Supreme Court New South Wales Medium Neutral Citation: Sapra Enterprises Pty Ltd v Cooper [2021] NSWSC 58 Hearing dates: 13, 14, 29, 30 and 31 July, 13 and 21 August 2020. Final submissions 19 November 2020. Decision date: 09 February 2021 Jurisdiction: Equity Before: Robb J Decision: The plaintiff is entitled to judgment against the first and second defendants for the amounts claimed. See par [189]. Note pars [245] to [249] and the directions stated therein. Catchwords: CONTRACTS –– Remedies –– Debt –– where no defence by guarantor and debtor to claims by creditor under written loan agreements CONTRACTS –– Misleading conduct under statute –– misleading or deceptive conduct –– where evidence does not establish such conduct CONTRACTS –– Unconscionable conduct –– where evidence does not establish such conduct CORPORATIONS — Directors and officers — Directors' duties — where it is alleged that a director has breached his duties — no breaches of duty proved. Legislation Cited: Competition and Consumer Act 2010 (Cth) Conveyancing Act 1919 (NSW) Corporations Act 2001 (Cth) Cases Cited: John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 Watson v Foxman (1995) 49 NSWLR 315 Category: Principal judgment Parties: Sapra Enterprises Pty Ltd (plaintiff / second cross-defendant) John Allan Cooper (first defendant / second cross-claimant) Central Home Loans Pty Ltd (second defendant / first cross-claimant) Robert Walter Taylor (third defendant) Atkinson Prakash Charan (first cross-defendant) Representation: Counsel: G Waugh SC / M Rabsch (plaintiffs and cross-defendants) J Cooper (self) (defendants and cross-claimants) Solicitors: Virtue Legal (plaintiffs and cross-defendants) File Number(s): 2018 / 226205 Judgment 1. The plaintiff in these proceedings is Sapra Enterprises Pty Ltd (Sapra). At relevant times Sapra has engaged in the business of making short-term commercial loans. 2. Sapra is part of a group of companies controlled by Mr Atkinson Prakash Charan (sometimes called Kash). Mr Charan is the first cross defendant. 3. The first defendant is Mr John Allan Cooper, who is a senior person with experience in the finance broking industry. 4. Mr Cooper said that he served in the Royal Navy and the Royal Australian Navy for 22 years before relocating to live in Australia and entering the commercial workforce. Since that time he has been employed in recruiting, sales and finance related roles and as a contractor to a number of businesses providing professional advice and business development services. He is actively involved in the community, volunteering as a member of the Policy Advisory Group (NSW) to National Seniors Australia, chair of the RCSA ethics committee (which I take to be a reference to the Recruitment, Consulting and Staffing Association of Australia and New Zealand) and a member of the New South Wales government Indigenous Employment Committee. Mr Cooper did not give detailed evidence of his experience in the finance broking industry. 5. Central Home Loans Pty Ltd (CHL) is the second defendant and a company that was incorporated for the purpose of creating a finance broking business whose affairs have led to the present proceedings. 6. The third defendant was Mr Robert Walter Taylor. Sapra discontinued these proceedings against Mr Taylor by notice of discontinuance filed on 28 July 2020. Mr Taylor has some residual relevance to these proceedings. I will deal with that issue at the end of these reasons. The proceedings 1. The proceedings were commenced by statement of claim filed by Sapra in the District Court on 23 July 2018. 2. Sapra claimed an amount of $468,880 plus interest in respect of three loans made to CHL. Sapra also claimed the same amount from Mr Cooper as a guarantor of the loans. Mr Cooper and CHL have filed defences and cross claims. I will consider the pleadings in more detail below. 3. The proceedings were heard over the period 13 and 14 July, 29, 30 and 31 July and 13 and 21 August 2020. Sapra delivered written submissions on 4 September 2020 and Mr Cooper and CHL, who I will collectively call the defendants, responded on 5 November 2020. Sapra delivered reply submissions on 19 November 2020. 4. Sapra was represented throughout the hearing by senior and junior counsel. Mr Cooper represented himself and CHL. 5. Mr Cooper was responsible for preparing the defence and the cross claim. From the terms of the pleadings it appears likely that Mr Cooper had some assistance from a legally qualified person, although, as will be seen, there are some unexpected inconsistencies between the two pleadings. 6. It is necessary to observe that the transcript pages were sequentially numbered for 13 and 14 July 2020, but the pagination recommenced at page 1 on 29 July 2020 and continued sequentially thereafter. Consequently, it will be necessary to refer to the transcript for the first two days by using the letters TA and make transcript references for the balance of the hearing by using the letters TB. Relevant company information 1. It will be appropriate to add the following by way of elaboration of the position of the parties and other persons relevant to the events the subject of this matter. 2. CHL was incorporated on 23 June 2017. Its initial director was Mr Cooper. On 4 August 2017, Mr Christian Oey was appointed as a further director of the company. Mr Oey was a gentleman who apparently had various business relationships with Mr Charan. Mr Oey ceased to be a director of CHL on 12 December 2017. Mr Charan was appointed as a director of CHL on the date Mr Oey resigned. Mr Charan resigned as a director of the company on 14 May 2018. Mr Cooper continues as the sole director of CHL. 3. Initially, all of the 100 ordinary shares in CHL were issued to Mr Cooper. It appears that, on 8 August 2017, 70 shares in CHL were transferred to ACCO Partners Pty Ltd (ACCO). It appears that on the same date Mr Cooper transferred his 30 shares to a company controlled by him called NTL Group Pty Ltd (NTL). I note that both Mr Cooper [1] and Mr Oey [2] said that Mr Cooper was to have 20% of CHL and that a provision to that effect was included in a shareholder's agreement to which reference will be made below. 4. ACCO was incorporated on 29 June 2017. Mr Oey was its sole director. Mr Oey retired as a director on 28 November 2017 and Mr Charan was appointed in his stead. The shares in ACCO were initially held equally by companies controlled by Mr Oey and his wife, being Ashburton Consolidated Investments Pty Ltd (Ashburton), and by Mr Charan, being JDC Global Partners Pty Ltd (JDC). As I interpret the ASIC Extract for ACCO, Ashburton transferred its shares in ACCO to JDC on 27 November 2017. 5. The evidence discloses little detail about the business relationship between Mr Charan and Mr Oey. Those gentlemen had an acrimonious falling out at the end of 2017, which led to Mr Oey resigning as a director of ACCO and CHL and being replaced by Mr Charan. Ashburton's shares in ACCO were also transferred at the time to JDC. Mr Charan made an unsubstantiated assertion as to the reason for the falling out, but the evidence does not permit the Court to make any positive finding on that issue. 6. The evidence does establish that Mr Oey and his wife were made bankrupt at the suit of Sapra. The evidence is ambiguous as to whether the application was based upon the liability of Mr Oey and his wife under the loan agreements the subject of these proceedings. [3] 7. It is material to note that up until the end of 2017 Mr Oey took significant responsibility for the management of the business of CHL. This period was during CHL's start-up phase. The cessation of Mr Oey's involvement in the business of CHL may have had a material effect on the success of its operations. Sapra's claim 1. Sapra's claim against the defendants was based upon three formal written loan agreements made on 21 September 2017, 2 November 2017 and 29 March 2018. In each case the borrower was CHL. The amounts of the advances were $100,000, $300,000 and $68,800 respectively. Mr Cooper, Mr Oey and his wife were parties to the first two loan agreements as guarantors. Mr Cooper alone was the guarantor under the third loan agreement, as that loan was made after Mr Oey had ceased his involvement in the business of CHL. 2. There is no issue about the fact, and the evidence clearly proves, that Sapra made each of the loans the subject of the loan agreements. The $100,000 the subject of the first loan agreement was actually paid by a different company associated with Mr Charan, being JJC Group (Aust) Pty Ltd ATF Denzel Deepak Trust, but it is clear that the payment was made by that company for reasons of urgency. Additionally, within the companies controlled by Mr Charan, the loan has been accounted for as a loan made by Sapra. 3. Each of the loan agreements was duly executed by all of the parties to it. In each case the party or parties who were guarantors and indemnifiers were clearly described as the guarantors or the guarantor. There was separate provision in the execution clause for the loan agreement to be signed by the directors or the director of CHL on behalf of that company and for the guarantors to sign separately in their personal capacities. 4. At one point Mr Cooper appeared to challenge the proposition that he executed the loan agreements separately as a guarantor, as opposed to signing them as a director of CHL. He ultimately admitted, when shown the execution clauses, that he signed in his personal capacity. [4] It is clear on the evidence that the guarantors duly executed each of the loan agreements validly in their personal capacities. 5. Although each document was described as a loan agreement, it is clear from its wording that it took effect as a deed of loan. Terms of loan agreements 1. The three loan agreements were not drawn in identical terms but they had materially the same effect, save for necessary differences in the statements of the amounts advanced and dates of repayment of principal and interest. 2. It will be convenient to take as representative the terms of the second loan agreement, dated 2 November 2017, as that was for the largest advance. Relevantly: 1. Recital A provided: "The borrower has requested, and the lender has agreed, to advance three hundred thousand dollars ($300,000) to the borrower". 2. In the definition provision, clause 1(c) provided: "'Commencement date' means 23 October 2017 with interest not to commence until the 1st day of January 2019". 3. "Interest payment dates" was defined in clause 1(e) to mean 1 February 2019. 4. Clause 1(f) defined the interest payable. "Acceptable Rate" meant 2.5% per calendar month, being $7,500 per month. "Higher Rate" was defined as 5% per calendar month, being $15,000 per month. 5. The "Repayment date" was defined in clause 1(i) as meaning 1 January 2020. However, both Sapra and CHL could require prepayment or repayment on 30 days written notice without penalty. 6. Clause 11 gave Sapra a right, at its option, to make the full outstanding amount of the loan due and payable without the necessity for any demand or notice to CHL, if any of the events of default in clause 12 occurred. 7. The events of default included, by clause 12(a), the failure by CHL to repay the loan on the repayment date or failure to pay any instalment of interest on the relevant interest payment date where such failure continues for more than five business days. 8. The guarantee was created by clause 14, which included an express acknowledgement by the guarantors that "the loan to the borrower was made at their request to the lender and in consideration of that advance". 9. Clause 22 was an 'entire agreement' provision in the following terms: The covenants and provisions contained in this agreement exclusively and completely state the rights of the borrower with respect to the loan. This agreement supersedes all negotiations and prior agreements, whether written or oral, in respect of the loan… 1. In the case of the 21 September 2017 loan agreement, the amount of the advance was $100,000, the Commencement date was left blank as to the day, being a date in September 2017, and interest was stated as not commencing until 1 January 2018. The interest payment date was stated to be 1 January 2018. The Acceptable Rate and the Higher Rate of interest were the same percentages per calendar month as for the $300,000 loan. The repayment date was stated to be 31 December 2018, but with the same entitlement to prepay or require repayment. 