Waltons Stores (Interstate) Ltd v Maher [2006] NSWCA 169 | Case summary

Waltons Stores (Interstate) Ltd v Maher [2006] NSWCA 169 | Case summary | Zoe

Friday 30 June 2006 LAHOUD & ORS. V. LAHOUD & ANOR. Judgment 1 HANDLEY JA: In this appeal I have had the benefit of reading the extensive reasons for judgment of Hodgson JA in draft. Subject to one matter I agree with his reasons and the orders he has proposed. My qualification relates to para [111] of his Honour's reasons. 2 With respect I can discern no basis for any estoppel in this case. The alleged statement about the care of Riad and the delivery of the watch were not statements of existing fact. They were promissory and positive in substance. The promises which support an orthodox promissory estoppel are negative in substance and restrict the promisor's enforcement of his existing legal rights against the promisee. The alleged promises made by Joseph were manifestly not of this character. Nor were they promises of the kind enforced in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. Joseph's so called representations did not continue and were not repeated. He did not stand by in silence, there was no continuing change of position by Victor, and there was no basis for a proprietary estoppel by standing by. 3 In any event in my opinion, in the circumstances of this case, cl 9 and sch 2 exclude proof of the antecedent collateral promises or statements of intention relied on by Victor. They also negative a finding of reasonable reliance on those promises on Victor's part, leaving Joseph's promises or statements, if proved, binding only in honour as was the case in Jorden v Money (1854) 5 HLC 185, 222, 229. 4 I agree with the orders proposed by Hodgson JA. 5 HODGSON JA: The principal contestants in this appeal are Victor Lahoud and his younger brother Joseph. For convenience, I will refer to them and their siblings by their first names. Other parties to the proceedings are Joseph's company and two of Victor's companies; and I will generally not refer to them separately as parties. 6 On 30 May 2005, Palmer J gave judgment in proceedings in which Joseph sued Victor seeking specific performance of terms of settlement signed on 6 February 2001, and also damages, and in which Victor put on a cross-claim seeking to set aside the terms of settlement or to obtain specific performance of an alleged collateral agreement and/or damages. Palmer J held that Joseph was entitled to enforce the terms of settlement, and that Victor's cross-claim failed. 7 On 13 October 2005, Palmer J made consequential orders, including orders requiring Victor to transfer two units to Joseph, dismissing the cross-claim and directing an enquiry as to Joseph's damages. Victor has appealed from the primary judge's decision.

We trust that you will clean up your act forthwith. 22 On 5 February 2001, Joseph went to the chambers of his Senior Counsel Mr. West QC, where his solicitor Mr. Chaffey and his Junior Counsel Mr. Neil were also present. He then went to the IRC before 10.00am with Mr. West and Mr. Neil. 23 At the IRC at around 10.00am, there was a meeting between Victor and Joseph. The judge was informed by Mr. West and Mr. Holmes QC (Senior Counsel for Victor) that they were having discussions. At this meeting, Victor and Joseph agreed on the substance of the terms later included in the terms of settlement, namely that Joseph would receive half the profit from Cammeray and two units from Northbridge. The main factual issue in the present proceedings concerned Victor's claim, denied by Joseph, that, as a condition of this agreement, Joseph agreed to give Victor back their father's watch and to share with him equally in caring for Riad, and that they agreed that this was not to be included in the documentation of the settlement. 24 After this meeting, Victor told his legal advisors that settlement in principle had been reached, but they needed to talk further and would go to Houda's house. Victor and Joseph then took a taxi to Houda's house. Another significant factual issue in the present proceedings concerned Victor's claim, denied by Joseph, that during this taxi ride there was a conversation as to how the agreement to share equally in caring for Riad should be implemented. 