Siev v. Magid [2004] NSWCA 135

LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT ED 50135/01 FILE NUMBER(S) : LOWER COURT Macready AJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40688/03 ED 50135/01

MASON P HODGSON JA STEIN AJA

FACTS By an agreement dated 23 March 2000, the appellant agreed to sell his rights in certain shares to the respondent for US$1,500,000, one half of which was payable within 21 days and the balance of which was payable within 15 months. The agreement provided that, upon receipt of the first payment, the appellant would take certain steps to give effect to the transfer of his rights in the shares to the respondent.

The respondent made the first payment, but the appellant did not take the required steps at all (per Hodgson JA, Stein AJA agreeing) or until May 2001 (per Mason P). The appellant did not at any time achieve an effective transfer of the rights in the shares to the respondent. The respondent purported to terminate the agreement in August 2001.

The appellant sued the respondent for the second payment, and the respondent cross-claimed for recovery of the first payment. The primary judge found for the respondent on both claims. On appeal to the Court of Appeal:

HELD (1) The appellant had committed a breach of the agreement entitling the respondent to terminate it. (2) Accordingly, the appellant was not entitled to the second payment. (3) Steps in performance of the agreement prior to effective transfer of the rights in the shares were conditional upon such transfer taking place, and since it had not taken place, the respondent was entitled to recover the first payment. **********

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40688/03 ED 50135/01

MASON P HODGSON JA STEIN AJA

Wednesday 5 May 2004 SIEV V. MAGID Judgment 1 MASON P: I have had the benefit of reading the judgment of Hodgson JA. It set out the facts and issues. Subject to what follows, I agree with his Honour's reasons. 2 In my view, Mr Ben-Shahar was the "Trustee" referred to in cl 4 of the written Agreement of 23 March 2000 (the Sale Agreement). 3 By the Sale Agreement, the appellant promised to sell to the respondent for US$1,500,000 his shares in ICM Ltd and Belix Ltd. Half of the purchase price was to be paid within 21 days. 4 Clause 4 stipulated that: Dan Siev will give an instruction to the Trustee to transfer all his rights in the above shares to Bob Magid upon receipt of the first payment. 5 The Sale Agreement was written in the Hebrew language by Mr Aharon Ben-Shahar, an Israeli lawyer. 6 At that time, Mr Ben-Shahar was in truth the trustee of the two parcels of shares, holding them for the benefit of the appellant, Mr Siev. Mr Ben-Shahar was registered as the holder of the ICM shares and he had possession of the Belix shares, which were bearer shares. 7 The Belix shares were kept in a bank safety deposit in Cyprus that was controlled by Mr Ben-Shahar. The trust of the Belix shares was declared and evidenced by a letter of 8 June 1999, addressed to the respondent, and signed by Mr Ben-Shahar's business partner, Mr Omer. Mr Omer gave the respondent an irrevocable undertaking in relation to the shares, describing them as "held in trust for Mr Dan Siev" and partners. On 1 September 1999, Mr Ben-Shahar endorsed and signed a handwritten note stating: At the request of Mr B Magid the foregoing trust duties are to be assigned to me. I undertake to act in accordance with the foregoing commitments given by S Omer to B Magid. 8 No one disputes that Mr Ben-Shahar was the legal owner of the Belix shares, holding them in trust for the appellant at the time of the Sale Agreement. 9 Mr Ben-Shahar's legal title to the Belix shares armed him with the authority to vote and exercise other shareholder rights pertaining to the shares. This included the capacity (on behalf of the beneficiary) to exercise 37.5% of the voting rights over Veline Ltd, the Maltese corporation that owned 100% of the capital of RomanSoft Ltd. Mr Magid owned 12.5% of Veline's shares (through a British Virgin Islands company called Wisp Investments Ltd). It follows that Mr Magid controlled 50% of the capital of Veline, so long as the trustee of the Belix shares (Ben-Shahar) exercised his duties as required on behalf of the beneficiary (Magid). 10 Ben Shahar's bare trusteeship armed his beneficiary with equitable rights to control the manner in which he exercised those legal rights. The beneficiary, being sui juris, could terminate the trust at any time (Saunders v. Vautier (1841) Cr & Ph 240, 41 ER 482). 11 The rights with which the trustee of the Belix shares was, from time to time, armed enabled that trustee to appoint and dismiss directors or agents of Belix. 12 Since at least as early as 24 June 1999 Belix had one director, Maria Monieti. She lived in Cyprus and was an employee of a Cypriot company, Totalserve Management Ltd. According to its letterhead it provided trust and management services in Cyprus. 13 Totalserve's managing director was Athos Fouttis. As Hodgson JA points out, the bank account of RomanSoft were under the control of Totalserve (effectively, Mr Fouttis) in Cyprus. 14 Hodgson JA sets out the conversations that took place in Tel-Aviv on 23 March 2000 that led to the execution of the Sale Agreement later that day. The first took place in Mr Ben-Shahar's office, but not within his hearing. Obviously its import was reported to him, because later that day he produced the draft Sale Agreement for execution by the parties. 15 These conversations show that the expressed purpose of cl 4 was to enable Mr Magid "to run the company" (RomanSoft) as a full equal partner with Lucian Alter as soon as the first $US 750,000 was paid. To that intent there was the following discussion before the document was signed: Siev: Immediately upon receipt of my $US 750,000.00 Ben Shahar will, on my instructions, fly to Cyprus and arrange the documentation, speak to the trustee in Cyprus and make sure the trustee in Cyprus knows that you are the owner of the shares and not me. For all the documentation, Trust Agreements etc., I am paying Ben Shahar $US 10,000.00 and he wants you to pay him $US10,000.00 also.

Magid: That is a lot of money, why should we be paying him that much money?

Siev: He has a lot of things to do with the trustee which are very complicated. There are various companies involved.

Shortly after the signing, there was the following conversation, according to Mr Magid's evidence: Having signed the Agreement which is annexure "A" to the Siev Statement, while we were still at Mr Ben Shahar's home, I said to Mr Ben Shahar, in Mr Siev's presence, "Why should Dan Siev and I pay you so much money?", to which he replied, "You don't realise how much I have to do. I have to go to Cyprus possibly more than once. I have to speak to the trustee of various companies. There is not only Belix, there are other companies to be dealt with. It is all very complicated. There are company trust structures in Cyprus and there are many people involved. I have to take a lot of time off from running my normal office". I then asked, "Who is the trustee and why don't we put his name in the agreement?", to which Mr Siev and Mr Ben Shahar each made replies which were to the effect of "We don't know the name of the trustee." Mr Ben Shahar then said, "These details will be sorted out when I am in Cyprus". 16 In my view, these conversations did not have the effect of identifying Totalserve as "the Trustee" in cl 4 of the Sale Agreement. 17 The Sale Agreement is a legal document drawn up by a lawyer. The two parcels of shares were held in trust at the time, by Mr Ben-Shahar. In this context, the plain or natural meaning of the phrase "the Trustee" was the person holding the shares in trust at the time of the direction. The possibility that Mr Ben-Shahar might assign the office (as it had previously been assigned to him by his partner) perhaps explains why Mr Ben-Shahar was not designated by name. 18 Clause 4 speaks of the Trustee transferring "his rights" in the shares. This language would not be apt for reference to a corporate entity like Totalserve, even if it carries on a business similar to an Australian trustee company. 19 Mr Ben-Shahar's conversation about flying to Cyprus to "make sure the trustee in Cyprus knows that you are the owner of the shares and not me" is consistent with Mr Ben-Shahar being "the Trustee" in cl 4. It illustrated his dominion over the shares and all parties' recognition that such dominion carried with it the capacity to give directions to "the trustee" with the management role in Cyprus. It recognised that the Cypriot company was regarded by the parties as "the trustee" for some purposes, but not (in my view) to the exclusion of Mr Ben-Shahar's role as the legal trustee of the two parcels of shares. 20 The Sale Agreement stands to be interpreted as at the time it was entered into. Accordingly, I draw no more assistance from Mr Ben-Shahar's crossing out the words "as Trustee" in the instruction dated 15 June 2000 than from his insertion of those words referable to himself in the draft Trust Deed prepared by him that is set out in Hodgson JA's reasons. 21 It is unnecessary to consider the additional difficulties for the respondent's argument stemming from the fact that Mr Ben-Shahar was the registered owner of the non-bearer shares in ICM Ltd. Clause 4 of the Sale Agreement was intended to work in relation to the two parcels of shares. 22 My conclusion on the "Trustee" issue does not, however, lead to the upholding of the appeal. The learned Master held that the letter dated 15 June 2000 was not in fact provided to Mr Ben-Shahar until some time in May 2001. 23 The delay in perfecting the purchaser's/respondent's effective control over the shares caused him significant difficulties. Hodgson JA summarises them at [109]. The respondent should have been placed in a position of equal authority as Lucien Alter as the effective 50% owner of RomanSoft. The appellant was using the uncertainty about the situation to advance his own interests, including delaying the repayment of the US$250,000 owing by RomanSoft to the respondent. The appellant's failure to put the respondent in a position to exercise the authority that he should have as a 50% owner of the business was a major reason for the respondent's decision to cancel the Sale Agreement on 29 August 2001. 24 The Master held that there was a clear breach of the appellant's obligation to cause an unquestionably effective transfer of his holdings in Belix to the respondent. The respondent would not have entered into the Sale Agreement unless he received the shares in both ICM and Belix. Clause 4 made it abundantly plain that control of the both lots of shares had to be given at the time of payment of the first instalment. This did not happen, due to the failure to instruct the Trustee to transfer all his rights in the shares to the respondent "upon receipt of the first payment". 25 The appellant argues that he is not vicariously liable for the shenanigans and prevarications of Mr Ben-Shahar, who undoubtedly exploited the uncertainty of the beneficiary position in early 2001. So much may be accepted. But this was a direct consequence of the appellant's failure to have given the timely instruction to "the Trustee". Had that occurred, the respondent would have been armed with legal power to compel his full admittance into shared control of RomanSoft. Instead, Mr Ben-Shahar was still making excuses and proposing modifications of the company structure as late as June 2001. The matter exploded in July 2001 when the appellant endeavoured to block RomanSoft's repayment of the debt it owed to the respondent. The respondent's summation was fully justified when he wrote to Hunt & Hunt on 28 April 2001 stating: … Mr Siev, having sold me his shares 18 months ago, continues to this day to act as though he is still the owner of those shares …. 26 The appellant's own conduct that enabled this to occur amounted to both breach and repudiation. 27 I agree with the orders proposed by Hodgson JA. 28 HODGSON JA: In 2001, the appellant Dan Siev brought proceedings against the respondent Robert Magid claiming an order that Mr. Magid pay him $US750,000.00 plus interest. Mr. Magid put on a cross-claim, claiming an order that Mr. Siev pay him $US750,000.00. Master Macready heard the case as an acting judge of this Court; and he decided that Mr. Siev's claim failed, and that Mr. Magid's claim succeeded. The following orders were made on the cross-claim: 1. Judgment in favour of the defendant/cross claimant in the sum of US$750,000, together with interest in the sum of US$130,849.32 (calculated from 29 August 2001 to 17 July 2003 at the rates set out in Schedule J of the Supreme Court Rules (NSW)) (the Judgment Sum). 2. The defendant/cross claimant is to procure the transfer to the plaintiff/cross defendant of the 7,000 shares held by Calrod B.V. in Internet Capital Merchant Ltd (the ICM shares). Such transfer is to be effected upon payment of the Judgment Sum by the plaintiff/cross defendant. 3. Interest pursuant to section 95 of the Supreme Court Act 1970 (NSW) is not payable on the Judgment Sum provided that the Judgment Sum is paid to the defendant/cross claimant within 28 days hereof. 4. The plaintiff/cross defendant is to pay the defendant/cross defendant's costs of these proceedings, as agreed or assessed. 29 Mr. Siev appeals to this Court from that decision. 30 The case concerned an agreement made in Israel between the parties, written out in Hebrew and signed by them on 23 March 2000. As translated, this agreement was as follows: Agreement Between Dan Siev (hereinafter Siev) And Bob Magid (hereinafter Magid) The parties have agreed on the following. 1. Dan Siev hereby sells all his holdings and rights of any kind whether directly or indirectly in the companies I.C.M. Ltd and BELIX Ltd. And Bob Magid is purchasing these shares from Dan Siev. 2. a. In consideration for the sale of the shares, as aforementioned, Bob Magid will pay Dan Siev the total of US$1,500,000 (one and a half million US dollars) and that is on the following dates and with the following payments. I. A total of US$750,000 will be paid within 21 days from today. II. The balance will be paid within 15 months from the date this agreement is signed (the balance being (US$750,000)) b. The balance of the payment will carry an annual interest of 5%. The total amount of the interest being US$46,875 will be paid together with the second payment. 3. If a full agreement will be signed between the parties, Bob Magid will give a personal guarantee and that is in the event that the agreement will be signed by a company on his behalf. 4. Dan Siev will give an instruction to the Trustee to transfer all his rights in the above shares to Bob Magid upon receipt of the first payment. 23/3/00 Signed Bob Magid Dan Siev 31 A crucial issue in the case concerned the meaning and effect of cl.4 of that agreement. The primary judge decided that Mr. Siev was in breach of that clause, that this breach was a fundamental breach of the contract, and that Mr. Magid effectively terminated the agreement following that breach. In order to understand the issues involved in that decision and in the appeal, it is necessary to consider the history of the matter in some detail.

