Toumazou v Toumazou and Ors [2002] VSC 258

11. The husband and the wife were divorced on 5 March 1998. The proceeding before me can in a broad sense be characterised as it was by counsel for the plaintiffs as a "commercial divorce". If the proceeding is so characterised it can be observed that it is not brought on a "no fault" basis; it is founded in allegations of breach of contract with respect to a complex series of agreements, and is further founded in allegations of misrepresentation, forgery, misleading and deceptive conduct, fraud, unconscionability and unjust enrichment.

14. There are two plaintiffs and 10 defendants, although the eighth defendant has been deregistered and the proceeding discontinued against it. The parties and their relationships are summarised in the following table:

Ex-husband of firstnamed Defendant. Sole director of secondnamed Plaintiff.

Trustee of the K & V Toumazou Family Trust, successor in that role to TVK Homes Pty Ltd.

Brother-in-law of the Wife, married to sixthnamed Defendant.

Company formerly controlled by Husband and Wife, now by Georgiou.

Company formerly controlled by Husband and Wife, now by Georgiou.

Company controlled by George Constantinou, cousin of the Wife and married to a cousin of Georgiou.

20. At the date of the relevant transactions TVK was the trustee of the K & V Toumazou Family Trust. TVK was the principal vehicle for the business activities of the husband and the wife.

23. TVK was deregistered on 26 February 1997. The secondnamed plaintiff seeks to sue as successor to TVK as trustee of the K & V Toumazou Family Trust. It was so appointed pursuant to the trust deed on 15 January 1987 (Exhibit B).

26. A vesting order is also sought pursuant to s.51(2) of the Trustee Act 1958, to ensure the secondnamed plaintiff's right to sue. I will return to this matter in due course.

29. The structure of the companies associated with Georgiou was that Larnaca Holdings Pty Ltd ("Larnaca") was the major operating and trading company. The other companies associated with Georgiou including Grenadier Tower Pty Ltd ("Grenadier"), Jelena Close Pty Ltd ("Jelena") and Thalasian Enterprises Pty Ltd ("Thalasian") were trustees of discretionary trusts which ultimately distributed their profits to entities associated with Georgiou and/or engaged Larnaca to act on their respective behalves for a management fee or other fee for services.

32. There is a relatively complicated disagreement as to the characterisation of and detail of a whole series of transactions between Larnaca and TVK. Ultimately, however, that disagreement crystallises in a dispute concerning mortgage documents purportedly executed by TVK or signed by the husband and the wife on behalf of TVK on 6 May 1996. Pursuant to one of these mortgages, TVK granted a mortgage to CTS Homes Pty Ltd ("CTS") over land at Eldale Avenue, Greensborough with respect to a loan of $100,000. On the same date TVK also granted a mortgage over the same property to Larnaca securing a loan of $184,359.27 and the husband and wife also signed a variation of mortgage on behalf of TVK increasing this sum by $10,000.

35. The position of the parties can be summarised as follows:

(a) The secondnamed plaintiff claims monies for loans and for alleged misrepresentations relating to loan transactions in respect of what are referred to in the pleadings as:

* the first loan to Georgiou

* the Reveneski (sic) loan

* the second loan to Georgiou

* the Tuckers Road agreement

* the Poppies Court loans

* the Panache loan

* the $30,000 loan

* the Georgiou holiday loan

* the Main Road loans

* the $70,000 loan.

(b) In the alternative these claims are put as claims for unjust enrichment;

(c) The defendants deny a variety of the alleged elements of the above transactions, but their principal defence is that the above alleged loan transactions are properly characterised as and reflect reductions of indebtedness by TVK to Larnaca and other entities associated with Georgiou. Further the execution of the mortgages by TVK evidenced and acknowledged the reconciled position of the parties at the end of the relevant transactions;

(d) The secondnamed plaintiff also makes a quantum meruit claim with respect to the alleged supply of materials for and work and labour done with respect to a house at Osset Street, Sorrento;

(e) The defendants deny (inter alia) that the materials were supplied by the secondnamed plaintiff and say they were paid for with monies to which the defendants were beneficially entitled, they deny that any work was done pursuant to any arrangement for reward, and they deny that the quantum of the claims has been established;

(f) The plaintiffs claim that the Eldale Avenue mortgages were not executed on behalf of TVK but were forged, alternatively they are void by reason of the doctrine of non est factum, further and alternatively they were procured by unconscionable conduct or procured by misleading and deceptive conduct;

(g) These allegations are denied;

(h) The plaintiffs claim that the wife and/or Georgiou and/or Georgiou's wife wrongfully caused to be lodged with the Australian Securities Commission purported resignations of the husband as a director of Grenadier and Jelena, and purported transfers of the husband's shares in Grenadier and Jelena to Georgiou. The husband asserts that the relevant documents purporting to bear his signature were forged;

(i) The matters alleged concerning the removal of the husband as a director and shareholder of Grenadier and Jelena, the alleged forgery of the mortgages and the procuring of the last mentioned loan (the "$70,000 loan") are said to have constituted a conspiracy to defraud the husband and TVK;

(j) The defendants say that the husband himself executed the relevant company documents and expressed a desire to have nothing to do with companies associated with Georgiou. They deny the alleged conspiracy to defraud.

(k) The thirdnamed defendant counterclaims the balance owing pursuant to the mortgage to Larnaca being $55,562.84 together with interest under the mortgage.

41. It can be seen that putting aside the quantum meruit claim and the claim with respect to resignation of directorships and transfer of shareholdings, an evaluation of the validity of the Eldale Avenue mortgages is critical both to the claim and counterclaim with respect to loan transactions, and to the claims of forgery, fraud, non est factum, unconscionable dealing and misleading and deceptive conduct.

44. It is appropriate to record that although English was not the first language of those who gave evidence before me, and the names of some of the corporate parties reflect a Greek Cypriot heritage[2], nevertheless all the parties had lived in Australia for many years. The sense of the evidence given was clear and in those instances when I had doubts the witness understood a question or I did not find the answer intelligible, I sought clarification of the evidence.