2. The third loan agreement for $68,880 was different from the others because, as mentioned, Mr Oey and his wife were not guarantors. The repayment date was stated to be 1 July 2018, and there was only one interest rate, being the Higher Rate of 2% per calendar month. 3. Clause 11 of the third loan agreement, which provided for the guarantee by Mr Cooper, also contained an express warranty that Mr Cooper was aware of the nature and effect of the guarantee and that he had chosen not to obtain independent financial advice before executing the agreement. Among other things, clause 12 noted that CHL and Mr Cooper had been invited to obtain independent legal and financial advice before executing the agreement. 4. It is clear that Sapra will be entitled to the judgment that it seeks in this matter unless some aspect of the defence or the cross claim requires a contrary result. Defence 1. The defendants filed a defence on 16 October 2018. The responses to Sapra's claims based upon each of the three loan agreements substantially mirrored each other, even though the circumstances in which each of the loans was made were significantly different. 2. In each case: 1. The defendants admitted that the parties to the loan agreement had executed the document on or about the date that it bore. [5] 2. They admitted that it was a term of the agreement that Sapra would advance the relevant amount, which was to be repaid on the stated date, and that CHL was to repay the interest provided for in the agreement with interest not to commence until the stated date. [6] 3. The defendants admitted that the guarantor parties had guaranteed all of the obligations undertaken by CHL. [7] 4. The defendants denied that the loan agreements contained any terms to the effect that interest instalments were payable on the first day of each month and that the "relevant interest payment date was the date stated in the relevant loan agreement". The defendants alleged that the interest was payable on the date specified for the repayment of the principal. [8] 5. In each case Mr Cooper denied that any of the guarantees given by him were supported by valuable consideration. [9] 6. Mr Cooper alleged that in the case of each of the loan agreements he was entitled to give a notice under s 925A of the Corporations Act 2001 (Cth) which would result in the rescission of the loan agreement. [10] 7. The defendants alleged that they entered into the loan agreements on the faith of misleading or deceptive representations made by Sapra as follows: [11] Representations made by [Mr Charan] to the effect that interest would not be charged on the [Relevant] Loan Agreement and that any sums advanced under the [Relevant] Loan Agreement would be used to generate business for the benefit of [CHL]… 1. It will be seen that the first part of this representation, concerning the charging of interest, is inconsistent with the terms of each of the loan agreements. The second part of the representation concerning the use to which the borrowed money would be put was no more specific than that it would be used to generate business for the borrower. 2. The defendants also in response to each of the loan agreements made an allegation that Sapra's conduct was unconscionable in all the circumstances in breach of s 21 of the Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law) as follows: [12] By procuring the entry into the [Relevant] Loan Agreement and by enforcing any rights under the [Relevant] Loan Agreement, [Sapra] has engaged in conduct in trade or commerce in connection with the supply or acquisition of goods or services that was unconscionable in all the circumstances. 1. This is an extraordinary allegation that it is unconscionable for a lender to make a loan and then to enforce its rights to repayment. 2. In response to each of the loan agreements, the defendants alleged that Mr Cooper was not liable under the guarantee for the following reasons: [13] [Mr Cooper] is not liable in respect of the [Relevant] Guarantees, in whole or in part, by reason of the negligent and detrimental way in which the business of [CHL] was operated by the sole director of [Sapra, Mr Charan], and whose conduct and knowledge is attributable to [Sapra], which materially prejudiced [Mr Cooper] and prejudiced [CHL's] ability to meet any obligations in respect of the [relevant] loan agreement. 1. This defence asserts that Mr Charan conducted the business of CHL as a representative of the lender, Sapra, instead of the business being conducted by Mr Cooper and Mr Oey, and that Mr Charan did so so negligently and detrimentally to CHL's business that the legal consequence was that Mr Cooper was relieved of his liability as guarantor under the three loan agreements. 2. The defendants also pleaded that Mr Cooper was not liable under his guarantee in respect of any of the loan agreements because it was a condition precedent to his liability under a term of the loan agreement that Sapra make a demand against him, and that no such demand had been made or alternatively no effective demand had been made. [14] 3. The defendants alleged that the term of the first loan agreement that entitled Sapra to accelerate the obligation to pay all outstanding monies on default was void as a penalty, although the defendants did not rely upon the same defence in respect of the later loan agreements. [15] 4. The defendants pleaded a specific defence to Sapra's claim on the November loan agreement that was not repeated in respect of the other loan agreements. The operative part of the allegation was as follows: [16] ii. Each of the November Guarantees was given: 1. in consideration for [Sapra's] promise to use any sums provided under the November Loan Agreement for the purpose of generating 1000 or more new loan applications for [CHL's] business by the end of November 2017 (November Loan Promise); and Particulars a. The promise was conveyed orally by [Sapra] through its sole director, [Mr Charan], in October 2017 in a conversation with Christian Oey and [Mr Cooper] at a meeting held at the offices of [CHL] at level 6, 287 Collins Street, Melbourne, Victoria, 3000. 2. on condition that [Mr Charan], being [Sapra's] sole director, would generate 1000 or more new loan applications for [CHL's] business by November 2017 (November Loan Condition); Particulars a. The condition was conveyed orally by [Sapra] through its sole director, [Mr Charan], in October 2017 in a conversation with Christian Oey and [Mr Cooper] at a meeting held at the offices of [CHL] at Level 6, 287 Collins Street, Melbourne, Victoria, 3000. iii. Neither the November Loan Promise nor the September [read November] Loan Condition was performed or satisfied at any material times; and iv. In the premises, [Mr Cooper] is not liable in respect of the November Guarantees, in whole or in part… 1. This defence assumes that if Mr Charan made the statements alleged, they were made in his capacity as a representative of Sapra. It is also based upon the proposition that there was a contract between Sapra and the parties to the November loan agreement, including the guarantor Mr Cooper, that had the effect that generating 1,000 or more loan applications was a condition precedent to liability under the guarantee. Cross claim 1. The defendants' cross claim was filed on 16 October 2018, the same date as their defence. The first defendant to the cross claim is Mr Charan and the second defendant is Sapra. It appears that some aspects of the cross claim mirror that of the defence, and some do not. 2. It is difficult to understand the relationship between the relief claimed and the allegations of fact made in the cross claim. 3. The defendants claimed the following relief: 1 Compensation under s1317H of the Corporations Act 2001 (Cth). 2 Injunctions under s 1325 of the Corporations Act 2001 (Cth). 3 Damages under s 236 of the Australian Consumer Law in Schedule 2 to the Compensation and Consumer Act 2010 (Cth) (Australian Consumer Law) (or, in the alternative, s 1041I of the Corporations Act 2001 (Cth)). 4 Orders under ss 237 and 243 of the Australian Consumer Law as pleaded herein… 1. The cross claim pleads claims against Mr Charan for breach of director's duties and for misleading or deceptive conduct and unconscionable conduct in breach of ss 18 and 21 of the Australian Consumer Law, and alleges that Sapra is liable on an ancillary basis for Mr Charan's breaches. 2. In essence, the defendants relied upon the duties in s 181 of the Corporations Act 2001 (Cth) (Corporations Act) of a director to act in good faith and in the best interests of the company and in s 182 of the Corporations Act not to use his or her position improperly to gain an advantage or to cause detriment to the company. [17] 3. As Mr Charan only became a director of CHL on 12 December 2017, the operative allegation of breach of director's duty [18] was that Mr Charan caused CHL to enter into the March Loan Agreement, caused Sapra to accelerate the date for repayment under the September and November Loan Agreements, and caused Sapra to take steps to enforce each of the three loan agreements. 4. The defendants made a separate allegation to the effect that Mr Charan breached his director's duties because [19] he "purported to resign as a director of [CHL] in order to accelerate the date for repayment under the September and November loan agreements and to cause Sapra to take steps to enforce each of the loan agreements". 5. The defendants alleged [20] that Mr Charan had breached director's duties because he exercised his powers for the benefit of Sapra and not CHL and to gain an advantage for Sapra and not CHL. 6. Thus, the defendants claimed that Mr Charan is liable to them because, being a director of Sapra, the lender, and also a director of CHL for a period, he breached director's duties that he owed to CHL by causing Sapra to enforce its legal rights against CHL. 7. The misleading or deceptive conduct claim pleaded by the defendants in the cross claim was based upon the following alleged representations: 13 In October 2017 [Mr Charan] represented to [the defendants] that any sums provided under the November Loan Agreement (sic) for the purpose of generating 1,000 or more new loan applications for [CHL's] business by November 2017. 14 On or about 18th September 2017, [Mr Charan] represented to [the defendants] that interest would not be charged on the September Loan Agreement. 15 On or about 18th September 2018 [read 2017] [Mr Charan] represented to [the defendants] that any sums advanced under the September Loan Agreement would be used to generate business for the benefit of [CHL]. 1. It may be observed that the representations alleged did not mirror the representations pleaded in the defence. The defence contained allegations that interest would not be chargeable under any of the loans, but the cross claim only made such a claim in relation to the September loan agreement. The same observation can be made concerning the representation that money advanced under the September loan agreement would be used to generate business for CHL. Finally, no representations are alleged in relation to the third loan agreement entered into in March 2018. 2. Notwithstanding that the defendants had pleaded that Mr Charan made representations in the context of both the September and the November loan agreements, in the cross claim they only alleged that they had entered into the September loan agreement in reliance upon the representations. [21] 3. The defendants then [22] interposed an allegation that, by procuring the entry by the defendants into the September loan agreement and by enforcing any rights under that loan agreement, Mr Charan and Sapra had engaged in conduct in trade or commerce in connection with the supply or acquisition of goods or services that was unconscionable in all the circumstances in breach of s 21 of the Australian Consumer Law. 4. The defendants then [23] alleged that they have suffered loss and damage because of the conduct of Mr Charan and Sapra in breach of ss 18 and 21 of the Australian Consumer Law (or in the alternative s 1401H of the Corporations Act). 