New South Wales Supreme Court CITATION : Iacullo v Behrens [2006] NSWSC 121 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 14, 15, 16, 17, 20 June 2005, 10 February 2006 JUDGMENT DATE : 10 February 2006 JURISDICTION : Civil JUDGMENT OF : Smart AJ at 1 DECISION : See paras 408 and 409. CATCHWORDS : Moneys not advanced as intended under loan agreement and mortgage - not a loan for past debts - consideration fails. Alternative claim for alleged cash advances dismissed. Lease of coffee shop set aside and no sums due to Iacullos for rent or damages. Partial indemnities as to finance leases granted - cross-claim for conversion dismissed. Fair Trading Act LEGISLATION CITED : Contracts Review Act 1980 Real Property Act Retail Leases Act 1994 Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 621 Burnes v Trade Credits Limited 1981 1 NSWLR 93 CASES CITED : Codelfa Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Hoyts Pty Ltd v Spencer (1919) 27 CLR 133 Toll (FGCT) Pty Ltd v Alphaharm Pty Ltd (2004) 219 CLR 165 PARTIES : Dominic Iacullo & Anor v Uwe Behrens & Anor FILE NUMBER(S) : SC 5466/2004 COUNSEL : (P) Mr M Ashurst (D) Mr F Gleeson SOLICITORS : (P) Michell Sillar (D) Aitken McLachlan Thorpe IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SMART AJ Friday, 10 February 2006 5466/2004: DOMINIC and LILLIAN IACULLO v UWE and PAULA BEHRENS JUDGMENT Introduction – The following abbreviations are used: DI = Dominic Iacullo, LI = Lillian Iacullo, UB – Uwe Behrens, PB = Paula Behrens. 1. As at 2000 PB and LI had been friends since their schooldays, first meeting when they were both 6 years old. PB had known DI for over 16 years. Their children had grown up together and the two families celebrated family milestones together. In 1995 PB married UB. This was her second marriage. Mr and Mrs Iacullo and Mr and Mrs Behrens and their families were friends and saw a lot of each other socially. 2. DI was, and regarded himself as, a successful businessman. He conducted a successful auto vehicle and automotive business, he owned a number of properties and he was developing some properties. One of those was situated at Canterbury Road, Campsie, close to Canterbury Hospital. There were retail spaces (including a chemist shop and coffee shop) and some offices for doctors and other related services. He spent over $500,000 in developing the property. He did not regard that as a substantial amount. About the same time as that development was proceeding and in about October 2000, the Iacullos entered into a contract for the purchase of a home at Blakehurst for $1.22 million. The Iacullos moved into the Blakehurst property in December 2000. That meant that their former home in Bower Street, Roselands, was available for lease. They did not sell it. 3. In 1995 the Behrens purchased a modest house at 82 Glamis Street, Kingsgrove. About March 1996 PB purchased a franchise of the "Cookie Man", selling cookies and other food items to the public in Westfield Shopping Centre, Hurstville. PB said that from time to time she sought business advice from DI, who was helpful. She looked up to him in business and commercial affairs. She admired his skills in these areas and was influenced and guided by him in these areas. UB was not involved in running or managing or working in the "Cookie Man" business. Latterly, UB worked as a handyman and ran a lawn-mowing and gardening business. He was in modest circumstances and was not familiar with financial affairs and matters of business. It was apparent from his period in the witness box that he was a man of limited talents and understanding. He was honest and did his best to tell the truth. The credibility of DI, LI and PB was poor and I have approached the evidence of each with caution. 4. From 1 January 2001 the Behrens became the tenants of the home of the Iacullos in Bower Street, Roselands. It was a substantial home and had a swimming pool. The rental was $1993.35 per month and this proved to be more than the Behrens could afford. She was not receiving an income after 1 April 2001. There was a dispute as to the circumstances surrounding the entry into this lease, but it is of little importance in the resolution of the parties' major disputes. 5. About 18 October 2000 DI had PB sign a letter, which he had had LI prepare, in these terms: " Re Leasing of Coffee Shop at 573 Canterbury Road, Campsie I am the owner of a Cookie Man Franchise for the past five years situated at 113 Westfield, Hurstville, 2220. I am currently in the process of selling the above business. Once the sale is finalised I am happy to proceed with the Lease for the café as agreed at $500,00 per week subject to terms and conditions of the Lease. I understand it is my responsibility to do the entire fit-out of the café including internal and external seating subject to your approval of the plans. If you need any further information regarding the above please contact myself or my solicitor, Greg Harle …" 6. PB said that at the time DI asked her to sign the letter he said: "Will you sign this letter for me, because I need to refinance with Perpetual. If I do not get the refinancing done I am going to lose my deposit on the house at Blakehurst." This was disputed. 7. By lease stated to commence on 1 March 2001 the Iacullos let the coffee shop at 571-573 Canterbury Road, Campsie to PB for 3 years at a rental of $26,000 per year. There were a lot of problems on fitting out the shop and it did not open for business until mid-October 2001 8. By letter of 26 February 2001 the Iacullos' solicitors wrote that the first two months of the term of the lease would be rent free and the third month would be at half rent. 9. The coffee shop did not do well. PB relied on a material misrepresentation, and sought to set aside the lease. She was sued for arrears of rent, loss of income pending a re-letting and damages. 10. In early 2002 the Behrens executed a loan agreement and a mortgage in favour of the Iacullos in the sum of $50,000, the security being a second mortgage of the Behrens property at 82 Glamis Street, Kingsgrove. $50,000 was not advanced as such. It was alleged by the Iacullos to be for the purpose of discharging pre-existing liabilities. This was denied by the Behrens. The Behrens contended that this sum was not advanced and that no valuable consideration was given by the Iacullos to the Behrens pursuant to the alleged loan agreement. 11. The Iacullos' claims could be summarised thus: (a) An order for possession of the property at 82 Glamis Street, Kingsgrove (because of the non-payment of $50,000 and interest and non-payment of $72,605.91 for unpaid rent and damages arising from the termination of the lease in respect of the Campsie property, it being claimed that the mortgage covers this). (b) Judgment against UB and PB for $50,000 and interest. (c) Judgment against PB in the sum of $72,605.91 later amended to $118,157.12 and interest. (d) Costs. 12. If the loan agreement is held not to be legally enforceable then the Iacullos seek to recover what they allege were the pre-existing liabilities owed by the Behrens: (a) $12,080 being the arrears of rent owing pursuant to a residential lease of 1 January 2001 of 26 Bower Street. (b) $12,879.52 being the amount due by PB pursuant to the lease of café-coffee shop premises. (c) $25,039.50 being a number of advances made to PB particularised in Annexure C to the affidavit of 30 June 2003 of DI. 13. In their defence the Behrens have, as mentioned, in answer to the claim for $50,000 and interest relied on the lack of valuable consideration for the loan agreement and the mortgage. The Behrens also relied on misleading and deceptive conduct in contravention of s 42 of the Fair Trading Act 1987 (NSW), based on an alleged loan representation that $50,000 would be advanced. They contended that sum was not advanced by the Iacullos. The Behrens also alleged that the loan agreement and mortgage were unjust at the time they were made. They relied on these circumstances: a) LI and PB have known each other as friends for about 30 years. b) PB and DI have known each other and been friends for about 16 years. Over that period DI provided financial advice and emotional and financial support to PB including: (i) advice on the tax treatment of investment properties and the benefits of negative gearing (ii) advice on the establishment of businesses and business advice generally (iii) advice as to the advantages and disadvantages of proceeding with PB's claim against her franchisor, the Cookie Man (iv) unsecured cash loans, from time to time on payment terms which did not include interest and were on an informal basis (v) emotional support and friendship 14. PB confided in DI from time to time in respect of her personal and business affairs. The Iacullos, as mentioned, leased a residential property owned by them to the Behrens. 15. The Behrens also claimed that PB was in a position of special disadvantage at or about the time of the execution of the loan agreement and mortgage, which position of special disadvantage was known or ought to have been known by the Iacullos and that it was unfair and unconscionable for the Iacullos to rely on the loan agreement and mortgage. 16. As to the alleged pre-existing liabilities of the Behrens they asserted as to the claim for $12,080.98 that they paid the Iacullos on 13 August 2001 $1991.35 by cheque in respect of rent due under the residential lease for August 2001. The Behrens further asserted that in January 2002 PB and DI agreed to set off $10,000 owing by DI to PB (being the balance of $15,000 given by PB to DI on 11 January 2001 to be held on her behalf for safekeeping) against five months rent under the residential lease. 17. The Behrens pleaded that after they vacated the Roselands property in November 2002 the Iacullos brought proceedings against them in the Consumer Trader and Tenancy Tribunal (CTTT) claiming moneys payable under the residential lease including the alleged unpaid rent and that the Iacullos failed to make any claim against the Behrens in respect of the alleged arrears of rent (as referred to in para 11A(a) of the claim). The Behrens further pleaded that the CTTT proceedings were determined by orders made on two occasions: (a) by orders dated 25 October 2002 and the Behrens paid $1343.40 (plus a credit allowed in respect of the rental bond) in accordance with the orders of the CTTT and (b) by orders dated 6 May 2003 and the Behrens paid $121.12 in accordance with the orders of the CTTT. (The order made on 25 October 2002 required payment of $3183.40 with cedit to be given for the amount of the bond paid to the Iacullos). 18. The Behrens further pleaded that the plaintiffs were estopped upon the principles in Anshun from making any further claims in the present proceedings in respect of the alleged arrears of rent under the residential lease of the Roselands property (which arrears were not admitted) The Iacullos disputed that the principles in Anshun applied. 19. As to the claim of $12,879.52 pursuant to the lease of the Canterbury Road premises, the Behrens pleaded that the amount claimed related to a period prior to the commencement of the coffee shop business in 2001 and that the Iacullos were precluded by their agreement or representations to PB from claiming such amounts. Those representations included that the Iacullos would waive rent until the coffee shop business (to be conducted by PB and DI as partners) was sufficiently profitable to allow for both the payment of rent to DI and a wage to PB and in any event the Iacullos would waive the rental payable for the first three months after the commencement of trading of the business and one-half of the rent for the following two months. There were other alleged representations. 20. As to the claim of $25,039.50 in respect of a number of cash advances made to PB the Behrens pleaded that any cash advances were made to the company, Flowers Café Campsie Pty Limited and not to PB personally. That was the company used to run the coffee shop business. 21. As the Iacullos did not press their claim for an increase in the rental payable under the rent review clause I will pass over the provisions in the pleadings relating to that matter. 22. The Behrens pleaded a series of representations arising from discussions held over some months (about February to April 2001) as to the commencement of a coffee shop business at the Canterbury Road premises. 23. The Behrens allege that DI, in addition to the previously mentioned representations as to waiver of rent, represented that: (a) if they were to commence the business they would do so as partners each would be a director of the business (if a company were formed to carry on the business) (b) PB was to be the sole lessee of the area within 571-573 Canterbury Road to be occupied by the business. He was a lessor and did not want it generally known that he was a partner in the business; (c) the profits and the liabilities of the business would be shared equally; (d) DI would provide and/or obtain finance to meet the start-up costs, including fit out (such costs incurred by DI to be reimbursed to him when the business was in a position, financially to do so) and manage the financial and administrative aspects of the business; and (e) PB would manage the café on a daily basis. 24. The Behrens alleged that about March/April 2001 in reliance upon the representations and in the circumstances earlier mentioned PB entered into the lease of the coffee shop and agreed to enter into the business with DI. 25. The Behrens alleged that by reason of the matters earlier pleaded as to the relationship between the Iacullos and PB the lease was unjust in the circumstances at the time it was made. The Behrens further alleged that by reason of those matters PB was in a position of special disadvantage at or about the time of the execution of the lease, which position of special disadvantage was known, or ought to have been known, by the Iacullos and that it was unfair and unconscionable for the plaintiffs to rely upon the lease. 26. The Behrens also alleged that about March/April 2001 an oral agreement was made between DI and PB in substantially the same terms as the representations previously summarised. 27. The Behrens alleged that about April/May 2001 Flowers Café Campsie Pty Limited was incorporated, that in about May 2001 a fit out of the premises commenced and that during the period April 2001 – September 2001 PB provided some equipment to the company for use in the business. The Behrens also alleged that from about April 2001 DI undertook the following tasks within the business and in part performance of the agreement: (a) the incorporation of that company; (b) decision making as to the nature of the fit out, including the selection of tradesmen; (c) management of the finances of the business including the cheque and deposit books for the CBA held by the Company; and (d) procurement of insurance for the business and its contents. 28. About August 2001 the company entered into the following finance leases: (a) a lease of air conditioning equipment with Service Finance Corporation Limited (b) a lease of kitchen equipment from AGC Limited (c) a lease of kitchen equipment and fit out from Australian Integrated Finance Pty Ltd. 29. It is also alleged that about August 2001, in reliance upon the representations and in the circumstances of the relationship between the Iacullos and PB, the latter executed guarantees and indemnities in respect of each of the finance leases. 30. The Behrens alleged that the business commenced trading about October 2001 and did not reach a level of profitability sufficient to pay the rental under the lease and a wage to PB. They further alleged that about 30 October 2002, contrary to the representations and in breach of the terms of the agreement the Iacullos: (a) demanded payment of outstanding rent of $20,836.31; (b) served on PB a Notice of Termination of the lease agreement; (c) evicted PB from 571-573 Canterbury Road 31. DI did not share equally in the profits and liabilities of the business. 32. The Behrens pleaded that the Iacullos were estopped from resiling from the representations made (and summarised earlier). 33. In their Notice of Cross-Claim the Behrens repeat paras 11 to 42 of the Amended Defence to the Further Amended Statement of Claim, that is those paragraphs relating to misleading and deceptive conduct, unconscionable conduct, the payments made, the proceedings in the CTTT including the estoppel based on the principles in Anshun, the commercial lease of the coffee shop area at 571-573 Canterbury Road, the representations made by DI, the facts relating to the commencement of the coffee shop business, the tasks undertaken by DI, the lease signed by the company, the guarantees and indemnities executed by PB and the conduct of the Iacullos contrary to the representations and in breach of the terms of the agreement. 34. The Notice of Cross Claim alleged that since November 2002 the Iacullos have refused PB access to the coffee shop area to allow her to take back and have otherwise not returned to her the equipment she provided and the equipment the subject of the finance leases and have thereby converted that equipment to their own use. Loss and damage are alleged. 35. The Behrens seek an order that the loan agreement, the mortgage and the lease agreement be set aside pursuant to the Contracts Review Act, s 72 of the Fair Trading Act (NSW) or under the general law. Alternatively, a declaration is sought that the loan agreement, the mortgage and the lease are void ab initio. In the further alternative orders were sought varying the loan agreement, the mortgage and the lease in such manner as the Court thinks fit. An order is sought that the matter be referred to the Master, Equity Division, to take accounts of and enquire of all dealings and transactions between PB and the Iacullos with respect to the café business. Also sought are damages including those recoverable pursuant to s 68 of the Fair Trading Act (NSW), interest and costs. 36. In their Amended Reply the Iacullos assert: (a) it was never agreed between them and PB that the principal amount of the loan of $50,000 would be advanced in cash (b) the unsecured cash loans were made by DI to PB in respect of the operation of the business known as Flowers Café Campsie. (c) the Behrens were independently represented by a firm of solicitors at the time that the loan agreement and mortgage were made (d) their relationship with PB in respect of the café premises was at all times an arms length relationship between landlord and tenant (e) (i) the incorporation of the company was arranged by PB through her accountant (ii) PB was responsible for the fit out of the premises (iii) DI only recommended tradesmen to PB in respect of the fit out of the café premises (iv) the management of the finances of the café business, including the cheque and deposit books for the Commonwealth Bank of Australia held in the company's name was conducted by PB (v) PB requested DI to arrange insurance for the café business and after he had done so the policy in respect of such insurance was maintained by PB. (f) if PB executed guarantees and indemnities in respect of any of the finance leases earlier mentioned (which is not admitted) she did not do so in reliance upon any conduct of the Iacullos or in the circumstances pleaded in paragraphs 18 to 20 of the Amended Defence (the personal relationship paragraphs). 37. The Iacullos admit: (1) On or about 30 October 2002 they demanded payment of outstanding rent of $20,836.31 (2) On or about 12 November 2002 they served on PB a Notice of Termination of the lease agreement (3) In or about November 2002 they evicted PB from the café premises and say they were entitled to do so by reason of her non-payment of rent and failure to vacate the coffee shop premises after service of the Notice of Termination. 38. In their Defence to Amended Notice of Cross Claim the Iacullos say in answer to the claim for conversion: (a) PB was offered access to the café premises to remove any equipment and/or belongings but declined the invitation to do so (b) She has abandoned any equipment left on the café premises (c) They are not liable for any loss or damage (which is not admitted) she may have suffered. 39. As to any reliance on the Contracts Review Act 1980 the Iacullos asserted that the loan agreement, the mortgage and the lease agreement were entered into by PB in the course of or for the purpose of a trade, business or profession carried on by her within the meaning of s 6(2) of that Act. The Facts 40. In the main, but not entirely, I will deal with these chronologically. 41. It seems that PB was entitled to operate the Cookie Man Franchise at Westfield Shopping Centre, Hurstville until August 2001. Apparently the lease of the relevant shop in the Shopping Centre expired on 31 March 2001. The term of the lease and that of the franchise agreement are not clear on the evidence and some amendment of these facts may be necessary. Relationship of the Parties And Purchase of Blakehurst Home 42. In October 2000 the Iacullos exchanged contracts for the purchase of 27 Gold Street, Blakehurst, a superior residence. At the time they owned and were living at 26 Bower Street, Roselands, a substantial and attractive residence. 43. In her affidavit of 25 November 2003 PB deposed to the assistance that DI gave her over the years in protecting her assets. She recounted how DI had sold them his four-wheel drive vehicle without them paying any money to him initially and permitting her to repay the purchase price by instalments which she did. PB said that there were also numerous occasions when DI lent her moneys and that she always paid him back. DI did not charge her interest on these loans. There was never a contract and they trusted each other. 44. PB said that on one of LI's visits to the Cookie Man and after LI had finished speaking to DI in relation to the purchase of their new home at Blakehurst the following conversation occurred: "LI: The Commonwealth Bank is not going to honour the cheque for the 10 per cent deposit on the new house PB: Can you get the money from somewhere else? LI: Dominic has just asked me if your father would be able to lend us any money PB: I do not think so." 45. In her affidavit of 14 June 2005 but not earlier, LI denied this conversation. LI added, "I have never asked Paula if her father would loan us moneys to purchase our home at Blakehurst. I do not ever recall discussing the financing arrangements for the purchase of the property." 46. In cross-examination LI agreed that in October 2000 she received news from DI that the bank had not honoured the deposit cheque of $122,000 for their new home. This was a surprise. She did not deny that she had received a telephone call from her husband about the deposit cheque. In October 2000 she went to the Cookie Man shop about every week. LI said it was possibly something she would have confided in PB, her close friend, about the time it occurred. LI was very "cagey" as she dealt with a series of questions about this topic and denied that she raised with PB a request from DI about borrowing some money from PB's father. LI said that the first time she turned her mind to responding to PB's affidavit of 25 November 2003 was on 14 June 2005. 47. I had major reservations as to the truthfulness of LI. This passage appears at T237: "Q. … You have not been present while some witnesses have been cross-examined? A. That's correct. Q. You have (been) reading the transcript outside the Court? A. No, not the transcript. Q. You have (been) reading, Mrs Iacullo, the transcript of these proceedings outside the Court this morning? A. No, I have been reading my affidavits. Q. I will ask you once more. It is the case that this morning you were reading the transcript of these -- A. --I did read part of it this morning, yes. Q. When you denied that you read it, that was untrue? A. Yes, it was." 48. As LI was asked these questions she looked at counsel and his instructing solicitor and realised that she was being asked about what they had seen. She appreciated that there could be evidence about her untruthfulness and decided that she could no longer maintain her initial stance. Her facial expressions and body movements were eloquent. Her untruthfulness was brazen. 49. I think that the conversation deposed to by PB with LI probably took place. Refinancing of Iacullos 50. PB said that shortly after this visit DI came to see her and gave her a letter dated 18 October 2000 (which is earlier set out) and asked her to sign it for him in the circumstances earlier mentioned. PB said that she agreed to his request as DI was a friend. She said that at the time of signing this letter she did not intend to take up a lease with DI because he had not asked her to and she was still running the Cookie Man. The letter wrongly stated that she was currently in the process of selling the Cookie Man business. 51. DI said that he did not borrow money from Perpetual and to that extent he denied he said the words attributed to him. DI said that he did ask PB to sign (and she signed) the letter dated 18 October 2000 (para 77 of DI's affidavit of 27 July 2004). Perpetual was and is a well known lender (via its companies) on realty. I think that DI probably did refer to Perpetual. The form of the letter DI had signed by PB could be placed before any number of lenders. About 8 December 2000 the Iacullos executed a mortgage over the Canterbury Road premises in favour of Perpetual Trustee Company Limited. There was an existing loan in place from Perpetual to DI's company, Glow Automotive. DI consolidated various loans into one loan. 52. DI agreed that prior to December 2000 he put in a finance application to Perpetual in which there were estimates of income and expenditure for the retail development. DI denied that it was in this context that he asked PB to sign a document indicating an intention to lease a coffee shop but DI was not being truthful. 53. DI said that at the time he asked PB to sign the letter, he knew that PB's franchise lease term at Westfield expired in August 2001. DI insisted that she was adamant that she was moving out. He said that at that stage he did not mention the Bank bouncing his cheque. He did not need to as that was already known and DI was in recovery mode. 54. It is probable that as at October 2000 there had been some discussion between PB and DI whether she would continue with the Cookie Man once her franchise lease term expired, but it was probably inconclusive. I do not accept that PB was then adamant that she was going to move out. PB did have problems with the Cookie Man business. This is evidenced by the Industrial Relations Commission proceedings about which there are relatively few details. 