Supreme Court New South Wales Medium Neutral Citation: Hedgehog Construction Services Pty Limited v Chobe Pty Limited & Anor; Chobe Pty Limited v Sydney Sand & Soil Pty Limited & Ors [2012] NSWSC 131 Hearing dates: 20/02/2012 Decision date: 27 February 2012 Jurisdiction: Equity Division Before: Einstein J Decision: 1. The statement of claim in matter 2009/288373 be dismissed. 2. Hedgehog Construction Services Pty Ltd remove its caveats (caveat number AD700006H and caveat number AD700010S) over the defendants' Euston Road properties. 3. The purported loan agreement dated 2 February 2007 between Chobe Pty Ltd, Volwave Pty Ltd, Blue Mountains Helicopters Pty Ltd and Sydney Sand and Soil Pty Ltd is void and of no effect. Catchwords: Dispute over purported loan agreements. Evidence Act - s 69 business records - s 136 general discretion to limit use of evidence. Real Property Act - s 74P - caveat lodged 'without reasonable cause'. Damages - trespass - illegal dumping of materials. Legislation Cited: Evidence Act 1995 (NSW) Real Property Act 1900 (NSW) Cases Cited: Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 National Australia Bank Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd (1990) 21 NSWLR 96 Category: Principal judgment Parties: Hedgehog Construction Services Pty Limited (Plaintiff 2009/288373) Chobe Pty Limited & Anor (First Defendant 2009/288373; First Plaintiff 2009/291124) Volwave Pty Limited (Second Defendant 2009/291124; Second Plaintiff 2009/291124) Blue Mountains Helicopters Pty Ltd (Third Plaintiff in 2009/291124) Sydney Sand & Soil Pty Ltd (First Defendant 2009/291124) George Abboud (Second Defendant 2009/291124) Jillian Abboud (Third Defendant 2009/291124) Gino Robert Cassaniti (Fourth Defendant 2009/291124) Representation: Counsel: Mr P Beazley (Plaintiff 2009/288373) Mr D Allen (Defendants 2009/288373; Plaintiffs 2009/291124) No appearance (All defendants 2009/291124) Solicitors: Beazley Singleton Lawyers (Plaintiff 2009/288373) Proctor & Associates (Defendant 2009/288373; Plaintiff 2009/291124) File Number(s): 2009/288373; 2009/291124 Judgment The proceedings 1The proceedings before the Court concern two matters to be listed together, with evidence in one being evidence in the other. 2The parties to the first proceedings are: (a)Hedgehog Construction Services Pty Ltd ["Hedgehog"] (the plaintiff) (b)Chobe Pty Ltd ["Chobe"] (the first defendant); and (c)Volwave Pty Ltd ["Volwave"] (the second defendant) 3The first proceedings began on 15 April 2009 as a summons seeking the extension of a caveat lodged by Hedgehog over properties owned by the defendants. On 17 July 2009 Hedgehog filed a statement of claim. The defendants filed an amended defence on 9 July 2010. 4The parties to the second proceedings are: (a)Chobe and Volwave (the first and second plaintiffs) (b)Blue Mountains Helicopters Pty Ltd ["Blue Mountains Helicopters"] (the third plaintiff) (c)George Abboud (the second defendant) (d)Jillian Abboud (the third defendant) (e)Gino Robert Cassaniti ["Gino"] (the fourth defendant) 5The second matter began on 30 October 2009 as a summons seeking the removal of a caveat lodged by Sydney Sand & Soil Pty Ltd ["Sydney Sand & Soil"]. On 25 March 2010 Chobe, Volwave and Blue Mountains filed a statement of claim. On 14 February 2012 the plaintiffs filed an amended statement of claim. Sydney Sand & Soil is no longer a party. It has been deregistered after being placed into voluntary administration. No defences have been filed. 6Chobe is the registered proprietor of land comprised in Folio Identifier D/339558 and known as 1 Euston Road Rydalmere; 7Volwave is the registered proprietor of neighbouring land being land comprised in Folio Identifier 62/9077 and known as 3 Euston Road Rydalmere; 8Blue Mountains Helicopters is the registered proprietor of land comprised in Folio Identifier 7/739108 and known as 5 Hume Road Smithfield [" 5 Hume Road "]. 9The Chobe and Volwave properties [ "Euston Road" ] adjoin and form a single block. The Hedgehog matter 10The pleadings in the Hedgehog matter raised the following issues: (a)Hedgehog says that Gino Cassaniti, as agent of Chobe, engaged Hedgehog to undertake building works on Euston Road for the sum of $200,000. Chobe says that Gino Cassaniti was not the agent of Chobe and accordingly Chobe did not enter into such an agreement. Chobe says that Gino Cassaniti, without the authority of Chobe, permitted Frank Condo, Abboud and another member of the [motorcycle club] Finks, Trent Doughty, to build a temporary club house on Euston Road in return for undertaking some work to remediate the site. (b)Hedgehog then says, because Chobe could not pay a progress payment for the work, a loan agreement was entered into for the contract price of $200,000 and that this amount is due and owing because the work was completed. Hedgehog relies upon a Loan Agreement and a supporting caveat, which it says were executed by Gino Cassaniti as director of Chobe. Chobe says Gino was not the director or agent of Chobe and the loan agreement was entered into without the authority of Chobe. Chobe further says that the work was not undertaken by Hedgehog or completed and hence, even if there was an agreement to pay $200,000 for the work, the contract was not performed by Hedgehog and therefore it has no right to be paid. (c)Chobe's main case however is that the loan agreement was created to defraud Chobe of $200,000. 