48. I find as a fact that the sum of $184,359.27 comprised in the mortgage to Larnaca was the product of a purported precise reconciliation of amounts outstanding between the parties calculated by Georgiou and presented to the husband prior to the execution of the mortgage. Likewise the amount of the variation namely $10,000 was also the product of a precise calculation. Exhibit 54 comprises a handwritten calculation which was produced before me in original and copy form from the records of Georgiou and TVK respectively. It was Georgiou's evidence (which I accept) that this document was both provided to the husband prior to the execution of the Eldale Avenue mortgages and discussed at the time of execution of such mortgages. Exhibit 54 states as follows:

54. It is the defendants' case that the mortgage and variation to Larnaca completed or settled an account stated whereby TVK, the husband and the wife acknowledged the net indebtedness of TVK to entities associated with Georgiou as at the date these documents were signed. The intention of the parties was that the disparate prior transactions in which they were involved would merge in the mortgage loan agreements. An account stated in the relevant sense of an account settled was explained by Brennan J in Bank of New South Wales v Brown:[3]

"An account stated may take either of two forms (per Jordan CJ in Commonwealth Dairy Produce Equalization Committee Ltd v McCabe (1938) 38 SR (NSW) 397 at 401). The two forms are explained by Viscount Cave in Camillo Tank Steamship Co Ltd v Alexandria Engineering Works (1921) 38 TLR 134 at 143: 'The expression 'account stated', as Mr Jowitt pointed out in his able argument, has more than one meaning. It sometimes means a claim to payment made by one party and admitted by the other to be correct. An account stated in this sense is no more than an admission of a debt out of court, and while it is no doubt cogent evidence against the admitting party, and throws upon him the burden of proving that the debt is not due, it may, like any other admission, be shown to have been made in error. This is the plain result of the authorities, such as Perry v Attwood (6 E and B, 691) and Laycock v Pickles (4 B and S, 497). Where the transaction is of this character, it makes no difference whether the account is said to be stated or to be 'stated and agreed'; the so-called agreement is without consideration and amounts to no more than an admission. There is a second kind of account stated where the account contains items both of credit and debit, and the figures on both sides are adjusted between the parties and a balance struck. This is called by Mr Justice Blackburn, in Laycock v Pickles, supra, a 'real account stated', and he describes it as follows: 'There is a real account stated, called in old law an insimul computassent, that is to say, when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side. It is then the same as if each item was paid and a discharge given for each, and in consideration of that discharge the balance was agreed to be due'.' Mr R M Jackson, in The History of Quasi-Contract in English Law (Cambridge, 1936) p.110, describes the former kind of account stated as admissions, the latter as contracts: 'The latter [he observes] should be discussed within the body of contract law, perhaps the most convenient place being in proximity to Accord and Satisfaction'."

58. The husband seeks to avoid the effect of the mortgage documents by asserting that although he agreed to sign a loan agreement with CTS, he did not agree to sign any mortgage, nor did he in particular execute a mortgage to Larnaca on behalf of TVK. Before addressing this fundamental aspect of the dispute, I should observe that the calculations reflected in the mortgage documents prepared on behalf of Georgiou were not generous to the husband. They were calculations made by a man who had dealt with banks through a recession and who was seeking to secure the interests of his family. They included sums paid for motor car repairs, home painting and other domestic matters. They also included monies advanced by Georgiou to TVK on behalf of Georgiou's mother-in-law. As Exhibit 54 indicates, they included matters predating 4 October 1995 which had not been included in a statement of that date. If I were not satisfied that the mortgages in effect rolled up, reconciled and settled the prior accounts of the husband and TVK on the one hand with Georgiou and all family entities associated with him on the other hand, I should have some difficulty in determining firstly, whether the domestic category of transactions (particularly those involving smaller sums of money) were properly to be regarded as loans or gifts, secondly, whether they involved TVK at all, and thirdly, whether Larnaca should now be regarded as standing in the shoes of other entities.

61. It follows that a critical question of fact in this case is whether the mortgage documents were in fact executed by and on behalf of TVK, and in particular whether they were signed by the husband, or as he asserts whether his signature which appears on them is a forgery.

64. The particulars subjoined to paragraph 59 of the Further Amended Statement of Claim before me allege that Georgiou told the husband that two papers which he signed were respectively to acknowledge the loan to TVK by Kyriacou and/or CTS Homes, and to record the state of the loan account between the fourthnamed defendant, Grenadier and TVK. It is alleged Georgiou also said that Anthony Pandelli, accountant, would complete the paperwork for the latter in order to balance the books. It is alleged that the two papers signed were each "signing clauses but were not attached to or part of any other document."

67. At p.81 of the transcript, the husband's evidence is recorded as follows:

"My ex-wife she did organise an appointment behind my back with the accountant, Anthony Pandelli, and when I went home after work she says to me we have to go to Pandelli, Pandelli need us to talk something. I went to Anthony Pandelli, the accountant, and then Anthony Pandelli, he did raise up to me and he says to me we are all agreed, Georgiou, Fraser, Anthony Pandelli, P. Pandelli, the solicitor, and David Phillip, we done some corruptions (?) and you have - we give you $300,000 and you send yourself bankrupt, you leave your place, and we give you $300,000 to send yourself - to send the company bankrupt and then Pandelli says to me I guarantee you, I'm gonna fix your papers, we can default the tax, default the bank where they borrow the money, we have done it with National Australia Bank and you got nothing to lose, and I did say no. My ex-wife, she argued, she start screaming, I'm gonna leave you, I'm gonna take the kids and I got all my family behind to back me up and then on the way home we had the kids, I had the call of Mr Georgiou, he says to me I'm here, I come home, I didn't know where you was at and I stayed with the kids until you come back. When we went back and my wife she knew - I believe she knew Georgiou, Leon Kyriacou and George Constantinou, her cousin, was there, they start forcing the issues on me, you're gonna have to do it, you have to do it, otherwise I'll divorce you and you're gonna listen what Georgiou - Georgiou was there and he put - he says to me at the end after a big fight, I was on my own, the kids they was there, I didn't want to hurt my kids, I didn't want the kids to see any argument with the mother or whatever and I stopped screaming and then Georgiou says, Leon Kyriacou is getting invalid pension and if you - you have to sign an agreement - he did give you the $100,000 over to CTS and he says to me we have to sign an agreement to take it to Pandelli to fix the accounts, which is the accountant. And that's what he put in the agreement, one agreement in front of me, and I signed the agreement but definitely there wasn't any mortgage or anything."

71. It is to be observed that this account does not refer to the execution of two pieces of paper as pleaded but rather to the execution of one agreement. It does, however, assert that no mortgage was signed. A similar position was taken at the conclusion of re-examination (tp.468). Although an arguably different position was expressed in cross-examination (tpp.407-409).

74. I further observe that the primary mortgage documents relied on by the defendants each consist of 1 sheet of paper executed on the reverse side. These documents are entirely inconsistent in form with the pleading of forgery made in the Further Amended Statement of Claim. They are also on their face entirely inconsistent with the plaintiff's evidence that he signed one document only which was not a mortgage.

77. The husband's account in cross-examination of the manner in which he signed the relevant documents was blatantly exaggerated and unconvincing:

"And you say he produced some documents, pieces of paper?---Agreements, that's what I said. Were they two single pieces of paper - what did they look like to you?

