Rafeletos said that, on a Sunday in early March 2002, he picked up Daniella from her apartment in Mortdale and they travelled down to the Yallah Property, where Daniella introduced Mr Rafeletos to her father. Daniella said that she first introduced Mr Rafeletos to her father at his tile shop at Port Kembla. She gave evidence that her father and Mr Rafeletos had a discussion at their first meeting. However, she did not participate in that discussion and did not know what was said. In his affidavit, Mr Capocchiano also said that he first met Mr Rafeletos at the premises at Port Kembla where he operated his tiling business. 37 The location where Mr Rafeletos and Mr Capocchiano first met is not of itself material. However, the difference in the versions given by the witnesses highlights the difficulty in reconciling their competing versions of events and in forming a judgment, on the balance of probabilities, as to what actually happened. In any event, it is clear that there was a discussion between Mr Rafeletos and Mr Capocchiano on a Sunday in March 2002.

Negotiations between Mr Rafeletos and Mr Capocchiano 38 According to Mr Rafeletos, Mr Capocchiano told him, at their first meeting, that the Yallah Property was for sale for a purchase price of $1,600,000, with a deposit of $300,000. Mr Cappochiano told him that he had an existing company that would buy the property but that he was unable to come up with a deposit or other money to fund the purchase. He told Mr Rafeletos that he was seeking an investment of $300,000 in return for which he would make Mr Rafeletos a director and a 50% shareholder of Great Wall. He told Mr Rafeletos that the Yallah Property was 90 odd acres and that there was a development application in respect of a 19 block subdivision. He said that, after selling 18 blocks, they would have the last lot, which was 27 acres with a factory and offices on it, for free. Mr Capocchiano told Mr Rafeletos that the factory was an ex abattoir called "Illawarra Meats". He said that he had done business with Illawarra Meats and that the abattoir closed down in 1986. 39 Mr Rafeletos said that he asked Mr Capocchiano why they would not buy the property in their own personal names. Mr Capocchiano responded that it was safer to buy in the name of his company, which was an established company. He said that it was much safer personally in case anything went wrong so that they would not lose their existing assets. 40 In response to an enquiry as to the structure of Great Wall, Mr Capocchiano told Mr Rafeletos that he was the sole director and that he and Daniella had shares in Great Wall. He said that Great Wall had no other assets. Mr Rafeletos said that Mr Capocchiano told him that, if he invested in Great Wall, he would be a director with him and he and Mr Rafeletos would be the only shareholders. He told Mr Rafeletos that he would organise with his accountant, Mr Murray Reid, for Mr Rafeletos to become a director and shareholder. Mr Rafeletos told Mr Capocchiano that he would be able to come up with the $300,000. Mr Capocchiano told Mr Rafeletos to be very quick as there was a lot of interest in the Yallah Property. 41 Mr Rafeletos said that Mr Capocchiano then proceeded to point out to him where the subdivision would take place and where the boundaries of the lots would be. Mr Rafeletos said that they spent about 45 minutes walking around the Yallah Property looking at the lots. 42 Mr Rafeletos said that, after they had walked over the Yallah Property, he told Mr Capocchiano that he loved the property and that he wanted it. He said that he would organise finance for the deposit and that Mr Capocchiano should organise with Mr Reid to make him a director and shareholder of Great Wall on the following Monday morning. Mr Rafeletos said that, at the end of the meeting, he asked Mr Capocchiano why he needed help to buy the property. Mr Capocchiano replied that he wanted a partner because the banks were unable to give him any finance because of his age. 43 Mr Rafeletos said that he then returned to Sydney. Daniella did not accompany him. 44 Mr Capocchiano gave a somewhat different version of the first meeting. He said that Mr Rafeletos was introduced to him by Daniella as her boyfriend and that Mr Rafeletos told him that he had heard that Mr Capocchiano was purchasing a property for development and the he would like to be involved. Mr Capocchiano replied that he was buying the property for his family in the name of Great Wall. He said that Mr Rafeletos told him that he wanted to be involved in the purchase. Mr Capocchiano said that he told Mr Rafeletos that he would give him a 20% share of Great Wall for $200,000. He said that Mr Rafeletos accepted and said that he also wanted to be a director of Great Wall. Mr Capocchiano said that he agreed to that. 45 Thus, it is common ground that a discussion took place in March 2002 as to the terms and basis upon which Mr Rafeletos might acquire an interest in Great Wall and become a director of Great Wall. The difference is as to whether the sum of $300,000, rather than $200,000, was mentioned and whether Mr Rafeletos was to acquire a 50% interest, rather than a 20% interest, in Great Wall. Neither version casts any light on the basis upon which Mr Rafeletos was to contribute either $300,000 or $200,000. For example, it is by no means clear whether either of them turned his mind to the question of whether: · the money was to be provided by Mr Rafeletos to Great Wall as consideration for the allotment of shares in Great Wall; or · Mr Rafeletos was to pay the money to Mr Capocchiano as the price for the transfer of existing shares in Great Wall; or · Mr Rafeletos was to lend the money to Great Wall. 46 Mr Rafeletos said that, on the following day, Monday, he made an appointment with St George Bank, with which he had been dealing for some years, to discuss how he could come up with the finance that he needed to enable him to contribute to the deposit. He said that he attended a meeting with an officer of St George Bank, at which he asked for an advance of $300,000 on the security of a block of units at Lakemba that he owned. He said that he filled out an application form, signed the form and left it with the bank officer. 47 Mr Rafeletos said that, on the Monday afternoon, he went to the home of his father, Mr Costa Rafeletos, and told his father that he had met Mr Capocchiano, who wanted him to go into partnership with him in the purchase of the Yallah Property, for a price of $1,600,000. He told his father that he had to come up with $300,000 to become a partner in Great Wall, the company that was going to buy the Yallah Property. He also told his father that Mr Capocchiano had promised that he would become a director of Great Wall. He told his father that he had been to St George Bank and offered his Lakemba units as collateral for a loan to provide the deposit. 48 Mr Rafeletos said that his father told him that, if he was going in as a partner, he should not be putting up the full $300,000 required for the deposit. He asked why Mr Capocchiano could not put up $150,000 and Mr Rafeletos put up the other $150,000. Mr Rafeletos told his father that that was the deal he had done with Mr Capocchiano, who could not get finance because of his age. Mr Rafeletos senior asked how someone who wants to buy a property for $1,600,000 could not come up with $150,000 as a deposit. 