Unique Lifestyle Investments Pty Ltd v Robertson [2005] VSC 347

INTRODUCTION

1 In this proceeding, the plaintiff, Unique Lifestyle Investments Pty Ltd ("Unique"), seeks relief, including an order that the defendant, Mr Dale Robertson, repay the sum of $2 million allegedly advanced or lent by the plaintiff in 2001 to Mr Robertson and/or his company, Riversdale and Burke Pty Ltd, now in liquidation. Although a considerably greater sum is demanded in the amended statement of claim, at the outset of the trial, Mr McCormick, counsel for the plaintiff, made clear that the plaintiff now pursued only the claim for $2 million.

SUMMARY OF FACTS AND EVIDENCE

2 Due to the defendant's election to call no evidence, evidence was led by the plaintiff only. Mr David Facione, a director of the plaintiff, Mr Lionel Sonntag, a former director, Mr Sirianni, the plaintiff's solicitor, and Ms Hyland, an investor, gave evidence on behalf of the plaintiff. Messrs Facione, Sonntag, Sirianni and Ms Hyland presented as consistent and credible witnesses.

3 The defendant, Mr Dale Robertson, was a property developer. He was a director of several companies, including Radomi Pty Ltd (subsequently called Burke & Riversdale Road Ltd) 635 St Kilda Road Pty Ltd and Rumasc Pty Ltd).

4 In March 2001, Mr Robertson was seeking investors who would be willing to provide funds for the purchase and development of a property situated at the intersection of Camberwell, Burke and Riversdale Roads, Camberwell ("the Riversdale Road land"). At that time, the Riversdale Road land was owned by Gemini Investments Pty Ltd ("Gemini") and was occupied by a Honda car dealership.

5 David Facione and Lionel Sonntag were investors residing in Sydney. They had dealt with each other in relation to previous investment transactions. Mr Sonntag controlled a finance company, I-Finance Australia Pty Ltd, which had arranged finance for some of Facione's previous investments. In February 2001, Mr Sonntag and Mr Facione established the plaintiff, Unique Lifestyle Pty Ltd ("Unique"), as the corporate vehicle through which they could acquire or conduct further investments.

6 In May 2000, Mr Facione had purchased, as an investment, a unit in the "Marquise development", a property development which had been carried out by 635 St Kilda Road Pty Ltd, another company directed by Mr Robertson. Mr Laurance Davis of Mills Oakley, solicitors, had acted for Facione in relation to his purchase of the unit. Mr Facione had expressed an interest in investing in other Melbourne properties. Mr Davis had provided Mr Facione with Mr Robertson's telephone contact details. Mr Facione first spoke to Mr Robertson by telephone from Sydney in about March 2001. They met in Melbourne approximately one week thereafter. Mr Robertson took Facione to inspect some properties, which were not of interest to Facione. Shortly thereafter, Mr Robertson telephoned Mr Facione in Sydney. He broached, in general terms, "a proposal" that might be available for a "few elite developers" and invited Mr Facione to discuss it further.

7 Facione conferred with his co-director of Unique, Mr Lionel Sonntag. Mr Robertson subsequently disclosed that the proposed site was the Riversdale Road land. On 1 April 2001, Mr Facione met Mr Robertson in Melbourne. Mr Robertson stated that he wished to purchase the Riversdale Road land on the basis that Mr Facione would provide the initial deposit and some working capital. Mr Facione stated that he could approach "a few friends" to raise the money. Mr Robertson stated that he would not contribute funds himself, but planned to obtain VCAT planning approval for the development of the Riversdale Road land, which would result in an increased value and would enable him to "refinance [the investors] out." MR Robertson wanted to settle the purchase contract in 18 months. Mr Facione said that he would get back to Robertson after speaking to Mr Sonntag.

8 Mr Robertson subsequently informed Mr Facione that the Riversdale Road land was available for purchase for $11.5 million, on 18 months terms. He said that he required immediately 1% of the deposit, which he could not fund himself. He requested Mr Facione to provide it. He stated that he planned a mixed commercial and residential development for the Riversdale Road land.

9 Mr Facione conferred with Mr Sonntag, who proposed to provide funding by means of a bank guarantee to the vendor at the Riversdale Road land, secured by suitable investors, rather than providing cash to Mr Robertson. At a meeting of Mr Sonntag and Mr Facione in Sydney on 23 April 2001, Mr Sonntag provided Mr Facione with handwritten notes setting out his requirements for the structure of any funding transaction.

10 Mr Sonntag's handwritten notes relevantly stated:

David Facione and/or nominee to be a director.

David and/or Unique not required to give guarantees.

Shareholders and Dale to give guarantees and warrantees (sic) against any claims, losses and damages.

2. Cash

1% today

3% 60 days - 90 days

Balance of $2,000,000 less A + B + Bank Guarantee to be paid to consultants as and when required.

Directors to approve payments and commitments.

Term 12 months.

Legal costs of Investor participants paid at settlement.

Interest of 30% p/a paid monthly.

Personally guaranteed by Dale and company's shareholders."

"Monies provided today on basis of general agreement signed subject to full legals. If not completed by Dale within 14 days then project reverts to Unique."

12 At trial, Mr Sonntag gave evidence that he prepared the above notes. He stated that Unique was set up for two investment projects, one of which was the Riversdale Road land development project. The notes indicated the terms he required for the investment in the Riversdale Road land development project. They indicated that a total of $2 million would be advanced for a 12 month term. It was envisaged that a part of the $2 million would be applied to consultancy, legal and accountancy fees.

13 At trial, Mr Sonntag stated that it was contemplated that a new company, of which Messrs Robertson and Facione would be directors, would purchase the Riversdale Road land.

14 On 24 April 2001, Mr Facione visited Melbourne. He met Mr Robertson and they discussed the requirements set out in Mr Sonntag's handwritten notes. Mr Facione's evidence was that after an initial refusal to give the requested security or a personal guarantee, Mr Robertson ultimately agreed to give security, as required in Mr Sonntag's handwritten notes. Messrs Facione and Robertson then met Laurance Davis at the offices of Mills Oakley. Mr Facione took Mr Davis through the requirements of the handwritten notes. Mr Facione, in the course of the meeting, agreed personally to provide the sum of $150,000, most of which was to be paid forthwith to the vendor of the Riversdale Road land as an earnest of good faith. He requested a written note to record that payment. Mr Davis dictated a short agreement, which Mr Facione wrote out by hand. Messrs Robertson and Facione signed the handwritten agreement, to which Mr Sonntag's handwritten notes were attached.

15 The handwritten agreement dated 24 April 2001 stated:

"I David Facione of 74 Arcadia Road Galston agree to deposit in the trust account of Mills Oakley lawyers the sum of $150,000 to be used for initial deposit of land being purchased at corner of Riversdale Road and Burke Road Camberwell by Dale Robertson and/or nominee in accordance with the heads of agreement between Gemini Investments Pty Ltd and Radomi P/L.

The said sum of $150,000 is not to be used for any other purpose whatsoever and is to be imediately (sic) refunded in the event of the offer to purchase not being accepted by the current owner of the property.