---I did say it's a photo - it's a paper like the copy A4. Just an A4 sheet of paper - just like a blank piece of paper like that?---It look like a transfer of land. So it had writing on it?---It had some writing on it - the paper. There was typed up writing on it?---Yes. And then there was a provision for someone to sign?---No, we had an argument, I said, and after the argument - I can't remember what was and that's what I said the paper how it was and I say I did sign an agreement. What I am asking you, sir, directly is what Mr Georgiou told you at the time you signed that piece of paper or those two pieces of paper?---Definitely wasn't a mortgage. He told you that it definitely wasn't a mortgage, is that your evidence?

---He hasn't told me, he was arguing with me to do what he want. Mr Toumazou, what did Mr Georgiou say to you at the time you signed those documents?---He was arguing, he's gonna go in gaol and I had to do what he has - what he wants me to do. So he said to you that he would go into gaol if you didn't sign the documents, is that your evidence?---Yes. That's the first time you've said that, isn't it, Mr Toumazou?---You haven't asked me and I haven't said. Nobody else has asked you?---About what? In the history of this proceeding when you've put your case to your lawyers, nobody else has asked you what Mr Georgiou said to you at the time that you signed those pieces of paper?---I said we had an argument and he was talking and he wants to fix it the way he wants it because he got problems and he's gonna go - he facing gaol, that's all."

81. As to the statement, "It look like a transfer of land", I note that the written opening on behalf of the plaintiffs stated at paragraph 5:

"The husband did sign a document which Georgiou put in front of him. It was a very emotional meeting and the husband did not pay attention to what he was signing. He is sure that it was not a Titles Office form." (My emphasis)

85. The execution of the relevant mortgages was directly attested to before me by four witnesses including the wife, each of whom the husband accuses of conspiring against him. I have formed the view that the mortgage documents were executed by the husband and the wife on behalf of TVK (as the four witnesses attest) and that they were intended to and did reconcile the financial position between the parties. At the relevant date the husband and wife were experienced in property transactions and the nature of the documents executed was patent. I accept that at the time of the meeting at which the husband signed the documents he was emotionally affected but I do not accept that he did not understand the nature and contents of the documents he signed as one of TVK's directors.

88. The husband acknowledges only that element of the mortgage transaction which is consistent with his own case. He denies those elements of the transaction which are inconsistent with his case. This reflects a broader pattern in his evidence which was to convey a generally consistent account of events but to omit events inconsistent with his own case and refuse to acknowledge the validity of any documents inconsistent with that case. (An obvious example is his evidence as to the loan agreement with Leon Kyriacou tp.79).

91. At the conclusion of the defendant's case I gave leave for the husband to be recalled to give further evidence. The last answers he gave in cross-examination included the following:

"When you received the money from CTS or Mr Kyriacou it was in May '95 - it was at or about that time that you had this discussion with Mr Georgiou, was it?---To do the account? Yes?---Yes, we have several occasions then he was running for money and I remember the time when he says to me, when he finish he says to me, we can't do it, we can't do everything before one year - after one year when he finish with the agreement with the bank. So that's when I say in May '95 because it was close - the agreement with Georgiou was finishing the year after he make the agreement with the bank and that's where I make the - I ask him to go to the accountant, we go take the books to the accountant because he had the books, he had the TVK accounts of Bank of Melbourne and I was asking - he had the Grenadier Tower because he was signature on the account, we have the cheques signed and everything, and he has to go there to say where this money's gone and where and put everything into the accountant to do the account and after that that's when he start, when he start his - his construction on his own house, that's when we come to argument. Then his daughter and the brain haemorrhage and then everything start - back in February, everything start back in February with all the account - all the accountant, the solicitors, and everybody was dealing and nobody give me an answer, I was running to them and everybody chasing my - I believe my ex-wife, she had the meeting - they had the meeting all of them at the hospital because Georgiou was staying in the hospital with his daughter and his wife. My ex wife, the only thing when I was seeing my ex wife, she was - I would see her when she was coming home to pick up the kids, cook and take the food to the hospital, full plates of food to feed Mr Georgiou and his family when he was in the hospital to have a meeting. And the other thing that was happening there, Georgiou given written orders to all his family, nobody can go to the hospital to visit Linda without calling Georgiou and get permission from him who is going to go to the hospital and who is not going to go. So I didn't have any - I didn't have any chance to have any conversation with him or whatever. The only thing, in February 1996 I went to Mr Pandelli and he says to me, I had the accounts, $200,000 on bills and all the borrowings was under TVK and K & V Family Trust and Mr Pandelli says to me, it's good to pay less interest, you make housing loan, which we did take a housing loan in March 1996. And as I understand now what all the evidence coming out, the housing loan it was for the bank to move in the house and do what they had to do with the mortgages. That's all I understand what the intention was from all of them. And from there on, after my ex wife leave, everybody all in the papers, putting my children, calling me at 10 o'clock at night, telling me 'You're an arsehole', sorry about my words but you did ask me and I have to say my story too and what they did to me and what I been through, telling me I'm an arsehole and I can hear Georgiou's words telling him off, I was jumping up and down so they can make me getting upset to go make a damage or do something wrong so they can get me with the police. They put me involved with the police, they done all such a things which not a human being he can go through it. We did try several occasions with the solicitor, the solicitor send in the letters, not answered of nobody and everybody was working and getting the papers. And one day on the inspection when we had with Mr Constantinou, Mr Fraser did send a letter Georgiou had the TVK books and he says he (indistinct) him for the TVK books, everything was in Georgiou's hand. From there on, Georgiou had a meeting, he was calling the tradesmen, he was calling all the people, he was pushing me off the work. I can't believe what's happening, why he done all this, a person which is totally was (indistinct) and destroy my ---"

95. The thrust of this evidence was clearer with the benefit of oral emphasis than perhaps it is in transcript. In my view this evidence and the husband's evidence as a whole demonstrate delusions of persecution. I accept that he has convinced himself by way of self-justification as to the general truthfulness of the version of events which he has given in evidence. I find, however, that he deliberately and untruthfully embroidered a number of the answers he gave to questions asked of him in cross-examination. In summary I do not find him a credible witness and I am not prepared to accept his evidence in preference to that of the defendants as to the fundamental character of the course of dealings between them.

98. Following the separation of the husband and wife the husband executed a Deed of Appointment whereby he purported to have himself appointed as trustee of the K & V Toumazou Family Trust (Exhibit 15). This Deed purported to covenant as follows:

"The new Trustee covenants that he has not received a benefit of any kind whatsoever out of or in connection with the trust."

The document corroborates the view that the husband was at the very least not careful in what he stated at the time of and after the marriage breakdown. At worst he was deliberately dishonest. I have formed a similar view as to much of his oral evidence before me.

