New South Wales Court of Appeal CITATION: Lahoud & Ors. v. Lahoud & Anor. [2006] NSWCA 169 HEARING DATE(S): 27 and 28 April 2006 JUDGMENT DATE: 30 June 2006 JUDGMENT OF: Handley JA at 1; Hodgson JA at 5; Ipp JA at 113 DECISION: Appeal dismissed with costs CATCHWORDS: CONTRACT - Appeal - Primary judge not satisfied that oral promises or representations made as conditions for entry into a written agreement - Whether factual errors shown. Hoyts Pty. Limited v. Spencer (1919) 27 CLR 133 CASES CITED: Stockland (Constructors) Pty. Limited v. Retail Design Group (International) Pty. Limited [2003] NSWCA 84 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Watson v. Foxman (1995) 49 NSWLR 315 Victor Lahoud - 1st appellant Castle Constructions Pty. Ltd. - 2nd appellant PARTIES: Solidare Pty. Ltd. - 3rd appellant Joseph Lahoud - 1st respondent Joseph Lahoud & Associates Pty. Ltd. - 2nd respondent FILE NUMBER(S): CA 40528/05 COUNSEL: Mr. J.T. Gleeson SC with Mr. P. Kulevski for appellants Mr. S.D. Epstein SC with Mr. T. Maltz for respondents SOLICITORS: Aitken McLachlan Thorpe for appellants Baron & Associates for respondents LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC3606/01 SC2530/04 LOWER COURT JUDICIAL OFFICER: Palmer J LOWER COURT DATE OF DECISION: 30 May 2005 LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 509 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA40528/05 SC 3606/01 SC 2530/04 HANDLEY JA HODGSON JA IPP JA Friday 30 June 2006 LAHOUD & ORS. V. LAHOUD & ANOR. Judgment 1 HANDLEY JA: In this appeal I have had the benefit of reading the extensive reasons for judgment of Hodgson JA in draft. Subject to one matter I agree with his reasons and the orders he has proposed. My qualification relates to para [111] of his Honour's reasons. 2 With respect I can discern no basis for any estoppel in this case. The alleged statement about the care of Riad and the delivery of the watch were not statements of existing fact. They were promissory and positive in substance. The promises which support an orthodox promissory estoppel are negative in substance and restrict the promisor's enforcement of his existing legal rights against the promisee. The alleged promises made by Joseph were manifestly not of this character. Nor were they promises of the kind enforced in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. Joseph's so called representations did not continue and were not repeated. He did not stand by in silence, there was no continuing change of position by Victor, and there was no basis for a proprietary estoppel by standing by. 3 In any event in my opinion, in the circumstances of this case, cl 9 and sch 2 exclude proof of the antecedent collateral promises or statements of intention relied on by Victor. They also negative a finding of reasonable reliance on those promises on Victor's part, leaving Joseph's promises or statements, if proved, binding only in honour as was the case in Jorden v Money (1854) 5 HLC 185, 222, 229. 4 I agree with the orders proposed by Hodgson JA. 5 HODGSON JA: The principal contestants in this appeal are Victor Lahoud and his younger brother Joseph. For convenience, I will refer to them and their siblings by their first names. Other parties to the proceedings are Joseph's company and two of Victor's companies; and I will generally not refer to them separately as parties. 6 On 30 May 2005, Palmer J gave judgment in proceedings in which Joseph sued Victor seeking specific performance of terms of settlement signed on 6 February 2001, and also damages, and in which Victor put on a cross-claim seeking to set aside the terms of settlement or to obtain specific performance of an alleged collateral agreement and/or damages. Palmer J held that Joseph was entitled to enforce the terms of settlement, and that Victor's cross-claim failed. 7 On 13 October 2005, Palmer J made consequential orders, including orders requiring Victor to transfer two units to Joseph, dismissing the cross-claim and directing an enquiry as to Joseph's damages. Victor has appealed from the primary judge's decision. CIRCUMSTANCES 8 It is convenient first to set out at some length circumstances of the case that are either not in dispute or else clearly established. 9 The parties agreed on a Statement of Background Facts which was set out in the judgment of the primary judge, as follows: 1. Wadih Lahoud (born 1910) married Hind Lahoud (born 1927) in Lebanon in 1947. 2. There were six children of the marriage, all born in Lebanon as follows: a) Rosemary (born 1948); b) Riad (born 1950); c) Victor (born 1953); d) Houda (born 1955); e) Nadia (born 1958); and f) Joseph (born 1961). 3. In 1971, Rosemary married Joseph Younan, an Australian citizen who was visiting Lebanon at the time. Mr Younan returned, and Rosemary migrated with him, to Australia after they were married. 4. Victor migrated to Canada in 1973 and then to Australia in 1974. Victor lived with Rosemary and Joseph Younan until he went back to Lebanon in 1977. 5. Until about the beginning of the Lebanese civil war, in about early 1975, the family lived in Wadi Kannoubine and in Tripoli in a complex of 4 units owned by the father, Wadih. The family lived in one unit and the other three were rented out. The building was hit by a missile during the civil war in 1975, and the family then moved to a unit owned by a family friend in a mountain village called Hasroun. The family remained there until they migrated to Australia in October 1977. The building in Tripoli was sold in 1978 and the proceeds transferred to the family in Australia. (There is a dispute as to who in the family received this money, which does not need to be resolved for the purpose of these proceedings.) 6. Prior to his retirement Wadih worked in Lebanon as a school teacher and also managed several properties, some of which he owned. In late 1976 he retired. 7. In early 1977 Victor returned to Lebanon to assist in arranging for the rest of the family to come to Australia. Wadih did not work after migrating to Australia. They, Wadih (who was a pensioner in Australia), Hind, Riad, Victor, Houda, Nadia and Joseph, arrived in Sydney on 2 October 1977. At that time an amount in the order of $30,000 (according to Victor) was provided to Victor comprising family funds from Lebanon. Victor says that such monies were applied towards family expenses and have been fully exhausted by mid-1979. Whether these assertions are correct does not have to be determined in these proceedings. 8. Hind (the mother) died from cancer in November 1977, just three weeks after arriving in Australia. When Hind, the mother, died, Rosemary became the family matriarch. 9. Riad is intellectually disabled. To the extent that he is unable to do certain matters, Riad has always been assisted by family members (although there is a dispute as to the nature and extent of the assistance provided by Victor on the one hand and other members of the family on the other). He lives on his own, does shopping, cooking and errands and travels independently by public transport. He did not go to school except for a short period after migrating to Australia when he learned English. He is expected to live to a normal age while taking regular medication for epilepsy. 10. In 1979 Victor commenced a property and construction business in the name of the second defendant ('Castle'). (There is a dispute as to whether Joseph was involved in the running of the business, which does not have to be resolved in these proceedings.) 11. In 1981 Wadih caused his share of a parcel of land in Lebanon which he jointly owned with a relative to be sold to that relative. The proceeds of the sale were provided to the family and about 90% of the total proceeds were entrusted to Victor. Victor asserts that the amount was about $125,000. He also asserts and Joseph denies that such monies were fully expended towards family expenses and were fully exhausted by the middle of 1982. Whether these assertions are correct does not have to be determined in these proceedings. 12. The whole family initially moved in with Rosemary when they arrived in Australia. In early 1982 they moved into a rented house in Chatswood. In late 1982 the family (Wadih, Riad, Victor, Houda, Nadia and Joseph) moved into a new house constructed by Victor in Castlecrag ('the Castlecrag House'). 13. Houda remained living in the Castlecrag House until 1983, Nadia until 1984, Wadih (the father) until he died in 1995, and Joseph until January 1998. In 1991 Houda and her family moved into the Castlecrag House. Joseph asserts that Houda looked after Riad and her father, and that she managed the household. There is a dispute as to this assertion which does not need to be resolved for the purpose of these proceedings. In January 1998, Joseph moved to his present home in Neutral Bay. 14. Joseph studied architecture and graduated in 1987. 15. After his graduation as an architect in 1987, Joseph was employed by a firm of architects known as Wolski Lycenko Brecknock ('WLB'). Victor and Castle had been engaging WLB among other firms since about 1981 to carry out architectural work for his and Castle's business. 16. In 1992 JVL Pty Limited, now Solidare Pty Limited, was incorporated (there is a dispute as to whether this company has ever traded, which does not need to be resolved for the purpose of these proceedings). 17. In about the middle of 1993 Joseph commenced his own private practice. A number of property developments were undertaken from 1993 until early 1998. There was a dispute in the 1999 IRC proceedings as to whether Joseph's involvement was as a joint venturer or as a subcontracted architect. That dispute does not have to be resolved in the present proceedings. 18. Joseph operated his architectural business practice from the ground floor of the Castlecrag House. There was one project prior to 1993, the Park Avenue project, which was purchased in Joseph's name, but there is a dispute as to whether Victor and Castle worked on it. That dispute also does not need to be resolved for the purpose of these proceedings. 19. In July 1995 at the age of 85 Wadih became very ill with pneumonia. He spent three weeks in hospital. He returned home to the Castlecrag House towards the end of July. Joseph asserts that he was cared for principally by Joseph and Houda (this is the subject of dispute, which does not need to be resolved for the purpose of these proceedings). He went back into hospital around 3 weeks later, and died on Sunday 27 August 1995 at 1.15pm in the presence of his family. 20. In 2002 Victor began renovating the Castlecrag House. Victor moved to Unit 30, 135 Sailor Bay Road, Castlecrag. Riad moved into Unit 6 but subsequently moved into Unit 4. 21. In January 1999 Joseph commenced proceedings in the Industrial Relations Commission of New South Wales pursuant to section 106 of the Industrial Relations Act in relation to work in connection with 9 specific projects. The proceedings were defended and were ultimately listed for hearing on 5 February 2001. Written terms of settlement were negotiated, and signed by the parties and their respective Queens Counsel on 6 February 2001. The settlement was partly performed. That settlement is the subject matter of the present proceedings. * Confidential and prepared for purpose of these proceedings only. 10 The evidence in the case concerned details of events leading up to the signing of the terms of settlement, and occurring over following months. Victor's claim was that there was an agreement collateral to the terms of settlement that dealt with two family matters that had arisen between him and Joseph. 11 The first matter concerned a watch that had been owned by their father. Immediately after the father's death in 1995, this watch was in the possession of Joseph, who claimed his father had given it to him. At that time, Victor protested very strongly about this, claiming that his father had previously given it to him and that he had lent it back to his father. It is common ground that Rosemary (the eldest sibling) said to Victor at about this time words to the effect that Joseph would give the watch back to Victor at the mass that was to take place 40 days after the father's death; but according to Rosemary, this was solely to calm Victor down and avoid embarrassment at a difficult time. The watch has been kept by Joseph ever since. 