Further, the monies are provided on the strict condition that a formal agreement is entered into, between ourselves and/or our nominees within fourteen days of this date, which agreement will reflect the matters on the attached note.

Dated 24/04/01

[Signed] David Facione

I Dale Robertson of 84 Union Road Surrey Hills hereby accept the terms and conditions.

Dated 24/04/01

[Signed] Dale Robertson"

16 The handwritten agreement was signed by Messrs Facione and Robertson.

17 The notes prepared by Mr Sonntag were attached to the handwritten agreement and were initialled by Dale Robertson on the first page.

18 Immediately after the execution of the handwritten agreement, Mr Facione provided the $150,000 by instructing his mother by telephone to make the necessary arrangements with his bank in Sydney. At that stage, Mr Facione did not identify Unique as the nominee he intended to use. He retained the original handwritten agreement and attached notes. Messrs Facione and Robertson had a further conversation later that day. Mr Robertson said, inter alia, that he required $300,000 in working capital for the development project.

19 At trial, Mr Sonntag gave evidence that he and Mr Facione later discussed Mr Facione's meeting with Mr Robertson. On the basis that Dale Robertson had agreed on 24 April 2001 to the terms set out in the handwritten notes, Messrs Sonntag and Facione decided to instruct Argyle Partnership to act as Unique's solicitors in relation to the formal agreement, which was to be prepared. Both Messrs Facione and Sonntag gave instructions to Argyle Partnership on behalf of Unique.

20 Initially, it was contemplated that the funding would be provided by bank guarantee. Mr Sonntag made the arrangements to put that in place.

21 On 11 May 2001, the contract to purchase the Riversdale Road land ("the purchase contract") was entered into between Gemini, as vendor, and Radomi Pty Ltd, a company of which Robertson was sole director and shareholder, (subsequently called Burke & Riversdale Pty Ltd ("B&R")) and/or nominee as purchaser, for a purchase price of $11,330,000 plus GST. Under the contract, a deposit of $1,699,500 was payable. The sum of $520,150 was payable upon the execution of the purchase contract and the balance of deposit of $1,179,350 on or before 8 June 2001. The residue of the purchase price, being $9,630,500, was due on 1 November 2002 or earlier by agreement. The guarantor under the purchase contract was Dale Robertson.

22 From April 2001, Messrs Sonntag and Facione proceeded to raise funds for investment in the Riversdale Road land development project from a number of potential investors, who were known to either or both of them personally.

23 Including Mr Facione, who advanced the sum of $150,000 on 24 April 2001, the investors invested a total of $2 million between May and October 2001, as follows:

Sarina Alesci (through Flowering Eucalyptus, a company)

Alan Renshaw (through Nature Organic Plant, a company)

24 Mr Facione introduced nine investors and Mr Sonntag introduced three investors to provide funds for the project. Mr Facione explained to the investors with whom he dealt the terms of the proposed investment, including that Unique would offer a 20% return on the proposed investment with Mr Robertson and that they would also have the option to purchase an apartment in the completed development on the Riversdale Road land. Both Messrs Sonntag and Facione gave evidence that the investors loaned their investment amounts to Unique. Where necessary, Mr Sonntag's company, I-Finance Australia Pty Ltd, provided individual investors with loans to enable them to make the investment.

25 In each case, a loan agreement was drawn between Unique and the investor concerned. Mr Sonntag identified Unique's loan agreement with Ms Hyland for $200,000 as typical of the "investor" loan agreements. Ms Hyland gave evidence that she had entered the loan agreement with Unique in September 2001 in order to invest in the development project through Unique. Both Ms Hyland and Mr Sonntag gave evidence that the name "Universal" appearing on Ms Hyland's loan agreement (followed by Unique's ACN) rather than "Unique," was due to a clerical error, and that both had understood the borrower company to be Unique.

26 Mr Sonntag stated that the loan funds were not provided as a single amount. Different investors paid at different times. Mr Facione's evidence was that Klianis, Peacock and Upshall paid their contributions between 9 and 11 May 2001, and Billyard, Alesci, Coppolino, the Peacocks, Renshaw and Trieste paid their contributions between 20 and 22 June 2001. Ms Hyland made her investment in September 2001.

27 Mr Sonntag stated that some investors paid their agreed contribution in more than one tranche. The investor contributions were paid in over about a three month period. Some of the investor loan moneys were first paid to Unique, but most such moneys were paid directly into a separate trust account in the name of B&R established with Mills Oakley, the solicitors of Mr Robertson.

28 The direct payments to the Mills Oakley trust account were made because, in about late April 2001, Mr Robertson informed Mr Facione that the vendor of the Riversdale Road land now required some cash, rather than being willing to accept all of the deposit by bank guarantee. Subsequently, he informed Facione that the vendor had revised its requirements and insisted that the entire deposit be paid in cash. It was therefore necessary to abandon the arrangements for a bank guarantee. Time was of the essence under the purchase contract. The balance of the deposit, being $1,699,500, was due on 8 June 2001. The parties therefore sought an extension until 18 July 2001 in order to enable Messrs Sonntag and Facione to arrange for the remaining investors to provide cash.

29 The letter of Mills Oakley to Mr Facione dated 16 May 2001 confirmed that contributions totalling $615,000 had been received into the trust account from persons including the investors, on dates in April or May 2001. The letter detailed the payments out, including a total of $520,150 paid to the trust account of Vadarlis & Associates, the solicitors for Gemini as vendor of the Riversdale Road land.

30 The handwritten agreement dated 24 April 2001 required the execution of a formal agreement within 14 days, that is, by early May 2001. Draft agreements were prepared. The drafts were discussed by Argyle Partnership, the solicitors for Unique, and Mills Oakley, the solicitors for Mr Robertson, together with other persons including Messrs Sonntag, Facione and Robertson. By late June 2001, however, no formal agreement had been executed. In consequence, Unique did not authorise Mills Oakley to release the funds held in the trust account and the balance of the deposit for the Riversdale Road land was not paid by the due date. Mr Facione gave evidence that he had become concerned about the delays in drafting the formal agreement.

31 The letter of Laurance Davis of Mills Oakley to Mr Facione of Unique dated 20 June 2001 relevantly states:

"Dear David,

Development at Corner of Riversdale and Burke Roads, Camberwell.

As requested I confirm that all monies deposited into the Mills Oakley Trust Account in relation to the Camberwell Development by you or on your behalf, will remain in our trust account until such time as I receive the Argyle Partnership written authorisation to release the said monies."

32 The letter of Dale Robertson to the "director, Unique" dated 20 June 2001 referred to "the payment of funds by your investors into the trust account of my solicitors, Mills Oakley, for use as the balance of the deposit payable in respect of the purchase of the above property by Burke and Riversdale Road Pty Ltd ("B&R")". It also referred to the agreement to be executed in respect of the development.

33 The letter of Laurance Davis of Mills Oakley to David Facione dated 25 June 2001 stated:

"Camberwell Development

In response to your request, I confirm the following is a full account of recent trust entries in this matter:

34 On or about 25 June 2005, Gemini, the vendor of the Riversdale Road land, served a rescission notice on B&R, on the basis of the failure to pay the balance of the deposit. The rescission notice required payment by 9 July 2001.