103. The probability of the conclusion that the husband knowingly signed the mortgage documents is further supported by a series of specific considerations.

(a) The mortgages were executed after some months of serious disagreement between the husband and the wife over financial matters and in the context of potential separation. I accept that the financial position of TVK was a matter of genuine contention between them. The mortgages were intended to define the position as between family entities. They were also intended to give security to the wife's family members;

(b) The evidence of Leon Kyriacou as to the mortgage granted to CTS in May 1996 is entirely credible. He states that on 10 May 1995 he agreed to loan $100,000 to TVK at the husband's request. This agreement is directly corroborated by an acknowledgment of loan document (Exhibit 39). The money was paid pursuant to the agreement by CTS on behalf of a family trust for Leon's children. He further states that it was Georgiou's suggestion that the loan subsequently be secured by a mortgage, and that he, his wife, Georgiou and Georgiou's wife, George Constantinou, the husband and the wife were all present when Georgiou explained to the husband and the wife that the mortgage to CTS was to secure the $100,000 loan which CTS had advanced and the other mortgage was to protect loans made by Georgiou and his company Larnaca. He says both the mortgages were signed in the presence of all seven parties at the kitchen/family room table in the husband and wife's home;

(c) The evidence of the other witnesses is very matter of fact, particularly as to the manner in which the essence of the transaction was discussed. Maroulla Georgiou said:

"Everybody signed around the table and in the end Ken [the husband] just threw the mortgages like that and said to Michael, 'Here, when you want to sell my house?' Michael said to Ken, 'I'm not selling your house, we have to do this to - to protect our money and uncle's money too'."

(d) The production of both the original of Exhibit 54 from the records of Georgiou and a copy from the TVK file which the wife asserts was kept by the husband, corroborates the process of the settling of accounts for which the defendants contend;

(e) The original mortgage documents are in a very clumsy form for forgeries. In particular, the mortgage to Larnaca is constituted by the original mortgage document and a variation to this document. The original mortgage document is formally sealed by the company but the variation is simply signed for and on behalf of the company. One might ask why if Georgiou did forge these documents he would not simply have forged one mortgage document for the full sum purportedly executed on behalf of TVK;

(f) The original mortgage documents were stamped and lodged at the Office of Titles on the day after they were allegedly executed;

(g) Georgiou completed the residential unit development at Eldale Avenue and in particular completed substantial drainage works in order to obtain a certificate of completion enabling the premises to be onsold. The evidence as to his course of actions is of logically consistent and reasonable conduct;

(h) No proceedings were taken on behalf of the husband or TVK to restrain the mortgagee sale of the properties. Further there is no record of allegations of forgery being made on behalf of the husband or TVK at this time;

(i) The evidence as to loan transactions between the parties as a whole, does not suggest that it was entirely unreasonable or inappropriate for the husband to settle the account at the figure stated.

(a) The husband knowingly signed the two Eldale Avenue mortgages and the variation of mortgage;

(b) The two mortgages were formally executed on behalf of TVK and the variation was signed for and on behalf of TVK (and subsequently formally executed on behalf of TVK following a requisition from the Office of Titles).

(a) The very fact of the execution of the mortgages is fundamentally inconsistent with the plaintiffs' claim, which is premised on the proposition that at the relevant date Larnaca and associated entities were substantially indebted to TVK rather than the reverse;

(b) The execution of the documents directly corroborates and evidences the fact that the husband and TVK accepted that accounts between the relevant parties should be reconciled and settled in accordance with Exhibit 54;

(c) There is an inescapable inference that the parties intended that the disparate prior transactions should merge in the mortgage loans; and

(d) TVK expressly covenanted to pay the sums comprised in the mortgage loans.

125. Before turning to other matters I should deal with the alternatives to forgery and non est factum pleaded on behalf of the plaintiffs with respect to the Eldale Avenue mortgages. The plaintiffs allege that "if (which is denied) TVK did execute the mortgages, then the conduct of CTS and Larnaca in procuring the said execution was unconscionable and the mortgages ought to be set aside in equity." I do not accept this proposition. In particular I do not accept that the husband was misled as to the character of the documentation which he signed, or that the emotions occasioned by the family context of the dispute entitle TVK to avoid the documents. Insofar as it is asserted TVK should have been allowed a cooling off period and that it should have been advised to obtain its own independent legal and accounting advice, I find that there was no obligation on the defendants to provide such a cooling off period or so advise the husband in the circumstances of this case. I find that the husband was in fact provided with Exhibit 54 prior to the meeting at which the mortgage documentation was executed, and that he had the opportunity to seek independent legal and accounting advice prior to settling the account. Indeed I find that he did consult with his accountant prior to the execution of the mortgages (although that meeting was from his point of view unsatisfactory). Further I accept that the nature of the calculations contained in Exhibit 54 was not only self-evident but discussed with him prior to the execution of the mortgages. I do not accept that the circumstances of this case are analogous to those in Garcia v National Australia Bank[4]. Lastly, it is to be observed that the husband was only one director of TVK and the execution of the mortgage documents was done by agreement between all directors (and indeed shareholders). For the above reasons the claim with respect to unconscionable conduct and the further alternative claims with respect to misleading and deceptive conduct fail.

129. It is apparent from the evidence as a whole that both the husband and Georgiou were under substantial financial pressure following the collapse of the property market in or about 1989 and 1990. This context provides a reason for each of them to have wished to borrow money in the early 1990's, but it does not of itself enable individual transactions between them to be characterised. The context does, however, perhaps explain the tortuous nature of some of the arrangements which each of them and, in particular, Georgiou had entered into. It is also important in that it is quite clear that the husband was regarded as part of the family group associated with Georgiou in Georgiou's ongoing dealings with banks and other creditors during this period.

132. The evidence as a whole shows that Georgiou was far more experienced in property development than the husband and that the husband in effect relied on Georgiou to set up deals and arrange jobs. The husband was a carpenter and the essential business of TVK was that of a builder. Georgiou had materially assisted the husband to start out in business and through the 1980's had assisted him with a variety of business ventures. The evidence of Georgiou as to the structure of arrangements entered into was generally more credible than that of the husband and extended to frank acknowledgment of some transactions which might be regarded as sharp. In this regard, I note in particular that Georgiou was able to explain the precise calculation of certain figures in connection with specific land transactions, which was at odds with the understanding of the husband, who attributed them to other transactions but could not explain their calculation.