5. Finally, [24] the defendants alleged that they are entitled to damages and orders under ss 237 and 243 of the Australian Consumer Law declaring "any or all of the September Loan Agreement void, voidable or unenforceable or refusing to enforce the September Loan agreement, or, in the alternative, varying the September Loan Agreement, as the Court may think fit". Resolution of outstanding pleading issue 1. It is necessary to interpose a pleading issue that arose during the course of the hearing. 2. During the hearing, when reflecting upon the terms of the cross claim and trying to understand its effect, I came to appreciate that the defendants had alleged in par 13 that Mr Charan had made a representation to them in October 2017 concerning what would be done with the amount of the advance under the November Loan Agreement. But then the defendants had omitted to refer to that representation, or anything concerning the November Loan Agreement, in pars 19 to 22 of the cross claim where they had set out their allegations concerning the effect of Mr Charan's conduct. As it appeared from the cross claim that it had been drawn by a layman in Mr Cooper, it seemed to me to be obvious that a mistake had been made, and by inadvertence express reference to the conduct in respect of the November loan agreement had been omitted from the cross claim. That conclusion seemed to be relatively clear from the use in par 20 of the expression "orders… declaring any or all of the September Loan Agreement void et cetera". The words "any or all" were followed only by reference to one of the loan agreements. 3. In order to ensure that there was no misunderstanding or unfairness concerning the effect of the cross claim, I raised the issue during the hearing. [25] 4. The defendants applied for leave to amend their cross claim. The application was made on about 13 August 2020. The proposed amended cross claim was marked as MFI 4. It was necessary for me to advise the parties that I would reserve judgment on the application to amend and deal with the issue in my reasons for judgment. 5. The cross defendants advised the Court that they would oppose the defendants being given leave to amend their cross claim. The cross defendants' final written submissions set out the grounds relied upon by the cross defendants for the Court to deny leave. [26] 6. A number of the amendments corrected obvious typographical errors in the original cross claim. 7. The defendants sought to amend par 15 of the cross claim by deleting the words "On or about 18 September 2018" and the word "September" in the expression "September Loan Agreement" and inserting in lieu "In October" and "November" respectively. Thus, the defendants sought to change par 15 from an allegation that Mr Charan made a representation to them as to how the September advance would be used to a representation in relation to how the larger November advance would be used. 8. The other amendments that the defendants sought to make were to pars 19 and 20. In essence, where the cross claim had referred to "the September Loan Agreement", the amendments would have the effect of changing the reference to "the September and November Loan Agreements" or words to equivalent effect. 9. My ruling is that leave is not given to amend clause 15 in the manner sought, but the amendments sought in relation to paragraphs 19 and 20 may be made. 10. As to par 15, the amendment, if allowed, would introduce a material change into the pleading, as it would alter the claim from a representation made before the September loan agreement into one made before the November loan agreement. Although there may be grounds for concluding that the cross defendants' defence of the cross claim was so thorough that it would have covered the change, I accept the submission by counsel for the cross defendants that it was too late for the defendants to change their case so late in the hearing after virtually all of the evidence had been received, particularly the evidence of Mr Charan. 11. As I have already observed, the cross claim does not mirror the equivalent allegations in the defence, so it cannot be said that the cross-defendants ought to have approached the defence to the cross claim with an understanding that it was likely that the defendants had made an inadvertent omission from their pleading. The allegations made in the cross claim are significantly different from those made in the defence such that the cross defendants were entitled to assume that the differences were intentional. 12. I will give leave to the cross claimants to make the proposed amendments to pars 19 and 20, because those amendments will do no more than complete the allegations insofar as they are based on the representations alleged in pars 13 to 15 of the cross claim. The effect of the leave will only be to make the allegation in par 13 concerning the alleged representation in respect of the November Loan Agreement meaningful. 13. I am satisfied that the natural way to read the cross claim in its original form is that there was an obvious omission to refer to the effect of the representation concerning the November Loan Agreement in the later paragraphs of the cross claim. 14. I am also satisfied that the cross defendants will suffer no real unfairness, as the evidence and the cross-examination dealt extensively with the issue of whether Mr Charan had made some positive representation before the November loan agreement that the $300,000 to be borrowed would generate 1000 or more new loan applications for CHL. Reliability of testimonial evidence 1. It will first be necessary to make some observations on the credibility of the testimonial evidence given by the witnesses. 2. This is yet another case where it is appropriate to start by setting out the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319, which demonstrates how difficult it may be for parties to prove facts dependent upon recollection and oral conversations where there is no objective corroboration long after the event. His Honour said: 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. 1. The present case is one that epitomises the wisdom of his Honour's judgment, as it applies directly to the defences upon which the defendants primarily rely, which are based upon statements allegedly made by Mr Charan. 2. The observation of Hammerschlag J in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] that "the court must feel an actual persuasion" of the occurrence or existence of relevant facts is also of paramount significance, particularly in a case such as the present where the defendants seek to avoid liability under formal written agreements by relying upon alleged representations made by the party who otherwise would clearly be entitled to enforce those agreements. 3. For the reasons that follow, I have not found the testimonial evidence given by any of Mr Charan, Mr Cooper or Mr Oey to be persuasive or credible, such that I would make a finding as to the existence of a significant fact based solely on their testimony. That is so particularly where the testimony of any of the witnesses is inconsistent on the subject. 4. This is one of those cases where the only reliable course is for the Court to start with an examination of the documentary and other objective evidence and then to make findings, where possible, by deduction based upon the objective evidence. 5. That means that as Sapra's case is based upon formal documentation and incontrovertible facts, its case does not depend on the credibility of Mr Charan as a witness. The defendants' case fails for many reasons, but one is that it depends upon the precision and reliability of the evidence, primarily of Mr Cooper, concerning conversations and events observed by him. As I have not found Mr Cooper to be a reliable witness, the defence has failed. Mr Charan 1. Sapra submitted that Mr Charan's evidence ought to be accepted where it is in contest with Mr Cooper or Mr Oey. [27] Sapra acknowledged that Mr Charan conceded that he did not have a good memory for dates and said that "he gave his evidence in a forthright, if at times strident, and consistent manner". 2. I do not agree. Mr Charan consistently responded to questions put to him in reasonable tones by Mr Cooper in cross-examination in an unresponsive and rude manner in which Mr Charan was clearly trying to establish his own case. Mr Charan was among the least reliable witnesses that I have experienced. 3. Mr Charan frequently responded to reasonable questions put to him by Mr Cooper by asserting that the cross examiner was lying. [28] 4. The following extract from the cross-examination gives a representative sense of Mr Charan's conception of what a proper response to cross-examination was: [29] Q. At that meeting, and I was there so I know, there was a meeting regarding the reason for the $300,000 loan. The reason that I have put in my evidence is that it was based on an assumption from you that the marketing, of which I believe you were running at the time, and I will come back to that in a moment, said that you needed money for sponsorships, and in order to encourage myself and Mr [Oey] to take out the loan of $300,000, which to me is an awful lot of money for a small business only starting, only been running for about four months, you suggested that you were an expert in marketing and that you would personally guarantee to produce 1,000 loan applications by November 2017 and therefore you needed the money to do various things in marketing. What do you say to that, Mr Charan? A. That's lie. Let me explain to you what really happened. Marketing first things first. If I do recall, you said Christian Oey asked you to be the marketing and the driver of Central Home Loans when he had the discussions with you. The discussions with you yes, you did. If you refer to the transcript you said that. So no, I wasn't charged with marketing. I wasn't any of that roles at CHL. What I did do was, which I regret now because you were incompetent and you did put a very bad Q. Mr Charan, perhaps just tone your voice down A. No, no, no, you are incompetent, John Cooper, you are, and I'm telling you this is why HIS HONOUR Q. Mr Charan, it is not necessary to make comments like that. What you have been asked about is whether at a meeting in late 2017, I think in October FIRST DEFENDANT: Correct, your Honour. HIS HONOUR Q. you agreed to take a marketing role in the second defendant, and in particular whether you said that you would bring up to a thousand FIRST DEFENDANT: Loan applications. HIS HONOUR Q. loan applications to the company. The question is whether you agreed to do that or you didn't? A. No. Your Honour, I didn't. I was just giving a quick small explanation just to give the full picture of what I did say and how this has been construed to something that is an absolute lie… I did not put a gun to John Cooper's head. He signed it, he signed the agreement actually, he didn't. I think, as far as I can tell, I think it was Christian Oey agreed and signed it. John Cooper, I arranged a meeting with Mario Biasin and John Cooper to go and meet and do this deal. John HIS HONOUR: Mr Charan, I've allowed you to elaborate your answer a bit. I now understand what you say the arrangement was. We need to go back to Mr Cooper asking the questions. WITNESS: Sure. Thank you, your Honour. 