CIRCUMSTANCES 32 Mr. Siev is an Israeli businessman, and Mr. Magid is an Australian businessman. The other main person involved in the transaction, Mr. Aharon Ben-Shahar, is an Israeli lawyer. 33 The transaction concerned an enterprise referred to as the Romansoft enterprise, which was formed to conduct an online casino. This enterprise comprised two companies, Romansoft Limited (Romansoft), a company incorporated in Cyprus which owned the intellectual property, and Internet Capital Merchant Limited (ICM), an Israeli company which had an agreement with IBM Denmark concerning services which enabled rapid authorisation of credit card details to merchants and customers on the internet. 34 This enterprise had been conceived by one Lucian Alter. Mr. Siev had been introduced to Mr. Alter by Mr. Ben-Shahar as a potential investor. The original ownership of the enterprise was 50/50 between the Alter interests and the Siev interests, with Mr. Ben-Shahar having a 1.5% interest within the Siev interests. 35 Mr. Magid acquired an interest of 12.5% in 1999, for which he paid $US1 million, being $US200,000.00 for the interest in ICM and $US800,000.00 for the interest in Romansoft. The relationship between Mr. Alter, Mr. Siev and Mr. Magid was regulated by a Subscription and Shareholders Deed for ICM dated June 1999, and an equivalent document for Romansoft. These documents were drawn or settled by Mr. Magid's solicitors Blake Dawson Waldron. 36 After these transactions in about June 1999, the shares in ICM were held by Mr. Alter (50%), Mr. Siev (37.5%) and Mr. Magid or interests associated with him (12.5%), these lastmentioned shares subsequently being transferred in about May 2000 to Calrod B.V., a Netherlands company controlled by Magid interests. The shares in Romansoft were held entirely by a Maltese company Veline Limited (Veline). 37 The shares in Veline were held as follows: 50% by Dangrega Holdings Limited (Dangrega), a British Virgin Islands (BVI) company controlled by Mr. Alter and his partners; 37.5% by Belix Investments Pty. Limited (Belix), a BVI company with an issued capital of 10,000 shares held as to 9,333 by Mr. Siev, 400 by Mr. Ben-Shahar, and 267 by one Eran Yarach; and 12.5% by Wisp Investments Limited (Wisp), a BVI company controlled by Mr. Magid. 38 The shares in Dangrega, Belix and Wisp were bearer shares, meaning that entitlement to exercise their rights was with the bearer of those shares. In June 1999, a partner of Mr. Ben-Shahar, namely Sasson Omer, held the Dangrega shares in trust for Mr. Alter and the Belix shares in trust for Mr. Siev. In aid of the provisions of the Subscription and Shareholders Deeds, Mr. Omer signed two letters, each dated 8 June 1999 and addressed to Mr. Magid, concerning the shares in Dangrega and Belix. The letters were in similar terms. That concerning Belix was as follows: I refer to the bearer shares by the Company, being the whole of the issued shares of that Company (the "Shares").

I hereby irrevocably undertake that these shares which are held in trust for Mr. Dan Siev and partners will not be transferred, delivered, dealt with or affected in any way whatsoever except in accordance with the provisions of the Subscription and Shareholders Deed dated June 1999 in relation to the Company. 39 Mr. Magid signed a similar letter, addressed to Mr. Siev and Mr. Alter, in respect of shares in Wisp, his signature being on behalf of a company Votraint No.1177 Pty. Limited, which apparently was then the bearer of the Wisp shares. 40 It appears that, as at 24 June 1999, Belix had one director, namely Maria Moniati. Ms. Moniati had also signed the Memorandum and Articles of Association of Romansoft as its secretary on 8 April 1999. She was an employee of a Cyprus company Totalserve Management Limited (Totalserve), which according to its letterhead provided trust and management services in Cyprus. The managing director of that company was Athos Fouttis. It seems clear from other material, to which I will refer, that the bank account or bank accounts of Romansoft were under the control of Totalserve (effectively, Mr. Fouttis) in Cyprus. 41 I would add that the Memorandum and Articles of Romansoft are subscribed by companies named Tudor Management Limited and Tudor Trustees Limited, and the signature on behalf of those companies appears to be the signature of one Peter G. Economidis. There is in evidence a letter dated 9 June 1999 on the letterhead of Tudor Management Limited, referring to Mr. Economidis and signed by one Maria Ioannou. That letterhead showed the company as having the same address as Totalserve, and shows an email and website associated with Totalserve. The inference is plain that the Tudor companies are closely associated with Totalserve. I would add that another document in evidence under the letterhead of Totalserve, concerning the bank account of Veline, in Cyprus, gives as the authorised signatories Peter G. Economidis or Athos Fouttis, separately. 42 Returning to the letters dated 8 June 1999 signed by Mr. Omer, there appears on each of those letters, as tendered in evidence, a handwritten note by Mr. Ben-Shahar, bearing date 1 September 1999, in the following terms: At the request of Mr. B. Magid the foregoing trust duties are to be assigned to me. I undertake to act in accordance with the foregoing commitments given by S. Omer to B. Magid. 43 Mr. Ben-Shahar's evidence was that this was written on the letters, or at least the copies of them held in his office, when Mr. Omer went to England. Mr. Magid denied making the request referred to in the note, and denied knowing that this note had been added to the documents. 44 The circumstances in which the agreement of 23 March 2000 was entered into are set out in the following paragraphs from a statement of Mr. Magid, the substance of which was accepted by the primary judge: 11. On 20th March, 2001 I attended a shareholders' meeting in the offices of Ben-Shahar, Lekner & Co. in Tel-Aviv. During the meeting Mr. Siev took me aside and said words to the effect, "I can't work with Lucian (Alter) and I am not willing to put more money into this business. You can get along with him so you may as well step into my shoes. That way you can control the company with him. Why don't you buy me out and take my place?" Believing that the differences between Messrs. Siev and Alter resulted from a personality conflict, and that I could work with Mr. Alter, I expressed interest in Mr. Siev's proposal and, after some bargaining, Mr. Siev said, "I agree to a price of $US 1,500,000.00". A discussion then took place to the following effect: Magid: "You are obliged to lend money into Romansoft. I am not going to put money in on your behalf and pay you the entire amount. There is a timing problem. I suggest that I lend the money to the company instead of you for eighteen months. So I will pay you $US750,000.00 now and $US750,000.00 in eighteen months time with interest". Siev: "Agreed". Magid: "If I have to invest further money into the business, I will need to be able to run the company straight away". Siev: "As soon as I get the first $US750,000.00 you can stand in my place and you can run the company with Lucian, the way I run it with Lucian now. You can replace Eran who is my representative as accountant and you can have your own representative act for you while you are overseas. You will be a full equal partner with Lucian". Magid: "Agreed". It was my understanding at that time that Mr. Siev owned 43.75% of the issued shares in ICM and, through his shareholding in Belix, 35% of the shares in Romansoft.

12. On 23 March, 2000 I met with Mr. Ben Shahar and Mr. Siev at Mr. Ben Shahar's home. During that meeting Mr. Ben Shahar produced the document which is annexure "A" to Mr. Siev's Statement dated 7 March, 2002 ("the Siev Statement"). Before the document was signed, a conversation to the following effect took place: Siev: "Immediately upon receipt of my $US750,000.00 Ben Shahar will, on my instructions, fly to Cyprus and arrange the documentation, speak to the trustee in Cyprus and make sure the trustee in Cyprus knows that you are the owner of the shares and not me. For all the documentation, Trust Agreements etc., I am paying Ben Shahar $US10,000.00 and he wants you to pay him $US10,000.00 also". Magid "That is a lot of money, why should we be paying him that much money?" Siev: "He has a lot of things to do with the trustee which are very complicated. There are various companies involved".

13 Having signed the Agreement which is annexure "A" to the Siev Statement, while we were still at Mr. Ben Shahar's home, I said to Mr. Ben Shahar, in Mr. Siev's presence, "Why should Dan Siev and I pay you so much money?", to which he replied, "You don't realise how much I have to do. I have to go Cyprus possibly more than once. I have to speak to the trustee of various companies. There is not only Belix, there are other companies to be dealt with. It is all very complicated. There are company trust structures in Cyprus and there are many people involved. I have to take a lot of time off from running my normal office". I then asked, "Who is the trustee and why don't we put his name in the agreement?", to which Mr. Siev and Mr. Ben Shahar each made replies which were to the effect of "We don't know the name of the trustee." Mr. Ben Shahar then said, "These details will be sorted out when I am in Cyprus". 45 On 5 April 2000, Mr. Magid caused an amount of $US50,000.00 to be paid into the bank account of ICM in Israel, and $US200,000.00 to be paid into the bank account of Romansoft in Cyprus, as part of the proposed loan of $US750,000.00 to the enterprise discussed on 20 March 2000. Mr. Magid caused $US750,000.00 to be paid into the bank account of Roberta International SA, a Siev company, in Liechtenstein, by instalments of $US250,000.00 on 30 April 2000, $US350,000.00 on 5 May 2000, and two instalments of $US75,000.00 each on 11 and 12 May 2000. He also caused $US10,000.00 to be paid into the bank account of Roberta International SA in Liechtenstein on 19 May 2000, this being in respect of Mr. Ben-Shahar's fees. 46 On 3 July 2000, Mr. Magid sent an email to Mr. Ben-Shahar, noting the subject as "Shares and loans", in the following terms: Could you please bring me up to date on the agreements relative to both companies. If you have provided me with documents could you e-mail me copies of all relevant documents related to my shareholding in both

Additionally I do not believe that I have loan agreements relative to the loans which I have made since our meeting and the remaining two tranches. Please send me these so that I can complete my loan commitment. 47 A further email on 13 July 2000 noted that there had not been a reply to the 3 July email. A facsimile sent to Mr. Ben-Shahar on 14 July 2000 enclosed copies of the emails. 48 On 27 July 2000, Mr. Ben-Shahar sent to Richard Dukes and Kristen Deards, the solicitors acting for Mr. Magid at Blake Dawson Waldron, the following letter by facsimile: RE: Internet Capital Merchant Please find attached a Share Transfer Deed signed by Aharon Ben Shahar concerning transfer of 9,500 ordinary shares of the aforementioned company to Calrod B.V. The said shares constituted 47.5% of the outstanding capital of the company.

Please make sure that an authorized person of Calrod B.V. signs on behalf of the company on the part of the transferee.

After the Share Transfer Deed shall be signed by Calrod B.V. please transfer the original copy (which shall be sent to you by a courier) to my office, so I shall he able to notify the Companies Registrar that the shares have been transferred.

Without limiting the foregoing, according to the Israeli Companies Laws and regulations, in order to register a foreign corporation as a shareholder of an Israeli Company, one has to provide the Companies Registrar with a valid Certificate of Corporation of the foreign company approved by Notary and the accurate signatory rights of the foreign company.