25 When Victor and Joseph arrived at Houda's house, they told her that they had settled the dispute. Houda became very emotional, and she also suggested that Rosemary and Nadia should be invited to come immediately. There is some dispute as to the conversation that first occurred when the family was assembled, but it is common ground that Victor then asked his sisters to leave the room so that he and Joseph could have a discussion in private. It is common ground that in this discussion the watch was mentioned, but according to Joseph discussion of the watch consisted of Victor asking for the watch and his refusing that request. Victor's evidence was that in this conversation there was agreement as to when the watch was to be handed over, and that there was further discussion as to how the care of Riad was to be shared equally. 26 Subsequently, Victor and Joseph returned to the city, and there were negotiations on that day and the next with a view to producing a document which could be signed. There was a meeting between Joseph and his legal advisers (Mr. Holmes, his Junior Counsel Mr. Crow and Mr. Callanan) at Mr. Holmes' chambers in the afternoon of 5 February, in which the watch was discussed. 27 On 6 February 2001, the parties and their lawyers continued to negotiate the drafting of an agreement in the form of a deed. It appears that taxation repercussions on each of the parties proved something of an obstacle to finalising the deed; and the parties agreed that they could dispose of the proceedings on the basis of immediately binding terms of settlement, with a deed to be finalised later. A document was prepared, and late on 6 February 2001 it was signed by Victor and Joseph and also by Mr. Holmes and Mr. West. The summons in the IRC was then dismissed by consent, with no order as to costs. 28 The terms of settlement which was then signed, apart from Schedule 1 which is not here relevant, were as follows: In consideration of the Applicants agreeing to the orders set out in paragraph 4, the following terms are agreed: 1. The Second Respondent is to pay to the First Applicant, by bank cheque no later than 6pm Tuesday, 6 February 2001, the sum of $570,00.00. The Respondents have provided written details of the profit calculation for the Cammeray Project, which is Annexure "A" hereto, and verily believe that those details are accurate. Either party may elect to have the figures audited by an accountant to be agreed or, in default of agreement, as nominated by the President of the Institute of Chartered Accountants. If on audit, the audited profit exceeds the said profit calculation, the First Applicant is to be paid one half of the difference by the Respondents. If the audit profit is less than the said profit calculation, the First Applicant will pay the Respondents one half of the difference. The reasonable costs of the audit are to be paid by the Respondents in the event the audited profit figure exceeds the said profit calculation and by the First Applicant in the event the audit profit is the same or less than the said profit calculation. 2. The Second Respondent is to pay to the First Applicant the sale proceeds of Unit 4 at 135-145 Sailors Bay Road, Northbridge (being the land contained in Folio Identifier 4/SP 53342) and a three bedroom unit at 135-145 Sailors Bay Road, Northbridge presently owned by the Second Respondent, which unit shall be nominated by the First Applicant by 4pm on Thursday, 15 February 2001 but shall not include unit 18 or 24. The First and Second Applicant and the First and Second Respondent agree to the conditions set out in schedule 1 hereof regarding this clause 2. 3. The First and Second Applicants and the First, Second and Third Respondents agree to the terms set out in Schedule 2 hereof. 4. The Summons herein be dismissed with no order as to costs forthwith. 5. (deleted) 6. Terms not to be disclosed except as required with financial advisers and legal representatives of the parties, or under compulsion of law. 7. The parties to this agreement will enter into a deed in accordance with this agreement. 8. (deleted) 9. The deed referred to in paragraph 4 will include a term by which: (a) The Applicants on the one hand, and the Respondents on the other, and each of them release each other from all claims that they have or may have against each other but for those which may arise from, or relate to, these Terms of Settlement or the terms of the deed referred to in paragraph 7; (b) The First Applicant shall complete whatever documents are required to transfer the shares held non-beneficially or beneficially as the case may be by him in the issued capital of the Second Respondent and the Third Respondent to the First Applicant or his nominee and tender his resignation as director of both companies.