49 Mr Rafeletos said that, after the discussion with his father, he spoke to St George Bank again and said that he wanted to borrow $200,000 instead of $300,000. Despite the assertion by Mr Rafeletos that he had originally applied to St George Bank for a loan of $300,000, the only material produced by St George Bank in answer to a subpoena was an application for a loan of $200,000 dated 19 March 2002 signed by Mr Rafeletos. 50 Mr Rafeletos said that, subsequently, Mr Capocchiano telephoned him and asked how he was going with the finance. Mr Rafeletos replied that everything was okay and that he should have an answer by the end of the week. He did not say that he told Mr Capocchiano at that stage that he was only asking for $200,000. Mr Rafeletos said that in reply to his enquiry as to how he was going with the directorship, Mr Capocchiano responded that it was all fine but that they needed to push the finance because they were running out of time. 51 Mr Rafeletos said that, a day or so later, he rang St George Bank and enquired about progress. He was told that approval had been given for $200,000. Mr Rafeletos then rang Mr Capocchiano and said that he had finance for $200,000. He said that Mr Capocchiano responded that that was okay and that he would get the other $100,000. He told Mr Rafeletos to organise a cheque for $200,000 and come down to Port Kembla with it. Mr Rafeletos asked Mr Capocchiano what name he should put on the cheque and he was told to put the name "Tobiano Pty Ltd" as the payee of the cheque. 52 On 20 March 2002, St George Bank wrote to Mr Rafeletos saying that, as at that date, loan funds totalling $200,000 were available to him "for settlement of your home". The letter stated that monthly repayments in the sum of $1,157 would be due on the twentieth of each month and that the repayments would be automatically deducted from a St George Bank savings account in the name of Mr Rafeletos. 53 Mr Rafeletos then went to the St George Bank branch in Kings Cross and collected a cheque for $200,000 payable to Tobiano. He travelled down to Mr Capocchiano's tile shop in Port Kembla, where he met Mr Capocchiano and gave him the cheque. Mr Capocchiano put the cheque in his pocket. Another of Mr Capocchiano's daughters, Loredana, also gave Mr Capocchiano a cheque, which he also put in his pocket. Mr Rafeletos and Mr Capocchiano then went in Mr Capocchiano's car to the office of Nigel Duncan & Associates in Wollongong Mall. 54 Mr Rafeletos said that they went into the office of Nigel Duncan & Associates, where Mr Capocchiano introduced him to a solicitor. Mr Capocchiano told the solicitor that Mr Rafeletos was his partner in, and a co-director of, Great Wall. He said that they were there to exchange contracts on the Yallah Property. The solicitor said that he had no knowledge that the exchange was to take place that day. Mr Capocchiano then made a telephone call to someone in which he said that he had $300,000 in his pocket and that he wanted to give it to someone to exchange contracts on the Yallah Property. The solicitor then placed a contract in front of Mr Capocchiano and Mr Rafeletos and they both signed it. 55 Mr Capocchiano's evidence was not inconsistent with Mr Rafeletos so far as the events of that day are concerned. He confirmed that he and Mr Rafeletos travelled together to the offices of Nigel Duncan & Associates in Wollongong, where they each signed a contract for the sale and purchase of the Yallah Property by Great Wall from Tobiano. The front page of the contract, which is in evidence, confirms that each of them signed it. 56 On 26 March 2002, Mr Reid sent to Great Wall documentation designed to effect changes to the capital structure of Great Wall. Mr Reid said that the documents must be signed and be returned to him before any changes could be made. The documentation included forms of consent to act as a director of Great Wall by Mr Rafeletos and by Loredana Capocchiano. In addition, there were draft minutes of a meeting of the directors of Great Wall showing Mr Capocchiano, Mr Rafeletos and both Daniella Capocchiano and Loredana Capocchiano as directors present at the meeting. Thus, the author of the document appears to have assumed, apparently erroneously, that Daniella was already a director of Great Wall. 57 The draft minutes referred to a resolution for the approval of the issue of 80 shares in the capital of Great Wall as follows: · Daniella Capocchiano - 16 · Mr Capocchiano - 24 · Mr Rafeletos - 20 · Loredana Capocchiano - 20 Having regard to the issued capital at the time, the result would have been shareholdings as follows: · Mr Capocchiano - 40% · Mr Rafeletos - 20% · Loredana Capocchiano - 20% · Daniella Capocchiano - 20% 58 One of the documents enclosed with Mr Reid's letter was a form of notification to the Commission of a share issue of Great Wall. The notification was completed in handwriting. It showed the number of shares issued as 100. However, that figure was altered from 80. The notification stated that the amount paid, or agreed to be considered as paid, was $1.00 per share. There was no mention of any premium, such as would be expected if the sum of $200,000 was to be paid to Great Wall as consideration for the allotment of shares. 59 The documentation prepared by Mr Reid tends to corroborate Mr Capocchiano's version of the discussion with Mr Rafeletos concerning the latter's involvement in Great Wall, to the extent that it indicates that Mr Rafeletos would have a 20% interest, rather than a 50% interest. On the other hand, no mention is made of the nature of the proposed contribution of $200,000 by Mr Rafeletos in connection with the purchase of the Yallah Property. That would suggest that the $200,000 was to be treated as a loan by Mr Rafeletos to Great Wall. In any event, the documentation remained unsigned and incomplete. The principal issue in the proceeding is why nothing further was done. 60 While the evidence given by Mr Rafeletos explained why the original proposal of $300,000 was reduced to $200,000, it did not explain why the documentation referred only to a 20% interest rather than a 50% interest. Further, there was no explanation as to the proposal for Loredana to acquire shares in Great Wall and become a director. 61 On 2 April 2002, Nigel Duncan & Associates wrote to Mr Capocchiano confirming that, in accordance with his instructions, contracts for the purchase of the Yallah Property by Great Wall had been exchanged on 28 March 2002. The letter pointed out that the contract provided for the balance of the purchase price, of $1,300,000, to be paid on or before 28 March 2003. In addition, the letter pointed out that Great Wall was to have the benefit of possession of the Yallah Property from the date of exchange and was to pay interest on the balance of the purchase price outstanding from that date. 62 On 2 April 2002, a bank cheque for the sum of $200,000, which was issued by St George Bank, was deposited for the credit of an account in the name of Tobiano. The amount of that cheque was debited to an account in the name of Mr Rafeletos with St George Bank. Thus, it is clear that $200,000 of the $300,000 deposit paid by Great Wall on exchange of contracts to purchase the Yallah Property was provided by Mr Rafeletos. The basis upon which the sum was provided is by no means clear.