11The pleadings pursued by the plaintiff in this matter seek that the defendants pay to the plaintiff the sum of $ 200, 000 interest pursuant to a loan agreement between the parties at the default rate of 12% per annum from 14 April 2007 until the date of payment. 12A number of other matters were pleaded by the plaintiff in its statement of claim dated 17 July 2009, but not elucidated and not subsequently treated with in final submissions before the Court. The plaintiffs' submissions dated 17 February 2012 state that by agreement, the parties sought to litigate the dispute over the loan agreement in these proceedings, and seek to recover on the loan agreement. The central issue 13During the course of the hearing, it became clear that the central threshold issue was whether the loan agreement in question was executed between the plaintiff and the defendants. 14If this cannot be established on the evidence before the Court then the remainder of the plaintiffs' arguments fall away. 15Philip James Beazley, solicitor for the plaintiff, deposes in his sworn affidavit of 17 June 2010 at paragraph 2 that he drafted a loan agreement between the plaintiff and the defendants, but does not know where the original document is. 16A document forming part of this affidavit (labelled "Annexure A"), purporting to be a draft loan agreement prepared by Mr Beazley between the plaintiff and the defendants, was presented to the Court. The admissibility of this document became a point of some contention. The first voir dire 17The admissibility of the purported loan agreement document is the subject of a voir dire. It is appropriate to treat with this issue at this stage. 18Mr Beazley representing the plaintiff argued that the document could be tendered as a business record under s 69 of the Evidence Act 1995 (NSW). 19This section reads as follows: 69 Exception: business records (1) This section applies to a document that: (a)either: (i)is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business; or (ii)at any time was or formed part of such a record; and (b)contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business. (2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made: (a)by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact; or (b)on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. 20The plaintiff suggested that s 69 is applicable in these circumstances because the loan agreement is a document prepared for the purposes of the business of the plaintiff. The defendants argued firstly that the document is not necessarily a business record as there is no evidence of the document being kept as part of the business. In the alternative it was also argued that the document, if admitted, should be limited only to proof of the document having being drafted and not as proof that it was executed or that there was any agreement between the plaintiff and defendants. 21In my view, the appropriate course to take is to admit the loan agreement document into evidence under the business records provision in s 69, but to limit the use to be made of this evidence under the general discretion provided by s 136. I am of the view that the exercise of this discretion is warranted in the circumstances of this case because of a danger that a particular use of the evidence might be unfairly prejudicial to the defendants, or misleading or confusing. The Court therefore limits the loan agreement documents beginning at page 326 of the court book and page 333 of the court book as documents forming respectively parts of caveat number AD700006H and caveat number AD700010S, and not as proof of an executed agreement. The Court also limits the loan agreement document beginning at page 5 (labelled 'Annexure A') of the affidavit of Philip James Beazley sworn 17 June 2010 to proof of the document having being drafted, and not as proof of an executed agreement. The Hedgehog loan agreement 22The Court is now in a position to determine the substantive issues with respect to the purported loan agreement. 23The first issue is that the plaintiff in this matter is not a party to the agreement presented to the Court. The plaintiff company in this case is 'Hedgehog Construction Services Pty Ltd'. The party described as the lender in the purported loan agreement is 'Hedgehog Constructions Pty Ltd'. Mr Beazley, who was responsible for drafting the agreement, presented evidence both in examination and in a sworn affidavit dated 17 June 2010 yet did not adequately explain this discrepancy. 