Supreme Court New South Wales Medium Neutral Citation: DGF Property Holdings Pty Limited v Di Federico (No 4) [2021] NSWSC 157 Hearing dates: 3 July 2020 (Submissions 6 July 2020); Directions 21 July 2020 Date of orders: 2 March 2021 Decision date: 02 March 2021 Jurisdiction: Equity Before: Emmett AJA Decision: Order that: 1. The Plaintiff, within 14 days, file and serve Proposed Short Minutes of Orders giving effect to these reasons and the earlier judgments. 2. The Defendants, within a further 14 days, file and serve a note indicating any dispute with the proposed orders. 3. If there is any dispute, each of the parties has leave to apply for the purpose of fixing a date for further argument. 4. If there is no dispute as to the proposed orders, judgment be entered in accordance with the proposed orders. Catchwords: CIVIL PROCEDURE — court administration — court powers — recall of prior reasons in proceedings — circumstances — observations made per incuriam — court not yet functus officio — final orders yet to be made — whether power to recall based upon UCPR r 36.17 CONTRACTS — remedies — damages — assessment — quantum dependent on prior loan agreements — whether evidence capable of establishing terms of such loan agreements CORPORATIONS — formation — pre-registration contracts — requirements of Corporations Act 2001 (Cth), s 131 — whether evidence established that "a person" purported to enter a contract on behalf of or for the benefit of a company prior to registration — whether conduct of company shareholders or director capable of ratifying purported agreements after registration Legislation Cited: Conveyancing Act 1919 (NSW), s 66ZL Corporations Act 2001 (Cth), s 131 Conveyancing Legislation Amendment Act 2018 (NSW) Uniform Civil Procedure Rules (NSW), r 36.17 Cases Cited: Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Babcock International Ltd v Babcock Australia Ltd; Babcock Australia Ltd v Eraring Energy (2003) 56 NSWLR 51; [2003] NSWCA 6 BJ McAdam Pty Ltd v Jax Tyres Pty Ltd (No 3) [2012] FCA 1438 Black v Smallwood (1966) 117 CLR 52; [1966] HCA 2 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 DGF Property Holdings Pty Ltd v Di Federico; DGF Property Holdings Pty Ltd v Butros [2018] NSWSC 344 DGF Property Holdings Pty Ltd v Di Federico; DGF Property Holdings Pty Ltd v Butros (No 2) [2018] NSWSC 1137 DGF Property Holdings Pty Ltd v Di Federico (No 3) [2020] NSWSC 510 Ex parte Harper; Re Rosenfield [1964-5] NSWR 58 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Kelner v Baxter (1866) LR 2 CP 174 Painaway Australia Pty Ltd v JAKL Group Pty Ltd (2011) 249 FLR 1; [2011] NSWSC 205 Re Express Engineering Works Ltd [1920] 1 Ch 466; All ER Rep Ext 850 Sydney Appliances Pty Ltd (in liq) v Robert Bosch (Australia) Pty Ltd [2000] NSWSC 32; 33 ACSR 680 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 Verschures Creameries Ltd v Hull & Netherlands Steamship Company Ltd [1921] 2 KB 608 Texts Cited: G Dal Pont, Law of Agency (LexisNexis Butterworths, 2014) W Bowstead, FMB Reynolds, P Watts, Bowstead and Reynolds on Agency (19th ed, 2010, Sweet & Maxwell) Category: Principal judgment Parties: DGF Property Holdings Pty Limited (Plaintiff) Enzo Di Federico (First Defendant) Franca Di Federico (Second Defendant) Representation: Counsel: G Sirtes SC with P Barham (Plaintiff) M Ashhurst SC (Defendants) Solicitors: Simone Legal (Plaintiff) Mills Oakley (Defendants) File Number(s): 2015/105403 Publication restriction: Nil Judgment Introduction 1. This is the fourth judgment I have given in relation to these proceedings. [1] The first judgment, [2] published on 23 March 2018 (the First Judgment), concerned two proceedings in which DGF Property Holdings Pty Ltd (DGF) was the plaintiff, namely, these proceedings (the Specific Performance Proceedings) and other proceedings, to which I shall refer as the Rescission Proceedings. Both proceedings arose out of a proposed subdivision of land situated in Delaware Road, Horsley Park, New South Wales (the Land). The defendants in the Specific Performance Proceedings are Mr Enzo Di Federico and Mrs Franca Di Federico (together the Di Federicos). The Di Federicos were also defendants in the Rescission Proceedings. The other defendants in the Rescission Proceedings were the purchasers (the Purchasers) under off-the-plan contracts made with DGF for the sale and purchase of lots in the proposed subdivision (the Sale Contracts). 2. It is relevant to know that DGF was incorporated on 17 September 2002 with an issued capital of four shares. Totu Pty Ltd (Totu) held two of those shares, BCF Design and Construction Pty Ltd (BCF) held one of the shares and Peter and Michael Remaili held the fourth share. Totu and BCF were entities associated with Mr Sylvano Frassetto, Mr Frank Gelonesi and Mr Graziano De Bortoli. Mr Frassetto and Mr Michael Remaili have since died. It is convenient to refer to those five individuals as the Proposed Joint Venturers. In doing so, I do not intend to suggest any formal arrangement or agreement among them. 3. In the Rescission Proceedings, DGF asked the Court to make orders under s 66ZL(6) of the Conveyancing Act 1919 (NSW) (the Conveyancing Act) permitting it to rescind each of the Sale Contracts. [3] A relevant effect of s 66ZL was that, despite express provisions in the Sale Contracts, DGF could not rescind any of them unless it had obtained an order of the Court permitting it to do so. The Di Federicos were joined as defendants in the Rescission Proceedings because DGF sought to recover from them costs that it may be required to pay to the Purchasers pursuant to s 66ZL. The Rescission Proceedings have now been finally resolved, except as to DGF's claim for costs against the Di Federicos. 4. In the Rescission Proceedings, the Court ordered, pursuant to s 66ZL(6) of the Conveyancing Act, that DGF be permitted to rescind each of the Sale Contracts, subject to DGF making an offer in writing to the Purchasers to enter into new contracts for sale. DGF was ordered to pay amounts for the Purchasers' costs of the Rescission Proceedings. The orders contemplated that such new contracts for sale were generally to be on the same terms as the rescinded Sale Contracts, except that the price to be paid under any such new contract for sale was to be the price payable under the rescinded Sale Contract plus a sum calculated on the balance of the purchase price payable under the rescinded Sale Contract from 10 June 2016 until the date of acceptance of the offer (and the making of a new contract for sale) at the rate of 4.75% per annum less, in relation to each Purchaser, the costs that DGF was ordered to pay to such Purchaser. [4] The rationale for that arrangement was that the Purchasers had the possible benefit of a delay in paying the purchase price. 5. In the Specific Performance Proceedings, the assessment of damages remains for determination. The damages claimed by DGF include the costs that it was ordered to pay to the Purchasers. 6. The dispute between DGF and the Di Federicos that is the subject of the Specific Performance Proceedings arose in connection with a deed between DGF and the Di Federicos made on 17 December 2013 (the 2013 Deed) and an agreement made between DGF and the Di Federicos on 22 October 2015 (the 2015 Agreement). The Di Federicos owned part of the Land and each of those instruments was entered into in order to resolve earlier disputes between DGF and the Di Federicos arising out of the proposed subdivision of the Land. The subdivision has now been completed and the various parcels in it have been transferred to the Purchasers or registered in the names of participants in the venture. 7. DGF claimed damages from the Di Federicos on the basis that they acted in breach of the 2013 Deed and the 2015 Agreement and, in the First Judgment, I concluded that they had breached their obligations. DGF contends that the completion of the subdivision was delayed by reason of those breaches and that the delay led to DGF's incurring additional outgoings by way of holding charges that they would not have incurred but for the delay alleged to have been occasioned by the breaches on the part by the Di Federicos. 8. In the First Judgment, I concluded that, by reason of the breaches on the part of the Di Federicos, progress with the subdivision was delayed during the period from 3 July 2015 to 16 May 2017. On the first date, an order was made under s 121B of the Environmental Planning and Assessment Act 1979 (NSW) as a result of the placement by the Di Federicos of unauthorised landfill on their land. The effect of the order was to prohibit further work on the subdivision. On the second date, the Fairfield City Council (the Council) indicated that it was satisfied that the s 121B order had been complied with. [5] 9. On 23 March 2018, I directed DGF to notify the Court and the Di Federicos, within 14 days, of its calculation of the amount of damages to which it claims to be entitled in accordance with the First Judgment. The Di Federicos were directed to notify the Court and DGF within 14 days after receipt of such notification whether they wished to dispute that the calculation of such damages was made in accordance with the First Judgment. The matter was listed on 26 April 2018 for the purpose of making final orders. 10. DGF did not comply with the direction given on 23 March 2018 and the time to comply was extended to 7 May 2018. On that day, DGF served its calculation of damages. On 15 June 2018, the Di Federicos served submissions in response to the calculation of damages by DGF. On 20 June 2018, DGF served an amended schedule of damages. 11. In oral argument on 21 June 2018, the Di Federicos submitted that DGF was not entitled, in order to prove the holding charges claimed by it, to rely on certain accounting records that had been exhibited to an affidavit of Mr Graziano De Bortoli sworn on 24 November 2017 (the November 2017 Affidavit). DGF was granted an adjournment to 4 July 2018 to deal with the issues thus raised by the Di Federicos. On 4 July 2018, DGF sought leave to reopen its case and to adduce further evidence as to its damages. DGF was directed to file and serve, no later than 30 July 2018, any evidence on which it wished to rely in support of its application to reopen, together with any further evidence upon which it would rely if leave to reopen were granted. The Di Federicos were directed to file and serve evidence on which they wished to rely in opposition of the application to reopen. I also directed the filing of written submissions. 12. On 29 August 2018, DGF filed and served the evidence upon which it sought to rely if leave to reopen were given. The material was supported by two tables, together with copies of invoices, receipts, cheque butts, bank statements and similar records. On 19 October 2018, the Di Federicos served a schedule in response to DGF's material with comments as to why certain of the expenses particularised were not accepted by them as relating to the subdivision of the Land. On 23 October 2018, directions were given for the formulation of the questions in dispute and the exchange of written submissions. The parties took steps in accordance with those directions. 13. On the basis that leave was extended to both parties to adduce further evidence on all issues concerning the assessment and quantification of the damages claimed by DGF, the grant of leave to DGF was not opposed by the Di Federicos. Accordingly, on 1 February 2019, DGF was granted leave to reopen its case and adduce further evidence of damages. 14. The proceedings were set down for further hearing on 12 August 2019. After the close of evidence on that day, DGF sought, and was granted, a further adjournment to adduce further additional evidence. The proceedings were then set down for further hearing on 21 November 2019. On 21 November 2019 and 22 November 2019, I received further affidavit and oral evidence and received further documentary evidence. Leave was given to the parties to supplement the written and oral submissions received on those days with further notes and submissions limited to specific questions. I subsequently received that material from the parties, the final material being received on 4 December 2019. Withdrawal of reasons 1. On 8 May, 2020, I published my third judgment in the Specific Performance Proceedings, which related to four outstanding questions concerning the assessment of damages to which DGF is entitled (the Third Judgment). [6] One of those questions was the extent to which DGF incurred loss consisting of interest at the rate of 8% was payable on funds provided to it for the purposes of the proposed subdivision. Relevantly for present purposes, I held as follows: [70] It is remarkable that quite significant sums of money were provided without any adequate record as to the terms upon which the advances were being made. Clearly enough, "investors" who provided funds after the first meeting of the [P]roposed [J]oint [V]enturers did so in the expectation of receiving a return on their "investment". It appears that most of the "investors" were associated in some way with the original four shareholders. Nevertheless, I consider that it is more likely than not that "investors" provided funds on the basis of the statements made to them by Mr De Bortoli that they would receive interest at the rate of 8% per annum on the amounts advanced. [71] There is no reason to doubt that Mr De Bortoli had authority from DGF to make arrangements with the "investors", including arrangements as to the payment of interest at the rate of 8% per annum on advances made by "investors". It was not suggested to Mr De Bortoli that his evidence with other "investors", from time to time was a fabrication. I accept that the advances by "investors", as distinct from advances by shareholders, were loans to DGF and that DGF is liable to pay interest on those loans at the rate of 8% per annum. … [99] It is more likely than not that some arrangement was made involving Mr Frassetto, on the one hand, and the other [P]roposed [Joint Venturers] on the other, whereby the imbalance in contributions by the [P]roposed [Joint Venturers] would be adjusted in some way by the payment of interest. It may be that the arrangement was to the effect that all advances made by [Proposed Joint Venturers] would bear interest at the rate of 8% per annum. However, I am not persuaded that any such arrangement was subsequently adopted or ratified by DGF when it was incorporated. I am not persuaded that DGF incurred a liability to pay interest on any funds provided prior to its incorporation. On the other hand, I am satisfied that "investors" who subsequently provided funds did so on the basis that the funds would bear interest at 8% per annum. However, there is no evidence as to the time when such interest was to be payable. It may therefore be reasonable to conclude that it was implied that the funds would be repayable when the project was completed and DGF was in a position to repay the advances from the proceeds of the sale of lots in the proposed subdivision. 1. I had not yet heard argument on the question of costs as between DGF and the Di Federicos in relation to the Rescission Proceedings. I indicated that I would hear the parties on questions of costs as damages after all other issues have been resolved. I afforded the parties the opportunity of considering the Third Judgment and both parties then made further submissions in the light of the conclusions reached in the Third Judgment. 2. On 9 June 2020, DGF served a calculation of its damages dated 25 May 2020. The total claimed was $777,795.54, of which $372,856.73 consisted of interest at the rate of 8% per annum applied to the sum of $5,084,409.99 over the period from 16 June 2016 to 16 June 2017. On 24 June 2020, DGF served written submissions in support of those calculations, to which the Di Federicos responded on 30 June 2020. 3. I then conducted a further oral hearing on 3 July 2020. The Di Federicos now assert that, in the course of oral submissions, DGF attempted for the first time to rely on paragraphs [154]–[156] of Mr De Bortoli's affidavit of 2 September 2019 (the September 2019 Affidavit) as evidence of an agreement made with "investors" who were not associated with the Proposed Joint Venturers to pay those "investors" interest at the rate of 8% per annum on advances made to DGF in connection with the proposed subdivision of the Land. The relevant paragraphs appeared under the subheading "Interest and interest payments by DGF" (the De Bortoli Evidence). In the De Bortoli Evidence, Mr De Bortoli said that he had located further documents, copies of which were annexed to the September 2019 Affidavit. 