Schedule 2 provides: It [is] the express intention of the parties that this document records and constitutes an immediately binding agreement for the settlement of all aspects of the dispute between the parties NOTWITHSTANDING THAT at the same time the parties contemplate that the agreement will be engrossed in more perfectly drafted documentation which the parties will and hereby agree to execute AND it is agreed that in the event of there arising any dispute between the parties regarding any suggested omission or uncertainty in the terms of this agreement or in the event of there arising any dispute between the parties in the course of the preparation of the more perfectly drafted documentation regarding the form or substance of such documentation the same shall be submitted to senior counsel nominated by the President for the time being of the New South Wales Bar Association for summary determination acting as an expert and not as an arbitrator AND the parties agree to accept such determination as final and binding and to execute such documentation as will carry into effect such determination. 29 The preparation of a deed had commenced the previous day, and on the evening of 5 February 2001 Mr. Callanan produced a draft. 30 Further drafts were produced by him the next day, including one produced late in the afternoon (Blue 379-84) containing the following terms: 1. RECITALS A. Joseph is an architect and Victor, his brother is a developer. B. Between 1989 and 1995 Joseph and Victor combined their respective skills and ability to obtain development consents for property purchased by Castle thereby improving the value of such properties for resale and in some instances enabling construction and on sale of units. C. JLA is a corporation owned by Joseph and since 1996 Joseph has operated his business through JLA. D. Solidare is a corporation previously known as JVL Pty Ltd but has not operated prior to the date hereof. E. Joseph and Victor could not agree on the apportionment of profits, the reimbursement of costs and the extent of remuneration for services. F. Joseph commenced proceedings number 283 of 1998 in the Industrial Commission of New South Wales (the "Proceedings") seeking a determination of such issues. G. Victor and Joseph have reached agreement without the need for any formal arbitration on the terms hereinafter appearing. …

Please advise in due course. 41 The enclosed recitals were as drafted by Victor on 22 February, and were as follows: A. Victor is a developer and Joseph, his brother is an architect. B. Castle is a corporation owned and operated by Victor since 1978. C. JLA is a corporation owned and operated by Joseph since 1996. D. Solidare is a corporation previously known as JVL Pty Limited. JVL was jointly owned by Victor and Joseph. Neither Solidare nor JVL operated prior to the date hereof. E. In 1988 Castle acquired an option on a property at 45 Park Avenue, Cremorne. Such property was subsequently purchased by Joseph in 1990. Joseph sold the property in 1992. F. Between 1993 and 1996 Joseph prepared development applications for the following projects: 236 Victoria Avenue, Chatswood, 214-216 Sydney Street, Chatswood, 557-561 Mowbray Road, Chatswood West and 135-145 Sailors Bay Road, Northbridge. G. Also between 1993 and 1996, Joseph prepared building applications for the following projects: 238 Victoria Avenue, Chatswood, 214-216 Sydney Street, Chatswood, 33-35 Abbott Street, Cammeray and 135-145 Sailors Bay Road, Northbridge. H. Between 1997 and 1998, Joseph and JLA on the one hand and Victor and Castle on the other agreed to jointly develop two projects namely at 73 Albert Avenue, Chatswood and 2-4 Bells Avenue, Cammeray. I. Joseph and Victor could not agree on (i) Apportionment of profits. (ii) Reimbursement of costs. (iii) Remuneration for architectural services provided by Joseph and or JLA to Castle. J. Joseph commenced prooeedings number 283 of 1998 in the Industrial Commission of New South Wales (the "proceedings") seeking a determination of such issues. K. Victor and Joseph have reached agreement without the need for any formal arbitration and the proceedings were dismissed on the terms hereinafter appearing. 42 On 28 February 2001, Mr. Chaffey sent a facsimile to Joseph concerning the obtaining of tax advice as to the taxation status of the settlement, having regard to the terms of settlement, the draft deed and the proposed amended recitals. 43 On 6 March 2001, Victor wrote to Mr. Callanan as follows: My concern is growing after each day that passes without finalising the settlement proceedings. It is now one month to the day since agreement in principle was reached and the proceedings in the commission were dismissed.