24A second issue is that the evidence presented to the Court does not prove that the purported loan agreement was in fact properly executed. This is because the evidence does not make clear who signed the document, in what capacity they signed the document or when and where they signed the document. 25The document is not the original executed document, nor is the document dated. 26In the course of examination, Mr Beazley said the following: Q. To go further it's necessary for you to give evidence as to paragraph 2 in the affidavit that we've been looking at which was I think on 17 June 2010, is that correct? A. Yes, your Honour. Q. Please go ahead. A. I had a conference with Mr Trent Doughty and I had a conference - he brought with him Mr Abboud, sorry not Mr Abboud, Mr Frank Condo to my office. Mr Frank Condo asked me to draft a loan agreement. .... I obtained some instructions from Mr Condo as to what to put in the document as he sat across from me in my office and I typed the document which is Annexure A. I then printed the document which is Annexure A and I handed it to him. 27The plaintiff sought to rely on further evidence, the substance of which is contained in paragraphs 14 to 18 of the affidavit of Philip James Beazley sworn 17 June 2010: [14] I received the executed loan agreement and the executed caveats on 2 January 2008. Annexed hereto and marked " H " is the Registered post envelope, the internal yellow envelope and the front page of the Loan Agreement showing the date stamp. I was overseas until mid January 2008. [15] I stamped the original loan agreement on 15 January 2008 by personally attending the Office of State revenue, on level 3, corner of Hunter, Elizabeth & Castlereagh Street, Sydney. At the same time I stamped two caveats which are the caveats annexed to the affidavit of Francesco Condo sworn 14 April 2009 (at pages 5 & 12). The caveats were stamped for $10.00 each as collateral to the loan agreement. [16] Stamp duty on a $200,000.00 loan is $741.00 being $5.00 for the first $16,000.00 and $4.00 per $1,000.00 thereafter. Annexed hereto and marked " I " is a true copy of my cheque butt for cheque 3034 in the amount of $751.00 payable to the Office of State Revenue. Annexed hereto and marked " J " is a true copy of my bank statement showing the cheque having been presented. [17] Cheque 3034 was used to pay the stamp duty of the loan agreement and one of the caveats. I would have paid $10.00 cash for the second caveat. [18] I have been unable to locate the original stamped agreement. I have not been able to locate my account to the plaintiff nor the stamp duty receipts. 28The plaintiff sought to rely on two further pieces of evidence. The first was the affidavit of David Salvatore Cassaniti sworn 23 April 2009, at paragraph 22, in which David expresses the opinion that the signature on the loan agreement belongs to his brother Gino who he believes has signed as director of Chobe and Volwave. The second was evidence in the affidavit of Philip James Beazley sworn 17 June 2010 forming "Annexure G" and comprising Australian Securities & Investments Commission electronic search records showing Gino to be sole director, secretary and shareholder of both Chobe and Volwave as at 14 December 2007. 29The import of Mr Beazley's evidence (both in examination and in his sworn affidavit), taken together with other evidence presented by the plaintiff, is not determinative of the real issue here in dispute. Taken at its highest, it would serve to establish that: (a)The draft loan agreement document is the loan agreement he drafted; (b)The draft loan agreement document was drafted by Mr Beazley in the presence of Trent Doughty and Frank Condo, on the instructions of Mr Condo; (c)The drafted agreement was given to Mr Condo, and then later received by Mr Beazley, in a registered post envelope on which Hedgehog is noted as the sender; (d)Stamp duty was paid on the documents together with the caveats at the Office of State Revenue; (e)David Cassatini is of the opinion that the signature appearing on the loan document belongs to Gino Cassatini; (f)Gino Cassatini was according to ASIC records the sole director, secretary and shareholder of Chobe and Volwave as at 14 December 2007; 30When the totality of the evidence in this case is examined, it becomes clear, in my view, that the existence of a properly executed loan agreement, as the plaintiffs' case requires, is not established. Accordingly, that case must fail. 31In the circumstances I order that the statement of claim be dismissed. I also order that the plaintiff remove its caveats (caveat number AD700006H and caveat number AD700010S) over the defendants' Euston Road properties. The Sydney Sand Matter 32This matter raised two main issues. The first issue: the purported Sydney Sand loan agreement 33The first issue relates to the existence of a purported loan agreement for the principal sum of $1.5 million between Sydney Sand & Soil as the lender and Chobe, Volwave and Blue Mountains as the borrower. 