4. Mr De Bortoli asserted that he had found documents showing that interest at the rate of 8% per annum had been paid to "Kernsea Pty Ltd" (Kernsea), a company owned by his parents. The documents relied upon consist of the following: * A cheque stub numbered "001185" dated 24 August 2012 recording a payment of $313,940 from an account of DGF to Kernsea on 24 August 2012. * A bank account position document in respect of DGF's account with Australia and New Zealand Banking Corporation Limited (ANZ) containing a handwritten loan calculation; * A bank account statement of Kernsea evidencing a deposit of $319,907 on 27 August 2012; * Photocopies of cheques made out to Kernsea totalling $319,907 and a deposit slip dated 27 August 2012 reflecting the sum of the two cheques. [7] One of the cheques was in the sum of $313,940, drawn on DGF's account with ANZ, numbered "001185" and dated 24 August 2012; and * A cheque stub numbered "001185" dated 24 August 2012. 1. In the September 2019 Affidavit, Mr De Bortoli asserted that the handwriting on the ANZ account position document was his own and recorded a calculation for interest payable to Kernsea for funds that it had lent to DGF. The handwritten note was as follows: "30/01/12 Kernsea Lent $300,000 to DGF 28/08/12 = 5808 x 8% = $13,940 Dollars 1. Take $300,000 From JDP Enterprises P/L and Deposit into DGF Prop Holdings P/L. And then repay Kernsea $313,940. ANZ Cash MGT Acc. 2. Take $350,000 from JDP Enterprises P/L and Deposit into Totu P/L." 1. The cheque stub numbered "001185" contained the following handwritten material: "24/08/2012 Kernsea P/L Loan Repayment For paying out United Church Loan $300,000.00 Interest $13,940.00 Repayment $313,940.00 001185". 1. The September 2019 Affidavit also referred to an internal email of Mr De Bortoli's accountancy practice, GDC Tax Pty Ltd (GDC), dated 10 December 2013 (the GDC Email). The GDC Email provided as follows: "10/12/2013 Rita, Ilhan Onur has $238,190.50 In our trust account. He has agreed to lend us the money at 8% interest. Please write out a cheque in this sum to DGF Property Holdings Pty Limited. Give cheque to Jasmin. Regards [Mr De Bortoli]". The description of the recipient in the GDC Email suggests that the recipient was a member of staff at GDC. 1. Finally, Mr De Bortoli referred to an internal file note of GDC (GDC File Note) detailing the calculations for the repayment of a loan that he asserted was made by himself to DGF in the sum of $200,000. The GDC File Note also referred to the loan from Mr Onur referred to in the GDC Email of 10 December 2013. The GDC File Note was as follows: "Client: DGF Property Holding P/L Loan from G. De Bortoli: 29/10/12 $200,000. @8%. 409 days Interest = x $200,000 x 8% = $17,920 Total Repayment = $217,920 Ilhan Onur From GDC trust A/C = Code 1785A $238,190.50". 1. DGF asserts that the September 2019 Affidavit was served some two and a half months before the hearing on 21 and 22 November 2019 and Mr De Bortoli was not cross-examined about the assertions made in it. However, the Di Federicos complain that that the De Bortoli Evidence was raised "very belatedly" and should have been raised during the hearing on 21 and 22 November 2019, in which the question of DGF's entitlement to damages was extensively considered. They complain that the point should, "at the very least" have been raised in DGF's written submissions of 24 June 2020. 2. The Di Federicos assert that, on 24 November 2017, Mr De Bortoli had conceded in cross-examination that he did not have authority from DGF to enter into "investor agreements" and that he had entered into agreements with prospective "investors" only "as an investor in DGF". They claim that that assertion had been made in their submissions of 20 November 2019 and was not responded to by DGF. The heart of their complaint is that DGF now seeks to relay on the De Bortoli Evidence as a belated answer to that submission. 3. The Di Federicos contend that what they characterise as the "new" argument based on the De Bortoli Evidence may have the ability to affect the Court's finding at [71] of the Third Judgment. [8] They claim, therefore, that it is appropriate that they be permitted now to make the submissions that they would have made had the issue been addressed prior to the hearing on 21 and 22 November 2019. 4. Those contentions indicated that further argument may be required in relation to the question of interest and, in that light, the parties were informed that the proceedings would be fixed for further directions for the purpose of considering whether the Third Judgment should be withdrawn and the question of interest be reheard. Accordingly, on 21 July 2020, I directed the parties to file and serve further submissions on that question. Pursuant to that direction, DGF filed submissions on 3 August 2020 and the Di Federicos responded to DGF's submissions on 5 August 2020. DGF filed submissions in reply on 19 August 2020. 5. DGF accepts that the Court can recall any part of its reasons where appropriate if the Court is not functus officio. I am clearly not, since I have not yet made any final orders in the Specific Performance Proceedings. However, DGF contends, it would be inappropriate to do so merely because counsel for the Di Federicos wishes to raise matters that have already been the subject of argument. The Di Federicos characterise the question as whether the Court should withdraw the reasons of 8 May 2020 in accordance with r 36.17 of the Uniform Civil Procedure Rules 2005 (NSW), which allows the Court, of its own motion, to vary a judgment if an error has arisen from an accidental slip or omission. I do not consider that reliance need be placed on that rule. Until such time as final orders have been made, the Court is in a position to reconsider any reasons for conclusions that it has expressed. 6. The Di Federicos contend, in effect, that the Third Judgment contains an error in so far as it did not address the question of Mr De Bortoli's authority to enter into agreements on behalf of DGF with the "investors". The Di Federicos do not assert that DGF has never previously referred to the De Bortoli Evidence. Rather they contend that 3 July 2020 was the first occasion on which DGF attempted to use the De Bortoli Evidence to support a contention that Mr De Bortoli had made agreements with "investors" on behalf of DGF to pay interest on their loans at the rate of 8% per annum. Thus, the Di Federicos contend, the submissions previously made by DGF indicate that all that DGF had previously said about the De Bortoli Evidence was that "payments" had been made by "investors" and that, in one instance, a "repayment" had been made to an "investor". Thus, the Di Federicos contend, it was not until the oral argument on 3 July 2020 that DGF referred to the De Bortoli Evidence as establishing an actual agreement entered into by Mr De Bortoli on behalf of DGF with "investors" to pay interest at the rate of 8% per annum. 7. DGF's submissions assert that the Di Federicos' contention that Mr De Bortoli did not, by his own admission, have authority from DGF to enter into the alleged "investor agreements" should be characterised as a "second attempt" and a "reprised argument". The Di Federicos suggest that such references are a concession that they fairly and squarely raised the lack of authority of Mr De Bortoli to enter into any agreement with "investors" on behalf of DGF. The Di Federicos reject any suggestion that they are impermissibly attempting to raise an argument that was not previously raised. 8. DGF disputes that its reliance at this stage on the De Bortoli Evidence involves a new argument and asserts that its contention as to agreement to pay interest at 8% to investors was squarely raised in its submissions of 21 November 2019 and in oral submissions on 22 November 2019. It asserts that it also raised the contention in its submissions in reply on 29 November 2019. 9. DGF's submissions of 21 November 2019 stated as follows: "In any event, the evidence of Messrs De Bortoli, Remaili and Gelonesi conclusively shows the 8% agreement … The documents support it. A contemporaneous payment in that amount referred to in [the September 2019 Affidavit] at [154] ff supports it." In the course of oral submissions on 22 November 2019 Counsel for DGF said: "On the loan, there is the objective evidence, I did mention it earlier, your Honour, but just to make sure your Honour hasn't forgotten about it, the payments that were made by DGF in respect of Kernsea … which was De Bortoli's … and there was also a payment made to Mr De Bortoli, and they were contemporaneous records of the 8%." 1. After extensive oral submissions on 22 November 2019, followed by written submissions, DGF's submissions of 29 November 2019 relevantly said: "Implied or inferred ratification by making loan repayments at 8% If it is accepted that the money received by [DGF] from the "investors" was not donations, it is highly likely that they were loans. If they were loans, it is highly unlikely that they were made on an interest-free basis and highly likely that they were received on the basis that interest at the rate of 8% would be paid as is being told to the court by De Bortoli, Gelonesi, Remaili and is supported by some of the loan repayments: see for example those loan repayments in [154]-[156] of [the September 2019 Affidavit]." 1. In the light of those submissions, DGF contends, there was no new argument or new issue arising out of the oral submissions on 3 July 2020. DGF asserts that none of the Di Federicos' submissions arise from the reference by Senior Counsel for DGF on 3 July 2020 to the De Bortoli Evidence. DGF asserts that the Di Federicos are having "a second bite of the cherry". 2. DGF contends that no distinction should be drawn between monies lent by the Proposed Joint Venturers and entities associated with them, on the one hand, and monies lent by others pursuant to loans solicited by Mr De Bortoli, on the other. Accordingly, it says there is no basis for recalling any of the Third Judgment to reflect such a distinction given the findings at [70], [71] and [99]. 3. I am satisfied that the observation in the Third Judgment that there was no reason to doubt that Mr De Bortoli had authority from DGF to make arrangements with the "investors" was made per incuriam and should be withdrawn. Accordingly, I withdraw so much of the Third Judgment as addressed the question of interest as damage suffered by DGF, namely, paragraphs [22] to [99]. My conclusions on the question of interest, having regard to the further submissions from the parties, now follow. I shall then deal with the outstanding question of the costs of the Rescission Proceedings. Agreement to pay interest 1. The question of interest was not perfectly articulated by DGF in its pleadings. In its statement of claim filed in the Specific Performance Proceedings on 14 October 2016, DGF claimed an order that the Di Federicos pay damages for breach of the 2013 Deed, "including holding costs" in relation to lots within the proposed sub-division. The holding costs were said to include "interest charges". The statement of claim then alleged that, as a result of breaches by the Di Federicos, DGF suffered loss and damage including "increased interest and other holding expenses" in relation to the Land. In its points of claim filed in the Rescission Proceedings on 17 October 2016, DGF alleged that it had liabilities including "approximately $100,000 for land tax, legal fees and development costs" and was liable for "accrued interest on the loans of approximately [$1.2 million]". While there are those references to interest in the pleadings, it is significant that there is no reference in the pleadings to any agreement made by DGF with any person to pay interest on any loans. Further, there is no reference to the rate of 8% per annum or any other rate of interest. 2. Much more significantly, the alleged obligation of DGF to pay interest on the funds provided by "investors" was not recorded in any contemporaneous record of DGF and there was no evidence that any documentary record of a right to receive interest or an obligation to pay interest, at the rate of 8% or any other rate, was ever made. For that reason, I observed in the First Judgment that it was by no means clear that DGF has any liability to pay interest to "investors" who had provided funds for the proposed development. [9] 3. Arrangements for DGF to pay interest to "investors" at the rate of 8% per annum are said by DGF to have been made by Mr De Bortoli. Significantly, Mr De Bortoli was neither a shareholder nor a director of DGF. However, one shareholder of Totu was Pinti Pty Ltd (Pinti), in its capacity as trustee of the De Bortoli family trust. Mr De Bortoli was the sole director of Pinti. Mr Gelonesi's wife, Peppina, was the other shareholder of and was the only director of Totu. On 1 August 2012, Saltnpepper Pty Ltd (Saltnpepper) purchased the shares in Totu held by Pinti. The relationship, if any, of Saltnpepper to the Proposed Joint Venturers is unclear. Mr Gelonesi is a director of Saltnpepper. 4. Before dealing with the alleged arrangements for interest, it is necessary first to say something more about the circumstances surrounding the formation and ownership of DGF. In his affidavit of 30 August 2017, Mr Gelonesi said that the genesis of DGF occurred when Mr Frassetto located a parcel of real estate in which he wanted the Proposed Joint Venturers to invest. Mr Frassetto first approached Mr De Bortoli to find out if he may be interested in joining the investment and Mr De Bortoli then approached Mr Gelonesi as well as Mr Michael Remaili. Mr Gelonesi said that Mr De Bortoli explained that Mr Frassetto needed extra funds to proceed with the investment and asked if the four together would be interested in becoming involved. Mr Gelonesi said that they all agreed and accordingly DGF was registered to purchase the real estate and then proceed with the subdivision development that has given rise to these proceedings. Mr Gelonesi said in that affidavit that DGF had no money of its own and that all of its "capital" had come from loans from shareholders and other "investors", who included small business clients of Mr Gelonesi's accountancy practice, who had surplus cash and had lodged the surplus cash with the accountancy practice for investment. 5. While, in earlier affidavits, Mr Gelonesi referred in some detail to "loans" by "investors", he did not refer to any agreement to pay interest. It was only in his third affidavit, the September 2019 Affidavit, that Mr Gelonesi first asserted that there was an agreement concerning interest at the rate of 8% per annum. Mr Peter Remaili has also now given evidence regarding an arrangement as to interest. I shall outline separately the evidence given by each witness as to the alleged arrangements to pay interest. The evidence of the pre-incorporation discussions 1. The evidence-in-chief of the Proposed Joint Venturers about the proposed arrangements was given by affidavit. That was followed by cross-examination, where possible. The evidence was often confused and ambiguous. I shall deal separately with each witness. Mr Frassetto 1. Mr Frassetto, who gave evidence at the hearing that resulted in the First Judgment, was, at relevant times, a director of DGF. In his affidavit of 9 February 2017, Mr Frassetto referred to balance sheets and profit and loss statements as well as taxation returns of DGF for the years ended 30 June 2015 and 30 June 2016. However, those records do not advance the matter any further. The balance sheet of DGF as at 30 June 2016 showed current liabilities for "trade and other payables" of $43,263.06 and non-current liabilities for "bank and other loans" of $10,420,061.57. There is no indication that any part of those liabilities was for interest. The profit and loss statement for the year ended 30 June 2016 showed income from interest received of $1,737.11 and expenses for interest paid of $719,622.82. No detail is shown in the records as to the recipients of the interest paid. There is no reference to any agreement to pay interest on borrowings from "investors" at the rate of 8% per annum or any other rate. While Mr Frassetto referred expressly to "the investor loans", he gave no evidence of there being any agreement to pay interest to "investors" at the rate of 8% per annum or any other rate. 2. In his affidavit of 10 March 2017, Mr Frassetto asserted that DGF had expended in the vicinity of $9,269,000 on the development of the Land and that that sum included the purchase price of various parcels of land and legal costs in funding proceedings. The affidavit referred to copies of accounting records of DGF. While Mr Frassetto refers to DGF funding the costs by borrowing funds from private investors, there is no mention of interest in the affidavit, or in any of the accounting records. As I have said, Mr Frassetto has since died. Mr De Bortoli 1. In his November 2017 Affidavit, Mr De Bortoli said that he was responsible for the incorporation of DGF in his capacity as an accountant and that DGF was incorporated for the purpose of undertaking property development. He said that the development that is the subject of these proceedings was the first development undertaken by DGF. 2. In his November 2017 Affidavit, Mr De Bortoli said that, in approximately 2003, he attended a meeting with Mr Frassetto, Mr Gelonesi, Mr Peter Remaili and Mr Michael Remaili. He said that, at the meeting, he said words to the following effect: "We are all going to have to inject money into this company. I propose that the interest rate that this money be lent will be 8% per annum unless we agree to change the interest rate later on. Everyone agree?" He said that all present agreed to that proposal. 