55. PB agreed that the statements made in the letter of 18 October 2000 were untrue. She realised that the letter was going to be used to influence a financial institution to advance a very substantial sum of money. On her version of events she was participating in a fraud on the financier. She did not attempt to say "no" or demur to what DI requested. PB said that she did not want the Iacullos to lose their deposit on the Blakehurst property. On her version of events the Iacullos were also participating in a fraud on the financier. I think that PB and the Iacullos were all participating in such a fraud. I reject the suggestion that the Iacullos were acting honestly in preparing the letter of 18 October 2000 and having PB sign it. 56. When it was put to DI that he asked PB to sign the letter of 18 October 2000 as part of the application for finance to Perpetual Trustee he replied, "Possibly, yes." The answer "Possibly, yes" was a little quaint. It was not a question of "Possibly". DI denied that he mentioned to PB at that time that a problem had occurred in relation to the deposit on the Blakehurst property with the Commonwealth Bank bouncing his cheque. It is probable that DI did mention this. The reason PB signed the letter was that she did not want the Iacullos to lose their deposit and believed that they would unless he re-financed. Lease of 26 Bower Street Roselands 57. In the latter half of December 2000 the Iacullos moved into their Blakehurst home. PB said that shortly before they moved into that home DI came around to the property at Kingsgrove and they had a conversation to the following effect: "DI: Why don't you rent my house and then you can rent yours? In that way you'll be able to negatively gear your property and obtain tax benefits. PB: Oh, okay, I'll think about it." 58. UB gave evidence that he was present with PB when fuller but similar remarks were made by DI to him with DI also stressing the advantages of more space for their family as the children grew up. Thereafter, before Christmas 2000, the Behrens accepted DI's offer and rented 26 Bower Street, Roselands from the Iacullos. The Behrens also let their Kingsgrove property as an investment property as DI had suggested. PB asked DI to reduce the rent of $460 per week, but he declined on the basis that the Behrens would receive a substantial refund when they did their tax returns. DI denied that he urged the Behrens to rent his house, but I think that he did. DI said that the Behrens were keen to rent the Roselands house. That may well have been so. 59. PB said that during a dispute with the Cookie Man franchise in the Industrial Relations Commission of NSW she would often speak to DI about it and he gave her advice. He advised her to settle at the conciliation. Ultimately the dispute was settled and the parties entered into a confidential settlement agreement. Coffee Shop 60. UB was not sure when DI first mentioned to PB that he wanted to have a coffee shop in his development project in Canterbury Road and that he wanted her to run it and be in partnership with him. UB thought it was around November-December 2000. He remembered DI discussing it with PB on New Year's Eve. The families had engaged in festivities that evening. UB said that they (UB and PB) did not really know what they were doing as they still had the Cookie Man franchise. He recalled DI proposing this toast, "Here is to us being business partners and to us making lots of money." Payment of $15,000 and its Fate 61. I interrupt the narrative as to the Coffee Shop to deal with this payment. 62. PB said that following the Christmas trading in 2000 she had a substantial amount of money in the bank account for the Cookie Man. She anticipated heavy outlays by March 2001. She said that she felt it was necessary to put aside some of those moneys where neither she nor her husband could access them. She explained the position to DI, told him she did not want the moneys spent and asked him to hold the moneys for her. She was concerned that her husband as a joint signatory to the bank account may make an imprudent withdrawal. 63. PB said that shortly after that conversation she saw DI at Glow Automotive and handed him a cheque for $15,000. He handed her no document (whether an invoice or a receipt or anything else) in response when she gave him the cheque. She said that she had a conversation with him to the following effect: "PB: I want you to look after this money for me. I may have to pay GST with it and I'll let you know when I need it, so I don't end up with a fine. DI: Okay. You've done the right thing, Paula. When you need the money I can give it back to you. Just give me a bit of notice." 64. DI made no comment as to this in his affidavit. This infusion of funds would have been welcome. DI had just moved into the Blakehurst home and was developing 571-573 Canterbury Road. 65. PB said that about a month later, in February 2001 she went to Glow Automotive and handed him $1000 in cash and asked DI to put it with the other money he was holding for her. A conversation to this effect ensued: "DI: What are you going to do about the fridge Uwe asked me to leave at Roselands. Uwe has not paid for it yet. PB: Well put this money towards it and leave the balance remaining with the other money you're holding for me. DI: Okay." 66. PB said that about the end of March 2001 she told DI that she was going to need a cheque for $5000 from the money she had given him, for the last rent payment for Westfield. DI said that would be fine. Shortly after this DI gave her a cheque for $5000. 67. PB said that between March 2001 and October 2001 she repeatedly asked for the balance of the moneys, namely $10,000. She said that usually DI's response was, "I have not got it now" or "You don't need it now, do you". She had told him that she had not yet lodged the BAS documents required for the Cookie Man and that the ATO had not yet contacted her to make those payments. On one occasion when she pressed him as to when he was going to give $10,000 to her he said that he would give it to her when he obtained a loan from the National Australia Bank. She said she told him that that was OK but if she were fined, he would have to pay it. He told her that he had a lot on his mind and that when he effected the refinancing she would receive the money. 68. DI denied that in January 2001 PB asked him to hold some money for her after Christmas trading. He agreed that she handed him a cheque for $15,000. The documents established that. DI said that PB never requested him to hold money for her. DI said that when he was constructing the shops (of which the coffee shop was one) he had alarms and air conditioning installed, the value of the air conditioning was slightly in excess of $7000 (including GST). 69. In his examination in chief DI recounted a conversation with PB not mentioned in his affidavit, although he dealt with the subject. He claimed this was said: "DI: I need a cheque for the bond and the air conditioner that I fitted in the café, PB: Okay, here's a cheque for $15,000." PB denied that this occurred and I do not think it did. At that stage PB had not decided whether to lease the coffee shop. She would be most unlikely to pay DI $15,000 in respect of the coffee shop when she had not yet decided to go into that venture. 70. DI agreed that as at 11 January 2001 he had not given PB any document setting out a security deposit required under the proposed lease of the café nor any document setting out the cost of the air conditioning. DI claimed he had told PB of that cost. 71. DI's attention was directed to a FAX dated 22 February 2001 from Michell Sillar, his solicitors to him and the attached Lessor's Disclosure Statement, which stated: "Finishes, fixtures, fittings, equipment and services to be provided by the Lessor Lessee has to pay for the finishes, fixtures, fittings, equipment and services to be provided by the Lessor No. (The alternate answer of Yes was crossed out) … Finishes, fixtures, fittings, equipment and services to be provided by the Lessee. Full fit out of shop." There was no reference to air conditioning. 72. DI believed that the document in question was sent by his solicitors to PB's solicitors. The document contained no statement that PB as lessee was to bear the costs of installing the air conditioning. 73. DI was referred to the letter of 26 February 2001 from the Iacullos' solicitors to Behrens' solicitors and the statement "the duly executed lease in duplicate must be returned to our office within seven (7) days together with a Bank Guarantee/Security Deposit in the amount of $6500 in favour of the Iacullos . 74. When it was suggested to DI that this request was inconsistent with PB having already paid him $6500 for a security deposit, DI gave this explanation: "No, I've done many leases through Michell Sillar and that's a standard thing they've put on a bottom whether I got the bond money up front or not." 75. DI claimed he issued a receipt the following day. He made no reference to issuing such a receipt in any of his affidavits. Ultimately the Iacullos tendered a document headed "Dominic and Lillian Iacullo Tax Invoice 00001002 of 11/01/2001" 76. The document is addressed to Mr & Mrs Behrens. The substance of it reads: "Paid $15,000 towards coffee shop, Shop 3 571-573 Canterbury Road, Campsie." I am very sceptical about the provenance of this document and when it was created. Neither the original nor a copy was given to PB. DI is too worldly wise not to have appreciated its significance at an early date. 77. DI agreed that he never invested $6500 in an interest bearing account for PB. He deposited the cheque for $15,000 into the Iacullos' own overdraft cheque account. That account did not bear interest. The Iacullos' account did go into debit from time to time after January 2001. From 23 January 2001 the Iacullos' account would have been in debit without the $15,000. 78. DI denied that after March 2001 PB asked for $10,000 back from him. DI claimed that he gave PB two invoices, one was for $15,000 and one was for Flowers Café later on in March 2001. He did not account to PB for interest on the security bond and attempted to justify this by stating, "I don't account to any of my tenants for interest on the bonds that they give me." 79. DI said that PB pressed him continuously for some money. He disagreed that she asked him for money from that which he was holding for her for safekeeping. He said that she asked him to lend her some money. He maintained that $5000 paid to PB on 4 April 2001 was a loan. DI said that they did not discuss interest when he gave PB $5000. He was not charging her interest at that time. 80. In cross-examination PB stated that the payment of $15,000 had nothing to do with the proposed coffee shop business. She insisted that her decision to go ahead with the coffee shop proposal was not made until late March 2001. She had never previously asked DI to hold any money on her behalf. 81. Although PB felt that DI was making a lot of excuses and was stalling in paying her $10,000 which she needed, she did not write him a letter of demand nor did she speak with LI, her close friend about it. Further, she still paid rent on the Roselands property to DI for the months of March, April, May, June, July, August, September and October 2001. She said that DI explained to her that when he refinanced she would receive her money. That is why she still made the rent payments. 82. PB agreed that she had not suggested anywhere in her evidence that DI had agreed to forego the security deposit. PB said that she was never asked by anyone to provide a bond. 83. I reject the Iacullos' contention that PB paid $15,000 to DI on account of the coffee shop venture, and particularly for the air conditioning and the security deposit. That money was to be held by DI and returned to PB as she required. She anticipated using the money to meet her taxation obligations when ascertained. The Coffee Shop History Continued. 84. The Letter of Intent of 30 January 2001 and signed by PB stating that she intended to lease the Coffee Shop at 571-573 Canterbury Road at a monthly rental of 2166.67 for 3 years "with commencement 1st March after 2 mths ½ rent $250 weekly" with an option to renew for 3 years was a fraud to assist DI with his financing of the new building. It provides as to Fit-Out for a "2 mths rent free period to commence from the date lease is executed." She agreed that this was her second fraudulent act. DI was a party to the fraud, the Letter of Intent probably being intended to be used to raise or reorganise finance. 85. There is a large measure of coincidence between the lease signed by PB and the Iacullos and the terms of the Letter of Intent of 30 January 2001. Those were the terms DI proposed. He was alert to the value of having her write in the terms in her hand DI wanted PB to run the coffee shop with him and under his control and probably believed that ultimately she would agree to do so. 86. The Iacullos' submissions as to the dishonesty of PB have force, but they proceed on the basis that DI was not involved in the frauds. I do nor accept that this was so. 87. DI caused his solicitors to prepare a lease of the coffee shop premises in anticipation that PB would eventually agree to become the lessee. It was not until the end of March 2001 that PB decided not to renew her lease with Westfield. She was not prepared to and did not commit herself to running the coffee shop and leasing it until she had resolved the Cookie Man situation. She did not sign the lease until April 2001. 88. UB said, and I accept, that after New Year's Eve 2000 and in the first few months of 2001 DI often came round to the Roselands property and had numerous conversations with PB. Most of the time UB did not become involved in the conversations as he saw them as PB's business. 89. PB said that in January and February 2001 DI and she had conversations on several occasions discussing the opening of a coffee shop in his development at 571-573 Canterbury Road. She said that in early March 2001 he telephoned her at the Cookie Man and they had a conversations to this effect: "DI: Are you interested in putting a coffee shop into my building. You shouldn't renew your lease with Westfield, come and do the coffee shop with me. PB: I am not sure what I am doing with the Cookie Man at the moment. I will think about it." The date of early March 2001 is probably incorrect and should probably be February 2001. DI denied that they had such a conversation but a conversation to that effect probably took place. 90. She deposed to a further conversation during January-February 2001 when he asked her whether she would be interested in going into the coffee shop: "PB: Dominic, I am not interested in going into business on my own because of how hard it has been running the Cookie Man for five years. I need someone to share the responsibility with me. (She had been required to operate the business by herself). DI: Well we will go into this as partners." DI denied this conversation and asserted that he never discussed with PB the possibility of being partners in the business. He did discuss renting the coffee shop to her. The Company 91. The incorporation of a company to run the coffee shop business overlapped with the granting of a lease to PB for that shop.. While the lease discussions continued from February 2001 and possibly even from 30 January 2001 when PB signed a Letter of Intent, the discussions between PB and DI as to the setting up of a company were held in early April 2001 and possibly before this. It is proposed to detail the subsequent history of the company although that extends beyond the execution of the lease and its termination. 92. PB said that in early April 2001 after she had decided to go into business with DI they had a conversation in which the setting up of the coffee shop was discussed. They agreed to set up a company to run it. She attributed words to the following effect to DI: "I'll look after the paper work and your role will be to look after the daily running of the café. We will both be directors. We will use your accountant." DI denied making that remark, but I think it probably was made. 93. Mr G J Widdup, a practising chartered accountant, who had PB and UB as clients recalled that sometime before April 2001 PB telephoned him and stated that she was going to open a café with DI, the husband of a very old friend and a successful businessman. He was going to help her get back on her feet. She had been under financial stress due to her operation of the Cookie Man business. Mr Widdup said that some short time after this, in the first week of April 2001 he received a note from PB in these terms: "Finished up at Westfield – It's time for a new venture. 571-573 Canterbury Road, Campsie Shop name Flowers Café (cafe (florist (sub-newsagent $500 per week – first 3 months rent free Landlord Dominic Iacullo Lease prepared by Greg Harle We will be partners in the Cafe Dominic Iacullo Paula Behrens. We would like to use you as our accountant for the Café. We need a shelf company as soon as possible later to be called Flowers Cafe T/A Flowers Café. Dominic is guarantor for all the financing – Any bills concerning café can be sent to above address Dominic Iacullo (w) 9 789 1177 (h) 9 546 3019 Paula Behrens 9 703 2828 0411 210064" PB's lack of business understanding is shown by her thinking her solicitors rather than the solicitors for the Iacullos would prepare the lease. The latter had already prepared a draft lease. 94. The accountants purchased a shelf company from Corporate Network Ltd. The necessary forms were lodged with Corporate Network Limited and a certificate of registration of the company Flowers Café Campsie Pty Limited was issued with a commencement date of 9 April 2001. All necessary consent forms were prepared and sent to PB. Subsequently the accountants received signed "Officeholder Consent Forms" signed by PB and DI. At the request of either PB or DI the accountants sent a FAX to the Commonwealth Bank, Campsie, enclosing a certified copy of the Company's Certificate of Registration to assist in the opening of a company bank account. The Australian Taxation Office was advised of the company's registration and an ABN registration number and tax file number obtained. 95. Mr Widdup said that on about 15 May 2001 he received a FAX from Glow Automotive which listed some figures. He had a telephone conversation with DI in which he asked Mr Widdup to put the figures in a format that the finance company would accept. Mr Widdup did so and forwarded a FAX with the re-formatted figures to DI on 17 May 2001. 96. Mr Widdup said that sometime in late 2001 he became aware that the coffee shop was not doing very well and that the relationship between PB and DI had soured. About 11 June 2002 the accountants received a copy of a letter of that date addressed to PB as secretary of the company from DI resigning as a director. The requisite forms were lodged with SCIC. In early 2003 PB instructed the accountants to voluntarily deregister the company. This was a result of the failure of the café financially. The requisite form was lodged with ASIC. 97. DI stressed that it was PB who gave the instructions to the accountant for the setting up of the company. PB was incorrect when she said that DI arranged all matters relating to the setting up of the company. PB said that it was not until after the commencement of these proceedings that she became aware from a search of the company that she was its sole shareholder. That statement was incorrect. 98. PB said that shortly after the conversation in which the company's registered name was selected she was at Glow Automotive when DI telephoned Mr Widdup. She could not remember exactly what was said during the conversation but the subject mostly was in respect of the setting up of the company which was to run the business and who were to be the directors of the company. 99. As to this occasion DI said that PB was with him at Glow Automotive when she called Mr Widdup and handed him the phone. DI recalled saying to Mr Widdup words to the effect of, "I'm to be a director and I'm not going to be a shareholder – Paula will hold all the shares". 100. It is probable that at an early stage DI did give instructions to this effect to Mr Widdup. Whether PB heard those instructions and whether she appreciated their effect are moot points on which I am not able to make a finding. PB was the only shareholder. This appears from the documents filed shortly after the registration of the company and from the company's annual return signed by PB. Coffee Shop Lease & Basis of Business Relationship 101. By letter bearing date 26 February 2001 the solicitors for DI purported to send the lease of the café premises to the solicitors for PB. That letter required the duly executed lease in duplicate to be returned to DI's solicitors within 7 days, together with a Bank Guarantee/Security Deposit for $6500 and some five cheques covering stamp duty, sundry legal costs and production fees. The letter proceeded that notwithstanding anything contained in the lease the first two months of the lease "shall be the rent free period and the third month should be at half rent." 102. PB said that around March 2001 DI came to her house and showed her a document which appeared to be a lease that had been prepared for one of the places within the development. He asked her to sign it so he could show his bank manager that he had a source of money coming in. This would increase his borrowing power. She was not ready to sign any lease because she still had her lease at Westfield. 103. Amongst other conversation words to this effect were, according to her, used: "DI: … When you sort out your current situation, we can commence the café business. If the café does not go ahead we will tear up the lease. I am only putting your name on the document because I am the landlord and I do not want it to be known that I am a partner in the business. PB: Dominic I can see your solicitor here wants costs for the preparation of the lease. I am not in a position to pay any money at the moment. DI: Do not worry Paula. I will pay it and we can sort it out later. The business will be a success because I know many people in the area. I have been operating here for many years. The first three months will be rent free and for the first two months after that it will be half rent, from the time we start trading. PB: Dominic, in my view, neither of us should take any money out until the café makes a profit then we can reimburse ourselves for rent and wages. Any profit after that should be shared equally. DI: I agree." 104. DI denied this conversation. He stated that the draft lease was forwarded by his solicitors and not delivered by him to PB. The versions of DI and PB are contradictory. For the version of PB to be true, either DI or someone acting on his behalf must have collected the letter and document addressed to PB's solicitors, either from DI's solicitors or PB's solicitors or some intermediary and put them in DI's hands. DI must then have given them to PB. Otherwise PB made up an elaborate story. I think that PB's version of events and the conversations which occurred is probably correct. 105. DI said that during early March 2001 he was looking for a tenant for the café premises and that he had discussions with a number of potential tenants, including PB. 106. PB said that during March 2001 DI telephoned her at the shop on a number of occasions enquiring whether she had made a decision. She replied in the negative. PB stated that before the end of her lease with Westfield she told DI that the Behrens did not have the money to put into the business of a coffee shop. DI replied "Paula, don't worry about the money; because I have that covered You won't have to pay anything up front. I will organise the money." DI denied that that conversation occurred but I think it probably did. 107. PB said that DI also said during this period: "We'll go into this together as partners. It will cost us about $40,000 all up, if it doesn't work – well that's $20,000 each, it's no big deal." DI denied this conversation occurred. He also denied that they ever discussed being partners in the business, but I do not accept DI's denials. 108. At the end of March 2001 PB decided not to renew the lease because Westfield wanted to increase the rent too much. She wrote a letter to Westfield on 29 March 2001 advising that trading would cease at 5.00pm on Saturday 31 March 2001. PB said that at the time of sending the letter to Westfield she had not decided whether she would go into the business with DI. However, she said that during the week after the expiry of the lease with Westfield she decided to go into business with DI to run the café. 109. UB said that he recalled an occasion in or around March/April 2001 when DI came to the Roselands property and had a lengthy conversation with PB about setting up the proposed coffee shop UB heard parts of the conversation as he moved around the house. UB said he specifically recalled DI saying words to the following effect: "Paula, no rent will be due and no wages will be paid until the shop is making a profit. Once that happens you can pay the rent and you will also receive a wage. But you do realise that the initial period will be the hardest because that is when we will be setting things up." DI denied the words attributed to him. 110. DI said that he never had any discussions with PB about going into business together, but I reject the evidence of DI on this point. PB said that in early April 2001 she and DI had a telephone conversation to the following effect: "DI: Paula have you taken the lease to a solicitor yet PB: Not yet. DI: Can you sign it and get it back to me because there is a florist who also wants the shop. My agent has found a tenant and taken a deposit for it. However, I would prefer a café business. If you backdate the lease from the time we first discussed it then I will tell the agent that you were before the florist." This was not an honest proposal. The lease was backdated and expressed to commence on 1 March 2001. DI's version of his conversation did not include the second, third and fourth sentences of the quoted reply as alleged by PB. It is probable that DI said words to the effect of the second, third and fourth sentences. 111. PB said that sometime after this she saw her solicitors and signed the lease. 112. DI said that the agent had found another tenant. However, as he (DI) had promised the lease to PB, he did not want to go back on his word to her. That is a specious explanation. 113. In cross-examination PB agreed that: (a) she did not tell her solicitors that there was to be a rent free period of 3 months; and (b) the instruction which she gave to the accountant was that there was to be a rent free period for 3 months. (She did not see why it was necessary to tell the accountant everything in one initial letter). (c) She did not tell the accountant that no rent was payable until after the business had started trading or become profitable despite her conversation with DI to this effect having taken place in March 2001 before she gave instructions to the accountant. (d) there was no document recording an agreement to give a longer rent free period after 2½ or 3 months and no document providing that no rent was due until the company started trading or the company (the coffee shop) became profitable. 114. These are important concessions on the part of PB. The difficulty was and is that PB relied on the oral representations of DI and the oral agreements she made with DI. She relied on him and what he said and his greater financial experience and expertise. He had courted her to run the coffee shop as he believed he could trust her and that she would run it well. She believed that they were going to be partners in the business and that he would guide and support her. PB attached relatively little importance to the documents which she signed, relying on what DI told her. As DI well knew PB did not have an ability to manage and cope with financial and business matters. Her expertise was in serving and preparing the food and the coffee. DI remarked on this. 115. The Iacullos attached importance to a difference between PB's account of the conversation with DI in para 10 of her affidavit of 2 June 2003 and that in para 42 of her affidavit of 25 November 2003. In para 10 the relevant sub-paras read: "PB: Dominic, your solicitors want costs for the preparation of the lease. I am not in a position to pay any money at the moment. DI: Don't worry Paula. I'll pay and we can work it out later. The business will be a success. The first three months will be rent free and then for the two months thereafter it will be half rent. The sub-paras in para 42 are in substantially similar terms except for the last sentence which reads: "The first three months will be rent free and for the first two months after that it will be half rent from the time we start trading." The change lies in the extra words at the end "from the time we start trading". 