Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Reliance Financial Services (NSW) Pty Ltd v Abdallah [2013] NSWCA 125 Hearing dates: 12 February 2013 Decision date: 20 May 2013 Before: Bathurst CJ at [1]; Beazley P at [134]; Macfarlan JA at [135] Decision: Appeal dismissed with costs [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: CONTRACT - construction - loan agreements - whether loan agreements were intended to be operative in accordance with their terms - whether primary judge made erroneous factual findings or failed to make necessary factual findings. Legislation Cited: Evidence Act 1995, s 128, s 140 Cases Cited: Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187; (2006) 66 NSWLR 186 Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 Manly Council v Byrne [2004] NSWCA 123 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449 Nominal Defendant v Clancy [2007] NSWCA 349 Nominal Defendant v Kostic [2007] NSWCA 14 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) [1999] HCA 3; (1999) 73 ALJR 306 Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority (1991) 24 NSWLR 156 Zurich Australian Insurance Ltd v Raman [2009] NSWCA 221; (2009) 53 MVR 273 Category: Principal judgment Parties: Reliance Financial Services (NSW) Pty Ltd (Appellant) Michael Abdallah (Respondent) Representation: Counsel: M Ashhurst SC and D A Allen (Appellant) A G Rogers and Ms Walsh (Respondent) Solicitors: Proctor & Associates (Appellant) Mitry Lawyers (Respondent) File Number(s): 2012/76132 Publication restriction: No Decision under appeal Jurisdiction: 9111 Citation: [2011] NSWSC 1507 Date of Decision: 2011-12-09 00:00:00 Before: Black J File Number(s): 2009/291209 Judgment 1BATHURST CJ: This is an appeal from a judgment of a judge of the Equity Division of the Court ("the primary judge") in which a claim by the appellant ("RFS2") as trustee of the Reliance Discretionary Trust ("the Trust") for recovery of an alleged debt due by the respondent in the sum of $1,271,000 was dismissed. 2On the appeal and it appears generally at the trial, there was no issue that payments in that amount, together with an additional $350,000, had been made to the respondent or a company associated with him, High Rise Developments Pty Ltd ("High Rise"), out of either a trust account operated by a firm of accountants, Cassaniti and Associates ("the trust account"), or what was described as a disbursement account of that firm ("the disbursement account"). It appears that Mr Sam Cassaniti ("Mr Cassaniti") at the relevant time effectively controlled the then trustee of the Trust, RFS1 ("the previous trustee"). Mr Cassaniti described the Trust as a vehicle out of which he made loans on behalf of his clients. 3The issue in the proceedings related to the characterisation of the payments. RFS2 contended they were loans to the respondent made pursuant to three Loan Agreements entered into between the previous trustee and the respondent; the first was dated 25 November 2002, the second 28 November 2002 and the third 2 December 2002. By contrast, the respondent contended that the payments were repayments of advances made by him to Mr Cassaniti. The advances were in the sum of $550,000 made in the middle of 2002 and in the sum of $900,000 following a conversation which occurred at the Black Stump Restaurant at Liverpool in August 2003. The primary judge preferred the evidence of the respondent. Background to the proceedings 4On 25 November 2002, the respondent and the previous trustee entered into a Loan Agreement pursuant to which the previous trustee agreed to lend the respondent the sum of $60,000. The Agreement contained an all moneys clause in the following terms: "2. The Borrower agrees to repay All Moneys Due to the Lender and/or Sam Peter Cassaniti t/as Cassaniti and Associates by the Borrower on the terms and conditions of this Agreement and acknowledges in this regard that 'All Moneys Due' wherever used in this Agreement means the Loan Amount together with all moneys owing to the Lender and/or Sam Peter Cassaniti t/as Cassaniti and Associates by the Borrower and/or any entity of which the Borrower is a Director or Shareholder either alone or jointly with another person or entity now or in the future, whether directly or indirectly or contingently under this Agreement or on any other account whatsoever and including all such money arising from any guarantee, deed, indemnity, account, document or any other agreement including interest (which may be capitalised or not at the discretion of the Lender) payable under this or any other agreement or on any judgment entered by the Lender and/or Sam Peter Cassaniti t/as Cassaniti and Associates in relation to any failure by the Borrower and/or any entity of which the Borrower is a Director or Shareholder in respect of All Moneys Due together with all costs, expenses, losses incurred or sustained by the Lender and/or Sam Peter Cassaniti t/as Cassaniti and Associates in relation to any failure by the Borrower and/or any entity of which the Borrower is a Director or Shareholder to comply with any agreement in writing