DECISION OF PRIMARY JUDGE 62 The primary judge accepted the evidence of the sisters. In relation to Joseph he said this: 100 In short, there is nothing inherently improbable about Joseph's evidence. There was nothing in his manner of giving evidence which caused me to doubt either his credit or his accuracy of recollection. 63 However, he said there were major difficulties in accepting Victor's evidence: 1. Discrepancies between Victor's evidence and that of his legal advisers as to what he said to them after the first discussion. 2. It was not the case that the issues of the watch and Riad's care had been causing family disharmony. 3. Difficulties in the evidence that Victor and Joseph agreed that the agreement concerning the watch and Riad should be kept private, especially in Victor's attempted explanation of this. 4. Difficulty with the evidence that Joseph had suggested that this agreement be kept private, shortly after his legal advisers had said everything must be in the settlement document. 5. Victor's evidence was coloured by resentment. 64 As regards corroboration of Victor by his legal advisers, the primary judge said: 1. His legal advisers in fact contradicted him as to what was said after the first discussion. 2. Mr. Callanan's evidence as to what was said to him in the afternoon could not be accepted without reservation because it was not as stated in later letters, his evidence was affected by a passionate commitment to his client's cause, and it was not supported by Mr. Holmes and Mr. Crow. 3. In any event, even Mr. Callanan's evidence did not say that Victor asserted that the private matters were pre-conditions of the settlement. 65 The primary judge stated the following conclusions: 126 Victor bears the onus of establishing that a legally binding "private agreement" was made between the brothers on 5 February 2001 in the terms which he alleges and that the parties agreed that performance of that agreement was a pre-condition to the performance of the commercial agreement expressed in the Terms of Settlement. I am not satisfied on the balance of probabilities that Victor has discharged that onus.

ISSUES ON APPEAL 66 Victor relied on the following grounds of appeal: A. Findings in error 1. His Honour erred in making the following factual findings which were not open on the evidence, were inconsistent with other evidence and/or were glaringly improbable: (a) the disharmony within the family from 1998 onwards was caused solely by the commercial disputes between Victor and Joseph and not by Joseph's failure to return the father's watch or share in the care of Riad (J25); and that the sisters (especially Houda and Nadia) corroborated Joseph on this point (J15-25); (b) any advice given by West QC to Joseph about the ground rules for discussion was given immediately prior to the first private discussion between Victor and Joseph (J36-37,114, 115); (c) the evidence of Joseph should be preferred to that of Victor in respect to the first private conversation, at the IRC (J49); (d) the evidence of Holmes QC and Callanan on what Victor said to them shortly after the first private conversation supported Joseph's case (J49); (e) the evidence of Joseph should be preferred to the evidence of Victor in respect to the second private conversation, in the taxi (J52); (f) that the essential terms of the commercial settlement were disclosed by Joseph and Victor to the sisters at Houda's house (J56); (g) in respect to the third private conversation at Houda's house, Joseph's evidence should be preferred to Victor's in respect to the watch (J129), but in respect to the care of Riad neither brother's evidence would be accepted - in particular, Joseph may have said something to Victor about sharing in Riad's care (contrary to Joseph's evidence) but it did not amount to a promise (contrary to Victor's evidence) (J130); (h) that the evidence of Callanan corroborating Victor's version of the agreement, being a conversation with Victor at the IRC and then a conversation in Holmes QC's chambers should be rejected as overstated and coloured by his passionate commitment to Victor's cause (J121-123); (i) that the evidence of Crow corroborating Victor's version, which was accepted as true (J47), was to be diminished in assessing the overall effect of Victor's corroborative evidence (J130); (j) that Victor's corroborative evidence from Callanan, Crow and Holmes QC was insufficient in total to alter the balance to such degree that Victor's case should be accepted (J125); (k) that on 6 February Victor had no conversation with Joseph about the watch (J74, 95); (l) that the conduct of Callanan and Victor after 6 February, including the dispatch of letters, showed inconsistencies with Victor's alleged agreement (J83-86, 89-97, 122-123); (m) that Joseph's evidence was reliable and corroborated (J98-100); (n) that Victor's evidence as to the reasons for keeping the agreement private were implausible (J104-112); (o) that Victor's evidence was coloured by resentment at the ingratitude and indifference of family members for his efforts (J116); (p) that Victor's agreement to keep matters private evinced an intention not to enter legal relations (J124).