Please provide us the foregoing documents together with the Share Transfer Deed, so we shall be able to complete the registration of the whole transfer.

The letter enclose a Share Transfer Deed signed by Mr. Ben-Shahar. It made no reference to the Belix shares or to Romansoft. 49 On 5 November 2000, Mr. Ben-Shahar sent the following letter to Mr. Magid: Re: Internet Capital Merchant Ltd. ("the Company")

1. Mr. Dan Siev called me and asked to resign from the Board of Directors of the Company.

2. Mr. Siev is not and never was a member of the Board of Directors of the Company.

3. According to the register of companies in Israel the members of the board of Directors of the Company are Lucian Alter and Eran Yarach.

4. I would like to take this opportunity and remind you that we still did not received the Share Transfer Deed, which was sent to you on the 27th of July 2000, singed (sic) by you, with regard to the transfer of 47.5% of the issued and outstanding share capital of the Company.

5. Please send me the Share Transfer Deed ASAP, this will enable us to report the transfer to the Israeli register of companies. 50 Mr. Magid replied as follows on 6 November 2000: Thank you for your fax dated 5 November 2000. I do not recall receiving a Share Transfer Deed. I cannot find any amongst our records. Could you kindly send me a copy of such a document. 51 At some date which does not appear to be identified in the evidence, Mr. Magid received from Mr. Ben-shahar's office the following draft Trust Deed: TRUST DEED THIS TRUST DEED made and entered into this 23rd day of March 2000, by and between A. Ben-Shahar, Adv. Of 2 Hashlosha st., Tel-Aviv ("the TRUSTEE") and between Wisp Investments Ltd. a company incorporated under the laws of Malta ("the BENEFICIARY") WHEREAS: (a) The BENEFICIARY, for consideration given, is beneficially interested and entitled to Nine Thousands and Five Hundreds (9,500) ordinary fully paid up shares par value 1 (one) STG. each, issued for the bearer, of BELIX INVESTMENTS CORP ., a company duly incorporated under the laws of the British Virgin Islands ("the COMPANY"), constituting in the aggregate 95% (ninety five percent) of the issued share capital of the COMPANY ("the SHARES IN TRUST" or "the SHARES") now held by the TRUSTEE;

(ii) At the request of a third party who has certain priority rights with respect to interests held by the COMPANY ("the THIRD PARTY"), the BENEFICIARY is required to deposit the SHARES IN TRUST in escrow with the TRUSTEE and the TRUSTEE who has accepted to do so shall receive an agreed remuneration therefor;

(iii) The BENEFICIARY is engaged, directly or indirectly, in a trust agreement with respect to the SHARES IN TRUST with another trustee ("the OTHER TRUSTEE"), whereby the exercise of all rights attached to the SHARES IN TRUST has been regulated;

(iv) The purpose of the trust herein provided is limited to the possession of the SHARES IN TRUST by the TRUSTEE and to the supervision of the TRUSTEE that any transaction of the SHARES IN TRUST is made in accordance with the interests of the THIRD PARTY;

NOW THIS DEED made in pursuance and in consideration of the above WITNESSETH as follows:

The BENEFICIARY hereby declares and directs that the TRUSTEE shall hold the SHARES IN TRUST according to the following trusts and terms and the TRUSTEE hereby accepts and undertakes to act according to the following trusts and terms:

(a) Possession and transfer of SHARES. Upon trust the TRUSTEE undertakes to: (1) retain the SHARES and deposit them in a safe deposit box of a European bank; and - (2) upon the written direction of the BENEFICIARY and subject to the written consent of the THIRD PARTY - to transfer the SHARES or any of them to the possession of the BENEFICIARY; or - (3) subject to the THIRD PARTY's waiver of his priority rights pertaining to the SHARES IN TRUST or subject to its written consent - to transfer the SHARES or any of them under terms and to any person(s) as shall be indicated by the BENEFICIARY.

(b) Disposition of SHARES . Upon trust the TRUSTEE undertakes to: (1) transfer the SHARES to the BENEFICIARY if, after written notice given to the BENEFICIARY and to the THIRD PARTY by the TRUSTEE, the formers for more than thirty days from the date of the notice, fail to indicate another trustee, agreed by both of them, to whom the SHARES may be transferred; - and - (2) upon further trust that, if the BENEFICIARY fails to accept such transfer of shares, to transfer the SHARES to any other person of the choice of the TRUSTEE, after ensuring, to the extent possible, that the BENEFICIARY's interests in the SHARES are secured. The TRUSTEE shall have the right to dispose of the SHARES at any time and for any reason whatsoever.

Unless otherwise agreed in writing by the parties herein, all rights attached to the SHARES (rather than the rights relating directly or indirectly to any reorganization of the COMPANY's share capital or the rights to make any transaction of the SHARES), shall be exercised exclusively by the BENEFICIARY.

Any additional shares of the COMPANY which the BENEFICIARY may be entitled to from time to time shall be held again by the TRUSTEE upon the same trusts as herein provided.

The BENEFICIARY undertakes to notify the OTHER TRUSTEE of the provisions of this deed immediately upon its execution, and to take all steps to ensure that the OTHER TRUSTEE complies therewith.

To remove any doubt it is hereby agreed, that in case of a contradiction between the provisions of this Deed and the provisions of the trust deed executed between the BENEFICIARY and the OTHER TRUSTEE (as shall be amended from time to time), the provisions of this Deed shall prevail.

This trust shall come to an end upon the transfer of the SHARES IN TRUST by the TRUSTEE to the BENEFICIARY or to any other person, in conformity with the terms herein contained, for any reason whatsoever.

The TRUSTEE shall hold in strict confidentially every issue, document or data with respect to the COMPANY and/or its shareholders and shall not disclose any information or documents related thereto to any third party without the prior written consent of the BENEFICIARY:

It is agreed that during the term of this Deed, upon the termination of the TRUSTEE's obligations and at any time thereafter, the BENEFICIARY shall have no cause of action or right for any remedy against the TRUSTEE, his partners or any of his employees.

The BENEFICIARY agrees to indemnify and to hold the TRUSTEE, his partners or employees harmless against any loss, liability, damage or expense that they may suffer, sustain or be subjected to as a result of, or in connection with, this Deed or any action taken by the TRUSTEE in connection with this Deed.

At any time upon the TRUSTEE's demand, the BENEFICIARY shall cover all expenses incurred by and reasonable fees due to the TRUSTEE in connection with this Deed and the TRUSTEE may terminate this Deed at any time if such expenses or fees are not covered by the BENEFICIARY as provided herein.

IN WITNESS WHEREOF we have hereunto set our respective signatures this 5th day of October 1999.

According to Mr. Ben-Shahar, it was not prepared by him; and Mr. Magid said that he did not sign it because it did not represent his understanding of the transaction. 52 On 6 November 2000, Mr. Siev sent a handwritten letter to Mr. Magid, in the following terms: Dear Bob

Further to our telcon of yesterday, I checked with Ahron Ben-Schachar (sic) the directors of I.C.M are: Lucian Alter and Eran Yarach. (Eran was my nominee).

I have no doubt, that owning 46.5% of I.C.M. you can nominate a director or replace Eran with another director (you have to check with Ahron the bylaws.

Re: Belix Limited The director of this company is and was one of the managers of the Cyprus trust company "Total Serve". I suggest when you come in December, go there, with Eran who is constantly in touch with them, and see that all formalities are to your satisfaction. You certainly can change the trust company of Belix Limited (I think they are good) or replace the director.

P.S. Allow me to remind you of the second payment which is due June 2001. 53 On 31 January 2001, Mr. Magid sent the following letter by facsimile to Mr. Siev: Dear Dan

In our recent correspondence, you offered to help me sell my shares in Romansoft/ICM.

It appears that the casino is back on track, and Lucian has two processors who appear to be much more reliable than others in the past. I am, however, finding it too difficult to try to monitor the business from this distance and would appreciate your help in placing my shares with someone who would be closer to the action or may even provide Lucian some synergy.

Best regards to Rutie and I hope to see you next time I am in Israel.

Kind regards Bob Magid 54 On 1 February 2001, Mr. Siev returned this document with the following handwritten message: Dear Bob, I will try to help you.

However due to the political situation here in Israel, investors foreign and local are now very hesitant and causious (sic).

Kind regards to you and Ruth. Dan 55 Thereafter, Mr. Magid engaged the services of Yuval Horn, an attorney in David Cohen Law Offices in Ramat Gan, Israel. On 17 April 2001, Mr. Horn sent the following letter to Mr. Ben-Shahar by facsimile Re: Romansoft Dear Mr. Ben-Shachar (sic), Further to our telephone conversations of April 9th, 2001 and today, I would like to set out my requests in writing, as follows:

I represent Mr. Robert Magid with respect to his ownership of equity interests in Romansoft Ltd., and Internet Capital Merchant Ltd. The power of attorney is attached hereto for your reference at your request.

In our conversation you approved the fact that your firm holds securities consisting of 47.5% of the issued share capital of Romansoft in trust for Mr. Robert Magid or entities in his control.

I would request that you confirm this fact in writing, so that my client has written proof of his ownership. In addition, kindly deliver to me the trust agreement under which you hold such shares.

The letter enclosed a power of attorney from Mr. Magid. 56 On 2 May 2001, Mr. Ben-Shahar replied in Hebrew, and the following is a translation of that letter: Dear Colleague,

In reply to your letter of 17.4.01 I reply, a reply that has been delayed due to me being overseas, that neither I nor my office are holding in trust any shares of the companies named in your letter of the above date.

A. Ben Shahar, Advocate 57 On 8 May 2001, Mr. Magid sent the following letter by facsimile to Mr. Siev: Dear Dan

When you and Lucian first came to Australia my only intention was to help you. I introduced you to people you wanted to meet. Important people. Serious business people. I assumed that I was dealing with decent people whom I could trust.

Now two years down the track, you are out of the picture and I am left in a totally unsatisfactory position. The lawyer who is involved, who I believe is a friend of yours and who was brought in by you behaves in a most un-lawyer like manner.

First of all, I have no idea who he represents. He represents you, the company and claims to represent me as well. However when I ask him to provide me with information all I get is evasion and non-cooperation. He claims not to have documents which I know are with him. He is meant to be holding bearer shares but says that he doesn't. He refuses to co-operate with my solicitor. And he received his payment from me, at his insistence, through your overseas account.

This is not the way lawyers work in Australia and he would have been disbarred ages ago. He had no right to claim to represent me and you and the companies. He now claims that he knows nothing about Roman, only ICM. You know and I know that he has shares in both companies. When is this bullshit going to end.

Then there is Eran who you claim is as straight as a die. Eran is paying money to Lucian, Kobi and Yoav overseas in breach of his responsibilities as a qualified accountant. This is crooked. I ask him for the phone number of Futis, whom he has visited. He says that he doesn't have it and I should get it from Lucian. Clearly Lucian told him not to give it to me.

He too refuses to co-operate with my representatives in Israel even though they have power of attorney from me. So much for Eran.

Meanwhile Lucian has thrown me off the yo-yo so I have no idea what is happening. I don't believe a word that Lucian tells me. I can only guess why IBM threw him out. What the true story about the crooks in Miami [is] we will never know.

What I know is that all decisions are made by Lucian without consultation with me. All payments are made by Lucian and Eran without consultation with me. They pay themselves whatever they want to essentially out of the money that you and I have invested, all without consultation with me.

I know how I treat my partners. I can tell you, it is not like that. However small a partner is in my businesses, I always heed his point of view. I have agreements with partners which are totally in my name without anything having been written. But they trust me, and they trust me with good reason.

Froika, with whom I spoke last night, tells me that Roman is making money. Do you think that if that is the case that I should at least be receiving interest on the money I put in? But that is not the crucial issue. The crucial issue is that no decision should be taken other than by Lucian and me unanimously. Eran should not be signing cheques. Lucian and my representative should be signing cheques or, preferably, my representative alone should be signing them until I have been paid out.

Ronen told me that he met you and you kept on harking back to the money I should pay you. Don't you think that you owe me something? Don't you feel a moral obligation to sort out this mess you got me into? Even if Lucian appeared suspect, at least I expected professional behavior (sic) from Ben Shahar and Eran.