with the Lender and/or Sam Peter Cassaniti trading as Cassaniti and Associates together with all further advances, loans, credit or financial accommodation whether made created or given on or before the signing of this Agreement or that may hereafter be made, created or given by the Lender and/or Sam Peter Cassaniti t/as Cassaniti and Associates in their absolute discretion to or for or on account of or at the express or implied request of the Borrower and/or any entity of which the Borrower is a Director or Shareholder. Please note this means that you agree to repay all moneys whatsoever owing by you and/or any entity of which you are a Director or Shareholder whether now or in the future to the Lender and/or Sam Peter Cassaniti t/as Cassaniti and Associates on the terms and conditions of this Agreement." [Emphasis in original] 5The clause is unusual insofar as it extended the liability of the respondent under the Agreement not only to advances made by the previous trustee, but also to advances made by Mr Cassaniti. It also purported to extend liability to debts owed by any company of which the respondent was a director or shareholder. 6Clause 3 of the Loan Agreement provided for interest at the rate of $1,000 per month, which equated to 20 percent per annum. It should be noted that notwithstanding this provision, in the proceedings interest was only sought at the rate prescribed by the Uniform Civil Procedure Rules. 7Clauses 6 and 7 of the Agreement provided as follows: "6. All Moneys Due are repayable on the earlier of a written demand of the Lender or as soon as the Borrower or any legal entity of which the Borrower is a Director or Shareholder becomes entitled to any taxation refund but in any event must be repaid no later than 25 November 2006. 7. The Borrower grants a charge in favour of the Lender in respect of any real or personal property owned by the Borrower (or any entity of which the Borrower is a Director or Shareholder) either solely or jointly with any other person/s or entity from time to time in order to secure payment of All Monies Due." 8A cheque in the sum of $60,000 in favour of the respondent was drawn on 25 December 2002 on the disbursement account but was dishonoured on presentation. The cheque was replaced by a cheque in the same amount on 2 December 2002. No interest appeared to have been sought on the advance at least up to 1 July 2005 when a letter of demand was sent to the respondent. 9The second Loan Agreement was dated 28 November 2002. The loan amount stated in the Agreement was $100,000. The loan provided for interest at 12 percent with a default rate described as the higher rate of 10 percent. The loan was expressed to be for a term of one year. 10Again, notwithstanding the identity of the lender, a cheque was drawn in favour of the respondent on the disbursement account in the sum of $100,000 on 28 November 2002. Despite the provision for interest and the term of the loan, no interest was sought and no demand for payment was made until 1 July 2005. 11The third Loan Agreement dated 2 December 2002 referred to a loan of $100,000. It was in the same form as the other Loan Agreements except that the provision for interest and the date of repayment were left blank. 12A cheque for $100,000 was drawn in favour of the respondent on the disbursement account on 2 December 2002. No interest was sought on the loan and no demand for repayment was made until 1 July 2005. 13Thereafter, further payments were made to the respondent or to High Rise by cheques drawn either on the disbursement account or the trust account. The only records of the payments tendered at trial was a document entitled "Reliance Financial Services (NSW) Pty Ltd as trustee for the Reliance Discretionary Trust" "Loans to Michael Abdallah". Apart from that document, copy cheques drawn on the trust account and the disbursement account, and bank statements referable to those accounts, no records of the Trust were tendered to identify on whose behalf particular advances were made or indicating how the advances were treated in the books and records of the Trust. In an affidavit sworn on 12 November 2009, Mr Cassaniti indicated that his office was broken into on a number of occasions and records were stolen. In a subsequent affidavit of 16 March 2010, he said that records were kept as to the source of funds for the Trust but he did not have access to them. 14The respondent's version of events was entirely different. He stated that in the middle of 2002, Mr Cassaniti requested that he (the respondent) lend him $550,000 with interest of $5,000 per week. In an affidavit sworn on 16 April 2011, he said that at that time he only had $200,000 he could lend, but he borrowed an additional $350,000 and gave the money to Mr Cassaniti in a bag at Mr Cassaniti's office in Liverpool. His evidence was to the following effect: "At the time I had only $200,000 which I could forward to him [i.e. Mr Cassaniti] but I borrowed a further $350,000 and forwarded the full amount of $550,000 to Sam [Cassaniti]. I provided the money to Sam at his office in Liverpool. At that time, Gino Cassaniti, Sam's cousin, was present. I provided the cash to Sam in a bag, who gave the bag to Gino who placed it in a safe that was in Sam's office." 