The Loan of $200,000 to Great Wall 63 It is impossible to reconcile the evidence of Mr Rafeletos and Mr Capocchiano. There is no contemporary objective evidence to support the assertion by Mr Rafeletos that he originally asked St George Bank for $300,000 and then varied his application. It is more probable that he only ever asked St George Bank for an advance of $200,000, following discussion with his father and renegotiation with Mr Capocchiano. It may be that there was originally a discussion along the lines that Mr Rafeletos would procure funding in the sum of $300,000 to enable the whole of the deposit to be paid. In return, he would receive a half share in the project, through a shareholding in Great Wall. It seems that there was some disagreement between Mr Rafeletos and his father concerning the proposed involvement of Mr Rafeletos. It may be that, following his discussion with his father, Mr Rafeletos renegotiated the bargain with Mr Capacchiano on the basis that he would procure $200,000 by way of finance in return for a 20% interest in the project. All of that, however, is pure speculation. 64 The arrangements that were in place, following exchange of contracts for the purchase by Great Wall of the Yallah Property, are curious, whichever version of the events given by the parties is to be accepted. On the one hand, if the agreement was abandoned, it is curious that Mr Rafeletos would permit the sum of $200,000 to remain as a loan to Great Wall, without any security for repayment and without having any interest in the development of the Yallah Property. There would be no commercial rationale for Mr Rafeletos, having resiled from the arrangement, to leave an unsecured loan of $200,000 outstanding for an indefinite period on terms that were not evidenced by any writing. On the other hand, if there was no departure from the arrangement to make Mr Rafeletos a director and shareholder of Great Wall, it might be thought curious that monthly repayments in respect of the St George Bank loan were made by Great Wall or Mr Capocchiano. 65 One might expect that, if Mr Rafeletos was to acquire an interest in Great Wall, whether it be 20% or 50%, he would be expected to provide consideration for that interest equal to its value at that time. There is no direct evidence as to the financial position of Great Wall as at the end of March 2002. In particular, there is no evidence to suggest that shares in its capital had any significant value at that time. Great Wall had its interest in the contract to purchase the Yallah Property negotiated at arms length. That contract was unlikely to have any significant value of itself. There is no evidence that the consideration payable was less than the value of the Yallah Property. It may be possible to draw an inference, from the contents of the letter from ANZ Bank that Great Wall had a deposit of $175,000. Even if such an inference were drawn, it would be offset by liabilities, resulting in minimal shareholders equity of Great Wall. 66 Towards the end of the hearing, accounts of Great Wall as at 30 June 2004 and 30 June 2006 were tendered by Mr Capocchiano and Great Wall. Those accounts had comparative figures for 30 June 2003 and 30 June 2005 respectively. The comparative figures in the accounts as at 30 June 2004, being the figures as at 30 June 2003, show negative shareholders equity of $24,618. That is to say, they show that the liabilities of Great Wall as at 30 June 2003 exceeded its assets as at that day by $24,618. Projecting those figures backwards would give rise to an inference that, as at March 2002, there was no shareholders equity in Great Wall. One would not expect that Mr Rafeletos would pay $200,000 to acquire shares in a company that had no shareholders equity. 67 A more commercial arrangement would have been that, in consideration of Mr Rafeletos procuring finance in the sum of $200,000, he would be given the opportunity of sharing in the proposal of acquiring, developing and selling the Yallah Property. It would be perfectly consistent with such an arrangement that, having procured the finance, and having accepted the risk to St George Bank, Mr Rafeletos would be given an interest in the development, through a shareholding in Great Wall, and that Great Wall itself would repay the loan obtained on its behalf. 68 On balance, I consider in the state of the evidence as to the financial position of Great Wall as at March 2002, that it is more likely than not that the ultimate arrangement that was made between Mr Rafeletos and Great Wall, in the discussions between Mr Rafeletos and Mr Capocchiano, was that Mr Rafeletos would procure funding for Great Wall in the sum of $200,000. In return Mr Rafeletos would be given 20% share of the capital of Great Wall for a nominal sum. That is consistent with the documentation prepared by Mr Reid on instructions from Mr Capocchiano. 69 The more likely arrangement, therefore, was that Mr Rafeletos was to procure finance for Great Wall, in consideration for which he would be given a proportion of its capital for a nominal sum. That is far more likely than the possibility that Mr Rafeletos would pay $200,000 as consideration for the acquisition of shares in a company that had no shareholders equity.