1. Finally, the following extract is instructive : [30] Q…So, why, Mr Charan, did you in May, just prior to issuing demands, through your solicitors, for repayment of the loans to the second defendant resign as the associate director of ACCO? A. I'll keep this quick. The first - the main reason was I could not stand you. You were lying. I caught you out. I didn't want to be around you and I didn't want nothing to do with you, John Cooper because you lied to me and you got caught out, okay. Secondly of all I was extremely angry, when I find out all these lies and this is why, I believe, that I had to make the call on behalf of Sapra Enterprises to call the loan in because you lied and you will keep on lying and you will keep on dragging this out and hence I - I did not want to be part of anything to do with you, John Cooper, anything at all. I don't like lies and I don't like people that actually rip me and that's what you've done. It's as simple and as clear as day. Q. And how have I lied? Don't answer that, perhaps it would take too long. A. I can keep it brief, if you want me to. Q. If you can, Mr Charan, that would be fantastic. A. Okay, how you lied. The pipeline that you claimed that you had which had millions of dollars coming in for CHL was absolutely lies because we find out..(not transcribable)…and we saw that so, yes, you do - you look a bit stunned there and, yes, I have caught you out lying and hence you are in this position right now. 1. Mr Charan, in my view, took every opportunity, even when it was not reasonably offered to him by the cross-examiner, to insist that he had no significant personal involvement in negotiating the terms upon which Mr Cooper initially became involved in CHL. [31] Mr Charan, in my view, also persistently understated his true involvement in the day to day business affairs of CHL. [32] 2. Mr Charan was contemptuous of his cross-examiner, saying for example: "Move on, John Cooper, yes" [33] and "John Cooper, you're wasting time. I've said that numerous times to you". [34] 3. Mr Charan persisted with this approach notwithstanding a number of explicit warnings given to him by the Court that he was required only to respond directly to questions asked. [35] 4. Mr Charan consistently treated the process of his cross-examination as a forum for disparaging Mr Cooper and giving the evidence Mr Charan chose to give. Mr Cooper 1. Sapra submitted that Mr Cooper was evasive, his evidence was inconsistent (with proven facts, with his own evidence and with Mr Oey's evidence), he was argumentative, prone to exaggeration, proven wrong on material points, and had an obvious interest in the outcome of the case. [36] 2. My view of Mr Cooper's credibility as a witness is that he was basically honest but his evidence was unreliable on significant issues, essentially for the reasons identified by McLelland CJ in Eq in Watson v Foxman which have been extracted above. The most significant aspects of Mr Cooper's evidence concerned statements that he claims were made to him by Mr Charan and Mr Cooper's distillation of his observations of Mr Charan's involvement in the business of CHL. 3. It appeared to me that, when Mr Cooper in cross-examination was giving evidence from his direct memory of what actually happened, the evidence was reasonably candid and reliable. For example, I accept Mr Cooper's evidence concerning Mr Charan's initial involvement in the negotiations to establish the basis of Mr Cooper's involvement initially with O'Corp Media Pty Ltd (O'Corp) and then CHL. [37] 4. There were deficiencies in the way Mr Cooper had prepared his affidavits in respect of incomplete or slanted summaries of written communications that were not annexed to his affidavits. I do not accept Sapra's submission that these deficiencies were the product of dishonesty on the part of Mr Cooper. It is likely that Mr Cooper's lack of expertise was a significant cause for the deficiencies. 5. However, it is reasonable to conclude that the judgments made by Mr Cooper as to what evidence he should put forward were influenced by the prism through which he viewed the events that had led to him being in the predicament in which he found himself. 6. It will be appropriate to set out some of the major examples of statements made by Mr Cooper in cross-examination that I consider to have been significantly affected, probably subconsciously, by Mr Cooper's perception of his own self-interest: 1. In response to a suggestion that Mr Charan made introductions at a higher level in relation to CHL's sponsorship program and left it to Mr Cooper and Mr Oey to proceed, Mr Cooper said: [38] A. Not exactly, no, there was a, the details of these sponsorships came from Mr Charan, so he was the person that was very keen to go down this track of providing leads for the company and he, I would say put considerable pressure on both Mr Oey and myself to go down this track, because he believed that he was paying for it. 1. Asked about Mr Cooper's claim that Mr Charan put him under pressure to sign the loan agreements, and whether he was talking about the first loan agreement, Mr Cooper said: [39] A. That was talking about the September loan agreement, yes, particularly, and also later in October there was pressure on the second loan agreement for the 300,000, which is called the November loan was actually discussed in October. So, having – just had the September and then October, there was another loan suddenly appears for another – for $300,000, which I was very unhappy about, discussed it with Mr Oey and for several weeks I refused to sign the document because I was thought it was not in the best interests of the company to do so. 1. Mr Cooper said in respect of the November loan agreement: [40] A. I am talking, that this November loan, particularly, $300,000, for a start-up company I thought was an extraordinary amount of money to borrow and I was very unhappy with it. 1. Further on that subject: [41] A. No. There were two separate loan agreements and there was pressure from Mr Oey in September to sign the hundred thousand which I – we had discussed and eventually I agreed to sign on behalf at the company and in the October there was negotiations regarding what is called the November loan and within three or four weeks of having, borrowing $100,000, I was being asked to agree to borrow another $300,000 from Mr Charan's company Sapra and I was not happy with that. I spent considerable time talking to Mr Charan's so-called financial accountant in the office, Mr David Green and he also advised me it was not a good idea to sign, but there is no record of that, and that's why I go on to say in 17 that Mr Charan came into my office one day and he wanted – encouraging me to sign that document and he uses the word, "it is okay to sign as the guarantees will never be invoked", was my concern about the guarantees. 1. Mr Cooper said of negotiations in respect of the $300,000 loan agreement: [42] A. Yeah, Mr Oey did handle the discussions, but the loan request for the $300,000 loan in November, came from the meeting that I discussed with Mr Charan the other day where the three of us met and he was talking about his marketing ideas with Melbourne Victory and the thousand loans which he disputes and, therefore, he said, "Well, I'll lend you the money, if we go ahead with these deals so the company can make a lot of money", and the pressure came from there onwards to sign these deals with him. 1. Asked about Mr Cooper's claim that Mr Charan was managing the effort to obtain finance broking deals through CHL's sponsorship efforts, Mr Cooper responded: [43] A. … further to the meeting about the marketing about the thousand loans and all that and the November loan of $300,000, Mr Charan said he would put together 1000 loans in that month and this was part of his plan to obviously do that, he had to recruit or we had to recruit if you like, but we had to have it in the business a marketing team to deal with those loans so that what that is referring to. 1. This evidence given by Mr Cooper consists of subjective distillation of Mr Cooper's perspective of the conduct of Mr Charan. The weight that could be given to the evidence must ultimately be determined having regard to the objective evidence of relevant events. Mr Oey 1. Sapra submitted that Mr Oey did not come to Court as an honest, disinterested person but to tailor his evidence to what he thought would help Mr Cooper win the case [44] . It submitted Mr Oey's evidence was full of inconsistencies and that he was evasive, at times to the point of being disingenuous. 2. Mr Oey's evidence was that he prepared the two versions of his affidavit evidence without assistance. There were significant differences between the two versions, which Mr Oey explained by saying aspects of his initial affidavit were too general to make sense and that he added more detail to provide a fuller explanation. [45] 3. It was difficult for the Court to make a judgment concerning the weight to be given to Mr Oey's evidence based upon his demeanour, because it was necessary for Mr Oey to give his evidence by video link in circumstances where the connection frequently failed and the image of Mr Oey on screen pixelated. 4. Mr Oey implausibly claimed that he felt no animosity to Mr Charan as a result of Sapra having been the moving party in the bankruptcy of Mr Oey and his wife, and that while he used to have personal animosity towards Mr Charan: "I forgive and I move on". [46] He conceded, however, that he hoped the defendants would succeed. [47] 5. Notwithstanding the difficult circumstances in which Mr Oey gave his evidence, however, I consider that Mr Oey responded in a satisfactory manner to the questions that were asked of him, generally giving direct and immediate answers to the questions asked. 6. On questions of fact I prefer the evidence given by Mr Oey to the evidence given by Mr Charan. In that respect, Mr Oey provided some reliable corroboration of Mr Cooper's evidence on such matters as Mr Charan's involvement in determining the terms of Mr Cooper's engagement, and also the extent of Mr Charan's involvement in the business of CHL. Admissibility of Mr Oey's evidence 1. There is an outstanding issue concerning the admissibility of the evidence given by Mr Oey in these proceedings. 2. Mr Oey made an affidavit on 9 April 2019 that was not served on Sapra in accordance with the Court's directions. 3. Mr Cooper made an affidavit on 7 August 2020 that explained why Mr Oey's affidavit had not been served in a timely way. The affidavit primarily explained the reasons for Mr Oey's reluctance to become involved in the case and to give evidence. 4. Mr Cooper provided to the Court and served on Sapra a revised affidavit of Mr Oey dated 28 July 2020. That was the day before the final day of the hearing. 5. Mr Oey's second affidavit was marked for identification as MFI 2 and his first affidavit was marked MFI 3. Ultimately, after senior counsel for Sapra had cross-examined Mr Oey on differences between the two affidavits, the first affidavit was tendered by Sapra and admitted into evidence as Exhibit P16. 6. Sapra had provided submissions as to why the Court should not permit any part of Mr Oey's second affidavit to be read into evidence in the form of written submissions by its counsel dated 7 August 2020. Those submissions primarily took the form of identifying aspects of Mr Oey's affidavit that either had not been put at all, or not been put sufficiently, by Mr Cooper to Mr Charan in cross-examination. 7. I took those submissions into account in making the rulings concerning the paragraphs of Mr Oey's affidavit that the Court should not permit the defendants to read. 8. Sapra also submitted that, if the Court permitted the defendants to read any parts of Mr Oey's second affidavit, then it would be necessary for Sapra to recall Mr Charan to deal with various matters, which would unnecessarily prolong the hearing. 9. As a result of the late service of Mr Oey's second affidavit, I reviewed the affidavit in chambers and on 13 August 2020 I advised the parties that I would not permit pars 3, 7, 9, the second sentence of 14, 20, 21, 22, 23 and 25 to 32 of the affidavit to be read. I considered that it was appropriate for the Court to decline to receive evidence on matters relevant to Mr Charan's evidence that had not been put to him in cross-examination. That approach was somewhat peremptory, but was necessitated by the fact that the matter had been set down to be heard over two days, had required another three days, and the defendants had served the affidavit of a new witness the day before the commencement of the final day of the hearing. 