FACTUAL ISSUES 69 Mr. Justin Gleeson SC, in his written and oral submissions, has made extensive and detailed criticisms of the judgment of the primary judge, and has supported a finding that the conversations were as claimed by Victor. Accordingly, he submits that this Court should find that there was material error in the judgment of the primary judge that vitiated his decision, and this Court should either make a factual finding in favour of Victor or send the matter back for a new trial. 70 I have carefully considered these submissions, and have come to the view that they do not succeed. I can best express my reasons by setting out and commenting on the principal submissions, and then giving a broader view of the considerations that have weighed with me. I will focus on the submissions that allege error, rather than merely putting arguments that a different conclusion was warranted. 71 The first group of submissions concerned the primary judge's criticism of Victor's evidence that the issues concerning the watch and Riad's care had been causing family disharmony prior to the entry into the terms of settlement. In fact, Mr. Gleeson submitted, two of the three sisters had said that the custody of the watch remained an issue, Joseph admitted the same, and the sisters generally confirmed that the care of Riad remained an issue. The primary judge had said that Joseph did not see Victor's letter of 13 January 1999 and did not know that Victor regarded the care of Riad to be an issue; but in fact Joseph admitted the contrary in evidence. The primary judge was in error to find that family disharmony leading up to the terms of settlement was caused solely by commercial disputes between Victor and Joseph. 72 In my opinion, the evidence of the sisters generally supported the view that the watch and the care of Riad were not major overt causes of family disharmony leading up to the terms of settlement; but, for reasons given by Mr. Gleeson, the primary judge was in error on the question whether Joseph saw the letter of 13 January 1999 and knew the care of Riad to be an issue, and in holding that family disharmony was caused solely by commercial matters. The circumstance that the watch and the care of Riad were raised in the IRC proceedings by Victor is itself an indication to the contrary; although I would remark that this point is somewhat two-edged for Victor, because it impacts on his claim that the resolution of these matters had nothing to do with the resolution of the IRC dispute, and his claim that he was concerned that these matters should be kept private. I will return to the question of whether these errors by the primary judge, either alone or in combination with other errors, were sufficient to vitiate his decision. 73 The next group of submissions concerned the primary judge's finding that the first discussion on 5 February 2001 occurred shortly after Joseph had received legal advice to the effect that everything had to be documented. The main point made by Mr. Gleeson was that the primary judge found that this advice was given in the presence of Mr. Chaffey, at the IRC and before the first meeting, whereas in fact Mr. Chaffey did not arrive at the IRC until the first meeting was already under way. Mr. Gleeson also submitted that the primary judge was in error in saying that Mr. Neil was not challenged on his evidence as to this point. 74 However, Mr. West asserted that his advice was given before negotiations between Joseph and Victor commenced, and he was not cross-examined. Mr. West did say he gave this advice in Mr. Chaffey's presence, but if it was intended on that basis to challenge his assertion that the advice was given before negotiations commenced, one would have expected that this would have been put to Mr. West. Although the primary judge may well have been in error to assert that the advice was given in the presence of Mr. Chaffey, in my opinion the probabilities strongly favour the conclusion that the advice was given before the negotiations commenced, and the error of the primary judge is immaterial. 75 In any event, if the advice was given after the first meeting, and if Joseph had at that first meeting made side agreements which were to be kept secret, the high probability is that he would have responded to the advice by saying something about these side agreements, and plainly he did not do so. So even if the advice was given after the first meeting, the fact that this advice was given would still weigh against Victor's version. 76 Next, Mr. Gleeson criticised the judge's conclusion that the evidence of Mr. Holmes and Mr. Callanan to the effect that, after the first meeting, Victor merely told them that there were private matters that needed to be sorted out, counted against Victor's case: it was entirely plausible that Victor would not have gone into details at that time. 77 What this overlooks is that Victor's evidence was that he did then tell at least Mr. Holmes and Mr. Callanan that the principal elements of the settlement included an agreement that Joseph return the watch and share the duties of looking after Riad; and that evidence was contradicted by Mr. Holmes and Mr. Callanan. 78 Mr. Gleeson then submitted that, whereas the primary judge said that Joseph's evidence that the sisters were told the terms of the settlement was corroborated by the sisters, at best their evidence merely corroborated that the agreement concerning the Northbridge units was mentioned. 79 In my opinion, even that amounted to significant contradiction of Victor's evidence that nothing was disclosed. 80 Mr. Gleeson submitted that the primary judge's finding that, when Victor handed over the cheque for $570,000.00, there was no conversation about the watch or Riad, was contrary to Victor's evidence, corroborated by Mr. Callanan and not disputed by Joseph, that Victor had asked for the watch. 