34The plaintiffs' amended statement of claim filed on 14 February 2012 provides a background to this issue: [2] At all material times the Second Defendant [George Abboud] was the sole director and controlling mind of Sydney Sand. ... [3] On 8 July 2008 the Fourth Defendant [Gino Robert Cassaniti] had this Court appoint a Provisional Liquidator to the Plaintiff corporations. ... [9] During the provisional liquidation the Second and Fourth Defendant informed the Provisional Liquidator: (a) That he was the director of each Plaintiff corporation; (b) That the Plaintiff corporations jointly owed Sydney Sand $1.5 million; (c) That the Plaintiff corporations, because of the $1.5 million debt, were insolvent; ... [11] After 6 August 2008 all the Defendants gave the Provisional Liquidator a document titled, "Agreement" which was purportedly signed by the Second Defendant on behalf of Sydney Sand and by the Fourth Defendant on behalf of Chobe, Volwave and Blue Mountains Helicopters. [12] The "Agreement" purports to evidence an agreement between Sydney Sand and Chobe, Volwave and Blue Mountains Helicopters dated 2 February 2007. [13] The "Agreement" purports to contain the following terms: (a) Sydney Sand would lend Chobe, Volwave and Blue Mountains Helicopters $1.5 million. (b) That Chobe, Volwave and Blue Mountains Helicopters acknowledge receipt of the said sum. (c) Sydney Sand was entitled to lodge a caveat of 1 Euston Road, 3 Euston Road and 5 Hume Road. (d) The $1.5 million would be repaid with interest which was to accrue at 12% per annum. [14] No money was ever advanced or lent by Sydney Sand to Chobe, Volwave or Blue Mountains Helicopters. [15] The "Agreement" was not signed by anybody on 2 February 2007. ... [17] The "Agreement" was created by the Second and Fourth Defendants in order to: (a) Affect the winding up of the Plaintiff corporations. (b) Claim from the Plaintiff corporations money to which Sydney Sand was not entitled. (c) Obtain money from the Plaintiff corporations money to which the Defendants were not entitled and which the Second and Fourth Defendant could share between them. ... [23] On 26 February 2009 the proceedings brought by the Provisional Liquidator to have the Plaintiff corporations wound up in insolvency were dismissed and the provisional liquidation of the Plaintiff corporations was terminated. 35The substance of the plaintiffs' contentions is therefore that Sydney Sand & Soil, George Abboud and Gino Cassaniti conspired to defraud Chobe, Volwave and Blue Mountains Helicopters of $1.5 million by purporting to have those companies , through Gino Cassaniti as their purported director , enter into a loan agreement for $1.5 million which was never lent. 36No defences have been filed. Sydney Sand & Soil has been deregistered, and none of the other defendants appeared before the Court. 37In the absence of any arguments to the contrary, there is insufficient evidence before the Court proving the existence of an executed loan agreement. 38In these circumstances, I am left with no alternative but to order that the purported loan agreement dated 2 February 2007 between Chobe Pty Ltd, Volwave Pty Ltd, Blue Mountains Pty Ltd and Sydney Sand and Soil Pty Ltd is void and of no effect. 39Counsel for the plaintiffs, in the course of final submissions, also sought to rely on the provisions in s 74P of the Real Property Act 1900 (NSW), though this was not pleaded. This section provides for the payment of compensation to any person who suffers damage by a person lodging a caveat unreasonably. 40The section states the following: 74P Compensation payable in certain cases (1) Any person who, without reasonable cause: (a) lodges a caveat with the Registrar-General under a provision of this Part, (b) procures the lapsing of such a caveat, or (c) being the caveator, refuses or fails to withdraw such a caveat after being requested to do so, is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in paragraph (a), (b) or (c) compensation with respect to that loss. (2) Compensation referred to in subsection (1) is recoverable in proceedings taken in a court of competent jurisdiction by the person who claims to have sustained the pecuniary loss. (3) A person who is a caveator is not entitled to bring proceedings under subsection (1) (b) if that person, having had an opportunity to do so, has failed to take all reasonable steps to prevent the caveat from lapsing. 41A caveat is lodged 'without reasonable cause' where the caveator does not have an honest belief based on reasonable grounds that he or she has a caveatable interest: Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NS W LR 459 ; National Australia Bank Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd (1990) 21 NSWLR 96. 