10. It was not feasible for the Court to devote the time necessary for a procedural hearing as to whether the Court should permit the defendants to read the balance of Mr Oey's second affidavit, and then to make a properly considered determination of whether the balance of the affidavit should be permitted to be read. I considered that the only practical course available to the Court was to provisionally receive into evidence the balance of Mr Oey's 28 July 2020 affidavit after the Court dealt with Sapra's objections. Senior counsel for Sapra was required to cross examine Mr Oey. [48] 11. I advised the parties that I would determine the issue of whether the defendant should be permitted to rely upon the evidence of Mr Oey that was provisionally admitted in these reasons for judgment. 12. My ruling is that I confirm the leave given by the Court to the defendants to read aspects of Mr Oey's second affidavit. I am satisfied that Sapra was given a proper opportunity to deal with Mr Oey's evidence in cross-examination and that Sapra's evidence had, to a reasonable degree, anticipated in fact Mr Oey's evidence, and Mr Charan had answered that evidence in an affidavit made on 13 August 2020 that Sapra was permitted to read. 13. As it has happened, the reception of Mr Oey's evidence has not altered the outcome of the case or affected Sapra's entitlement to the relief that it claims. Background 1. On a number of occasions in April and May 2017, Mr Cooper met with Mr Oey and Mr Charan to discuss the terms on which Mr Cooper would be employed in a venture controlled by Mr Oey and Mr Charan. 2. I prefer the evidence given by Mr Cooper and Mr Oey concerning Mr Charan's personal participation in the discussions. I consider that it is objectively improbable, given the nature of Mr Charan's personality as displayed in his cross-examination, that he would have left the matter entirely to Mr Oey. 3. However, I do not consider that the circumstances of the negotiations have any significance to the outcome of this case, and do not understand why Mr Charan went to the lengths that he did to deny any significant involvement in the negotiations. 4. Objective evidence of the result of the original negotiation is found in an email from Mr Oey to Mr Cooper dated 1 June 2017. 5. That email establishes that the proposal was that Mr Cooper was to be "General Manager – Channel Partnerships". The role related to a business called "No Bankruptcy" operated by O'Corp that was owned as to 50% each by Mr Oey and Mr Charan. Both Mr Oey and Mr Charan were directors of O'Corp. 6. There was little evidence as to the nature of the business of No Bankruptcy, but I infer that it sought out clients who were at risk of bankruptcy because of their financial situation, and attempted to re-structure their debts by providing finance on appropriate terms with a view to assisting the clients being able to escape bankruptcy. 7. The email explained that Mr Cooper's objective was to help reach a short term goal of achieving $250,000 revenue per month "by generating leads and revenue from enterprise partners" such as mortgage brokers, accountants and tax agents, as well as Australian Seniors and banks. Mr Cooper was required to represent No Bankruptcy at events and to speak at seminars for the business. The email provided: 2. In addition, we would like you to also be on and Chair our Oversight Committee, and also put forward any candidates with perhaps banking and/or political backgrounds you feel will lend the type of credibility we need for our business. 1. It appears from the email that a substantial part of Mr Cooper's role was to be in networking. It seems that Mr Cooper was to use his seniority and contacts to assist in improving the revenue of No Bankruptcy and to establish an oversight committee that would improve the credibility of the business. 2. However, the email also included the following statement as part of O'Corp's objective in contracting with Mr Cooper: 4. Integrating your existing finance/mortgage broking business into our business and growing it. 1. There was evidence that Mr Cooper owned the business name "Central Home Loans", but it had been dormant. There was no significant evidence that Mr Cooper had been operating a substantial finance and mortgage broking business. 2. Mr Cooper gave evidence that, relatively quickly, the object of his assisting in growing the No Bankruptcy business fell away, and the focus moved to Mr Oey and Mr Charan acquiring an interest in Mr Cooper's Central Home Loans business. 3. This is recorded in an email from Mr Oey to Mr Cooper on 13 June 2017, which is a reply to an email from Mr Cooper that was not included in the evidence. 4. The email included the following: In terms of acquisition terms and structure of CHL, you would need to first of all carve that out of NTL Group and establish a PTY LTD entity. I would be more inclined to acquire perhaps 70% of the CHL business and leaving you as a co-Director of the new entity along with me. Should the unlikely event we at part one (sic) ways (i.e. you leave your NB post), you would maintain your 30% retention. 1. The evidence does not establish what Mr Cooper told Mr Oey and Mr Charan about the nature and extent of the existing Central Home Loans business. 2. On 20 June 2017, Mr Cooper on behalf of his company, NTL, signed an agreement that appointed him as a contractor to O'Corp. The contract was for a period of six months. The fee was $13,000 per month, paid fortnightly. The services to be provided, as set out in Schedule 1, were: The Services will include: Enterprise business development services; Establishing and developing referral channels and partner agreements including with, but not limited to: – short-term lending companies – consumer and commercial – National Seniors Association – Mortgage brokers Identifying, establishing and building other complimentary (sic) revenue streams within the Company Establishing an oversight committee Strengthening relations between the Company and Australian banks Such other duties as reasonably requested by the Company from time to time. 1. As already noted, CHL was incorporated on 23 June 2017 with Mr Cooper as its initial shareholder and director. Mr Oey was not appointed as a director until 4 August 2017. 2. On 28 July 2017, CHL, Mr Cooper and ACCO entered into a shareholders' agreement. Although Mr Cooper was identified as a party, the execution clause provided that it had been executed by NTL. Mr Cooper signed the agreement on behalf of both CHL and NTL, and Mr Oey signed it on behalf of ACCO. 3. Mr Cooper arranged for the shareholders agreement to be prepared by his solicitor at Mr Oey's request. 4. Mr Charan's evidence was that the agreement was entered into by Mr Oey on behalf of ACCO and that Mr Charan was not personally aware of its terms until much later. 5. The evidence included a further shareholder's agreement dated 17 July 2017, this time between CHL, NTL and ACCO. The copy that is in evidence has only been signed by Mr Cooper on behalf of CHL and NTL. It is not clear whether this document was ever executed by ACCO. 6. The shareholders agreement was included in an exhibit to Mr Charan's 13 August 2020 affidavit, together with copies of emails concerning the negotiation of the shareholder's agreement that establish that Mr Charan received relevant emails. Mr Charan nonetheless claimed that he left all discussions to Mr Oey and did not read the content of the emails or the agreement until the end of 2017. [49] 7. Mr Oey gave evidence that, in early July 2017, he asked Mr Charan whether he had any issues with the draft shareholders agreement and that Mr Charan replied: "yes I do – but I will speak with my lawyers to sort it out". 8. Clause 4(a) provided that ACCO would hold 80 shares and Mr Cooper 20 shares. 9. Clause 5(a) provided that Mr Cooper would be managing director of CHL and that he would be "responsible for the management and operation of the Company". 10. Under clause 6(a), Mr Cooper was made chairman of the board of directors and he was given a casting vote by clause 6(b). 11. Clause 7(a) provided that CHL's principal activity would be to engage in the business of mortgage broking. 12. Clause 7(b) provided: The Company and the shareholders agree that ACCO will be responsible for all ongoing costs of the Company including without limitation costs related to marketing, IT, email/web hosting, administration, legal services, bookkeeping and accounting, statutory compliance and taxation requirements and obligations. 1. Apart from clause 7(b), there was no provision in the shareholders agreement or elsewhere for the shareholders to provide to CHL the capital necessary to enable it to establish its business before it could generate enough revenue for the business to be self-sustaining. 2. Clause 10(a)(i), which was concerned with restrictions on the shareholders transferring their shares, contemplated, without positively providing for, the shareholders making loans to CHL. This is as it required that the transferee replace any existing shareholder loans made by the transferor shareholder. 3. It is not necessary for the Court to make a positive finding on the issue of whether the shareholder's agreement became binding, or whether Mr Charan knew about the terms of the agreement on or about the date of its making. 4. The evidence makes it clear that CHL did not at any relevant time call upon ACCO under clause 7(b) to provide capital to fund the operation of its business, or to otherwise be responsible for its debts. 5. The defendants did not seek any relief in their pleadings based upon clause 7(b) of the shareholder's agreement, or even refer to that provision in their pleadings. 6. There is no evidence that the defendants acted in any way upon the basis of clause 7(b) until it was referred to by Mr Cooper in his principal affidavit in the proceedings. 7. The evidence establishes that ACCO did not independently have sufficient capital to fund its apparent obligation under clause 7(b). That may not have availed ACCO if CHL had sought to enforce the provision, but it is not something that happened. 8. The only capital that CHL received was the proceeds of the three loans made to it by Sapra. 9. Mr Cooper accepted in cross-examination that Mr Oey conducted the negotiations with Mr Charan on behalf of Sapra for the purpose of making the first $100,000 loan. [50] 10. Mr Oey's evidence was that, in September 2017, he asked Mr Charan to make "a cash injection of $100,000 for CHL to assist in the set-up and ongoing costs". He said that Mr Charan replied: [51] I agree to lend $100,000 to CHL and no interest will be charged as it is coming out of my own pocket. CHL can pay me back when it has funds to do so. 1. Mr Cooper gave evidence that Mr Oey told him that the proposed loan would be interest-free. Mr Cooper also said that he resisted signing the loan agreement but reluctantly did so after Mr Charan said to him: [52] "it is okay to sign as the guarantees will never be invoked". 2. Mr Cooper also said that he believed that Mr Charan had provided the funds "out of his own pocket". [53] 3. CHL and the guarantors executed the first loan agreement on 21 September 2017. As noted above, the loan agreement provided for an interest holiday until 1 January 2018 and was otherwise on the terms that have already been discussed. 4. There was considerable evidence concerning events leading up to the making of Sapra's second loan of $300,000 to CHL on 2 November 2017. 5. Sapra relied upon an email dated 30 August 2017 sent by Mr Oey to Mr Charan that discussed what was referred to as the "pipeline". This was a reference to the finance broking deals that CHL was working on that would generate commission for CHL if the deals were ultimately concluded. 