1. In his November 2017 Affidavit, Mr De Bortoli said that the financial accounts for DGF for the period ended 30 June 2016 were prepared by a staff member of his firm, that it was his practice to review accounts prepared by his staff members in relation to clients that he was managing and that DGF was one of the clients that he was managing at the time. Mr De Bortoli said that, in the week before swearing his affidavit, after reviewing the accounts more carefully, he had formed the view that the accounts were incorrect, as the non-current liabilities failed to set forth accurately the loan liability that should have been included as payable by DGF. He said that DGF operated on an accruals basis and that, in applying that methodology to DGF's accounting records, income and expenses were brought to account when they are accrued, whether or not revenue was actually received and whether or not expenses were actually paid. Mr De Bortoli said that, having reviewed the accounts of DGF for the years 2013 to 2017, he had formed the opinion that the accounts did not accurately reflect a true and fair view of DGF because of the incorrect figure for bank and other loans. Mr De Bortoli identified copies of accounts for the years 2013 to 2017 that had been prepared on 23 November 2017. 2. Mr De Bortoli also said in his November 2017 Affidavit that, after the initial investment of money, as referred to in the meeting in 2003, he was involved in the negotiation of every other loan with the "investors" and had separate conversations with each of the principals of the "investors" other than those where he himself was the principal. He said that, during those occasions, it was his standard practice to say to each prospective "investor" words to the following effect: "Any funds which you advance would be used in the development that DGF is undertaking in Horsley Park. DGF will pay you interest at 8% per annum. The interest payments and the repayment of principal will not occur until the sales of the lots settle after the subdivision has been completed." He said that all of the "investors" said words to the effect that they agreed. 1. Mr De Bortoli said that, for various reasons, some "investors" later requested their money back. He asserted that, in those cases, the funds were repaid with interest. 2. In his September 2019 Affidavit, Mr De Bortoli referred to documents from the business records of DGF, saying that, although DGF had not been incorporated at the time, the documents showed how the amounts contributed for the purchase of the Land were accounted for after DGF was incorporated. In that affidavit, Mr De Bortoli said that, during the meeting in 2003, he raised the fact that Mr Frassetto was not in the best financial position to be able to contribute equally to the development. He said words to the following effect: "[Mr Frassetto] is not going to be able to contribute to the development of Delaware Road in the same proportion as the rest of us. … Any loan funds should attract interest and I'm thinking of about 8% as it is an unsecured loan and I think that interest rates are about 7% of the moment. … Loan repayments and interest payments will not be paid until the project is finalised and settlement proceeds are realised." Mr De Bortoli said that those present agreed to his proposal. 1. In the course of cross-examination on 24 November 2017, Mr De Bortoli was asked whether it was his evidence that what occurred at the meeting that he described in his affidavit was not recorded in any minutes of meeting. His response was: "No, because in 2003, the company wasn't even established, so we got together, we decided to buy property and the company wasn't established at that point of time, so, Mr Syl Frassetto brought this opportunity to us and we got together and we had a meeting." In answer to a question about not mentioning in his affidavit that DGF had not yet been incorporated, Mr De Bortoli replied: "Well I'm sorry, you know I was talking about - it's always in relation to the DGF. So, when we had that meeting we hadn't purchased the property at that time, we haven't even exchanged contracts and the company wasn't established." Later in his cross-examination, Mr De Bortoli was asked about the Remailis and said they were at the initial meeting. When asked whether that meeting was a shareholders' meeting of the Company, his response was: "The company wasn't formed at that time, yes." 1. In cross-examination on 12 August 2019, Mr De Bortoli agreed that he kept no documentary record at all of any agreement to pay 8% on the "investment loans". He also agreed that his evidence was that any agreement occurred at a time when DGF had not been incorporated. 2. In cross-examination, Mr De Bortoli disagreed with the proposition put to him that it was decided at the meeting that Mr Frassetto would have to pay 8% on the shortfall in his contributions compared to the other shareholders' contributions. Mr De Bortoli said, "the 8% was about any monies advanced to the company in excess of other people's loans". When asked whether he accepted that the discussion as to a rate of 8% was about the interest that Mr Frassetto would incur on the difference between Mr Frassetto's loan account and the loan accounts of the other shareholders, Mr De Bortoli responded: "No, no; all the shareholders in the company, or their related entities, any inequalities in the loan would be - will be charged 8% interest." Mr De Bortoli agreed that at the meeting in 2002, Mr Frassetto said: "If I have to pay interest because my share is being paid by others and it is adjusted accordingly then that is fair enough … As long as it's adjusted we are happy to carry it. How about the rest of you? Mr De Bortoli agreed that everybody accepted that that would be fair. However, he said that the way it was calculated was that "it comes out of the company, it's like getting a bank loan, you pay the interest back to the Bank". He asserted that that is what was said. He denied that the conversation was in respect of Mr Frassetto's shortfall compared with the others. Mr Gelonesi 1. In his affidavit of 2 September 2019, Mr Gelonesi said that, in around 2003, he attended a meeting with Messrs Frassetto, De Bortoli, Peter Remaili and Michael Remaili, at which they "discussed that a new company would be incorporated for the proposed development at Delaware Road, Horsley Park". He also said that they discussed the funding of the development. He said they also discussed "the situation that Mr Frassetto would not be able to match the contributions" to be made by him (Mr Gelonesi), Mr De Bortoli and by Peter Remaili and Michael Remaili because Mr Frassetto was not in a financial position to contribute an equal share. Mr Gelonesi said that they discussed that "requiring that interest be paid would be a reasonable way of adjusting" for Mr Frassetto's shortfall. Mr Gelonesi said that Mr De Bortoli said words to the following effect: "You know that [Mr Frassetto] is not able to put money in to the same extent that we are so I think interest is a fair way of balancing these unequal contributions." Mr Gelonesi said that they all agreed that that was a fair way of dealing with "the uneven loans" to the proposed new company and that Mr De Bortoli then said words to the following effect: "We need to fund the development so the partners should be entitled to interest on the investment which I think should be based on comparable rates and maybe a little bit higher because the loans will be unsecured loans. How about 8%?" Mr Gelonesi said that the others agreed. 1. In his cross-examination on 12 August 2019, Mr Gelonesi was asked questions about his affidavit, in which he described his initial involvement in the development of the Land. He was asked whether he or Mr De Bortoli said: "As long as it's adjusted, we are happy to carry it." He responded: "On the basis that it was adjusted by the company paying interest to the investors, yes, that's correct." When asked whether the company did not exist at that stage, he responded: "Well, it was going to. That's a foregone conclusion." He then said it was irrelevant that the company did not exist at that stage, saying: "There is many, many businesses entered into where the companies are ratified after the business has been discussed and agreed to." When it was suggested to him that there never was any such ratification his response was: "Of course there was. The company was set up." 1. Mr Gelonesi then agreed that he knew what a shareholders' resolution ratifying earlier acts made by the company is. When it was suggested that there never had been a shareholders' resolution in respect of DGF, his response was: "We were an association of friends". He also said: "There was no formal resolution written down." 1. Mr Gelonesi agreed in the course of that cross-examination that he had never been at a shareholders meeting of DGF at which a resolution had been passed in respect of 8% interest on loans. Mr Gelonesi also agreed that he has never seen anything in writing recording any agreement made by the shareholders of DGF. When asked whether he had ever been present when a resolution had been passed in respect of ratification of any agreement for DGF to pay 8% interest on loans, his response was "no, purely informal". He agreed that the most that he could recall was "the meeting in 2003", at which those present discussed, first, a shortfall on the part of Mr Frassetto being covered by the others and, secondly, a discussion about interest of 8% that was somehow going to equalise that shortfall. Mr Gelonesi agreed that, to his knowledge, that was "the beginning and the end" of any agreement between the Proposed Joint Venturers as to the payment of interest in respect of monies borrowed by DGF. 2. In cross-examination during the hearing on 21 November 2019, Mr Gelonesi agreed that there was a discussion at the meeting to the effect that Mr Frassetto did not have as much money as the rest of them. He said that they did not discuss that Mr Frassetto would pay interest on any shortfall. Mr Gelonesi rejected the proposition that Mr Frassetto said that it would be fair enough if he had to pay interest because his share was being paid by others. Mr Gelonesi said that that would have implied that the others were lending Mr Frassetto money to put in to the project and that that was never discussed. He said that he or Mr De Bortoli said that it would "be adjusted" by the proposed company paying interest to "the investors". Mr Remaili 1. As I have said, Michael Remaili has since died. In his affidavit of 2 September 2019, Peter Remaili said that he recalled that, during 2003, he was present at a meeting at the Fairfield offices of Mr De Bortoli's firm with his brother Michael Remaili, together with Mr De Bortoli, Mr Gelonesi and Mr Frassetto. Mr Remaili said that the meeting was to discuss the development to be undertaken on the Land. He said that the discussion was that the development was to be undertaken under a company name and all of those present were to receive shares "in this new company". 2. Mr Remaili said in his affidavit that, during the meeting, those present discussed how the development was to be funded and the way in which they would need to deal with the fact that Mr Frassetto's contribution to the development would be less than the others. Mr Remaili said that that issue was raised by Mr De Bortoli and that that was another reason why interest and the rate of interest was discussed. He said that Mr Frassetto was not in a position to contribute funds in the same proportion as the others and they all realised that they would need to carry a component of his contribution throughout the development. He said that Mr De Bortoli said that Mr Frassetto would not be able to put in as much money as the rest of them so they would need to "carry him" and the way to deal with that was "for interest to be paid". 3. Mr Remaili said that Mr Frassetto said: "What can do if I cannot put in any money. If I have to pay interest because my share is being paid by others and if it is adjusted accordingly then that is fair enough." Mr Remaili said that either Mr De Bortoli or Mr Frassetto said words to the following effect: "As long as it is adjusted, we are happy to carry it. How about the rest of you?" Mr Remaili said that he and his brother agreed that that was "fair". Mr Remaili said that either Mr De Bortoli or Mr Gelonesi said words to the following effect: "Because the company will need to borrow the money it should pay interest. I suggest that the interest should be 8% because that is slightly above market." Mr Remaili said that he and his brother and Mr Gelonesi agreed with that proposal and that Mr Frassetto said words to the following effect: "We have to do what we need to do and get the job done so the 8% is fair." 1. In cross-examination, Mr Remaili said that there was a discussion about the funds that had to be borrowed "to carry" Mr Frassetto. When asked how much they were going to have to borrow to carry Mr Frassetto, Mr Remaili responded "it was 8%", a totally unresponsive answer. When pressed, Mr Remaili said that he did not know at the time how much they needed to borrow. He then said that the amount that was going to be borrowed was not discussed. Mr Remaili said that there was discussion about the amount of interest needed to be incurred and said, "the amount that was suggested was 8%". Mr Remaili said that Mr De Bortoli said: "It was put down that we needed to borrow funds, and at the time interest rates were between 7 to 8%, and we agreed to carry the amount, and it was put to the table at 8%, and everybody agreed." 1. When asked whether Mr Frassetto said that he had to pay interest of 8% on the shortfall of his share, Mr Remaili responded "of his share that was borrowed, yes". Mr Remaili was then asked whether the conversation was about the others putting in more than Mr Frassetto and Mr Frassetto agreeing to pay 8% on the shortfall on what he was putting in. Mr Remaili agreed that they were all going to share equally in the profits of the proposed development "as long as the interest was calculated". He was asked whether it was agreed at the meeting that anybody who put in less than the other shareholders were putting in had to pay interest on their shortfall. Mr Remaili responded that it was Mr Frassetto who "needed the shortfall". It is difficult to make sense of the evidence given by Mr Remaili. Pre-incorporation discussions 1. The Di Federicos made submissions both orally and in writing concerning the alleged arrangements between the Proposed Joint Venturers that were said to have been made before the registration of DGF. As indicated above, evidence was given by several witnesses that a meeting of the Proposed Joint Venturers took place in around 2003, at which discussions took place concerning their proposed contributions. Each said that the meeting took place before DGF was incorporated. All of the evidence given by those associated with DGF asserted that the first meeting of the Proposed Joint Venturers occurred before the registration of DGF, although each of them said that it was in around 2003. However, DGF was in fact registered on 17 September 2002, as evidenced by a document issued by the Australian Securities and Investments Commission (ASIC). 2. Mr De Bortoli first volunteered during cross-examination the fact that DGF had not been incorporated when the alleged arrangement involving payment of interest at the rate of 8% was said to have been made. As summarised above, that was confirmed by other affidavit and oral evidence from witnesses called on behalf of DGF. 3. On 22 November 2019, the Di Federicos submitted that, given the evidence that the arrangement about the payment of interest had been made prior to the incorporation of DGF and given that there was no evidence of ratification of that agreement, DGF's claim for damages arising from the alleged agreement must fail. On the same day, DGF requested further time to make submissions concerning ratification and that request was granted. 