81 This appears to be an error, but one that is immaterial. 82 Mr. Gleeson's next group of submissions concerned the primary judge's finding that Mr. Callanan's letters of 3 April 2001 and 17 April 2001 were not in accord with the private agreement now alleged by Victor; whereas Mr. Blackwell's oral evidence confirmed that on 3 April 2001, Mr. Callanan had informed him there was a secondary agreement in relation to the watch and the care of Victor's and Joseph's brother. 83 However, this submission does not meet the most important problem with the letters, apart from their timing, namely their failure to assert a concluded agreement to share equally in the care of Riad. 84 Mr. Gleeson then submitted that the primary judge was in error in saying there was no inconsistency in Joseph's evidence, since the primary judge had found, contrary to Joseph's evidence, that the matter of Riad was discussed. There were also inconsistencies between Joseph's evidence and that of his legal advisers, for example his assertion that he told them on 5 February 2001 that Victor asked about the watch and he had said that Victor could not have it, and also his assertion that he was not aware what the alleged private agreements involved until he saw the letter of 17 April 2001 (contrary to Mr. Blackwell's evidence concerning what happened on 3 April 2001). 85 In my opinion, there were factors such as these detrimental to Joseph's credibility which were not adequately dealt with by the primary judge; but in my opinion, Victor's case failed before the primary judge not because of positive acceptance of Joseph's evidence, but because of problems with Victor's evidence. For that reason, there is a question whether these matters were material to the primary judge's decision, to which I will return. 86 The next group of submissions by Mr. Gleeson concerned the primary judge's adverse comments concerning Victor's explanations of keeping the alleged agreement private. 87 In my opinion, no error is shown in the primary judge's comments on this matter, and in my opinion this matter is a substantial consideration weighing against Victor's evidence. 88 Mr. Gleeson submitted it was not open to the primary judge to find that Victor's evidence was coloured by resentment, since this was not put to Victor in cross-examination or sourced to particular events. 89 In my opinion, this was an observation that the primary judge could appropriately make concerning a witness whose credit was strongly challenged, without specific matters of resentment having been put to the witness; and in my opinion, the observation is supported by much that Victor wrote and said, beginning with his letter of 1 September 1998 and continuing up to the way he gave evidence in the case. 90 Mr. Gleeson submitted that the evidence of Mr. Callanan as to what Victor said to him on 5 February 2001 should not have been rejected, when this evidence was not directly challenged; and particularly the primary judge should not have relied on "passionate commitment" as a reason, when this was not put to Mr. Callanan. 91 On the question of what was to be made of Mr. Callanan's evidence, as well as the evidence of Victor and Joseph, I think it is important to keep in mind the considerations which were very well expressed by McLelland CJ in Eq. in Watson v. Foxman (1995) 49 NSWLR 315 at 318-9: Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s52 of the Trade Practices Act 1974 (Cth) (or s42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration. That is the position in the present case. 92 Although this passage is directed in terms to allegations of misleading conduct, much of what was said applies also to allegations of contractual statements and evidence of contemporary accounts of such statements given by a person claiming to have heard them. 93 Mr. Callanan was cross-examined at length. Since the cross-examiner could have no instructions as to just what was said between Victor and Mr. Callanan on 5 February 2001, there was some inhibition on the cross-examiner putting to Mr. Callanan directly that what he said was incorrect. In my opinion, the whole conduct of the case showed clearly that it was Joseph's contention that there was no collateral agreement, and that therefore it was very unlikely that Victor would on 5 February 2001 have told Mr. Callanan what Mr. Callanan said he told him. Further, Mr. Callanan was questioned (Black 210-214) about his drafting of cls.2 and 11 of the draft deed, and his advice to his client, the suggestion being that these clauses were inconsistent with the existence of a collateral agreement and with Mr Callanan having been informed of the existence of such an agreement. 94 Mr. Callanan's attention was drawn to the letter he had sent to Mr. Chaffey on 4 February 2001, and he agreed it would have been better not to send it. In my opinion, it was not necessary to put explicitly to Mr. Callanan that he was passionately committed to his client's cause in such a way as could, at least unconsciously, colour his evidence. The comment was open to the judge in relation to a witness whose evidence was plainly under challenge, and there was a sufficient basis for it. 95 I would add that another illustration of Mr. Callanan's commitment to his client's cause may be seen from the third paragraph of his letter of 22 February 2001 (par.[35] above), considered in the light of his evidence at Black 217F-J concerning his letter of 12 February 2001, and his evidence at Black 219B-F concerning his facsimile of 15 February 2001. At the Black 217, his evidence was as follows: Q. And your client approved you sending this document? A. That was my understanding at the time.