6. The email said: Subject-JC update CHL $3M of loan settling in 2 weeks. John is in contact with the respective brokers to push the remaining loans outstanding in the pipeline on the search to hire in house brokers in the process of on-boarding a group of new third party brokers increasing our accredited brokers number to about 40, selling & testing our products Seniors – John is pursuing a start date for loans and debt negotiation. Still haven't heard back, but he is doing his utmost to secure the start date. … 1. On 20 September 2017, Mr Oey sent a further "CHL update" to Mr Charan, which included 4. Pipeline – moving very slowly. $3M of the forecasted $6M will settle next week, but will miss September's commission distribution – we will now have to wait until the October 25th payment date. NB gave him 3 leads today for refinancing work. 1. On 12 November 2017, Mr Oey sent a further email to Mr Charan on the subject of "Updated pipeline", which included: We have c. $93M in Loans at the moment that are pretty accurate in settling. This doesn't include the 7 meetings Calvin & Joseph have book (sic) for this week, and it doesn't include a $200M loan JC is working on in Sydney. It does include a $60M loan JC is working on & the $30M Vince loan Peter is working on. The upfront look like this: Nov $1,787 Dec $4,225 Jan $20,785 Feb $817,000 Feb is for forecasted larger as the $60M & $30M Loans should settle mid Feb. The $30M loan looks like a goer, and the $60M is a goer only if the client, who is a property developer, finds land in western Sydney to build 100 apartments. … Commercial/construction loans will not be CHL loans (we don't get the funds from AL&M), we access to funds from specialist construction/commercial lenders. The commissions range from 1-3% but no trail. The likelihood of the other vanilla loans settling is around 70% as they are not our brokers and they are not selling our loans therefore we have very little control. 1. Mr Oey gave evidence of a meeting in mid-October 2017 with Mr Cooper and Mr Charan in which, according to Mr Oey, Mr Charan stated that he had organised a major sponsorship with Melbourne Victory FC and some other local sporting clubs. [54] The Melbourne Victory sponsorship deal was for around $240,000 per annum. Mr Oey said that he and Mr Cooper rejected the sponsorship proposal on the basis that CHL could not afford such an expensive sponsorship, and Mr Charan responded by saying: I am an expert in building customer databases, and this marketing strategy I know will work, so I will fund the $240,000 for sponsorships and $60,000 for the extra staffing requirements, out of my own pocket. 1. Mr Oey's evidence was that a day or so later he was told by Mr Charan that Mr Charan had changed his mind and that the funding would be done by a loan agreement between Sapra and CHL. According to Mr Oey, Mr Charan said: [55] Well technically I still am, but I am lending the money to CHL – it's just paperwork. Can you contact Gerard and get him to draw up a loan agreement for $300,000. 1. According to Mr Oey, he and Mr Cooper resisted CHL entering into the second loan agreement, and Mr Charan said: [56] I am an expert at this type of marketing strategy, so I will personally guarantee to get 1000 loan applications by the end of November 2017. If I do not achieve this then I shouldn't be in business. I would go so far as not to charge any interest on a loan – trust me. 1. Mr Cooper's evidence was that, before CHL entered into the second loan agreement, Mr Charan made the following statements to him: [57] As I am an expert in marketing and running call centres and have had considerable hands-on experience and success in a previous business which has made me a multimillionaire, I will take control of the lead developments of CHL. … I will run the marketing team and I will get 1000 leads by the end of November. If I do not achieve this outcome, I will not have done my job properly. … I am confident that I will succeed with my marketing plan. 1. The defendants also relied upon an email sent by Mr Oey to Mr Cooper on 18 October 2017 that included the following: First of all, for what it's worth, Margaret and I think you are doing a marvellous job and have achieved much in a few months. Second of all, I regret getting you mixed up with Kash and I feel like I owe you an apology – I am sincerely sorry to cause you this stress. Had I known how Kash would behave I would not have involved you. That said, Kash called me for an update tonight on various fronts & companies, so I'll outline some of these that are relevant to you below with my commentary: … FFV & Melb Victory Kash said he will fund the sponsorship (interest-free) and when CHL makes money it can start paying him back. There are many brand placement opportunities and entertainment passes supplied as part of the sponsorship packages. Kash will also pay for any marketing costs for now (interest-free) outside of these sponsorship packages. … Your revised remuneration Kash asked if you have agreed to $0 per month. I said no, it's ridiculous and John can't afford to do that. … John, I don't know if these grass roots strategies will work, but at least Kash is trying to generate leads for us, even though we may not agree with, or are sceptical on the approach. Who knows, it may work – but it's a 50/50. 1. On 23 October 2017, Mr Charan sent an email to Mr Oey that included the following statement: However, I'll manage the sales team till they bring us at least 600k worth of Business then I will handball the whole team to JC. I will have strict KPI and targets for each staff to ensure they keep bringing in more and more leads for us. 1. The evidence then included a number of emails that showed work being done by Mr Charan for the purposes of CHL's business. The parties sought to put different complexions on this evidence. The defendants' case was that Mr Charan effectively took over, particularly in relation to an attempt to obtain leads that might generate finance broking opportunities for CHL by pursuing opportunities that may arise out of Mr Charan's contacts with football clubs, particularly Melbourne Victory FC. One issue was whether a woman called Andrea Swain effectively took instructions only from Mr Charan. Mr Charan appeared to distance himself from this conclusion by suggesting that he involved himself in CHL's affairs to improve its prospects of generating revenue, but formally left it to Mr Cooper, with the assistance of Mr Oey, to manage the business. 2. It is not possible on the limited available evidence for the Court to make any comprehensive findings on this issue. The truth probably lies somewhere between the extremes contended for by the parties. The issue does not, in my view, matter for the purpose of the determination of the issues in this case. 3. However, I do make a finding that the evidence does not establish that Mr Charan usurped the management responsibility of Mr Cooper, as managing director, to the extent that Mr Charan became exclusively responsible for the management of the business of CHL, with the result that its ultimate failure to earn revenue was solely the responsibility of Mr Charan. 4. On 26 October 2017, CHL entered into a sponsorship agreement with Melbourne Victory Ltd. The amount of the sponsorship was $200,000 per annum with an initial payment of $20,000 plus monthly payments of $16,363.65. 5. The sponsorship agreement provided for a number of sponsorship rights. Strangely, most of those rights were for the benefit of the Charan Foundation, which apparently was a charity managed by Mr Charan's wife. CHL was also given rights to TV commercials for Melbourne Victory home games and other marketing opportunities on Melbourne Victory's website and social media promotions. 6. There was evidence that, notwithstanding that it was the Charan Foundation that was given the right to place a sponsorship logo on the under 15's Academy playing strip, the football jumper worn by that team actually advertised CHL. 7. The sponsorship agreement was executed by Mr Cooper and Mr Oey on behalf of CHL. 8. Mr Charan's evidence was that he only introduced Mr Cooper to the officials of Melbourne Victory FC and left it to Mr Cooper to negotiate the sponsorship agreement. I do not accept that evidence. I accept that Mr Cooper and Mr Oey were very sceptical about the commercial benefit of CHL entering into the sponsorship agreement, given the amount required to be paid and the lack of revenue being earned by CHL. 9. I am satisfied that Mr Charan drove the process by which CHL entered into the sponsorship agreement. The fact that side benefits were provided to the Charan Foundation rather gives the game away. 10. It will be convenient to note that, at a later time, CHL also entered into an official partnership agreement with Brisbane Roar Football Club Pty Ltd. The document that is in evidence is not dated, but provides for advertising benefits for CHL commencing on 9 February 2018. The sponsorship payment was $7,058.82 plus GST per month for 17 months, giving a total of $120,000 plus GST. 11. Although the total amount of the two sponsorship payments was plainly very large given the financial position of CHL, the evidence established that the total amount of the payments made before CHL ceased operating was only $73,529.40. 12. The second loan agreement for the sum of $300,000 was entered into on 2 November 2017. It provided for an interest holiday until 1 January 2019, a period of over 12 months. 13. Mr Cooper accepted in cross-examination that Mr Oey asked Mr Charan to arrange for Sapra to make the additional $300,000 loan to CHL. [58] 14. Mr Cooper also accepted that he chose not to get legal advice before he signed the November loan agreement as guarantor. [59] 15. For completeness I note that on 1 January 2018, CHL, NTL and ACCO entered into a stakeholder's deed which effectively replaced the shareholder's agreement in relation to the future ownership and management of CHL. 16. Further information about CHL's 'pipeline' was sent to Mr Charan from time to time, including an email on 26 March 2018 written by Mr Cooper, which said: …Pipeline attached. We have over $193,016,440 in potential loans we are working on and assuming all settle we could receive around $1,544,000 in upfront commission in the next 3 to 6 months. Of course, they may not all settle. However, we are adding around $5/10M plus per week of new loans so the pipeline is building steadily. I have not included monthly trail commission in this report, but will in the next report. As you know I am working on securing the preferred lender status with Paul Holland's residential development of the 1500 homes in Qld. If we settle all loans, (which would be unrealistic to expect) that would be a total of $750M in financing with a potential upfront amount to CHL of $60M and trail payments of $1.5M per year. Even if we did 50% of that we would still be doing well. … 1. The third loan agreement was entered into between Sapra and CHL on 29 March 2018. 2. Mr Cooper accepted in cross-examination that Mr Charan did not place him under any pressure to sign the guarantee as part of the March 2018 loan [60] . 3. As late as 11 May 2018, Mr Cooper was still providing 'pipeline' information to Mr Charan. By email dated 11 May 2018, a copy of which was sent to Mr Charan, Mr Cooper attached a spreadsheet called "CHL Pipeline for May 18". The schedule listed 49 possible deals that could lead to the receipt of commissions by CHL. The schedule provided for specific referral fees for 22 of the deals, one of which was for a loan amount of $65,000,000 with the report "Awaiting confirmation of new builder" with a timeline 18 May. The fee was $670,000. There were other loan amounts of $60,000,000 and $19,500,000 that were still in process. A small number of deals were said to be not proceeding. The total amount of the expected income was $782,698. 