12 The second matter concerned the care of Riad. On 13 January 1999, Victor wrote a letter addressed to Rosemary, Houda, Nadia and Joseph, which he sent to Rosemary's home, and which was in the following terms: For a while now, I have been waiting for one or all of you to offer at least some ideas about Ryad's future. It looks like none are forthcoming. I propose that a fund be established with a minimum contribution from each one of us. If someone wants to top up the minimum requirement at any stage, it is up to them. The fund will be used initially to buy a house for Ryad (say $20,000 each for a total of $100,000 with the rest being financed). After that the fund will provide say $500 per week (that is $100 per week from each one of us) for living expenses and bills etc. If someone has a better idea, I would like to read it. I will not put up with the current situation for much longer. 13 This letter was shown to Joseph. No agreement was reached as to the matters raised in it prior to the settlement of the IRC proceedings. 14 Although the merits of the IRC proceedings were not directly an issue in these proceedings, they have some indirect relevance. The position taken by the parties prior to the commencement of the IRC proceedings is indicated by an exchange of without prejudice letters in August and September 1998. 15 On 20 August 1998, Joseph wrote the following letter to Victor: I no longer know how to ask you tor my share of the projects we worked on together without [sounding] threatening. I have tried to be more than reasonable to sort out this whole matter without success [so] far. It was your idea that we work together. You told me and we agreed that we were doing those projects together. I did not and could not have forced you into any situation you did not agree with. By denying me my share of the profits is both unfair and extremely unreasonable. This letter is my final attempt to get you to be reasonable for the sake of our family and the good reputation of our father in the community. The last thing I want to do is to damage his reputation and what he worked hard to achieve. I am prepared to accept a sum of $2.4M in return for all payments and claims I have in relation to the projects we did together. This figure is far less than what I am entitled to in justice as my share of the profits. This offer is open for 1 day from the time you receive this letter. It is up to you to choose the manner in which we resolve this matter. 16 Joseph replied as follows on 1 September 1998: I am in receipt of your letter dated 20 August, 1998. I am saddened by what has become of you. Until a few months ago, I still had hope that one day you will come to your senses. Unfortunately, on reading your letter I am now convinced that your delusions have totally gripped you to the extent where you have lost touch with reality. If you believe you are right, you owe it to yourself to test your belief in whatever forum you have in mind; I would welcome the opportunity. If you wish to preserve the good reputation our father had in the community you are advised to refrain from stealing what is not yours. As I had continuously said to you, the only way to resolve this matter is for you to pay me for what I have done for you and for me to pay you for what you have done for me. It is as simple as that. After that no one owes anyone anything. A. The outstanding debts you have to pay back are as follows: 1. Rent since 1982 - A modest $450 per week which included furnished accommodation and all bills paid. If you add 10% average interest and accumulate both rent and interest it adds up to a sum of approximately $750,000. 2. Books, drawing board, mobile phone, BMW, Toyota hatchback. It adds up to approximately $60,000. 3. Provision of finance for the Bent Street project. Based on the fact that without that finance the project was not possible, it is reasonable to request 75% of the profits. I am not aware what these are. You may provide me with the figures so I can assess my share. For the record, this is not an ambit claim. There can be no doubt that without my joint and several guarantees, the project would not have proceeded. I estimate I am owed about $400,000. B. On the other hand I believe I owe you the following: 138 Victoria Road, Chatswood - DA $ 9,000.00 33 Abbott Street, Cammeray - BA $ 5,000.00 112 Sydney St, Willoughby- DA $12,000.00 557 Mowbray Rd, Chatswood - pre DA $ 8,000.00 135 Sailors Bay Rd, Northbridge- Basic DA+BA $80,000.00 222 High Street, Willoughby - DA $27,000.00 2-4 Warringa Rd & 19 Morden St, Cammeray - DA $34,000.00 TOTAL $175,000.00 Less: $80,000 paid for Northbridge $ 80,000.00 $ 95,000.00 Less: $60,000 (cars & others) $ 60,000.00 $ 35,000.00 The result of this exercise is that I owe you $35,000 and you owe me $1,150,000. It is then, after you pay me $1,115,000 you will be in a position to say that I have done nothing for you. Until then, you will remain indebted to me for the rest of your life. And further: 1. In relation to the Park Avenue property, herewith is a list of the payments I have made: 4/7/89 (Chq No: 099615) $ 6,604.00 28/9/88 (Chq No: 342951) $ 20,000.00 28/9/88 (Chq No: 342952) $ 10,000.00 22/11/89 (Chq No: 001394) (Cheque given to J Lahoud to exchange property in his name) $32,000.00 24/1/90 Chq No: 610779) (Cheque given to J Lahoud to pay Stamp Duty on purchase) $ 12,594.60 2/2/90 (Chq No: 099671) $ 39,363.64 (Chq No: 099670) $ 2,603.00 (Chq No: 099672) $ 2,471.86 (Chq No: 099673) $ 453.50 (Chq No: 099674) $ 163.03 $126,253.63 (These figures were paid at the exchange and at settlement only. There were other payments made by me, but I do not need to waste any time on the subject). Can you account for the payments you made, including date and cheque numbers, and then justify the claim you have made that I left all the losses to you. In this respect it is worth noting that when I settled my court case with Esanda I insisted that the unpaid moneys owing by you were written off. 2. In relation to the claim of working together, whatever notion or dream you had it did not materialise until 28 January, 1997. That was in relation to work from that date forward. I may have had this dream as well, but some dreams are not meant to be. The agreement however, was based on sharing the commitments as well as the profit. 3. In relation to Cammeray, I acknowledge that you have contributed $215,564.65. This includes the $50,000 borrowed by Castle Constructions. I have contributed $1,471,607.69. Our agreement dated 28 January, 1997 was simple. It had only few elements, but they had to be fulfilled. These were: (a) 50-50 contribution to costs (b) Who has overall say in any decision relating to the project (me in this case) (c) There was an implied aspect that working "together" commenced on that date. You have violated every aspect of the agreement. On top of that you accuse me of not respecting the agreement. I asked you to contribute funds and you declined. I asked you to provide security and you said you didn't have any. I asked you to prepare plans for the Lane Cove site and you declined forcing me to seek other alternatives. I asked you to work in my office and you placed pre-conditions which would suggest that you were doing me a favour. I have said to you consistently that due to your violations of the essential terms of the agreement, it has lapsed. I have also asked you consistently to provide me with your account of the work done on Cammeray and High Street so I can finalise the accounts between us. You have declined to do that, preferring instead to waste your time on attempts to steal my hard work for the past 25 years. I have allowed for all this in my accounts. The net result of these accounts is as follows: Owed by you to me: $1,115,000.00 Less: money held: $ 215,564.65 Balance $ 899,435.35 Please advise when you are able to make this payment. And one more thing: Your share of the house is 4% of the net sale proceeds. I will keep that in mind when the house is sold. Whatever you choose to do, be prepared to go all the way. I do not feel any sorrow, but plenty of sadness. 17 However, notwithstanding this reply, an affidavit dated 24 May 2000 sworn by Victor's accountant in the IRC proceedings showed that Victor's company, in its income tax return for the year ended 30 June 1998, claimed a loss of over $600,000.00, calculated after treating Victor as a creditor of the company in the sum of $2,775,000.00, of which $2.4 million was included in sundry creditors and $375,000.00 in trade creditors, on the basis of the very claims Joseph was making in the IRC proceedings. 18 The issues concerning the watch and Riad were mentioned in affidavits filed on behalf of Victor in the IRC proceedings. In his affidavit sworn 29 July 1999, Victor said this in pars.44 and 225: 44. In relation to our handicapped brother, Riad, he has been in my care since 1977. He lives with me and I look after all his financial needs. Riad is on constant medication and he needs special care. This comes at a tremendous cost to me both financially and emotionally. 225. It is true that my father passed away on 27 August, 1995. I do recall that short afterwards I had a conversation with Joseph as follows: Me: "When you took our father to the Embassy a few months ago, he asked me if he could use the watch that he had given me several years earlier. Have you seen it?" Joseph: "Yes I have it. He gave it to me". Me: "He can't possibly have given it to you. You know it is only symbolic and he gave it to me several years ago. He only borrowed it on the day when he wore a suit for the first time in years". Joseph: "I do not know anything about that. He gave it to me". The suggestion by Joseph in this paragraph that at that point in time the family got closer together cannot be further from the truth. Paragraph 44 was repeated in a later affidavit sworn by Victor on 10 October 2000. 19 The matter of the watch was also raised in an affidavit sworn by Nadia, filed in the IRC proceedings by Victor's solicitors, as follows: My father was an invalid since he arrived in Australia. He spent most of his days in bed. He was very sick towards the end of his life. He died in August 1995. For quite some time before he died, Victor had a wristwatch which had previously belonged to my father. Before he died, my father went to the Lebanese Consulate in Sydney. He later said to me "I asked Victor if I could wear the wristwatch on the trip to the Consulate". After he died, I heard Victor say words to the effect of "I wonder what happened to the watch". I found out later from my sisters that Joseph had it. I do not know how he acquired it. 20 The IRC case was listed for hearing for three weeks commencing Monday 5 February 2001. On the previous weekend, Victor and Joseph met in an attempt to settle the proceedings. Although there are substantial differences as to the details of these discussions, it is common ground that Joseph offered to settle for $3 million, while Victor offered one half the profits from a project at Cammeray plus one home unit from a project at Northbridge. 21 Also in the days leading up to the date set for hearing, there were communications between the solicitors concerning documents, culminating in a facsimile sent on Sunday 4 February 2001 by Mr. Callanan, Victor's solicitor, to Mr. Chaffey, Joseph's solicitor, which included the following matter: We have received your facsimile of the 2/2/00 with amazement. You seem to have not only misplaced the Wilkinson disc but now you have incredibly misplaced in the space of one day your client's cheque book. It seems that these disappearances are a dishonest attempt to gain some advantage by "playing the man and not the ball". We are concerned at the dishonest inferences that you and your client seem to be attempting to establish, rather than concentrating on the substantive issues. Or perhaps your concern is that the balance of fairness is with our client and these diversions are serving some purpose by attempting to discredit our client unfairly? … It seems that our client's diaries have been tampered with, both in terms of claimed privilege sections being unsealed, and loose pages removed. No doubt the claim will be made that it must have occurred at discovery or elsewhere. We cannot tolerate any more of this conduct, which is the mirror of the set up in relation to the Boral Bessar document and the proven failure of you and your client to properly source our client's 1998 financial statements (if your client did not already have a copy) from documents then in the Commission, as ventilated when these puerile matters were unnecessarily brought before the Commission. We trust that you will clean up your act forthwith. 