116. At the time the words were spoken it was not envisaged that the fit out would take so long and that there would be so many problems with it. The first quote for the fit out was given on 11 April 2001, but the contract was not signed until 10 July 2001. As a result of a further series of problems the fit out was not completed until October 2001 and the café did not open until mid October 2001. It was estimated that the actual fit out would take a month. 117. As at March 2001 it would have been reasonable to proceed on the basis that the contract for the fit out would be signed and the work completed within three months, that trading would then commence and that rent relief would be needed for the next two months while the business built up. 118. In the context I do not regard the omission of the words "from the time we start trading" from the first version of the conversation as significant. It was not anticipated that there would be a delay of the magnitude which occurred. Further, the lease was backdated to 1 March 2001. This was well before PB had decided to embark upon the café venture and wrote to her accountant. 119. The attention of PB was directed to the Lessor and Lessee Disclosure Statement, especially cl 6 which reads: "Apart from the statements or representations set out above, no other promises, representations, warranties or undertakings (other than those contained in the lease) have been made by the lessor to the lessee in respect of the premises or the business to be carried out on the premises." 120. PB agreed that she read this clause and that the statement contained within it was true. She had not inserted details of any other agreements or representations in the lengthy space provided. PB said that there were other agreements and these were oral. She was unable to explain why she did not include details of these other oral agreements. 121. PB said that while she went to her solicitors' office to sign the lease, the solicitors did not explain the lease. She did not read the lease. She understood that she would be bound by the terms of the lease. She did not tell either her solicitors or her accountants about any oral (or side) agreements or representations. The lease contained a whole agreement term but PB did not know what this meant. 122. PB asserted that before she sent the instructions to the accountant DI had said that he would provide the finance for the fit out of the coffee shop. This was confirmed in her instructions to the accountant, "Dominic is guarantor for all the financing …" 123. PB said that later he wanted her to borrow the money for the fit out as he did not want his name on the finance documents. She knew from April or May 2001 that DI was not going to provide finance for the fit out. DI told her to mortgage her house. 124. PB denied that DI told her this before she signed the lease for the coffee shop. She then said that it would have been after April or May 2001 but later she seemed to accept that it was about the time she signed the lease. 125. PB was referred to the letter bearing date 5 June 2001 from her solicitors to DI's solicitors enclosing Lease, in duplicate, duly executed and a series of trust account cheques in payment of the costs of solicitors, mortgagee's costs, stamp duty and registration fees. PB's solicitors were provided with the necessary funds of $2247.70 by Flowers Café Campsie Pty Ltd from its CBA account about 24 May 2001. It is not clear who provided the sum of $2247.70 to the company, but it may well have come from moneys provided by DI. At an early stage he had said that he would pay the lease costs. 126. PB agreed that after she became aware of DI's attitude to financing the project she did not tell her solicitors to stop the lease going ahead. PB just appeared to accept DI's instructions that the arrangements had changed and to do what he wished. She appeared to feel committed to the project. She still retained the belief that neither rent nor wages would be payable until the business was trading and profitable and that she and DI would run the business in partnership. The Agents Commission 127. DI said that he had a conversation around March 2001 about the agent's commission for finding a tenant of the coffee shop area, namely the florist, to the following effect: "DI: Paula, the agent wants his commission. PB: I'll pay it." 128. PB gave a different version of events. She said that in April 2001 (or perhaps a little later) DI said to her, "Paula the agent was angry because he will not get his commission for finding the florist, but that is not my problem." PB denied that the conversation deposed to by DI occurred. PB recalled that after the café had started operating and probably in March 2002, when DI was at the café, she had a conversation with him to the following effect: "DI: I want a cheque for $1000. It is for the agent because he is hassling me for the money. PB: What does that have to do with the café? DI: Well I will keep it with me in my wallet but I am not going to give it to him unless he really hassles me for it." DI denied that there was any question of the cheque not being given to the agent unless he pressed for it. DI said that he handed the cheque to the agent straight away. 129. PB said that after the conversation DI then handed her the chequebook for the café and she signed the cheque for $1000. The cheque bore the number 118. The chequebook and the bank statements reveal that cheques 117 and 119 were presented in March 2002 and that cheque 118 in favour of the agent was presented in June 2002. The agent's records indicate that the cheque was received in June 2002. It is improbable that the agent would not bank the cheque promptly when he had been pressing for it. I think that the version given by PB is correct and that DI probably did not give the cheque to the agent until June 2002. The Café Fit-Out 130. The air conditioning equipment was installed in the café premises in the early months of 2001 by or at the behest of DI. PB said that at the time she entered into the air conditioning document some months later she understood that that equipment had been installed. PB understood that DI owned that equipment and was using it as security for a loan. She did not understand that the document was a rental agreement. She agreed later that she should have answered earlier that she was aware that the air conditioning transaction was not totally legitimate. She knew that the invoice had been subsequently created for finance purposes. She described it as a forgery. 131. In cross-examination DI agreed that in March 2001 he spoke to several shopfitters, including R & C Shopfitting (R & C). DI had spoken to one of his customers who was a shopfitter. That person decided the job was too big for him. DI spoke to David Catesby, the Sales Manager of R & C, about the job and its likely cost and also to Romano Pacione (RP), the Principal of R & C. In March 2001 DI was aware that the anticipated cost of the fit out was at least $40,000, possibly more. 132. PB said that in April and May 2001 she and DI began sourcing appropriate people to carry out the fit out of the café. Most of the quotations were addressed to DI. The final quote of R & C of 10 July 2001 was addressed to both of them. DI said that he suggested a number of different shopfitting companies to PB, that she chose R & C and that it was her choice alone. I do not accept this last mentioned assertion. R & C was a joint choice made on DI's recommendation. 133. DI agreed that many quotes were received with his name upon them. There was a FAX machine at the office of Glow Automotive whereas PB did not have a FAX machine. DI held discussions with R & C about its quotes. 134. DI agreed that PB left it to him to look after the fit out side because she only knew how to run the food side. DI agreed that he told RP that he (DI) was going to look after the actual fit out. That was on behalf of PB. 135. PB stated that all decisions for the fit out were discussed between them (PB and DI). However, DI usually had the final say. She said that DI organised installation of services such as plumbing, electrical and air conditioning. DI agreed that once R & C gave him a floor plan of what was needed at the coffee shop he was actively involved in organising the fit out. DI said that PB asked him to look after the underground services and that was why he signed off on a construction drawing. She chose the colours and interior design. DI chose the tiles for the wall and floor, drain in the kitchen, the tiles for the toilets, the chairs and tables. PB stated that DI wanted everything new and would not agree to anything secondhand. He insisted that he had put the best of everything into the building and that he wanted the same for the fit out of the coffee shop. She gave some examples. He overruled her on the choice of chairs and tables. DI insisted that the ultimate choice was that of PB. DI said that he had nothing to do with the choice of tiles, chairs or tables. DI agreed that he recommended to PB that she choose new equipment, but the ultimate decision was hers alone. He did not use the words attributed to him. Having seen and heard both PB and DI at length in cross-examination it was clear that DI was the dominant player in attending to the fit out and in the decisions which were made as to that. I reject the contention that the decisions were those of PB alone. I also reject the contention that the ultimate choice was that of PB. 136. PB said that throughout the fit out of the coffee shop the tradesmen used were selected by DI. She did not have any control over the selection of the tradesmen. DI said that PB asked him to organise the tradesmen for her and that he agreed. 137. PB said that in about September 2001 R & C delivered, for the first time, the benchtops and other materials to commence the first stage of the shop fit out DI told her that he was not happy with R & C's work to date. He organised a meeting between himself, PB and RP of R & C at the coffee shop. David Catesby, the Sales Manager also attended. PB said that the meeting was heated with numerous arguments between DI and RP and DI and Catesby. DI did not dispute that the verbal exchanges he had with RP and Catesby were vigorous. PB deposed to this conversation: "RP: You do not know anything about shop fit-outs. You should stick to being a mechanic DI: I am Paula's half partner in the business." 138. On 11 May 2001 Canterbury City Council issued its consent in respect of 571-573 Canterbury Road to a "Change of Use and Shop Fit Out for Florist and Gift Shop". It is not clear how this fits into the overall picture. Finance of the Fit Out 139. PB understood in the early stages that DI was going to provide the finance for the fit out. PB said that during April/May 2001 she had a conversation with DI to the following effect: "DI: … the bank manager has agreed to give me this money but he wants to see some financials from me. PB: What happened to you having the money situation covered. DI: … it would be better for you to borrow the money because being the landlord I do not want to put my name on any paper work involved in the café business. Trust me, I know the bank manager and it will not be a problem. The loan will be an interest only loan at a cost of about $400 per month. This will be easily affordable and we should be able to pay ourselves shortly after opening the café. PB: … I do not think that a bank manager will approve a loan because I do not have any income. DI: Use your house as security. PB: I will not do that." 140. As earlier mentioned when PB became aware of DI's attitude to financing the project she did not tell her solicitors to stop the lease going ahead. She disagreed that she was content to go ahead with the venture on the basis that she would be providing the finance. She did assume some financial responsibility for the project. 141. On 14 June 2001 PB & UB applied to the St George Bank Ltd for finance to fit out the café. DI was not involved in that application, which was unsuccessful. PB agreed that if the application had been successful they had intended to go ahead with the financing of the fit out and that she was prepared to do so without DI's name being in any part of the application for finance. 142. PB said that RP became aware that they were having difficulty obtaining finance because they were unable to pay him some of the quoted price upfront. RP referred them (PB & DI) to Natalie Uren at Innovation Finance. PB said that DI entered into negotiations with Innovation Finance, but did so in the name of PB. By FAX of 15 June 2001 to DI Innovation Finance (per Natalie Uren) suggested two ways of financing the cost of the fit out, that is, by a lease facility or asset purchase facility. She advised that a second mortgage over 82 Glamis Street was not cost effective PB believed that DI was acting on behalf of the company. PB did not speak to Natalie Uren. 143. PB agreed that she signed a statement of assets and liabilities of herself and UB in respect of an application for finance. She realised that the finance application would involve her personally giving guarantees and indemnities and that the finance company needed the information requested. Finance was arranged by Innovation Finance. DI played a major part in obtaining finance and had discussions with Natalie Uren. PB said that about July/August 2001 DI told her that Natalie Uren was going to courier some documents for PB to sign. 144. PB said that she signed three lease agreements and three personal guarantees. The lease agreements (and associated guarantees) between the company and AGC and between the company and AIF were signed by her on one occasion at the office of Glow Automotive and the lease agreement between the company and SFC was signed at a later date. On each occasion DI was present and told her and the witness where to sign. The witness was Robert Proscino, LI's cousin and an employee of Glow Automotive. 145. In her affidavit of 25 November 2003 PB stated that when executing the document she did not realise that she was executing guarantees and indemnities in addition to the lease agreements. She said that she did not question or ask DI exactly what she was signing as she trusted him. In cross-examination PB conceded that it was false for her to say that she did not realise that she was executing guarantees and indemnities at the time she did so. 146. PB conceded that she was aware that DI's name did not appear on the guarantee. She knew that if the company did not meet its obligations she would be personally liable. 147. PB agreed that when the finance documents arrived by courier for her to sign there were stickers on them indicating where she was to sign. She said that DI was present while she signed the documents and that it was both the stickers and DI which and who were directing her where to sign the documents. This was further explained: "Q. His direction was ' The documents have arrived, you'll need to sign them.' A. Yes Q. Then to work out where you had to sign them you followed the arrow that Mrs Uren had placed on them. A. Yes." The documents were signed at Glow Automotive office. 148. PB agreed that when the documents were signed DI was not pressuring her to sign them. He did not rush her to sign the documents but she did not read them. PB agreed that she signed the documents voluntarily. She had the opportunity to read and understand them. She had access to copies of the documents shortly after she signed them. 149. This passage appears in her cross-examination: "Q. At the time you signed these documents [the finance documents] you understood that you were personally guaranteeing the liability of the company. A: No. I thought I was signing as a director of the company." 150. This last mentioned answer was challenged in cross-examination. PB conceded that she knew when she had signed the document headed GUARANTEE & INDEMNITY AGC – Australian Guarantee Corporation Limited - that she was guaranteeing the company's liabilities, that is, the liabilities of Flowers Café Campsie Pty Ltd. 151. PB agreed that she knew that DI's name did not appear on the AGC finance document. She agreed that he did not want to be associated with it. She gave this evidence: "Q. [DI] said the finance is a matter, that's up to you, didn't he? A. Up on behalf of the café, yes." 152. PB signed the Service Finance Corporation Ltd documents as Guarantor. She has signed directly under the Title "GUARANTORS". ("Must Be Signed By Directors If Customer Is a Private Company"). PB adhered to her answer that she was only guaranteeing as a director on behalf of Flowers Café. She conceded that whether she was guaranteeing as a director or not she knew that if the company failed in its obligations to the finance company she personally would be liable. 153. PB was taken to the finance documents of Australian Integrated Finance Pty Ltd (Elderslie Finance). PB signed the Rental Schedule/Tax Invoice on behalf of the company. PB also signed a document headed Deed of Guarantee & Indemnity as the guarantor. She also signed a document headed "Guarantor's Acknowledgment". (Commercial). In answer to the questions posed in it she stated that she had read the guarantee and indemnity and that she was aware that she should get legal advice from her lawyer and financial advice from her financial adviser before she signed the guarantee and indemnity. She also stated that she decided to sign the guarantee and indemnity without getting advice and that she understood that this was at her own risk. 154. After having been taken through the three sets of financial documents (leases, guarantees and indemnities) PB agreed that it would be false to say that when she executed these documents she did not realise that she was executing them as guarantees and indemnities as she had done in para 74 of her affidavit of 25 November 2003. She gave this explanation: "I always believed I was signing on behalf of the company and that we were both directors and both liable." Partnership 155. PB said that prior to instructing the accountant she and DI agreed that each of them would be a director of the company. It was not a case of DI assisting her with the paperwork, rather DI took the role of looking after the paperwork. 156. PB said that she and DI decided that they would form a company with both of them as directors to conduct the café business. She gave this evidence: "Q. And you considered Mr Iacullo and yourself as partners because you were both directors of this company? A. Yes. Q. The form of the partnership that you intended was a private company with both you and Mr Iacullo as a director? A. Yes Q. And that's in fact what happened? A. I believe so, yes." 157. PB agreed that as from mid April 2001 when she signed the various company forms to be lodged with ASIC she knew that she was the only shareholder in the company. She also signed the company's Annual Return on 21 January 2002, showing herself as the sole shareholder. In para 55 of the affidavit of 25 November 2003 she had stated, "It was not until after the commencement of the proceedings that I became aware that I was its sole shareholder." PB denied that this statement was false. She said that when she signed the documents she did not check the documents properly. 158. PB adhered to the contention in her affidavit that she did not know at the time she signed the company forms and the Annual Return that she was the sole shareholder of the company. 159. PB said that DI had control of the company's chequebook and the money. PB had no explanation for why DI, after writing out the cheques, did not sign them but had her sign them. She replied that this was for DI to answer. PB said that to her knowledge DI did not sign any cheques except those intentionally held and not presented. Prelude to the Loan Agreement 160. PB said that the café commenced trading in mid to late October 2001 and that almost every day DI asked her how the business fared that day and often asked, "Is there any money for banking?" DI said that he did not visit the café every day. When he did go there he offered to do the banking as PB would find it difficult to leave the shop. 161. Initially there was not much money for banking. She gave DI what cash there was over and above the float in the cash register. She understood that DI banked the money, or had it banked. Goods delivered to the café were paid for out of the cash register, except that if large amounts had to be paid DI would write a cheque and PB would sign it. DI had possession of both the cheque book and the deposit books for the company account. DI denied that he had possession of the cheque book. PB obtained possession of the deposit book about October 2002. DI arranged for all insurances for the café and for the fixtures and equipment installed in the café. DI insisted that he did this at PB's request. 162. Sometime after the café commenced trading DI handed PB a cheque which was written out and completed from the company's cheque book, stating that it was rent for the café. When PB responded that there was not enough money in the account she said DI said that he was going to use the cheques to claim GST on them as if the rent had been paid. PB said that she agreed to sign the cheque on the understanding that DI would put aside the cheque until the business was making enough to pay the rent. DI denied the conversation and stated that the first cheque that he received from PB, which was drawn on the Flowers Café account, was in March 2002 after the loan agreement had been executed. 163. In about October 2001 PB experienced acute financial difficulty. This was the reason she stopped paying rent for the Roselands property. She did not claim to offset the $10,000 which DI allegedly held. PB did not appear to have an explanation as to why she did not contact DI over the non-payment of the rent. Nor did she contact LI. 164. PB said that she applied for a loan of $50,000 in November 2001 to put some money into the coffee shop to match DI's contribution and to have some excess money for the residential rent. She was referred to an application of 7 December 2001 for $50,000 made to St George Bank by her and her husband. This application was refused. 165. PB said around early December 2001 she and DI had a conversation to this effect: "DI: It is about time I started getting something out of the café because I have put a lot of money into it. We should start getting rent now. PB: Well if you are going to start taking the rent I am going to start taking a wage and we know that there is not enough money to do that at the moment." DI denied that this conversation occurred. 166. DI said that he recalled PB coming to their home in Blakehurst and having a conversation with LI in which words to the following effect were used: "PB: I don't want to continue in the café business and I have had a few job offers. DI: Then maybe you should put a manager in the café to look after it for you." I doubt whether a conversation in those terms occurred. I accept that by December 2001 PB would have been disappointed with the slow progress of the business and that she was not able to draw a wage but the business was not doing well enough to employ a manager as DI knew. 167. As business was slow DI and PB agreed to sub-lease part of the café to Amelia Cavallheiro to sell flowers. DI had a sub-lease prepared for part of the café at a weekly rental of $150 (plus GST). Amelia provided PB with a cheque for her rent monthly which PB gave to DI to bank. 168. PB said that prior to Christmas 2001 she went to the Iacullos' house and that amongst other things, a conversation to this effect took place: "DI: Paula, look I am not a partner in the business and I want to start receiving rent. PB: Dominic, that is not possible. The shop does not make enough money. We agreed that you would not receive any rent and I would not receive any salary until there was enough money in the business. You cannot involve yourself in setting up the shop, fitting it out and then walk away … The café was totally your idea and you declined the florist so that you could take a share of the profits… If rent was all you were interested in you should have taken up the florist. What about the $10,000 you are holding for me? DI: … I have applied that to the legals for the shop and also for the rental bond. PB: You cannot do that. I cannot cope with all that debt on my own as well as pay your rent for the shop and rent for your house and you use my money without my knowing. What about refinancing the loans like you said we would do after we had some trading figures. Then there may be enough money to pay rent and wages. DI: … I am going away over Christmas and I will think about a resolution then." 169. DI said that his recollection of the conversation with PB which occurred around Christmas 2001 was to the following effect: "DI: Paula, you really need to start paying your rent. PB: What about the $15,000 I gave you? DI: That was for the bond and the air conditioner. The legal fees were paid by Flowers Café by cheque. PB: I don't have enough money to pay, is there any other way we can resolve this issue DI: Look, I'm going away over Christmas and I'll think about a resolution." DI said that UB was present during this conversation. 170. PB agreed that the meeting prior to Christmas 2001 referred to in para 31 of her affidavit of 2 June 2003 and para 93 of her affidavit of 25 November 2003 was pretty important. She said that she erred in her first affidavit when she said that that conversation took place at her home and LI was not present. In fact it took place at the Blakehurst home of DI and LI, with the latter being present. 171. It is common ground that a meeting was held but PB and DI give somewhat different versions of what was said. Both versions have DI demanding that PB start paying rent for the shop. In both versions the moneys paid by PB to DI in January 2001 were raised and in both DI said that he was going away over Christmas and would think about a resolution. DI did not accept that PB raised her understanding of their arrangement (no rent and no salary payable until there was enough money in the business) and the fit out. 172. It is most unlikely that PB would not have raised her understanding of the arrangement. This was an answer to the claim by DI for rent for the café. It is also probable that PB complained that DI had involved himself in setting up the shop, fitting out the shop and then walked away. PB probably raised the prospect of refinancing and protested about DI unilaterally applying the balance of the moneys paid to him in January 2001 as he chose. PB's version of the conversation is more probable, especially when regard is had to their very different personalities, temperaments and levels of commercial experience. PB believed strongly that the arrangement to which she deposed had been made with DI. 173. In his affidavit of 14 June 2005 DI amplified the conversation set out in para 31 of his affidavit of 30 June 2001 with PB about paying rent. He said that during the conversation one of the defendants (he thought it was PB) said: "We're trying to get bank finance to pay off the amounts owed to you and Lilian, but it's a bit hard as Uwe is currently unemployed and has just started his own lawnmowing business and doesn't have a regular income." 