Q. So, is it right to summarise that as saying that when you used the expression "matters in dispute" you are referring to the subject matter of the IRC proceedings? A. And any dispute no matter how it arose between the two brothers in performing services. They were all cleaned up as of 6 February 2001. 97 In my opinion, this would be a most unconvincing explanation of why a solicitor would have done what Mr. Callanan did, if he knew there was an important agreement which was part of the settlement yet which was not being recorded. 98 I note that both Victor and Mr. Callanan gave evidence that agreement about the two matters was brought to the attention of Mr. Holmes and Mr. Crow. I think it most unlikely that Mr. Holmes and Mr. Crow would have permitted the signing of the terms of settlement, including cl.9 and the second schedule, if they had been informed there were matters which were part of the agreement but were not included in the terms of settlement, at least without careful advice and express instructions. I think it unlikely that they would have let the matter pass without advising that Victor at least obtain a letter from Joseph setting out these private arrangements. Mr. Holmes and Mr. Crow did not recall being given such information, except to the limited extent indicated by Mr. Holmes's affidavit filed in the IRC proceedings. 99 In all the circumstances, in my opinion the primary judge was amply justified in not accepting Mr. Callanan's evidence as to what he was told by Victor on the day. This does not mean that Mr. Callanan was an unsatisfactory witness, much less a dishonest one, but merely that he is subject to ordinary fallibility of the kind discussed in Watson v. Foxman. 100 Mr. Gleeson also made submissions supporting the probability of Victor's case, to the effect that Victor was very much concerned about the two matters, he felt he was in a strong position in the IRC proceedings, and it was most unlikely he would have given ground by offering two units on 5 February 2001 unless he had obtained satisfaction on the two matters that concerned him. It was highly unlikely, he submitted, that Victor would have been content with Joseph's rebuff concerning the watch and a loose assurance concerning Riad. 101 As mentioned earlier, there were factors detrimental to Joseph's credibility that were not adequately dealt with by the primary judge. In particular, in my opinion it was clear on the whole of the evidence that (as found by the primary judge) the care of Riad was mentioned in discussions in a way that must have given some encouragement to Victor, and in my opinion the discussions concerning the watch must also have been not entirely unsatisfactory to Victor. Joseph's evidence to the contrary of these propositions was wrong, and I would not regard Joseph as a reliable witness as to the content of the conversations. 102 However, in my opinion there were stronger reasons not to consider Victor to be a reliable witness. One matter to which the primary judge did not give the significance that I think it deserves concerns the contrast between what Victor asserted in his letter of 1 September 1998 and the contents of his company's tax return for the year ended June 1998, which was explored in cross-examination of Victor at Black 163-166. In my opinion, this matter seriously undermined the credibility of Victor as a witness, and also undermines the thrust of Mr. Gleeson's positive argument on the probabilities. 103 In his letter of 1 September 1998, Victor flatly rejected Joseph's claim for $2.4 million. Yet not long afterwards, he signed his company's tax return, claiming a loss that could be justified only if that $2.4 million, and indeed a further $375,000.00, was owing to Joseph. His attempt to say he relied on his accountant on this matter can carry little weight: he did not know if he had provided his accountant with his letter denying Joseph's claim, and in any event, a businessman of his experience should know that the tax return should be based on a true and fair view of the company's financial position, and that, where the amount of tax payable depended on the value of such a large and wholly disputed debt, a genuine attempt to assess its true value was required. 104 This matter was raised in affidavits in the IRC proceedings. It was obvious that Victor's denial that he owed Joseph anything, if made good in those proceedings, would demonstrate gross falsity of the tax return. Victor ran a risk of adverse tax consequences from any result that did not return to Joseph at least some part of this $2.775 million. In those circumstances, Victor's willingness to compromise, after holding out for as long as possible, is readily understandable. It is also wrong to suggest that it was only Victor who made concessions on 5 February 2001; Joseph also made concessions from his previous position. 