THE ALLEGED ACCORD AND SATISFACTION 70 In his affidavit, Mr Capocchiano said that, on 29 March 2002, the day after contracts were exchanged between Great Wall and Tobiano, Mr Rafeletos telephoned him and said that he had had an argument with his father, who did not want him to put any money into Mr Capocchiano's company in case "he went broke" and Mr Rafeletos lost his money. Mr Capocchiano said that he replied that, if that is how Mr Rafeletos's father felt, he should not worry about it. He said that he would take over the loan and make the repayments. He said he would pay out the loan when he sold the Koonawarra Property. He said that Mr Rafeletos told him that he would send the details of the St George Bank Savings account to him. He said that, following that conversation, he took no further action in relation to the documentation sent to him by Mr Reid. Mr Capocchiano said that, following the conversation that he said he had with Mr Rafeletos on 29 March 2002, Mr Rafeletos has had no further involvement in Great Wall or any other of its property dealings until December 2006. 71 Mr Rafeletos denies that he had any such conversation with Mr Capocchiano on 29 March 2002 such as Mr Capocchiano alleges in his affidavit. Costa Rafeletos gave evidence that his son never told him that he had withdrawn from the arrangement with Mr Capocchiano concerning the Yallah Property. He said that the only argument he had with his son about the proposal was an argument before the exchange of contracts. In cross-examination Costa Rafeletos said he had a disagreement with his son when he was rushing to give a cheque to Mr Capocchiano. He said that he told his son to be careful to get the right papers before he went any further. He said that his son was angry because he was delaying him in taking the cheque to Mr Capocchiano. He denied that his son ever told him that the deal was not going to proceed. 72 A great deal of the evidence was directed to the conduct of the parties after March 2002. In particular, attention was given to the transfer of the Koonawarra Property to DG Empire. 73 There is a question as to whether that was by way of satisfaction of any indebtedness of Great Wall in respect of the payment of $200,000. It is may be significant that the Koonawarra Property was not owned by Great Wall. I have a real doubt as to whether Mr Capocchiano had any interest in the Koonawarra Property, after it was acquired by his daughter.