4. On 29 November 2019, additional submissions on ratification of the alleged arrangement concerning interest were filed on behalf of DGF. In those submissions, DGF did not challenge the evidence of its own witnesses that the agreement was made before incorporation of DGF. Rather, the submission argued in favour of express and implied ratification of the alleged arrangement. On 4 December 2019, submissions in response on the question of ratification were filed on behalf of the Di Federicos. Those submissions also assumed the correctness of the evidence of DGF's witnesses that the alleged arrangement was made before DGF was incorporated. Timing of pre-incorporation meeting 1. On 9 April 2020, the Court drew the parties' attention to the records of ASIC that indicated that the registration of DGF occurred on 17 September 2002. [10] That prompted submissions on behalf of the Di Federicos on 15 April 2020 setting out in detail the evidence of the witnesses called by DGF confirming that the agreement concerning interest was alleged to have taken place prior to the incorporation of DGF. That evidence was quite unequivocal and the references to the first meeting of the Proposed Joint Venturers being "about 2003" was much more likely to have been an error. The Di Federicos contended that the references to 2003 as the date of the first meeting of the Proposed Joint Venturers must have been mistaken and that the meeting probably took place about mid-2002, before the registration of DGF. 2. Mr De Bortoli attached to the November 2017 Affidavit a document (the Summary) that he described as "a GDC Tax summary in respect of loans made to [DGF], from the records of [DGF]". The Summary is headed as follows: Client: [DGF] Balance Date: 2004-2017 Subject: Loan Reconciliation Summary The Summary shows dates on which advances were said to have been made to DGF by each "investor" set out in the List. Significantly, no reference is made in the Summary to interest or any liability for interest. 1. The first entry in the Summary is as follows: Gelonesi De Bortoli & Remaili $2,368,700.45 13/01/2003 $2,357,759.33 Purchase of property – Delaware Rd" 9/04/2005 $10,941.12 30/06/2016 $2,368,700.45 "Gelonesi[,] De Bortoli & Remaili" are shown in the Summary as having a balance of $2,368,700.45 as at 30 June 2016. That entry suggests that three of the Proposed Joint Venturers advanced the purchase price for the Land, but Mr Frassetto did not. That is explained by the evidence referred to above that Mr Frassetto was not able to provide his share. 1. The contract for the purchase of the Land by DGF was entered into on 2 December 2002, when a deposit in the sum of $262,500 was paid. Completion took place on 15 January 2003. Neither the deposit nor the purchase price was paid out of DGF's account with ANZ. I have referred above to the first entry in the Summary, which is dated 13 January 2003, recording a credit to "Gelonesi[,] De Bortoli & Remaili" in the sum of $2,357,759.33. It beggars belief that DGF would have committed to buying the Land before arrangements were in place with the Proposed Joint Venturers for the contribution of funds to enable it to complete the purchase. It is clear that the first meeting of the Proposed Joint Venturers occurred sometime during 2002 and prior to the registration of DGF in September 2002. The evidence summarised above would otherwise be nonsensical. 2. In the light of that evidence, it is clear that the witnesses called on behalf of DGF were mistaken as to the time of the first meeting of the Proposed Joint Venturers. That is easily understood in circumstances where any such meeting occurred some 14 or 15 years before the evidence was given. Clearly, the evidence by the witnesses, that a meeting occurred in 2003 before the registration or incorporation of DGF, was wrong in one respect or another. It is much more likely that the mistaken recollection was as to the date of the meeting rather than the order of events, namely, whether the meeting was before or after the registration of DGF. 3. In written submissions filed on behalf of DGF following the Court's invitation referred to above, complaint is made that the question of the date of the first meeting of the Proposed Joint Venturers was not an issue that was raised by the Di Federicos in the pleadings. DGF also complains that the question of when any agreement concerning the rate of interest was made was not an issue foreshadowed in opening submissions and precise evidence about the question was not adduced because it was not known to be an issue. That complaint on the part of DGF is without foundation. It must be remembered that this question has arisen in the context of the grant of an indulgence to DGF to reopen by reason of a misunderstanding as to whether or not the original hearing was to cover all issues, including assessment of damages. Terms of pre-incorporation meeting agreement 1. The position in relation to the Proposed Joint Venturers is quite unclear. It is necessary to draw a distinction between the original contributions made by the Proposed Joint Venturers, on the one hand, and subsequent contributions by "investors", on the other. I accept that there was a discussion at the first meeting of the Proposed Joint Venturers in which an arrangement was discussed whereby Mr Frassetto was to be treated as an equal principal notwithstanding that he was not in a position to contribute his fair share of the funds necessary to begin the proposed development. However, the terms of the arrangement are quite obscure. Some evidence suggests that the shortfall was to be equalised by treating all contributions by the Proposed Joint Venturers as loans to the proposed company, which would bear interest at the rate of 8% per annum. 2. However, Mr Remaili's evidence suggests that the imbalance in contributions was to be equalised by Mr Frassetto paying interest on the shortfall in his contribution. On that basis, the interest payable by Mr Frassetto on his shortfall would be payable to the other shareholders rather than to DGF. I am simply not persuaded that it is more likely than not that an arrangement was made that had legally binding effect that the proposed new company would have a liability to pay interest to the Proposed Joint Venturers on funds provided by them for the purchase of the Land. I am unable to make a finding as to the extent to which, if at all, Mr Frassetto agreed to pay interest on the shortfall in his original contribution. 3. Thus, a distinction should be drawn between the advances made by the Proposed Joint Venturers, on the one hand, and advances made by other "investors". That is to say, the intended profit from the venture would be shared among the shareholders of DGF. There has been no suggestion that the other "investors" were to share in the profit. It is unclear whether the arrangements whereby the Proposed Joint Venturers were to contribute equally were to be distinguished from the arrangements with other "investors". Ratification of alleged agreement between Proposed Joint Venturers 1. It is clear that the arrangement among the Proposed Joint Venturers occurred prior to the incorporation of DGF. The Di Federicos contend that the evidence as to the arrangements made during the discussions at the first meeting of the Proposed Joint Venturers would not lead to a finding that the arrangements were binding on DGF. It is common ground that there was no written record made either at the time when the alleged arrangements were entered into, or after the registration of DGF, that purports to record those arrangements. More particularly, it is common ground that there was no meeting of the directors of DGF at which the arrangements were ratified or adopted. In the absence of any evidence of adoption or ratification by DGF of the arrangements made at the first meeting of the Proposed Joint Venturers for the payment of interest at 8% per annum on funds advanced to DGF by joint venturers or companies associated with them, the question is whether the evidence supports a conclusion that the actions of DGF and those who participated in the first meeting of the Proposed Joint Venturers were sufficient to give rise to a finding that the alleged arrangements were in fact ratified or adopted by DGF. 2. Under the general law, a contract made on behalf of a non-existent company does not bind the company after incorporation and a company could not ratify a contract made prior to its incorporation. [11] Section 131 of the Corporations Act 2001 (Cth) (the Corporations Act), which deals with contracts before registration of a company, was enacted to overcome what was perceived to be a difficulty in that regard. 3. Section 131(1) relevantly provides that, if a person purports to enter into a contract on behalf of or for the benefit of a company before it is registered, the company becomes bound by the contract and is entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract within a reasonable time after the contract is entered into. Section 131(2) provides for liability of a person to pay damages to each other party to the pre-registration contract if the company is not registered. Under s 131(4), if a company ratifies the pre-registration contract but fails to perform all or part of it, the Court may order the person who entered into the contract on behalf of the company to pay all or part of the damages that the company is ordered to pay. 4. DGF contends that the arrangement to pay interest at the rate of 8% on funds provided for the subdivision project was ratified expressly by the shareholders or by its sole director, Mr Frassetto. Alternatively, DGF says, the ratification of the arrangement is to be inferred from the fact that it has taken legal proceedings, by continued borrowings or by accounting for the payments received as loans. However, because an agreement made before the incorporation of a company cannot be ratified under the general law, it is necessary for DGF to establish the criteria set out in s 131 of the Corporations Act in order to demonstrate ratification. In the absence of establishing that there was an agreement with an identifiable person, within the meaning of s 131(1) of the Corporations Act, there was no implied or inferred ratification. 5. In cross-examination at the hearing that led to the First Judgment, Mr De Bortoli agreed that the shareholders of DGF had never resolved to pay interest on any loans made to it. He also said that he was not aware whether Mr Frassetto made any agreement. He said that there was no shareholders' meeting called and it was all "before the company was established". Mr De Bortoli also said that Mr Frassetto, the only director of DGF, had commented a number of times on the fact that DGF had never resolved to pay any interest on any loans made to it. Mr De Bortoli also said that he was not aware of any minute recording any resolution by DGF to pay any interest on loans made to it. A call for the minute book made by counsel for the Di Federicos produced no such minute. Ratification by shareholders 1. I have referred above to the evidence, given by Mr Gelonesi at the hearing following leave to reopen, to the effect that there has never been a resolution passed in relation to the payment of interest at 8% on loans. In the circumstances, it is difficult to see how any pre-incorporation agreement made among the prospective shareholders was ratified by DGF after its incorporation in accordance with the statutory requirements of s 131 of the Corporations Act. 2. Nevertheless, DGF asserts that Mr Remaili's evidence was to the effect that there were numerous meetings where "it was discussed" that loans were to accrue interest at 8%, being meetings at which the Proposed Joint Venturers were present, albeit that they were not formal meetings of shareholders. When asked whether "between some date in 2003 and a couple of days prior to 2 September 2019" he had ever been asked to recall his recollection of that meeting that had taken place some 16 years ago, Mr Remaili responded: "We've had meetings in the past and we've always spoke about what's in my affidavit". 1. It is quite unclear from that evidence when the meetings took place, who was present at the meetings and what exactly was discussed. Ratification by the members of a company of a pre-incorporation agreement requires, at least, an agreement by the members to that effect. Thus, where a meeting of the members of a syndicate who have formed a company of which they are the sole shareholders are all present at a meeting, the meeting can be treated as a general meeting of the shareholders even if the minutes of the meeting record it as a board meeting. [12] However, a vague general informal discussion by some of the shareholders about a matter will not be sufficient. It is necessary for all of the members to agree expressly, after incorporation, albeit at an informal meeting, that the company be bound by the pre-incorporation agreement. There is simply no such evidence of any such meeting of the members of DGF. 2. If all the shareholders of a company are present together in a meeting and signify their assent to a transaction, their decision would be effective to adopt the transaction on behalf of the company as if a resolution of that effect had been passed at a properly constituted meeting. That would be so, if all shareholders are present and believe they are conducting a meeting even if the requirements as to notice in the company's constitution have not been observed. A transaction will be a valid transaction of a company if all corporators of the company assent, whether that assent is given at a meeting of some kind or even without a meeting and whether or not that assent is given simultaneously by all shareholders or at different times and places. [13] However, DGF has adduced no evidence of express assent by the shareholders of DGF, after the incorporation of DGF, to the acceptance of a liability on the part of DGF to pay interest on monies provided for the purposes of the subdivision. Ratification by sole director 1. DGF relies, in the alternative, on a possible ratification by Mr Frassetto, who was the sole director of DGF. DGF asserts that Mr Frassetto "may have had a directors' meeting and resolved to ratify the pre-incorporation agreement". However, there was no evidence of any such meeting or resolution. DGF also relies on evidence given by Mr De Bortoli at the first hearing in answer to the suggestion that there was not any actual agreement reached at a meeting: "There was a discussion and an agreement, so people were putting different amount of funds, we agreed to compensate the other people by paying interest on those funds. Not everybody had the funds available at that point in time." When asked whether the shareholders of DGF ever resolved to pay interest on loans made to it, Mr De Bortoli replied: "This meeting did happen but it wasn't the shareholders of DGF." 1. Mr De Bortoli agreed that the shareholders of DGF have never resolved to pay interest on any loans made to it but asserted that he was not aware whether Mr Frassetto made any agreement. Mr De Bortoli asserted that he conveyed "on to other investors that 8% would be paid on Mr Frassetto's undertaking". However, Mr De Bortoli, having accepted that there should be a minute taken, said that he was not aware of any minute recording any resolution by DGF to pay any interest on loans made to it. DGF concedes that it is unlikely that there was a minute. 2. In his affidavit of 10 March 2017, Mr Frassetto asserted that DGF had expended in the vicinity of $9,269,000 on the subdivision, which included the purchase price of the Land, including a parcel of land purchased from the Di Federicos and legal costs in funding various proceedings. Mr Frassetto asserted that DGF had funded those expenditures by borrowing funds "from private investors". It is highly significant that Mr Frassetto made no mention of any agreement to pay interest on funds borrowed from "private investors". 3. DGF asserts that, in the light of that evidence, there "probably was express ratification" by Mr Frassetto as a director and that "it just was not written down, so it was express but not formal". DGF asserts that it would be likely that Mr Frassetto, in his capacity as the only director of DGF, had determined "albeit informally" that DGF would pay interest on loans made to it in circumstances where its "modus operandi was borrowing funds". 4. DGF points to the fact that Mr De Bortoli, apparently with DGF's authority, was soliciting payments to DGF from third parties and asserts that DGF continued to receive funds upon which interest "would be paid". In his November 2017 Affidavit, Mr De Bortoli said that, after the initial investment of money following the agreement at the first meeting of the Proposed Joint Venturers, he was involved in the negotiation of every other loan with "the investors" on behalf of DGF. He said in his affidavit that he had separate conversations with each of the principals of the "investors" during which it was his standard practice to say to each prospective investor words to the effect: "Any funds which you advance would be used in the development that DGF is undertaking in Horsley Park. DGF will pay you interest at 8% per annum. The interest payments and the repayment of principal will not occur until the sales of the lots settle after the subdivision has been completed." 