22 On 5 February 2001, Joseph went to the chambers of his Senior Counsel Mr. West QC, where his solicitor Mr. Chaffey and his Junior Counsel Mr. Neil were also present. He then went to the IRC before 10.00am with Mr. West and Mr. Neil. 23 At the IRC at around 10.00am, there was a meeting between Victor and Joseph. The judge was informed by Mr. West and Mr. Holmes QC (Senior Counsel for Victor) that they were having discussions. At this meeting, Victor and Joseph agreed on the substance of the terms later included in the terms of settlement, namely that Joseph would receive half the profit from Cammeray and two units from Northbridge. The main factual issue in the present proceedings concerned Victor's claim, denied by Joseph, that, as a condition of this agreement, Joseph agreed to give Victor back their father's watch and to share with him equally in caring for Riad, and that they agreed that this was not to be included in the documentation of the settlement. 24 After this meeting, Victor told his legal advisors that settlement in principle had been reached, but they needed to talk further and would go to Houda's house. Victor and Joseph then took a taxi to Houda's house. Another significant factual issue in the present proceedings concerned Victor's claim, denied by Joseph, that during this taxi ride there was a conversation as to how the agreement to share equally in caring for Riad should be implemented. 25 When Victor and Joseph arrived at Houda's house, they told her that they had settled the dispute. Houda became very emotional, and she also suggested that Rosemary and Nadia should be invited to come immediately. There is some dispute as to the conversation that first occurred when the family was assembled, but it is common ground that Victor then asked his sisters to leave the room so that he and Joseph could have a discussion in private. It is common ground that in this discussion the watch was mentioned, but according to Joseph discussion of the watch consisted of Victor asking for the watch and his refusing that request. Victor's evidence was that in this conversation there was agreement as to when the watch was to be handed over, and that there was further discussion as to how the care of Riad was to be shared equally. 26 Subsequently, Victor and Joseph returned to the city, and there were negotiations on that day and the next with a view to producing a document which could be signed. There was a meeting between Joseph and his legal advisers (Mr. Holmes, his Junior Counsel Mr. Crow and Mr. Callanan) at Mr. Holmes' chambers in the afternoon of 5 February, in which the watch was discussed. 27 On 6 February 2001, the parties and their lawyers continued to negotiate the drafting of an agreement in the form of a deed. It appears that taxation repercussions on each of the parties proved something of an obstacle to finalising the deed; and the parties agreed that they could dispose of the proceedings on the basis of immediately binding terms of settlement, with a deed to be finalised later. A document was prepared, and late on 6 February 2001 it was signed by Victor and Joseph and also by Mr. Holmes and Mr. West. The summons in the IRC was then dismissed by consent, with no order as to costs. 28 The terms of settlement which was then signed, apart from Schedule 1 which is not here relevant, were as follows: In consideration of the Applicants agreeing to the orders set out in paragraph 4, the following terms are agreed: 1. The Second Respondent is to pay to the First Applicant, by bank cheque no later than 6pm Tuesday, 6 February 2001, the sum of $570,00.00. The Respondents have provided written details of the profit calculation for the Cammeray Project, which is Annexure "A" hereto, and verily believe that those details are accurate. Either party may elect to have the figures audited by an accountant to be agreed or, in default of agreement, as nominated by the President of the Institute of Chartered Accountants. If on audit, the audited profit exceeds the said profit calculation, the First Applicant is to be paid one half of the difference by the Respondents. If the audit profit is less than the said profit calculation, the First Applicant will pay the Respondents one half of the difference. The reasonable costs of the audit are to be paid by the Respondents in the event the audited profit figure exceeds the said profit calculation and by the First Applicant in the event the audit profit is the same or less than the said profit calculation. 2. The Second Respondent is to pay to the First Applicant the sale proceeds of Unit 4 at 135-145 Sailors Bay Road, Northbridge (being the land contained in Folio Identifier 4/SP 53342) and a three bedroom unit at 135-145 Sailors Bay Road, Northbridge presently owned by the Second Respondent, which unit shall be nominated by the First Applicant by 4pm on Thursday, 15 February 2001 but shall not include unit 18 or 24. The First and Second Applicant and the First and Second Respondent agree to the conditions set out in schedule 1 hereof regarding this clause 2. 3. The First and Second Applicants and the First, Second and Third Respondents agree to the terms set out in Schedule 2 hereof. 4. The Summons herein be dismissed with no order as to costs forthwith. 5. (deleted) 6. Terms not to be disclosed except as required with financial advisers and legal representatives of the parties, or under compulsion of law. 7. The parties to this agreement will enter into a deed in accordance with this agreement. 8. (deleted) 9. The deed referred to in paragraph 4 will include a term by which: (a) The Applicants on the one hand, and the Respondents on the other, and each of them release each other from all claims that they have or may have against each other but for those which may arise from, or relate to, these Terms of Settlement or the terms of the deed referred to in paragraph 7; (b) The First Applicant shall complete whatever documents are required to transfer the shares held non-beneficially or beneficially as the case may be by him in the issued capital of the Second Respondent and the Third Respondent to the First Applicant or his nominee and tender his resignation as director of both companies. Schedule 2 provides: It [is] the express intention of the parties that this document records and constitutes an immediately binding agreement for the settlement of all aspects of the dispute between the parties NOTWITHSTANDING THAT at the same time the parties contemplate that the agreement will be engrossed in more perfectly drafted documentation which the parties will and hereby agree to execute AND it is agreed that in the event of there arising any dispute between the parties regarding any suggested omission or uncertainty in the terms of this agreement or in the event of there arising any dispute between the parties in the course of the preparation of the more perfectly drafted documentation regarding the form or substance of such documentation the same shall be submitted to senior counsel nominated by the President for the time being of the New South Wales Bar Association for summary determination acting as an expert and not as an arbitrator AND the parties agree to accept such determination as final and binding and to execute such documentation as will carry into effect such determination. 29 The preparation of a deed had commenced the previous day, and on the evening of 5 February 2001 Mr. Callanan produced a draft. 30 Further drafts were produced by him the next day, including one produced late in the afternoon (Blue 379-84) containing the following terms: 1. RECITALS A. Joseph is an architect and Victor, his brother is a developer. B. Between 1989 and 1995 Joseph and Victor combined their respective skills and ability to obtain development consents for property purchased by Castle thereby improving the value of such properties for resale and in some instances enabling construction and on sale of units. C. JLA is a corporation owned by Joseph and since 1996 Joseph has operated his business through JLA. D. Solidare is a corporation previously known as JVL Pty Ltd but has not operated prior to the date hereof. E. Joseph and Victor could not agree on the apportionment of profits, the reimbursement of costs and the extent of remuneration for services. F. Joseph commenced proceedings number 283 of 1998 in the Industrial Commission of New South Wales (the "Proceedings") seeking a determination of such issues. G. Victor and Joseph have reached agreement without the need for any formal arbitration on the terms hereinafter appearing. … 2 Payment and Release Without admission or concession on the part of any party and with a view to resolving any misunderstandings and grievances, in consideration of: (a) these presents, and (b) the Terms of Settlement annexed hereto and marked "A", and (c) Joseph completing whatever document or documents are required to transfer the shares held beneficially or non beneficially, as the case may be, by him in the issued capital of Castle and Solidare to Victor or his nominee and tendering his resignation as director of both companies, the applicants (and each of them) and the respondents (and each of them) release and discharge the others from all actions, suits, claims, demands, costs and other liabilities of any nature which any party now or at any time may have, or but for the execution of this Deed, could or might have had against the others on any account whatsoever and without limiting the generality of the foregoing, the applicants (and each of them) and the respondents (and each of them) hereby indemnify and keep indemnified the others from all actions, suits, claims, demands, costs and other liabilities of any nature which either the applicants (or anyone of them) or the respondents (or anyone of them) now or at any time may have, or but for the execution of this Deed, could or might have had against the others in relation to any moneys given by Wahid to Victor during his lifetime and any matter raised by any party to this Deed in the Proceedings and any other matter whatsoever giving rise to a cause of action which arose prior to the date hereof. … 11. Prior Agreement This Deed constitutes the entire agreement of the parties relating to this Deed of Release and supersedes all prior understandings, negotiations, agreements written or oral, express or implied, in relation thereto. 31 Previous drafts had also contained terms identical to cl.2 and cl.11. These drafts were the subject of negotiations involving Joseph and Victor and their legal advisers, and it appears that by the end of 6 February, recital E had been deleted and other alterations of a relatively minor nature had been made. 32 On the evening of 6 February 2001, Joseph attended Victor's office and Victor gave him a cheque for $570,000.00. 33 Subsequently, further relatively minor alternations were made to the deed, following communications between Mr. Chaffey and Joseph's accountant Jonathon Blake, and on 12 February 2001, Mr. Callanan sent a copy of the deed in the resulting form to Victor and to Mr. Chaffey. 34 His letter of that day to Victor was as follows: Attached is the Deed in its agreed form. Could you execute the original on receipt and return it to us for exchange. We are advised that details of the unit to be selected will be given by Thursday. 35 His letter of that day to Mr. Chaffey was as follows: Attached is the Deed of Agreement for execution. We note that the Agreement has now been agreed and we will arrange an exchange of parts on Thursday, 15 February 2001. 36 The deed in this form was then executed by Joseph and his company, and Mr. Chaffey advised Mr. Callanan of this by facsimile on 15 February 2001. However, on the same day, Mr. Callanan sent the following facsimile to Mr Chaffey: We refer to the above matter and confirm that the amendments to the draft Deed of Agreement proposed by you are currently with our clients' tax advisors and we hope to finalise our position in the next day or so. It may be the case that recital E, which we believed described the basis for any payment, namely a compromise of the total claim as it related to profits, payment for services and repayment of expenditure, needs to be revisited. We will advise you. On the selection of units our client instructs us that he agrees with your understanding of the situation. 