174. Over the Christmas period the Behrens found a cheaper place to rent. PB said that in about early January 2002 UB telephoned DI and told him that they had found another place and that they wanted to move out in two weeks. UB confirmed this. DI insisted that they had to give him at least four weeks notice and that they could not leave now because he had helped PB out when she needed him and now they had to help him out. DI had a solution which he would speak to PB about when they got together. 175. PB said that shortly after this conversation she met with the Iacullos. She believed that it was at their Blakehurst home. She deposed to a conversation to this effect: "DI: My solution is for me to lend you some money because I do not want you to have to worry about money. You should just focus on running the café business. Trust me I am your friend. (DI accepted that he said the words in the first sentence DI added that PB said to him "I have no money to pay") PB: Well I am not going to pay you rent on Roselands until my $10,000 has been reimbursed to me, otherwise I will not see it again. DI: Okay. It is all right if you do not pay me that money. You will not have to pay rent then until March. How about I lend you $50,000 as a band aid solution and in six months time we will look at the situation again. Do not worry, I am here to support you. PB: How is the money going to be paid back? DI: We are going to sue the shopfitter. PB: How much do we expect to get back from him? DI: I think around $40,000. PB: Well you can have all the money that you get from Romano." 176. PB said that later in the conversation she said to DI words to this effect: "I think we should try and sell the shop and after all the finance has been paid out, you can have what is left over." DI replied, "That is all right with me." DI denied that a conversation to the effect stated ever occurred. 177. DI said that in early January 2002 he had a meeting with UB and PB at the offices of Glow Automotive, during which they had conversation to the following effect: "DI: The problem with the money you owe me needs to be resolved. PB: We can't borrow the money from a bank to pay you – you said you'd think about it while you were on holidays DI I propose to lend you the money for a period of 9 months and secured by a mortgage over your house. That should be long enough for the worst of your problems to be over. I only view this as a temporary measure. $50,000 should be enough to cover what you currently owe. PB: OK I'll agree to that UB: Yes I agree as well DI: I want this agreement to be properly documented how about we meet back here in about a week. PB&UB: OK." (This appeared in DI's affidavit of 14 June 2005. It is curious that it was not given at an earlier date in view of the affidavits of the Behrens) 178. DI said that around 10 January 2002 LI and he met with PB at Glow Automotive. DI said that he did not believe that UB was present and that LI had typed up a "heads of agreement" which he showed to PB. DI said that they had a conversation to the following effect: "DI: Lilian has typed up a heads of agreement which reflects our agreement from last week. If you sign this I'll get my solicitors to draft the documents. (PB read the document) PB: OK. I'll sign it. (PB signed and dated it) In the document PB agreed: "to pay all relative costs and legal fees associated with the loan agreement of $50,000 using my home at 82 Glamis Street, Kingsgrove as second mortgage under St George Bank for a period of 9 months commencing 1 January 2002 to 30 September2002. " The document specified the solicitors acting for PB. 179. There are a number of curious features about the document. UB is not a party, although 83 Glamis Street was in both names as the Iacullos knew. The lender is not specified. The document does not refer to DI or DI and LI advancing $50,000. No interest rate is mentioned. It was a document which was desirable from the lender's point of view if there was going to be no cash advance from which the costs and legal fees mentioned in it could be deducted. 180. By letter bearing date 10 January 2002 the Iacullos wrote to Michell Sillar, instructing them to prepare a second mortgage under the St George Bank over the house of PB and UB at 82 Glamis Street, Kingsgrove. The instructions also stated that the term of the loan was 9 months (1 January–30 September 2002) at an interest only rate of 7 per cent and direct debited into DI's account. The letter recorded that PB and UB had "agreed to pay all costs, stamp duty and legal fees associated in preparing this agreement." The Iacullos regarded the dispatch of this letter as supporting their version of events. 181. It is necessary to refer to the evidence of UB as to what took place after the Christmas holiday period of 2001-early 2002. UB said that when he telephoned DI and advised that the Behrens would be moving out of the Roselands house DI, in addition to saying that they could not leave, said, "I can lend you $50,000 as a bandaid solution. Once that happens I will be able to pay Paula a wage from the café business. You will have money in your account so that you can afford to pay me rent on time". Whether an actual sum was mentioned is debatable. 182. UB said that after this telephone conversation he had a meeting at Glow Automotive attended by PB, DI and himself. Inter alia, DI said: "I am sick and tired of putting money into the shop. You are going to have to get a loan." 183. UB said that after this he attended another meeting at which DI and LI were present. UB deposed to a conversation to this effect: "DI: Look Uwe, you can't get a loan and I want go give you a loan for $50,000. UB: We don't need $50,000. DI: I am sick and tired of putting money into the shop. I've put in $20,000.00 and Lillian is on my back and she doesn't want me to put any more money into the shop. I will give you $50,000.00 and you can use $20,000.00 to put into the shop and you can have $30,000.00 if you need it for anything else, because nobody else will lend it to you. Paula will then be able to draw a wage at $500.00 per week and she can start paying the rent. If the shop goes really well, we will be able to refinance. We will need your house as security but we will never call on it. It is just for security. UB: Dominic I do not want this money to have anything to do with the house. DI: If you don't do this, I want all my money back and you are on your own. You'll lose everything. I will not help you anymore. UB: No I don't want to risk my house. DI: You have to, this is the only way. I have been thinking about this and this is the only way, you have to do it, it's just for security for Lillian. We know Paula but we've only known each other for a short time. UB: I don't want to. DI: Look it's for Lillian's sake only, just for her peace of mind, we will never use it. UB: Well, when are you going to put the money in our bank account? DI: When all the paperwork is done. UB: Well I don't really understand all this Dominic, but I trust you. DI: You just have to sign over as a second mortgage." 184. UB described what happened at the meeting thus: "During this conversation Dominic was yelling at me and pacing around the room. At one stage he banged his fist on the table. I did not understand exactly what was going on as I was not involved in the business, however, the way Dominic was acting, I was worried. I did not understand that as a partner in the business Dominic did not have a right to take all his money back as he threatened do so in the conversation set out above. At the time, I was only earning about $500.00 per week and it was difficult to make ends meet as Paula was not getting any income from the Café. Dominic was showing me pieces of paper that I did not fully understand. He would point to the pieces of paper indicating to me that they were the amounts of money he had invested into the Café. I do not recall ever being shown any document which indicated that Paula was liable to pay back rent for the Café. Dominic did not say anything during this conversation that he wanted to be paid back rent, or that back rent was due and owing for the lease of the Café." 185. It was common ground that at least two meetings were held in early January 2002. PB said that there were quite a few meetings and UB gave evidence of two meetings. PB thought that the meeting at which DI's solution of a loan of $50,000 (referred to in para 97 of her affidavit of 25 November 2003) was discussed took place at the Iacullos' residence and not in the office of Glow Automotive. PB did not claim that the loan was discussed at any other meeting. She did not believe UB was present. PB did not think that DI referred to "the money you owe me" and did not recall saying to DI "We can't borrow the money from a bank to pay you. You said you'd think about it while you were on holidays." PB agreed that DI said "I propose to lend you the money for a period of 9 months secured by a mortgage over your house, that should be long enough for the worst of your problems to be over." PB agreed that DI said, "I only view this as a temporary measure." PB denied that DI said, "$50,000 should be enough to cover what you currently owe." She denied that she and UB agreed to DI providing a loan of $50,000 to cover what they currently owed DI. 186. Neither DI nor PB referred to the first meeting to which UB deposed, but it probably occurred. LI was not at the meeting. UB said that the next meeting was at Glow Automotive and attended by DI, LI, PB and himself. UB said that DI asserted that UB could not obtain a loan for $50,000. UB was wary of DI and opposed to giving the Behrens' house as security. DI insisted and the meeting became spirited with DI yelling at UB, making threats and pacing around the room, amongst other things. Eventually UB reluctantly relented and, as earlier mentioned, DI stated that the money would be put into the Behrens' bank account when all the paperwork had been done. 187. PB did not give evidence of the exchanges between DI and UB. PB was somewhat dismissive of UB and what she regarded as his lack of understanding and lack of business skills. It is not in dispute that DI proposed a loan to the Behrens of $50,000 for 9 months as a temporary measure. I accept UB's evidence of the robust nature of much of the meeting. I do not accept that UB readily agreed to DI's demand that the Behrens provide their home as security. He felt forced into that position. 188. I am satisfied that in January 2002 DI held out to the Behrens that he would advance them the sum of $50,000 and that DI did not tell them, or suggest to them, that the proposed loan was to cover past indebtedness, or what they currently owed, or a loan or loans previously made to her. If DI had told the Behrens, or either of them, that the loan was to cover past indebtedness and that no moneys would be paid to them, they would never have signed the loan agreement or the mortgage. DI appreciated this. He realised that his own interests were best served by having the Behrens provide their home as security for past indebtedness to the Iacullos, but he gave the Behrens to understand that they would be advanced $50,000. In reaching these conclusions I have taken into account subsequent events and the whole of the evidence, to some of which I will refer. I have also relied on my assessment of DI, LI, PB and UB. 189. In view of the robust nature of much of the meeting of early January 2002 it is not surprising that UB was not at the meeting of 10 January 2002. He was neither party to the Heads of Agreement nor mentioned in them. Perhaps DI thought it best to leave it to PB to secure UB's signature to the loan documents. PB said that she understood, when she signed the Heads of Agreement, the loan commenced from 1 January 2002 and that she had not received a payment of $50,000 on that day. PB could not explain why she signed a document with this starting day. The Iacullos submitted that this pointed to the loan being in respect of the debts they already owed, but that is to read too much into PB signing the Heads of Agreement prepared by the Iacullos. 190. By letter of 22 January 2002 headed: "Iacullo Mortgage to Behrens Property: 82 Glamis Street, Kingsgrove." Michell Sillar, the Iacullos' solicitors forwarded the Loan Agreement, Mortgage and Costs Invoice to the Behrens' solicitors. The letter stated: "We understand that our client has already advanced $50,000 to your clients." and "We assume you will contact the first mortgagee (St George Bank) for approval to the second loan." 191. PB said that she discussed the terms of the loan agreement and the mortgage with their (the Behrens') solicitors, briefly. It is not clear whether this discussion was over the telephone. PB only recalled visiting the solicitors' office to drop the documents off after they had been signed. 192. PB denies that her solicitors advised her in January 2002 that they had been informed that the loan and mortgage were in respect of a loan previously made to her. 193. PB said that around February 2002 while driving to the Commonwealth Bank at Campsie DI asked PB what she was going to do with $50,000. She replied that she was going to put $20,000 into the café account because that would match the cash he had contributed. The balance was to stay in her home loan account so she would always have money to pay the rent at home (the Roselands property). PB said DI replied to the following effect: "You will probably be able to draw a wage from the café business. In six months time we can review the situation and, if need be, I will extend the loan for a further six months and that will give us time to refinance the shop or sell the shop. I promise you that I will never make you sell your house." PB said that at no time during the conversation did DI mention that the money which he was going to lend her was for rent owing on the café and other associated expenses. 194. DI denied the conversation attributed to him. 195. PB said that shortly after the conversation just mentioned she had another conversation with DI to the following effect: "DI: Lillian is giving me a hard time about me lending you money. She wants it done properly with a registered mortgage over your property. PB: Why is it necessary to have the paperwork between us like a mortgage? I have given you $15,000 and I did not ask you to sign anything. We have always done things between us and we have not needed paperwork. DI: Lillian wants it because she does not trust Uwe." 196. DI confirmed that he did have a conversation with PB about taking a registered mortgage as security. 197. In March 2002 PB and DI attended at the offices of Tillyard & Callanan, Solicitors, to discuss a proposed claim against R & C. I do not attach importance to the words of introduction said to be used or used by PB. 198. PB said that around the time of that meeting she had a discussion with DI in respect of the loan he had offered to her, to the following effect: "PB: Dominic I do not need that much money, but only enough to pay my tax bill and some to put into the business. DI: But if you do not need it, at least you will have some for an emergency. I do not want you to have to worry about money anymore, just focus on running the café. Lillian is giving me a hard time about the amount of money that I have put into the business so far anyway. 199. PB said that the reference to "my tax bill" was a reference to the GST moneys she owed to the ATO from her operation of the Cookie Man. The ATO contacted her in early 2002 and required repayment of the GST. An arrangement was made for payment by instalments. 200. In early March 2002 PB and UB signed the documents (a loan agreement and a mortgage) in the presence of a neighbour and PB caused them to be delivered to her solicitors. 201. A week or so after the executed documents were returned to the Behrens' solicitors Mrs Heather Smith, Mr Harle's secretary, from the office of PB's solicitors, in response to a query from PB, advised that the loan moneys would be deposited into the Behrens' bank account on settlement. At that stage apparently, Mrs Smith did not appreciate or had overlooked the terms of the letter of 22 January 2002 from the Iacullos' solicitors. A little later PB learnt from Mrs Smith that the Iacullos required the consent of the St George Bank Ltd as first mortgagee to be obtained, the insurance to be increased and the names of the Iacullos noted on the insurance policy as interested parties. 202. By letter bearing date 8 March 2002 to the Iacullos' solicitors, the Behrens' solicitors enclosed duly executed copy of letter of consent from St George Bank. That letter stated, inter alia, "We would also be obliged if you would arrange for your costs, disbursements and stamp duty could (sic) be deducted from the loan advance." This request was inconsistent with any understanding that the loan advance had already been made. This elicited the reply of 14 March 2002 from the Iacullos' solicitors that as to their costs and stamp duty they were instructed "our client has already advanced the mortgage funds to your client." The Iacullos' solicitors requested cheques to cover the stamp duty and their costs. 203. UB said that about a week after he and his wife went to their next door neighbour and signed the loan agreement and the mortgage and no money had been received, he (UB) telephoned DI and had a :conversation to the following effect. "UB: Dominic, what is happening with the money. DI: It is coming soon. I'm with a customer, I've got to go." After this conversation UB spoke to PB. 204. UB said that he later telephoned DI and that they had a conversation to the following effect: "UB: Dominic what is happening with the money? DI: The money has already been used for the air conditioning, back rent and other expenses. UB: What do you mean. The money was not meant for that. You were supposed to give us the money. That is not fair. DI: Bad luck." UB said that he was so shocked he immediately hung up. DI denied that this conversation occurred, but I am satisfied that it did. 205. UB said that shortly after this telephone conversation he went to Glow Automotive to speak to DI and that they had a conversation to the following effect: "DI: Uwe, you know I paid for your solicitors bill for the loan. Aren't I good to you. I am looking after you. UB: What do you mean by that. DI: Well you owe me $50,000 and you should start paying me the interest monthly. UB: You shouldn't be talking to me. I've got nothing to do with the café business. That's your and Paula's business. If the café needs to borrow money, then the café should pay it back." DI: I need to start collecting rent and also start getting back rent. UB: You remember the deal that you had with Paula was that there is no rent, no wages until the business makes a profit. If you want back rent, then Paula should get back wages.. DI: That is not the way it is. UB: But that's not fair. DI: That is not my problem." 206. DI denied that the conversation alleged ever occurred. DI said that Michell Sillar (DI's solicitors) were unable to recover their costs of acting on the mortgage from PB's solicitors and DI paid the account of Michell Sillar. That totalled $1189.50, made up as follows: Consent fee to St George Bank (1st mortgage) $ 216.50 Fee to register mortgage to LPT NSW 60.00 Michell Sillar – costs & disbursements 913.00 Michell Sillar strongly recommended that the second mortgage to the Iacullos be registered and DI accepted their advice. I am satisfied that the conversation deposed to by Uwe Behrens occurred, but perhaps somewhat later than UB suggested. 207. PB said that on or about 8 March 2002 DI came over to her home and they had a conversation to the following effect: "DI: I want to show you how to set up the interest payments online so that they come out of your account automatically every month. PB: I do not know how to do it. DI: Well, I will show you how to do the first one and then you can do them after that," 208. PB said that she and DI went to her computer and logged onto her St George online banking account which was for the portfolio loan UB and PB had with respect to their property. While they were both sitting at the computer DI showed PB how to make the payment for interest. As he did so he used words to the following effect: "This is the interest owing for the month. This amount will come out every month automatically." PB said that she noticed DI had entered into the computer $291.67 and effected a transfer from her St George account to his account at the Commonwealth. PB said that after DI had left their home she deleted the "whole set-up" and that she only allowed him to transfer the initial amount of $291.67 because at the time she felt intimidated by DI and UB was not at home. She had not received the loan moneys. DI stated that it was PB who transferred the moneys but he sat with her while she carried out the transaction. DI stated that UB was also present. I do not think it matters much whether DI made the transfer in the course of showing PB how to effect the transfer or whether she made it on his instructions. The purpose of the visit was clear. DI was endeavouring to ensure that the specific sum was transferred each month from the Behrens' account to the Iacullos' account. I do not accept DI's evidence that UB was present. PB agreed that she did not protest that she would not make an interest payment because she had not received the money (the loan of $50,000). She did not ask when she was getting the money. She just wanted to get DI out of the house. She was scared of his reaction if she refused to do what he wanted, as he was very aggressive. 209. PB said that about 25 March 2002 she again spoke with Mrs Heather Smith from her solicitors and was advised that they had been told that the funds had already been advanced by way of unpaid rent and money that the mortgagee had put into the shop. PB said that she instructed Mrs Smith that what she had been told was not right and that UB and PB would not be proceeding with the loan on that basis. There was a notation on the letter of 14 March 2002 from DI's solicitors (advising DI had already advanced the mortgaged funds to PB) in these terms: "25/3/02 Not advanced as yet." There was no reference to not proceeding with the loan. 210. PB said that DI came to her a few days later and was angry. They had a conversation to the following effect: "DI: (angrily) What do you mean you have not received the money and do not agree with the loan? Your solicitor has sent me a bill for the work that he has done, which I have paid. I do not expect to hear any more about the loan. PB: You were advancing the money to assist us, not to make up back rent. That was never the agreement. DI: Well that is the way it is." 211. PB said that during this conversation DI showed her a copy of a letter of 25 March 2003 from the Behrens' solicitors to the Iacullos' solicitors. That letter (or FAX) advised, amongst other things, that no mortgage funds had as yet been advanced and requested the Iacullos' solicitors to deduct their costs and stamp duty from the mortgage advance. 212. DI said that he did not recall showing PB a copy of the letter of 25 March 2003, nor did he recall having an angry conversation with PB at that time in the terms deposed to. He did pay the stamp duty on the loan and the registration fee on the mortgage to enable the mortgage to be registered. I think that a conversation along the lines of that deposed to by PB probably occurred. 213. PB was taken (T179) to her verified defence of 19 February 2003 and to her allegation: "further and in the particular circumstances surrounding the alleged loan particular, the plaintiff unduly influenced the defendants to sign the agreement by emphasising financial ruin to the defendants". PB said that this statement was true. DI said that he would not help them anymore. PB also said that the second statement that DI threatened to withdraw from the partnership was also true. 214. PB agreed that if DI was giving (lending) a further $50,000 she would not have to be threatened into that. PB agreed she would have accepted a loan of $50,000 without any threats. The problem lay in providing their house as security. PB insisted that it was never said that the loan was for past indebtedness. 215. PB further agreed that at the meeting in January 2002 in which the loan of $50,000 was agreed there were no threats by DI to withdraw from the partnership. PB gave this evidence: "Q: It is simply false to say is it not, that Mr Iacullo threatened you to take $50,000 A: That's correct. Q: The reason why you swore that in your affidavit was because you knew that the loan was in respect of a past debt rather than a future advance? A. No I didn't know. It was never said it was for a past advance." 216. PB said that about June 2002 following a request from DI, she called at the premises of Glow Automotive. DI handed her some documents and they had a conversation to the following effect: "DI: (showing her the documents) I want you to sign these because I am going to resign as a director. PB: You said you were going to see it through. DI: Well for the purposes of the sale. I only want any purchasers to see me as the landlord and not as anything else. I need you to sign these documents now otherwise, if I don't get them within 14 days I will have to pay a fine." PB then signed the documents and left Glow Automotive. 217. DI denied the conversation recounted by PB. He did resign as a director of Flowers Café Pty Limited. 218. PB said that about 12 June 2002 she was given a letter dated 2 April 2002 addressed to the Behrens at their old address, 82 Glamis Street, Kingsgrove, enclosing a copy of a FAX dated 2 April 2002 from the Iacullos' solicitors. That FAX advised that the mortgage funds had been advanced to the Behrens by way of unpaid rent for the coffee shop and other financial assistance provided to the Behrens. 219. PB said that upon receiving that letter and after contacting Heather Smith she (PB) sent Heather Smith a FAX advising that the Behrens did not wish to proceed with the mortgage at 82 Glamis Street, Kingsgrove as the conditions of the loan were not what they originally discussed with the Iacullos. 220. PB was aware that there was no document recording any instructions not to go ahead until 12 June 2002. PB agreed that DI resigned as a director of Flowers Café Campsie Pty Ltd on 11 June 2002 and that the next day after a telephone conversation she sent a letter by FAX to her solicitors telling them to cancel the loan. PB also wrote: "I'm not happy with the situation at present regarding the partnership between myself and Dominic Iacullo regarding the café." 221. PB agreed that she was not happy that DI had resigned. She said that sending the letter (FAX) had nothing to do with the resignation of DI. She explained the FAX as being written on the day she received the letter from her solicitor enclosing the copy letter of 14 March 2002 from DI's solicitors. The letter to her had been sent to the wrong address and this explained the delay. 222. It is difficult to accept PB's contention that her decision not to go ahead with the loan was unrelated to DI's resignation as a director, notwithstanding the delay of over two months in her solicitor's letter of 2 April 2002 reaching her. She had been told on 25 March 2002 by Heather Smith from her solicitors the Iacullos' position and DI had also conveyed their position to PB subsequent to 25 March 2002. DI had told UB that the mortgage was to cover past financial accommodation or benefits provided by the Iacullos but no action of consequence was taken by either of the Behrens. They were in a parlous financial position and could not easily take action. PB allowed matters to drift. She did not know what to do. She had received no written confirmation prior to about 12 June 2002. The resignation galvanised PB into action. By that time the Iacullos' solicitors had held the executed loan agreement and mortgages since early March 2002. 