1. As DGF asserts, it was "extraordinarily unlikely" that the payments received by DGF were gifts and it would be "highly unlikely" that, in the balancing exercise to account for a shortfall of contributions by Mr Frassetto, the contributors other than Mr Frassetto would receive no benefit for their contribution and that profits would then be shared as per the shareholding. DGF asserts that that would defeat the point of the exercise. It asserts that it would be equally unfair that as subsequent borrowings occurred both from companies associated with the Proposed Joint Venturers and from third parties that the new borrowings would attract interest, but the original borrowings would not. Therefore, DGF asserts, "the likelihood is that [Mr] Frassetto expressly but informally ratified the agreement." 2. In effect, DGF invites the Court to draw inferences as to matters that were within the direct knowledge of Mr Frassetto, who gave evidence at the first hearing, but about which Mr Frassetto gave no evidence. However, the Court should not draw inferences favourable to a party in circumstances where a witness who had direct knowledge of the matters gives evidence but is not asked any questions by the party as to those matters. [14] Inferences should not be drawn in favour of a party that calls a witness who could have given direct evidence when the party refrained from asking the crucial questions of the witness. [15] 3. In any event, s 131(1) of the Corporations Act requires that the agreement said to be ratified be entered into "by a person" on behalf of the company to be incorporated. That requires an identifiable person. [16] In the present case, it is by no means clear who is said to have entered into the alleged agreement on behalf of DGF. At best, the evidence referred to above establishes no more than that the prospective shareholders of DGF agreed amongst themselves that, at some point in the future, they would enter into an agreement with the proposed company to pay 8% interest on loans. That is not sufficient to satisfy the requirement of s 131(1). [17] Implied or inferred ratification 1. DGF asserts that, where a principal sues on a transaction effected by an agent outside the authority of the agent or grounds a defence to legal proceedings on the basis of the validity of such a transaction, it is implicit in the principal's actions that the agent's unauthorised transaction has been ratified. [18] DGF accepts that it has not sued on any transaction between it and any of the "investors" who advanced funds to it. However, it asserts that it has sued the Di Federicos on the basis of the transaction and that, in resisting the Di Federicos' assertion that there was no agreement to pay interest, the actions of DGF are the equivalent of suing on such a transaction or basing a defence on such a transaction. 2. DGF says that the essence of taking proceedings or defending proceedings on the basis of a transaction made by an agent outside the agent's authority is that it is a formal and open acknowledgement by the principal of the act of the agent. DGF asserts that the position that it has taken in the Rescission Proceedings has been an endorsement of the case that it is conducting, namely, that by virtue of the conduct of the Di Federicos, DGF incurred increased interest in addition to other holding expenses. 3. It may well be correct to say that a party will not be permitted to approbate and reprobate. That is to say, it cannot claim that there is a valid act by its agent on the one hand and then sue its agent for taking action without its authority on the other hand. [19] However, that is not to the point. 4. The evidence of Mr Gelonesi was that DGF had no money of its own and all of its funds had to come from loans made by shareholders and other "investors", being clients of Mr Gelonesi's accountancy practice who had surplus cash lodged with his practice for investment. DGF asserts that, in those circumstances, it was obvious that there would be a return on the investment. Mr Frassetto said in his affidavit that DGF had funded the outgoing by borrowing funds from private "investors". 5. DGF asserts that the continued borrowing of money from "investors" and the repayment of funds to certain "investors" together with interest at 8% was evidence of an implied or inferred ratification of the pre-incorporation agreement. It asserts that DGF continued to receive money from various entities and accounted for the receipts as loans. Thus, DGF says, since the money received from DGF from the "investors" was not by way of gift, it must have been by way of loan and, if there were loans, is highly unlikely that the loans were made on an interest-free basis and highly likely that they were received on the basis that interest would be paid at the rates about which evidence was given. However, it is also possible that the advances were by way of contribution to the capital of a joint venture, on the basis that the contributors would be entitled to receive a share of the profits in proportion to their respective contributions. 6. DGF also relies on the proposition that the receipt or retention of money with knowledge of the circumstances of a contract under which it is paid will normally constitute ratification of that contract. [20] DGF asserts that there is no difference in principle between keeping the money advanced and keeping the land purchased with the money advanced. DGF asserts that the alleged loans were made until finalisation and sale of the lots in the proposed subdivision of the Land. It asserts that it acted in accordance with the pre-incorporation agreement by retaining the funds except in the cases where the funds were earlier repaid. 7. The difficulty with DGF's contention is that it has not proven any agreement the ratification of which might have been effected by retaining the funds advanced and now alleging as against the Di Federicos that there was such an agreement. There has been no implied or inferred ratification. Adoption by acquiescence 1. DGF also asserts that, if it is accepted that there was a pre-incorporation agreement concerning the lending of funds to DGF, even if it were not accepted that there had been other acts amounting to express or implied or inferred ratification, DGF would nonetheless have tacitly adopted the agreement by acquiescing in it. It asserts that its conduct in not denying the existence of a pre-incorporation agreement is the equivalent of "a clear adoptive act". [21] Again, the answer to such a contention is that there is no evidence that any such an agreement was made. Contentions if no ratification 1. DGF then asserts that s 131 of the Corporations Act provides a mechanism whereby, even if there is no ratification by DGF, it may be ordered to pay damages. DGF asserts that, if it be assumed that Mr Frassetto entered into the arrangements with the "investors" in respect of the funds originally provided for the purchase of the Land, Mr Frassetto is the "person" referred to in s 131. Accordingly, proceedings could be brought against Mr Frassetto (or presumably his estate) to recover damages and under s 131(3) the Court could order DGF to pay damages. However, it is no more likely that Mr Frassetto, rather than any other person present at the pre-incorporation meeting, was the "person" within the meaning of s 131(1). Further, there has been no order for DGF to pay damages and, accordingly, no basis for asserting that the acts of the Di Federicos have caused DGF to incur a liability to pay such damages. There has been no evidence from any of the "investors" as to the existence of any agreement that DGF would pay interest. 2. Finally, DGF advances a contention that it has been kept out of the proceeds of the sale of the lots in the subdivision and will therefore be entitled to interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW). However, such interest is only payable in proceedings for the recovery of money on the money awarded as damages. The proceeds of the sale of the lots in the subdivision are not DGF's damages. Section 100 cannot have any application. Conclusion on pre-incorporation discussion 1. It is more likely than not that some arrangement was made involving Mr Frassetto, on the one hand, and the other proposed shareholders on the other, whereby the imbalance in contributions by the proposed shareholders would be adjusted in some way by the payment of interest. It may be that the arrangement was to the effect that all advances made by shareholders would bear interest at the rate of 8% per annum. However, I am not persuaded that any such arrangement was subsequently adopted or ratified by DGF when it was incorporated. I am not persuaded that DGF incurred a liability to pay interest on any funds provided pursuant to the arrangements made prior to its incorporation. The evidence of discussions with "investors" 1. In the November 2017 Affidavit, Mr De Bortoli made the following assertions: 1. DGF had operated solely on funds that had been borrowed from 11 "investors", who had debts outstanding to them in relation to their loans. 2. Pinti lent the sum of $239,200 to DGF at the same rate of interest as DGF was paying to other "investors". 3. Totu lent the sum of $1,135,454 to DGF. 4. Sunrise Corporation Pty Ltd (Sunrise) lent DGF the sum of $1,014,699. Mr De Bortoli and Mr Gelonesi were directors of Sunrise, but Sunrise was not a shareholder of DGF. 5. GDC lent the sum of $474,500 to DGF. Mr De Bortoli was a principal of GDC but GDC was not a shareholder of DGF. 6. Pollako Pty Ltd (Pollako) lent the sum of $228,201 to DGF. Pollako was a company owned by Mr Frassetto but was not a shareholder of DGF. 7. "KI Group" lent the sum of $790,919.00 to DGF. "KI Group" appears to stand for "Kitchen Image". 8. GDC Partnership lent the sum of $86,593 to DGF. Mr De Bortoli was a principal of GDC Partnership but GDC Partnership was not a shareholder of DGF. 9. Ms Maureen Towe and the Towe Unit Trust made loans totalling $2,327,200. 10. Jaymy Unit Trust and Mr Ilhan Onur lent money to DGF. 1. There is no evidence to suggest that Ms Maureen Towe, the Towe Unit Trust, Jaymy Unit Trust, Mr Onur or KI Group has any link with the Proposed Joint Venturers or DGF except as "investors". Mr Gelonesi described them as small business clients of his accountancy practice who had surplus cash that they lodged with his practice for investment. 2. In the November 2017 Affidavit, Mr De Bortoli set out a list of "the identity of each of the investors in DGF" together with "the amount lent to DGF by each of them" (the List). The List shows a total of $9,664,201 and is set out in Appendix 1 to these reasons. Mr De Bortoli confirmed that DGF does not have any written loan agreement with any of the persons or entities set out in the List. 3. The earliest date for entries in the Summary, other than "Gelonesi[,] De Bortoli & Remaili", was "10/04/2003" for the sum of "$6,050" in the name of Pollako, for "Benbow Enviro Invest Aust PL". The next entry for Pollako was $110,000 on "23/06/2004", followed by nine more entries of various amounts. Pollako is shown as having a balance of $228,201.29 as at 30 June 2017 representing the total sum of those eleven entries. The only other entries in the Summary during 2003 were for the sum of $405,250 on 25/06/2003 and $70,204 on 26/06/2003 in the name of Totu and a sum of $507 on 7/05/2003 in the name of "G De Bortoli" for "Aust Native Landscaping". The total amount of loans shown in the Summary, including that from "Gelonesi[,] De Bortoli & Remaili", is $9,664,402.12. When that contribution is excluded, the total amount is $7,295,701.67. Most of the other "investors" are shown in the Summary as having made advances in substantial amounts for the first time in 2012 and subsequently. 4. The amounts included in the List broadly correspond with the totals that appear in the Summary in relation to each "investor", subject to minor inconsistencies. First, "Gelonesi De Bortoli & Co" appears in the Summary, but the corresponding amount that appears on the List is there termed "GDC Partnership". Secondly, the List rounds the amounts that appear in the Summary to the nearest dollar amount. Thirdly, there is a discrepancy of approximately $200 between the total of the funds in the List, being $9,664,201, and the total of the funds in the Summary, being $9,664,402.12. It may be that the discrepancy arises out of the entry on the List for "Frank Gelonesi and G De Bortoli" being in the amount of $35,397.00 and the amount in the Summary for "F Gelonesi & G De Bortoli" being for $35,596.56, a difference of $199.56. Finally, the KI Group loan recorded in the List does not in the Summary appear with the other loans. Rather, the KI Group loans appear in a final calculation at the end of the Summary, which provides as follows: Total Loans $8,873,482.33 Total of Bank, GDC and KI Loans [sic] Less Gelonesi De Bortoli & Remal[i] $2,368,700.45 $6,504,781.88 Bank Loans Add KI Group Loans $790,919.79 KI Group Loans $7,295,701.67 1. Mr De Bortoli claimed that certain entries in the Summary reflect repayments made by DFG to an investor, indicated with a minus sign. The November 2017 Affidavit said that some investors called in their loans in conversations with Mr De Bortoli and were subsequently repaid by DGF, with the relevant entries on the Summary recording a "zero balance". This is the case for two entries: FARM Smallgoods Pty Ltd and one of the two entries for GDC. 2. In his affidavit of 2 September 2019, Mr Gelonesi said that DGF's funding came from loans made to it. He set out the loans made to DGF during the period 3 July 2015 until 16 May 2017 and provided references to the corresponding bank account statements. Those loans align with those in the Summary and the List, albeit with an additional loan from Erigolia Pty Ltd, described as a company associated with Peter Remaili, of $20,000, made on 11 August 2016. There is no record of such a loan in the Summary or the List. However, that amount was deposited into the bank account of DGF on 11 August 2016. 3. The Summary may suggest that the original intention was that the Proposed Joint Venturers would fund the development. The terms on which the Proposed Joint Venturers were to contribute to the development would not necessarily be the same as the terms upon which outside "investors" would provide funds. Thus, the Proposed Joint Venturers would, through their associated entities, derive a return on their investment from the profit generated by the development while those who made advances would have no interest in the outcome, other than as lenders, and would be expected to receive interest on the amounts advanced. 4. A complication with that thesis, of course, is that the Proposed Joint Venturers appear to have made further contributions either personally or through various associated entities, in so far as several of the "investors" are associated with the Proposed Joint Venturers. It may be that those further contributions would be entitled to bear interest. On that basis, for Mr Frassetto to be entitled to share in the profit of the project, it would be necessary for him to compensate the other Proposed Joint Venturers for the shortfall in his original contribution. Consideration as to interest 1. The question that remains is as to the terms on which the advances referred to above were made to DGF. DGF has the onus of establishing that Mr De Bortoli was authorised to enter into loan agreements with "investors" and it is not for the Di Federicos to disprove that agreements were made. The Di Federicos contend that the Court should not be satisfied that it is more likely than not that agreements to pay interest at 8% were ever made. They rely on the following matters: * Nothing about interest was ever reduced to writing, notwithstanding the obvious experience in commercial affairs possessed by Mr De Bortoli and Mr Gelonesi; * There is no record of DGF recording such an agreement, by way of minutes or otherwise; * Mr De Bortoli agreed that to his knowledge the shareholders of DGF have never resolved to pay interest on any loans; * There was obvious confusion and inconsistency in the evidence of Mr De Bortoli, Mr Gelonesi and Mr Remaili as to exactly what was said at the first meeting of the Proposed Joint Venturers and in particular what was said about interest; * Mr Frassetto, the only director of DGF, gave no evidence as to any agreement as to interest, and gave no evidence as to what was said at the first meeting of the Proposed Joint Venturers; * None of the non-shareholder "investors" gave any evidence about being a party to any such agreement; and * The only evidence of any conversation with "investors" about payment of interest on their loans was given by Mr De Bortoli related not a conversation on behalf of DGF but conversations in the capacity of an "investor". 