4. Mr Charan said of the information that he was being given by Mr Cooper about the pipeline: [61] Based on the revenue projected to be received by CHL in the pipeline information provided by Mr Oey, I had no concerns that CHL had the ability to repay in a timely manner all the funds advanced by the Plaintiff by way of loans as well as any sponsorship fees and still have sufficient funds remaining to pay the operating expenses of CHL. 1. However, as at the end of May 2018, Mr Charan said that he was aware from his discussions with Mr Cooper that the projected revenue had not eventuated. 2. There was a further proposal that Sapra would lend $100,000 to CHL that was explored in May 2018. The proposal was not implemented. By an email addressed to Mr Charan on 16 May 2018 Mr Cooper said: "I will of course provide a personal guarantee with the loan being repaid when the company has sufficient funds to do so. 3. On 29 May 2018, Mr Cooper wrote an email to Mr Charan in which he advised that CHL had no money in the bank to pay staff wages due the next day, and it did not have money to pay other outstanding invoices and creditors or the monies due under the two sponsorship agreements. Mr Cooper said that CHL would have to cancel the sponsorship agreements with immediate effect. (I have assumed that when Mr Cooper said "we have on money" in the email, he meant "no money"). Mr Cooper added: I am still attempting to raise money so that I can buy your shares and continue to trade but I need a few more days to see if I can achieve this. 1. Mr Charan's response on the same day included: I believe you have funds that you have taken from the account over the past 11 Months that you have saved, which can be injected back into the CHL account to pay staff. I will not be injecting any monies into CHL as you have not only failed to deliver your promise but also failed to provide adequate security for any future cash injection. 1. On 30 May 2018, Sapra's solicitors served demands on CHL and Mr Cooper as guarantor for repayment of the amount of $460,000 within 14 days. More formal letters of demand were served on later dates. 2. CHL's Westpac bank statements were in evidence for the period 31 October 2017 to 31 March 2018 when the account was closed with a small deficit balance. 3. Apart from the credits for the $100,000 Sapra loan on 9 October 2017 and the $300,000 loan on 13 November 2017, and small credits of $1,050 on 4 October 2017 and $1,493.25 on 19 October 2017, no payment was credited to the account until 23 January 2018. Putting aside the $68,000 deposit on 3 April 2018 from the third loan made by Sapra, and also an unexplained credit of $30,000 on 20 March 2018 which is described as a loan made by Sapra, from 23 January 2018 there were only 13 deposits with a total value of $112,114.21. Some or all of those payments may represent revenue earned by CHL from its business operations, although the evidence does not support a positive finding to that effect. Consideration 1. For the reasons that follow I find that Sapra is entitled to the relief that it seeks in these proceedings. 2. Many of the defences raised by the defendants as well as claims made in their cross claim were misconceived and untenable, and indeed not pursued in their final submissions. 3. As the defendants did not formally withdraw any of their claims, it was necessary for Sapra to deal with all of the claims in its final written submissions. 4. Subsequently, when the defendants served their final written submissions, it emerged that they had not put submissions to support many of the issues that they had raised. 5. The evidence justifies a finding that CHL failed to establish a viable revenue stream before its available loan capital was exhausted. This was because it was unsuccessful in converting the leads that were identified in the 'pipeline' from time to time into commission-earning finance contracts, and the attempt to reverse that outcome by means of the sponsorship agreements was unsuccessful. 6. The evidence does not permit any finding as to the practical reasons for that outcome. The possibilities range from there being no viable commercial opportunity to inadequate competence on the part of CHL's managers and employees, to just plain bad luck. 7. Mr Cooper's initial involvement in providing consultancy services to O'Corp evolved immediately into his role as the managing director of CHL's start up finance broking business in circumstances where no capital was available to CHL. 8. Such capital as was provided was made available in the form of the three loans made by Sapra. 9. Mr Cooper was reasonably experienced in business and was well aware of the personal risks involved in permitting CHL to enter into the loan agreements supported by guarantees given by Mr Cooper. 10. It may be accepted that Mr Cooper had misgivings about CHL entering into the loan agreements and Mr Cooper guaranteeing its obligations. Mr Cooper had a choice on each occasion, and whether or not Mr Charan placed 'pressure' on Mr Cooper, Mr Cooper had and exercised in commercial terms a free choice to execute the loan agreements. It is not surprising that there was some level of pressure, because CHL progressively became increasingly indebted and revenue was not earned in a timely way to service the increasing indebtedness. Mr Cooper had the choice of cutting his losses or undertaking increasing risks in order to realise the potential economic benefit of his shareholding in CHL. 11. At first glance the terms of the loan agreements appear lopsided in that the guarantors underwrote the entire risk of CHL's business failing, but on the other hand, Mr Charan through Sapra took the risk that neither CHL nor the guarantors would be able to repay the debts. 12. I am satisfied that Mr Charan did involve himself in the management of CHL's business to a much greater degree than he was prepared to admit. It is not surprising that he did so given the increasing exposure of Sapra as lender and the emergence of doubt as to whether CHL could turn leads referred to in the 'pipeline' into revenue. 13. As I have stated above, the evidence does not justify a finding that Mr Charan usurped entirely the management roles of Mr Cooper and Mr Oey, while the latter remained involved in the management of CHL. Mr Cooper remained managing director and it was a matter for him to exert his authority. There is force in the question put by senior counsel to Mr Cooper in cross-examination: [62] "You are both grown men capable of making your own decisions and minds up weren't you?" 14. Mr Oey left the business in December 2017 for reasons that were not explained. It is probable that his sudden departure reduced the viability of CHL's business. 15. The Melbourne Victory and the Brisbane Roar sponsorships did not yield significant returns for CHL in the relatively short period they were in operation. 16. However, the evidence does not establish that the failure of CHL to generate sufficient revenue in a timely fashion to service the loans made by Sapra was caused by CHL's entering into the sponsorship agreements, or any negligence or inadequate management by Mr Charan of the opportunities afforded by the sponsorship agreements. 17. The primary reason the business of CHL failed was its incapacity to turn finance broking leads in the 'pipeline' into revenue, which was primarily the responsibility of Mr Cooper as managing director. 18. I am satisfied that Mr Charan became increasingly active in the management of the business of CHL because he was indirectly a major shareholder and his company, Sapra, was at risk in respect of the loans that it had made and he had a genuine objective to use his commercial experience to turn around CHL's prospects. 19. Mr Charan was the agent of Sapra for the purpose of negotiating and agreeing to the terms of the three loan agreements. It does not follow that everything that Mr Charan said or did in relation to his involvement in the affairs of CHL was done as an agent of Sapra or that his conduct could in all cases be sheeted home to Sapra. 20. No doubt Mr Charan made statements and claims from time to time concerning how CHL should conduct its business and how Mr Charan might contribute positively by his efforts to a successful outcome. The evidence does not establish that statements made by Mr Charan of that nature, whatever they may in fact have been, were made as a representative of Sapra, or as part of an inducement by Sapra to cause CHL to accept the loans from Sapra that were made, or to cause the guarantors to guarantee those loans. 21. I find that the loans made by Sapra to CHL were facilities offered for the benefit of CHL in the same way as would have been loans made by a bank. CHL needed capital and Mr Charan was persuaded by the information available to him, including in particular the 'pipeline', that it was in his and CHL's ultimate commercial interests for Sapra to make the facilities available. In that he was wrong, as it has turned out, but no doubt Mr Charan appreciated the commercial risks involved. 22. The defendants have failed to persuade me to the necessary degree of satisfaction that Mr Charan made the statements that he has been alleged to have made in terms or in a context that could reasonably have been construed by the defendants as being promises or actionable misrepresentations, in the sense of being misleading or deceptive conduct that would exonerate the defendants from their liability under the three loan agreements. 23. It is likely that Mr Charan made many statements concerning his commercial abilities and the likely prospects of his involvement, which may even have gone so far as to be boastful. 24. However, the significance of any statements or claims that Mr Charan may have made must be judged in the light of the information provided to him by CHL, for which Mr Cooper was ultimately responsible, by means of the 'pipeline'. 25. I infer that the 'pipeline' information that was provided to Mr Charan by CHL were somewhat more extensive than is actually found in the evidence. There are statements in the evidence that suggest that the provision of 'pipeline' information was recurrent. 26. The circumstances in which CHL provided 'pipeline' information to Mr Charan was sufficiently proximate to the making of the loans by Sapra to satisfy me that the 'pipeline' information was a significant inducement to cause Mr Charan to arrange for Sapra to make the loans. 27. The evidence does not permit findings as to the reasons why the forecasts in the 'pipeline' information failed to materialise. The Court could not make a positive finding that the information was misleading or deceptive. That said, the forecasts in the 'pipeline' information failed so consistently and so absolutely that it is doubtful that the forecasts were reasonable. 28. However, the issue in this case is not whether the defendants misled Sapra into making the loans, but whether Mr Charan on behalf of Sapra misled or otherwise wrongly induced the defendants into entering the loan agreements. 29. In that context, the failure of the forecasts in the 'pipeline' information remains relevant, but only in the general context of whether it was the conduct of Mr Charan, on behalf of Sapra, that has vitiated the loan agreements on the basis of the application of proper legal principle. 30. It should be added that the evidence does not establish that CHL was deprived of the value of the three loans because of any consequences of the statements alleged to have been made by Mr Charan. CHL received full value for the loans. It applied the money in meeting its operating costs and it was the commercial failure of its business that ultimately deprived CHL of the money that it had borrowed from Sapra. 31. It will now be appropriate to consider more specifically the particular allegations made by the defendants in their defence and cross claim concerning the conduct of Sapra and Mr Charan that they claim should exonerate them from their obligations under the three loan agreements. 