42In the present circumstances, in which no defences have been filed and no appearances made by the defendants, the Court is not in a position to properly assess the reasonableness of any belief held by any caveator as to the existence of any caveatable interest. As such, no order for compensation under this section is made. The second issue: dumping of materials on 5 Hume Road 43The other issue before the Court in this matter relates to paragraphs 30 to 35 of the plaintiffs' amended statement of claim, which read as follows: [30] Further in August 2007 the director of the Plaintiff Corporations was David Cassaniti. [31] In August 2007 the Fourth Defendant informed David Cassaniti that: (a) He and the Second Defendant were going to undertake work on 1 Euston Road and 2 Euston Road; (b) That materials would be removed from 1 Euston Road and 2 Euston Road and dumped on 5 Hume Road. [32] David Cassaniti replied by telling the Fourth Defendant that he was not permitted to: (a) Undertake work on 1 Euston Road and 2 Euston Road; (b) Dump materials on Hume Road. [33] At a time after that conversation the Second and Fourth Defendants dumped materials on 5 Hume Road. [34] In the premise the dumping of the materials was a trespass to 5 Hume Road. [35] The Plaintiff Corporations have suffered loss and damage as a result of the trespass, being the costs of remediating the site by removing the materials and the costs of dealing with Holyroyd City Council and paying fines imposed by Holyroyd City Council. 44The plaintiff in its submissions seeks damages for trespass and costs for the entire proceedings on an indemnity basis against the second and fourth defendants. 45In support of this claim the plaintiff referred to the affidavit of David Salvatore Cassaniti sworn 14 February 2012, in which David deposes that Gino had access to a key to the 5 Hume Road property, and that Gino told David that he would put rubbish from the Euston Road site on 5 Hume Road. The plaintiff also relies on the affidavit of Trent David Doughty sworn 5 February 2012, in which Mr Doughty deposes that George Abboud was present at the Euston Road site during the course of works. Additionally the plaintiff referred to the affidavit of Brian Gavahan sworn 7 July 2011, and the annexed exhibit "BG1", which is a report on costs and which suggests at 4.2.1 that the total estimated cost of removing materials at the 5 Hume Road property is $181, 494. 46The evidence presented to the Court does not in my view establish who is responsible for the waste materials at the Hume Road site, and is accordingly insufficient to establish the cause of action sought by the plaintiff in this part of its case. The second voir dire 47A further issue was the admissibility of a document contained in Annexure A to the affidavit of Francesco Condo sworn 14 April 2009. This was a document purporting to be a quotation issued by Hedgehog to Volwave and Chobe, dated Wednesday 13 th of August 2007, containing a signature the plaintiff says is that of Mr Condo, and setting out the scope of works the plaintiff says they have performed on the Euston Road property. 48The issue with this document related to the inability of counsel for the plaintiff to compel Mr Condo to come before the Court and give evidence. Mr Condo at the time of trial was incarcerated in South Australia, and counsel for the plaintiff in the course of the hearing stated that he had not been put into funds to be able to pay for a video link. The plaintiff suggested that if this document was not admitted into evidence the Court might not be in a position to understand certain other evidence, including paragraph 16(a) of the affidavit of Jim Kekatos sworn 15 February 2012 and Exhibit BG1 to the affidavit of Brian Gavahan sworn July 7 2011. In the result, the plaintiff sought to tender the evidence as a business record pursuant to s 69 of the Evidence Act 1995 (NSW). The substance of the objection to this document on behalf of the defendants was the suggestion that the report was not proven in the sense that in the absence of evidence from Mr Condo its authenticity could not be established. 49I am of the view that the document is admissible as a business record; however I propose to limit the use to be made of the evidence according to the general discretion provided by s 136, as to do otherwise might be unfairly prejudicial to the defendants in this matter, or misleading or confusing. In the absence of evidence from Mr Condo, the Court is not in a position to assess the authenticity of the document. Therefore the document contained in Annexure A to the affidavit of Francesco Condo sworn 14 April 2009 is not to be used as proof that the plaintiff in fact performed work pursuant to any purported agreement with the defendants. 50In the event that any of the parties who were represented seek to agitate questions of costs, they are to approach the Equity List Judge for a short hearing date. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 February 2012