1. The only financial material of DGF in evidence consists of the accounting records to which I have referred. There are no primary accounting records in evidence, such as ledgers. DGF contends that, even if the original intention was that the Proposed Joint Venturers would fund the development, that is not what eventually occurred. Thus, there are no accounting records that suggest that the sums advanced from the Proposed Joint Venturers or their related entities were intended to be equity. 2. DGF accepts that the details of the first meeting of the Proposed Joint Venturers are "vague". It justifies that characterisation by asserting that "these people were all friends and associates and did not seem to make notes of their decisions". DGF asserts, however, that there is uniformity in the evidence of the witnesses as to the discussions concerning Mr Frassetto's lack of funds to match the contributions by the other Proposed Joint Venturers and the proposal that the way to "balance" unequal contributions was for DGF to borrow money to fund the development and pay interest on the money borrowed. DGF asserts that various contributions made to the project for the purchase of land, payment of stamp duty were finalised in January 2003 and many more payments were thereafter made to or on behalf of DGF, which DGF asserts were "loans". 3. The records of DGF in evidence show paid up capital of $4, being four shares of $1 each. As I have said, three of the shares were held by companies controlled by Mr De Bortoli, Mr Gelonesi and Mr Frassetto respectively and the fourth was held on behalf of the Remaili brothers. Clearly enough, if the Prosed Joint Venturers and "investors" had provided funds to DGF as share capital, the accounts of DGF would be expected to have shown substantial paid up capital rather than substantial non-current liabilities. 4. It is remarkable that quite significant sums of money appear to have been provided without any record of the terms upon which the advances were being made. Clearly enough, "investors" who provided funds after the first meeting of the Proposed Joint Venturers did so in the expectation of receiving a return on their "investment". DGF contends that, even if the original intention was that the Proposed Joint Venturers would fund the development, that is not what eventually occurred. DGF contends that the evidence only supports the conclusion that the subsequent advances were made by way of loan. Further, DGF says, there is no evidence to suggest that the accounts of any of the entities associated with the Proposed Joint Venturers advanced money to the respective Proposed Joint Venturers for investment in DGF on capital account. In addition, DGF says, there is no basis for suggesting that any of the entities associated with the Proposed Joint Venturers injected funds into DGF on capital account, since they were not shareholders. Finally, DGF asserts, there is no evidence to suggest any agreement between the Proposed Joint Venturers prior to the incorporation of DGF, or subsequent to its incorporation, or among the entities that became shareholders in DGF, whereby the funds provided to DGF by any one of them would somehow be accounted for in a profit calculation at some time in the future, presumably after the Land was sold. 5. DGF asserts that it was not possible for any profit generated by the venture to be distributed to the Proposed Joint Venturers or to the entities associated with them that advanced funds unless the funds were advanced by way of loan. Apart from the holders of shares in DGF, none of the entities who advanced funds could be paid a dividend. There has been no suggestion of an arrangement whereby the entities would receive some other remuneration by way of salary or wage for services provided. Drawings by shareholders would be treated as advances and as unfranked dividends. 6. DGF asserts that the only way that the entities associated with the Proposed Joint Venturers, none of whom was a shareholder, could receive a return on their investments was to receive interest on the money advanced as loans. The only way that any profit derived by DGF could be ascertained for the purpose of distribution to shareholders was after the payment of expenses. The value of the shares would depend upon the value of the Land after the subdivision was effected or upon the total proceeds of sale of lots in the subdivision. The value of the shares would depend upon the liabilities of DGF as against the value of its sole asset, the Land or the proceeds of sale. 7. Thus, the shareholders could realise a return on their investment by selling their shares. That is to say, to the extent that the development resulted in a profit from the development, the value of the shares would be increased by the amount of the profit. That value could be realised by sale of the shares. 8. DGF contends that, notwithstanding the absence of any ratification of arrangements by DGF following its incorporation, every time funds were advanced to DGF, a separate contract came into existence. It says that, once it is accepted that the funds were advanced with the expectation of a return on the investment, the return had to be provided either by way of a share in profit or by way of interest. DGF contends that, in the absence of any mechanism whereby the non-shareholders could receive a share of profit, the return must have been by way of interest. 9. It is highly significant that there is no evidence from any of the "investors" as to the terms of their arrangements, if any, with DGF. There is no reason, in principle, why any of the so-called "investors" could not have made an arrangement with DGF to receive, by way of return on their "investment", a share in DGF's profit, if any, under the development. That would have been an expense of DGF for the purpose of determining its corporate profit and of calculating its taxable income. 10. Mr De Bortoli said in the November 2017 Affidavit that he told "investors", other than those associated with the Proposed Joint Venturers, that interest payments and repayment of principal would not occur until settlement of the sale of the lots after the subdivision had been completed. Such an arrangement, of course, would be appropriate if the "investors" were to receive a share of the profit as the remuneration for their advances. A lender would normally expect to receive interest on a loan but an "investor" who was participating in profit, on the other hand, would not expect to receive a share of the profit until the venture was complete. Again, it is significant that there is no evidence from any of the "investors" as to such an arrangement. 11. In their submissions of 20 November 2019, the Di Federicos contended that the lack of any evidence by Mr Frassetto as to any agreement with the "investors" to pay 8% interest on the loans is hardly surprising as, even on Mr De Bortoli's evidence, there was no agreement between DGF and the "investors". Rather, there was only an alleged oral agreement between the "investors", on the one hand, and Mr De Bortoli, on the other, acting only in the capacity of an investor in DGF. 12. Mr De Bortoli's evidence was not convincing. When asked in cross-examination on 24 November 2017 who the individuals were with whom he claimed he had made oral agreements to the effect that DGF would pay interest on loans, Mr De Bortoli could not remember. When it was suggested to Mr De Bortoli that there were no oral agreements entered into on behalf of DGF to borrow money from individual investors and to pay those investors interest on those monies, Mr De Bortoli's response was there was a discussion in relation to the funds received from Ms Towe and the Towe Unit Trust with Ms Towe's son-in-law, Mr Gary Thompson. However, Mr De Bortoli was not sure when any meeting with Mr Thompson took place but said "it would have been before I put the money into … DGF". 13. Mr De Bortoli said that he explained to Mr Thompson that he was "investing the funds into DGF at 8% to get her [sic] a better return". When asked about the capacity in which he claimed he entered into the agreement with Mr Thompson, Mr De Bortoli responded that he did so "as an investor in DGF". He agreed that it was an agreement between one investor in DGF and a prospective investor in DGF. The Di Federicos complain that, notwithstanding such clear evidence that the only "investor" who was not a party to the original pre-incorporation agreement was Ms Towe and that Mr De Bortoli was not authorised by DGF to offer to pay 8% interest to Ms Towe, DGF made no reply to the submissions during the hearing on 21 and 22 November 2019. 14. The De Bortoli Evidence, on which DGF now seeks to rely, must be considered closely. Thus, there is no evidence in the records of DGF that Kernsea ever lent any money to DGF. Kernsea is not shown as one of the lenders in the List or the Summary. The banking records of DGF did not show any monies having been received from Kernsea on 30 January 2012 or on any other date although there is evidence of a payment of the sum of $319,940 being made by DGF to Kernsea on 27 August 2012 and of the same sum being deposited into Kernsea's bank account on the 27 August 2012. 15. The evidence in relation to Kernsea is by no means decisive. During the course of re-examination on 21 November 2019, Mr De Bortoli suggested that Kernsea did not appear on the List or the Summary because "those funds, I'd say would have been paid direct to a previous shareholder, and when we were preparing the reconciliation, we just went straight off the bank statements." This assertion is at odds with the fact that there are entries in the Summary that are not reflected in the bank account statements of DGF. For instance, the "Gelonesi[,] De Bortoli & Remaili" entry for $2,357,759.33 did not appear in the bank accounts, nor did a loan of $600,000.00 from FARM Smallgoods Pty Ltd recorded as made on 31 January 2012, yet both are recorded in the Summary. 16. The Di Federicos assert that the evidence is capable of supporting several findings as follows: * The only "investors" with whom Mr De Bortoli claims to have had discussions regarding the payment of interest at 8%, other than the initial discussions with the Proposed Joint Venturers prior to the incorporation of DGF, were Ms Towe and her son-in-law, Mr Thompson; * Mr De Bortoli was not expressly authorised by DGF to offer to pay to Ms Towe or the trust associated with her interest at 8% on loans; * To the extent that Mr De Bortoli may have told Mr Thompson that he could obtain a return of interest at the rate of 8% on Ms Towe's investments, there is no evidence that Mr De Bortoli made an agreement to that effect with DGF or that any officer of DGF subsequently ratified any such agreement; and * The only possible significance of the payment of "$19,340 [sic] on 24 August 2012" made to Kernsea is that an inference might be drawn that interest at that rate was payable to "investors" at the time of repayment of their respective loans and it is otherwise irrelevant for the purpose of determining DGF's damages since, even if it was interest on a loan, it was repaid in August 2012, three years before the relevant delay. 1. The Di Federicos contend that there is no evidence of any actual "investor" who was not associated with the Proposed Joint Venturers other than Ms Towe and Jaymy Unit Trust and Mr Ilhan Onur. In those circumstances, the Di Federicos contend, DGF is entitled to no interest since it has not established that there was any agreement with any of the "investors" to pay interest. 2. DGF accepts that its record-keeping was "not world's best practice" and that documents were provided and annexed to affidavits in "something of a haphazard fashion". It says that the explanation for the absence of appropriate documentation is partly the nature of the close relationship of the Proposed Joint Venturers and the "investors" and partly the haphazard nature of the record-keeping. 3. DGF asserts that, while Mr De Bortoli was not a director of DGF, it was plain that he thought he had been a director at one point and, indeed, swore an affidavit as a director, something about which he was cross-examined. DGF asserts that Mr De Bortoli was "plainly a shadow director". Indeed, he agreed, when it was put to him in cross-examination, that he "acted as a director of" DGF. DGF asserts that Mr De Bortoli was closely aligned with it and those who were its shareholders and with its director, Mr Frassetto. DGF asserts that the individuals involved were friends and did not document everything, even concerning substantial amounts of money, and that they trusted each other such that, effectively, millions of dollars were lent to DGF by a number of entities and persons without documentation and without security. 4. The Di Federicos accept that, in its most recent submissions, DGF now engages with what they characterise as "the critical question of Mr De Bortoli's authority". Thus, DGF contends that Mr De Bortoli was a "shadow director" of DGF and that he had agreed in cross-examination that he had acted as a director of DGF. The Di Federicos draw attention to the actual evidence given by Mr De Bortoli. Mr De Bortoli answered "no" to successive questions asking him whether he is a director of DGF, whether he had ever been a director of DGF and whether he had from time to time acted as a director of DGF. When asked whether he was quite certain that he had never acted as a director of DGF, Mr De Bortoli responded that, from his best recollection, he was not sure. When pressed on the question as to whether he was sure that he had never acted as a director, he confirmed that he was "not quite sure". When asked if he may have acted as a director of DGF, Mr De Bortoli conceded that "he may have". 5. Mr De Bortoli was then shown a copy of DGF's defence to cross-claim of 26 November 2013, which bears his signature in the affidavit verifying the defence. When his attention was drawn to the fact that he swore that he was director of DGF and that the allegations of fact contained in the defence were true, his response was he did that "on the [sic] mistake" and that he did not "read it properly". Mr De Bortoli said that it looked like he had incorrectly signed the affidavit as a director since, as far as he was aware, he was not a director. Subsequently, Mr De Bortoli confirmed that he was not a director and that he signed the affidavit "by mistake". He denied that he signed the affidavit intentionally knowing that he was not a director because he believed that he never was a director of DGF. Mr De Bortoli could not offer any explanation as to how he could have made the mistake, saying that he could not remember why he signed the affidavit. He suggested that he thought, perhaps, that he was signing it as the accountant for DGF. 6. DGF contends that, whether or not Mr De Bortoli actually did solicit loans on behalf of DGF on the basis that DGF would pay interest at the rate of 8%, it is irrelevant whether or not Mr De Bortoli subjectively considered himself to be a director or to have acted as a director since his personal view as to the capacity in which he acted is irrelevant. [22] There was no objection to the questions put to Mr De Bortoli as indicated above. Nevertheless, DGF contends, it is erroneous to dwell on Mr De Bortoli's subjective views as to whether he was a director or ever acted as a director. 7. The evidence clearly indicates that Mr De Bortoli never considered himself to be a director of DGF and that he never knowingly acted as a director of DGF. Mr De Bortoli's evidence was that the one instance of his acting as a director, by signing the defence to cross-claim on 26 November 2013, was by way of a mistake because he thought he could sign the document as DGF's accountant. 