135. The analysis of loan transactions undertaken by counsel on behalf of the defendants can be regarded as falling into four stages of dealings. I find this the most logical framework within which to deal with the loan transactions. Before commenting on these dealings, however, I make the following further general observations as to the evidence with respect to the loan transactions:

(a) There is a series of loan documents which directly corroborate the character of disputed transactions which the defendants assert (namely loans to TVK) but which are inconsistent with the plaintiffs' characterisation of such transactions. These include:

* a series of acknowledgments of receipt of loans (some signed some not signed);

* computer generated accounts of TVK which include characterisation of relevant payments as "pay loan" (Exhibit R);

* cheque butts which are annotated with the words "pay loan".

Taken on their own some of these documents might be explained as fabrications or otherwise misleading but taken together I find that they are on the balance of probabilities strongly corroborative of the defendants' case.

(b) TVK's records were written up by the husband, the wife, their eldest son (as computer operator) and Georgiou who "helped the [husband] out" (tpp.43, 60 & 61).

(c) The fact that documents relied on by the defendants do not provide a seamless record and that there are no loan arrangement documents relating to various periods of the dealings (eg the period in which Georgiou was overseas in Cyprus) does not detract from the credibility of these documents, but rather suggests they are authentic. If they are forged, one might ask why the forgeries result in an incomplete and inconsistently documented sequence.

(d) There are absolutely no documents which acknowledge the receipt of loans from TVK to Larnaca. I would not have expected sophisticated documentation but I would expect at least some handwritten receipts of the type produced in support of the defendants' case if the husband's characterisation of transactions was correct.

(e) The husband's own case is not put squarely on the basis that he kept tabs on the financial position of TVK throughout the relevant period. Indeed, he claims in part that Georgiou and the wife misrepresented to him that $100,000 was advanced to TVK pursuant to a mortgage granted over the then matrimonial home at 23 Parklands Close, Donvale. It is implicit in this claim "The Reveneski Loan Misrepresentation" referred to in the Further Amended Statement of Claim that the husband had no detailed knowledge of TVK's bank accounts for the period of over a year during which he says he made five payments. I do not find it credible that on the one hand he says he was not aware that TVK had not received $100,000 but on the other hand he claims to have a detailed recollection of TVK's continuing financial position.

(f) The evidence of Georgiou and the wife is that Georgiou produced a series of calculations of current balance as between the parties during the course of the business dealings. These have been produced to the Court and are corroborative of the course of dealings for which Georgiou contends. The husband's evidence that no such documents were produced and his failure to produce any ongoing calculations reconciling a current balance as between the parties produced during the course of the history of the dealings, are not credible. Conversely I accept the evidence of the wife that the husband kept a red manilla folder in which he filed documents which Georgiou gave to him from time to time, recording the ongoing position with respect to loans.

(g) Throughout the period of mutual business undertakings between the parties, Mr Anthony Pandelli ("Pandelli") acted as accountant for TVK, Larnaca, Grenadier, Jelena and Panache. I accept his evidence that he reconciled the accounts of these entities on an ongoing basis. Further I accept his evidence that he was never aware of any loans being made to Georgiou or his companies by the husband, the wife or TVK.

(h) I accept that in March 1996 the husband met Pandelli at the accountant's office and at the meeting the accountant endeavoured to analyse the then financial position of the company and establish the amounts that were owed by TVK to banks and other creditors. Pandelli also sought to ascertain the value of the company's assets with a view to establishing the solvency of the company. This analysis was consistent with the characterisation of transactions for which the defendants contend rather than that of the plaintiffs.

(i) Correspondence from solicitors acting for the husband in the early stages of the dispute is not consistent with his current account of loan transactions.

141. The plaintiffs bear the onus of proof with respect to the history and outcome of the loan transactions which they have asserted. Although Mr Upjohn raised some difficult and acute questions as to the complete resolution of the history of accounting between the parties, I am not persuaded that the husband's characterisation of events is either probable or complete.

144. The first sequence of loan transactions contained in Schedule B to the Defences runs from 24 April 1989 through to 23 April 1992. At the end of this period the defendants' analysis purports to show the sum of $132,414.04 owing by TVK to Georgiou (See Exhibit 56). The defendants' case is that this sum was written off.

147. The most contentious dealing during this period relates to Lot 24 Parklands Close. Georgiou's evidence as to the arrangement pursuant to which this property was purchased can be summarised as follows. A company associated with Georgiou had purchased 5 blocks of land in late 1987 from Mel Gib Pty Ltd ("Mel Gib") a company associated with his accountant Pandelli. In early 1988 Georgiou and his wife offered the husband and the wife the following arrangement:

1. Georgiou's company would substitute the husband and wife or TVK as the purchaser in respect of Lots 7, 22, 23, 24 Parklands Close, Donvale. These lots were being purchased at below market value pursuant to an arrangement with the accountant. 2. Lots 22 and 24 would be purchased in the names of TVK and the husband and wife respectively, as trustees for Larnaca. Any profits from the subsequent resale of the two properties would be for the benefit of Larnaca. Lot 22 would be paid for by Georgiou and his wife and Lot 24 (which contained an existing house) was to be paid for with the proceeds of the husband and wife's then matrimonial home 11 Albany Way (in respect of the purchase and construction of which Georgiou had provided financial assistance to the husband and wife). It was intended the husband and wife could use Lot 24 as their home whilst they built a new home on either Lot 7 or 23. 3. After a new home had been built on either Lot 7 or 23, Lot 24 would be sold and the husband and wife would receive from the sale the amount they originally paid together with any further monies they had expended in relation to Lot 24. The balance of the sale proceeds would go to Larnaca. 4. Pending sale of Lot 24 the husband and wife would be able to use the equity in Lot 24 to provide additional working capital. Any mortgage secured over Lot 24 would be the responsibility of the husband and wife upon the sale of that lot. 5. The husband and wife could acquire Lots 7 and 23 as their own property at the reduced price which would be passed on to them by Georgiou's company.

151. The result of this alleged transaction is that Schedule B to the defences treats the amount paid for Lot 24 Parklands Close by TVK of $170,000 as a payment to Georgiou, and the amount received by TVK upon resale of the property of $305,000 as an amount received by TVK from Georgiou. In fact the first sum was paid by TVK to the vendor company after TVK was substituted for Georgiou's company as a purchaser. In turn the $305,000 was received from a third party by TVK upon resale of the property. It can be seen that Schedule B thus treats the profit on resale as though it were a loan from Georgiou to TVK.