35 It was not disputed that on 2 July 2001, Mr Robertson executed a document entitled an "Investment Arrangement".

36 The Investment Arrangement states:

"Unique is prepared to invest in the Project on the basis that:

1. Unique holds 50% of the issued shares in Burke and Riversdale Road Pty Limited and 50% of the allotted units in the Unit Trust (acquired for $1.00 each) subject to the terms of the Investment Agreement.

2. The relevant parties agree to the principle (sic) terms of the following arrangements:

3. The relevant parties agree to and must execute documents prepared by Unique's solicitors which fully and further elaborate on the principle (sic) terms of the arrangements".

37 The Investment Arrangement provided for execution by Unique, B&R, Dale Robertson and Rumasc Pty Ltd. It was signed by Mr Sonntag on behalf of Unique, Mr Robertson on behalf of B&R, Mr Robertson on his own behalf and by S. Lewis on behalf of Rumasc.

38 Schedule 1 to the Investment Arrangement is voluminous. It contains the four agreements or contracts referred to in sub-paragraph 2(a)-(d) of the Investment Arrangement.

39 The Investment Agreement included in Schedule 1 relevantly provides:

Burke & Riversdale Road Pty Limited (ACN 091 223 764) of Level 1, 131 Queen Street, Melbourne, Victoria (Burke).

Unique Lifestyle Investments Pty Limited (ACN 095 803 286) of Suite 1A, Level 2, 802 Pacific Highway, Gordon, New South Wales (Unique).

Dale Howard Robertson of 89 Union Street, Surrey Hills, Victoria (Robertson).

Rumasc Pty Limited (ACN 096 513 343) of Suite 4, 310-314 Whitehorse Road, Balwyn, Victoria (Rumasc).

Context

A. Burke has entered into a contract (the Contract) to purchase the Property upon which it intends to carry out the Development. The Contract was exchanged on 11 May 2001 and is to complete on 1 November 2002.

B. Burke requires funds to enable it to pay the deposit on the Property and to provide working capital to carry out the initial stages of the Development.

C. Burke has requested Unique to invest in the Property and the Development to the extent of $2,000,000 (Investment Sum) on the terms of the arrangements.

D. Unique has agreed to invest in the Property and the Development on the terms of the arrangements.

1. Investment Sum

1.1 The Investment Sum is $2,000,000.

1.2 The Investment Sum shall be paid as to:

(a) $555,000 on or before the date hereof (receipt of which is acknowledged);

(b) $1,179,000 on the date hereof; and

(c) the balance by monthly payments of approximately $40,000 in accord with the Project (being the undertaking of the development) budget.

1.3 Part of the Investment Sum may be paid by bank guarantee, however the working capital component of the Investment Sum may not be paid by bank guarantee.

1.4 The parties acknowledge that Unique's investment in the Property and the Development is for a period expiring on or before 1 July 2002, being to assist in providing the deposit money and some of the costs of the initial stages of the Development. The period of the investment may be extended by mutual agreement between the parties.

2. Repayment of the Investment Sum.

2.1 The Investment Sum is to be repaid by the Repayment Date which is the earlier of:

(a) 1 July 2002;

(b) the time of refinancing of the Project;

(c) the time of introducing other investors to the Development; and

(d) of such earlier date as Robertson may require.

(a) pay to Unique the Investment Sum to the extent it was paid as cash (ie not as bank guarantee);

(b) pay to Unique any outstanding interest on the Investment Sum to the extent it was paid as cash (ie not as bank guarantee) in accord with clause 3;

(c) return to Unique any bank guarantees provided as part of the Investment Sum together with any letter or other requirements which may be required by the bank to cancel such guarantee;

(d) pay to Unique interest in accordance with clause 3 on the amount of the Investment Sum paid by way of bank guarantee;

(e) pay to Unique all reasonable costs and expenses which have been incurred prior to the Repayment Date by Unique's investors in raising the bank guarantees or cash required for the Investment Sum, including fees paid and penalty interest incurred in relation to the bank guarantees and any other financing costs incurred or accrued in respect of the Investment Sum, legal costs of obtaining advice from or drafting documentation by The Argyle Partnership, fees paid to I-Finance (Australia) Pty Limited, courier fees and other out of pocket expenses (Investor Costs); and

(f) pay to Unique the reward sum of $2,000,000 (Reward Sum).

3. Consideration

3.1 In consideration of providing the Investment Sum Unique is to receive:

(a) interest on the Investment Sum (Interest)

(i) at 35% per annum for cash [paid as to 25% per annum monthly in arrears (reduced to 20% if paid on time) and at 10% per annum capitalised monthly and paid on the Repayment Date]; and

(ii) 20% per annum (reduced to 15% per annum if paid on time) for bank guarantees (paid on the Repayment Date).

(b) payment of the Investor Costs up to a maximum of $60,000 on the Repayment Date;

(c) payment of the fees of I-Finance (Australia) Pty Limited up to a maximum of $50,000 within 30 days of the date hereof;

(d) the Reward Sum; and

(e) the right to purchase (Purchase Rights) all the units in the residential portion of the Development for 90% of the financier's valuation for construction funding purposes or in lieu thereof (at Unique's option) a further reward sum (Residential Reward Sum) payable on the Repayment Date. The parties agree that the Residential Reward Sum is $1,000,000 if no town planning approval has been obtained for the residential portion of the Development the Residential Reward Sum is $3,000,000.

3.2 The Investment Sum, the Interest, the Investor Costs, the i-finance fees, the Reward Sum and the Residential Reward Sum (if applicable) together with any interest payable thereon are referred to as the Unique Moneys.

4. Security

4.1 Burke must provide the security set out in this clause 4 for the Unique Moneys and the purchase rights.

4.2 A personal guarantee and indemnity by Dale Robertson.

4.3 A registered equitable charge over the assets of Burke.

6. Costs

6.1 Robertson agrees to pay Unique's reasonable legal costs and disbursements in connection with its investment structure advice in relation to the Development, the negotiations, preparation and execution of this Agreement. Such costs must be paid within 30 days of the date of this Agreement. Such costs exclude any legal advice provided to Unique's investors.

9. Covenants by Burke

9.1 Burke covenants with Unique:

(a) to pay interest in accordance with clause 3.1(a);

(b) to repay the Investment Sum, Investor Costs and unpaid Interest on the Repayment Date;

(c) to pay the Reward Sum or to procure 635 St Kilda Road Pty Limited to accept a reduction in the purchase price for the Marquise Contract by $2,000,000.00; and

(d) to enter into the Concourse Documents contemplated by clause 8.8 or pay the Residential Reward Sum.

...

11. Covenants by Robertson

11.1 Robertson must supply all further working capital as and when required by the Project Budget and necessary to complete the Project by obtaining the Project Permits and refinancing the Property.