The Gift to DG Empire 74 In his affidavit, Mr Capocchiano said that he had purchased the Koonawarra Property "in the name of my daughter Sarah" in 1989. He said that, by 2004, he considered that the Koonawarra Property had a value in the order of $250,000 to $260,000. 75 Mr Capocchiano said that, in April 2004, Mr Rafeletos told him that he would like to build a house on the Koonawarra Property. Mr Capocchiano said that Mr Rafeletos told him that he would get a loan to build a house and would have excess funds when construction was complete so that he would be able to pay out the St George Bank loan. 76 DG Empire was incorporated on 3 July 2003. Its directors were, and are, Daniella and Mr Rafeletos, each of whom is also a secretary. DG Empire has twenty issued shares of $1 fully paid. Mr Rafeletos and Daniella Capocchiano each own ten shares beneficially. 77 Under a trust deed bearing the date 14 July 2003, DG Empire is the trustee of the DG Empire Trust. The settlor of that trust was Mr Reid. The settled sum was $10. The trust deed named Mr Rafeletos and Daniella Capocchiano and any spouse of either of them and any child of either of them as both income beneficiaries and corpus beneficiaries. Under the trust deed, Mr Rafeletos was given power to appoint new or additional trustees and power to remove a trustee. There was no evidence as to the circumstances in which the trust deed was executed. It is another matter in respect of which Mr Reid might have been able to give some relevant evidence. 78 Daniella gave evidence that, in early 2005, she assisted Mr Rafeletos in preparing a document in support of an application to St George Bank for finance for a proposal by DG Empire to acquire land at Warrawong. She said that she prepared a document, called "Statement of Position" in accordance with instructions given to her by Mr Rafeletos. Mr Rafeletos accepts that the document that Daniella says she prepared is consistent with his financial position at that time, save for a reference to a loan to Great Wall in the sum of $200,000, financed by St George Bank, as an asset of Mr Rafeletos. Mr Rafeletos denied that he gave instructions for the preparation of the document. 79 The circumstances in which the document came to light and was tendered throw some doubt on its genuineness. While Daniella said that the document was prepared in connection with a proposed application to St George Bank for finance, the document was not produced by St George Bank in answer to a subpoena that covered such a document. It is therefore more likely than not that no such document was ever provided to St George. 80 While Mr Rafeletos denied that he had ever seen the document before it was shown to him in cross-examination, it is not inconsistent with the arrangement that I consider it is more likely than not was put in place in March 2002, following the discussions between Mr Rafeletos and Mr Capocchiano. That is to say, it is consistent with an arrangement, under which Mr Rafeletos was to procure finance for Great Wall, that he would show the loan to Great Wall as an asset to offset his liability to St George Bank. Even if the document was prepared on the instructions of Mr Rafeletos, I do not regard it as inconsistent with the stance adopted by Mr Rafeletos in the proceeding. 81 On 3 March 2005, St George Bank wrote to the directors of DG Empire, as trustee of DG Empire Family Trust, offering two loan facilities, being a fixed commercial loan of $1,500,000 and a variable commercial loan of $800,000. The security for the two facilities was to include mortgages over a commercial property at Warrawong owned by DG Empire and a mortgage over property located at Sussex Inlet owned by Great Wall. In addition, there were to be guarantees by Mr Rafeletos and Daniella as well as by Great Wall and Mr Capocchiano. On 15 March 2005, National Australia Bank wrote to the directors of DG Empire, as trustee for DG Empire Family Trust, agreeing to provide two facilities, being a fixed rate bill facility in the sum of $1,500,000 and a floating rate bill facility in the sum of $900,000. The security required was similar to that to be provided in connection with the St George Bank facility. 82 There is no evidence that Mr Capocchiano was aware of the terms of those facilities or that he had ever consented to give a guarantee in respect of borrowings by DG Empire. On the other hand, an inference can be drawn that the banks were informed by the directors of DG Empire that Great Wall may be prepared to give financial assistance in connection with a borrowing by DG Empire. That may be consistent with Mr Rafeletos believing that he maintained some interest in Great Wall. In any event, it appears that neither of those facilities was taken up. 83 It is common ground that on 28 May 2004 there was a transfer of the Koonawarra Property from Sarah Capocchiano to DG Empire. The transfer that Sarah signed in favour of DG Empire contained an acknowledgement of receipt of consideration of $200,000. However, on 10 June 2004, Mr Vic Cuoco, of Verekers, solicitors, wrote to Sarah confirming that the transfer had been completed but that no moneys had passed through the firm in relation to the transaction. The letter confirmed that any transfer money was to be dealt with directly between Sarah Capocchiano and the purchaser. The letter also confirmed that there was to be no adjustment of rates on settlement. 84 The Koonawarra Property was a double block when initially bought. Sarah Capocchiano said that her father arranged for subdivision of the land and told her that he would like to put it in her name so that she could get a start in life. That indicates that Sarah was to be the beneficial owner. However, she said that, in 2004, Mr Capocchiano told her to transfer the Koonawarra Property to her sister and Mr Rafeletos. Sarah said that she assumed that she would be paid the sum of $200,000 at some time in the future. That suggests that she understood that she was the beneficial owner. 85 The circumstances concerning the transfer in May 2004 from Sarah Capocchiano to DG Empire are ambiguous. At that time, it appears that a close, personal relationship between Mr Rafeletos and Daniella Capocchiano continued to exist. Further, there is no objective evidence to suggest that the transfer of the Koonawarra Property was intended to be by way of discharge of any liability of Great Wall to repay the advance of $200,000 made by Mr Rafeletos. Indeed, the transfer was to DG Empire, which was acting as a trustee. Daniella held 50% of the shares in DG Empire and was an equal discretionary beneficiary with Mr Rafeletos under the terms of the DG Empire Trust. Further, the accounts of Great Wall as at 30 June 2007 continued to show indebtedness in the sum of $110,000, the sum shown in the accounts as at 30 June 2003. I do not consider that the transfer should be taken to be by way of satisfaction of any indebtedness of Great Wall to Mr Rafeletos.