223. The mortgage, which was undated, was stamped on 2 July 2002. PB and UB had not paid either the mortgagees' costs or the stamp duty. After mid June 2002 there was activity on the part of the Iacullos to have the mortgage stamped and registered, so it could be readily enforced. 224. PB said that DI telephoned her in about June 2002 enquiring whether she had signed an authorisation with St George Bank to approve the second mortgage and if she had received an account from her solicitor. A conversation to the following effect ensued: "PB: Why have you lumbered me with the café business and all of the debt when we agreed that you could recoup any money put into the café through any ultimate sale or any money which came from any action against the shop fitter? DI: I have got to look after myself and make sure I am covered. PB: You have manipulated me and used my trust in you as a friend to get yourself a nicely fitted out shop which you can now lease. If the shop had succeeded you would have taken half the profits and the rent. Now I wear all the costs. Are you going to sue the shop fitter? DI: No. I do not have the resources to fight him and if you want to do that, well you can do that yourself. PB: … You previously told me that Romano had really angered you to the point that you could not sleep at night and that you have a bottomless pit that you could fight him with. The only solution now is to sell the café business." 225. DI denied that the foregoing conversation occurred and said that it was never his intention to sue the shopfitter and he did not retain the shopfitter. I think that a conversation along the lines alleged by PB probably occurred. 226. PB said that a week or two later DI came to the café and showed her a copy of the loan documents and said words to the following effect "…it's official and you now have to pay me interest on the loan." The mortgage would have been registered after it was stamped on 2 July 2002. The date of registration does not seem to appear. DI said that the conversation alleged never occurred and that he did not take the loan documents to the café. I am not able to make a finding as to whether DI took the loan documents to the café. It is probable that DI told PB that the mortgage had been registered and that PB had to pay DI interest on "the loan". The Evidence of Uwe Behrens 227. I interrupt the narrative again to refer further to the evidence of Uwe Behrens, which I regard as important. Unlike DI and PB, whom I regarded as dishonest in their conduct and untruthful on contentious matters, I thought that UB was substantially honest. DI also came across in his evidence as aggressive and slippery with a talent for looking after his own interests, even if that involved him in misleading his erstwhile friends. In evaluating the evidence given and in trying to determine the facts I have placed reliance upon my assessment of DI, PB and UB and what they would probably do and say or not do and not say. Both DI and PB were in the witness box for substantial periods and this afforded considerable opportunity to observe their conduct and reactions. I have, of course, paid attention to the evidence each witness gave. 228. UB swore two affidavits, one dated 2 June 2003 and the other dated 21 April 2004. The first affidavit does not bear the name of any solicitor. It is not clear who prepared this affidavit. I doubt if UB prepared it. At the very least he must have received some assistance. 229. During his period in the witness box UB evinced a marked lack of comprehension of an appreciable number of questions addressed to him. UB was not foxing. The cross-examiner and UB did not seem to be on the same wave length. This matter with all its ramifications was generally beyond him but he was able to recall the matters on which he gave evidence and he did understand that DI was going to lend them $50,000 and did not do so. 230. UB's first affidavit tends to be a little skimpy and does not contain matters which ordinarily it would be expected to cover. The second affidavit was prepared with the assistance of UB's current solicitors and fills in some of the gaps. The first affidavit deals with events starting in December 2001 and the loan of $50,000. UB's second affidavit briefly traces the relationship between the Iacullos and the Behrens from 1994 onwards. UB did work as a handyman around DI's home and usually agreed to DI's requests for assistance. UB also did jobs at Glow Automotive. On one occasion DI advised UB that he should be getting into property and suggested that UB might like to purchase a particular residential unit. UB told DI that the Behrens could not afford it. 231. UB said that after the statement about no rent being due and no wages being paid until the shop was making a profit, he recalled having conversations with DI at Glow Automotive to the following effect: "UB: Dominic, how do you think the shop is going to go DI: I think it is going to be successful. I know a lot of people in business that would come down and eat there. You and Paula will have to go around and put out flyers and let people know that we are opening. It will be tough to start off but there won't be any rent payable and Paula won't get a wage until the shop is earning a profit. You have got to go out and make more money yourself to cover for Paula. UB: I am trying to do that." 232. DI said that both PB and UB were present during this conversation. DI denied that he ever said words to the effect, "There won't be any rent payable and Paula won't get a wage until the shop is earning a profit". I think that DI did use words to that effect. 233. UB said that during the fit out of the café from June 2001 until it opened in October 2001 DI often asked him (UB) to come down and help clean up after tradesmen had been at the café and in the adjoining premises (the chemist's shop). This was unpaid work. It was DI who retained the tradesmen to do the plumbing, the electrical work and the installation of the air conditioning in the café. UB gave an instance of DI overruling him on the selection of some tiles and of the tradesmen referring to DI as the boss. 234. I have earlier summarised some of UB's evidence as to the events and conversations relating to the loan of $50,000 The following is a summary of some of the matters which emerged from UB's cross-examination. UB agreed that during his telephone conversation with DI in January 2002 about moving out and a possible loan of $50,000 he did not raise with DI that he held $10,000 of his wife's money – it was for paying taxes. DI got quite upset. Over the earlier months of 2001 UB heard snippets of the conversations between DI and PB as to the proposed coffee shop. One of these was that there was no rent payable and no wages (until the business was profitable). He recalled one particular conversation in which this was said by DI in the kitchen of their house about April 2001. 235. UB agreed that the arrangement of no rent payable and no wages was important. He had no explanation why this did not appear in his first affidavit. The explanation lies in the circumstances surrounding the preparation of UB's affidavit and the limitations of UB. He was not capable of preparing a comprehensive account without extensive professional assistance. That is not an explanation UB would be capable of giving. 236. UB stated that DI was very keen on the creation of the coffee shop business and had great hopes of building a successful business. UB did not recall anything being said about a lease nor about a company being set up in the many conversations between DI and PB. He understood that DI and PB were going to be partners. He heard them discussing being directors and when he heard the word "directors" he associated that with being partners. UB may well not have appreciated the significance of what was being discussed. 237. The troubles over the café and with DI were a contributing factor to PB and UB separating in about June 2003. 238. UB gave the following evidence in cross-examination as to the $50,000 loan: "Q. After you had the telephone conversation with Mr Iacullo about the 50,000 dollar loan, did you leave the rest of the loan transaction up to your wife. A. Yes." This should not be taken to mean that the meetings mentioned by UB did not take place. They did. I accept the versions of UB of those meetings. Specifically, I accept that it was proposed that DI would advance $50,000 and that the loan was not to cover past advances and past indebtedness. UB did leave PB to attend to the formal matters of completing the loan documents and related matters. 239. UB explained that they tried to get a loan but were unsuccessful. A meeting was held. UB continued: "And it was Dominic that suggested that he give us the $50,000 and … we could match the $20,000 he'd already put in and the $30,000 would have gone into the portfolio loan if we needed to have access to that and then he said, when the shop gets better we'll be able to refinance and then pay that back and we'd be in a …different position. UB said that he personally witnessed this, that DI made the suggestion early in January 2002 and then they had another meeting. UB continued: "[DI] actually organised a meeting for us to come into his office … that's where he said that … he wanted to give us the $50,000 but he wanted the house as security and I didn't want to do that." 240. UB said that this meeting took place in January 2002. UB rejected the suggestion that DI wanted the $50,000 to cover the moneys he claimed that PB owed him. UB continued: "[DI] kept saying that he put in $20,000 and that we should put in the same … out of that 50 … we said that we didn't need that much money …". 241. UB said that DI stated that they use the balance of the $50,000 if they needed to. If they didn't need to they could just give it back. UB said it was not clear in his head when PB first told him that she did not want to go ahead with the loan. UB explained that he was having difficulty in paying the house rent. His income was not much more and PB was not receiving a wage. 242. UB denied that if he and PB had been able to get a loan (from a financial institution or company) they were going to give the money to DI. UB said: "…he was going to give me $50,000 and out of that $50,000 we would have put $20,000 into the shop and that means Paula would have been able to get a wage, we would have been able to pay our rent and we would have had money in the portfolio loan which would have actually dropped that down. We would have been paying less in interest and we would have been better off and tried to get the shop to increase its turnover." 243. UB said that as to the loan of $50,000, the main meeting as to that was held at the offices of Glow Automotive and was organised by DI. It was attended by DI, LI, PB and himself. UB said that this matter was mentioned on a couple of occasions before the main meeting. 244. UB said that until the hearing of this action began he had not seen the document "Heads of Agreement" signed by PB and dated 10 January 2002. UB could not remember PB telling him that she had signed a document to the general effect of the Heads of Agreement or about a loan of $50,000. UB said, " … the only thing I knew about was that we had to sign for the $50,000 loan was when Paula brought home some documentation and we went next door … and we signed some documents there." PB said that they had to sign and UB did. 245. UB said that he had nothing to do with the finances for the café. He did not have much to do with the café. He was not involved. It was a venture PB and DI wanted to do and were doing together. UB added, "Dominic didn't involve me that much in it except for when it was being built I did a lot of cleaning up there … I'd help as much as I could." UB said that he left finances to PB and signed the documents she requested. 246. UB said there was nothing in his head of his wife telling him DI had resigned as a director. He recalled PB mentioning that she was going to cancel the $50,000 loan agreement. He thought this was around February/March 2002. UB did not think it was because DI had resigned as a director. UB said that PB might have told him why he was going to cancel the loan; he could not remember. 247. As UB gave his evidence he came across as a rather sad and forlorn figure, upset by the loss of his marriage. This was his major concern. Café Fit Out – Romano Pacione (RP) 248. Romano Pacione was the principal of R & C Shopfitting (R&C) which fitted out the café. His evidence covers the period from March 2001 to October 2001. RP deposed to a meeting with DI at the café in about March 2001 in which DI said words to this effect: "I have run restaurants at Leichhardt. Paula my business partner has had a shop before but she has left this in my hands because she knows how to run a business to make food but all the other stuff she doesn't know." 249. About 12 March 2001 R&C provided an initial quotation for the fit out of the café. During further negotiations RP learnt, but he did not recall how and when, that the entity which would be operating the café was a company called Flowers Café Campsie Pty Ltd. A further quote was issued about April 2001. RP said that on one occasion after 11 April 2001 and before the contract was signed he had a conversation with DI at Glow Automotive's premises in which, inter alia, words to this effect were used: "RP: Why are you so involved in all of this, Dominic? DI: Well, Paula is my business partner but she has only run cookie shops … she doesn't know anything about this fit-out stuff. I want it all to look right. The idea is that she is going to be running the shop. Once all the costs are paid for and the financers (sic) have been paid back and the café is actually making money, then we will split the difference between us. I am not going to charge her rent in the meantime and once all the bills have been paid, she can get paid and then we will split the difference." 250. RP said he had previously spoken with PB and discussed the layout of the café with her. 251. RP said that the negotiation of the terms of the arrangement between the company and R & C was done between either himself and/or David Catesby for R & C and DI on behalf of the company. The contract was signed about 10 July 2001 at PB's house at Roselands, with DI and PB both being present. RP said that this was only the second time he had met with PB, but he had several telephone conversations with her. Most of these related to the selection of colours for the tiling, paint work and the general interior décor of the café. 252. In the earlier draft agreements R & C set out its usual payment terms, these required 40 per cent of the contract price to be paid on the signing of the agreement, RP said that between 11 April 2001 and 10 July 2001 he and DI had a conversation to the following effect: "DI: I only want to pay 40% upon delivery of the fit out. RP: … we are not going to go ahead and fabricate the fit out just on a signed contract. DI: Well, Paula hasn't got the finance to do that. RP: Why don't you give Innovation Finance a call." RP believed he gave DI that company's telephone number. 253. RP said that after this conversation PB telephoned him. She explained, "We are having trouble getting finance to pay for the fit out." RP referred her to Innovation Finance. 254. About 13 July 2001 R & C faxed drawings to Glow Automotive for the fit out. One of these was signed off by DI. About 17 July 2001 R & C stopped fabricating the fit out for the café because it had received no funds. 255. All the hydraulics, electrical services, refrigeration lines and concreting had to be installed in the café before R & C could instal the fit out. RP said that DI regularly telephoned him and requested him to come down to the café and explain to the tradesmen DI had retained to instal the other works where R & C's fit out was to be installed, notwithstanding RP had already prepared detailed plans indicating the fit out locations. RP estimated that he attended the site for this purpose about four times per week from July 2001 to October 2001. 256. RP said that significant delays were experienced at the café because of the carrying out of other prior works so that installation of the fit out could not take place until late September/early October 2001. 257. Notwithstanding those delays RP said that by early August 2001 his firm had completed the fabrications for the fit out. RP said that he telephoned DI and said words to the following effect, "The fit out has been ready for some time but we are not going to instal it until the funds have been released." This was a reference to the balance of the funds, R & C already having received $34,143 from AGC. 258. On or about 24 September 2001, DI sent a FAX from Glow Automotive in the name of PB asserting that since 18 September 2001 the café had been ready for R & C to carry out the shop fit and complaining about the delay and holding R & C liable for $1000 per day for every day after 1 October 2001 that "we cannot trade". It was stated that Innovation Finance had been authorised to release moneys for the equipment. R & C replied stating that the only delay was that funds had not been released. 259. RP said that ultimately the installation of the fit out commenced on or about 2 October 2001; he arrived at the café with the fabrications and equipment for the café. DI, PB, David Catesby and Natalie Uren from Innovation Finance and others were present. RP declined to unload the truck until all the funds had been released. The conversation became quite heated with DI stating, "If your guys don't instal the handrail … I'm the landlord of this whole place. I've got the keys and if you don't instal it I'll lock you out and you'll be in breach of contract." Ms Uren had some documents which had to be signed before the finance could be settled. To RP's recollection either DI or PB signed them and returned them to Ms Uren. On this basis R & C agreed to begin the installation of the fit out. 260. By memo of 2 October 2001 RP referred to the meeting that morning and dealt with a number of issues that had arisen, including those as to equipment being supplied and a complaint as to the conduct of DI. The memo stated that R & C can either continue with the job or stop and pointed out the consequences of each option. The memo concluded: "I would like to know which option you would like to continue with. I do not want to deal with Dominic. I will take my instructions from you only Paula as I do not have a contract with your landlord." 261. RP said that the installation of the fit out took about three days, that DI was there for nearly the whole time, checking the work done by R & C as it went. PB visited the site for short periods each day. She observed what was being done and asked RP how to operate certain items of equipment. RP said that on some occasions PB asked questions as to why a certain item of work was being done. Before RP could answer DI intervened, saying, "This is what I have organised." 262. RP said that about 5 October 2001 DI insisted that RP make him a cash box. RP said that a meeting was later held, attended by PB, Natalie Uren and himself. The minutes record a list of items to be done by 12 October 2001, one of which was a cash box. DI signed a plan for the glass display counter on 5 October 2001 and PB said to RP, "Romano, this is the design that Dominic now wants. He has signed off on it." 263. On 12 October 2001 DI sent a FAX to R & C stating that it was now 2.30pm and no-one had turned up on site to finish the job. 264. R & C replied by FAX of 12 October 2001 that the agreement was made on the basis that payment would be made by 9 October 2001 and that as at 5.30pm on 12 October R & C was yet to receive these payments. A copy of this FAX was sent to Ms Uren. 265. About 18 October 2001 R & C received from Australian Integrated Finance Ltd (AIF) the sum of $21,450 being the balance of the funds for the fit out. Of this amount $3630 was refunded by R & C to AIF due to a cancellation of joinery. RP noted that a dispute had arisen over the fit out and a complaint made to the Department of Fair Trading. He was not aware of anything arising from it. 266. In cross-examination RP said that he was not prepared to start work without a deposit whereas DI wanted R & C to start work without a deposit. RP conceded that there were disputes with DI over a number of items including DI not wanting to pay for changes he desired. 267. RP said of DI, "I got to a point where he was hindering, not helping" and "he wanted to make everyone's time there as painful as possible." These statements indicate that relations on the job became very difficult and that DI was playing a major role. 268. RP said (T229) that DI stated as to this job that he (DI) "was going to be building, looking for someone to go inside there, didn't want anyone else, had someone who operated a shop before and him and her were going to build it together." RP kept a diary in which he recorded conversations with DI and his affidavit was prepared having regard to what he had written in it. RP was cross-examined that as at 2 October 2001 he considered that DI's interest in the job was nothing more than a landlord. His letter followed a heated conversation. RP wanted to minimise the role of DI and his interference. 269. From RP's evidence it emerges that DI was not acting as a non-executive director, but as a principal doing his utmost to protect and advance his interests. I thought that RP's evidence should be accepted. Mr Kontobasi – February to November 2001 270. Mr J Kontobasi commenced work at Glow Automotive on 1 February 2002 acting as a Manager in Sales. He left on 19 March 2003. There was litigation between them. He had been friends with DI and LI and had been approached by DI to invest in the business of Glow Automotive. Mr Kontobasi recalled a conversation to the following effect: "DI: Me and Paula are operating the Café. We are going to boost the sales. You wait till you see how much money we are going to be making. JK: That's good Dominic". 271. Mr Kontobasi stated that during the six month period after he commenced working at Glow, DI was very involved in the café. In particular: (a) in the top drawer of the filing cabinet in the small office at Glow there were numerous documents relating to the operation of the café, such as invoices and sheets setting out the weekly expenses for the café. Mr Kontobasi recalled numerous occasions when PB attended the office at Glow and, using the computer there, typed up the weekly expenses into a pro forma sheet, printed out that sheet and placed it in the filing cabinet. Often DI reviewed the weekly expenses and invoices for the café. (b) DI kept the chequebook and bank deposit books for Flowers Café Campsie Pty Ltd. (c) Often Mr Kontobasi, at DI's request, picked up the takings for the day of Flowers Café Campsie Pty Ltd and banked them, using that company's deposit books. (d) Mr Kontobasi recalled that on one particular occasion DI said to PB, "When you need a cheque you ring me and I will give you one." (e) After this, DI, on more than a few occasions filled out cheques from the Flowers Café Campsie Pty Ltd chequebook. DI also signed some such cheques. (f) On occasions DI accessed or dealt with the bank account of Flowers Campsie Café online. (g) DI, while looking at the computer screen complained that PB was not making enough. On another occasion he complained, "I know she is making $500 per week and she is putting it in her pocket and is only giving the rest to me." (h) Mr Kontobasi said that often when they went to the café for lunch DI, without speaking to PB went behind the counter, opened the cash register and saw how much money was there. DI also regularly opened the refrigerator and cupboards, checking the levels of supplies and products. (i) DI in promoting the business of Glow Automotive in the general area also promoted the café. 272. In November 2002 DI told Mr Kontobasi that he was going to lock PB out. DI made arrangements for locksmiths to attend at the café and change the locks, thereby preventing PB from obtaining access to the café. 273. The evidence of Mr Kontobasi established that DI exercised a firm control over the conduct of the café business. He fulfilled a role that was much more than that of a non-executive director. His actions and the extent of his engagement were akin to those of a partner. He was attending to the business and fit out sides of the café's affairs. I thought that the evidence of Mr Kontobasi should be accepted. Decision to Sell Business 274. By July 2002, and probably some months earlier, neither PB nor DI were satisfied with the returns from the business. A decision was made that the business should be sold. DI found a broker to handle the sale. An agency agreement for the sale of the business known as Flowers Café was signed by PB. It bears the date 29 July 2002. A prospective purchaser made an offer for the business, but it involved a three month trial and the purchaser deciding to proceed thereafter. There were some discussions between DI and PB and between the broker and PB. The offer by the prospective purchaser was transmitted to DI. He then handed it to PB. It was obvious that DI was attending to the sale. He justified the communications he had received as being in his capacity as the owner and lessor of the premises. 275. PB said that when the company was set up in order to operate the café she did not have an understanding of what it meant to operate a company. She said she did not understand that it was actually the company which was running the café business and not she and DI as individuals. DI always arranged all the documentation and she assumed that he was acting in their best interests as partners. She did not understand that the Finance Agreements and the leases and all the other documents for the business should have been entered into with the company as the contracting party. She said that because of this lack of understanding she agreed to sign the lease for the café, the finance agreements and also the Agency Agreement for the sale of the business in her personal capacity. She said that she did not understand the true distinction between a company, a business and a person and the different legal consequences. 276. PB said that she had a further conversation with DI, probably in September 2002, to the following effect: "PB: What about my wages? Will I be able to recoup any of that? DI: That is what happens when you work for yourself. My time is worth a lot more than yours. PB: In your mind only! I have worked over 60 hours a week, every week for over a year and you think that that is worth nothing and that I have not contributed a cent to the business … I put in nearly $5000 of my own, as well as a cappuccino machine which I owned and was previously worth $6000. You walked out on the business in June this year DI: For the purposes of the sale I want any incoming owners to only recognise me as the landlord.. PB: You promised me that you would never leave as my partner and you promised to see the whole thing through to the end. You have managed the accounts for the café. You have done the banking. You even arranged a direct debit for the payment of rent, but you did not ask my permission." DI denied the conversation alleged. However, he stated that he did say words to the effect "I want you to pay the money you owe us." It is probable that a conversation to the same effect as that deposed to by PB occurred. 