15Mr Gino Cassaniti was called to give evidence by the respondent. He stated that he may have been present with the respondent when monies were passed from him to Mr Cassaniti but he had no present recollection. He was cross-examined to the following effect: "Q. Mr Cassaniti, do you recall in your lifetime ever seeing the sum of half a million dollars in cash or greater? A. You mean in front of me? Q. Yes. A. No. Q. It's not something you're likely to forget is it? A. No." 16Mr Andre Abdallah, a brother of the respondent, gave evidence that the respondent had asked him to lend him money. He said in his examination in chief that he had access to $350,000 in cash which he loaned to the respondent. He said he was told later that the money was to be on-lent to Mr Cassaniti. He said that the money was the proceeds of an illegal sale of drugs and there were no records of the transaction. In cross-examination he gave the following answers: "Q. Mr Abdallah, you said that the source of the $350,000 was from the illegal sale of drugs, was that the illegal sale of drugs by you? A. Yes. Q. Might this loan to your brother Michael have taken place in October 2003? A. 2002 is when I gave him 200,000 then I've given him 50 every time I get money I give it to him. It's like putting it in the bank anyway so it's I give it to my brother instead of having this money around the house." 17There was tendered in evidence a book containing handwritten records prepared and maintained by the respondent and described in the proceedings as the blue book ("the blue book"). The respondent stated in evidence that although he had the book in his possession in 2002, he did not commence to make entries until 2003. The book contains an entry "Andre = $300,000 + 3, 3, 3, 3, 3, 3 3". 18The respondent explained those entries as recording monies he borrowed from his brother Andre Abdallah in the sum of $300,000 plus $21,000. 19Mr Cassaniti denied ever receiving such an advance. 20The respondent gave varying explanations for executing the Loan Agreements. In the portion of his initial affidavit sworn 9 November 2009 which was read, the respondent stated that he used to sign blank documents at the request of Mr Cassaniti in connection with his business affairs but he had no recollection of signing the Loan Agreements. He also stated that while some of the signatures appeared similar to his, he could not categorically say that they were his signatures. He was referred in cross-examination to a portion of that affidavit which was not read in chief, in which he stated that his signature in the Loan Agreement annexed to Mr Cassaniti's affidavit of 4 November 2009 was a forgery. He conceded in cross-examination that his signature appeared on each of the Loan Agreements. The respondent then contended that when Mr Cassaniti started to repay the $550,000, he (Mr Cassaniti) suggested that agreements be filled out so that if the police investigated it would not look like money laundering. Finally, he stated that Mr Cassaniti said it would help him with his tax and that if he (Mr Cassaniti) got investigated, he would not get into trouble for money laundering. 21In an affidavit sworn 16 April 2011, the respondent claimed that on 13 August 2003 he had a meeting with Mr Cassaniti at the Black Stump Restaurant at Liverpool. At the meeting Mr Cassaniti asked whether the respondent could lend him another $900,000, and stated that he would not need it for more than eight weeks and that he was prepared to pay $200,000 in interest. The respondent claimed that he stated that he could, but that it would take him a couple of weeks to get the whole amount. The respondent stated that Mr Cassaniti asked if the money could be paid in cash, but that he told him that it would have to be by cheque. He also stated in his affidavit that Mr Cassaniti asked if when he got the money he could make out cheques in the name of Dean Korkis in the sum of $150,000 and Blue Jeans Pty Ltd ("Blue Jeans") in the sum of $200,000. 22The respondent said that following that conversation he paid four cheques in satisfaction of his offer to make a loan: a cheque of $200,000 drawn on 14 August 2003 in favour of Cassaniti and Associates; a cheque of $50,000 drawn on 26 August 2003 in favour of that firm; a cheque of $100,000 drawn on 18 September 2003 in favour of Patricia Cassaniti; and a cheque for $150,000 drawn on 26 August 2003 in favour of Dean Korkis. Mr Cassaniti's evidence in relation to the meeting and these cheques was set out in his affidavit sworn 2 June 2011 as follows: "5. In relation to paragraph 7 I did meet Mr Abdallah at the Black Stump restaurant at Liverpool on several occasions. However, this was not at my request. It was at the request of his friend, Mr Jabour Lahood. I did not need a loan of $900,000.00. I deny the conversation. 