105 The way Victor dealt with the inconsistency between his outright rejection of Joseph's claim and what he asserted to the tax commissioner would justify a finding that he was not an honest witness. His letter of 1 September 1998 and other evidence in the case suggest that Victor is more than usually inclined to think of himself as being in the right and other people as being in the wrong, and to adjust his perception of the facts accordingly, either consciously or unconsciously. Another example of this is that, if Mr. Callanan's evidence concerning his letter of 12 February 2001 and the change of position in his facsimile of 15 February 2001, set out above, is correct, the reason why the deed was not finalised at that time was because of a change of mind by Victor, and subsequent attempts by Victor to improve his perceived taxation position; yet despite this, Victor attributed the whole blame for non-completion of the deed to Joseph. 106 All these considerations lead me to the view that the primary judge's errors were not material. He correctly held that Victor had not proved his case. However, if the primary judge's errors were material, in my opinion Victor's evidence does not have sufficient credibility to justify the ordering of a new trial, much less a decision in his favour on this appeal. In coming to this conclusion, I have regard particularly to Victor's unreliability, but also to the consideration that if an agreement as alleged by Victor had been made, it is highly likely that Victor's legal advisers would have been told and the drafting of the deed and the terms of settlement would not have proceeded as it did; to the way the alleged private agreement was raised for the first time on 7 March 2001 when Victor was attempting to revise the previously-agreed deed to improve his perceived taxation position; and also the considerations set out in Watson v. Foxman. 107 Accordingly, in my opinion the appeal fails on factual issues. Victor has failed to establish what was said in the three private conversations, and has failed to establish that whatever was said in these three conversations amounted either to an agreement to return the watch and/or share equally in the care of Riad, or to a representation that Joseph would do so.

OTHER ISSUES 108 It is not necessary for my judgment to resolve the legal issues that could otherwise arise. However, I will make some brief comments. 109 In my opinion, even if Victor's evidence was accepted, he would be precluded from relying on a collateral agreement by cl.9 and schedule 2 of the terms of settlement: see Hoyts Pty. Limited v. Spencer (1919) 27 CLR 133. 110 There is a substantial question whether, if representations were made as alleged by Victor, Victor could rely on the Fair Trading Act. I accept that a representation made in the course of settling legal proceedings could be made in trade or commerce, if the conduct of the legal proceedings was part of the representor's commercial enterprise or if the legal proceedings were an incident of a commercial relationship between the representor and the representee: cf. Stockland (Constructors) Pty. Limited v. Retail Design Group (International) Pty. Limited [2003] NSWCA 84 at [18]-[23]. However, if the commercial relationship were at an end, and the legal proceedings could not be regarded as part of any ongoing commercial enterprise of the representor, there is a real question whether such representations would be considered as made in trade or commerce. It is not necessary to decide this in this case. 111 I do not think Hoyts v. Spencer, or cl.9 and schedule 2 of the terms of settlement, would defeat a claim in estoppel, although there is a substantial question whether, even if representations were made as alleged by Victor, the elements of estoppel would have been made out in this case. If the elements of estoppel had been made out, that could justify it being made a condition of enforcement of the terms of settlement that Joseph return the watch. I am doubtful that it could justify any particular condition concerning the care of Riad. The Court would not impose a condition that would in substance amount to specific performance of a promise to share equally in the care of Riad: that is the kind of promise which could not be the subject of an order for specific performance. I do not think the Court would order an enquiry as to damages, since the question is not whether Victor has suffered damage because the promise was not carried out, but rather what is the relief required to remedy the change of position and Joseph's unconscionable behaviour. There was evidence from Rosemary that Riad was subsequently not living with Victor or being supported by him. I think it likely that, if estoppel had been made out, there could not have been any remedy in relation to the care of Riad.

Waltons Stores (Interstate) Ltd v Maher

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