29 Bower Street Roselands 277. By their application of 11 October 2002 to the Consumer Trader & Tenancy Tribunal in respect of 29 Bower Street, Roselands, the Iacullos sought: "An order ending the Residential Tenancy Agreement and granting the landlord possession An order for all money owing to be paid up to vacating." 278. On 25 October 2002 the Tribunal made the following orders: "1. Order for termination and possession: the tenancy agreement is hereby terminated, and possession is to be given to the landlord on 3/11/02. 2. The Tenants Uwe Behrens and Paula Behrens, 29 Bower Streetef NSW 2198 is (sic) to pay the landlord, Dominic Iacullo & Lillian Iacullo, 27 Gold Street, Blakehurst NSW 2221 the sum of $3183.40 on or before 3/11/02. 3. The Rental Bond Board is directed to pay the landlord, Dominic Iacullo and Lillian Iacullo, 27 Gold Street, Blakehurst NSW 2221the whole plus interest of rental bond number 988 119815. Any amounts received to be credited against the money order." DI said that the amount of $3183.40 was paid to him by bond and cheque. 279. By their application of 4 November 2002 to the Tribunal the Iacullos sought: An order that the tenant pay the landlord compensation for losses of cleaning expenses and as damages on vacating. (? unclear) An order for cost of replacing taken property An order that the tenant pay the landlord $1840 as compensation for loss of rent (time for repairs) The stated reasons for requesting the orders were: "Vacating the property without cleaning the carpet, maintenance of pool, damage to pool equipment & general cleaning in accordance with the condition reports/witnesses/photos. Property taken without authorisation on vacating premises." 280. On 27 March 2003 "the Tribunal made the following orders for the payment of money which the Tribunal found to be due and owing "1. The respondents, Uwe Behrens and Paula Behrens … is ( sic) to pay the applicant Dominic Iacullo and Lillian Iacullo … the sum of $121.12." The Tribunal stated: "The application for compensation other than the agreed water usage is dismissed because the landlord has not been able to produce an ingoing condition report as a consequence of which the Tribunal is unable to determine that the tenants are liable for the sums claimed." The Amended Points of Claim lodged with the Tribunal sought $9795.12 and contained a variety of claims. 281. DI agreed that in the proceedings before the Consumer Trader & Tenancy Tribunal he and his wife did not claim $12,080 being arrears of rent said to be owing pursuant to the residential lease of 29 Bower Street. This was because this sum was claimed to be part of the past indebtedness covered by the mortgage of $50,000. The Iacullos did not wish to claim the same sum twice. 282. DI denied that by the middle of 2002 it was apparent to him that the café business was not going to prosper. DI asserted that it was his belief that the café business was doing well and that PB was putting the money in her pocket. No evidence was led to support DI's belief, although he asserted that there was evidence. The gratuitous statement fell from DI as he was being pressed in cross-examination. He was not able to accept that a venture in which he had much faith could not prosper. DI insisted that the café was paying PB a wage. He denied that the deal between him and PB was that no rent would be paid to him for the café and no wages would be paid to PB until the café business was profitable. He denied that they had agreed to share the profits of the business. This object could have been achieved in a number of ways, despite the company structure. 283. DI said that when the lease was terminated and did not run its full course there was a reversion as to rent back to 1 March 2001, the starting date of the lease. DI added that the "rent free period was given on the proviso that the full term of the lease would be enforced but because it broke down, the Iacullos then applied the rent to those periods." 284. DI said that in January 2002 he applied part of the loan of $50,000 to unpaid rent. DI insisted (T88): "So the $50,000 …was applied to the house rent first, those loans I've given to Paula, and the balance of the money that was owing came off the rent to do with the business." 285. DI agreed that as at January 2002 he was still proceeding on the basis that there was a rent free period. He was aware that his solicitors had given particulars that he had applied $50,000 in respect of rent for March to July 2001 and part of August 2001. After some hedging (T89) DI ultimately agreed that as at January 2002 PB was entitled to a rent free period covering, amongst other matters, March to July 2001 and part of August 2001. When it was put to DI that as at January 2002 he regarded PB as entitled to a rent free period he could not have applied any of the $50,000 in January 2002 to arrears of rent in March-April 2001, DI replied "We didn't." 286. However, DI maintained that at the end of the day they did apply part of the $50,000 towards payment of the rent for the month of March 2001. DI said that the agreement was that PB was going to pay from March onwards the rent for the café, rent for the house and interest on the loan. DI said that as to the rent for the café from August 2001 to March 2002, he explained to PB that they would fix it later on. DI believed that this material did not appear in any of his affidavits. 287. DI said that after Christmas 2001 he gave the Behrens a document as to how he was going to apply the $50,000. He could not be more precise as to date. A copy of such a document was not annexed to any of his affidavits. DI, on being pressed about that document, said that he showed the Behrens such a document. DI said he believed his solicitors sent the Behrens' solicitors some documents. He was sure he had seen in his documents a document setting out the alleged past indebtedness of PB in January or February 2002. 288. As to the lease of the café, cl 29 was struck out. That provided: "The Lessor does not in any way or for any purpose become a partner of the Lessee in the conduct of its business or otherwise or a joint venturer or a member of a joint enterprise with the Lessee and any such relationship is expressly negatived by this Lease. It is ironic that there should have been such a spirited contest about whether there was a partnership when the clause just mentioned was struck out of the lease. 289. Clause 28.14 incorporates the usual provision that the Lease comprises the whole agreement between the parties and purports to exclude any other agreement, collateral agreement, promise, representation, warranty or undertaking. Curiously, and incompatibly with such a provision, the letter of 26 February 2001 permits a rent free period of two months and a half rent period of one month. 290. DI attached to his affidavit of 30 June 2003, a schedule headed "Monthly Rent Payments" received for the café, being Schedule B. That shows $15,000 being paid to and received by DI on 11 January 2001, and a contra entry of $14,300 for "Bond & Air Con". It then lists payments of $2383.24 for each month from March 01 to June 02 (both inclusive) and payments of $202.50 for the four months of July, August, September and October 2002. The payment of $2502.50 includes a rent review component (now not pressed). The object of this list was to demonstrate the large sum owed by PB for unpaid rent. The list claims that the total due was $46,190.59. An analysis of the list shows that it cannot be used to justify the claim that much of the $50,000 represented past indebtedness. The list makes no allowance for the rent free period and the amounts claimed from March to October 2002 (both inclusive) fell due after the execution of the mortgage. DI stated that his wife and he made a number of personal loans to PB. Annexure C is headed: "Personal cheque and Cash Loans to Flowers Café from Dominic and Lillian Iacullo." Attempted Justification of Claim of $50,000 for Past Indebtedness 291. DI attached to his affidavit of 30 June 2003 a schedule headed "Monthly Rent Payments for Unit 4, 571-573 Canterbury Road, Campsie." The lease commencement date was stated to be 1 March 2001. The schedule shows $15,000 being paid to and received by DI on 11 January 2001 and a contra entry of $14,300 for "Bond & Air Con." The statement then lists amounts as being due of $2383.24 for each month from March 2001 to June 2002 (both inclusive) and amounts due of $2502.50 for the four months of July, August, September and October 2002. The amount of $2502.50 includes a rent review component which is now not pressed. This list, which claims a total due of $46,190.59, was to demonstrate the substantial sum owed by PB for unpaid rent for the café. The list of amounts now claimed to be due cannot be used to justify the claim that much of the $50,000 represented past indebtedness. The list makes no allowance for the rent free period and the amounts claimed from April to October 2002 (both inclusive) which fell due after the execution of the mortgage. If regard is had to the Heads of Agreement providing that the loan commenced on 1 January 2002, the period to be excluded is even longer. Alleged Personal Loans to PB 292. In addition to the claims for rental arrears for the café, the Iacullos relied on a number of alleged personal loans made by them to PB. Annexure C to DI's affidavit of 30 June 2003 is headed "Personal Cheque and Cash Loans to Flowers Café from Dominic & Lillian Iacullo." The so-called "Personal Loans" total $25,039.50. However, there are a number of caveats in respect of that list. The first entry bears date 4/4/2001 and is for an amount of $5000. According to PB that represents DI paying her, at her request, $5000, being part of the money DI was holding for her. I accept that that sum of $5000 was part of $15,000 DI was holding for PB, and that DI was returning the sum of $5000 to PB. I do not accept that $15,000 was handed by PB to cover air conditioning and the bond. Nor do I accept that the fourteen other payments were made to PB personally. An analysis of the bank statements shows that these sums, claimed to be advanced to PB as personal loans, were banked to the credit of Flowers Café Pty Ltd. 16/ 5/01 - $ 3500 21/ 9/01 - $ 5000 24/10/01 - $ 3000 5/11/01 - $ 2000 26/11/01 - $ 3500 The bank deposit slips reveal that DI paid the following cheques of the Iacullos into the company's bank account: 20 September 2001 - $5000 25 October 2001 - $3000 5 November 2001 - $2000 26 November 2001 - $3500 The original cheque for each of these sums has been produced. DI also relied on some eight cash payments totalling $950, a payment of $900 made on 11 October 2001 and a payment of $1189.50 on 28 June 2002. The last payment was said to represent fees paid by DI, which should have been paid by the company or PB. The following cheques signed by PB were drawn on the bank account of the company: 13/8/ 01 - Cash $2500.00 8/9/ 01 - Tile Deposit $ 297.60 12/9/ 01 - Amber Tiles $3353.70 18/9/ 01 - Frank Bruno subcontractor $5000.00 29/9/ 01 - Future Printing & Decorations P/L $ 600.00 30/11/01 - Telstra $ 392.62 30/11/01 - GPR Concrete Services $ 159.50 293. As mentioned on 18 September 2001 PB drew a cheque on the company's bank account for $5000 in favour of Frank Bruno, subcontractor. It seems that that cheque was presented to the company's bank on 20 September 2001. That put the company's bank account into debit. On 20 September 2001 DI drew a cheque for $5000 in favour of the company and the deposit slip signed by DI and dated "20.9.01" shows him depositing that cheque into the company's account. The coincidence of the entries and the dates should be noted. 294. DI also relied on some eight cash payments totalling $950, a payment made on 11 October 2001 and a payment of $1189.50 on 28 June 2002. The last payment was said to represent fees paid by DI, which should have been paid by the company or PB. 295. I will deal with the issues substantially in the order adopted by the parties. The Mortgage 296. In summary the Iacullos contended that: (a) The Mortgage secured an advance that discharged existing liabilities to an amount of $50,000 (b) To the extent the Loan Agreement is silent on the purpose of the loan (what was meant by the term "advance") it is a latent ambiguity as to which the Court can consider extrinsic evidence to determine the true intention of the parties ( Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 and Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 621 at 645) (c) The extrinsic evidence supports the Iacullos' construction of the word "advance". 297. The loan agreement between the Iacullos (the "Lender") and the Behrens (the "Borrower") contains but one recital, namely: "The Borrower has requested the Lender to make a loan available to him ( sic) upon the terms and conditions set out in this document." Clause 1 of the Agreement provides: "The Lender agrees to advance to the Borrower subject to the terms and conditions of this document the sum of $50,000 (referred to in this document as the 'Principal Sum')." 298. The Agreement provides for the payment of interest and repayment of the principal sum by 30 September 2002 and a number of other matters such as Events of Default and payment of expenses. The Agreement contains an entire agreement clause (cl 12). 299. The Behrens submitted that as the Loan Agreement upon which the Iacullos relied was wholly in writing, contained an entire agreement clause and was not ambiguous, resort could not be had to extrinsic evidence. 300. The Behrens submitted that the word "advance" in cl 1 of the Loan Agreement was not ambiguous and that they had not given the Iacullos a direction to apply the "advance" towards past debts. The Behrens submitted that the word "advance" normally means the furnishing of money for some specific purpose: Burnes v Trade Credits Limited 1981 1 NSWLR 93 at 95D(PC). Their Lordships stated that the meaning of the word "advance" may be shaded somewhat by the context. The Behrens pointed out: (a) the recitals in the Loan Agreement do not refer to debts or the loan being made for the purpose of discharging past debts. (b) the language of cl 1 of the Loan Agreement "agrees to advance" is prospective and does not contemplate past debts. (c) the Loan Agreement itself does not contain any direction by them to pay the advance to the Iacullos in discharge of past debts. 301. For Australian courts the classic statement of the principles governing the admissibility of evidence of surrounding circumstances is encapsulated in the judgment of Mason J in Codelfa at 352: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract where it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction unless they were known to both parties, although … if the facts are notorious knowledge of them will be presumed." 302. In Burns Philp Hardware at 645 Mahoney JA dealt at some length with the various circumstances in which extrinsic evidence will be admitted. He did not appear to regard the statements of Mason J in Codelfa as covering all situations. For example, he pointed to the case where a term is inherently ambiguous in the sense that in its ordinary or acceptable meaning it may indicate one of several different things. He pointed also to the case where a term when used in general and without a governing context has been held to be inherently ambiguous. At 645G-646A Mahoney JA continued: "Where a term is inherently ambiguous in this sense the ambiguity may be resolved by the context of its use in the document and the surrounding circumstances to which, in accordance with the Codelfa case, reference may legitimately be made. But I think it remains to be finally determined where a term which is inherently ambiguous in the sense to which I have referred and is not made unambiguous by its context or the surrounding circumstances, evidence may be admitted to show in which of the alternative ordinary meanings of the term it was used in the particular document and the kind of evidence which may be adduced for that purpose. I do not think that in the present case it is necessary to determine that question." 303. I would not regard the word "advance" as inherently ambiguous, but it is a general word, which is sometimes used loosely. However, in the present case the context of the agreement points, for the reasons advanced by the Behrens and summarised earlier, to the word "advance" meaning the supply or furnishing of money for use by the Behrens, primarily to advance the café business. 304. Unfortunately the fit out of the café had taken too long. As at early January 2002 the café business had been in operation for less than three months and could not be described as profitable. It had not reached the stage where it could afford the rent and to pay a wage to PB. There was a real question whether it would be profitable. DI was worried about the lack of profitability of the business. It was not making the money he had expected. He had had to keep putting money into the business and the café rent was not being paid. PB had not put a comparable amount (about $20,000) into the business. It looked as though it would continue to be a drain on his funds if steps were not taken. 305. DI foresaw the possibility, and perhaps even the probability, of him suffering financial losses. He was aware that the Behrens had a substantial interest in their home, that there was no second mortgage over it, that there was plenty of room for such a mortgage and that he needed security to ensure that he got his money back. All this was coupled with DI's belief that the café business was doing well, that PB was pocketing at least enough to pay herself a wage and that she was falsely reporting the position of the business to him and avoiding paying the café rent. 306. DI's solution, which he proposed in early January 2002 involved a loan of $50,000. He probably intended that to cover what he regarded as the existing indebtedness of the Behrens to the Iacullos. However, DI was personally careful not to tell that to the Behrens. Instead he raised and discussed the matter in the context of what they would be able to do with the $50,000, which they were to receive. DI was aware of and had to overcome the resistance of UB to providing the Behrens' house at Kingsgrove as security. DI was aware that the Behrens would not agree to provide their Kingsgrove house as security for past indebtedness. I have not overlooked the terms of the letters of Michell Sillar, but the Behrens did not accept that the $50,000 had already been advanced and was to cover past indebtedness. 307. The Iacullos sought to attach too much importance to the Heads of Agreement, signed by PB alone and containing no reference to UB, commencing the loan from 1 January 2002. The letter of 22 January 2002 from Michell Sillar to McBride Harle & Martin enclosing the Loan Agreement, Mortgage and costs invoice stated, "We understand that our client has already advanced $50,000 to your clients." Normally, it would be expected that a solicitor acting for the Behrens would ask them if that was so and write in reply if that was disputed. The receipt stamp upon the letter bears date 31 January 2002. There was some delay in signing the documents. They were signed in front of a neighbour in early March 2002 and delivered to the solicitors' offices. There are at least two possibilities. Either the import of the sentence quoted was not appreciated or overlooked, or the substance of that sentence negated by the Behrens. They were not told that the documents covered past indebtedness. As previously mentioned, the letter of 8 March 2002 of McBride, Harle & Martin forwarding the documents asked Michell Sillar to deduct their costs, disbursements and stamp duty from the loan advance. 308. In their reply of 14 March 2002 Michell Sillar stated that they were "instructed that their client has already advanced the mortgage funds to your client." McBride Harle & Martin received instructions from PB on 25 March 2002 that the mortgage funds had not yet been advanced and that day wrote to that effect to Michell Sillar and requested Michell Sillar to deduct their costs and the stamp duty from the mortgage advance. 309. Although the letters of 22 January 2002 and 14 March 2002 of Michell Sillar state respectively that their client had already advanced $50,000 and the mortgage funds to the Behrens, they do not state that the loan documents are in respect of past indebtedness. It is not until the letter of 2 April 2002 that the position is clearly stated by Michell Sillar, namely, "We are instructed the mortgage funds have been advanced to your client by way of unpaid rent for the coffee shop … and other financial assistance our client has provided to your client." For the reasons earlier explained, that letter did not come to PB's attention until about the time she received DI's letter of resignation. 310. During the period after the signature by the Behrens of the loan agreement and mortgage, DI firstly told UB that the money ($50,000) was coming soon and subsequently that the money had already been used for the air conditioning, back rent and other expenses. There was also UB's visit to Glow Automotive and his conversation with DI, recounted earlier. 311. I have reached the following conclusions: (a) The loan agreement contemplated DI advancing $50,000 to the Behrens, that is, furnishing that money to them. As was pointed out in Burnes at 95D the furnishing need not necessarily be by way of loan. However, a loan was in contemplation in the present case. Under the loan agreement (and the mortgage) this does not purport to be a loan to cover past indebtedness including moneys previously advanced and debts previously incurred, for example, for rent. The context of the agreement makes that reasonably clear. (b) I do not regard the language of the loan agreement as ambiguous or susceptible of more than one meaning. I regard it as reasonably clear and would therefore not rely on the surrounding circumstances in construing the loan agreement. It must be construed as a whole. (c) If I am wrong in my view of the language of the agreement and regard should be had to the surrounding circumstances, this was a case in which the Iacullos, through DI, gave the Behrens to understand, and the Behrens did understand, that they were to be paid $50,000 by way of a loan and that was to be secured by way of a second mortgage over the Behrens' house. This continued as the understanding of the Behrens past the execution of the loan agreement by the Iacullos apparently on about 21 March 2002. I have earlier traced the history and made findings as to what happened between early January 2002 and June 2002. These include DI's inquiry of PB as to what she was going to do with the $50,000 and her response, and DI's statement to UB in March 2002 that the money was coming soon. (d) I reject the evidence of DI that he told the Behrens that he would lend them $50,000 to cover the moneys that they owed him. I also reject the evidence of DI that he showed the Behrens a document in respect of their past debts and DI's evidence that sometime between January and March 2002 he gave PB a document setting out the past debts she owed to the Iacullos. (e) This is not a case for the admission of extrinsic evidence because of inherent ambiguity in the sense used by Mahoney JA in Burns Philp Hardware. If I am wrong in that conclusion my review of the evidence leads me to the conclusion that in the present case "advance" was used in its normal meaning of furnishing money to the Behrens, albeit by way of loan. The extrinsic evidence, which I have accepted, leads to the conclusion that this was not a loan to cover past indebtedness. (f) The Behrens did not give the Iacullos any direction to pay the advance towards past debts. 312. While perhaps not strictly necessary, I state these further conclusions: (a) The claim advanced in paragraph 11 of DI's affidavit of 6 September 2004 that the advance of $50,000 was applied, presumably in either January or March 2002 as to $12,879.52 towards arrears under the café lease for the months of March to August 2001 and $25,039.50 to extinguish the alleged personal loans to PB is not correct because: (i) the café lease was still on foot and there was a rent free period of at least 2½ to 3 months, for which no allowance had been made. DI conceded that the Schedule in respect of the café lease was a reconstruction after the event. (ii) the sum of $1189.60 for legal fees was incorrectly included – this being for fees becoming due in late June 2002. (iii) $17,000 represented cheques paid in to the account of Flowers Café Campsie Pty Ltd by DI. (iv) $5000 was payment of part of the sum of $15,000 held by DI for PB. 313. These further matters should be noted as to the alleged application of $50,000: (a) In March 2003 DI stated (to the bookkeeper) that the loan of $50,000 was to cover rent payments for the café shop up to March 2002 (T90) (b) the letter of 2 April 2002 from the Iacullos' solicitors makes no reference to applying the advance to alleged arrears under the residential lease. (c) the handwritten notes of DI on a document headed Monthly Rent Payments given to DI's solicitors in December 2002 provide for a different break up of $50,000 to that now pressed. Those handwritten notes represent an attempt to reconstruct how DI allegedly applied $50,000 six months earlier. 314. The conclusion to be drawn is that neither in January nor March 2002 did DI apply the sum of $50,000 to specific past debts. He took a broad approach, estimating in January 2002 that at that stage and in the future, the Behrens would owe him $50,000. He wanted security in that amount to protect himself and his wife. DI did not tell this to the Behrens. He led them to believe that he was going to furnish them with $50,000 repayable in nine months. I find that the consideration for the Loan Agreement and Mortgage totally failed. Statutory Relief 315. In view of the last mentioned finding it is not necessary to deal with the claims for relief under s 72 of the Fair Trading Act and s 7 of the Contracts Review Act. As appears from my review of the facts I am satisfied and find that DI misled the Behrens by promising to advance them $50,000 as a short term loan, but never intended to do so. The basis of the Behrens executing the loan agreement and the mortgage was that they were to be paid $50,000 by way of a short term loan. All Moneys Clause in Mortgage 316. The Behrens' submission as to the construction of the "all moneys clause" does not arise because of my conclusion that the consideration for the loan agreement and mortgage totally failed, but I should briefly note its terms. The Behrens contended that the all moneys clause must be construed in the context of the Iacullos' separate claim against PB for rent and damages of $76,095 under the café lease. The Behrens contended that the all moneys clause secured only moneys owed to the Iacullos jointly by the Behrens. It was further submitted that the only moneys of that character are moneys allegedly owing under the loan agreement and there are no such moneys in fact owing. It is not necessary to rehearse the detailed submissions advanced by the Behrens. They contended that the alleged debt and damages claim against Mrs Behrens under the café lease was not a joint debt of the "Mortgagor (UB & PB) and was not secured by the mortgage. Iacullos' Alternative Debt Claims 317. The Iacullos submitted that if the mortgage was not enforceable against the Behrens, then PB had liabilities to the Iacullos as follows: (a) $12,080.98 outstanding for rent for 29 Bower Street (b) $24,039.50 by way of cash advances (c) $81,036 outstanding for rent for the café and damages for termination ($12,879.52 was previously allowed in the sum of $50,000) 29 Bower Street 318. DI prepared a statement dated 9 October 2002 and apparently sent to his solicitor on 15 October 2002 (being annexure L to his affidavit of 30 June 2003) setting out the rent payments received from UB & PB. It asserts on p 1 that $12,080.98 had not been paid. DI maintains that claim. 