11.2 Robertson covenants with Unique:

(a) to pay interest in accordance with clause 3.1(a);

(b) to repay the Investment Sum, Investor Costs and unpaid Interest on the Repayment Date;

(c) to pay the Reward Sum or to procure 635 St Kilda Road Pty Limited to accept a reduction in the purchase price for the Marquise Contract by $2,000,000.00; and

(d) to enter into the Concourse Documents contemplated by clause 8.8 or pay the Residential Reward Sum.

...

13. Essential Terms

13.1 The following clauses will be essential terms of the Agreement:

(a) failure by Burke to pay Interest in accordance with the provisions of clause 3.1(a);

(b) failure by Robertson to provide working capital as required (by the Project Budget and as and when required to complete the Project;

(c) failure by Burke to repay the Investment Sum in accordance with the provisions of clause 2.3;

(d) failure of Burke to pay the Reward Sum;

(e) failure of Burke to enter into documentation for sale of Residential Component to Unique or pay the Residential Reward Fee.

14. Default

14.1 If Burke or Robertson default of any of their obligations under this Agreement then Unique reserves the right to cancel or terminate this Agreement and may exercise all powers and remedies nor or hereafter existing in law or in equity available to it, including

(a) requiring that Unique Moneys are immediately due and payable;

(b) the right to transfer, mortgage, charge, sell the Investment or the Project; and

(c) the right to sell its interest in Burke or the Trust or both.

...

14.4 Termination of this Agreement under clause 14.1 will not prejudice any claim Unique may have against the Burke or the Robertson under this Agreement at the date of the termination.

15. Indemnity

15.1 Robertson indemnifies and agrees to keep indemnified Unique against all claims, demands, actions, proceedings, costs, expenses and liabilities (including without limitation legal costs and disbursements on a full indemnity basis) suffered or incurred by Unique directly or indirectly as a result of any breach of the obligations of Burke under this Agreement.

40 On the execution of the Investment Arrangement, Mr Facione was appointed a director of B&R and shares in B&R were transferred to Unique. Unique, through its solicitor, Argyle Partnership, by letter dated 2 July 2001, gave Mills Oakley the authority to release funds from the trust account to the vendor in order to pay the balance of the deposit, on withdrawal of the rescission notice. Facione testified that the vendor withdrew the rescission notice and the funds were released.

41 Mr Sonntag testified that the bulk of the investor funds were paid directly into the Mills Oakley trust account, but some went into a Unique account. Of the funds deposited with Unique, Mr Sonntag recalled that some went into the Mills Oakley trust account and some went to the company set up to acquire the land. (It is clear that Mr Sonntag's recollection was incorrect, as B&R was already incorporated.) Mr Sonntag testified that Unique controlled the release of funds from the Mills Oakley account. He stated that after the execution of the Investment Arrangement on 2 July 2001, Unique authorised the release of funds direct to the vendor's solicitor to pay the deposit. Ultimately, some funds went to pay Mills Oakley's legal fees and to I-Finance Australia Pty Ltd.

42 The Mills Oakley trust account history produced on 9 July 2002 entitled "client Burke & Riversdale Road Pty Ltd - Camberwell Development. Contact Robertson, Dale" records receipts and payments, including receipts from nominated investors. It also records the payment of $1,201,140 on 6 July 2001 to Vadarlis & Associates. That payment is recorded as reversed, and the sum is recorded as paid to the vendor of the Riversdale Road land, Gemini, as "payment of deposit of settlement".

43 Mr Sonntag stated that all of the investment moneys were advanced from Unique, although "effectively" advanced by the investors. He was, however, unable to give an exact breakdown of the payments into the Mills Oakley trust account and the payments to Unique, or any amounts that went to B&R. Unique's financial statements were not discovered.

44 In October 2001, B&R and Mr Robertson failed to pay interest due to Unique. There were many subsequent failures to pay amounts due under the Investment Agreement.

45 Following the failure to pay interest, negotiations, including meetings with Mr Robertson and meetings attended by the solicitors for the parties, took place during 2002. Draft terms of settlement were drawn, but were not executed. Mr Facione gave evidence that in the course of negotiations in 2002, Robertson acknowledged the debt to Unique and promised to repay it.

46 Gemini served a notice of rescission dated 6 November 2002 on B&R, based on its failure to pay the balance of the purchase price for the Riversdale Road land. B&R did not pay the specified sum within the 14 days stipulated. The vendor rescinded the purchase contract.

47 Negotiations between Unique and Mr Robertson for settlement of Unique's claim continued during 2003. Further draft terms of settlement were drawn, but were not executed. In June 2003, Ms Hyland, an investor, and her associate, Ms Rennie, contacted Mr Robertson by e-mail in relation to "the monies owed from the Honda Camberwell investment". The e-mail of Mr Robertson to Ms Rennie dated 9 July 2003 stated that he had not settled the purchase and was facing difficulties. The e-mail further stated, "I met with David yesterday to discuss various matters amongst them the debt to you and the other investors. He asked me what my intentions were. I replied as I always have that I intend to repay all the funds that were loaned for the project. I could not give a specific time as to when they will be paid, but I confirmed that I would try to do it as soon as possible ... I informed him that I am happy to meet with solicitors to work out a solution or scheme of arrangement. ... "

48 On 8 August 2003, B&R was wound up by order of the Court. The Form 507 Report for B&R, prepared pursuant to the relevant provisions of the Corporations Act 2001 (Cth), signed by Dale Robertson and dated 26 August 2003, states that debts to unsecured creditors totalled $3,911.142.48.

49 The attachment to the Form 507 includes in the "schedule H unsecured creditors" of B&R, Unique Lifestyle Investments Pty Ltd, as a creditor for an amount claimed of $2,693,445.50. The amount admitted as owing is $2,693,445.50. A notation states "dispute as to interest amount". The schedule is apparently initialled by Dale Robertson.

50 Mr Sirianni gave evidence of his participation in meetings with Mr Robertson and others during the course of 2002, in which Mr Robertson stated that he intended to obtain refinance and that the moneys owed to Unique's creditors would be repaid. Mr Sirianni referred to draft deeds and correspondence exchanged during 2002 and 2003 in relation to the proposed settlement of Unique's claims. A draft agreement dated 16 February 2003 prepared by a solicitor acting for Mr Robertson recited that Robertson acknowledged, inter alia, that Facione and Sonntag, via Unique, had secured investors to invest the sum of $2 million in the acquisition of the Riversdale Road land and that the funds were received by B&R and used to pay the deposit and architectural and other expenses relating to the development of the site. The draft settlement agreement was not executed. The negotiations did not result in a settlement.

51 Mr Facione gave evidence that the $2 million remains unpaid.

THE PLEADINGS

Further amended statement of claim

52 By further amended statement of claim dated 1 November 2004, the plaintiff pleads that at all material times, its directors were Mr David Facione and Mr Lionel Sonntag. The defendant, Mr Robertson, was a director of B&R, formerly called Radomi Pty Ltd. He was also the sole shareholder of Rumasc Pty Ltd.