I should be asking you to return me the money I placed in your overseas account because you haven't delivered anything.

Do you think I will pay you another penny if the situation remains as it is?

What I expect from you Dan is full co-operation with Ronen and Yuval Horn, make sure that I have full and equal authority to Lucian, replace Eran as signatory to the accounts with my representative, make sure that Ben Shahar provides all the documents we need. I don't require you to work for me. Just make sure that I am treated fairly.

I have been telling Ronen for some time that you, Dan, are the key to the solution of this problem. I am depending on you to do the right thing. Best regards

Bob 58 Mr. Siev replied by a handwritten letter dated 9 May 2001, in the following terms: Dear Bob

I understand your position and agony and am ready to help, but not under all circumstances.

You must first decide if you want to go to "war" or solve your problems with Roman/I.C.M in a peaceful manner.

If you choose alternative one, I am out of the game, and do what ever (sic) you find suitable.

However if you want to solve the problem in a good spirit I am willing to assist.

Remarks: Pls understand that sending a lawyer to Lucian, Eran, Ben Shahar was in my opinion a mistake because the interpretation of this act by them was that you decided to start a legal fight and in this case why assist. (would you?!)

I reject totaly (sic) and completely your insinuation about my honesty indicated in the first paragraph of your fax.

I dealt with you fare (sic) square and honest. I don't feel guilty, and I don't think you can blame me for any wrong doing. If you doubt my honesty and integrity, why do you approach me?!

I think that the majority of your requests are reasonable and attainable. From what I heard "Roman" is now making money and it seems to be a good bussiness (sic).

Re: Our Agreement Please read it.

You wrote quote: "You have not delivered any thing". Unquote.

The only thing I had to deliver according to #4 of our agreement was a letter of instruction to the trustee, to transfer all my rights in the shares you bought to you, which I did. (See copy attached). If your condition for payment is to receive the shares physically, pls instruct Ben-Shahar to deliver you the shares. They are yours. Any way (sic) you received full delivery of my obligations according to our signed agreement.

Blaming, blaming, blaming and calling your partners crooks will bring you nowhere.

I repeat, I understand your frustration, and think that most of your requests towards Roman/I.C.M are reasonable and attainable . The situation, Bob, is much less critical than you imagin (sic).

The document attached was a document in Hebrew bearing date 15 June 2000, the translation of which is as follows: To: Adv. A. Ben Shahar From: Dan Siev

Re: Share Purchase/Sale Agreement Between Bob Magid and Myself

This is to confirm that I have received from Bob Magid half the amount due regarding the sale of the shares pursuant to the Agreement between us dated March 3, 2000.

Therefore, I request that you as Trustee will exercise the provisions of Clause 4 of the Agreement between us.

Mr. Magid's evidence was that he had not previously seen or heard of this document. 59 On 9 May 2001, Mr. Ben-Shahar wrote to Mr. Magid the following letter: Dear Bob, RE: Roman Soft Dan Siev has showed me the facsimile transmission which you have sent him earlier.

I would like to inform you that the issues in you facsimile transmission which are related to me are odd and untrue.

As I notified you in the past, your part of the shares of Roman Soft which are held by me, are being kept for you and you can have them whenever you like.

All what I have been asking from you, was an explicit order, signed by you and verified by a Notary, to whom should I give your part of the shares which are, as you know, bearer shares. This point of view, which was expressed to you in the past, is valid, and any information to the contrary that you received from any third party concerning this subject matter is simply untrue.

A. Ben Shahar 60 On 10 May 2001, Mr. Magid wrote to Mr. Siev the following letter: Dear Dan In your letter you state: l reject totally and completely you insuniation (sic) about my honesty indicated in the first paragraph of your fax.

When I read it I had no idea what you were talking about, but when I re-read mine I understood how you interpreted my sentence: I assumed that I was dealing with decent people whom l could trust..

If you take that sentence alone it can be interpreted to mean that I now find both you and Lucian dishonest. This was not my intention and I apologise if that is the way it sounded. What was intended was clear when you read the rest of the letter. That is, that initially I believed that I was dealing in the manner that I would deal with Australians. A lawyer is a lawyer with a strict code of conduct. The same for an accountant. And the same for partners. A company is a company with rules on shareholder rights, representation, information, etc. What transpiered (sic) here was nothing like that. If you read my letter carefully nowhere have I impuned (sic) your honesty.

Which brings me to your second point. I am totally baffled by your comment about my being represented by a lawyer. This is astounding. If you had a business in Australia and your partners were not cooperating with you what would you do? I presume that you would choose a local representative whom you trust. Am I right? Of course I am.

Which is exactly what I did. Who would that be? The person who I believe is the most trustworthy person I know, Ronen. So Lucian rejects Ronen. But it is not up to Lucian to decide who represents me. That is my choice. And you know Ronen is a decent person, reasonable, fair, sensible. There is no conflict of interest He might work with Michael Lubel, (who I believe is 1,000 times more reasonable than Lucian), but if I ask him not to dance at two weddings, Ronen will not do so.

Now Ronen is not a lawyer but he works with Yuval Horn. The agreements involved Malta and Cyprus and are very complex. Furthermore there were agreements with IBM, the Miami crooks, etc. so clearly I needed a lawyer to help me out.

Are you implying that having a local representative is some form of sabotage? You are an experienced businessman, what are you saying?

Do you really think that I enjoy fighting, litigation, etc.? Maybe you don't know me. I can get along well with anyone, but when someone starts raping me, excuse me, but I will draw the line there. Do you think that it is right that having put the money in, that everyone including Lucian, Yoav, Kobi, Eran, Aharon, Froika get to the isalahat and there is nothing left for me? I would like to see you in my position.

So I ask you as a reasonable person to help me out of this mess. My preference is to have nothing to do with Lucian. If that is impossible, I have to have a say in how the money is spent, i.e. signature on the cheque account.

Let Lucian and his boys get rich on Roman, but not at my expense. Regards Bob 61 In June 2001, Mr. Magid visited Israel. Around 5 June, he attended a meeting at Mr. Siev's home with Mr. Siev and Mr. Yarach. 62 There was a further meeting on 6 June 2001, at the offices of Mr. Ben-Shahar, between Mr. Magid, Mr. Siev and Mr. Ben-Shahar. On that day, Mr. Siev signed a document in Hebrew, the English translation of which is as follows: To: Ben Shahar IRREVOCABLE INSTRUCTIONS I, the undersigned, Mr. Dan Siev, am hereby instructing you irrevocably to transfer to Mr. Bob Magid all my holdings in the companies Veline and or Romansoft by the transfer of my holdings in Belix Investments either in person or by any other means in accordance with your judgement such that, following the transaction, Mr. Bob Magid will either directly or by representation be the owner of 47.5% of shares in Veline Inc.

Signed: Dan Siev Dated: 1/6/01 63 According to Mr. Magid, he then asked Mr. Ben-Shahar to give him the shares Mr. Siev had agreed to transfer to him; and Mr. Ben-Shahar said words to the effect: Bob, you know I keep the shares in a safe in Cyprus. To register the shares with Totalserve I must tell them in whose name they are being held. I strongly advise you against putting your name to the shares as some of Romansoft's transactions are in countries which do not permit internet gambling. I suggest that since your other shares are held in Wisp that these shares are held in Wisp too.

According to Mr. Magid, Mr. Ben-Shahar then produced a document in Hebrew, the English translation of which is as follows: TO Aharon Ben Shahar

I, the undersigned, Mr. Bob Magid, holder of Australian passport no.17745330 hereby irrevocably instructs (sic) you to transfer all the holdings due to me in the company VELINE, and/or BELIX INVESTMENT CORP. or in any other company related to WISP.

Mr. Magid then signed that document. 64 Then, according to Mr. Magid, a conversation to the following effect took place: Siev (to Mr. Ben Shahar): "Bob could buy out your and Froika's shares. You could sell your shares to Bob for $US100,000.00."

Magid: "But how can that be done when both of you have shares in Belix which, with the Wisp shares, owns 50% of Veline and Froika only holds 1% or so of the shares in Dangriga which owns 50% of Veline. How would this give me control of RomanSoft? Froika has no control of Dangriga so this would not take me over 50%."

Ben Shahar: "That is not a problem, both the Belix and Dangriga shares would be converted into Veline shares."

Magid: "Why would Lucian Alter allow himself to end up in a minority position?"

Ben Shahar: "Lucian Alter understands nothing about legal niceties and would trust me to do the right thing. I will simply point out that it is more convenient and efficient running one company." 65 According to Mr. Magid, Mr. Ben-Shahar then produced a transfer which purported to convert Mr. Magid's holding in Belix into shares in Veline. Mr. Magid did not sign that document, and subsequently he went to lunch with Mr. Siev. During that lunch, according to Mr. Magid, a conversation to the following effect took place: Magid: "Controlling Belix gives the owner equal control of RomanSoft. Ben Shahar's suggestion that I convert my Belix shares to Veline would mean I lose control since I would be in a minority with 47.5% of RomanSoft. I would have to trust that Ben Shahar would simutaneously convert Lucian Alter's and everyone elses shares otherwise I would lose my control."

Siev: "You have nothing to worry about. Lucian Alter understands nothing about laws and contracts and is not interested in them. He trusts Ben Shahar implicitly and Ben Shahar will be able to trick him." 66 Shortly afterwards, there was a conversation to the following effect: Siev: "What about the $US750,000.00 you owe me. I know you cannot pay it straight away."

Magid: "I will stand by my agreement, Dan, as long as you stand by yours. I have paid you $US750,000.00 for what I now understand was an equal controlling share and should have received control of your shares 12 months ago. However I still have received nothing" 67 After lunch, Mr. Magid and Mr. Siev returned to Mr. Ben-Shahar's office, and Mr. Ben-Shahar prepared a document in Hebrew, the English translation of which is as follows: Agreement Between Dan Siev (hereinafter Siev) And between Bob Magid (hereinafter Magid)

Whereas on the 23/3/00 an agreement was signed between the parties according to which Magid purchased from Siev holdings in the companies as specified in that agreement

And whereas according to the agreement Magid was to pay Siev a sum of US$750,000 with interest on the 20/6/01

And whereas the parties agree to postpone the payments as specified

The parties have agreed upon the following: 1. The parties agree on a postponement of the implementation of Magid's debt to Dan according to the following details a. A sum of US$100,000 of the debt will be paid no later than 20/8/01 b. The balance of the debt will be paid on 20/6/02

To these sums the interest is detailed in the original agreement should be added.

2. To facilitate the collection Magid will give Siev a promissory note to the total of the debt, including interest accrued to that date.

3. The other provisions of the original agreement shall remain in force.

Mr. Siev signed the document, but Mr. Magid said that, before he signed it, he would like to discuss it with his lawyer. 68 On 14 June 2001, Mr. Magid sent to Mr. Ben-Shahar a letter, referring to a statement that his Romansoft shares were being kept for him, and that he could have them whenever he liked; and asking that Mr. Ben-Shahar arrange to have these shares physically given to his daughter, Sasha Hoffman. On 21 June 2001, Ms. Hoffman sent an email to Mr. Magid saying that she had spoken to Mr. Ben-Shahar, who said that he did not receive the fax dated 14 June 2001, and that the shares were out of the country and would be in his possession only in two weeks' time. 69 Meanwhile, on 17 June 2001, Mr. Siev sent a handwritten letter to Mr. Magid, as follows: Dear Bob,

You left Israel without signing our agreement (attached) regarding the postpoment (sic) of your debt to me of U.S.$796,875 due on June 20 2001, for a period of one year.

If I will receive the A.H. agreement signed by you including your signed promissory note (attached) for the sum of U.S$836,716 ($976,985 + 5% interest) the end of June 2001, I will respect our agreement.

However, in case, I will not receive the signed agreement & signed prommisory (sic) note till (sic) then, our agreement for postpoment (sic) of your debt is nil (sic) and void, and I demand payment as per our original agreement i.e. now!!