154. It is clear that the transactions involved were undertaken pursuant to a family arrangement. In particular I note that Georgiou remained as guarantor of the original contracts for purchase from Mel Gib and that he simply substituted the husband and wife and TVK in place of his own company in the relevant contracts. Nevertheless Georgiou in effect claims $135,000 arising out of the profit on resale of a property in respect of which he had no equity and in respect of which TVK paid the entire price. The relevant arrangements were never documented, and I might have some serious reservations with respect to this claim and in particular Georgiou's assertion that no sharing of the profit on resale was contemplated. Ultimately, however, I note that Georgiou wrote off a sum which is in effect equivalent to this profit of $135,000 less selling expenses, namely $132,414.04. In evidence Georgiou said that he and his wife were prepared to do this because it was a "paper profit" (tp.538). It might also have been regarded as a profit to which in fairness TVK and in turn the husband and wife had the better claim or alternatively some claim. Nevertheless I find it unnecessary to determine this issue because Georgiou and his wife have in effect surrendered the quantum of this claim in the reconciliation of accounts presented to me.

157. The second dealing which is particularly contentious which occurred in the initial period covered by Schedule B is that involving Reveneski. Schedule B records a payment of $10,000 on 4 April 1992 by TVK to the benefit of Georgiou with respect to Reveneski. The husband alleges that Georgiou and the wife misled him in that they misrepresented to him that a business associate of Georgiou had advanced the sum of $100,000 to TVK. It is common ground that the sum of $100,000 was not advanced to TVK. I do not accept that the husband was misled as alleged. I do not accept the representation was made and I do not accept the husband would have been unaware as to whether TVK had received $100,000 from this source and would have remained unaware for a period in excess of 12 months. Further I do not accept that a number of individual payments claimed under this head were made at the direction of or for the benefit of Georgiou or made in connection with this transaction. I do not accept that the seventhnamed defendant Redata Pty Ltd remains indebted to TVK with respect to monies paid in association with this transaction. I accept the evidence of the accountant Pandelli in this regard.

160. I am satisfied that as at 23 April 1992 putting aside Georgiou's claim in relation to the transaction with respect to Lot 24 Parklands Close, the husband and TVK were effectively all square with Georgiou and his companies. Further I accept Georgiou's evidence that as at this date the "slate was wiped clean" (tp.538).

163. The next series of transactions is between 1 July 1993 and 21 February 1994. I am satisfied that the defendants' account of these transactions is corroborated by a series of loan receipts and other documents. I am satisfied that a number of the payments and in particular that made with respect to the Tuckers Road purchase of $33,047.56, and that made with respect to the Research Warrandyte Road purchase of $32,986.47 are to be characterised as Georgiou says. They are not to be understood to be associated with the Poppies Court dispute as the husband asserts. I accept that Schedule B is accurate with respect to each of the individual transactions listed. I further accept that the husband was provided with a statement which reconciled the position of the parties at the end of this period. This statement did not, however, include the full amount of interest set out in Schedule B. This statement is comprised in Exhibit 38 and is in the following form:

" TVK HOMES TO GRENADIER Loan Balance as at 22/9/93 $28,465.97 Interest at 10% = $237.22/Month 5 Months x 237.22 $ 1,186.08 Principal & Interest = $29,652.05 Amount Paid 21/2/94 by TVK To Grenadier = $30,000.00 Refund Due to TVK = $ 347.95."

167. In answer to a question from me Georgiou volunteered that when this statement was presented to the husband, the husband said not to worry about the $347.95 interest (tp.564). I doubt whether the full amount of interest claimed in Schedule B was incurred or alternatively claimed before it was agreed between the parties that their accounts were in effect again all square.

170. The Tuckers Road transaction also deserves some further comment. It was common ground between the husband and Georgiou that this transaction was initially entered into in an attempt to limit the extent to which the National Australia Bank as mortgagee recovered the full value of the property upon its resale. Georgiou ascertained that the bank would accept a sale price of $105,000 in satisfaction of a mortgage it held over the property. He also ascertained that the property could in fact be sold for a figure in the vicinity of $135,000. It was agreed TVK would purchase the property for $105,000. There is disagreement as to whether or how the profit on resale would then be shared. In the event, TVK paid a deposit but the property was in fact purchased by another company. In due course it was onsold for $125,000 and the nett proceeds were paid into TVK's Bank of Melbourne account and utilised for the construction of the Osset Street house. Curiously the husband does not assert that the full monies acknowledged by Georgiou to have been paid by TVK in respect of the purchase were in fact paid in this connection. Georgiou says that a further payment of $33,047.56 was paid by TVK on his behalf in addition to the deposit. The husband also fails to acknowledge that the deposit on resale was paid into TVK's account.

173. In the event I am not persuaded either that the terms of the agreement were sufficiently certain or that it was in fact performed by TVK, so as to entitle TVK to anything other than a credit for the monies paid by it at Georgiou's request and direction.

176. I note in passing that the arrangement originally contemplated is of the character identified by Georgiou in evidence concerning a statutory declaration given to the National Australia Bank as being "just between Ken (i.e. the husband) and me."

179. The third series of transactions is that which gives rise to the calculation of $184,359.27 comprised in the mortgage to Larnaca. In my view the principal transactions contained in the Schedule are corroborated by documentary evidence. As I have already indicated the amount in issue also includes a number of smaller accounts relating to domestic expenses and a loan from Georgiou's mother-in-law. For the reasons I have already set out I accept that the husband and TVK accepted liability for these sums upon execution of the mortgage documentation.

182. The fourth series of transactions contained in Schedule B are those which give rise to the $10,000 claim comprised in the variation to mortgage. There is no dispute as to the actual payments involved and I again accept that TVK and the husband accepted liability for the balance of $10,000 upon signature of the mortgage documents.

185. In summary although there are aspects of the defendant's accounting which are not as fully corroborated by documentary evidence as others, and although the claim ultimately contains some items which might be thought contentious but for the execution of the mortgages, I accept that at the date of the execution of the mortgages TVK was in debt to entities associated with Georgiou and that conversely entities associated with Georgiou were not in debt to TVK. The dispute in the absence of the mortgage documents would be as to the precise extent of the debt of TVK and the identity of the parties to whom such debt was owed. I specifically find that even if the relevant mortgage documents had not been executed under seal, it could not be said that there was a total failure of consideration passing to TVK in respect of the agreement embodied in the mortgage to Larnaca. On the contrary the reconciliation of accounts finalised a series of complex transactions and claims in a sum certain.

189. Grenadier was incorporated on 29 June 1992. Its initial shareholders and directors were John and Helen Kyriacou. On 17 May 1994 they transferred their shares to the husband and the wife. They also resigned as directors of the company and the husband and wife were appointed in their stead. Grenadier was a trust company involved in dealings in relation to which Georgiou had the ultimate controlling interest. In May of 1994 it purchased vacant land at Osset Street, Sorrento. Thereafter a house was constructed on this land. TVK was the registered builder with respect to this construction, but the project was managed and the job was supervised by Georgiou. The construction of the house was substantially funded through an account which TVK had with the Bank of Melbourne. It is common ground that this account was understood to be for the benefit of Georgiou and that monies in it would be applied to the Osset Street construction.[5] It was kept separate from the rest of the accounts for TVK's business. The plaintiffs now claim for monies advanced to Grenadier with respect to the construction of the house at Osset Street, for a percentage on the total cost of the job, and for monies expended on materials and sub-contractors. I am not satisfied that TVK had a claim to any of these monies. The plaintiff's claim seeks to take advantage of a banking arrangement which was put in place for Georgiou's benefit and the fact that TVK was the registered builder. It does not reflect the substance of the arrangements entered into with Georgiou.