Conduct of the Parties after March 2002 86 At an early stage, Great Wall and Mr Rafeletos tendered financial accounts of Great Wall as at 30 June 2007. Curiously, those accounts, as well as the accounts for earlier years, which were tendered later, showed a liability to Mr Rafeletos of $110,000. Mr Capocchiano proffered no explanation for such an item in the accounts. In any event, it is not inconsistent with an arrangement such as I have just described that Mr Rafeletos would be shown as a creditor. 87 The accounts of Great Wall as at 30 June 2007 were put forward as indicating that it would be unlikely that Mr Capocchiano regarded Mr Rafeletos as having an interest in Great Wall. The accounts show a total equity of $9,031,342. Non-current assets include property, plant and equipment having a value in excess of $13 million. Apart from the Yallah Property, Great Wall was the owner, as at 2 June 2006, of four parcels of land at West Wyalong and a parcel of land at Sussex Inlet. An inference can be drawn that Great Wall continues to hold those parcels. Mr Rafeletos gave evidence that he was involved with Mr Capocchiano in the purchase of the West Wyalong property. Be that as it may, there is no evidence one way or the other as to whether any increase in value of the West Wyalong property or the Sussex Inlet property contributed to the shareholders' funds shown in the accounts of Great Wall as at 30 June 2007. I regard the evidence as entirely equivocal. 88 It is common ground that the payments required by St George Bank in respect of the advance of $200,000 made to Mr Rafeletos were not thereafter made by Mr Rafeletos. Payments were, however, made, although the evidence is unclear as to the precise identity of the payer or the source of the funds. In his affidavit, Mr Capocchiano said that, following his conversation with Mr Rafeletos on 29 March 2002, all statements from St George Bank had been sent to him at his Albion Park Rail home and that all repayments had been made by him or by Great Wall. He said that all instalments had been paid since the first instalment due in April 2002, although three payments made on 23 July 2002, 21 August 2002 and 18 October 2002, were paid into a different St George Bank account in the name of Mr Rafeletos. 89 Incomplete statements in relation to the account of Mr Rafeletos with St George Bank are in evidence. Those statements show credits in the sum of $1,157 on 23 July 2002 and 21 August 2002. That is the amount of the monthly repayment specified by St George Bank in its letter to Mr Rafeletos of 20 March 2002. The only statements in evidence show balances outstanding at various dates as follows: · 19 October 2002 - $198,194.07 · 30 June 2007 - $181,372.21 · 20 October 2007 - $180,047.13 · 20 April 2008 - $179,876.72 · 29 April 2009 - $173,447.68 Thus, there has been a reduction in the principal sums owing. 90 Great Wall and Mr Capocchiano place considerable store on the fact that, following the advance by St George Bank to Mr Rafeletos, all correspondence concerning that advance was directed away from Mr Rafeletos to one or other of Great Wall and Mr Capocchiano. It is common ground that Mr Rafeletos made no repayment in respect of the loan. On the other hand, it is by no means clear from the evidence who made the repayments. In any event, for the reasons I have indicated above, that question may be equivocal. To the extent that the payments were made by Mr Capocchiano by way of advance to Great Wall, one would expect to see an item in the accounts of Great Wall showing a liability to Mr Capocchiano. The purported accounts of Great Wall as at 30 June 2007 show an item of non-current indebtedness to Frank and Italia Capocchiano as at that date of $1,383,452. However, there was no evidence as to the manner in which that debt came into existence, assuming that the accounts give a true and fair view of the financial position of Great Wall. 91 Mr Rafeletos gave evidence that he was actively and directly involved with the development of the Yallah Property. He said that that involvement included meetings on the site. However, that evidence was denied by Mr Yates, who denied having met Mr Rafeletos before December 2006. 92 Mr Yates was clearly involved at various times with the proposed subdivision of the Yallah Property. Correspondence dealing with the Yallah Property to which Mr Yates was a party, between June 2003 and March 2007, makes no reference to any involvement on the part of Mr Rafeletos. On the other hand, the correspondence makes passing reference to Mr Capocchiano. On any view, Mr Yates was acting on behalf of Great Wall and Mr Capocchiano was the majority shareholder of Great Wall. I consider that the correspondence in question is equivocal as to whether or not Mr Rafeletos had any involvement in Great Wall after March 2002. 93 Mr Rafeletos also asserted that he had signed an agency agreement with Mr Tim Fitzgerald, a real estate agent, in connection with the sale of lots in the subdivision of the Yallah Property. Mr Fitzgerald was not called to give evidence and no agency agreement was tendered. As I have said, the evidence of Mr Rafeletos should not be accepted unless corroborated. However, the absence of evidence from Mr Fitzgerald does not necessarily corroborate the evidence of Mr Capocchiano. 