P.S. For June 22 till (sic) July 18 I can be reached only through #00972-55-328235. 70 On 24 June 2001, Mr. Ben-Shahar sent a letter in Hebrew to Mr. Magid, the English translation of which is as follows: TO Mr. Bob Magid Australia Via fax: 612-9251-4112

Dear Bob, Re: VELINE HOLDINGS LIMITED

1. Enclosed are certificates of conveyance of 825 shares from Belix to Wisp

2. After the transfer, WISP will have together with shares transferred to it in the past, 950 shares which amount to 47.5% the total holdings of the shares of Veline.

3. I ask you to please have WISP sign in the appropriate place (TRANSFEREE), and also to have the witnesses to signature with their details.

4. After signing together with the witnesses' signatures please return the share conveyance certificates to me. Sincerely A. Ben Shahar, Attorney 71 Mr. Magid responded with a letter dated 25 June 2001 in the following terms: Thank you for your letter dated 24th June, 2001.

What you are proposing is not what I requested of you. I do not wish for Belix to transfer shares in Veline to Wisp, as I pointed out to you at our meeting. What I wanted you to do is to hand over to my daughter, the 95 of Belix Bearer Shares which I purchased from Dan Sieve(sic). 72 In about July 2001, Mr. Magid required repayment of the $US250,000.00 that he had lent to the Romansoft enterprise. According to Mr. Magid, the following conversations subsequently took place: On the 17 July, 2001 I received a telephone call from Lucian Alter, who said words to the effect of "Eran Jarach is with me and I have him on speaker". During that conversation Lucian Alter said words to the effect "We will repay you the $US250,000.00 which you lent to Romansoft and Interplay (ICM) with interest. The first installment (sic) of $100,000 will be paid on 18 July and the second on 18 August." On 22 July, 2001 I had a telephone conversation with Mr. Lucian Alter. Mr. Eran Jarach was also in Mr. Alter's office at the time, and Mr. Alter set his telephone on loudspeaker in order that I could speak with both of them. The conversation was to the following effect: Magid: "You have agreed to send $US 100,000.00 of repayments straight away so why have we not received it?" Alter: "We are having a problem transferring you the money. Dan Siev is furious, he has instructed us under no circumstances should we transfer money to you or parties associated with you." Magid: "You agreed that you would transfer money on the eighteenth. Do you still intend to do so?" Alter: "Of course we do, but how do we do it, Dan Siev is stopping us?" Magid: "I will give you the details of two companies to which you can send the money. That way we can get around Dan Siev's objection." Within days we received the fast payment.

Several days later, I received a telephone call from Mr. Alter. Again Mr. Alter's telephone was set to speaker and Mr. Jarach was in the room. The conversation which took place was to the following effect: Alter: "We can't send you more money. Dan Siev found out that we sent you the first $US100,000.00 and he has spoken to Fouttis of TotalServe and told him not to approve any transactions. He is running our business. We don't know what to do." Magid: "How do you know that this is true?" Alter: "He has faxed Fouttis not to send any more money. We have a copy of the fax. Fouttis has refused all of our requests to transfer funds. We are quite desperate." 73 On 20 August 2001, Hunt & Hunt, solicitors acting for Mr. Siev, wrote the following letter to Mr. Magid: MR DAN SIEV -V- MR ROBERT MAGID We are the Australian solicitors acting for Mr Dan Siev. Mr Siev has instructed us as follows:

On 23 March 2000 an agreement was entered into between Mr Siev and you under which Mr Siev sold to you all of his holdings and rights in ICM Limited and Belix Limited for the total consideration of US$1.5 million.

Under that agreement US$750,000 was to be paid not later than 21 days after the signing of that agreement ("the First Instalment") and the Second Instalment of US$750,000 was to be paid within 15 months from the signing of that agreement and no later than 23 June 2001. The Second Instalment also included an additional amount being interest at the rate of 5% per annum totalling as at 23 June 2001, $46,875.00.

After receipt of the First Instalment, Mr Siev wrote to Advocate Ahron Ben Shahar instructing him to transfer the ICM and Belix Limited shares to you. In accordance with these instructions the ICM shares were duly transferred. As you did not provide Mr Shahar with instructions regarding the identity of the transferee in whose name the Belix Limited shares were to be registered, these shares have not been transferred.

In early June 2001 you met with our client Mr Siev in Israel where you requested an extension of time for the payment of the Second Instalment. We are instructed that an extension of one year was agreed subject to you agreeing to pay further interest in the amount of 5% of the outstanding balance and conditional upon you signing a promissory note in respect to all sums outstanding to our client.

The Agreement, including the form of promissory note, was provided to you on or about 6 June 2001. We are instructed that you requested time to consult your solicitor prior to signing the agreement and the promissory note. On 17 June 2001, having not heard from you, our client forwarded to you a letter indicating that should Mr Siev not receive the signed agreement and promissory note by 30 June 2001 his consent to the postponement of the second payment would be void.

Our client has not received the signed agreement and promissory note, nor has he received the amounts due under the Second Instalment.

Our client has attempted to contact you on numerous occasions unsuccessfully.

Accordingly, we are instructed by our client to seek full payment of the outstanding amounts within 14 days failing which we have been instructed to commence proceedings against you.

We therefore require that you forward a bank cheque made payable to our client in the amount of US$803,125 calculated as follows: Balance $750,000.00 Interest at the rate of 5% per annum from 23 March 2000 to 23 August 2001 in the amount of $53,125.00 74 On 27 August 2001, Mr. Ben-Shahar wrote the following letter to Mr. Magid: As l informed you in the past the shares of Veline Holdings Ltd. Which were sold to you by Mr. Dan Ziv (sic) are available to you at any time.

Such holdings can be transferred to you from Belix Investments Co. to VISP (sic) Investments Ltd. or by way of transfer of all of Belix holdings to you according to your instructions.

As requested in the past and in order to perform the transfer proceedings, please, provide me with an instruction letter sign by you and certified by a notary or any other legal authority certifying your signature. Following the receipt of the instruction letter the shares will be transferred to the transferee specified by you. 75 On 28 August 2001, Mr. Magid wrote the following letter to Hunt & Hunt: We are in receipt of your letter dated 20 August 2001.

The information contained in your letter is only partially correct. An agreement was entered into between Mr Siev and myself on 23 March 2000 at the home of Mr Aharon Ben Shahar, Mr Siev's solicitor, in Herzlia Pituach, Israel.

According to the agreement, upon my payment of the first tranche of $750,000, Mr Ben Shahar was to transfer the authority contained in Mr Siev's shares in Belix Limited and ICM Limited to myself or my nominees.

Mr Siev and Mr Ben Shahar informed me that Mr Siev's holding in Belix was in bearer shares and his solicitor, Mr Ben Shahar, informed me that he would hold them in trust for me until I instructed him to transfer them to whomever I nominated. Mr Ben Shahar was paid US$10,000 by me under his instructions into the overseas bank account of Mr Siev as his fee for representing my interests in the transaction. Mr Ben Shahar was to inform the directors of Belix, Veline and Romansoft that I was the new owner of the bearer shares formally owned by Mr Siev and hence that l would instruct the relevant companies in accordance to the authorities contained in the shares formally owned by Mr Siev.

Although Mr Ben Shahar received payment for his services, neither the shares nor the authority were ever transferred. Throughout the latter part of last year all of my instructions to the operating company, Romansoft, were ignored. I appointed Yuval Horn and Ronen Hoffman as my attorneys to act on my behalf in Israel. This instruction was ignored. Cheques continued to be signed on behalf of both ICM and Romansoft by Mr Siev's representative, Mr Eran Jerach (sic), rather than my appointees.

Romansoft is a Cypriot company. Cheques and authority to transfer funds originate from Israel under the signature of Mr Jerach and Mr Lucian Alter, the President of Romansoft and ICM. I am told that these are sent to Cyprus where the instructions are implemented by Romansoft's sole representative, Mr Futis with whom I was not able to speak. I requested Mr Jerach to provide me with Mr Futis's phone number. He deceitfully informed me that he did not have it although he later confessed to me that he was in touch with Mr Futis on a daily basis.

Mr Ben Shahar, who in addition to being Mr Siev's solicitor is apparently a minor shareholder in both companies. He was aware my predicament as was Mr Siev, both of whom were aware of their failure to comply with the terms of the above-mentioned agreement with Mr Siev.

Finally, when I instructed Mr Ben Shahar to hand over the Belix shares to my daughter in Israel, he refused to do so.

When I requested Mr Alter, the President of Romansoft in Israel to repay my loan to the company in July 2001 as per the loan agreement, Mr Siev, who purportedly was no longer a shareholder in the company, ordered the company not to repay the loan. Upon the payment of the first tranche of $100,000 against his advice, he replaced Mr Jerach as signatory of Romansoft, and instructed Mr Futis not to carry out any instructions without his, Mr Siev's, approval. This is the current situation. Hence Mr Siev, having sold me his shares 18 months ago, continues to this day to act as though he is still the owner of these shares, despite the above-mentioned agreement.

I have received no consideration for my payment of $750,000. All the shares remained throughout this period with Mr Siev including the authority associated with them. I therefore reserve my right to pursue Mr Siev for the refund of our moneys. Our solicitors in Israel are instructed accordingly.

Should you wish to discuss the matter further, please do not hesitate to call me. 76 On 29 August 2001, a letter was sent on behalf of Mr. Magid from David Cohen Law Offices to Mr. Siev, in Hebrew, setting out the history in much the same way as set out by Mr. Magid in his letter to Hunt & Hunt, and notifying that the agreement of 23 March 2000 was "immediately cancelled". The letter went on to request the return of $US750,000.00 plus interest of 5%. It stated that, when this was received, Mr. Magid would transfer the ICM shares back. 77 A further facsimile from Mr. Magid to Mr. Ben-Shahar dated 31 August 2001 again set out the history, much as alleged by Mr. Magid to Hunt & Hunt, and setting out various complaints of Mr. Magid. 78 Finally, in early September 2001 Mr. Magid wrote letters to Mr. Fouttis and Ms. Moniati seeking information about Romansoft and Belix; and the only response was a letter from Ms. Moniati dated 7 September 2001 to the effect that "we" could not supply the information.

PLEADINGS 79 The allegations in Mr. Siev's Statement of Claim were simple: 1. Pursuant to a written agreement dated 23 March 2000 (the "Share Sale Agreement") the Plaintiff sold to the Defendant all of his holding and rights of any kind in the companies ICM Limited and Belix Limited.

The Plaintiff's shares were held by Advocate Ben Shahar (referred to in the Share Sale Agreement as the trustee) in escrow.

The purchase price for the shares was the sum of US$1,500,000.00.

The purchase price was to be payable by two instalments. The first instalment of US$750,000.00 was to be paid within 21 days of the date of the Share Sale Agreement. The second instalment of US$750,000.00 was to be paid within fifteen months from the date of the Share Sale Agreement.

It was a further term of the Share Sale Agreement that interest at the rate of 5% p.a. would accrue on the second instalment payment from the date of the Share Sale Agreement until payment.

The first instalment of US$750,000.00 was paid by the Defendant.

It was a further term of the Share Sale Agreement that after payment of the first instalment, the Plaintiff would instruct the trustee to transfer all of the Plaintiffs holdings and rights in the shares to the Defendant.

Upon receipt of the first instalment, the Plaintiff instructed the trustee to transfer all of its holding and rights in ICM Limited and Belix Limited to the Defendant in accordance with the Share Sale Agreement.

The Plaintiff has performed all of his obligations under the Share Sale Agreement.