192. TVK also claims with respect to work and labour undertaken by the husband at Osset Street. In evidence, however, the husband did not establish that this work was done pursuant to any arrangement for reward.

195. I am not satisfied that the husband has established a claim for work and labour done (see Brenner v First Artists Management Pty Ltd[6]). The gist of such a claim in the absence of a contract for the performance of work and labour is that the defendant has actually or constructively accepted the benefit of the plaintiff's services in circumstances where it would be unjust to do so without making restitution to the plaintiff (Brenner p.257). I find rather that the husband did the work in acknowledgment of the favours he had received from Georgiou in the past and in the expectation that his family would be able to holiday at the house. I accept the evidence of Maroulla Georgiou that there was a reciprocal gift of display house furniture but the whole transaction was in the nature of a balancing of family favours.

"Why hasn't Ken ever been paid for the work he did at Ossett Street?---Because he didn't want to pay. It was a favour for us. He came to help Michael to do some work together and at that time I said to Michael will you - you better (indistinct) of position, it's not fair for Ken not to pay. And we ask Ken for money, to pay some money, he said, no way, I don't need any money, I come to help you and he returned. I give the family (indistinct) to my sister, it was a lounge, dining, buffet, prints, everything, it was a full house with furniture, and I said to my sister, you keep the furniture because I don't want Ken to do something for us because we are in better financial position than you, I don't want your money. He didn't get any money because he come to help us, to do some work for us. We make so many favours to them and he wants to return the favour with one favour for us."

The Claim with Respect to Directorship of and Shareholdings

201. The husband claims an order pursuant to s.175 of the Corporations Law for the rectification of the register of members of the fourth and fifthnamed defendants. He also claims declarations that he is a director of the fourth and fifthnamed defendants and that Georgiou's wife is not a director of the fourth and fifthnamed defendants.

204. The husband asserts in paragraph 78 of the statement of claim that he did not resign as a director of Grenadier or Jelena. I am satisfied that the husband voluntarily executed the relevant resignation documents and the relevant share transfer documents. He did so because he had no beneficial interest in the activities of the relevant companies and because he wished to sever his association with Georgiou. I reject the allegation that the documents are forgeries and I reject the husband's evidence that he did not sign them (tpp.93 & 94).

207. I further note that the husband has asserted that these documents are forged at least since the affidavit sworn in this proceeding on 23 July 1997 (see paragraph 7(e)). The allegations with respect to Jelena have also been the subject of separate proceedings in this Court which were dismissed by consent on 21 August 1997 (No. 4091 of 1997). I find as a fact that the plaintiffs have failed to establish that there was a conspiracy to defraud them with respect to these transactions (as alleged in the Further Amended Statement of Claim). The repeated false allegations of forgery in connection with this transaction are totally unwarranted allegations of fraud and I regard them as being so serious as to disentitle the plaintiffs to the relief claimed in equity, even if some irregularity were established with respect to the procedures adopted by the defendants. In Armstrong v Sheppard & Short Ltd [7], Lord Evershed M.R. said:

"But there were other good grounds, and formidable grounds (as I think), for refusing the plaintiff an injunction. That he misled the defendants is beyond a peradventure. It is no less clear that he attempted to mislead the court. He asserted - contrary to the fact - that he never had any conversation with the defendants about the matter at all; and in his evidence in chief he so swore untruly. It is not, therefore at all surprising that the judge came to the conclusion that he should grant no equitable relief; and in my judgment, on the facts of this case, he was well entitled to take that view."

211. It was not in any event established before me that the resignations and share transfers were procedurally incomplete. In this regard I note the contents of replaceable rules 203A and 1072F of the Corporations Act 2001. I further observe that the relevant memorandum and articles were not in evidence before me. Accordingly despite some apparent irregularity in the relevant company minutes I decline to make the orders sought.

215. It is clear that Larnaca has not been paid all the monies to which it is prima facie entitled under the relevant mortgage.

218. Two further matters were raised in final address for the plaintiffs with respect to the counterclaim. The first is that the mortgage documents were altered after their initial execution. In particular the title details comprised in the mortgages included all the land contained in Certificate of Title volume 6697 folio 392. Prior to registration this description of title was altered and in effect reduced to two subsidiary titles relating to two lots only (formerly comprised within the larger title originally referred to in the mortgage documents). It is asserted that at the date of this alteration the wife had no power to consent to it as only one of two directors of TVK. I do not accept that this entitles the mortgagor to avoid the claim for the balance of monies due, because:

(a) This matter was not pleaded by way of defence to the counterclaim and the defendant was not given a full and proper opportunity to meet this defence.

(b) The memorandum and articles of the company were not in evidence before me and I do not accept that the plaintiffs have established that the wife's consent to the alteration of the mortgages was beyond power.

(c) Even if the effect of the alteration to the mortgages were such as to render them inoperative in terms of the creation of an interest in land they would still in my view evidence the debt which is claimed.

224. It was also argued in final address that the proposed vesting order would not enable the mortgagee to claim against the secondnamed plaintiff. It was said the claim could only be made against TVK. It was submitted:

"A creditor of a retired trustee must claim against that person, and then:

(a) rely upon the former trustee joining the new trustee, in the exercise of the former trustee's right of indemnity against the trust assets; or

(b) obtain judgment and then wind up the former trustee, a liquidator of which will then enforce the right of indemnity against the new trustee.

TVK is deregistered. The third defendant must reinstate it, and then take either of the above courses of action."