94 Mr Rafeletos also asserted that he was engaged in negotiations for the sale of lots in the subdivision of the Yallah Property and that he had signed transfers. None of the transfers in evidence was executed by him whether as agent of Great Wall or otherwise. On the other hand, it may be significant that, in December 2006, a transfer to a purchaser of one of the lots in the subdivision of the Yallah Property was prepared on the basis that Mr Rafeletos would sign it as a witness. He actually signed the transfer, but his name was ruled through and only the signature of Mr Capocchiano was operative. That may tend to corroborate the version of events given by Mr Rafeletos in relation to his discussion with the solicitor concerning his authority to sign documents on behalf of Great Wall. It is, however, of very minimal weight. 95 Great Wall and Mr Capocchiano also relied on the evidence of Ms Marie Field, a real estate agent, Ms Cheryl Lappin, a planning officer with Wollongong City Council, and Mr Nathan McEwan, a solicitor, all of whom had some involvement with the development of the Yallah Property. None of them supports the evidence of Mr Rafeletos and Mr Le Serv that Mr Rafeletos had an involvement at an early stage in the sales of lots in the subdivision of the Yallah Property. Once again, that evidence is equivocal. 96 Towards the end of 2006, Mr Capocchiano's stroke resulted in his hospitalisation. At that time, Great Wall was involved in settlement of the sale of lots in the subdivision of the Yallah Property. Mr Rafeletos said that he was told by the solicitor acting in connection with the sales that the solicitor could not accept instructions from him because he had no authority from Great Wall and was not a director of Great Wall. Mr Rafeletos said that he went straight to Mr Capocchiano to ask why he was not a director. He said that Mr Capocchiano promised that he would do what he had promised in 2002 and confirmed that he would make him a director and give him a 50% shareholding in Great Wall, which, at that stage had not occurred. He said that Mr Capocchiano told him to speak to Mr Reid. 97 Mr Rafeletos said that he subsequently spoke to Mr Reid and told him that he was supposed to be a director from the beginning and was supposed to have 50% of the shares. He said that he told Mr Reid that Mr Capocchiano had asked him to organise the papers and to go and see him and get the share certificates rectified. Mr Rafeletos said that he subsequently spoke to Mr Capocchiano and told him that Mr Reid was preparing all the paperwork for the directorship and the 50% shareholding and that he would bring them down for Mr Capocchiano to sign. He said that Mr Capocchiano told him that was fine and that he would sign the documents as soon as Mr Reid had all the paperwork organised. 98 Mr Rafeletos said that a couple of days later he received a phone call from Mr Reid in which Mr Reid said that he had visited Mr Capocchiano, who had had a change of mind. He said that Mr Capocchiano was not going to sign the documents. Mr Rafeletos said that he then went to the hospital again to see Mr Capocchiano, who said that he could not help because he had previous problems with a former son-in-law. Mr Capocchiano denied that such a discussion took place. 99 It is curious that Mr Rafeletos had not taken any steps before then to confirm his position as a director and shareholder. It is significant that he says that, even then, he referred to a 50% interest. Great Wall and Mr Capocchiano also place some store on the fact that Mr Rafeletos gave no evidence of having made any attempt, prior to the end of 2006, to follow up the proposal that he be made a shareholder of, and become a director of, Great Wall. There was evidence that he became a director and shareholder of DG Empire, indicating that he had some knowledge of the formalities involved. Nevertheless, the circumstances in which that occurred were not explained and I regard that matter as equivocal. I would not regard Mr Rafeletos as someone who is familiar with the niceties of documentation relating to the internal management of a limited liability company. 100 Evidence was adduced concerning arrangements made between Mr Capocchiano or Great Wall, on the one hand, and Mr Rafeletos, on the other hand, while Mr Capocchiano was in hospital. An account was opened with a building society on which Mr Rafeletos operated. There was considerable dispute as to whether the expenses debited to that account were expenses of Great Wall or whether the account was no more than remuneration to Mr Rafeletos for services that he provided in connection with the subdivision and sale of lots in the Yallah Property, by reason of Mr Capocchiano's indisposition. In any event, it is of some significance that, when Mr Capocchiano was unable to attend to the affairs of Great Wall, he looked to Mr Rafeletos for assistance. Having regard to the failure to call Mr Reid to rebut the evidence given by Mr Rafeletos, that even at that late stage he was to be made a director until Mr Capocchiano changed his mind, I would be disposed to conclude that the arrangements that were then put in place tend, if anything, to undermine Mr Capocchiano's evidence concerning the alleged discussion on 29 March 2002.

