(b) Consideration
174 The evidence establishes that a bankruptcy notice and a creditor's petition had issued against Alan Sobbi in 2001 and that that had been brought to Mr Cassaniti's attention. There is, however, no evidence that affirmatively establishes that he knew or was conscious or suspicious of the fact that, as at 11 June 2002, that Alan Sobbi was, in fact, bankrupt.
175 There is some evidence to support the proposition that Sam Cassaniti had reason to believe that bankruptcy proceedings may, at some point in time, have culminated in an order for Alan Sobbi's bankruptcy. It has been necessary on this aspect to assess Sam Cassaniti's evidence, having regard to his past convictions and other matters relied upon as affecting his credibility.
176 Evidence was given by David Salvatore Cassaniti in his affidavit sworn 30 September 2009 (paragraphs [12], [13] and [14]) that his practice in 2001 was that if he received from a trustee or liquidator a Statement of Affairs to be completed by a client, he would send the document on to the client with a covering letter.
177 David Cassaniti said that he recalled taking a Statement of Affairs form to the jewellery shop run by Ghandi and Alan Sobbi at 227 Macquarie Street, Liverpool for Alan Sobbi. He said he did not recall when this occurred.
178 His evidence was that he went into the shop with the Statement of Affairs and that both Ghandi and Alan Sobbi were there. He said that he said in front of them:-
"Alan this is a statement of affair [sic] . Your trustee in Bankruptcy needs you to complete it. This is serious, you need to fill the form out and send it in. If you need a hand, one of the guys will help you out with it, it can become a criminal matter if you don't complete and your bankruptcy doesn't commence until it is completed."
179 Mr David Cassaniti said that, as he said this, Ghandi Sobbi shook his head. According to David Cassaniti, Alan Sobbi said, "leave, leave it here, it's nothing, it's already been sorted out. It's been paid".
180 It was put to David Cassaniti that he had, in effect, been less than accurate in his affidavit. In cross-examination, he accepted that his second affidavit contained an error, in that it stated that he was the Office Manager for Reliance. He said he was a director of Reliance but that he was Office Manager. He could not explain how the error had been made in the affidavit.
181 The evidence discloses (in particular, Exhibit 5) that David Cassaniti was aware that Alan Sobbi had been made bankrupt and that arrangements had been made for a s.81 examination. David Cassaniti said in evidence that, in October 2001, Alan Sobbi had told him that he had sorted the matter out. He said he appreciated that, in May 2002, Alan Sobbi was in a great deal of financial trouble.
182 He was cross-examined at some length on his evidence including, in particular, his evidence of having provided Alan Sobbi with the Statement of Affairs in the presence of his father.
183 In re-examination he said that he recalled the amount of the debt owed by Alan Sobbi at the time was $20,000 and he believed it was a debt owed to the Commonwealth Bank.
184 Given that the events to which he deposed occurred almost eight years before the date of his affidavit and the fact that there are only limited records of events occurring at that time, it has been necessary to consider David Cassaniti's evidence with appropriate caution.
185 Whilst I accept David Cassaniti when he said he provided Alan Sobbi with the Statement of Affairs, I do not consider that his evidence can be taken as sufficiently reliable to conclude that Ghandi Sobbi was present at the time he handed the document to Alan Sobbi. He did not, in evidence, provide any contextual or other matters by which he was able to recall so many years later that Ghandi Sobbi was, in fact, present at the time he said he delivered the Statement of Affairs.
186 On the question as to Sam Cassaniti's knowledge on the matter and, notwithstanding the attack on his credibility, I do not consider that the evidence establishes that he knew or, alternatively, was conscious or held a reasonable suspicion of the fact of a sequestration order having been made against Alan Sobbi as at late May up to and including 11 June 2002 when he was dealing with the loan and associated transactions. In arriving at that conclusion, I have taken into account Sam Cassaniti's evidence on this aspect, which I accept, having closely observed him giving evidence. Whilst other evidence establishes that, as at late 2001, bankruptcy proceedings had been initiated against Alan Sobbi, Sam Cassaniti's firm had a practice in handling such matters giving advice to clients as to how to deal with bankruptcy proceedings. There is no reason not to accept that such practice was followed in the present case especially given the relatively small amount of the debt said to have been owed by Alan Sobbi.
187 Although Ghandi Sobbi's gave evidence that, had he known that his son was bankrupt when he was asked to guarantee the loan, he would not have done so, that evidence is to be evaluated in the light of other evidence and the context of the case.
188 In the written submissions for the plaintiff, it was contended:-
"56. The Plaintiff contends that the Defendants' knowledge of the bankruptcy of their son would have had no effect on their decision to execute the Mortgage. To say otherwise is to say that they would have foregone the opportunity to have Lemery Holdings purchase the House of Diamonds, in the circumstances of the House of Diamonds causing considerable embarrassment … a reasonable inference to be drawn is that the purchase would be to the advantage and profit of Lemery and that profit would be used to pay Alan Sobbi's debts."
189 In cross-examination of Ghandi Sobbi, gave the following evidence:-
"Q. If you thought your son was being threatened with physical harm and you could stop that by borrowing $600,000 that is what you would have done, isn't it?
A. INTERPRETER: If I can borrow, yes, but if I can't borrow, no."
190 It was contended for the plaintiff that a more fundamental problem with accepting Ghandi Sobbi's evidence on the significance of his son's bankruptcy, was the fact that Alan Sobbi's bankruptcy did not change the nature of the transaction and it did not add a risk to the transaction: Written Submissions, paragraph [58].
191 I have concluded that, assuming Ghandi Sobbi was unaware of the fact of his son's bankruptcy, it is more probable than not that if he, at the time of the loan, had been so aware, he would, nonetheless, have proceeded with the loan and associated transactions. This conclusion rests, not only upon the fact, as I determine below, that the defendants did stand to receive a "benefit" from the loan but also upon the fact that, to Ghandi Sobbi's knowledge, Alan Sobbi's financial position as at May/June 2002 was far from sound.
192 The file note of Cassaniti & Associates dated 17 May 2002 (which I accept as a reasonable accurate record) supports the fact that Ghandi Sobbi was aware that his son, Alan Sobbi, had, as at the date of the loan, significant financial problems, in particular, the Ibrahim matter, his indebtedness to the Commonwealth Bank and that he was, at that time, being pursued by a process server.