37 On 22 February 2001, Victor sent Mr. Callanan a draft of new recitals for the deed, and on the same day Mr. Callanan sent the following facsimile to Mr. Chaffey: We refer to previous correspondence and confirm that our client has now received his tax advice which accords with the discussions had between the parties on Tuesday 6th February, 2001 at court. As you will recall the writer expressed his concern, in the conference room adjacent to the court room in the presence Victor Lahoud, Joseph Lahoud and yourself, that the proposed schedule 1 did not afford our client a tax deduction for the payment of the proceeds of the sale of the two units. You indicated that your tax advice, from two accountants, was that the sale price would be revenue in the hands of Castle Constructions Pty Limited on the disposal of trading stock (i.e. revenue) and the subsequent payment by Castle to your client would therefore be deductible. Our clients' advice confirms that where the payment relates to an income element in any settlement then deductibility is maintained. It was for that reason that Recital E was included in the Deed, consistent with your explanation of the treatment on sale of the unit. It is therefore pressed and must be included in the Deed. We observe that it should make little difference to your client since the disposal of a right to sue is an asset and the disposal of such a right is a capital gain. You will also recall that the reason given for given by you in the said conference for your clients not accepting the two units in specie was that your client did not wish to receive a capital gain. Our clients accepted the rational (sic) given and agreed to the dismissal on those bases. Whilst your clients may have subsequently reconsidered their position the Deed as requested does not reflect the basis upon which our client agreed to the dismissal of the proceedings. We also observe that a dismissal of proceedings brought, rather than discontinuance, is not in our view consistent with giving up a right to sue. Your client sued and settled on a basis that reflected a compromise of the totality of claims, however, categorised, for a share of profits, fees for services or prepayment of expenses incurred on certain projects, all revenue related. We will submit the Deed, consistent with the above stated bases for settlement, in the next day or so. 38 On the same day, Mr. Chaffey sent the following facsimile in response: We refer to your letter of 22 February 2001 and are instructed as follows: 1 The written terms of settlement signed by our respective clients and Senior Counsel and handed to the Court on 6 February 2001 record the agreement. You seem to suggest that you and/or your client acted on advice from the writer and/or the applicant which is clearly not the case. Further you drafted the terms of settlement. 2 The said terms of settlement do not refer to any element of income. 3 The terms of settlement specify, in schedule 2, the method by which a deed is to be drawn and entered into. This has taken place between the parties and we refer you to your letter of 12 February 2001 (a copy of which is attached). You will recall that we discussed with you the amendments to the deed in light of the terms of settlement referred to above and those amendments were agreed as referred to in your said letter of 12 February 2001. 4 We do not wish to comment on the matters raised on page 2 of your letter other than to note that you appear to be attempting to find some method of suggesting that our client is somehow responsible for what you say is now the advice you are giving to your client. This is not the case. Our client, as raised above, has signed the deed as referred to in your letter of 12 February 2001 and is in a position to exchange that deed. 39 There was a further response on the same day from Mr. Callanan, as follows: We refer to yours (sic) letter dated 22 February 2001. Our clients will not hand over the keys as requested by you until the Deed of Agreement has been agreed in final form. The terms of the Deed as requested by you on 12 February 2001 have not been the subject of agreement by our clients (as indicated by the writer to you when terms of the Deed were amended in accordance with your clients' request) since they have continued and continue to contest the terms of the Deed. We are simply saying that the parties are ad idem in terms of the tax treatment of the payment, as discussed prior to settlement. Our clients do not accept that any capital payment will be made by them and their instructions to us are that the issue is not negotiable. The Terms of Settlement were amended in part by us, however you will recall that those Terms were brought by you to Court and not drafted by the writer. It has always been our view that the Summons sought relief in terms of consideration for services relating to revenue activities and the Terms of Settlement, on their own, reflected a compromise of the totality of claims for such services and in no way related to the compromise of undissected claims relating to both capital and income. We trust that the above records the position of our clients. We cannot therefore confirm a time for exchange of the Deed or the handing over of keys under the Deed of Agreement has been agreed in the terms contemplated by both parties prior to the discontinuance of proceedings. 40 The following day, Mr. Callanan sent the following facsimile to Mr. Chaffey: We refer to previous correspondence and our discussions yesterday. The substantive parts of the Deed are as drafted. Enclosed is a draft list of recitals that our client considers necessary to reflect his understanding of the intentions of the parties to the proceedings on settlement. Please advise in due course. 41 The enclosed recitals were as drafted by Victor on 22 February, and were as follows: A. Victor is a developer and Joseph, his brother is an architect. B. Castle is a corporation owned and operated by Victor since 1978. C. JLA is a corporation owned and operated by Joseph since 1996. D. Solidare is a corporation previously known as JVL Pty Limited. JVL was jointly owned by Victor and Joseph. Neither Solidare nor JVL operated prior to the date hereof. E. In 1988 Castle acquired an option on a property at 45 Park Avenue, Cremorne. Such property was subsequently purchased by Joseph in 1990. Joseph sold the property in 1992. F. Between 1993 and 1996 Joseph prepared development applications for the following projects: 236 Victoria Avenue, Chatswood, 214-216 Sydney Street, Chatswood, 557-561 Mowbray Road, Chatswood West and 135-145 Sailors Bay Road, Northbridge. G. Also between 1993 and 1996, Joseph prepared building applications for the following projects: 238 Victoria Avenue, Chatswood, 214-216 Sydney Street, Chatswood, 33-35 Abbott Street, Cammeray and 135-145 Sailors Bay Road, Northbridge. H. Between 1997 and 1998, Joseph and JLA on the one hand and Victor and Castle on the other agreed to jointly develop two projects namely at 73 Albert Avenue, Chatswood and 2-4 Bells Avenue, Cammeray. I. Joseph and Victor could not agree on (i) Apportionment of profits. (ii) Reimbursement of costs. (iii) Remuneration for architectural services provided by Joseph and or JLA to Castle. J. Joseph commenced prooeedings number 283 of 1998 in the Industrial Commission of New South Wales (the "proceedings") seeking a determination of such issues. K. Victor and Joseph have reached agreement without the need for any formal arbitration and the proceedings were dismissed on the terms hereinafter appearing. 42 On 28 February 2001, Mr. Chaffey sent a facsimile to Joseph concerning the obtaining of tax advice as to the taxation status of the settlement, having regard to the terms of settlement, the draft deed and the proposed amended recitals. 43 On 6 March 2001, Victor wrote to Mr. Callanan as follows: My concern is growing after each day that passes without finalising the settlement proceedings. It is now one month to the day since agreement in principle was reached and the proceedings in the commission were dismissed. Michael, as I have said from day one, I did what I did for one reason only family-unity. The large sacrifices I made were not motivated by anything else. As much as unity is not something that can be forced on families, I felt that my sacrifices would remove any conflict - irrespective of the merrit (sic) - and pave the way for unity. It looks to me that because of my brother's greed (in not wanting to pay tax) the source of conflict has returned to the scene. This is causing me huge concerns. I feel as if I was cheated. I find it hard to believe that Mr Chaffey is still waiting for accountants advice on the text of the deed of settlement I have not heard from Joseph since 14 February, 2001. I am not prepared to let this matter remain unresolved for much longer. Please request the other side to respond within seven days. If they do not and or if their response is not acceptable to us, they must be informed, in very clear and unambiguous terms, that the whole of the settlement agreement is placed in jeopardy. In other words, the matter can go back to court if it has to. At the same time, please advise Mr Chaffey that the figures provided to them for the Cammeray project are being audited. As a matter of course, they should hold the funds paid to them on 6 February, 2001 in trust until such time as the settlement agreement is finalised. This request is to protect our position about finalising the agreement and is unrelated to the auditing of the figures. Please discuss this matter with Mr Holmes at your earliest convenience and report to me as soon as possible. 44 On 7 March 2001, Mr. Callanan sent a without prejudice facsimile to Mr. Chaffey, as follows: We refer to the above matter. We note that your Mr Chaffey advised us last week that your client was still awaiting a further advice from his accountant and that finalisation of the terms of the Deed of Agreement and our client's proposed recitals is subject to that further advice. Our client has instructed us to record his concern that this matter is now starting to drag, particularly in view of the need to place units on the market as contemplated by the agreement reached between our respective clients. Our client has instructed us that his profit calculation for the Cammeray project is not correct and that errors in the calculation of the sum of $570,000 have been discovered by his accountants. Accordingly, a recalculation is being prepared and we will advise of the amended sum shortly. We are instructed that our client is not prepared to let the matter remain unresolved for much longer and requires a response within seven (7) days from the date hereof. We are further instructed that if no response is received on terms acceptable to our client, which terms must acknowledge the spirit and intent of our respective clients' agreement, namely that the payment of proceeds of sale of units to your client shall be deductible in the hands of our client, then our client will consider that the spirit and intent of the agreement between your client and our client will not have been achieved, and our client cannot proceed on that basis. We understand that there are private matters agreed between our respective clients collateral to the formal agreement which have not been performed to date. Our client has indicated that he reached the private agreement with his brother (without strict legal consideration and contest) for family unity and future relationships. He cannot now understand why other considerations are not preventing the proper expression of the spirit and intent of the agreement. In all of the circumstances, our client requests that the funds paid be held in trust pending resolution of the precise amount to be paid on account of the Cammeray project and resolution and acknowledgement of the spirit and intent of the agreement reached between our respective clients. We await your reply. 45 The third-last paragraph of this letter was the first documented mention concerning the private agreements alleged by Victor. 46 Communications between Mr. Chaffey and Joseph at around this time indicate differences of opinion concerning taxation issues and payment of legal fees. Later in March 2001, Joseph instructed Mr. Blackwell of Cowley Hearne to act for him. 47 On 19 March 2001, Victor wrote as follows to Mr. Callanan: I wish to confirm my instructions in this matter. These are: 1. That you write to the other side and inform them that due to their non performance, irreparable damage has been caused to our position. Accordingly our consent to the agreement is withdrawn. 2. That your seek the advice of Mr. Holmes, QC, on how best to have the "incomplete" agreement declared null and void. 3. That you prepared, on my behalf a statement of demand for the repayment of a loan made to Rosemary in 1984. This stand was substantially maintained in a later letter of 21 March 2001. 