The Defendant failed to pay the second instalment by 23 June 2001 in accordance with the Share Sale Agreement, or at all, and has, despite demand for such payment, refused to pay it. 80 Mr. Magid's defence, apart from various non-admissions and denials, is contained in pars.4 and 7 of the Defence, which are as follows: 4. In answer to paragraph 7: (a) says that it was an express term of the Share Sale Agreement that upon receipt by the plaintiff of US$750,000 (being the first instalment of the purchase price) the plaintiff would give instructions to the "trustee" to transfer all of the plaintiffs rights and shares in ICM and Belix to the defendant; (b) says that the plaintiff breached such express term by failing to instruct the "trustee" of the plaintiffs rights and shares in Belix, to transfer those rights and shares to the defendant, upon receipt by the plaintiff of the first instalment of the purchase price on 12 May 2000; (c) otherwise makes no admissions. …

In answer to the whole of the plaintiff's contentions, the defendant says that: (a) it was an express term of the Share Sale Agreement that, upon receipt by the plaintiff of US$750,000 being the first instalment of the purchase price, the plaintiff would give instructions to the "trustee" to transfer all of the plaintiff's rights and shares in ICM and Belix to the defendant; (b) it was an implied term of the Share Sale Agreement that the plaintiff would transfer, or take such steps as were necessary to cause the transfer of, his holdings and rights in ICM and Belix to the defendant, upon payment to the plaintiff of the first instalment of the purchase price; Particulars The term is implied in order to give business efficacy to the agreement. (c) it was an implied term of the Share Sale Agreement that the plaintiff would do all that was reasonably necessary to enable the defendant to enjoy the benefits of the agreement, and would not do any act or thing which would hinder or prevent the defendant from obtaining the benefits of the agreement; Particulars The term is implied by law. (d) further or alternatively, it was an implied term of the Share Sale Agreement that the plaintiff would not voluntarily do anything to cause or permit the enjoyment by the defendant of the benefits contemplated by the agreement to be rendered nugatory or worthless or seriously undermined; Particulars The term is implied by law. (e) further or alternatively, it was an implied term of the Share Sale Agreement that the plaintiff owed the defendant a duty of good faith, both in performing his obligations and exercising his rights under the agreement; Particulars The term is implied by law. (f) the plaintiff breached each of the express and implied terms of the Share Sale Agreement referred to in paragraphs (a), (b), (c), (d) and (e) above; Particulars (1) The plaintiff failed on and after 12 May 2000 to instruct the "trustee" as referred to in the Share Sale Agreement, to transfer to the defendant all of the plaintiffs rights and shares in Belix. (2) The plaintiff failed on and after 12 May 2000 to transfer, or take any steps to cause the transfer of his holdings and rights in Belix to the defendant. (3) The plaintiff gave instructions to the directors and management of ICM and Belix after 12 May 2000 as the purported beneficial owner of shares in each of those companies, including instructions in about mid 2001 to Lucian After and Eran Jerach, directors of ICM, and Athol Futis of Total Serve Management Limited, the corporate director Belix, not to repay loans owing by ICM and Romansoft to the defendant, and not to pay dividends from Romansoft or Belix to the defendant. (4) The plaintiff failed to inform the directors and management of ICM and Belix after 12 May 2000 that he was no longer the beneficial owner of shares in ICM or Belix and that they should now take instructions from and treat the defendant as the beneficial owner of the shares previously held either directly or indirectly by the plaintiff in those companies. (5) The "trustee" as referred to in the Share Sale Agreement has failed to transfer the plaintiff s rights and shares in Belix to the defendant. (g) further, notwithstanding repeated demands by the defendant, the plaintiff has wrongly and in breach of the Share Sale Agreement failed and refused to transer or cause the plaintiffs rights and shares in Belix to be transferred to the defendant; (h) by his conduct, referred to in paragraph (g) above, the plaintiff has evinced an intention no longer to be bound by this Share Sale Agreement and has repudiated such agreement; (i) the defendant, as he was entitled to do, accepted the plaintiff's repudiation by letter dated 29 August 2001, and offered to re-transfer to the plaintiff the 9,500 shares in ICM transferred to the defendant in April 2001; (j) by reason of the above, the defendant has suffered loss and damage; Particulars The sum of US$750,000 paid to the plaintiff under the Share Sale Agreement together with interest therein. (k) in the premises, the plaintiff is not entitled to the relief sought in the Amended Summons, or any relief at all. 81 Mr. Magid's cross-claim made the following allegations: 1. By a written agreement dated 23 March 2000 between the Cross-Claimant and the Cross-Defendant (the "Share Sale Agreement"), the Cross-Defendant agreed to sell to the Cross-Claimant all of his holdings and rights either directly or indirectly in the companies Internet Capital Merchant Limited ('7C") and Belix Investments Corp BV ("Belix").

2. It was an express term of the Share Sale Agreement that, upon receipt by the Cross-Defendant of US$750,000, being the first instalment of the purchase price, the Cross-Defendant would give instructions to the "trustee" to transfer all of the Cross-Defendant's rights and shares in ICM and Belix to the Cross-Claimant.

2A. It was an implied term of the Share Sale Agreement that the Cross-Defendant warranted that he was in a position to vest legal and beneficial title in all of his holdings in Belix to the Cross-Claimant.

3. It was an implied term of the Share Sale Agreement that the Cross-Defendant would transfer, or take such steps as were necessary to cause the transfer of his holdings and rights in ICM and Belix to the Cross-Claimant, upon payment to the Cross-Defendant of the first instalment of the purchase price. Particulars The term is implied in order to give business efficacy to the agreement.

4. It was an implied term of the Share Sale Agreement that the Cross-Defendant would do all that was reasonably necessary to enable the Cross-Claimant to enjoy the benefits of the agreement, and would not do any act or thing which would hinder or prevent the Cross-Claimant from obtaining the benefits of the agreement. Particulars The term is implied by law. 5. It was an implied test of the Share Sale Agreement that the Cross-Defendant would not voluntarily do anything to cause or permit the enjoyment by the Cross-Claimant of the benefits contemplated by the agreement to be rendered nugatory or worthless or seriously undermined. Particulars The term is implied by law. 6. It was an implied term of the Share Sale Agreement that the Cross Defendant owed the Cross-Claimant a duty of good faith both in performing his obligations and exercising his rights under the agreement. Particulars The term is implied by law. 7. The Cross-Claimant paid to the Cross-Defendant the first instalment of the purchase price. Particulars 20/4/00 US$250,000 05/5/00 $350,000 11/5/00 $75,000 12/5/00 $75,000 TOTAL US$750,000

The Cross-Defendant breached each of the express and implied terms of the Share Sale Agreement and the implied warranty referred to in paragraphs 1 to 6 above. Particulars (1) The Cross-Defendant failed on and after 12 May 2000 to instruct the "trustee" as referred to in the Share Sale Agent to transfer to the Cross-Claimant all of the Cross Defendant's rights and shares in Belix. (2) The Cross-Defendant failed on and after 12 May 2000 to transfer, or take any steps to cause the transfer of his holdings and rights in Belix to the Cross-Claimant. (3) The Cross-Defendant gave instructions to the directors and management of ICM and Belix after 12 May 2000 as the purported beneficial owner of shares in the capital of each of those companies, including instructions in mid 2001 to Lucian Alter and Eran Jerach, directors of ICM and to Athol Futis of Total Serve Management Limited, the corporate director of Belix, not to repay loans owing by ICM and Romansoft to the Cross-Claimant, and not to pay dividends from Romansoft or Belix to the Cross-Claimant. (4) The Cross-Defendant failed to inform the directors and management of ICM and Belix after 12 May 2000 that he was no longer the beneficial owner of shares in ICM or Belix and that they should now take instructions from and treat the Cross-Claimant as the beneficial owner of the shares previously held either directly or indirectly by the Cross-Defendant in those companies. (5) The "trustee" as referred to in the Share Sale Agreement has failed to transfer the Cross-Defendant's rights and shares in Belix to the Cross-Claimant.

Notwithstanding repeated demands by the Cross-Claimant the Cross-Defendant has wrongly and in breach of the Share Sale Agreement failed and refused to transfer, or cause the Cross-Defendant's rights and shares in Belix to be transferred to the Cross-Claimant.

By his conduct referred to in paragraph 9 above, the Cross-Defendant has evinced an intention no longer to be bound by this Share Sale Agreement and has repudiated such agreement

The Cross-Claimant as he was entitled to do, accepted the Cross-Defendant's repudiation by letter dated 29 August 2001, and offered to re-transfer to the Cross-Defendant the 9,500 shares in ICM transferred to the Cross-Claimant in April 2001.

By reason of the above, the Cross-Claimant has suffered loss and damage. Particulars The sum of US$750,000 paid to the Cross-Defendant under the Share Sale Agreement together with interest thereon. 82 Mr. Siev's defence to that Cross-claim, apart from denials, was contained in par.2 of his Defence to the Cross-claim, as follows: 2. In relation to paragraph 8 the Cross Defendant: (i) Denies subparagraph 1 and says that it instructed the "Trustee" to transfer to the Cross Claimant all the Cross Defendant's rights in his shares in Belix by way of letter dated 15 June 2000 and says that there was no obligation imposed on him to instruct the trustee to transfer the shares in Belix to the Cross Claimant; (ii) Denies subparagraph (2) and says that he did everything required of him by the Share Sale Agreement; (iii) In relation to subparagraph (3), the Cross Claimant denies giving the instructions referred to denies acting as the purported beneficial owner of the shares and says that Mr Magid was repaid $100,000.00 on account of his loan. Further, the Cross Defendant says that so far as he is aware no dividends were paid by Romansoft or Belix; (iv) The Cross Defendant denies subparagraph (4).

DECISION OF PRIMARY JUDGE 83 The primary judge found that Mr. Siev did not comply with the requirement of cl.4 of the agreement of 23 March 2000 to give an instruction to "the trustee". He found that the instruction bearing date 15 June 2000 was not given to Mr. Ben-Shahar at that time, but most likely after 8 May 2001; and that Mr. Ben-Shahar was not in any event the trustee referred to in the agreement. 84 He also found that there was an implied term of this agreement that Mr. Siev would transfer, or take such steps as were necessary to cause a transfer of, his holdings in ICM and Belix to Mr. Magid on payment of the first instalment; and that Mr. Siev was in breach of that implied term in respect of the terms in Belix, though not the shares in ICM. 85 The primary judge found that these were breaches of conditions of the contract, giving rise to a right in Mr. Magid to terminate the contract; and that this was done by the solicitor's letter of 29 August 2001. He held that accordingly, Mr. Siev was not entitled to payment of the second instalment of $US750,000.00. 86 Having come to those conclusions, he did not consider whether or not Mr. Siev had repudiated the agreement. 87 As to the cross-claim, the primary judge held that, on return of the shares, Mr. Magid would not retain any substantial benefit from the contract, so that there was a total failure of consideration; and Mr. Magid was entitled to recover the $US750,000.00 he had paid. 88 The factual findings on which the finding of breaches was based included the following: that Mr. Siev was a very unsatisfactory witness; that Mr. Ben-Shahar was an unsatisfactory witness in the same way as Mr. Siev; and that in cases of conflict, he preferred Mr. Magid's evidence to that of Mr. Siev and Mr. Ben-Shahar. 89 On that basis, the primary judge in substance accepted Mr. Magid's evidence about the conversations referred to earlier in the outline of circumstances. 90 As regards the identity of "the trustee" referred to in the agreement, the primary judge held that there was a patent ambiguity because the trustee was not referred to by name; and that accordingly extrinsic evidence was admissible. Ultimately, relying particularly on the conversation, just before the signing of the agreement, about the need for Mr. Ben-Shahar to go to Cyprus to deal with the trustee, and having regard to Mr. Siev's perception, expressed in his letter of 6 November 2000, that the trustee was Totalserve, the primary judge held that the trustee referred to in the agreement was in fact Totalserve. He also relied on the circumstance that, in the copy of the instruction dated 15 June 2000 produced to the Court by Mr. Ben-Shahar, Mr. Ben-Shahar had crossed out the Hebrew word translated as "as Trustee", and was unable to give any believable explanation for having done so.

GROUNDS OF APPEAL 91 Mr. Siev relies on the following grounds of appeal: 1. The trial judge erred in finding that the trustee referred to in clause 4 of the agreement dated 23 March 2000 between the appellant and the respondent ("the Agreement") was Totalserve.

The trial judge erred in failing to find on the evidence before him that the trustee referred to in clause 4 of the Agreement was Aharon Ben-Shahar.