8. A de facto director, sometimes referred to as a "shadow director", is a person who performs the functions normally attaching to the office of a director without having been formally appointed as such. [23] The only evidence that Mr De Bortoli ever performed any function of a director of DGF was his signing that affidavit in November 2013, many years after the agreements alleged to have been made with "investors". Any suggestion that Mr De Bortoli was a "shadow director" or a "de facto director" of DGF must therefore be rejected. The Di Federicos dispute DGF's contention that the admission made by Mr De Bortoli that he only entered agreements with "investors" in his own capacity as an investor was not really an admission that he had no authority from DGF to enter into such agreements. In that regard, the Di Federicos draw attention again to the specific evidence given by Mr De Bortoli during cross-examination. Thus, when asked as to the capacity in which he claimed he entered into an agreement with Mr Thompson, Mr De Bortoli responded "as an investor in DGF". He was then asked whether he meant that one investor in DGF was entering into an agreement with another investor in DGF. His response was "a prospective investor, yes". He then confirmed that that was the only capacity in which he claimed he entered an agreement with Mr Thompson. 9. DGF also relies on the evidence given by Mr De Bortoli that he "conveyed onto other investors that 8% interest would be paid on Mr Frassetto's undertaking". That evidence was given in the course of the following exchange: "Q. To your knowledge, did the shareholders of DGF ever resolve to pay interest on loans made to it? A. This meeting did happen but it wasn't the shareholders of DGF. Q. The shareholders of DGF have never resolved to pay interest on any loans made to it, correct, to your knowledge? A. Yes, that's correct, but I am not aware if the director made any agreement. Q. Who is the director who may or may not have made an agreement? A. Mr Sil Frassetto. Q. But as far as you're aware‑‑ A. There was no shareholders meeting called to do that, it was all before the company was established. Q. DGF has never resolved, to your knowledge, to pay any interest on any loans made to it? A. The director of the company has commented on that fact a number of times. Q. We can ask him? A. Yes, you can. Q. But you've had no direct involvement in any such arrangement? A. I conveyed onto other investors that 8% interest would be paid on Mr Frassetto's undertaking." However, the fact that Mr De Bortoli told others about something that a director of DGF may have said is not evidence that Mr De Bortoli was authorised on behalf of DGF to enter into agreements with potential investors. 1. Further, the statement by Mr Frassetto to which Mr De Bortoli was referring was made at the meeting of the Proposed Joint Venturers prior to the incorporation of DGF and the shareholders of DGF at no stage resolved after incorporation of DGF to pay interest on any loans made to it. Mr De Bortoli confirmed that, so far as he was aware, there was no shareholders meeting called to do that and "it was all before the company was established". 2. The Di Federicos reject DGF's contention that it should have been put to Mr De Bortoli in cross-examination that he had no authority to offer Kernsea 8% interest on its advances to DGF: Mr De Bortoli had never claimed that he had such authority or that there was an agreement with Kernsea that it would be paid interest at the rate of 8%. Mr De Bortoli's evidence was that the only oral agreements he had entered into were with Ms Towe and Mr Thompson, her son-in-law. Thus, Mr De Bortoli was asked whether, apart from the discussion among the Proposed Joint Venturers prior to DGF's incorporation, there were any oral agreements that he entered into on behalf of DGF to borrow money from individual investors and to agree to pay those investors interest on those monies. Mr De Bortoli responded that there had been a discussion in relation to funds for the Towe Unit Trust and with Ms Towe. He said he looked after the financial affairs for the Towe Unit Trust and Ms Towe and explained to Mr Thompson that he was "investing these funds into DGF at 8% to get her a better return". 3. DGF asserts that "the documentary evidence should prevail". However, the "documentary evidence" says absolutely nothing about any agreement to pay interest to "investors" at the rate of 8% or any other rate. As indicated above, there is simply no evidence of any discussion between Mr De Bortoli, on the one hand, and any "investor", on the other, as to the terms upon which the funds were to be provided by "investors" to DGF much less of any discussion between an officer or authorised agent of DGF and any "investor". 4. The critical loan records of DGF, namely the Summary, make no reference to interest being payable on loans by "investors" at the rate of 8% or any other rate. There is no evidence of any written communication with any of the "investors" recording an agreement to pay interest at the rate of 8% or any other rate. The only contemporaneous record of any kind is the GDC Email of 10 December 2013 extracted above with respect to a loan made by Mr Onur to DGF at the rate of 8%. [24] DGF's bank statement records a deposit on 12 December 2013 in the sum of $238,190.50 and the Summary records two sums from Mr Onur on 12 December 2013, one of $200,000 and another of $38,190.50. There is no reference to the terms of any loan such as when it was to be repaid or when interest was to be paid. The parties made no submissions on the topic. 5. The Di Federicos do not dispute that funds were provided by the "investors". The question is as to the terms upon which those funds were provided. There is no contemporaneous written record of interest at the rate of 8% or any other rate being payable, aside from the one email in relation to Mr Onur. The evidence is equally capable of supporting a conclusion that the "investors" were to be remunerated by a share of profit. DGF contends that "the loans were entered into the books". However, the contemporaneous records of the loans make no reference whatsoever to any liability to pay interest to "investors" at the rate of 8% or any other rate. So much was recorded in the Third Judgment. 6. DGF contends that an agreement to pay interest at the rate of 8% should be "inferred". However, as I observed in the Third Judgment, the Court should not draw inferences in favour of a party when that party could have called direct evidence to prove the fact about which the inference is sought to be drawn. 7. The Di Federicos respond to DGF's contention that Kernsea, KI Group, Ilhan Onur and Towe Unit Trust were "investors" not associated with the Proposed Joint Venturers by pointing out that the only "investor" that Mr De Bortoli claimed to have offered interest at the rate of 8% was Ms Towe, in the circumstances indicated above. The Di Federicos contend that Mr De Bortoli was not authorised by DGF to make any agreement with any "investor" to pay interest on the advances made at the rate of 8% or any other rate. For those reasons, the Di Federicos contend, the conclusion in [71] of the Third Judgment should be withdrawn and the Court should conclude that DGF has not proven that it has any liability to pay to any of the "investors" interest on advances at the rate of 8% or any other rate. 8. There is an extraordinary paucity of evidence as to the terms upon which the persons and entities who advanced money would be remunerated for the use of those funds. In that regard, DGF accepts that "the documentary record is thin". As I have said, it justifies that fact by referring to the nature of the relationship between the Proposed Joint Venturers and other persons and entities who provided funds to DGF. DGF asserts, having regard to the amounts involved, the accounting records and the loan repayments made, it is plain that monies were lent and received. That may be so. However, it is far from plain that the monies were lent and received on the basis that the loans would bear interest at the rate of 8% per annum or any other specific rate. 9. DGF contends that the conclusions that I reached in the Third Judgment should stand. It reiterates its contention that, having entered into the loans, DGF would have no defence to a claim by an "investor" for repayment of the loans. That must be so. The question, however, is not whether advances were made by the "investors" to DGF but the terms upon which the advances were made. The question is whether I am satisfied that it is more likely than not that arrangements were made with "investors" by Mr De Bortoli on behalf of DGF and that any arrangements made on behalf of DGF included a term that, at the time when the amounts were repaid, following completion of the development project, interest would be paid on the amounts advanced at the rate of 8% per annum. 10. While it is certainly more likely than not that the advances were not interest-free loans, the question is how "investors" were to be remunerated for the use of their money. It is significant that the persons and entities concerned have been referred to as "investors" and not as lenders. A lender is not an investor. An investor one would normally expect to have an interest in the outcome of the venture. The case advanced by DGF is that the "investors" were no more than lenders at a fixed rate of interest, albeit payable after the completion of the venture upon repayment of the loans. 11. While DGF concedes that poor document keeping has bedevilled its case, it says that, if the evidence in relation to Kernsea was to be contested, it should have been put to Mr De Bortoli squarely during cross-examination that his evidence that Kernsea had lent DGF money and that it had been repaid with interest at 8% was false. DGF points out that, apart from his mistakenly swearing an affidavit as a director and his laxity concerning record-keeping, Mr De Bortoli's credit was not impugned. DGF also points to evidence that "certain payments were made direct rather than through the bank account of" DGF, including the very significant expense of the purchase of the land in the first instance. When Mr De Bortoli was asked in re-examination whether he was able to say why there were no references to Kernsea in the Summary, he responded: Yes, because those funds, I'd say, would have been paid direct to a previous shareholder and, when we were preparing the reconciliation, we just went straight off the bank statements. 1. DGF asserts that the documentary evidence supports DGF's claims that loans were made by all investors and carried interest at 8% per annum. It asserts that the documentary evidence should prevail over the oral evidence given by Mr De Bortoli on 24 November 2017, some two years before the second hearing in November 2019. DGF says that the fact that, in 2017, Mr De Bortoli was unable to recall each and every person who had lent money, when the documentary evidence both then, and later, set out numerous lenders, ought not be relied upon to deny the likelihood of agreements having been made to pay interest, no matter who lent the money, particularly where he had set out his methodology for soliciting loans. However, the only evidence, as I have said was Mr De Bortoli's evidence in cross-examination as follows: "I conveyed on to other investors that 8% interest would be paid on Mr Frassetto's undertaking". 1. DGF asserts that the idea that Mr De Bortoli solicited millions of dollars of loans without authority or the knowledge of DGF is untenable and that Mr De Bortoli's evidence about soliciting loans is clear that the "investors" agreed that loans to DGF would carry interest at 8% per annum. DGF asserts that the loans were procured by Mr De Bortoli on that basis and that the loans were entered into the books of DGF. DGF dismisses the absence of any particular evidence that Mr Frassetto asked Mr De Bortoli to procure loans for DGF at 8% per annum repayable at the conclusion of the Development. DGF contends that, looked at objectively, it is clear that the "investors", other than those connected with the Proposed Joint Venturers, could claim interest from DGF at 8% per annum. It asserts that it would be unable to resist any claim for interest by any of the "investors" on the basis that the loans had been solicited by Mr De Bortoli rather than by Mr Frassetto. A contract may be inferred from the acts and conduct of parties as well is in the absence of words. [25] 2. I reiterate the high significance of the fact that none of the "investors" gave evidence as to the terms of their respective arrangements with DGF. Further, even the evidence of the arrangements made by the Proposed Joint Venturers is confused. In the absence of any suggestion that the "investors" were to be remunerated by a share of the profit of the venture, it is more likely than not that the "investors" were to be remunerated by a payment of interest. 3. The reasonableness of an interest rate of 8% at the time when the project was proposed or at the time when the advances were made by the "investors" may be relevant to the question of whether a rate was agreed. In his affidavit of 2 September 2019, Mr Gelonesi referred to a schedule of variable home loan interest rates as at 2003. The source of those figures was not identified. The interest rates identified are between 6.55% and 7.05%. The provenance of the schedule was not identified but it was not disputed. It is probably capable of supporting a finding that 8% was not an unreasonable rate of interest to be paid on advances made for the purpose of the proposed project. 4. As I understand the position, the sale of the lots in the subdivision of the Land have now been completed. I would also draw the inference that the alleged loans by "investors" have been now been repaid by DGF and, if there was a liability to pay interest, the interest would have been paid to "investors". However, there has been no evidence as to whether interest has in fact been demanded or paid. 5. It appears probable that, while the original intention was that the Proposed Joint Venturers would fund the project in equal shares, that intention was frustrated by Mr Frassetto's inability to contribute his share. Had they contributed equally, the Proposed Joint Venturers would have been remunerated by the increase in the value of their shares in DGF. I consider that it is more likely than not that the idea of a payment of interest to the Proposed Joint Venturers who contributed more than their share resulted from Mr Frassetto's inability to contribute his share. 6. There are strands of evidence that may be capable of supporting DGF's contentions. Thus, there is evidence relating to the following: * a loan from Mr Ilhan Onur, a client of GDC; * a personal loan from Mr De Bortoli; and * a loan from Kernsea. I shall deal with each of those strands separately. Loan from Mr Ilhan Onur 1. The following documents are in evidence: * The contemporaneous GDC Email of 10 December 2013 from Mr De Bortoli to Rita, an employee of GDC. It refers to Mr Onur's agreement to lend DGF $238,190.50 at 8% interest. Mr De Bortoli instructs Rita to draw a cheque from GDC's trust account to that effect. The GDC Email may lend support to Mr De Bortoli's evidence of a practice of soliciting loans to DGF. * The GDC File Note about DGF as client which includes, among other things, "Ilhan Onur…From GDC trust A/C = Code 1785A $238,190.50". * DGF's ANZ account statement for December 2013 that records a deposit made on 12 December 2013 of $238,190.50. [26] There are handwritten notes around the relevant bank statement entry, but the handwriting was not tendered with the account statements at the hearing of 24 November 2017. [27] * The Summary records two entries for Ilhan Onur dated 12 December 2013 (among others of different dates) for $200,000.00 and $38,190.50 respectively, a sum corresponding to the $238,190.50 deposited in DGF's ANZ account on the same date. 1. However, there was no oral evidence about this alleged loan and no witnesses were called in relation to it. In particular, there is no evidence of any discussion with Mr Onur or whether the money was for the development of the Land. Personal loan from Mr De Bortoli 1. The following documents are in evidence * The GDC File Note that records a personal loan Mr De Bortoli made to DGF on 29 October 2012 at an 8% interest rate over 409 days, suggesting a date for repayment of such a loan on or around 11 December 2013, in the amount of $217,920.00. * On 29 October 2012, there is a $200,000.00 bank transfer into the DGF ANZ account. Again, there is handwriting on the statement that was not tendered. * DGF used cheque number 001241 to repay an unspecified person $217,920.00 described on the cheque butt as a "loan repay $200,000" and "$17,920". That cheque butt was dated 10 December 2013 and was withdrawn from DGF's bank account on 16 December 2013. The payee field was left blank. As confirmed in cross-examination of Mr De Bortoli, that amount corresponds to that recorded in the GDC File Note. * The Summary under "G De Bortoli" does not record any loan of $200,000 being paid by or repaid to Mr De Bortoli. However, "G De Bortoli" has a significant number of loan payments recorded under his name in various other amounts. A single repayment of $222,200 is recorded as having been made to him during 2015. * The Summary records a "loan" of $200,000 made on "29/10/212 [sic]" in relation to "Pinti Pty Ltd" and indicates that this amount is outstanding. * The Summary, under "GDC Tax Pty Ltd", records a $200,000 repayment made on 10 December 2013, bringing that "investor's" balance to zero. $200,000 is recorded as advanced by GDC Tax Pty Ltd on 17 June 2013. Although the loan amount and the repayment date recorded aligns with that of cheque butt 001241, the recorded date of the commencement of the loan does not match the date in the GDC File Note. * On 17 June 2013, there is a $200,000 deposit into the DGF Bank account. * In December 2013, the only withdrawal around $200,000 was the $217,920.00 cheque. 