53 The plaintiff pleads that on 11 May 2001, B&R (then Radomi) entered a contract to purchase land situated at 472-480 Riversdale Road, East Hawthorn from Gemini for the purchase price of $11,330,000 plus GST, to be paid by a deposit of $1,699,550 plus GST. The deposit was due in two instalments. The first instalment of $520,150 plus GST was due on 11 May 2001 and the second instalment of $1,179,350 plus GST was due on or before 8 June 2001. The balance of the purchase price, being $9,630,500 plus GST, was due on 1 November 2002.

54 The plaintiff alleges that by a written Investment Agreement executed on or about 2 July 2001 by, inter alia, Mr Robertson, B&R and Unique, Unique agreed to lend to Mr Robertson and B&R $2 million ("the investment sum") to fund the deposit, or alternatively, agreed to invest $2 million with B&R, to be used, inter alia, to fund the deposit and part of the development of the property. It further alleged that Mr Robertson agreed to provide security for the payment of the $2 million, and that Mr Robertson and B&R agreed to repay the $2 million to the plaintiff on the defined "repayment date", which was the earliest of:



1 July 2002;



the time of refinancing the project;



the time of introducing other investors;



or such earlier date as Robertson may require.

55 The plaintiff alleges that the Investment Agreement contained further terms, including that the plaintiff would be paid additional sums by Mr Robertson and/or B&R, including:



Interest on the investment sum at 35% per annum;



Investor costs up to a maximum of $60,000;



Investor fees of up to a maximum of $50,000;



A "reward sum" of $2 million on repayment date.



At the option of the plaintiff, a further "residential reward" sum of $1million, in lieu of purchasing residential units built on the property at 90% of the financier's valuation.

56 The investment sum and the above sums were collectively designated "the Unique moneys".

57 The plaintiff alleges that Mr Robertson agreed personally to pay the Unique moneys and the plaintiff's reasonable legal costs and disbursements incurred in connection with the Investment Agreement and personally guaranteed to the plaintiff the payment of the Unique moneys. It alleges that Mr Robertson, as a separate obligation, personally indemnified the plaintiff against all claims, demands, costs, expenses and liabilities it suffered by reason of any breach by B&R of its obligations under the Investment Agreement.

58 The plaintiff alleges that in performance of the Investment Agreement it advanced, or procured the advance of, the investment sum to Robertson and B&R.

59 The plaintiff further alleges that in part performance of the Investment Agreement, on 12 November 2001, Mr Robertson and B&R caused the plaintiff's investor fees and legal costs to be paid. Further, 50 shares in B&R were transferred to the plaintiff, and Mr Facione was appointed a director of B&R.

60 It is alleged that in breach of the Investment Agreement, neither Mr Robertson nor B&R has repaid any of the investment sum, the interest, the investor costs, the reward sum or the residential reward sum to the plaintiff.

61 The plaintiff alleged that Mr Robertson is indebted to the plaintiff for the relevant amounts, including the $2 million. Alternatively, the plaintiff relies on the indemnity allegedly given by Mr Robertson in relation to B&R's breach of its obligation to pay.

62 Alternatively, the plaintiff alleges that the purchase of the Riversdale Road land was not completed by B&R, due to a rescission notice based on its failure to pay the balance of the purchase price due on 1 November 2002 to Gemini, so that the Investment Agreement became impossible to perform and was frustrated.

63 The plaintiff also alleges misleading and deceptive conduct pursuant to s.52 of the Trade Practices Act 1974 (Cth).

Defence and Counterclaim

64 By defence and counterclaim dated 4 February 2005, the defendant, Mr Robertson, admits that he was a director of B&R, which was wound up on 8 August 2003. He admits that B&R entered the contract to purchase the Riversdale Road land, on the terms alleged.

65 The defence alleges that Mr Robertson was also a controller of 635 St Kilda Road Pty Ltd, a company which developed a property it owned at 635 St Kilda Road Melbourne, in December 2000. It alleges that Mr Robertson was introduced to Mr Facione, who subsequently purchased some apartments from 635 St Kilda Road Pty Ltd, by Mr Davis, a solicitor of Mills Oakley. The defence alleges that Robertson and Facione, in March 2001, agreed to purchase and develop the Riversdale Road land as a joint venture, on terms that Robertson would obtain finance and permits and would appoint a builder, while Facione would pay the deposit and $300,000 in consultant's fees in relation to permits and would purchase a number of apartments in the development on completion.

66 The defence alleges that Mr Facione, as a "joint venture partner", owed Robertson fiduciary duties.

67 The defence alleges that B&R's entry into the contract to purchase the Riversdale Road land was "for the purpose of giving effect to the joint venture" between Mr Robertson and Mr Facione. It alleges that Mr Facione provided the funds for the initial deposit.

68 The defence denies that on 2 July 2001, Mr Robertson and B&R executed the alleged Investment Agreement on the terms alleged.

69 It denies that the plaintiff ever provided any funds to B&R and/or Mr Robertson.

70 It alleges that Unique had no authority to make loans.

71 In relation to the denial that the plaintiff provided or advanced funds, the defence alleges that 50% of the shares in Unique are owned by Mr Facione and 50% by Elonica, a company owned by Unique's other director Mr Sonntag, who is a defendant in a proceeding issued by Unique for alleged breach of his fiduciary duties, in which proceeding Mr Sonntag has claimed that Unique was operated as a quasi-partnership whose sole activity was the development of a particular property ("the Stead Street property").

72 Further, the defence alleges that if B&R and/or Mr Robertson executed any agreement, there was no consideration, or only past consideration, and the terms of the alleged loan or investment agreement were so uncertain as to be unenforceable.

73 Further, the defence alleges that Mr Robertson signed any document on the terms alleged under duress, and that Mr Facione thereby breached his duties under the joint venture.

74 The defence alleges that, as at 8 June 2001, the sum of $1,179,350 was due and owing under the contract to purchase the Riversdale Road land and a rescission notice had been served. It alleges that Mr Robertson entered the contract, $521,150 was applied from his Mills Oakley account towards the deposit, and Mr Facione insisted that, unless Mr Robertson signed the document presented by Fiona Sonntag, Mr Facione would not continue with the joint venture and would not procure the release of the balance of the total funds of $1,677,000.

75 The defence further alleges that by an agreement subsequently made between Mssrs Robertson and Facione, Mr Facione agreed to release Mr Robertson from his obligations under the joint venture agreement, in consideration of Mr Robertson's release of Mr Facione.

76 The counterclaim repeats the above allegations and alleges that Mr Robertson and Mr Facione (the second defendant by counterclaim), agreed to purchase and develop the Riversdale Road land as a joint venture, pursuant to which Mr Facione was to pay the deposit on the signing of the contract and to pay the first $300,000 in consultant's fees. The counterclaim alleges that Mr Robertson incurred expenses, B&R entered the contract, and Mr Facione provided the funds to pay the deposit.

77 It claims that any liability to Unique arose as a result of duress and breach of Mr Facione's fiduciary duty, in which breach Unique was knowingly involved. It seeks declarations, damages under the Trade Practices Act and an order that "the Loan Agreement" is void.