48 On 26 March 2001, Mr. Blackwell sent a facsimile to Mr. Callanan: We act for Mr Joseph Lahoud and Joseph Lahoud & Associates Pty Limited and have taken over the conduct of this matter from Mr Chaffey of Windeyer Dibbs Solicitors. Our client wishes to have the matters under the Terms of Settlement resolved as quickly as possible and therefore require that the following be agreed/provided as soon as possible. … Deed of Agreement The parties had previously agreed as per your fax dated 12 February 2001 and Windeyer Dibbs fax of 15 February 2001 (copies enclosed) that the Deed of Agreement attached to your fax was the agreed Deed and would be signed and exchanged. As this Deed has been agreed by both parties we require that both parties comply with their agreement and that on completion of the matters under the Terms of Settlement the Deed of Agreement be signed and exchanged. … 49 On 28 March 2001, Mr. Callanan replied: We refer to your facsimile dated 26 March 2001 and respond as follows: 1 Deed of Agreement Your client may be well aware that the Deed of Agreement annexed to our facsimile dated 12 February 2001 was not acceptable to our client and, accordingly, no exchange of parts of the Deed took place. Our client's concern has always been that the spirit and intent of the agreement reached in the Industrial Commission of New South Wales is reflected in not only the Terms of Settlement but any Deed of Agreement that is signed and exchanged. The spirit and intent of the overall arrangement reached in the Industrial Commission of New South Wales was that whatever payment was made by our client to your client or clients was not a capital gain in the hands of your client and deductible in the hands of our client. That is the cornerstone of the outstanding dispute that prevents our client from exchanging a Deed of Agreement in the form that your client presents. 2 Access Our client has at all times offered to coordinate access to the units to assist your clients in their marketing of the units. Our client has not provided the keys to your clients, as discussed with their former solicitors, pending final resolution of the terms and subsequent exchange of the Deed of Agreement. We were informed by your clients' former solicitors on at least three occasions after 12 February 2001 that your clients were awaiting their accountant's advice before they could respond to us in relation to the matters raised by us in our letters dated 22 February 2001, a copy of which is enclosed herewith. We enclose a copy of a further letter dated 7 March 2001 which notes that there are other agreements reached privately between our respective clients in relation to the proceedings which, on our instructions, have yet to be carried out by your client. In all of the circumstances, we reserve our client's rights to seek whatever relief is required to ensure that both the Terms of Settlement and any Deed of Agreement to be exchanged between the parties reflect the spirit and intent of the agreement reached in the Industrial Commission of New South Wales. We are currently seeking our client's instructions on all the matters raised and generally. 50 On 29 March 2001, Mr. Blackwell responded: We refer to your fax of 28 March 2001. Your response is in conflict with the signed Terms of Settlement and correspondence between the parties in that: 1. Deed of Agreement Your fax of 12 February 2001 clearly states that: "Attached is a Deed of Agreement for execution. We note that the Agreement has now been agreed and we will arrange an exchange of parts on Thursday, 15 February 2001." We are at a loss to understand how despite the above fax from your office and supply of the Deed you can claim that the Deed of Agreement was not acceptable by your client. Your statement was relied upon and the consensus on the Deed of Agreement was confirmed by Windeyer Dibb's fax of 15 February 2001 in which you were informed that not only did Mr Joseph Lahoud agree to the Deed of Agreement but that he had executed it. In such circumstances the parties are bound to execute and exchange the agreed Deed of Agreement. In response to your third paragraph we deny that there was any such spirit or intention. The Terms of Settlement records the whole of the settlement between the parties. The tax status of any payment from your client was a matter for your client and his advisers prior to the signing of the Terms of Settlement. As the Terms of Settlement have been signed any such claim by your client is irrelevant to our client's enforcement of the Terms of Settlement. … 4. Enforcement of Terms of Settlement and Deed of Agreement We are instructed that if the matter cannot be resolved by agreement by 4pm Tuesday, 3 April 2001 then we are instructed to enforce the Terms of Settlement and Deed of Agreement. Please telephone the writer to arrange a suitable time for the handing over of the keys to Units 4 & 31 and exchange of the previously agreed Deed of Agreement. 51 On 3 April 2001, Mr. Callanan sent a facsimile to Mr. Blackwell: We refer to your letter of the 29th March, 2001. In relation to the matters raised we make the following comments: 1. The Agreement had been agreed by your client, but not by our client. That as it may be, our client is prepared to proceed to give effect to the terms of settlement that were reduced to writing subject to what follows hereunder. In our respectful submission any self serving recitals requested by either party have little relevance in relation to the operative parts of any Deed executed between them. … Having dealt with your letter we will now deal with the mechanics of finalising this matter. We are instructed that Joseph Lahoud and Victor Lahoud , as a condition of the overall settlement agreed privately between them, agreed to do certain things and exchange items of family personalty, but not reduce those agreements to writing, The nature of those agreements was disclosed to legal representatives on the day of settlement, and despite assurances as to their performance, no effort has been made by Joseph Lahoud to attend to those matters. We are instructed that our client will perform all aspects of the Terms immediately and simultaneously with the satisfaction of these outstanding agreements. We telephoned your office to discuss such matters this morning and will appreciate a call to provide the detail to enable you to discuss such matters with your client. May we suggest that the most effective way for this matter to satisfactorily conclude is for a meeting with or without lawyers between Joseph and Victor Lahoud to settle the private matters, organise access and sale and agree on any adjustments to the Cammeray apportionment of profits. Any resignations and share transfers can be tendered by us or alternatively prepared and handed over to us or to our client at the meeting. 52 On 6 April 2001, Mr. Blackwell responded: We refer to your fax of 3 April 2001 and reply as follows adopting your paragraph numbering: 1. Given your fax of 12 February 2001 we fail to see how this can be your response. This point aside we are instructed that our client will agree to sign the Deed and exchange same on completion of the sale of units 4 & 31. In relation to the third sentence we agree with your comments on self serving recitals. … In response to Page 2 of your fax in relation to the alleged private agreement between our clients concerning family matters our client denies that any such agreement took place. Further as no such agreement is mentioned or referred to in the Terms of Settlement the enforcement of the signed Terms of Settlement is totally independent of any such claim or other private agreement even if it did exist. … 53 On 17 April 2001, Mr. Callanan wrote as follows to Mr. Blackwell: We refer to your letter dated 6 April 2001. We see no justification for the exchange of the deed to await completion of the sale of the units. As was apparent from our letter dated 12 February 2001, and the letter written on behalf of your client from Windeyer Dibbs dated 15 February 2001, it was the common intent of the parties that the deed be exchanged as soon as its terms had been agreed. Our client has instructed us to effect a prompt exchange of the deed and to attend to the matters required of the terms conditional upon your client honouring the collateral agreement. This verbal agreement was made between the two brothers at court before the Terms of Settlement were entered into. As your client is aware, our client entered into the Terms of Settlement conditional upon your client's making and honouring this agreement in relation to private family matters. The terms of this private family agreement were: 1 Your client would immediately give to our client the watch which was previously owned by their father. 2. Your client and our client would sit down and make arrangements suitable to ensure the welfare and wellbeing of their brother Riad for the remainder of his life. Our client will not give effect only to parts of the overall agreement reached. Our client is dismayed and affronted that his brother now denies that a private agreement was reached and has instructed you to attempt to seek performance of only those parts that suit your client. As you would by now be aware, the family aspects of this matter have been critical throughout. The parties were ultimately able to settle their differences only because of the value placed on family matters and private family discussions. By his actions your client has thereby evinced an intention to repudiate the overall agreement reached. Our client's position is that performance of the entire overall agreement be effected or alternatively he is prepared to accept your clients' repudiation. In those circumstances the funds already paid should not be applied to your clients' benefit pending resolution of this matter. It would be a tragedy for the family if the overall settlement reached after years of bitter and costly litigation was now set aside. We understand that our respective clients have not spoken directly to each other since the day of settlement. We repeat our request for a meeting of the parties so that the agreement can be implemented. If your client fails to confirm that he is prepared to honour the entire agreement reached with his brother within seven (7) days, we are instructed to commence proceedings to have the entire agreement set aside and to recover the moneys paid, or to take such other action as our client may be advised. 54 On 2 May 2001, Joseph made application in the IRC with a view to enforcing the terms of settlement. However, following the lodging of caveats by Joseph in June 2001 and proceedings brought in the Equity Division by Joseph in July 2001 to extend these caveats, the substantial contest between the parties has proceeded in the Supreme Court. 55 However, I note here that included in evidence filed in the IRC was an affidavit dated 19 October 2001 by Mr. Holmes, which included evidence of a conversation said to have taken place at a conference in his chambers attended by Victor, Mr. Crow and Mr. Callanan on 5 or 6 February 2001: Holmes: "What are the private arrangements or family agreement that you have made with Joseph?" Victor Lahoud: "It was about Riad and he has agreed to give me back my father's watch." Holmes" "Was that the one that was discussed at the funeral and referred to in the affidavits?" Lahoud: "Yes". Holmes: "My father has a watch, it is very important to me also, in fact I keep in here in my drawer. It's an air force issue watch which was given to him when he was a navigator during the war". I then turned around and took the watch out of my drawer and showed it to Victor Lahoud. ISSUES BEFORE THE PRIMARY JUDGE 56 Joseph's points of claim sought orders enforcing the terms of settlement. Victor's defence relied essentially on matters raised in his cross-claim. 57 The final version of the cross-claim alleged that, during negotiations in three conversations on 5 February 2001, Joseph made representations that he would give the watch back to Victor, that he would care for Riad on an equal basis, and that although these matters were essential and binding terms of any agreement to settle the IRC proceedings, it was better if they were not included in any documented settlement agreement. 58 The cross-claim went on to allege: 1. Joseph had no intention of complying with these representations, and made them knowing they were false or recklessly. 2. The representations constituted a collateral agreement. 3. The representations gave rise to estoppel preventing Joseph from enforcing the settlement without giving effect to the representations. 4. The representations were misleading and deceptive in breach of ss.41 and 42 of the Fair Trading Act. Accordingly, Joseph was not entitled to enforce the settlement, or performance should be made conditional on performance of the obligations contained in the representations, and/or damages. 59 On 14 March 2005, the primary judge ordered that all issues other than quantification of Joseph's damages (if any) be determined at the hearing. However, I note that Victor's claim for damages was added by amendment at the hearing, suggesting that quantification of his damages (if any) could also be the subject of a later enquiry. 