319. In paragraph 5 of her affidavit of 10 May 2005 PB said that by the end of March 2002, UB and PB owed the Iacullos $9969.75 for unpaid rent for November 2001, December 2001, January 2002, February 2002 and March 2002, at the rate of $1993.95 per month. 320. The Iacullos stated that the Behrens had not paid the rent for August 2001. The Behrens maintained that they paid it by cheque number 00023 bearing date "10.8.01" for $1993 and relied on a cheque butt containing those details and the word "Rent" but no payee. The word "Rent" appears at first blush to be written in a different pen to the date and amount. There was no expert handwriting evidence. The plaintiff did not issue a subpoena to her bank to produce the cheque showing the payee. Nor did the Iacullos issue a subpoena during the hearing. The bank statements of the Iacullos do not show a separate deposit of a cheque for $1993, but they do show a deposit of 13 August 2001 of $11,287.61. The deposit slip for that deposit was not produced, so that it is not known how that deposit was made up and whether it included a cheque from the Behrens for $1993. 321. The Behrens' bank statement (Exh B2, p899) establishes that on 13 August 2001 cheque 0023 for $1993.35 was paid by the Behrens' bank. There is a discrepancy of 60 cents in the amount paid and the amount due, but I regard that as de minimis. DI did not deny receipt of such rent payment. He did not recall having a record of the payment (T176, lns 40-50). 322. Although the evidence is not as complete as it could be, a limit has to be imposed on the amount and time spent over such a small sum. Importance must be attached to the close correlation between the amount due, the amount of the cheque and the time of drawing the cheque, the payment by the Behrens' bank of the cheque and the receipt of a larger deposit to the Iacullos' account on the same day. 323. The probabilities favour the conclusion that the August 2001 rent of 29 Bower Street was paid by the Behrens. 324. As to the assertion by the Behrens that the amount owing by them on the lease of 29 Bower Street has been discharged by agreement, the Iacullos pointed out that this depends on accepting that here was such an agreement and that she had advanced $15,000 (or $16,000), later reduced to $10,000 for safekeeping. 325. I have accepted that the payment of $15,000 by PB to DI about 11 January 2001 was for safekeeping, although her stated reasons for doing so were somewhat unusual. They depend on her fear that UB might spend some of that money if left in the joint account, that he would have been angry if she put the money in a separate account in her name, her friendship with the Iacullos and her admiration of DI's business skills. I have earlier expressed the view that the letters of 18 October 2000 and 30 January 2001 were signed by PB in her capacity as a close friend of DI to assist him in raising finance. The evidence points to PB not making a final decision not to renew the lease of the Cookie Man premises in Westfield, Hurstville, until late March 2001. the Cookie Man business was not without its problems, e.g., the Industrial Relations Commission proceedings. PB was not in a position to manage both the Cookie Man premises and the coffee shop and she would have appreciated that. She would also have realised that she did not have the financial resources to fit out the coffee shop and provide the working capital for its early months while the business built up. 326. DI was very keen initially that PB should manage the coffee shop business and she was interested from at least New Year's Eve, 2000. PB's claim that the approach by DI about the coffee shop did not even commence until early March 2001 was false. It was obviously sensible to instal the air conditioning during the construction or finishing of the premises, rather than subsequently. 327. The difficulty DI was experiencing was taking PB from the stage of interest in the coffee shop to the point of decision. DI found it necessary and prudent to look for another tenant and one was found, that is, the florist. It is most unlikely that, while PB was at the point of interest and not decision, she would have agreed to any of her $15,000 being appropriated to air conditioning and for the bond. As at 11 January 2001 she may not have proceeded with the lease of the coffee shop. 328. The Iacullos pointed out that PB's version of events was inconsistent with the cheque stub completed by DI about 4 April 2001 which reads: "Paula Behrens Loan Reimbursement of loan when refinanced" I do not attach weight to that. It is capable of a number of meanings. 329. The Iacullos relied on PB not contacting LI and endeavouring to enlist her aid to recover the $10,000, which PB claimed was outstanding, and which she needed. PB believed that LI knew the position. Having seen and heard LI and DI any such contact would not have been fruitful. 330. The Iacullos further relied on PB, when she stopped paying the rent in October 2001, not speaking to DI, telling him she could not pay the rent and was setting off the rent against the money he owed her, rather than waiting until he raised the issue in December, As she regarded herself as still being in credit, that is, the $10,000 had not been exhausted that is not significant. It is often the party who claims to be entitled to the money and who has not been paid who raises the question of non-payment, rather than the debtor. 331. According to DI this conversation took place, presumably in January 2001: "DI: I need a cheque for the bond and the air conditioner that I fitted in the café, PB: Okay here's a cheque for $15,000." In an earlier summary of the conversation DI stated that he told PB he needed a cheque for $15,000. I do not believe this conversation or any conversation to that effect, took place. Although PB had shown interest in the coffee shop she had not decided whether to become involved. She knew the money would be needed at a later stage, to pay GST. She was not sure of the amount. Her financial means were modest. It is hard to envisage her committing $15,000 for air conditioning and a bond when she had not decided whether to proceed and lease the coffee shop. She knew that as at 11 January 2001 she did not have the resources to fit out and establish the coffee shop, which DI was building. 332. I adhere to my view that I do not accept that DI handed a receipt for $15,000 to PB about 11 or 12 January 2002 or the provenance of the so-called receipt. It was not discovered and was produced out of DI's bag on the second day of the hearing in slightly unusual circumstances. It does not refer to the bond or air conditioning. It reads: "Paid $15,000 towards coffee shop" and the shop is specified. GST is shown as "$900". At the bottom of what is described as "Tax Invoice" this appears "TOTAL PAYABLE $15,000". Underneath is written, in small print: "Direct Banking to: D & I Iacullo Commonwealth Bank Campsie BSB 062 133 Account No 1012 0365" 333. This is an inappropriate document to give to PB as a receipt for the items now alleged. Curiously there is no evidence of any prior request by DI to PB for $15,000 to cover the cost of the air conditioning and the bond. It is unlikely that PB would have been able to write a cheque for $15,000 in immediate response to any request from DI, nor would DI have expected it. 334. The Behrens submitted that the assertion that PB was liable for the air conditioning cost was inconsistent with the Iacullos' disclosure statement bearing date 5 March 2001 as signed by PB. It was not sent to the Iacullos' solicitor by DI until 13 March 2001. It does not mention air conditioning as such. It does state that "finishes, fixtures, fittings, equipment and services" are to provided by the lessor and that the lessee does not have to pay for these. I would regard "air conditioning" as a service of the premises intended to be provided. However, the disclosure statement lists the "finishes, fixtures, fittings and services to be provided by the lessee" as "Full fit out of shop". I would not regard air conditioning as a service necessarily involved in the full fit out of the shop. The provision of air conditioning did not form part of the fit out contract for the coffee shop. It had already been provided. Further, DI closely supervised the fit out of the coffee shop. 335. The Behrens also relied on the failure of the Iacullos to hold the security bond moneys on behalf of the lessee (PB) in an interest bearing account and to account to the lessee for interest earned on such deposit. Section 47 of the Retail Leases Act 1994 provides "(1) A retail shop lease is taken to include provision to the following effect (a) Money paid by the lessee to the lessor as security for the performance of the lessee's obligations under the lease must be held by the lessor on behalf of the lessee in an account bearing interest (b) The lessor must account to the lessee for interest earned on such a deposit … (c) … (2) This section does not prevent the lessor appropriating security money in accordance with any lawful entitlement to do so." 336. Under s 3 of the Act "retail shop" means premises that are used wholly or predominantly for the carrying out on of one or more of the businesses specified in Schedule 1. The businesses specified include, "Restaurants, cafeterias, coffee lounges and other eating places." "Retail shop lease" or "lease" means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of premises as a retail shop. 337. The coffee shop was a retail shop and the lease of those premises was a retail shop lease. It could not be said that the Act did not apply to the lease of the coffee shop. 338. PB did not authorise DI to apply any of the $15,000 towards a security deposit for the coffee shop. DI was to hold that sum on her behalf. DI did not insist upon payment of the security bond prior to entering the lease. Nor did he tell PB not to pay the security deposit – see Reference Schedule, Item 10, Annexure A and Third Schedule of the lease. Given the relationship between DI and PB the payment of the security deposit slipped into the background and was not an issue between them. At some stage, probably in late 2001, DI purported to appropriate $6500 of the $15,000 to the account of the Iacullos, treating it as moneys to which the Iacullos were entitled. DI's purported appropriation was ineffective. DI never established the requisite interest bearing account in respect of the alleged appropriation of $6500 either in January 2001 or subsequently. The point under the Retail Leases Act 1994 is secondary. My primary view is that DI was given $15,000 on 11 January 2001 for safekeeping on behalf of PB. 339. I am satisfied that about 4 April 2001 DI repaid $5000 to PB at her request. That was not a loan by DI to PB. In January 2002 the Behrens, having fallen behind in payment of rent for 29 Bower Street by four months (October 01 to January 02), PB refused to pay such rent because of DI's non-payment of $10,000 despite PB's requests, and the Behrens and the Iacullos agreed to set off the $10,000 against five months rent (October 01–February 02). 340. The Iacullos claim of $12,080.98 for arrears of rent for 29 Bower Street fails in substance. As to that claim the Behrens have accounted for $11,993, that is they have established that sum was paid. That would leave $87 outstanding. The parties sensibly argued the matter on broad lines and there may be some discrepancy which accounts for the difference, or the parties may have thought it was not worth taking time to debate. That also would be sensible. This matter may need to be addressed when the minutes of order are being settled. Alleged Loans to PB 341. I have previously held that the payment of $5000 about 4 April 2001 by DI to PB was not a personal loan by DI to PB, but a payment to PB of part of the money he was holding on her behalf. 342. The Iacullos relied on these entries in the cheque butts of DI: Paula Behrens 16.5.01 Loan $ 3,500.00 Flowers Café (different biro) Flowers Café 20.9.01 Campsie P/L $ 5,000.00 Loan to Paula Future Painting 11.10.01 Paint $ 900.00 Flowers Café 24.10.01 Flowers Café Campsie P/L $ 3,000.00 Loan to Paula 5.11.01 Flowers Café Campsie P/L $ 2,000.00 Loan to Paula Flowers Café Campsie 26.11.01 Loan to Paula $ 3,500.00 ("to Paula" in different biro) These cheque butt entries are supported by the affidavits of DI. The Iacullos relied on these payments and the cash payments DI claims to have made not being recorded in the books of the company as a loan to the company. 343. Counsel for the Iacullos demonstrated in cross-examination of PB that she had an inadequate understanding of how these payments should have been treated in the company's books, but that does not mean that such payments should be treated as loans to PB. As a director with access to the accounts and records of the company DI could have asked PB to keep a record of these payments and the company to keep a record showing its indebtedness for these payments to PB. There is no suggestion that DI did so. 344. Counsel for the Behrens took the Court to the Business Activity Statement of the company for the quarter 1 April 2002–30 June 2002, and the accompanying accounts and transaction details These were prepared by the accountant, G J Widdup. The company's profit and loss statement for the period July 2001–June 2002 contains these entries: July - Oct - Jan - Apr - Total Sep 01 Dec 01 Mar 02 Jun 02 Other Income/Expenses Deposits from D & I Iacullo 5000 8500 0.0 0.0 $13,500 Deposits from Paula Behrens 1200 - 1200 50.00 0.00 $ 50 The statement shows a net loss for the year of $12,861.23. The statement reveals that no rent and no wages were paid. The accounts would need to be adjusted accordingly. 345. On p 12 of the company's accounts, headed "Transaction Detail By Account", there are these entries: Type Deposits Date Name Split Paid From D&I Amount Iacullo Deposit 21/09/2001 D Iacullo Commonwealth $ 5,000 Deposit 25/10/2001 D Iacullo Commonwealth $ 3,000 Deposit 5/11/2001 D Iacullo Commonwealth $ 2,000 Deposit 26/11/2001 D Iacullo Commonwealth $ 3,500 $13.500 It seems that the accounts kept by or under the supervision of the company's accountant for the year ended 30 June 2002 did show the deposits as loans. 346. There is no documentary evidence that PB acknowledged receiving the moneys in question as personal loans from DI, nor any evidence of the material terms of the alleged personal loans. The deposits represent a tacit acceptance by DI of a responsibility or desire to ensure that the company had sufficient capital, albeit loan capital, to function. 347. As pointed out earlier the cheques were paid into the company's account, mostly by DI. I reject the contention that all the payments or advances represented loans to PB. While the payment of $5000 about 4 April 2001 was in a special category and represented the repayment of money held by DI for PB, the other payments were to the company and not to PB. I reject the claim of the Iacullos to the sum of $25,039.50. Lease of the Coffee Shop 348. The Iacullos submitted that the terms of the written lease (in particular cl 1.1 (rent) and 28.14 (whole agreement) cannot be precluded by an alleged oral agreement (Hoyts Pty Ltd v Spencer (1919) 27 CLR 133 at pp 138, 139, 149, 143 and 147). Particular reliance was placed upon the observations of Isaacs J at 143 that the parties may agree to have one contract only and that: "if the parties agree to commit their agreement in writing, then what is written is the conclusive record of the terms of their agreement, and, unless it can be shown that the document was not intended as the complete record of their bargain, no oral evidence can be admitted to alter or qualify it." 349. The Iacullos further submitted that PB was bound by the terms of the lease whether she elected to read those terms or not. Toll (FGCT) Pty Ltd v Alphaharm Pty Ltd (2004) 219 CLR 165 at paras 19, 39, 42 and 45. 350. The Behrens, and PB in particular, sought to avoid liability under the lease of the coffee shop from the Iacullos to PB by contending that PB relied upon DI's representation that DI and PB would conduct the coffee shop business together, that there would be a three month rent free period and that there would be no rent and no wages payable unless and until the coffee shop was profitable. 351. The Iacullos submitted that the claim that the lease was procured by misleading and deceptive conduct failed. 352. The principal factual dispute is whether the alleged representation was made. The Behrens submitted that the Court should accept Mrs Behrens' evidence for the following reasons, on which I comment: (a) she did not have the financial ability to conduct the proposed café business on her own and finance the fit out and the establishment of the coffee shop business. Comment: There is much substance in the point. PB did not have the necessary operating capital to finance the fit out and establish the business. (b) it is highly improbable that PB would undertake the coffee shop venture from scratch without the promise of the assistance of a business partner such as DI. Comment: This point also has much substance. DI remarked on PB knowing how to handle the food (and drink) side of the business, but not its other aspects. PB had experienced difficulties in running the Cookie Man. She had a high regard for DI's business ability. The coffee shop was a significantly bigger venture. (c) her evidence of the no rent no wages representation was corroborated by UB. He was a forthright and honest witness and his evidence in this matter was not shaken in cross-examination. The attack on UB's credit for not including the "no rent no wages" conversation in his first affidavit was misconceived. His first affidavit of 2 June 2003 preceded the plaintiff's amendment to the Statement of Claim on 6 September 2004, which first introduced the separate claim against PB under the coffee shop lease. Comment: I was impressed by the honesty of UB and his simplicity of approach. I attach greater weight to his evidence on this point than that of PB or DI. (d) the deletion of cl 29 from the lease (the "no partnership" clause). PB believed she signed the lease in early April 2001. There was, it seems, some delay in sending it to the lessors' solicitors. By their FAX of 15 May 2001 the Iacullos' solicitors advised that they had been instructed that cl 29 of the lease was to be deleted. Curiously, by letter (FAX) of 17 July 2001, PB's solicitors wrote confirming their recent telephone conversation that cl 29 of the lease may be deleted. The deletion can only be explained on the basis that DI and PB wanted to be able to operate as business partners, with DI also being the landlord. DI contended that PB told him through her solicitor that cl 29 precluded him being a director of Flowers Café Campsie Pty Ltd. DI said, "The reason why it was decided was Paula asked me to remove it because she wanted me to be a director of her company." Comment: Clause 29 as drafted did not stop DI becoming a director of Flowers Café Pty Ltd and could not be so construed. I do not believe DI's explanations. (e) DI's evidence that he was a director "in name only" was an unconvincing attempt to distance himself from being PB's business partner and should not be accepted. Inter alia: (i) it is contrary to the evidence of his actual involvement in the affairs of the company (ii) his involvement covered the financial and administrative side of the company's affairs. He was a signatory to the company's cheque accounts and obtained and used internet banking access to the company's account. He had possession of the company's chequebook and drew cheques in favour of creditors. His wife also drew cheques on the company's accounts. He signed cheques in his own favour in respect of the rent payable under the coffee shop lease in March and April 2002, but did not present such cheques. His evidence that he signed these cheques by mistake as a knee jerk reaction was fanciful and should be rejected. DI did so apparently to claim GST input taxed credits for himself. The company could not do so, as it was accounting for GST on a cash basis and had not paid the rent. DI arranged and directed the fit out of the coffee shop He played a leading role in arranging finance for the fit out, although he always ensured that PB was the one ultimately financially liable. DI arranged additional finance for the fit out in August of $15,400, relying on an inflated invoice issued by On-Air Installations to Service Finance Corporation Pty Ltd, knowing that the air conditioning had been purchased by him in March 2001 (T44-46). DI's direct involvement is consistent with him being a business partner of PB, but not just a landlord. Comment: DI's involvement was extensive and reached into almost all aspects of the administrative and financial aspects of the coffee shop business. Until October 2001 these were the major aspects of that business as the coffee shop had not opened and the areas of PB's expertise (namely, food and drink) had not arisen. DI's conduct far exceeded the role of a landlord and also that of a non-executive director, even allowing for PB seeking his assistance. DI was dominating even for a partner. 353. PB also relied on the contract message history of AGC, the entries in which suggest that DI was playing an active role in obtaining finance from AGC and in the dispute with Innovation Finance (Exh B, p 558), DI arranging insurance (at PB's request according to DI) and his attending a meeting with the company's solicitors in early March 2002 to obtain advice as to suing the shop fitter. The matters mentioned in this paragraph are not as weighty as those mentioned in the previous paragraph. DI's knowledge of the fit out would have been useful to the company's solicitors. 354. PB contended that her reliance upon DI's representation that they would conduct the business together, that there would be a three month rent free period and half rent for two months and that there would be no rent and no wages payable unless and until the café was profitable, was not displaced by the subsequent conduct of PB in attempting to arrange finance for the fit out herself in mid-2001. I think that this is so. Instead of DI providing the finance for the fit out as was originally intended, DI wanted the finance to be raised by PB and for her to assume the liability for doing so. DI still intended to effectively control the coffee shop business. 355. PB also submitted that she only assumed liabilities as guarantor of the finance leases on the assumption that DI was also responsible indirectly, as a director of the company. It was contended that it was not to the point that her belief as to DI's legal liability may have been misplaced. 356. In their submissions attempting to rebut the alleged misrepresentation about March/April 2001 that DI and PB were in the coffee shop venture together, with no rent and no wages payable until it was profitable, the Iacullos contended that: (a) the claim that DI had misrepresented the existence of a "partnership" turned out to be no more than that he agreed to be a director of a company wholly owned by PB. Comment: This understates the position. PB and DI did agree that there should be a company with each of them as a director. PB did not seem to understand fully the difference between a partnership and a company. There can still be a partnership even when the chosen vehicle in its implementation is via a company. (b) The claim that there was an anterior agreement that rent did not become payable until the business was trading or profitable, was inconsistent with the contemporaneous documents. Reliance was placed on the Disclosure Statement in which PB did not insert any details as to either agreements or responsibilities and, in effect, stated that there were none, the whole agreement clause in the lease and, most importantly, PB's instructions to her accountant. Those instructions state "$500 per week – first 3 months rent free", "We need a shelf company as soon as possible", and "Dominic is guarantor for all the financing". Comment: The discrepancy between 2½ months and 3 months as the rent free period is not a matter of major concern. However, the omission of the substance of the major alleged misrepresentation from her instructions is a matter of major concern. PB's explanation for not including this detail was unsatisfactory. PB did not tell her solicitors of the alleged representation (or agreement). (c) the failure of UB to refer to any such agreement in his affidavit of 2 June 2003, even though he knew the matter was a serious issue in the proceedings. Comment While UB did not set out the particular conversation verbatim in that affidavit as he did in para 14 of his later affidavit, UB does, in his earlier affidavit, when recalling another later conversation, state: "You remember the deal you had with Paula was that there is no rent, no wages until the business makes a profit. If you want back rent, then Paula should get back wages." This reference to "the deal" and its substance robs the criticism of much of its force. There is the second and perhaps lesser point that as at 2 June 2003 there was no claim for rent and damages under the coffee shop lease. As earlier stated, I thought that UB was an honest witness (d) the Behrens' "current" recollections are most likely based on bits of conversations that occurred during the negotiation of the lease agreement overlaid (either consciously or unconsciously) with self interest. At most what they are capable of proving is that at some time during the negotiations there was a discussion about the rent free period being greater than that which was finally offered. They do not establish that this remained the position as at the date the lease was executed. Comment: I do not agree with this submission. The draft lease did not stipulate the rent free period. That was contained in the letter of 26 February 2001 from Michell Sillar. The Disclosure Statement was signed by PB on 5 March 2001, although the FAX forwarding it was sent on 22 February 2001 to Glow Automotive. It seems that discussions about the proposed coffee shop venture and the lease probably took place in March 2001, while PB was deciding whether to renew the Cookie Man lease. UB thought that the conversation as to no rent and wages being paid took place around March/April 2001 and that is probably correct. This was important. Without that term or representation PB was in no financial position to proceed and could not have done so. It was also important to PB that they were in the venture together. She could not proceed on her own. DI wanted a coffee shop because of the money he thought this would make. (e) The Iacullos further submitted that even if there had been an actual agreement in March 2001 regarding when rent would become payable under the lease, it cannot be claimed that the earlier agreement somehow constitutes misleading and deceptive conduct. Reliance was placed on the decision of the High Court in Toll (FGCT) Pty Ltd v Alphaharm Pty Ltd (2004) 219 CLR 165, especially at paras 19, 39, 42, 43 and 45. 