When making his finding as to who was the trustee referred to in clause 4 of the Agreement, the trial judge erred by failing to have regard to the objective facts including but not limited to the following:- 3.1 In or around June 1999, the respondent caused Calrod BV to execute a deed in which it was recited that Aharon Ben-Shahar and his partner, Sassy Omer, held shares in Interplay Software Limited on trust for the appellant and Lucian Alter and that the respondent had agreed to subscribe for shares in that company; 3.2 As at 8 June 1999, Sassy Omer held bearer shares in Dangriga Holdings Limited on trust for Lucian Alter, and the respondent was informed of that fact; 3.3 As at 8 June 1999, Sassy Omer held bearer shares in Belix Investments Corporation on trust for the appellant, and the respondent was informed of that fact; 3.4 As at 1 September 1999, Aharon Ben-Shahar held bearer shares in Dangriga Holdings Limited on trust for Lucian Alter, and the respondent was informed of that fact; 3.5 As at 1 September 1999, Aharon Ben-Shahar held bearer shares in Belix Investments Corporation on trust for the appellant, and the respondent was informed of that fact; 3.6 On or about 23 March 2000, Aharon Ben-Shahar prepared a draft trust deed which included a recital which stated that Aharon Ben-Shahar held shares in Belix Investments Corp on trust for Wisp Investments Ltd, a copy of which was sent to the respondent; 3.7 Calrod, BV, Interplay Software Limited, Dangriga Holdings Limited, Belix Investments Corporation and Wisp Investments Ltd were part of a single corporate structure through which an enterprise referred to as Romansoft proposed to conduct an on-line casino; 3.8 The agreement between the appellant and the respondent dated 23 March 2000 did not name the trustee by name, from which an inference is to be drawn that both parties were aware of the identity of the trustee; 3.9 There is no evidential basis nor logic in the finding that the respondent did not know the identity of the trustee when signing the agreement. 3.10 When preparing the instruction dated 15 June 2000, the appellant referred to Aharon Ben-Shahar as the trustee; 3.11 On 13 July 2000, the respondent sent an email to Aharon Ben-Shahar requesting an update on the agreements relative to "both companies". 3.12 By facsimile of 27 July 2000, Aharon Ben-Shahar provided to the respondent's solicitor a share transfer deed in regard to ICM Limited signed by Aharon Ben-Shahar effecting transfer in ICM's shares. 3.13 The respondent did not become aware of Totalserve until 6 November 2000; 3.14 In his facsimile dated 8 May 2001, the respondent stated that Aharon Ben-Shahar was meant to be holding, and that the appellant and the respondent knew he was holding bearer shares in Belix Investments Corporation. 3.15 In his facsimile dated 8 May 2001, the respondent did not make any complaint that the bearer shares in Belix Investments Corporation had not been transferred to him; 3.16 By facsimile of 14 June 2001 from the respondent to Aharon Ben-Shahar the respondent accepted that shares were being held (by Aharon Ben-Shahar) for the respondent. 3.17 In facsimiles from Aharon Ben-Shahar to the respondent of 24 June 2001 and from the respondent of 25 June 2001 (to Aharon Ben-Shahar) it is clear that the respondent knew that Aharon Ben-Shahar was holding Belix Bearer Shares (which the respondent had purchased from the appellant). 3.18 The respondent was informed by Aharon Ben-Shahar's on 27 August 2001 that he was holding shares sold by the appellant to the respondent and awaiting instructions from the respondent in order to transfer the shares to a transferee to be specified by the respondent. 3.19 At all times prior to filing his defence in these proceedings, the respondent acted on the basis that Aharon Ben-Shahar was holding bearer shares in Belix Investments Corporation as trustee; 3.20 The appellant gave an instruction to Aharon Ben-Shahar as trustee to transfer all the appellant's rights in ICM Limited and Belix Investment Corp in accordance with clause 4 of the agreement. 3.21 In his letter dated 28 August 2001 to Hunt & Hunt, the respondent stated that under the agreement dated 23 March 2000 that upon payment of the first tranche of US$750,000 Aharon Ben-Shahar was to transfer the authority contained in the appellant's shares in Belix Investments Corporation to the respondent or his nominees; 3.22 In their letter dated 29 August 2001, the respondent's lawyers Doron Cohen-David Cohen stated that Aharon Ben-Shahar had engaged in prima facie unethical behaviour by not transferring the shares in Belix Investments Corporation to the respondent; 3.23 In his letter dated 31 August 2001 to Aharon Ben-Shahar, the respondent stated that Aharon Ben-Shahar had a responsibility to complete the transaction for which he was paid and referred to Aharon Ben-Shahar's and the appellant's actions in not transferring the authority to the respondent; 3.24 The failure by the respondent to produce any evidence from Totalserve that is (sic) was the trustee.

The trial judge erred in finding that the appellant had not given an instruction to the trustee to transfer all his rights in ICM Ltd and Belix Investment Corp in accordance with clause 4 of the Agreement.

The trial judge erred in failing to find that the appellant had given an instruction to the trustee to transfer all his rights in ICM Ltd and Belix Investment Corp in accordance with clause 4 of the Agreement.

The trial judge erred in finding that the instruction dated 15 June 2000 by the appellant to Aharon Ben-Shahar was not given until May 2001.

The trial judge erred in failing to find that the instruction dated 15 June 2000 by the appellant to Aharon Ben-Shahar was given on 15 June 2000.

The trial judge erred in finding (in paragraph 67) that no sense could be made of the terms on which the shares were held on the basis that the subscription and shareholders' deeds were not in evidence when the fact was that both relevant deeds were in evidence (exhibit D, pages 5-66 and 128-189) and referred in paragraph 7 of the judgment.

The trial judged erred in finding (in paragraph 68) that the relevant date for determining the trustee was the date of the agreement.

The trial judged erred in finding (in paragraph 68) that the evidence of the need to go to Cyprus to deal with the trustee and that the respondent's perception that the trustee was Totalserve were the best indications of who was the trustee.

The trial judge was in error (in paragraph 70) in finding that there was a breach of clause 4 of the agreement of 23 March 2000 on the basis that Aharon Ben-Shahar was not the trustee and the trial judge should have held on the evidence that, in any event, the document of 15 June 2000 was clearly made available to Aharon Ben-Shahar as trustee at some stage in May 2001.

The trial judge erred in finding that the appellant had breached clause 4 of the Agreement.

The trial judge should have held that the appellant had fulfilled his obligations under clause 4 of the agreement.

The trial judge was in error in treating the failure (if any) by Aharon Ben-Shahar to transfer the shares as a failure of the appellant to comply with clause 4 of the agreement or with any implied obligation.

The trial judge should have held that the appellant had no obligation in relation to the transfer of the shares to the respondent other than to comply with clause 4 of the agreement.

The trial judge was in error (in paragraph 75) in finding that there was an implied term that the appellant would transfer or take such steps as were necessary to cause a transfer of his holdings and rights in ICM and Belix to the respondent upon payment to the appellant of the first instalment of the purchase price of if there was, in finding that there was a breach thereof.

Alternatively, the trial judge was in error in finding that there was a breach of any implied term (as per paragraph 75) in respect of the shares in Belix.

His Honour should have held that the only obligation on the appellant was to comply with clause 4 of the agreement.

When making his finding as to when the instruction dated 15 June 2000 was given, the trial judge erred by failing to have regard to, or not having proper regard to, section 140 of the Evidence Act 1995 and the principles in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449.

The trial judge erred in disregarding objective facts and made findings contrary to compelling inferences and incontrovertible evidence in circumstances where the trial judge allowed the demeanour of the witnesses to control his findings in the face of proven facts (see Fox v Percy (2003) 197 ALR 201).

The trial judge erred in finding that the respondent had validly terminated the Agreement on 29 August 2001.

The trial judge erred in finding that the respondent had suffered any damage.

The trial judge erred in finding that the respondent was entitled to restitution in circumstances where the trial judge found that there had been no total failure of consideration.

The trial judge erred in failing to find that the respondent was liable to pay the second instalment of US$750,000 to the appellant.

The trial judge erred in finding that the respondent was entitled to restitution of the first instalment of US$750,000. 92 The appeal raises three main issues: first, was Mr. Ben-Shahar the trustee referred to in the agreement of 23 March 2000; second, was there a breach or repudiation justifying rescission by Mr. Magid; and third, was there a total failure of consideration.

SUBMISSIONS 93 Mr. Ellicott QC for Mr. Siev submitted that it was plain that the trustee referred to in cl.4 of the agreement of 23 March 2000 was the trustee who held the shares in ICM and Belix on trust for Mr. Siev: it was that trustee, and that trustee alone, who was in a position to transfer all Mr. Siev's rights in the shares to Mr. Magid, as contemplated by cl.4. As a matter of fact, that trustee was Mr. Ben-Shahar. 94 Mr. Ellicott submitted that, as at June 1999, Mr. Magid knew that the shares in Belix were held by Mr. Omer in trust for Mr. Siev: he was then represented by Blake Dawson Waldron, he admitted that the letter setting that out was probably with Blake Dawson Waldron, and he admitted that he may have read it. It was plain that Mr. Ben-Shahar replaced Mr. Omer, and the overwhelming probability was that this occurred on 1 September 1999. Even though Mr. Magid denied giving the instruction to Mr. Ben-Shahar to act as his trustee and denied seeing the handwritten note dated 1 September 1999, in oral evidence he agreed that he was informed that Mr. Ben-Shahar was holding the shares on trust for Mr. Siev (Black 168). 95 Furthermore, Mr. Ellicott submitted, the letter of 17 April 2001 sent on Mr. Magid's behalf by the Israeli solicitor asserted that Mr. Ben-Shahar held securities in the Romansoft enterprise. Mr. Magid's fax of 8 May 2001 asserted that Mr. Ben-Shahar was "meant to be holding bearer shares"; and there were similar indications in other communications from Mr. Magid. 96 Mr. Ellicott submitted that it was not pleaded that the trustee was Totalserve; and this was not alleged in any way prior to the proceedings. There was no evidence that the trustee was Totalserve. This was never squarely put in cross-examination to Mr. Siev or Mr. Ben-Shahar. Accordingly, the finding that Totalserve was the trustee was not open: see Commonwealth Securities Limited v. South Pacific Pty. Limited [2003] NSWCA 199. 97 Although the primary judge found that the instruction bearing date 15 June 2000 was not given at that time, and most likely was not given until after May 2001, this finding, Mr. Ellicott submitted, was glaringly improbable, having regard particularly to the transfer of ICM shares that occurred in July 2000, and also the record made by Mr. Ben-Shahar and signed by him that he held 9,333 Belix shares on trust for Mr. Magid. This record gave every appearance of being made by someone acting carefully and in the ordinary course. Furthermore, Mr. Ellicott submitted, there was no complaint made by Mr. Magid about the conduct of Mr. Siev or Mr. Ben-Shahar until at least May 2001. In his communications he referred to the relevant shares as his shares, and such concerns as he had related to difficulties with Mr. Alter and Mr. Yarach, and with his wish to sell the shares on to someone else. 98 In any event, Mr. Ellicott submitted, even if this instruction was not given until May 2001, this was not a fundamental breach giving rise to a right to terminate. There was no suggestion of any significant consequences arising from any delay. Mr. Siev did substantially what was required, and there was accordingly no ground for termination. 99 Mr. Ellicott submitted that accordingly, Mr. Siev was entitled to the second payment of $US750,000.00. In so far as the primary judge relied on possible shortcomings in the conduct of Mr. Ben-Shahar, this did not amount to any breach of contract by Mr. Siev. 100 On the cross-claim, Mr. Ellicott submitted that, even if the primary judge was correct on the question of termination, Mr. Magid was not entitled to recover the amount he had paid, because there was no total failure of consideration: see Baltic Shipping Co. v. Dillon (1993) 176 CLR 344 at 350-1; David Securities Pty. Limited v. Commonwealth Bank of Australia (1992) 175 CLR 353; and Heckenberg v. Delaforce [2000] NSWCA 137. 101 Mr. Hammerschlag SC for Mr. Magid submitted that there were four issues in the case: first, in the circumstances that occurred and on the proper construction of the agreement, had Mr. Siev established on the balance of probabilities that Mr. Ben-Shahar was the trustee referred to in the agreement; second, was notice given to the trustee in accordance with the terms of the agreement; third, was Mr. Magid entitled to terminate; and fourth, if so, what damages was he entitled to? 102 On the first issue, Mr. Hammerschlag submitted, Mr. Siev failed; and the primary judge made a positive finding that the trustee referred to was Totalserve. On the second issue, the primary judge found that notice had not been given, none having been given to Totalserve and such notice as was given being given much later than required. On the third issue, the primary judge found that Mr. Magid was entitled to terminate and had terminated the agreement. On the fourth issue, the primary judge found that Mr. Magid was entitled to the return of the money paid. 103 Mr. Hammerschlag submitted that on the first issue, the primary judge's findings should stand: there was cogent material to show that the parties meant to refer to the trustee(s) in Cyprus. This was the sensible commercial interpretation, and consistent with the way the parties acted. 104 Mr. Hamemrschlag submitted that the primary judge's findings on the second and third issues followed from this finding. 105 On the fourth issue, Mr. Hammerschlag submitted that the primary judge correctly found that, subject to return of the ICM shares, there was a total failure of consideration. He referred to Rawson v. Hobbs (1961) 107 CLR 466 at 485.