60 The central factual issue before the primary judge was what was said in the three conversations, and whether whatever was said amounted to representations or promises which could constitute a contract or be the basis on relief for misrepresentation, misleading conduct or estoppel. Relevant to this factual issue was the totality of the circumstances, including the circumstances I have outlined above, and evidence as to conversations involving the legal advisers of the parties and their sisters. 61 This evidence included: 1. Evidence from the sisters suggesting that the questions of the watch and Riad were not ongoing causes of family disharmony prior to the settlement of the IRC proceedings. 2. Evidence from Joseph's lawyers that, prior to the meeting between Joseph and Victor on 5 February 2001, Joseph was told to the effect that there should be no side deals and that everything that was agreed must be in the settlement documents, and that this was also agreed with Victor's lawyers. 3. Evidence from Victor that he told his legal advisers after the first conversation: The principal elements of the agreement are such that I treat the Cammeray project as a 50/50 joint venture, give Joseph two units in the Northbridge project, he returns my father's watch to me, and he shares with me the duties of looking after Riad. However, the evidence from his legal advisers was to the effect that at this time Victor said merely that there were some private matters that needed to be discussed. 4. Evidence from Joseph that when the family assembled, the terms of the commercial settlement were stated, evidence from Victor that the sisters were told that the terms of settlement were private, and evidence from the sisters supporting a conclusion that at least the term concerning the transfer of the two units was stated. 5. Evidence from Mr. Callanan that in the afternoon of 5 February, there was conversation between him and Victor as follows: Victor: 'Michael, Joseph and I have agreed that the two private matters shall remain private. They are not to be recorded in any formal deed of settlement.' Callanan: 'What were those matters, Victor?' Victor: 'Joseph has agreed to return my father's watch to me which, as you know, is very important to me and also to share with me equally in the care of our brother, Riad.' Callanan: 'So these are your instructions to me?' Victor: 'Yes they are.' 6. Also, evidence from Mr. Callanan that there was the following conversation in Mr. Holmes' chambers: Callanan: 'Malcolm, just before leaving Court, Victor raised two private matters with me and instructed me not to include these matters in any formal deed of settlement. I thought it appropriate that I raise them with you.' Holmes: 'Victor, what are these private matters?' Victor: 'Joseph and I agreed that he will return my father's watch to me and also, that he and I will equally share in the care of Riad. However, since these are family matters and private in nature both Joseph and I agreed that we don't want them to be recorded in the formal terms of settlement.' Holmes: 'Victor, you obviously place great importance on your father's watch. You must show it to me when you get it back. Is this the watch discussed at your father's funeral and referred to in earlier affidavits?' Victor: 'Yes.' Holmes: 'I still have my father's watch. Look, I'll show you.' The evidence of Mr. Crow and Mr. Holmes confirmed the display of Mr. Holmes' watch, but otherwise went no further than indicating that Victor said that Riad and the watch had been discussed and sorted out (although as noted earlier, Mr. Holmes' affidavit of 2001 was somewhat more specific on the question of the watch). DECISION OF PRIMARY JUDGE 62 The primary judge accepted the evidence of the sisters. In relation to Joseph he said this: 100 In short, there is nothing inherently improbable about Joseph's evidence. There was nothing in his manner of giving evidence which caused me to doubt either his credit or his accuracy of recollection. 63 However, he said there were major difficulties in accepting Victor's evidence: 1. Discrepancies between Victor's evidence and that of his legal advisers as to what he said to them after the first discussion. 2. It was not the case that the issues of the watch and Riad's care had been causing family disharmony. 3. Difficulties in the evidence that Victor and Joseph agreed that the agreement concerning the watch and Riad should be kept private, especially in Victor's attempted explanation of this. 4. Difficulty with the evidence that Joseph had suggested that this agreement be kept private, shortly after his legal advisers had said everything must be in the settlement document. 5. Victor's evidence was coloured by resentment. 64 As regards corroboration of Victor by his legal advisers, the primary judge said: 1. His legal advisers in fact contradicted him as to what was said after the first discussion. 2. Mr. Callanan's evidence as to what was said to him in the afternoon could not be accepted without reservation because it was not as stated in later letters, his evidence was affected by a passionate commitment to his client's cause, and it was not supported by Mr. Holmes and Mr. Crow. 3. In any event, even Mr. Callanan's evidence did not say that Victor asserted that the private matters were pre-conditions of the settlement. 65 The primary judge stated the following conclusions: 126 Victor bears the onus of establishing that a legally binding "private agreement" was made between the brothers on 5 February 2001 in the terms which he alleges and that the parties agreed that performance of that agreement was a pre-condition to the performance of the commercial agreement expressed in the Terms of Settlement. I am not satisfied on the balance of probabilities that Victor has discharged that onus. 127 First, for the reasons which I have given, I do not prefer the credit of Victor over the credit of Joseph. 128 Second, I am not satisfied that the evidence of Victor's lawyers unequivocally corroborates Victor's evidence that an agreement was made that Joseph was to hand over the watch immediately and unconditionally and that Joseph was to share responsibility for Riad on the terms alleged. 129 I am satisfied that Victor raised the question of the watch with Joseph at Houda's house. It is open to conclude that, despite Joseph's refusal to hand back the watch immediately, Victor took some hope from what Joseph said that, if the commercial settlement resolved satisfactorily, Joseph might eventually be willing to give him the watch. It is open to conclude that Victor said something to Mr Callanan in the late afternoon on 5 February and in the conference with Mr Holmes to the effect that the issue of the watch would be resolved, and that he has later elevated that possibility into a promise. 130 I am satisfied also that Victor mentioned the care of Riad in the course of private discussions. Joseph may well have said something to the effect set out in Mr Callanan's letter of 17 April, that is, that he was willing to "sit down and make arrangements suitable to ensure the welfare and wellbeing" of Riad. Again, it is open to conclude that Victor said to his lawyers later on 5 February that he had come to a satisfactory arrangement about that, and that he has later elevated Joseph's willingness to discuss Riad's care into an agreement in the terms which Victor now alleges. 131 Third, because of Victor's insistence to his legal advisers that the "private matters" should not form part of the Terms of Settlement, I am not satisfied that whatever was discussed or agreed privately between the brothers was intended by them to be legally binding and, in particular, to be a pre-condition of performance of the Terms of Settlement. 132 In summary, therefore, Victor has failed to prove the "private agreement" for which he contends, so that the Cross Claim fails on the facts. ISSUES ON APPEAL 66 Victor relied on the following grounds of appeal: A. Findings in error 1. His Honour erred in making the following factual findings which were not open on the evidence, were inconsistent with other evidence and/or were glaringly improbable: (a) the disharmony within the family from 1998 onwards was caused solely by the commercial disputes between Victor and Joseph and not by Joseph's failure to return the father's watch or share in the care of Riad (J25); and that the sisters (especially Houda and Nadia) corroborated Joseph on this point (J15-25); (b) any advice given by West QC to Joseph about the ground rules for discussion was given immediately prior to the first private discussion between Victor and Joseph (J36-37,114, 115); (c) the evidence of Joseph should be preferred to that of Victor in respect to the first private conversation, at the IRC (J49); (d) the evidence of Holmes QC and Callanan on what Victor said to them shortly after the first private conversation supported Joseph's case (J49); (e) the evidence of Joseph should be preferred to the evidence of Victor in respect to the second private conversation, in the taxi (J52); (f) that the essential terms of the commercial settlement were disclosed by Joseph and Victor to the sisters at Houda's house (J56); (g) in respect to the third private conversation at Houda's house, Joseph's evidence should be preferred to Victor's in respect to the watch (J129), but in respect to the care of Riad neither brother's evidence would be accepted - in particular, Joseph may have said something to Victor about sharing in Riad's care (contrary to Joseph's evidence) but it did not amount to a promise (contrary to Victor's evidence) (J130); (h) that the evidence of Callanan corroborating Victor's version of the agreement, being a conversation with Victor at the IRC and then a conversation in Holmes QC's chambers should be rejected as overstated and coloured by his passionate commitment to Victor's cause (J121-123); (i) that the evidence of Crow corroborating Victor's version, which was accepted as true (J47), was to be diminished in assessing the overall effect of Victor's corroborative evidence (J130); (j) that Victor's corroborative evidence from Callanan, Crow and Holmes QC was insufficient in total to alter the balance to such degree that Victor's case should be accepted (J125); (k) that on 6 February Victor had no conversation with Joseph about the watch (J74, 95); (l) that the conduct of Callanan and Victor after 6 February, including the dispatch of letters, showed inconsistencies with Victor's alleged agreement (J83-86, 89-97, 122-123); (m) that Joseph's evidence was reliable and corroborated (J98-100); (n) that Victor's evidence as to the reasons for keeping the agreement private were implausible (J104-112); (o) that Victor's evidence was coloured by resentment at the ingratitude and indifference of family members for his efforts (J116); (p) that Victor's agreement to keep matters private evinced an intention not to enter legal relations (J124). 2. His Honour erred in making findings of fact adverse to witnesses when the relevant proposition was not put to them in evidence in a manner which would allow them to explain or rebut it or when their evidence on the point was unchallenged in cross-examination: (a) as to Victor, findings at J109, 116, 122,130; (b) as to Callanan, findings at J122, 123, 130. 3. His Honour erred in making a finding about the context of the private discussion concerning Riad's care (J130) contrary to the evidence of both Victor and Joseph and in terms not put to any witness in cross-examination or contended for by either side. B. Findings which should have been made 4. His Honour ought to have found: (a) immediately prior to 5 February 2001 there was significant family disharmony between Victor and Joseph, affecting the entire family, the cause of which included Joseph's failure to return the watch and the refusal of Joseph in particular to share in the care of Riad; (b) a significant reason for Victor to agree to the settlement of the commercial dispute was the assurances obtained from Joseph that he would return the watch and share equally in the care of Riad; (c) Victor's version of the first, second and third private conversations should be accepted; (d) Callanan, Crow and, to the extent available given his recollection, Holmes QC corroborated Victor's evidence; (e) Joseph had led no relevant corroborative evidence on the central issues and his evidence was unreliable in important respects, as demonstrated by inconsistencies with the evidence of West QC and his later solicitor, Blackwell, and internal contradictions; (f) the objective probabilities strongly favoured Victor's evidence: it is glaringly improbable that he would have settled for vague statements of future intent on the return of the watch and the equal care of Riad as a basis for resolving the IRC action. 