232. I note that the submissions made on behalf of the plaintiffs do not address the question whether the defendant Larnaca may be entitled to follow trust property into the hands of the secondnamed plaintiff. The relevant principle was stated by O'Bryan J in Re Wilson[8]:

"There appears to be no reason in principle why a creditor must pursue his common law rights to judgment before he will be allowed to be subrogated to the trustees' indemnity against the estate. It is one thing to refuse him an order for administration as a matter of discretion if no more appears than the fact of the debt, but if he has demanded payment from his debtor and has failed to receive payment and the circumstances are such as to lead to the reasonable conclusion that a judgment, if obtained, would be fruitless, it would be a harsh and unnecessary rule that required him first to proceed to judgment. The principle of this right of subrogation is stated in Halsbury's Laws of England (2nd ed.), vol. 13, p.189, in the following terms - 'the executor is personally liable for the debts of the business, but he has a right of indemnity against the assets of the testator's estate, so far as they are authorised to be employed in the business; the creditor, on the other hand, has no legal claim against the estate, but he is allowed in equity to enforce on his own behalf the executor's right of indemnity. He is subrogated to this right, while he retains also his legal claim against the executor.' This statement of the law, in my opinion, is justified by the authorities (In re Johnson; Shearman v Robinson; In re Frith; Newton v Rolfe). In the latter case the creditor's right of subrogation was recognised and given effect to although he does not appear to have sued the trustee at law (see also In re Bracey; Hull v Johns)."

(Citations omitted).

236. The relevant principles are further discussed in Ford and Lee Principles of the Law of Trusts, 3rd edition, at para. 14080. The usual order would, as the decision in Re Wilson contemplates, be in the nature of an order for administration. (See now Order 54 of the Rules of the Supreme Court). In McLean v Burns Philip Trustee Co Pty Ltd[9] Young J stated at 637:

"As I have said before, the trust is the creature of Equity, rights under a trust exist only because of the orders an Equity Court may make and it is to my mind inconceivable that if a matter of mal-administration or, worse, fraud were brought to the attention of the Equity Court by a plaintiff who was a creditor, the court would not act on that motion. It certainly would not send the plaintiff away with his suit dismissed with costs because of a lack of standing. Thus, one could well have the situation of a discretionary trust which was being used by its managers in fraud of creditors. This problem has raised its head recently and has been attacked in various ways. If the trustee is a company, the court may appoint a provisional liquidator who will pay the creditors, and then, if appropriate, the winding up summons will be dismissed: see Re Denilikoon Nominees (No 2) Pty Ltd and the Companies Act (1981) 6 ACLR 262, but an alternative solution, and one that applies whether the trustee is corporate or unincorporated is to put a discretionary trust into general administration. To do so would be consonant with the words of Murphy J in Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 at 372: see also Re Byrne Australia Pty Ltd and the Companies Act [1981] 1 NSWLR 394 at 398; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; the article by Ford 'Trading Trusts and Creditors Rights' in [1981] MelbULawRw 1; (1982) 13 MULR 1."

240. In the present case, however, the plaintiffs' submission strikes a threshold difficulty. The case was conducted until final addresses on the basis the secondnamed plaintiff stands in the shoes of TVK, drawing no distinction between the claim and the counterclaim. Indeed paragraph 3(b) of the Further Amended Statement of Claim specifically states that the secondnamed plaintiff "has assumed all of the rights and obligations held or owed by TVK as trustee of the trust as at 25 July 1996" (my emphasis).

243. When I drew the terms of paragraph 3(b) to the attention of counsel for the plaintiffs, he did not seek to amend it, but submitted that the pleadings did not bar the point being taken on the counterclaim. He submitted "clearly, the pleading is wrong, insofar as it refers to obligations. However, the error in the pleading is of no consequence."

246. I accept that the counterclaim does not in terms refer to and adopt paragraph 3(b) of the Further Amended Statement of Claim. I also accept that as a matter of pleading the counterclaim stands on its own (see Rule 13.15 of Chapter 1 of the Rules of the Supreme Court). It follows that as a matter of strictness the pleadings on the counterclaim may not bar the point that is now desired to be taken. The secondnamed plaintiff relies on the general denial in paragraph 17 of the Reply and Defence to Counterclaim which states:

"17. As to paragraph numbered 93 of the counterclaim: (a) it says that the allegation that Parklands is trustee of the Trust is inconsistent with the non-admission of the same allegation made in paragraph 4 of the Amended Defence; (b) it denies that it is or was at 2 August 1996 indebted to Larnaca in the sum of $55,562.80 or at all."

250. Nevertheless the plaintiffs' case on the counterclaim was conducted jointly with the case on the claim. In my opinion the secondnamed plaintiff is estopped from denying the position asserted in paragraph 3(b) of the Further Amended Statement of Claim as a result of such conduct and the defendants' reliance upon it:

(a) the position taken by the secondnamed plaintiff results in a situation where it asserts one position in the Further Amended Statement of Claim and another for the purposes of the counterclaim;

(b) the secondnamed plaintiff has sought a vesting order to facilitate the claim which includes paragraph 3(b). Indeed the chose in action in respect of which the vesting order is sought is defined by the Further Amended Statement of Claim which includes paragraph 3(b). The secondnamed plaintiff has obtained a concession from the defendants that such vesting order would not be opposed if it were necessary to the disposition of the claim on the merits. Such concession was sought by counsel for the plaintiffs. The equity of the vesting order might be said to be affected by an abandonment of paragraph 3(b) of the Further Amended Statement of Claim. The concession which the defendants made was clearly a step taken in the course of the hearing to their prejudice;

(c) the secondnamed plaintiff continues to seek a vesting order from me with respect to the claim which is pleaded to include paragraph 3(b). In my view it cannot do so and simultaneously take a position with respect to the counterclaim which is directly contrary to the express pleading of paragraph 3(b);

(d) the defendants' case as a whole was conducted in response to the Further Amended Statement of Claim including paragraph 3(b). It is not now open to the plaintiffs to resile from the position taken in this pleading.

Conclusion

256. Having regard to the view I have reached as to the claim in this matter I do not believe it is appropriate to make a vesting order, as the right in respect of which such order is sought does not in my opinion exist.

259. There will be judgment for the defendants on the claim and for the thirdnamed defendant on the counterclaim. I will hear counsel as to the question of costs of the claim and as to the appropriate calculation of the counterclaim.

262. This case unfortunately demonstrates the wisdom of the observation, "And if a house be divided against itself that house cannot stand."

[1] (1991) 198 CLR 571

[2] I note in passing that present day Larnaca is the site of the ancient city of Kitium, the birth place of the great stoic philosopher Zeno of whose ethical doctrine the Oxford Classical Dictionary records: "According to this doctrine the only real good is virtue, the only real evil moral weakness. Everything else including poverty, death, pain is indifferent. Since nobody can deprive the wise man of his virtue he is always in possession of the only real good and therefore happy."

[3] [1983] HCA 1; (1983) 151 CLR 514 at 535-6.

[4] [1998] HCA 48; (1998) 194 CLR 395

[5] cf Twinsectra Ltd v Yardley [2002] UKHL 12; (2002) 2 WLR 802

[6] [1993] VicRp 71; [1993] 2 VR 221

[7] [1955] 2 QB 384 at 397

[8] [1942] VicLawRp 40; [1942] VLR 177 at 183

[9] (1985) 2 NSWLR 623