357. In Toll the authorised signing officer of the distributor signed a credit application which "invited him to read the terms and conditions on the reverse before signing". He was not rushed or tricked into signing the document. He chose to sign it without reading it. He could have read it if he wished. Finnemores (later Toll) the carrier, did not set out to conceal from him [the signing officer] the terms and conditions of the document or to encourage him not to read them. Finnemores had no way of knowing that he did not read the document." (para 39) In such circumstances the High Court held that any suggestion that the agreement was vitiated by misrepresentation would be untenable 358. While there are factual differences between Toll and the present case, the principles in Toll should be applied, where relevant, allowing for all necessary changes. In the present case PB signed a letter of intent and, later, a Disclosure Statement. She had solicitors act for her on the lease, and chose to tell neither them nor the accountant of the representation made (or the agreement which had been reached) as to the payment of rent and wages. The provision as to no rent for 2½ months is contained, not in the lease, but in the letter of the solicitors for the lessors, of 26 February 2001, forwarding the lease. In May 2001 DI deleted the no-partnership clause in the lease and this was raised again in July 2001 by PB's solicitors and confirmed. The rental provisions remained. The lease was stamped on 17 July 2001 and re-lodged for registration on 21 December 2001. The evidence does not disclose why re-lodging occurred and whether this is of any importance 359. PB relied on an "arrangement" (and I use a neutral term), made with DI. The Iacullos treated the "arrangement" as an oral agreement which could not stand in view of the terms of the executed written lease, whereas the Behrens treated it as a misrepresentation. Of course, the Behrens' approach went hand in hand with their assertion that DI and PB went into the coffee shop business venture together. 360. The letter of the lessors' solicitors of 26 February 2001 refers to the agreement that the "first 2 months of the term of the lease shall be the rent free period and the third month shall be at half rent." It also states that PB "is entitled to rely on this letter in entering into the lease". 361. The evidence of UB corroborates the "no rent no wages until the coffee shop was profitable" arrangement. UB also refers to DI referring on New Year's Eve 2000 to "their being business partners". That was at a very early stage. His subsequent evidence does not deal with the partnership issue expressly, but he paints a picture of them acting together. 362. In her affidavit of 25 November 2003, PB said that in January/February 2001 she made it clear to DI that she was not interested in going into business on her own because of her experience of running the Cookie Man on her own. In reply he had assured her that they would go into the coffee shop business as partners. PB said that she told DI before the end of the Westfield lease that she and UB did not have any funds to put into the coffee shop business and he responded that they would not have to pay anything up front. PB said that in early April 2001 she and DI agreed to set up a company. I have earlier referred to the incorrect evidence PB gave as to the setting up of the company and her knowledge of being the sole shareholder. I have also traced briefly the subsequent history including her entry into the finance guarantees, and DI's desire not to have his name associated with the coffee shop venture other than as a landlord. 363. The actual role discharged by DI during the fit out and the early operation of the coffee shop was that of the dominant partner and far more than that of the landlord or a non-executive director or a consultant. As earlier mentioned, on an occasion between 11 April 2001 and the signing of the contract in July 2001, Romano Pacione, on noting the role played by DI asked why he was involved in all of this (the fit out) and received the reply, "Well, Paula is my business partner, but she has only run Cookie shops … she doesn't know anything about this fit out stuff." RP knew that the company Flowers Café Campsie Pty Ltd would be operating the coffee shop. 364. Mr Kontobasi refers to DI stating, "Me and Paula are operating the Café." At that stage DI and Kontobasi were close associates. Mr Kontobasi's description of DI's role and his activities was that of a dominant partner and not that of a non-executive director. 365. In considering the documents and the alleged misrepresentation it is important not to lose sight of the role and functions which DI respectively played and exercised. The evidence of Messrs Pacione and Kontobasi as to DI's role was persuasive. The "no partnership" clause was deleted from the lease. That was no idle act. So far as he could, DI, while giving her assurances that they were in the coffee shop business venture together, wanted to ensure that PB was responsible for all liabilities in connection with the operation of the café and that he controlled the financial and administrative aspects. That is what happened. The company was the vehicle for DI to achieve his aims. It took some time for PB to realise that she was being manipulated. PB's role was that of the foot soldier and the person to undertake obligations and give guarantees. It is a great pity that PB did not tell her professional advisers all the relevant facts and place the full picture before them, rather than placing her trust in DI. In that she was foolish. Her subsequent falsehoods in an effort to extricate herself from the position in which she found herself were regrettable. 366. I accept that during the course of contract negotiations, the parties may change their positions. They may take extra steps to protect themselves, rearrange, or minimise their liabilities. 367. I have reached these conclusions: (a) DI represented to PB in March 2001, prior to her entering into the coffee shop lease, that they would conduct the proposed coffee shop business together, and in conjunction with that representation made representations that there would be a 2½ month rent free period under the coffee shop lease and that there would be no rent or wages payable until the coffee shop business was profitable. (In the evidence there is a reference to an initial rent free period of 3 months and also to 2 months thereafter at half rent. While the representation as to the longer period was probably made, it is unnecessary to take this point further, as I am satisfied that no rent was payable unless and until the coffee shop business was profitable and it was not profitable as at 12 November 2002) (b) In substance what DI represented and proposed was a partnership with PB running the coffee shop and DI bringing his business experience to bear in the setting up of the shop and in managing the financial aspects of the business. It was envisaged that once the coffee shop business became profitable PB would pay DI rent at the agreed rate and PB would be paid a weekly wage ($500 pw) with the profits to be split equally between them. How this would be achieved had not been agreed. This could have given rise to problems. (c) Flowers Café Campsie Pty Ltd was formed as the vehicle to give effect to their joint intention to operate the coffee shop business together. DI used the company to minimise, if not eliminate, any personal liability on his part. PB assumed, as guarantor, liability under the financial leases. (d) DI in fact exercised the role of the dominant partner, controlling the financial and administrative aspects of the business. His role was far greater than that of landlord and non-executive director. Cross Claims 368. The Cross Claims repeat paras 11to 42 of the Amended Defence to the Further Amended Statement of Claim, The repeated paragraphs presently relevant to the coffee shop lease are paras 24 to 42 (both inclusive). They cover the defence and claim under the Fair Trading Act, the Contracts Review Act and under the general law. 369. In their final written submissions the Behrens concentrated as to the coffee shop lease on what they described as the misleading conduct of DI and relief under the Fair Trading Act. In their initial submissions, which were incorporated into their final submissions, the Behrens sought relief under the Fair Trading Act as to the coffee shop lease. The initial submissions were lodged just prior to the hearing starting. As to the coffee shop lease I have considered the position under the Fair Trading Act. 370. The Behrens submitted that the representations by DI in relation to waiving payment of rent and the rent free periods were representations as to a future matter and are taken to be misleading by s 41 of the Fair Trading Act because DI (on behalf of the Iacullos) did not have reasonable grounds for making such representations. Despite what he said, he did not intend to waive the rent of the coffee shop unless and until the coffee shop business was profitable. He referred to obtaining "back rent". 371. By letter of 30 October 2002 DI and LI demanded payment of $20,836.31, being the alleged outstanding rent for the coffee shop, GST, interest and legal costs within seven days. They also made a without prejudice offer applicable in the event of the sale of the business and required to be accepted within five days of 30 October 2002. 372. The Iacullos, in exercise of their purported right of re-entry, re-entered the coffee shop and excluded PB. The Iacullos had the locks changed. By notice to PB dated 12 November 2002, and delivered that day DI and LI terminated the lease of the coffee shop upon the stated ground of "failure to pay the rent for a period in excess of fourteen (14) days, i.e., since 1 March 2002." PB was in no position, financially, to resist her eviction. By letter of 12 November 2002 to PB, DI and LI advised that they would give her a limited right to access the coffee shop. She was advised to make arrangements with their real estate agent, David Kay Pty Ltd for access to occur before 26 November 2002. On 13 November 2002 on the letterhead of the real estate agent PB made arrangements for the removal and collection of food perishables from the coffee shop. PB was required to return all keys of the property. 373. By FAX sent on 15 November 2002 by PB addressed to DI and faxed to David Kay probably by DI, PB asked to be advised of a suitable time to "access the shop and remove my things." The FAX continued: "Items not leased, Coffee machine, grinder, radio, plates, cutlery, glasses, microwave, salamander, utensils, tables/chairs, pots/pans, milkshakemaker, trays, personal papers, cheque book, money in register, stock etc. Items leased, Fridges, freezers, fixtures etc. Icecream fridge needs to go back to Cadbury ice cream Coffee cups, umbrella, barriers need to go back to Schibells coffee. Natalie from Innovation Finance is waiting to hear back with a time so that the leasing companies can take back their equipment. Please Fax your response to me ASAP …" 374. By letter of 18 November 2002 and stated to be faxed on 19 & 20 November 2002, DI and LI asked PB to make arrangements with Graham Sun of the real estate agents, or with David Bannerman of Michell Sillar. 375. By FAX bearing date 26 November 2002 Mr Sun, of the agent, advised "Further to the landlord's notice of 12 November 2002 we advise that today is the final day to have your goods/equipment removed from the premises" and "Please contact me should you intend to proceed." 376. The accounts of Michell Sillar reveal that DI consulted with them as to the "removal of the lessee's goods, issues arising from the proposed purchaser of the business seeking to purchase the business, removal of the sub-tenant's goods." 377. Negotiations took place between the real estate agent and Innovation Finance Pty Ltd as to equipment located at the coffee shop and financed by Service Finance Corporation Limited, AGC Limited and Australian Integrated Finance Pty Ltd respectively. By FAX of 26 November 2002 Innovation Finance asked the agent if any of their clients were interested in taking over the contracts or making an offer on the equipment. On 26 November 2002 the agent sent copies of the summaries of the finance contracts to DI. 378. By its Business Sales Advice of 13 March 2003 headed: "Sale: Coffee Shop Re: Sale of Business" Century 21 Parkside advised: "… Purchase Price: $50,000 Lease: Grant of New Lease Rent Period: 3 years Option: 3 years & 3 years Rent: 550 & GST pw" 379. Ultimately, DI paid the following sums to the finance companies (inc GST): (a) Service Finance Corporation Ltd $ 2,500 - purchase of air conditioner - invoice dated 2.4.03 (b) Australian Integrated Finance - purchase of 4 pieces of equipment - invoice dated 14.4.03 $11,000 (c) AGC Limited - purchase of kitchen fittings and kitchen furniture - $10,000 $23,500 DI already had a purchaser for these items. 380. About 15 April 2003 the Iacullos, according to their invoice, sold this equipment for $55,000 ($50,000 & GST of $5,000) to M & P Troulis, the incoming tenants of the coffee shop). While the sale agreement for the equipment does not bear a date, it specifies the settlement date as 16 April 2003. The lease bears date 7 April 2003, with the 3 year term commencing on 1 May 2003 and an option for 3 years. The monthly rent was $2383.33 381. The agent (Century 21 Parkside at this stage) rendered an account for commission of $8000 re "Sale of Shop". 382. The remittance advice of the Iacullos' solicitors to Century 21 Parkside reads: "Mr D & Mrs L Iacullo Sale of Shop 4, 571-573 Canterbury Road, Campsie, Business broker commission." 383. The account of Michell Sillar of 17 April 2003 reads "Drafting … the lease for Iacullo Sale of Business." 384. Taking into account the commission of $8000 and GST of $5000 the Iacullos made approximately $18,000 on the purchase and sale of the equipment and fittings of the coffee shop. It was an easy, no risk arrangement because the Iacullos had a definite purchaser before they agreed to purchase the equipment from the financiers. 385. As RP pointed out, some of the equipment was custom made for the coffee shop. What is apparent is the close link between the purchase and use of the equipment and the lease. They are inter-connected. A Coffee shop equipment for use in the business was being sold along with the grant of a new lease. Conversion 386. PB has complained that the Iacullos refused her access to allow her to take back and have otherwise not returned to her a coffee espresso machine, a coffee grinder, a focaccia press, a radio and the equipment the subject of the finance leases. 387. The letter of 12 November 2001 of DI the Iacullos, while stating an intention to give PB a limited right of access to the coffee shop before 26 November 2002 on conditions, makes no reference to whether she can remove any items. The note signed by PB on 13 November 2002 refers to the removal of perishable food items from the shop by the agent, or authorised agents, their collection by PB and the return of all keys. I have earlier referred to PB's FAX of 15 November 2002 apparently sent to DI and the Iacullos' letter bearing date 18 November 2002. This does not make clear what PB was to be allowed to collect. The FAX of 26 November 2002 from the agent to PB refers to that being "the final day to have your goods/equipment removed from the premises." There is no specification of PB's goods/equipment. On the same day three faxes were received from Innovation Finance. PB assumed, or was told, that Innovation Finance would wish to collect the leased goods from the coffee shop. Because of the default, or impending default, the financiers would probably not accept PB removing the leased goods. 388. A stalemate had developed. Innovation Finance, on behalf of each financier, was seeking somebody to take over the existing leases or purchase the equipment. In the ensuing months it seems that Innovation Finance on behalf of the financiers was content for the leased equipment to remain in the closed coffee shop. It seems that in February-March 2003 DI entrusted the re-letting of the shop and the sale of the business/equipment to another agent, Century 21 Parkside, which was able to find a purchaser for the business/equipment at a substantial profit for the Iacullos, and a new lessee for the shop. The equipment in the shop was of use to a lessee proposing to conduct the business of a coffee shop. The evidence suggests that the premises were well fitted out for a coffee shop. 389. It is too late and impracticable to order the return of the goods which PB asserts belong to her. There was no admissible evidence of the value of those goods, but the estimated cost/value in para 36 of the Amended Defence was $2400-$3400 and a little more in subsequent documents. In the absence of any reliable evidence of value, it is not possible to make any award of damages in her favour. PB is not entitled to maintain any claim for conversion in respect of the leased goods in the circumstances of the present case. 390. PB did not dispute that substantial amounts were owed to the finance companies under the leases. The payout figures (calculated about November 2003) were estimated to be: (a) AGC $21,231.13 (b) AIF $20,343.48 (c) SFC $13,919.93 $55,494.54 391. PB said that as at 25 November 2003 SFC had commenced proceedings against her, claiming $14,887.42 plus interest and costs. The materials do not reveal whether the financiers have given credit for the amounts received from DI as the purchaser of the equipment and what the present indebtedness is said to be. Relief Claimed: 392. In their final submissions the Behrens sought the setting aside of the coffee shop lease and an order that the Iacullos indemnify PB in respect of her liability under the finance leases. It was further submitted that if the Court concluded that it should not provide relief in respect of the finance leases, relief should be granted in respect of the liabilities assumed by PB under the café lease. I have earlier summarised the relief claimed by the Behrens in their cross-claim. 393. Should the lease of the coffee shop be set aside? When she signed the lease PB knew that she had to comply with its terms. I have found that the lease was entered into as a result of a material misrepresentation on the part of DI that he and PB would carry on the coffee shop business together and that no rent and no wages would be payable unless and until the coffee shop business became profitable. I am satisfied that it did not become profitable in the period from mid-October 2001, when it opened up, to 12 November 2002. PB would not have entered into the lease if the misrepresentations had not been made. As at 12 November 2002 the lease had, according to its terms, commenced on 1 March 2001. 394. Rather than setting aside the lease, would the better course be to vary the terms of the lease by adding at the end of cl 1 a proviso in these terms: "Provided that no rent shall be payable by the lessee to the lessors unless and until the coffee shop business becomes profi6able, that is able to pay the rent and a weekly wage of $500 to the lessee." That only gives effect to part of the material misrepresentation. As the lease would not have been entered into but for the misrepresentation, the lease should be set aside. PB ceased to occupy the coffee shop from 12 November 2002. 395. There would be an accompanying declaration that as at 12 November 2002 no rent or occupation fee was due and payable by PB to the Iacullos. 396. PB signed the finance leases knowing that she was liable as guarantor. As earlier mentioned the loan in respect of Service Finance Corporation Limited was in respect of an air conditioning system for which an invoice with an inflated cost of $15,000 was submitted. Its cost was about $6500 plus GST. The air conditioning unit in the coffee shop and those in the other two areas of the Iacullos' premises, were fitted at the same time in early 2001. DI had paid a company known as Air-On Installations for the air conditioning unit. DI said that PB subsequently arranged finance on that unit. He was aware that was happening. The maximum amount which the financier was prepared to lend was $14,000 plus GST. DI said he had difficulty in answering the question which asked him whether he said he had no involvement in raising that finance. DI was then taken to a FAX dated 9 August 2001 from Innovation Finance to him. His assistance was sought in having the air conditioning unit supplier complete an invoice for the supply of the unit. A pro forma invoice setting out what was required was attached. The FAX read "… could you please have the attached invoice prepared and forwarded by FAX to 02 8 817 0058." That was the FAX number of Innovation Finance. The FAX continued that they had arranged "for the cheque to be directly deposited into your account today …". The FAX also stated "… the invoice will need to be forwarded to the funder for settlement." In the bottom right hand corner of the pro forma invoice some person has written "9774 1822 Fax". That is the Fax number of Air-On Installations. (also referred to as "On Air Installations"). 397. There is a Tax Invoice bearing date 3 August 2001 from Air-On Installations addressed to Service Finance Corporation Ltd for "Supply and Install New Actron … Air Conditioning System" for $15,400 (inclusive of GST). This evidence was given by DI: "Q. And what I'm putting to you is you faxed … the pro forma invoice to On-Air Installations. A. I reiterate the fact that Paula did not have a fax machine and she requested me to fax it on her behalf." 398. DI said that possibly before he sent the FAX he had a telephone conversation with a man known as Paul from On-Air Installations to tell him it was coming, but he could not remember what happened three years ago. DI in truth remembered that conversation. 399. DI agreed that the purpose of that conversation was to explain to On-Air Installations that he was requesting them to complete an invoice in the manner which subsequently appeared (referred to earlier). He also agreed that the purpose of this invoice was to obtain finance from Service Finance Corporation for $15,400. 400. DI agreed that the number noted on the bottom of the FAX from Innovation Finance in handwriting was the serial number of the air conditioning unit for which On-Air Installations invoiced the finance company. 401. DI agreed that he knew the air conditioning unit was not valued at $14,000 or $15,000 and that the invoice given to the finance company was untrue and explained his actions thus: "That was a deal that Natalie [Uren of Innovation Finance] and Paula arranged amongst themselves and they requested to me to ring Air-On on their behalf." Later on DI said: "I didn't request that invoice from Air On, Paula did, I just faxed it across. I've made that very clear earlier." 402. I do not believe DI when he seeks to blame PB and exonerate himself. DI, as a director of the company, was dealing with this matter and contacting both Innovation Finance and Air-On Installations. He had previously dealt with the latter. He was the architect of and the person who carried out the fraud on SFC. DI appreciated the need for capital. 403. The bank statements of the company reveal that on 21 August 2001 $15,400 was paid into the company's account. At that point there was a credit balance in the account of $108.14. Between 22 August 2001 and 12 September the credit balance was used to meet about ten cheques and one pre-authorised automatic withdrawal, that is, it was used as if it were capital and fully expended. 404. While DI organised and carried out the fraud it seems that both DI and PB benefited in that it allowed Flowers Café Campsie Pty Ltd to meet a substantial number of cheques to help it become operational. PB signed the lease documents with SFC as guarantor. In all the circumstances DI should be ordered to indemnify PB in respect of three-quarters of the amount which remains owing to SFC. 405. As to the other two finance leases it seems that the moneys for the fit out and equipment were paid to R & C and that Innovation Finance may have allowed excessive funds to be paid to R & C. PB was aware that she was guaranteeing the company's obligations under the finance leases to AIF and AGC. DI was the effective organiser of the fit out and the finances and the dominant partner. DI represented to her that they would carry on the business of the coffee shop together. The appropriate order is that DI should indemnify PB in respect of half the amount outstanding under the finance leases to AIF and AGC. In fixing these shares I have not taken into account the profit which DI made on the purchase and sale of the equipment in the coffee shop The air conditioning unit did not form part of that equipment. 406. In their Further Amended Notice of Cross Claim the Behrens sought an order that the matter be referred to the Master, Equity Division, to take accounts of and to enquire of all dealings and transactions between PB and the cross defendants with respect to the coffee shop business. 407. I have decided not to follow that course. The dealings and transactions of the parties were deployed fairly fully before me. Taking accounts and holding an enquiry would be very expensive and the costs of that would not be justified, having regard to the relatively small amounts involved in these proceedings. The declarations and orders I propose will sufficiently resolve the matters in issue between the parties. Further proceedings would not be warranted. 408. These proceedings should be disposed of as follows: (a) Dismiss the claim for judgment for possession of 82 Glamis Street, Kingsgrove, being the land descried in Folio 92/14705 of the Real Property Act Register. Leave to issue a writ of possession refused. (b) Dismiss the claim that the Behrens pay the Iacullos the sum of $50,000 together with interest. (c) Declare that the Loan Agreement between the Iacullos and the Behrens and the mortgage executed by the Behrens over 82 Glamis Street, Kingsgrove, are unenforceable and that the Behrens hold 82 Glamis Street, Kingsgrove, free from Mortgage 895 3490K. (d) On the alternative claim of the Iacullos for $12,080.98 for outstanding rent for 29 Bower Street, Roselands, there seems to be an outstanding balance of $87 to be addressed when the Short Minutes are settled. (e) Dismiss the alternative claim of the Iacullos for $25,039 for alleged cash advances to PB (f) Set aside the lease No 8053407S from the Iacullos to PB as to the coffee shop, 571-573 Canterbury Road, Campsie, folio identifier 1/1020408. (g) Declare that no sums are due by way of rent or damages by PB to the Iacullos in respect of the coffee shop. (h) Order that DI indemnify PB as follows: (i) As to the amount due to Service Finance Corporation Limited under the air conditioning lease – three-quarters of such amount. (ii) As to the amount due to AGC Limited under the lease of various items of kitchen equipment – one half of such amount. (iii) As to the amount due to Australian Integrated Finance Pty Limited under the lease of dishwasher, gas stove, p[an fryer and freezer – one half of such amount. (i) Dismiss the claim for damages for conversion. 409. I direct that the Behrens deliver draft Short Minutes of Order to give effect to this judgment to the Iacullos and to my associate within 7 days. Within a further 5 days the Iacullos are to notify my associate and the Behrens of all objections to such Short Minutes. The Short Minutes will be settled 14 days from today or on such other day as may be arranged with my associate. At that time I will also hear submissions as to costs. ********** 13/03/2006 - - Paragraph(s) 14/03/2006 - paragraph 13 lost in original entry on system - Paragraph(s) para 13 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.