THE PARTIES' MAIN CONTENTIONS

78 The plaintiff claims that it loaned or advanced the $2 million (which it had borrowed from various investors) to the defendant Mr Robertson and B&R pursuant to an Investment Agreement which provided that the funds would be applied in part to pay the deposit for the purchase of the Riversdale Road land, and in part to pay consultants retained in relation to the proposed development of the land by Mr Robertson, which would be conducted through the corporate vehicle for the development project, B&R.

79 The plaintiff further claims that, pursuant to the Investment Agreement, Robertson and B&R were jointly and severally liable as principal debtors to repay the $2 million advanced by Unique within one year. Alternatively, the plaintiff contends that Mr Robertson guaranteed B&R's obligation to repay the $2 million. It is not disputed that neither B&R, (which was wound up in insolvency in August 2003) nor Mr Robertson has paid the claimed $2 million, or any lesser amount, to the plaintiff in satisfaction of its claim.

80 By a defence filed 4 February 2004, discussed above, the defendant denied the agreement alleged by the plaintiff; denied that the plaintiff ever provided funds to B&R or to him; and claimed that the alleged agreement was uncertain, ultra vires, induced by duress and lacked consideration. At trial, however, the defendant did not seek to establish those defences. At the conclusion of the plaintiff's case, Mr Pirrie, counsel for the defendant, submitted that the defendant had no case to answer, on the basis of the deficiencies of the plaintiff's evidence and legal issues. He elected to call no evidence. That course was appropriate, given the grounds of the no case submission. Counsel for each party agreed that their submissions in relation to the "no case" should also constitute their final addresses.

81 In Protean Holdings Ltd (Receivers and Managers Appointed) v American Home Assurance Co, [1] Tadgell J stated that in determining a no case submission, the ultimate question for the court is whether the evidence adduced by the plaintiff is not sufficient to debar the defendant from obtaining judgment without attempting to answer it.[2]

82 A finding that there is sufficient evidence to debar the defendant from obtaining judgment without answering the plaintiff's evidence does not constitute a finding that the plaintiff has established its case on the balance of probabilities. While the rejection of a no case submission by the defendant does not necessarily ensure success for the plaintiff, the distinction is a fine one.[3]

83 In Sarkis v DCT,[4] Nettle JA, with whom Warren CJ and Charles JA agreed, considered that although it may be that upon a no case submission, the judge is prevented from drawing inferences against the applicant arising from its decision not to call evidence, it did not follow that the judge is also precluded from drawing inferences against the applicant on the basis of documents tendered by the other party to support its allegations.[5]

84 His Honour endorsed Windeyer J's observation in Jones v Dunkel[6] that, in a trial by a judge alone, a no case submission may mean "would you, the judge, on the evidence given, find for the plaintiff?"[7] His Honour stated that in such a case, the judge must decide whether he or she could find for the claimant on the evidence so far led. His Honour noted that, as Tadgell J reasoned in Protean, it would be "quite unrealistic to expect ... [the judge] to do so without being able to consider all questions which bear on the sufficiency of the evidence and without power to draw or decline to draw all inferences from the evidence given on which the respondent party may seek to rely."[8]

85 In submitting that the defendant in the present proceeding had no case to answer, Mr Pirrie, counsel for the defendant, argued that there was no evidence capable of establishing the case against the defendant, or alternatively, that the plaintiff's evidence was so unsatisfactory and unreliable that the Court should decline to act upon it.

86 Mr Pirrie argued that the Investment Agreement, on which the plaintiff relied, did not constitute an enforceable agreement. It merely recorded an informal arrangement. If, contrary to that submission, it did constitute an agreement, he contended that it was conditional upon the execution of further documentation, which had not occurred.

87 Further, he argued that if the Investment Agreement were otherwise an enforceable agreement, it was too vague and uncertain to be enforced and was either not supported by consideration, or by past consideration only.

88 Relevant authority establishes that the modern approach to the construction of commercial agreements of business people is, generally, to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction, unless irremediable obscurity or a like fundamental flaw indicates that there is, in fact, no agreement. It is permissible to have regard to extrinsic evidence of the "factual matrix"[9] or surrounding circumstances in determining the meaning of contractual terms.

89 In Hillas & Co Ltd v Arcos Ltd,[10] Lord Tomlin stated:

"the problem for a court of construction must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains."[11]

"Businessmen often record the most important agreements in crude and summary fashion. Modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is, accordingly, the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects."[12]

91 In Biotechnology Australia Ltd v Pace,[13] Kirby J, in acknowledging the difficulty of reconciling the competing principles, stated as a general observation that:

"The determination of every case depends upon its own facts. The meaning of the agreement between the parties must be discovered objectively. Where there is suggested ambiguity or vagueness or where it is urged that a term is illusory, it may sometimes be both necessary and appropriate to have regard to extrinsic evidence in order to give meaning to that to which the parties have agreed; see, eg Kell v Harris (1915) 15 SR (NSW) 473 at 479; 32 WN (NSW) 133 at 136 and Raffles v Wichelhaus [1864] EngR 150; (1864) 2 H&C 906; 159 ER 375.

The court will endeavour to uphold the validity of the agreement between the parties: see Hillas & Co Ltd v Access Ltd. The court will attempt to avoid frustrating the wishes of the contracting parties so far as those wishes may be ascertained from the agreement between them: see Meehan (at 589); see also Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at 437 where his Honour said that: ' ... In the search for that intention no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.'

But the court will not do so, where, in effect, it is asked to spell out, to an unacceptable extent, that to which the parties have themselves failed to agree. Nor will the court clarify that which is irremediably obscure ... ". [14]

92 In Vroon BV v Fosters Brewing Group Ltd,[15] Ormiston J also stated "that in commercial transactions the court should strive to give effect to the expressed arrangements and expectations of those engaged in business, notwithstanding that there are areas of uncertainty and notwithstanding that particular terms have been omitted and not fully worked out" whilst acknowledging that "[w_]here one should draw the line is difficult to state and equally difficult to apply_".[16]

93 Consistently with the above principles, in MLW Technology Pty Ltd v May,[17] Gillard AJA, (with whom Winneke P and Buchanan JA agreed), stated:

"The court, in construing contracts between businessmen and also their actions, should proceed in a common sense, non-technical way. How would the businessmen construe the agreement in the light of the commercial purpose of the setting ... "[18]

94 His Honour referred[19] to Lord Wright's observations in Hillas, supra, and to Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[20] in which Lord Steyn, noting that the law had moved on from a strict technical approach, stated:

"Since then there has been a shift from strict construction of commercial instruments to what is sometimes called purposive construction of such documents ... It is better to speak of a shift towards commercial interpretation. About the change in approach to construction there is no doubt. ... In determining the meaning of the language of commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial contract is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is generally hostile to technical interpretations and undue emphasis on niceties of language."[21]

95 Mr Pirrie pointed out that clause 2 of the Investment Arrangement provided that "the parties" who were not specifically identified, agreed to "the principle (sic) terms" of Schedule 1, which contained the Investment Agreement. He argued that it was not clear that Mr Robertson was a "party" referred to in clause 2 of the Investment Arrangement, who, as such, had agreed to "the principle (sic) terms" of the Investment Agreement. Further, he contended that even if Mr Robertson were "a party", there was nothing to establish that the covenant by Mr Robertson in clause 11.2(b) of the Investment Agreement personally to repay the $2 million on the repayment date, was a "principal term", to which he had agreed.