5. Further or alternatively, his Honour erred in failing to deal with the representation or estoppel case. 6. His Honour ought to have found the representation or estoppel case established. 67 Joseph raised the following matters in a Notice of Contention: 1. The provisions of s.54A Conveyancing Act 1919 have the consequences where: (a) the Terms of Settlement provided for the disposition of an interest in land; and b) the collateral agreement which the appellants asserted was not in writing, nor was there any memorandum or note of it in writing, signed by the respondents or another person authorised by them, that no action or proceedings may be brought by the appellants on the alleged collateral agreement. 2. Since the Terms of Settlement were executed with the intention of embodying the whole of the parties' agreement in relation to their subject matter, the content of the alleged collateral agreement is incapable in law of contradicting or varying the terms recorded in the Terms of Settlement. 3. The provisions of the Terms of Settlement (in particular paragraph 3 and Schedule 2) had the effect of depriving the alleged collateral agreement of any possible legal force. 68 I will first consider the factual issues raised on the appeal, and then consider the following legal questions: whether Victor can rely on a collateral contract, whether he can rely on the Fair Trading Act, and whether he can rely on estoppel. FACTUAL ISSUES 69 Mr. Justin Gleeson SC, in his written and oral submissions, has made extensive and detailed criticisms of the judgment of the primary judge, and has supported a finding that the conversations were as claimed by Victor. Accordingly, he submits that this Court should find that there was material error in the judgment of the primary judge that vitiated his decision, and this Court should either make a factual finding in favour of Victor or send the matter back for a new trial. 70 I have carefully considered these submissions, and have come to the view that they do not succeed. I can best express my reasons by setting out and commenting on the principal submissions, and then giving a broader view of the considerations that have weighed with me. I will focus on the submissions that allege error, rather than merely putting arguments that a different conclusion was warranted. 71 The first group of submissions concerned the primary judge's criticism of Victor's evidence that the issues concerning the watch and Riad's care had been causing family disharmony prior to the entry into the terms of settlement. In fact, Mr. Gleeson submitted, two of the three sisters had said that the custody of the watch remained an issue, Joseph admitted the same, and the sisters generally confirmed that the care of Riad remained an issue. The primary judge had said that Joseph did not see Victor's letter of 13 January 1999 and did not know that Victor regarded the care of Riad to be an issue; but in fact Joseph admitted the contrary in evidence. The primary judge was in error to find that family disharmony leading up to the terms of settlement was caused solely by commercial disputes between Victor and Joseph. 72 In my opinion, the evidence of the sisters generally supported the view that the watch and the care of Riad were not major overt causes of family disharmony leading up to the terms of settlement; but, for reasons given by Mr. Gleeson, the primary judge was in error on the question whether Joseph saw the letter of 13 January 1999 and knew the care of Riad to be an issue, and in holding that family disharmony was caused solely by commercial matters. The circumstance that the watch and the care of Riad were raised in the IRC proceedings by Victor is itself an indication to the contrary; although I would remark that this point is somewhat two-edged for Victor, because it impacts on his claim that the resolution of these matters had nothing to do with the resolution of the IRC dispute, and his claim that he was concerned that these matters should be kept private. I will return to the question of whether these errors by the primary judge, either alone or in combination with other errors, were sufficient to vitiate his decision. 73 The next group of submissions concerned the primary judge's finding that the first discussion on 5 February 2001 occurred shortly after Joseph had received legal advice to the effect that everything had to be documented. The main point made by Mr. Gleeson was that the primary judge found that this advice was given in the presence of Mr. Chaffey, at the IRC and before the first meeting, whereas in fact Mr. Chaffey did not arrive at the IRC until the first meeting was already under way. Mr. Gleeson also submitted that the primary judge was in error in saying that Mr. Neil was not challenged on his evidence as to this point. 74 However, Mr. West asserted that his advice was given before negotiations between Joseph and Victor commenced, and he was not cross-examined. Mr. West did say he gave this advice in Mr. Chaffey's presence, but if it was intended on that basis to challenge his assertion that the advice was given before negotiations commenced, one would have expected that this would have been put to Mr. West. Although the primary judge may well have been in error to assert that the advice was given in the presence of Mr. Chaffey, in my opinion the probabilities strongly favour the conclusion that the advice was given before the negotiations commenced, and the error of the primary judge is immaterial. 75 In any event, if the advice was given after the first meeting, and if Joseph had at that first meeting made side agreements which were to be kept secret, the high probability is that he would have responded to the advice by saying something about these side agreements, and plainly he did not do so. So even if the advice was given after the first meeting, the fact that this advice was given would still weigh against Victor's version. 76 Next, Mr. Gleeson criticised the judge's conclusion that the evidence of Mr. Holmes and Mr. Callanan to the effect that, after the first meeting, Victor merely told them that there were private matters that needed to be sorted out, counted against Victor's case: it was entirely plausible that Victor would not have gone into details at that time. 77 What this overlooks is that Victor's evidence was that he did then tell at least Mr. Holmes and Mr. Callanan that the principal elements of the settlement included an agreement that Joseph return the watch and share the duties of looking after Riad; and that evidence was contradicted by Mr. Holmes and Mr. Callanan. 78 Mr. Gleeson then submitted that, whereas the primary judge said that Joseph's evidence that the sisters were told the terms of the settlement was corroborated by the sisters, at best their evidence merely corroborated that the agreement concerning the Northbridge units was mentioned. 79 In my opinion, even that amounted to significant contradiction of Victor's evidence that nothing was disclosed. 80 Mr. Gleeson submitted that the primary judge's finding that, when Victor handed over the cheque for $570,000.00, there was no conversation about the watch or Riad, was contrary to Victor's evidence, corroborated by Mr. Callanan and not disputed by Joseph, that Victor had asked for the watch. 81 This appears to be an error, but one that is immaterial. 82 Mr. Gleeson's next group of submissions concerned the primary judge's finding that Mr. Callanan's letters of 3 April 2001 and 17 April 2001 were not in accord with the private agreement now alleged by Victor; whereas Mr. Blackwell's oral evidence confirmed that on 3 April 2001, Mr. Callanan had informed him there was a secondary agreement in relation to the watch and the care of Victor's and Joseph's brother. 83 However, this submission does not meet the most important problem with the letters, apart from their timing, namely their failure to assert a concluded agreement to share equally in the care of Riad. 84 Mr. Gleeson then submitted that the primary judge was in error in saying there was no inconsistency in Joseph's evidence, since the primary judge had found, contrary to Joseph's evidence, that the matter of Riad was discussed. There were also inconsistencies between Joseph's evidence and that of his legal advisers, for example his assertion that he told them on 5 February 2001 that Victor asked about the watch and he had said that Victor could not have it, and also his assertion that he was not aware what the alleged private agreements involved until he saw the letter of 17 April 2001 (contrary to Mr. Blackwell's evidence concerning what happened on 3 April 2001). 85 In my opinion, there were factors such as these detrimental to Joseph's credibility which were not adequately dealt with by the primary judge; but in my opinion, Victor's case failed before the primary judge not because of positive acceptance of Joseph's evidence, but because of problems with Victor's evidence. For that reason, there is a question whether these matters were material to the primary judge's decision, to which I will return. 86 The next group of submissions by Mr. Gleeson concerned the primary judge's adverse comments concerning Victor's explanations of keeping the alleged agreement private. 87 In my opinion, no error is shown in the primary judge's comments on this matter, and in my opinion this matter is a substantial consideration weighing against Victor's evidence. 88 Mr. Gleeson submitted it was not open to the primary judge to find that Victor's evidence was coloured by resentment, since this was not put to Victor in cross-examination or sourced to particular events. 89 In my opinion, this was an observation that the primary judge could appropriately make concerning a witness whose credit was strongly challenged, without specific matters of resentment having been put to the witness; and in my opinion, the observation is supported by much that Victor wrote and said, beginning with his letter of 1 September 1998 and continuing up to the way he gave evidence in the case. 90 Mr. Gleeson submitted that the evidence of Mr. Callanan as to what Victor said to him on 5 February 2001 should not have been rejected, when this evidence was not directly challenged; and particularly the primary judge should not have relied on "passionate commitment" as a reason, when this was not put to Mr. Callanan. 91 On the question of what was to be made of Mr. Callanan's evidence, as well as the evidence of Victor and Joseph, I think it is important to keep in mind the considerations which were very well expressed by McLelland CJ in Eq. in Watson v. Foxman (1995) 49 NSWLR 315 at 318-9: Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712. Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s52 of the Trade Practices Act 1974 (Cth) (or s42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration. That is the position in the present case. 92 Although this passage is directed in terms to allegations of misleading conduct, much of what was said applies also to allegations of contractual statements and evidence of contemporary accounts of such statements given by a person claiming to have heard them. 93 Mr. Callanan was cross-examined at length. Since the cross-examiner could have no instructions as to just what was said between Victor and Mr. Callanan on 5 February 2001, there was some inhibition on the cross-examiner putting to Mr. Callanan directly that what he said was incorrect. In my opinion, the whole conduct of the case showed clearly that it was Joseph's contention that there was no collateral agreement, and that therefore it was very unlikely that Victor would on 5 February 2001 have told Mr. Callanan what Mr. Callanan said he told him. Further, Mr. Callanan was questioned (Black 210-214) about his drafting of cls.2 and 11 of the draft deed, and his advice to his client, the suggestion being that these clauses were inconsistent with the existence of a collateral agreement and with Mr Callanan having been informed of the existence of such an agreement. 94 Mr. Callanan's attention was drawn to the letter he had sent to Mr. Chaffey on 4 February 2001, and he agreed it would have been better not to send it. In my opinion, it was not necessary to put explicitly to Mr. Callanan that he was passionately committed to his client's cause in such a way as could, at least unconsciously, colour his evidence. The comment was open to the judge in relation to a witness whose evidence was plainly under challenge, and there was a sufficient basis for it. 95 I would add that another illustration of Mr. Callanan's commitment to his client's cause may be seen from the third paragraph of his letter of 22 February 2001 (par.