Conclusions as to Accord and Satisfaction 101 I consider that it is inherently unlikely that, having abandoned the agreement made with Great Wall because his father warned him of the personal risk involved, Mr Rafeletos would have left $200,000 as an unsecured loan to Great Wall for an unspecified period. I am not persuaded, on the balance of probabilities, that the discussion alleged by Mr Capacchiano took place on 29 March 2002. 102 There is no defence of laches or delay. Nor is there any allegation of any acquiescence or conduct on the part of Mr Rafeletos that might give rise to an estoppel. It follows that the agreement made between Mr Rafeletos and Great Wall remained and, subject to any repudiation continues to remain on foot.

REMEDY 103 Mr Rafeletos originally sought an order for the rectification of the register of members of Great Wall. Subsequently, he amended his claim to seek specific performance of the alleged agreement as well. He claims specific performance of an alleged agreement with Great Wall to give effect to the documentation enclosed with Mr Reid's letter of 26 March 2002. However, that documentation makes no mention of the sum of $200,000 that was to be provided on some basis by Mr Rafeletos to Great Wall in connection with the purchase of the Yallah Property. 104 Alternatively, Mr Rafeletos seeks specific performance of an alleged agreement with Mr Capocchiano, whereby Mr Capocchiano agreed to transfer shares representing 20% of the issued capital of Great Wall. It is unclear whether Mr Rafeletos seeks specific performance of an agreement that involved paying $200,000, as consideration for the transfer or allotment of shares, or of an agreement that involved lending $200,000 to Great Wall unsecured. 105 The defence filed on behalf of Great Wall and Mr Capocchiano admits the making of an agreement but does not deal specifically with the identity of the parties to that agreement. Further, the admission does not deal with the question of whether the sum of $200,000 to be provided by Mr Rafeletos was to be by way of consideration for the acquisition of a 20% interest in the issued capital of Great Wall or merely by way of finance to assist in the purchase of the Yallah Property. A fortiori, it does not deal with the question of whether, if the former, it was a payment to Mr Capocchiano for his shares or a payment to Great Wall for the allotment of new shares in accordance with the documentation prepared by Mr Reid. 106 None of the matters to which I have just referred was addressed in substance by either party. In particular, Great Wall and Mr Capocchiano made no submission that any arrangement that was made was void for uncertainty. However, they resist an order for specific performance of the agreement that they admit was made on March 2002. As I understand their position, their defence is the alleged abandonment of the agreement immediately after contracts for the sale and purchase of the Yallah Property had been exchanged. 107 The delay between the making of the agreement and claiming orders for specific performance is a consideration relevant to the question of the grant of specific performance. As I have said, the claim for specific performance was not made until some time after the proceeding was commenced. Even if it had been made at the time of the initial commencement of the proceeding, it was still some five years after the time for performance by Great Wall of its obligations under the agreement. It may be possible for a term to be implied that the allotment or transfer to Mr Rafeletos of a 20% interest in the share capital of Great Wall would be effected within a reasonable time after the performance by him of his side of the bargain, namely, providing the sum of $200,000 in connection with the payment of the deposit under the contract for the sale and purchase of the Yallah Property. Even so, a period of some five years elapsed before the commencement of the proceeding on 5 October 2007. The agreement, on any view, was made prior to 28 March 2007. 108 There has been no evidence from Mr Rafeletos that he is ready, willing and able to perform any further obligations on his part yet to be performed under the agreement. On the other hand, it may be that there is very little for him to do, other than to pay a nominal sum as consideration for the allotment of shares, to agree to be bound by the constitution of Great Wall as a shareholder and to consent to act as a director. He has otherwise performed his side of the bargain, namely, the provision of finance in the sum of $200,000 towards the payment of the deposit under the contract for the sale and purchase of the Yallah Property. 109 Evidence was adduced to show other transactions that had been entered into by Great Wall, such as the acquisition of properties at Sussex Inlet and West Wyalong. That evidence may rebut the suggestion that Mr Rafeletos had any continuing interest in Great Wall, although I consider that it is equivocal. 110 There is no basis for a conclusion that there was a joint understanding or intention that Mr Rafeletos would share in any other venture that might be undertaken by Mr Capocchiano, either through Great Wall, or otherwise. It is by no means clear that, if Mr Rafeletos had been a shareholder of Great Wall, the acquisition by Great Wall of the West Wyalong property and the Sussex Inlet property would have occurred. They are matters that would militate against the exercise of discretion in favour of the grant of specific performance of the agreement that made in March 2002 between Great Wall and Mr Rafeletos. 111 In all of the circumstances, I do not consider that an order for specific performance of the agreement of March 2002 is warranted. I am not satisfied that that agreement can now be performed as it would have been if shares were allotted and Mr Rafeletos was appointed as a director within a reasonable time after 28 March 2002. I do not consider on balance, that the parties would be in the same position as they would have been, had those steps been taken at that time. It follows that it is unnecessary to determine whether an order for rectification of the register of members would have been an available remedy. 112 The intention of Mr Rafeletos and Mr Capocchiano was that Great Wall would be used as the vehicle for a joint enterprise between them. The enterprise involved acquiring the Yallah Property with borrowed funds, developing it by means of subdivision and selling lots in that subdivision, so as to generate a profit. I consider that the bargain between Great Wall and Mr Rafeletos was that, in consideration of Mr Rafeletos' procuring finance in the sum of $200,000 to enable Great Wall to pay the deposit under the contract for the purchase of the Yallah Property, Mr Rafeletos would be allotted 20% of the issued capital of Great Wall for a nominal consideration. Great Wall would thereafter discharge the obligations of Mr Rafeletos in respect of the finance that he procured. 113 It is clear that Mr Capocchiano and Great Wall have repudiated that contract, such that it would be open to Mr Rafeletos to terminate the contract and sue for damages for its breach. That is an alternative remedy claimed by Mr Rafeletos. 114 I consider that damages should be determined by reference to the value that 20% of the issued capital of Great Wall would have had at the date of judgment if the only activity in which Great Wall had engaged after the date of the agreement had been the acquisition, development and sale of lots in the Yallah Property.

CONCLUSION 115 In the light of the findings I have made, I consider that Mr Rafeletos is entitled to damages for the repudiation of the agreement made with Great Wall in March 2002. However, I am mindful of the fact that some of the conclusions that I have reached may not have been fully addressed by the parties. Accordingly, I propose to treat these findings as provisional. I propose to list the proceeding for directions for the purpose of considering the further steps necessary for determination of the quantum of damages and to hear any application for leave to make further submissions in relation to my provisional findings. I certify that the preceding one hundred and fifteen (115) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Solicitor for the Applicant: Thomas Booler & Co.

Counsel for the Respondents: Mr MS Willmott SC with Mr R Wilson

Date of Hearing: 18-19 August 2008, 14, 16-17 October 2008, 4 November 2008 and 28-30 April 2009

At a glance

Court

Decision date

Before

Source

Judgment (18 paragraphs)

Parties

Legislation Cited (1)

Cited By (2)