96 The Investment Arrangement provided for the signature of Mr Robertson and was signed by him. Applying a common sense, non-technical construction likely to accord with that of the business people themselves in the light of the commercial purpose and the context, I am satisfied that Mr Robertson was a party to the Investment Arrangement within terms of clause 2.

97 Mr Robertson was also expressly identified as a party to the Investment Agreement. By clause 11.2(b) of the Investment Agreement, Mr Robertson covenanted with Unique to repay the investment sum, investor costs and unpaid interest on the repayment date. As the recitals and terms make clear, the essential subject matter of the Investment Agreement was the payment by Unique of an "Investment sum" of $2 million, for the specified purposes of providing the deposit on the contract to purchase the Riversdale Road land and the working capital to develop it. As a matter of commercial common sense, any term providing for the repayment by a party of the investment sum would be considered by "a reasonable commercial person" to be a highly important "principal term", to which Mr Robertson, as a party to the Investment Arrangement, had agreed.

98 Clause 13 of the Investment Agreement states that "the following clauses will be essential terms of the agreement". Clause 13 is poorly drafted. It proceeds to list as essential terms, a series of failures by B&R to fulfil various obligations. The literal terms of clause 13 do not make sense. If the draftsperson intended obligations, rather than failures to fulfil them, as essential terms, there is nevertheless no reference to any obligation of Mr Robertson. It follows that if "essential terms" and "principal terms" are interchangeable, no term of the Investment Agreement would be agreed to by, or binding on, Mr Robertson. That analysis is inconsistent with clause 14, which assumes that Robertson has obligations under the Investment Agreement and indeed, provides that any default by Mr Robertson in relation to them is a ground for termination by Unique. Clause 14.4 also expressly refers to Unique's claims against Robertson under the Investment Agreement.

99 Any construction whereby Mr Robertson assumed no obligations under the Investment Agreement would produce an absurd outcome. His inclusion as a party would have been unnecessary. Such a construction is not only inconsistent with the fundamental character of the document as a whole, but is also at odds with the uncontradicted evidence of Messrs Facione and Sonntag, who testified that a significant requirement of their initial dealings with Mr Robertson was that he should undertake personal liability (albeit by guarantee) to repay the investment sum, which, after initial resistance he agreed to do, signing the handwritten agreement of 24 April 2001.

100 The Investment Agreement refers to the purchase of the Riversdale Road land by B&R and to B&R's requirement for funds. It provides, by clause 9.1(b), that B&R must pay the investment sum, investor costs and unpaid interest on the repayment date. Clause 11.2(b) provides that Mr Robertson must pay the investment sum, investor costs and unpaid interest on the repayment date. In my opinion, on a fair, broad and commercially reasonable construction, clause 11.2(b) of the Investment Agreement constituted Mr Robertson jointly and severally liable with B&R to repay, inter alia, the investment sum to Unique on the repayment date.

101 Mr Pirrie also submitted that because the Investment Agreement did not refer to a "loan" and recital B stated that B&R required the funds, there could be no loan to Robertson.

102 I reject that submission. The nature of a transaction must be determined on the basis of substance, rather than the label adopted. Under the Investment Agreement, the investment sum was to be advanced and subsequently repaid. It is therefore a loan, by whatever name called. I have concluded, for reasons set out above, that Mr Robertson was jointly and severally liable to repay the investment sum. The fact that it was required by, or advanced to, parties other than Mr Robertson, does not preclude his liability to repay it.

103 Mr Pirrie also submitted that the Investment Arrangement provided that Unique was prepared to invest in "the project", and referred to four "arrangements" contained in Schedule 1. It did not identify whether those agreements were "stand alone" or independent. Further, the Investment Agreement itself referred to "a project", which was not identified.

104 The liability of Mr Robertson pursuant to the covenant in clause 11.2(b) of the Investment Agreement to repay the $2 million on the repayment date is unqualified. While Unique's willingness to invest was expressed to have been dependent on execution of the other agreements, that circumstance does not assist the defendant. There is no indication that his liability to repay the investment sum under the Investment Agreement was dependent on, or negated by, anything contained in any other agreement in Schedule 1. The defendant, despite its election to call no evidence, could have pointed to any provision in the other agreements in Schedule 1 which, as a matter of construction, expressly or impliedly qualified Mr Robertson's liability under the covenant in clause 11.2(b). The defendant did not do so. There is no basis on which to find that Mr Robertson's express liability to repay the $2 million under clause 11.2(b) was modified or excluded by any term of the other agreements in Schedule 1.

105 The Investment Agreement comprises part of Schedule 1 to the Investment Agreement and the documents must be read together. I am satisfied that the meaning of the central terms relevant to the present dispute, taken in context, is clear. The Investment Agreement displays the complexities attendant on multiple related agreements and the drafting imperfections characteristic of an agreement which contemplates the execution of more formal documentation. While apparently professionally drafted, it is a somewhat "crude and summary" [22] document. It is not, however, in my opinion, unenforceable on the ground of uncertainty. While I reject the plaintiff's contention that the relevant terms of the Investment Agreement are ambiguous, the asserted ambiguity would, in any event, be adequately addressed by the extrinsic evidence of "the factual matrix" given on behalf of the plaintiff.

106 Mr Pirrie also submitted that the Investment Agreement, even if otherwise valid, was unenforceable because the Investment Arrangement (to which it was attached) stated that "the relevant parties agree to and must execute documents prepared by Unique's solicitors which fully and further elaborate on the principle (sic) terms of the arrangements". The Investment Agreement was thus, he argued, conditional upon the execution of further documentation, which had not occurred.

107 I am satisfied that, as Mr McCormick, counsel for the plaintiff, submitted, applying the principles of construction referred to above, and in the light of the uncontradicted evidence, the Investment Agreement falls into the category identified by Dixon CJ and McTiernan and Kitto JJ in Masters v Cameron[23] as "a case which the parties have reached finality in arranging the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise, but not different in effect."[24] As such, it is "a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not ... ".[25] The contract is not conditional upon the execution of the further documentation, although the parties have agreed to that course.

108 Mr Pirrie also pointed out that the Investment Agreement did not contain a guarantee by Mr Robertson. Further, he contended that clause 15.1 of the Investment Agreement was limited to an indemnity for legal and like costs incurred by Unique due to legal action taken as a result of any breach by B&R of an obligation under the Investment Agreement.

109 Clause 15.1 of the Investment Agreement provides:

"Robertson indemnifies and agrees to keep indemnified Unique against all claims, demands, actions, proceedings, costs, expenses and liabilities (including without limitation legal costs and disbursements on a full indemnity basis_ suffered or incurred by Unique directly or indirectly as a result of any breach of the obligations of [B&R] under this Agreement."