1. The calculation on the GDC File Note accords with the amount withdrawn from DGF's account. The Summary discloses conflicting possibilities as to which person or entity actually advanced the "personal loan" and subsequently received repayment of it. There is a deposit into DGF's account on the commencement date referred to by the GDC File Note, and a repayment out of the account on or around the date that GDC File Note records and reflects interest of 8% for the relevant period. Loan from Kernsea 1. On 30 January 2012, Kernsea lent DGF $300,000 to discharge a loan arrangement that DGF had with the Uniting Church (NSW) Trust Association Limited (the Uniting Church). Kernsea appears to have paid that money directly to the Uniting Church. That loan from the Uniting Church to DGF was to enable DGF to lend money to Nelson Bay Developments Pty Ltd. DGF repaid Kernsea $313,940, reflecting 8% interest, with cheque number 1185, the relevant cheque butt being dated 24 August 2012, which Kernsea deposited on 27 August 2012. The following evidence relates to Kernsea: * DGF made recurring payments to Uniting Church entities that occurred every month from 10 June 2004, evidenced by its bank statements, which abruptly ended in January 2012. * A tax invoice from Holman Webb Lawyers dated 12 March 2010 and addressed to DGF in respect of their costs of acting on behalf of the Uniting Church refers to "advance securing" $1,227,000.00 to DGF. The security was 79 Delaware Road, Horsley Park. [28] * The Uniting Church is not mentioned in the Summary. * At the hearing on 21 June 2018, there was discussion about a loan from the Uniting Church to DGF for the purpose of financing the Nelson Bay Development. [29] * In January 2012, DGF paid $495.00 by cheque. Cheque butt 1170 described the payment as "prep of discharge of documents loan with Uniting Church (NSW) Trust Ass". That cheque was debited to DGF's account on 31 January 2012. * Mr De Bortoli's calculations on the ANZ statement indicate that Kernsea lent $300,000 to DGF on 30 January 2012 and includes an interest calculation up to 28 August 2012 in the amount of $13,940.00. [30] * Cheque butt 1185 described Kernsea as the payee of the cheque, being "for paying out United Church" and included a breakdown of a loan of $300,000 with interest of $13,940.00. * Cheque 1185 was deposited together with another cheque, collected in the exhibit to the September 2019 Affidavit, [31] which shows two cheques and the deposit slip. * Kernsea's bank account statement shows the deposit of those funds on 27 August 2012. * In evidence on 21 November 2019, Mr De Bortoli said that Kernsea was not included on the Summary because its money was "paid direct to a previous shareholder and, when we were preparing the reconciliation, we just went straight off the bank statements". 1. The documents concerning Kernsea tend to suggest that the money was advanced for a purpose other than the development of the Land. Further, Kernsea was not recorded in the Summary. Similarly, Mr De Bortoli's own personal loan was not recorded in the Summary. One view might be that neither loan was advanced for the purpose of the development of the Land. Conclusion as to interest 1. Those strands are not capable of making a rope that will support DGF's case on interest. The state of the evidence is such that I am not able to be satisfied that DGF has established the terms upon which advances were to be made to DGF by the Proposed Joint Venturers or entities or persons associated or connected with them or by others. The evidence of the discussion involving the Proposed Joint Venturers prior to the incorporation of DGF is confused and unconvincing. It is unclear whether the discussion about interest payable to persons or entities related to the Proposed Joint Venturers was for all funds provided or only by way of balancing for shortfalls in contributions. I am simply unable to conclude that the advances that were made were made pursuant to any agreement made with DGF that DGF would pay interest on the amounts of the advances. Costs 1. On 24 July 2018, the Court ordered DGF to pay the Purchasers' costs of the Rescission Proceedings. I did not intend that that order would foreclose DGF from claiming, as damages in the Specific Performance Proceedings, the costs that it was ordered to pay in the Rescission Proceedings. That is a head of damage now claimed by DGF. 2. A plaintiff or cross claimant in proceedings will not ordinarily be entitled to recover, as damages in the claim made by that plaintiff or cross-claimant in those proceedings, the costs of making that claim. On the other hand, the Court has a discretion to order a party to pay another party's costs of the proceedings. The effect of such an order may be to indemnify the plaintiff or cross-claimant in whole or in part in respect of costs incurred in prosecuting the claim in the proceedings. 3. However, it is possible that costs incurred by a party in prosecuting a claim against another party in one set of proceedings, or in defending a claim by another party in one set of proceedings, may be the result of wrongful conduct by a third party, such that the first party would be entitled to recover those costs from that third party. Thus, if the wrongful conduct were tortious, the plaintiff may be entitled to be put in the position in which it would have been but for the tortious conduct. If the wrongful conduct were a breach of contract, the plaintiff may be entitled to be put in the position, as far as money can do so, in which the plaintiff would have been had the contract been performed. That is to say, if the incurring of legal costs by a party in separate proceedings can be shown to have been caused by the wrongful conduct that is the subject of fresh proceedings by that party, those costs may be recoverable as damages in the fresh proceedings. 4. In the First Judgment, I observed that, without any order of the Court, DGF could have rescinded the contracts for sale when the respective sunset dates in respect of the contracts for sale occurred. [32] DGF contends that, had it so rescinded the contracts for sale, it is likely that it would have been met with a series of claims by the Purchasers that such rescissions were not in good faith, given the increase in the value of the relevant lots in the subdivision. DGF asserts that it had indicated that it wanted to complete the subdivision and honour the contracts for sale, but the point was reached where it could no longer do so, because, in the meantime, s 66ZL of the Conveyancing Act had been enacted. DGF asserts that its commencement of the Specific Performance Proceedings against the Di Federicos prior to the commencement of the Rescission Proceedings was evidence of its honourable intentions. 5. In the First Judgment, I held that the conduct of the Di Federicos constituted a breach of the 2013 Deed and also constituted a breach of the 2015 Agreement, in that the Di Federicos failed to take any steps to challenge the s 121B Order and failed to comply with the s 121B Order. I concluded, therefore, that that conduct caused delay in the completion of the subdivision. I also concluded that, had unauthorised fill not been brought onto the Di Federicos' land in the way that it was, it is more likely than not that, subject to DGF complying with the other requirements of the Council, a subdivision certificate would have been issued in the second half of 2015. [33] I considered that it was reasonable to conclude that, since the Di Federicos' land was part of the subdivision, a subdivision certificate would not be issued by the Council so long as the stop work direction was in place or the s 121B Order was outstanding. 6. DGF asserts that, from the commencement of the operation of s 66ZL, on 2 November 2015, until 16 May 2017, it "could not go forwards and could not go backwards" since it was forbidden by the Di Federicos from accessing their land and it was no longer permitted to rescind. DGF accepts that the Council may have made a determination of sorts on 16 May 2017 but asserts that there was nothing in the evidence that indicated any change of heart by the Di Federicos, allowing DGF onto their land between 16 May 2017 and the date of the First Judgment, on 23 March 2018. DGF asserts that the Di Federicos were entirely hostile to DGF and refused access to their land and that it was only the First judgment that broke the deadlock. Even then, DGF asserts, it was still attempting to gain access to the Di Federicos' land as late as 9 April 2018. 7. It says that, as a direct result of the conduct of the Di Federicos, it lost its contractual rights to rescind following the enactment of s 66ZL of the Conveyancing Act. It says that, if it did nothing, it would be liable to an action by from the Purchasers. It claims that, by reason of the breaches by the Di Federicos, it was suffering loss in that it was incurring ongoing holding costs and interest because of its inability to complete the development and realise the sales of the lots in the subdivision. 8. DGF asserts that, in order to attempt to mitigate that loss, it gave rescission notices to the Purchasers on 13 May 2016 and commenced the Rescission Proceedings. DGF accepts that it was far from entirely successful in the Rescission Proceedings, but asserts that it mitigated some of its losses and the stalemate was broken. It says that, if the Di Federicos had not committed the relevant breaches, DGF would not have needed to, and would not have commenced, the Rescission Proceedings. It asserts that it could not know in advance what the result of the proceedings would be and that it may have been in the position of not obtaining an order for specific performance or damages against the Di Federicos, such that its position vis-a-vis the Purchasers was no more advanced despite three years of litigation against the Di Federicos and would still be exposed to suit by the Purchasers. 9. DGF claims the costs of the Rescission Proceedings as a head of damage suffered as a consequence of the breaches by the Di Federicos. It asserts that the breaches by the Di Federicos were a material cause of the losses incurred by it consisting of the incurring of its own costs of the Rescission Proceedings and the order for that it pay the costs of the Purchasers. [34] DGF asserts that it was foreseeable that, if the Di Federicos committed such breaches, DGF may end up in proceedings against the Purchasers and be ordered to pay costs. In that regard, it is necessary for DGF to establish that it was a reasonable and natural consequence of the breaches by the Di Federicos that DGF would have commenced the Rescission Proceedings and incur those losses. [35] 10. I do not consider that DGF has established that the Di Federicos caused it to commence the Rescission Proceedings. The conduct of the Di Federicos, which delayed DGF by some 11 months, was not a cause of DGF's failure to rescind the contracts for sale before it was deprived by statute of its entitlement to do so without an order of the Court. I do not consider that any conduct of the Di Federicos was a cause of the loss suffered by DGF consisting of the incurring of its own costs in the Rescission Proceedings or the incurring of the liability to pay the costs of the Purchasers in the Rescission Proceedings. 11. While the Di Federicos were party to the Rescission Proceedings, they were joined only in respect of the question of costs and no other relief was sought against them in those proceedings. I do not consider that the Di Federicos were necessary parties to the Rescission Proceedings. However, in so far as the two proceedings continued together, they were necessarily involved in the Rescission Proceedings. Nevertheless, I do not consider that they are entitled, in the Specific Performance Proceedings, to an order in relation to the costs of Rescission Proceedings, either their own, or those of the Purchasers. Conclusion 1. As I understand the position, in the light of the conclusions expressed above and those expressed in the earlier judgments, the calculation of the damages to which DGF is entitled is now a matter of arithmetic. I propose to direct DGF to file and serve draft orders in accordance with these reasons and the earlier judgments. Those draft orders should be served no later than 14 days after these reasons are published. I shall direct the Di Federicos to file and serve a note indicating any dispute with the proposed orders within a further 14 days. If there is no dispute, I will direct the entry of judgment in accordance with the proposed orders. If there is any further dispute, each of the parties has leave to approach my associate for the purpose of fixing a date for further argument. ********** Appendix 1 (The List) Extract from Affidavit of Graziano De Bortoli sworn 27 November 2017 Paragraph 16 Identity of each of the Investors Silvano [sic] Frassetto, Frank Gelonesi, myself and Peter Remailli to facilitate purchase of property:- $2,368,700.00 Sunrise Corporation Pty Limited:- $1,014,669.00 GDC Tax Pty Limited:- $474,500.00 Pollako Pty Limited:- $228,201.00 Maureen Towe:- $1,000,000.00 The Towe Unit Trust:- $1,327,200.00 Pinti Pty Ltd:- $239,200.00 Totu Pty Ltd:- $1,135,454.00 Kl Group:- $790,919.00 GDC Partnership:- $86,593.00 Jaymy Unit Trust:- $42,000.00 Frank Gelonesi and G De Bortoii:- $35,397.00 G De Bortoii:- $279,386.00 Frank Gelonesi:- $73,750.00 llhan Onur:- $568.232.00 $9,664,201.00 Endnotes 1. See DGF Property Holdings Pty Ltd v Di Federico; DGF Property Holdings Pty Ltd v Butros [2018] NSWSC 344; DGF Property Holdings Pty Ltd v Di Federico; DGF Property Holdings Pty Ltd v Butros (No 2) [2018] NSWSC 1137; DGF Property Holdings Pty Ltd v Di Federico (No 3) [2020] NSWSC 510. 2. DGF Property Holdings Pty Ltd v Di Federico; DGF Property Holdings Pty Ltd v Butros [2018] NSWSC 344. 3. Note that s 66ZL was altered in 2018 with new provisions following the Conveyancing Legislation Amendment Act 2018 (NSW). 4. See DGF Property Holdings Pty Ltd v Di Federico; DGF Property Holdings Pty Ltd v Butros (No 2) [2018] NSWSC 1137. 5. See First Judgment at [174]. 6. See DGF Property Holdings Pty Ltd v Di Federico (No 3) [2020] NSWSC 510 at [17]. 7. The deposit slip recorded $10 more than the sum of the two cheques. However, Kernsea's bank statement indicates that $10 was subsequently withdrawn due to an "error in deposit". 8. Extracted above at [15]. 9. See First Judgment at [377]. 10. Referred to above at [64]. 11. See Kelner v Baxter (1866) LR 2 CP 174; Black v Smallwood (1966) 117 CLR 52; [1966] HCA 2. 12. See Re Express Engineering Works Ltd [1920] 1 Ch 466; All ER Rep Ext 850. 13. See Sydney Appliances Pty Ltd (in liq) v Robert Bosch (Australia) Pty Ltd [2000] NSWSC 32; 33 ACSR 680. 14. See Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418. 15. See Ex parte Harper; Re Rosenfield [1964-5] NSWR 58 at 62. 16. See BJ McAdam Pty Ltd v Jax Tyres Pty Ltd (No 3) [2012] FCA 1438 at [23]. 17. See Painaway Australia Pty Ltd v JAKL Group Pty Ltd (2011) 249 FLR 1; [2011] NSWSC 205 at [275]. 18. See G Dal Pont, Law of Agency (LexisNexis Butterworths, 2014) at [5.29]. 19. See Verschures Creameries Ltd v Hull & Netherlands Steamship Company Ltd [1921] 2 KB 608. 20. See W Bowstead, FMB Reynolds, P Watts, Bowstead and Reynolds on Agency (19th ed, 2010, Sweet & Maxwell) at [2-071]. 21. Gino Dal Pont, Law of Agency (LexisNexis Butterworths, 2014) at [5.31]. 22. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [35]. 23. See Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd (2003) 178 FLR 1; [2003] QSC 205 at [257]. 24. See above at [22]. 25. See Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117. 26. Court Book 5 (1 February 2019) at 1654. 27. Transcript 24 November 2017 at 305–306. 28. See Court Book 4 (1 February 2019) at 1234. 29. Transcript 21 June 2018 at 8–12. 30. See above at [20]. 31. See Exhibit GD-1 at 120. 32. See the First Judgment at [397]. 33. See the First Judgment at [164] and [165]. 34. See Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315. 35. See Babcock International Ltd v Babcock Australia Ltd; Babcock Australia Ltd v Eraring Energy (2003) 56 NSWLR 51; [2003] NSWCA 6 at [79]–[80]. 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: 02 March 2021