DECISION 106 In my opinion, contemporary documents establish on the balance of probabilities that, as at 23 March 2000, Mr. Siev's rights in ICM and Belix were in relation to shares in those companies held by Mr. Ben-Shahar on trust for him; and plainly this was known to Mr. Ben-Shahar and Mr. Siev. In my opinion also, the circumstances and the conduct of Mr. Magid support the inference that he also knew this at that time, or at least could reasonably be taken by Mr. Ben-Shahar and Mr. Siev to have known this. 107 Further, I accept Mr. Ellicott's submission that the language of cl.4 of the agreement of 23 March 2000 suggests that the trustee being referred to in that clause is the person holding the shares the subject of the agreement on trust for Mr. Siev: the reference in cl.4 to transferring Mr. Siev's "rights in the … shares to Bob Magid" points strongly to the trustee being that person. 108 However, in my opinion the words "the Trustee" involve ambiguity. There is a patent ambiguity as to who the trustee is, even if one were to accept that the words are referring to the person holding the shares on trust. Also, there is in my opinion ambiguity, at least latent, as to whether it is the person holding the shares on trust that is referred to. The fact that Mr. Ben-Shahar was then the person holding the shares, and there appears to have been no reasonable possibility that he would cease to be that person within the 21 days when the first payment was to be made, makes it odd that his name was not inserted, if the trustee referred to in the agreement was the person holding the shares on trust. Also, in my opinion extrinsic evidence is admissible to resolve the ambiguity; and this evidence includes the conversation just prior to the agreement, referred to in Mr. Magid's evidence. That conversation, which was accepted by the primary judge, points very strongly towards the trustee referred to in the clause being the trustee actually holding the reins of the business in Cyprus. The name of that trustee was not identified at the time of the agreement, but the whole of the evidence in the case indicates plainly that this was Totalserve. 109 The same conversation suggests also that it was considered important that the trustee holding the reins of the business in Cyprus know that Mr. Siev was out, and Mr. Magid had come to have Mr. Siev's interest in the enterprise, as well as the interest previously held by Mr. Magid. In the events that happened, it turned out that this was indeed important. When Mr. Magid had difficulties dealing with Mr. Alter and Mr. Yarach, he was unable to exercise any influence on the conduct of the business and the application of the funds of the business through the people in Cyprus, notably Mr. Fouttis and Ms. Moniati, these being the people who had Romansoft's books and control of Romansoft's bank account or accounts. Furthermore, when subsequently Mr. Magid arranged with Mr. Alter for repayment of his loan, full repayment was prevented by Mr. Siev giving instructions to Mr. Fouttis. Had Mr. Fouttis been made aware that Mr. Siev was out, and that Mr. Magid had the benefit of Mr. Siev's interest in the enterprise, it could be inferred that this would not have happened. And in September 2001, Mr. Fouttis and Ms. Moniati would not give Mr. Magid information about Romansoft and Belix: it is true that by then, on Mr. Magid's case, he was not entitled to this information, because he had terminated the agreement; but on Mr. Siev's case, Mr. Magid still owned the shares in Belix, and so was entitled to the information. 110 In my opinion, it can be inferred from the conversation to which I have referred that the intention of the parties was that Mr. Siev would, through Mr. Ben Shahar, give notice to the trustee in Cyprus that Mr. Siev's interest had been transferred to Mr. Magid. The question then is, is this, together with the other matters I have referred to, sufficient to support the primary judge's finding that the trustee referred to in cl.4 of the agreement of 23 March 2000 was this Cyprus trustee, that is, Totalserve. 111 It is true that the words in cl.4 "instruction to the Trustee to transfer all [Mr. Siev's] rights in the above shares to Bob Magid" do not fit comfortably with the idea that the effect of the instruction was that the trustee should, rather than transfer the rights, give effect to the transfer of those rights, by acting on the basis that Mr. Magid replaced Mr. Siev as owner of the rights. However, the document was handwritten on the spot, and in my opinion it was open to the primary judge to hold that the conversation, just before the document was signed, indicated that the trustee was the Cyprus trustee, and also that this indication prevailed over any contrary suggestion arising from the language of the document itself. 112 The primary judge did not explicitly reason in this way, and in some places appears to have based his decision partly on a view that Totalserve was trustee of the shares, and thus could and would itself carry out a legally effectual transfer of rights in the shares. However, in other respects, the reasons given by the primary judge for finding that Totalserve was the trustee referred to in cl.4 were valid reasons; and I do not think the words suggesting a view that Totalserve was trustee of the shares are sufficient to vitiate the primary judge's reasoning. 113 There is no substance in Mr. Ellicott's submissions that a finding that Totalserve was the trustee was not open on the pleadings, evidence or conduct of the case. In my opinion, it was plain from the pleadings and from the witness statement of Mr. Magid that Mr. Magid was seeking to make out a case that the trustee referred to in cl.4 was the Cyprus trustee referred to in the conversation that took place just prior to the making of the agreement. 114 In those circumstances, in my opinion Mr. Siev's contention that the primary judge's finding of breach of cl.4 should be overturned has not been made good. My view is, as already suggested, that in all the circumstances this was a very significant breach of contract, and in my opinion it was breach sufficiently fundamental to give a right to Mr. Magid to terminate the contract. 115 As regards the primary judge's finding of fact that the instruction to Mr. Ben-Shahar dated 15 June 2000 was not given at that time, but most likely given after 8 May 2001, this was a finding substantially dependent on the primary judge's findings concerning credit, which are not shown to be in error. There is in my opinion no appealable error in relation to this finding of fact. However, I would add that this finding was not necessary to the basic decision of the primary judge, which I have already indicated should be confirmed. 116 As regard the primary judge's holding that Mr. Siev was in breach of an implied term to transfer or cause the transfer of his holding in Belix to Mr. Magid, I note that the agreement concerned the sale by Mr. Siev of "all his holdings and rights of any kind directly or indirectly" in ICM and Belix to Mr. Magid. Plainly, that agreement required Mr. Siev to transfer or cause the transfer of all those rights to Mr. Magid: this is not a term implied for business efficacy, but a clear implication of the express terms of the contract. It was submitted in effect that, even if Mr. Ben-Shahar as trustee failed to carry out and give effect to a direction that the shares were to be held on trust for Mr. Magid, nevertheless Mr. Magid had received all Mr. Siev's holdings and rights of any kind, in that by virtue of the direction given to Mr. Ben-Shahar he had the same equitable right as Mr. Siev had previously had. However, in my opinion, there is a substantial difference between the equitable interest of a beneficiary which a trustee fully recognises and gives effect to, and the equitable interest of a transferee from that beneficiary which the trustee does not recognise and give effect to. In the former case, there is full beneficial ownership, while in the latter the transferee's rights are more in the nature of a right to bring legal proceedings to compel a reluctant trustee to comply with the trust. 117 Furthermore, as pointed out by the primary judge, not only did the trustee in this case not recognise and give effect to Mr. Magid's rights, but Mr. Siev and the trustee attempted to dilute those rights by bringing about a situation where Mr. Magid did not control Belix and thereby have control of 50% of Veline, but had control only of 47.5% of Veline. In those circumstances, in my opinion the primary judge's holding that there was a breach of contract in this respect also should be upheld. 118 There was some suggestion in argument that there was also repudiation by Mr. Siev by reason of his instructions to Mr. Fouttis not to repay the loan from Mr. Magid. Repudiation of this kind was not found by the primary judge, and was not the subject of a Notice of Contention or written submissions. I do not think this is a matter that Mr. Magid can in the circumstances rely on in this Court. 119 It follows from the above discussion that there was an effective termination of the agreement by the letter dated 29 August 2001 from Mr. Magid's Israeli lawyer. In my opinion this means that Mr. Magid was relieved of his obligation to pay the second instalment of $US750,000.00, and would at least have been entitled to damages. The question is, do those damages amount to $750,000.00, or is Mr. Magid otherwise entitled to recover the $US750,000.00 which he paid. 120 In my opinion, this was plainly an agreement where steps were to be taken before final completion of the agreement by payment of the second instalment of the purchase price. Those steps included payment of one half of the purchase price, and the instruction to "the trustee" to transfer all Mr. Siev's rights in the shares to Mr. Magid. In my opinion also, unless and until all Mr. Siev's rights and holdings in ICM and Belix were effectively transferred to Mr. Magid, all steps taken in part performance of the agreement were conditional on substantial compliance with this requirement. Certainly, in my opinion, the payment of one half the purchase price was not a mere deposit, but rather part payment conditional upon effective transfer of these rights in ICM and Belix taking place. 121 However, I accept that once an effective transfer of these rights had taken place, the payment of the first one-half of the price became unconditional and Mr. Siev's rights in relation to the shares were replaced by an unconditional right to be paid the remaining one-half of the purchase price. 122 So the first question is, at the time of termination, had there been substantial compliance by Mr. Siev with his obligation to effect a transfer of his rights in ICM and Belix to Mr. Magid. 123 There was compliance in respect of ICM. In respect of Belix, Mr. Siev had, by the document bearing date 15 June 2000, instructed the trustee holding his Belix shares to transfer his rights in those shares to Mr. Magid; but in my opinion, that fell short of an effective transfer to Mr. Magid of all Mr. Siev's rights in Belix. As mentioned above, the trustee did not give effect to the instruction and recognise Mr. Magid's rights in the shares; and Mr. Siev and the trustee attempted to dilute those rights. In my opinion also, the failure of Mr. Siev to ensure that Totalserve was informed that Mr. Siev was out of the picture and that Mr. Magid was unconditionally and fully entitled to the whole of Mr. Siev's interests were also an element of a failure to effectively transfer Mr. Siev's rights in the shares. Particularly in circumstances where transactions are being carried out in different countries by persons acting on instructions from other persons they believe to be entitled to give those instructions, the mere right to bring legal proceedings is in my opinion very different from full and effective transfer of rights. 124 For those reasons, in my opinion there was never compliance with Mr. Siev's obligation to transfer the Belix shares such as to make the intermediate steps that had been taken unconditional. Accordingly, in my opinion, on valid termination, Mr. Magid was obliged to undo so much of Mr. Siev's performance as had conditionally been carried into effect, that is, to disclaim any interest in Belix and to return the ICM shares; and Mr. Siev became obliged to return the part payment. I note that, even if the part payment had been expressed as a forfeitable deposit, any attempt to keep it would have been subject to relief against forfeiture. 125 The unravelling of a partly completed contract could require the application of equitable principles, and may not be permitted in circumstances where substantial restitutio integrum is not possible. In my opinion it is plainly possible here. As found by the primary judge, there was no benefit to Mr. Magid in having the ICM shares and some rights connected with the Belix shares for the period which he had them, and there is nothing received and retained by Mr. Magid that would prevent the case from being regarded as one where there was a total failure of consideration. I think this result is consistent with Rawson v. Hobbs. 126 I do not think Baltic Shipping is against this. At pp.350-351, Mason CJ was dealing with a contract which had been incompletely performed, where the innocent party received and retained a substantial part of the benefit; that is, not with a case where a conditional receipt of a benefit is reversed and no substantial benefit is retained. 127 Accordingly, in my opinion Mr. Magid is entitled to the judgment he received on the cross-claim.

CONCLUSION 128 For those reasons, in my opinion the appeal should be dismissed with costs. 129 STEIN AJA: I agree with Hodgson JA.

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