32. The highest claim made by the defendants was based upon an alleged contract. [63] By reference to what was defined as the November Loan Promise and the November Loan Condition, the defendants alleged in relation to the November 2017 loan agreement that Mr Cooper gave the guarantee in that agreement in consideration of a promise by Sapra, made on its behalf by Mr Charan, to generate 1000 or more new loan applications for CHL's business by the end of November 2017. 33. There is simply no evidence at all of any statements allegedly made by Mr Charan that were capable of supporting, first, a finding that Sapra entered into any contract with the defendants concerning the commercial outcome of the advance of $300,000, or, secondly, that there was any promise that any loan applications would be made, let alone that there would be 1000 of them by the end of November 2017. 34. This claim on the part of the defendants was entirely imaginary. For example, taken at its highest, the statements attributed to Mr Charan by Mr Cooper [64] could not be construed as a promise made by Mr Charan to achieve 1000 completed loans by the end of the month of November. 35. The representations alleged by the defendants in their defence to have been made by Mr Charan on behalf of Sapra were to the effect that interest would not be charged on any of the loans and that the sums advanced would be used to generate business for the benefit of CHL. [65] 36. As to the first part of the alleged representation, significant interest holidays were provided for in the September and November loan agreements, but they were for limited periods. The defendants must have understood the limitations which appeared clearly from the wording of the loan agreements. The Court could not find that the defendants were induced to enter into the loan agreements by a statement that there would be no interest, when they understood that all that was in fact on offer were interest holidays. 37. In these circumstances the Court would not be justified in finding that Mr Charan made the statements in the terms alleged. 38. Mr Charan may well have made some statements capable of being understood as meaning that the sums advanced would be used to generate business for CHL. CHL had no capital of its own. The clear purpose of the making of the loans was to provide capital to fund CHL's business operations. That was the purpose for which the money was used. 39. There is no basis for the Court to find that Mr Charan said that the use of the funds would necessarily be successful in generating revenue, either at all or to any particular level. In that respect, the alleged representations are formulated in such general terms as to deny them the effect of actionable representations. 40. The claim made by the defendants [66] that it was unconscionable for Sapra, as lender, to enter into the loan agreements with the defendants and then to enforce its rights is so obviously untenable that it may be rejected without reference to authority. Each of the three loans were genuine commercial dealings entered into by Sapra at the request of Mr Oey or Mr Cooper in circumstances where CHL otherwise had inadequate capital to fund the ongoing operation of its business. The three loan agreements were negotiated at arm's length. On balance, the most significant inducements that operated were CHL's claims concerning its prospects as represented by the 'pipeline'. Sapra accepted considerable commercial risk as a result of its making of the three loans. There was nothing commercially unreasonable in the terms of any of the loan agreements, and indeed the significant interest holidays provided a real benefit to CHL. 41. The defendants' claim [67] that the defendants were materially prejudiced by reason of the negligent and detrimental way in which the business of CHL was operated by Mr Charan, as the sole director of Sapra, fails entirely for a number of reasons. First, the defendants had not established that Mr Charan engaged in the business of CHL as an agent of Sapra, rather than in his capacity as an indirect shareholder. Secondly, the evidence does not permit a finding that Mr Charan's conduct was a real cause of the failure of CHL's business, or that what he did was negligent. 42. The defendants' claims that Mr Charan breached the director's duties that he owed to CHL are also entirely misconceived. It could not been a breach of duty by Mr Charan to cause Sapra to enter into the March Loan Agreement at the request of Mr Cooper, in his own capacity and as the managing director of CHL. Mr Charan acted in his capacity as a director of Sapra, and the evidence is entirely inconsistent with Mr Charan having been the moving force behind the defendants' entering the March loan agreement. 43. The defendants established no basis at all for their claim that, when Mr Charan, acting as the director of Sapra, caused that company to exercise its rights to accelerate the date for repayment under the September and November loan agreements, he was breaching any duty that he owed as a director of CHL. 44. The suggestion that it is a breach of director's duty by a director of a company to resign as director in order to enable that person to cause another company of which he is a director to enforce its legal rights against the first company is also misconceived. 45. The allegations made by the defendants in their cross claim [68] as to Mr Charan personally engaging in misleading or deceptive conduct in relation to the assertion that the sum provided under the November loan agreement would generate 1000 or more new loan applications, no interest would be charged under the September loan agreement, or the sums advanced under that loan agreement would be used to generate business for the benefit of CHL fail for reasons that have already been considered above. 46. The reasons given above also dispose of the claim in the cross claim [69] that it was unconscionable for Mr Charan and Sapra to enter into and enforce the rights under the September loan agreement. 47. The final observation that should be made about the defendants' claims in their defence and cross claim concerning the wrongful conduct alleged against Mr Charan and Sapra is that there is no real consistency between the way in which the claims were pleaded and the evidence given by the defendants' witnesses as to what was said and done. 48. It remains necessary to deal with the various claims pleaded by the defendants that were not addressed at the hearing or in final submissions. [70] 49. In the circumstances, it is only necessary to record that I accept the submissions made by counsel for Sapra as to why these defences fail (noting that I do not understand any more than counsel did the defendants' reliance upon s 925A of the Corporations Act). 50. Sapra's original case included a claim that Mr Cooper alienated his interest in certain real property to his partner, who was the third defendant, Mr Taylor, once demands had been made in respect of Mr Cooper's obligations as guarantor under the three loan agreements. Sapra alleged that the purpose of the alienation was to defeat Sapra from recovering the debt, contrary to s 37A of the Conveyancing Act 1919 (NSW) (Conveyancing Act). 51. Mr Cooper was said to have contributed $42,381 to the purchase of a property in Newcastle by way of a loan. When the property was sold, that money was set aside in accordance with an undertaking given by Mr Taylor's solicitor, in lieu of a freezing order that had been made against Mr Taylor. 52. The payment into court was made in accordance with orders made in chambers by consent on 28 July 2020. Those orders included the following notation: "[t]he third defendant makes no claim to be entitled to any of the trust account moneys and that the persons who claim an interest in the monies are the plaintiff and the first defendant. The plaintiff submits that the Court should order that that sum be paid out to the plaintiff in part satisfaction of any judgment against the first defendant". 53. As I understand it, the effect of the notation is that it records an agreement by Mr Taylor that he makes no claim to the money paid into court and accepts that the only parties with a claim to that money are Sapra and Mr Cooper. 54. As the $42,381 was paid into court in these circumstances, Sapra did not detail its claim under s 37A of the Conveyancing Act in its written submissions, although it set out in Annexure E to those submissions the basis for its claim for an order that the amount in court be paid out to it. 55. As I understand the defendants' written submissions, they have not put any argument in contest to this aspect of Sapra's claim. 56. It therefore appears to be appropriate for the Court to proceed upon the basis that Mr Cooper does not challenge the Court making the order sought by Sapra. 57. The draft short minutes of order should be provided to the defendants for their comment. As the defendants were not legally represented, I will allow them to inform the Court whether I am correct in my understanding that there is no contest about the Court making the orders sought by Sapra concerning the money that has been paid into court. I will allow that opportunity because there may be some risk that the defendants inadvertently failed to respond to Sapra's submissions concerning the fate of the money paid into court. 58. Sapra should provide draft short minutes of order to the defendants and my Associate within seven days of the publication of these reasons for judgment. An explanation of the calculation of interest should be provided. 59. The defendants will have a further seven days to respond to Sapra and my Associate, including in respect of any submissions they wish to make concerning the order to be made in relation to the money paid into court. If the defendants make any additional submissions on this subject, Sapra will have a further seven days to respond. 60. In principle, Sapra is entitled to an order that the defendants pay its costs of these proceedings. However, I will give the parties an opportunity to provide brief written submissions on the issue of costs. 61. Submissions on costs limited to three pages should be provided by Sapra and the defendants within the consecutive seven-day periods referred to above. ********** Endnotes 1. TB 76.35 2. 28 July 2020 affidavit par 8 3. TB 213.14-45, TB 256.26 4. TB 152.26, TB 154.29. 5. Pars 6a, 13a, 20a. 6. Pars 6b, 13b, 20b. 7. Pars 6bv, 13bv, 20bv. 8. Pars 6cd, 13cd, 20de. 9. Pars 6e, 13e, 20f. 10. Pars 10b, 16b, 22b. 11. Pars 10ai, 16ai, 22ai. 12. Pars 10aiv, 16aiv, 22aiv. 13. Pars 11b, 18b, 23b. 14. Pars 12, 19, 24. 15. Par 9c. 16. par 13d. 17. Par 6. 18. Par 7. 19. Par 8. 20. Par 9. 21. Par 19. 22. Par 20. 23. Par 21. 24. Par 22b. 25. TB 203. 26. Pars 147 to 149. 27. Final written submissions par 41. 28. TA 89.35, TA 89.37, TA 90.33, TA 94.46, TA 95.18, TA 109.27, TA 111.12, TA 115.35, TB 27.24. 29. TA 111.12 to 112.28. 30. TA 112.50 to TA 113.36. 31. TA 87.20, TA 87.35, TA 88.5, TA 89.20, TA 93.41. 32. TA 89.20, TA 89.26, TA 93.41, TA 94.26, TA 96.29, TA 97.6,TA 100.3, TA 101.13, TA 105.17, TB 20.39, TB 23.24, TB 25.45 – TB 26.20, TB 32.48, TB 38.21. 33. TA 108.2. 34. TB 19.30. 35. TA 90.3, TA 90.20, TA 111.37. 36. Final written submissions par 27. 37. TB 64.19, TB 66.25, TB 67.1, TB 77.15,TB 100.44, TB 101.25. 38. TB 85.35. 39. TB 105.3. 40. TB 105.14. 41. TB 105.47. 42. TB 106.27. 43. TB 116.11. 44. Final written submissions par 33. 45. TB 242.13. 46. TB 212.7, TB 213.35, TB 213.32. 47. TB 214.45. 48. TB 203.15. 49. 13 August 2020 affidavit pars 31 and 32. 50. TB 104.13. 51. 28 July 2020 affidavit par 13. 52. 9 April 2019 affidavit par 17. 53. 19 April 2019 affidavit par 18. 54. 28 July 2020 affidavit par 15. 55. 28 July 2020 affidavit par 16. 56. 28 July 2020 affidavit par 19. 57. 9 April 2019 affidavit par 19. 58. TB 107.4. 59. TB 110.44. 60. TB 106.18. 61. 13 August 2020 affidavit par 11. 62. TB 118.17. 63. See [38] above. 64. See [90] above. 65. See [34(7)] above. 66. See [32(9)] above. 67. See [45]-[47] above. 68. See [49] above. 69. See [52] above. 70. See [32 (4), (5) and (6)], [36] and [37] above. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 February 2021