110 Given the conclusion I have reached on the defendant's primary liability to repay the Investment Sum, it is unnecessary to determine the scope of clause 15.1 I note, however, that it is not limited to legal costs and disbursements. In my opinion, the indemnity is a principal term which would extend to Unique's liability to repay the investors' claims, indirectly suffered as a result of B&R's breach of its covenant to repay the investment sum.

111 In addition to the submissions based on the construction of the Investment Agreement, the defendant also argued that the evidence did not establish that the plaintiff, rather than the investors, advanced the investment sum. Further, Mr Pirrie contended that the plaintiff's documentary evidence in support of the advance of the moneys pursuant to the Investment Agreement was unclear, incomplete and unsatisfactory.

112 Mr Pirrie submitted that Unique's failure to produce any banking records or financial statements was "troubling". Its explanation that the documents had been lost, was not, in his submission, satisfactory.

113 He argued that the evidence established only that a number of individuals transferred moneys to the Mills Oakley trust account in the name of B&R. It did not establish that they made loans to Unique.

114 He contended that the documentary evidence of the loans by investors to Unique was scant and that Ms Hyland's evidence should be discounted, because her loan document referred to "Universal" as the debtor company.

115 He asked the Court to infer that the inclusion of the incorrect company name in Ms Hyland's loan document was deliberate. Further, he pointed out that her loan was made at a late stage, in September 2001.

116 While Ms Hyland's loan document referred to "Universal" rather than "Unique", the company number was that of Unique. Ms Hyland was a consistent, clear and credible witness. Both she and Mr Sonntag testified to a clerical error in the company name. I am satisfied that the Hyland loan agreement documented the loan made by Ms Hyland to Unique, in the circumstances to which Ms Hyland and Mr Sonntag testified.

117 Although only two investor loan agreements were tendered in evidence, Messrs Sonntag and Facione gave consistent evidence as to the loans to Unique by individual investors. Their evidence was credible, supported by the evidence of Ms Hyland, and, moreover, was uncontradicted. It is not essential, in such circumstances, that the loans be proved by documentary evidence.

118 Mr Pirrie also submitted that the documentary evidence did not clearly indicate the payments in of the relevant amounts to Unique or the Mills Oakley trust account or the payments out. As such, it did not establish that the plaintiff advanced or procured the advance of the investment sum.

119 The relevant letters, acknowledgments and Mills Oakley trust account records do not clearly document the making of all of the various payments comprising the $2 million. There is no comprehensive documentary record of the payment in of the funds. According to Messrs Faccione and Sonntag, the investment amounts were, in some cases, paid in instalments by individual investors at different times, either to Unique or into the Mills Oakley trust account. Unique's financial records have been lost. The evidence before the Court does not enable me to determine the reason for the loss of Unique's records.

120 Similarly, there is no clear, comprehensive documentary record of the payments out, although the principal payment out (being the balance of the deposit) is recorded in the Mills Oakley trust account records. It is, however, unnecessary that the movements of the funds be documented in order to establish the advance. The directors of Unique gave uncontradicted evidence of the advance and payment of the funds. The financial documents in evidence, although not comprehensive, are consistent with their testimony, which I accept. The acknowledgment in the Form 507, signed by Robertson, that B&R owed Unique a total of approximately $2.6 million is, in my opinion, compelling evidence in support of the advance of the funds for the specified purposes.

121 Further, Robertson acknowledged his personal liability to repay the investment funds in the e-mail dated 9 July 2003. While the acknowledgment was made in direct correspondence with individual investors, their disregard of the corporate veil in that context is explicable. There was no evidence to contradict or explain the evidence advanced by the plaintiff.

122 Mr Pirrie argued that because the sum of $550,000 was, as the Investment Agreement acknowledged, advanced prior to its execution, it was past consideration, and the Investment Agreement was unenforceable on that basis.

123 That contention disregards the fact that a substantial proportion of the investment sum was advanced after the execution of the Investment Agreement. In Pao On v Lau Yiu Long,[26] Lord Scarman, delivering judgment on behalf of the Privy Council, stated:

"An act done before the giving of a promise to make a payment or confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisor's request: the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit: and payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance."[27]

124 In Ipex Software Services Pty Ltd v Hosking,[28] Callaway JA (dissenting on other grounds) approved Lord Scarman's statement in Pau On v Lau Yiu Long. His Honour observed that in the case before him, a transfer made prior to the execution of an agreement was not intended to be gratuitous and was not an example solely of detrimental reliance, but was "more like the performance of a service on the basis that it would be paid for, followed by a promise which fixed the amount of the payment ... and was therefore not past but executed consideration capable of supporting the promise on which [the party] sued".[29]

125 That analysis is, in my view, equally applicable to the amount of $550,000 advanced prior to the execution of the Investment Agreement in the present case.

CONCLUSION

126 I am satisfied, on the balance of probabilities, that under the Investment Agreement both the defendant and B&R were joint and several debtors who covenanted to repay the $2 million investment to be provided by Unique for a one year term for the specified purposes. I am satisfied that under the Investment Agreement, the defendant indemnified Unique for losses suffered by reason of claims made against it due to breaches by B&R of its obligation to pay the Investment Sum. I am also satisfied that the plaintiff borrowed the funds advanced under the Investment Agreement from individual investors pursuant to individual loan agreements.

127 Further, I am satisfied that the plaintiff advanced the $2 million to B&R, the defendant or to other parties, for the purposes specified in the Investment Agreement.

128 I am satisfied that following the expiration of the repayment date named in the Investment Agreement, despite demand being made, no part of the $2 million has been repaid to the plaintiff.

129 I am therefore satisfied that the defendant is liable pursuant to the Investment Agreement to pay to the plaintiff the sum of $2 million. The counterclaim should be dismissed.

[1] [1985] VicRp 18; [1985] VR 187.

[2] Ibid at 237.

[3] James v ANZ Banking Group Ltd (1985) 9 FCR 448 at 451.

[4] [2005] VSCA 67.

[5] Ibid at [13].

[6] [1959] HCA 8; (1959) 101 CLR 298 at 330-331.

[7] Ibid at 331.

[8] [2005] VSCA 67 at [14].

[9] Reardon Smith Line Ltd v Ynngar Hansen-Tangen [1976] 1 WLR 989 at 997; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337.

[10] [1932] UKHL 2; [1932] All ER 494.

[11] Ibid at 499.

[12] Ibid at 503-4.

[13] [1988] 15 NSWLR 130.

[14] Ibid at 136.

[15] [1994] VicRp 53; [1994] 2 VR 32.

[16] Ibid at 67.

[17] [2005] VSCA 29.

[18] Ibid at [76].

[19] Ibid at [77] - [81].

[20] [1997] UKHL 19; [1997] AC 749.

[21] Ibid at 770-771.

[22] Hillas &Co Ltd v Arcos Ltd [1932] UKHL 2; [1932] All ER 494 at 503-4.

[23] [1954] HCA 72; (1954) 91 CLR 353.

[24] Ibid at 360.

[25] Ibid.

[26] [1979] UKPC 2; [1980] AC 614.

[27] Ibid at 629.

[28] [2000] VSCA 239.

[29] Ibid at [23].