[35] above), considered in the light of his evidence at Black 217F-J concerning his letter of 12 February 2001, and his evidence at Black 219B-F concerning his facsimile of 15 February 2001. At the Black 217, his evidence was as follows: Q. And your client approved you sending this document? A. That was my understanding at the time. Q. You would not unqualifiedly commit yourself to say that a document is in its agreed form without instructions? A. It is not normally the way I practise. Q. And it is not the way you practise in relation to Mr Lahoud's affairs? A. Mr Lahoud agreed with me what I should send. At Black 219, his evidence was: Q. After he, Mr Chaffey, had indicated that his client had executed the entry document, you sought to reopen it, didn't you? A. I did, yes. Q. Now the reason you wrote the facsimile of 15 February 2001 was that your client had changed his mind and decided not to execute the agreed document? A. That's right, he did not accept the recitals as they appeared and he conferred in consultation with his accountant that the recitals be expressed in another form. 96 In my opinion, it is unlikely that Mr. Callanan, if told by Victor what Mr. Callanan said he was told, would have countenanced Victor entering into a deed containing cls.2 and 11, or have permitted Victor to sign the terms of settlement containing cl.9 and the second schedule, at least without very careful advice and express instructions. The matter was raised in re-examination, in the following terms: Q. My learned friend asked you a number of questions concerning advice that was proffered to Mr Victor Lahoud in relation to the effect of the deed of settlement on the capacity to sue in relation to the subject matter of the proceedings. Do you recall various questions along those lines? A. Relating to the terms of settlement or what I call the agreement, the terms of settlement. Q. Indeed his Honour asked you a question about this topic and on each occasion you said that the advice to him was that the effect of the terms of settlement was that he could no longer sue in relation to matters in dispute? A. That's right. Q. What did you mean to convey by the expression which you used a number of times, "matters in dispute"? A. If it was in dispute, if I can talk about the private terms, the private terms they had reached agreement and privately we don't want that in the document so there is no dispute about those. That is an agreement that they are privately going to perform for matters of family comedy (sic: comity?) affairs. In terms of the financial matters that had been the subject of quite strenuous litigation, they were matters in dispute and they were matters that were being settled. Q. So, is it right to summarise that as saying that when you used the expression "matters in dispute" you are referring to the subject matter of the IRC proceedings? A. And any dispute no matter how it arose between the two brothers in performing services. They were all cleaned up as of 6 February 2001. 97 In my opinion, this would be a most unconvincing explanation of why a solicitor would have done what Mr. Callanan did, if he knew there was an important agreement which was part of the settlement yet which was not being recorded. 98 I note that both Victor and Mr. Callanan gave evidence that agreement about the two matters was brought to the attention of Mr. Holmes and Mr. Crow. I think it most unlikely that Mr. Holmes and Mr. Crow would have permitted the signing of the terms of settlement, including cl.9 and the second schedule, if they had been informed there were matters which were part of the agreement but were not included in the terms of settlement, at least without careful advice and express instructions. I think it unlikely that they would have let the matter pass without advising that Victor at least obtain a letter from Joseph setting out these private arrangements. Mr. Holmes and Mr. Crow did not recall being given such information, except to the limited extent indicated by Mr. Holmes's affidavit filed in the IRC proceedings. 99 In all the circumstances, in my opinion the primary judge was amply justified in not accepting Mr. Callanan's evidence as to what he was told by Victor on the day. This does not mean that Mr. Callanan was an unsatisfactory witness, much less a dishonest one, but merely that he is subject to ordinary fallibility of the kind discussed in Watson v. Foxman. 100 Mr. Gleeson also made submissions supporting the probability of Victor's case, to the effect that Victor was very much concerned about the two matters, he felt he was in a strong position in the IRC proceedings, and it was most unlikely he would have given ground by offering two units on 5 February 2001 unless he had obtained satisfaction on the two matters that concerned him. It was highly unlikely, he submitted, that Victor would have been content with Joseph's rebuff concerning the watch and a loose assurance concerning Riad. 101 As mentioned earlier, there were factors detrimental to Joseph's credibility that were not adequately dealt with by the primary judge. In particular, in my opinion it was clear on the whole of the evidence that (as found by the primary judge) the care of Riad was mentioned in discussions in a way that must have given some encouragement to Victor, and in my opinion the discussions concerning the watch must also have been not entirely unsatisfactory to Victor. Joseph's evidence to the contrary of these propositions was wrong, and I would not regard Joseph as a reliable witness as to the content of the conversations. 102 However, in my opinion there were stronger reasons not to consider Victor to be a reliable witness. One matter to which the primary judge did not give the significance that I think it deserves concerns the contrast between what Victor asserted in his letter of 1 September 1998 and the contents of his company's tax return for the year ended June 1998, which was explored in cross-examination of Victor at Black 163-166. In my opinion, this matter seriously undermined the credibility of Victor as a witness, and also undermines the thrust of Mr. Gleeson's positive argument on the probabilities. 103 In his letter of 1 September 1998, Victor flatly rejected Joseph's claim for $2.4 million. Yet not long afterwards, he signed his company's tax return, claiming a loss that could be justified only if that $2.4 million, and indeed a further $375,000.00, was owing to Joseph. His attempt to say he relied on his accountant on this matter can carry little weight: he did not know if he had provided his accountant with his letter denying Joseph's claim, and in any event, a businessman of his experience should know that the tax return should be based on a true and fair view of the company's financial position, and that, where the amount of tax payable depended on the value of such a large and wholly disputed debt, a genuine attempt to assess its true value was required. 104 This matter was raised in affidavits in the IRC proceedings. It was obvious that Victor's denial that he owed Joseph anything, if made good in those proceedings, would demonstrate gross falsity of the tax return. Victor ran a risk of adverse tax consequences from any result that did not return to Joseph at least some part of this $2.775 million. In those circumstances, Victor's willingness to compromise, after holding out for as long as possible, is readily understandable. It is also wrong to suggest that it was only Victor who made concessions on 5 February 2001; Joseph also made concessions from his previous position. 105 The way Victor dealt with the inconsistency between his outright rejection of Joseph's claim and what he asserted to the tax commissioner would justify a finding that he was not an honest witness. His letter of 1 September 1998 and other evidence in the case suggest that Victor is more than usually inclined to think of himself as being in the right and other people as being in the wrong, and to adjust his perception of the facts accordingly, either consciously or unconsciously. Another example of this is that, if Mr. Callanan's evidence concerning his letter of 12 February 2001 and the change of position in his facsimile of 15 February 2001, set out above, is correct, the reason why the deed was not finalised at that time was because of a change of mind by Victor, and subsequent attempts by Victor to improve his perceived taxation position; yet despite this, Victor attributed the whole blame for non-completion of the deed to Joseph. 106 All these considerations lead me to the view that the primary judge's errors were not material. He correctly held that Victor had not proved his case. However, if the primary judge's errors were material, in my opinion Victor's evidence does not have sufficient credibility to justify the ordering of a new trial, much less a decision in his favour on this appeal. In coming to this conclusion, I have regard particularly to Victor's unreliability, but also to the consideration that if an agreement as alleged by Victor had been made, it is highly likely that Victor's legal advisers would have been told and the drafting of the deed and the terms of settlement would not have proceeded as it did; to the way the alleged private agreement was raised for the first time on 7 March 2001 when Victor was attempting to revise the previously-agreed deed to improve his perceived taxation position; and also the considerations set out in Watson v. Foxman. 107 Accordingly, in my opinion the appeal fails on factual issues. Victor has failed to establish what was said in the three private conversations, and has failed to establish that whatever was said in these three conversations amounted either to an agreement to return the watch and/or share equally in the care of Riad, or to a representation that Joseph would do so. OTHER ISSUES 108 It is not necessary for my judgment to resolve the legal issues that could otherwise arise. However, I will make some brief comments. 109 In my opinion, even if Victor's evidence was accepted, he would be precluded from relying on a collateral agreement by cl.9 and schedule 2 of the terms of settlement: see Hoyts Pty. Limited v. Spencer (1919) 27 CLR 133. 110 There is a substantial question whether, if representations were made as alleged by Victor, Victor could rely on the Fair Trading Act. I accept that a representation made in the course of settling legal proceedings could be made in trade or commerce, if the conduct of the legal proceedings was part of the representor's commercial enterprise or if the legal proceedings were an incident of a commercial relationship between the representor and the representee: cf. Stockland (Constructors) Pty. Limited v. Retail Design Group (International) Pty. Limited [2003] NSWCA 84 at [18]-[23]. However, if the commercial relationship were at an end, and the legal proceedings could not be regarded as part of any ongoing commercial enterprise of the representor, there is a real question whether such representations would be considered as made in trade or commerce. It is not necessary to decide this in this case. 111 I do not think Hoyts v. Spencer, or cl.9 and schedule 2 of the terms of settlement, would defeat a claim in estoppel, although there is a substantial question whether, even if representations were made as alleged by Victor, the elements of estoppel would have been made out in this case. If the elements of estoppel had been made out, that could justify it being made a condition of enforcement of the terms of settlement that Joseph return the watch. I am doubtful that it could justify any particular condition concerning the care of Riad. The Court would not impose a condition that would in substance amount to specific performance of a promise to share equally in the care of Riad: that is the kind of promise which could not be the subject of an order for specific performance. I do not think the Court would order an enquiry as to damages, since the question is not whether Victor has suffered damage because the promise was not carried out, but rather what is the relief required to remedy the change of position and Joseph's unconscionable behaviour. There was evidence from Rosemary that Riad was subsequently not living with Victor or being supported by him. I think it likely that, if estoppel had been made out, there could not have been any remedy in relation to the care of Riad. ORDERS 112 For those reasons, in my opinion the following order should be made: appeal dismissed with costs. 113 IPP JA: I agree with Hodgson JA save that I express no opinion on the estoppel issue discussed in para [111] of his Honour's reasons. ********** 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.