6. In relation to paragraph 8, I state that I have never heard of Mr Dean Korkis. Blue Jeans Pty Ltd is the company which belongs to Mr Lahood's brother, Mr Anthony Lahood. They were friends of Mr Abdallah for many years. I deny asking for cash. 7. I did start doing some Accountancy work for Blue Jeans Pty Ltd. 8. In relation to paragraph 9 I state that I may have received the following cheques; No Date Amount 1. 14 August 2003 $200,000.00 2. 26 August 2003 $50,000.00 3. 18 September 2003 $100,000.00 However if I received any of these monies I have repaid the monies to Mr Abdallah shortly after receipt." 23Notwithstanding these statements, it was ultimately contended by Mr Cassaniti that those payments should be treated as repayment of part of the advances made by the previous trustee to the respondent. It should be noted that no credit was given for these repayments in the 1 July 2005 Letter of Demand. That demand was for an amount $2,806,016 in contrast to the amount of $1,271,000 now claimed. 24The cheques to which I have referred in par [22] above total $500,000. In addition, in his affidavit sworn 16 April 2011, the respondent claimed that he gave Mr Cassaniti $200,000 cash at a meeting which took place in the car park adjoining Mr Cassaniti's office. He said that at the time he was in the company of his brother, Mr Ayssor Abdallah, who at the car park meeting also gave Mr Cassaniti a cheque in favour of Blue Jeans in the sum of $200,000, thus making the total of $900,000 requested. 25Mr Ayssor Abdallah did not swear an affidavit. However, he was called to give evidence by the respondent. No evidence in chief was led and his cross-examination was short. It is convenient to set it out in full: "Q. Mr Abdallah, in about 2003 you say that your brother Michael asked you if you could loan him a couple of hundred thousand dollars. Is that correct. A. Yeah, that's right, yeah. Q. And he said to you that he wanted a cheque payable to Blue Jeans. Is that correct? A. Yeah, that's right. Q. And you said 'Who is Blue Jeans?'? A. That's right, yes. Q. And he said 'Jabour La Hood? A. Jabour La Hood, yes. Q. Jabour La Hood? A. That's right, yeah. Q. I take it you've met with Mr Mitry to take evidence from you? A. Yes, yeah. Q. And did Mr Mitry ask you for any bank account details of any bank accounts that you had in 2003? A. Yes he did, several times. Q. And did you provide him with those details? A. I tried to but the bank - they don't go past seven years, they only hold them for seven years. That's what they said to me and I couldn't get them so. Q. Did you provide him with your bank account number? A. No I didn't, no. Q. At any time? A. No. Q. Did Mr Mitry ask you for your bank account number? A. Yes he did, yes. Q. And you didn't give it to him? A. No because I've changed four times since then so - and it's long ago over - it's I don't know - it's probably - it's more than seven, eight years ago I think it is and I don't remember what it is. I've changed, I've moved a few times and I've changed loans a few times because I like everyone does - I chase the dollar like everyone does." 26It should be noted that Mr Ayssor Abdallah did not corroborate the statement by the respondent, that the respondent handed $200,000 cash to Mr Cassaniti in his presence or that he handed the cheque made out to Blue Jeans to Mr Cassaniti. 27So far as the $200,000 cash was concerned, the respondent's evidence was that he borrowed $150,000 of this amount from his brother, Mr Brian Abdallah, and that the other $50,000 came from his own funds. Mr Brian Abdallah gave evidence that he loaned $150,000 to the respondent in 2003. He subsequently qualified this evidence as follows (omitting portions which were struck out): "Well I had $100,000 there and I gave my brother $100,000 and the money I made interest I gave to Michael the other 50, so it wasn't the whole lot, 150, it was 100 and the interest I made I gave to Michael so I can make more interest." 28Mr Brian Abdallah said he kept the money in both the freezer and a cupboard. 29A number of other matters should be noted. First, the respondent contended he was given security for the advances he claimed to have made in 2002 and 2003 by the deposit of four Certificates of Title. Three of the Certificates of Title were seized by the NSW Crime Commission but produced for the purpose of the proceedings. Mr Cassaniti denied giving such security. He acknowledged, however, that the registered proprietors shown on the Certificates of Title were debtors of either himself or the previous trustee and he had held the Certificates of Title as security. He did not indicate how they came into the respondent's possession. 30Second, on 15 December 2003 Mr Cassaniti signed a document in the following terms: "I Sam Peter Cassaniti hereby acknowledge that I guarantee the debt of Mr Jabour Lahood to Mr Michael Abdullah. I acknowledge that the debt is currently $2,600,000.00 and I agree to mortgage 3 properties that are controlled by me. I acknowledge that I am responsible for the debt and I will be indemnified from Mr J. Lahood. I allow the registration of a caveat on certain properties." 31Mr Cassaniti gave a number of explanations for this document. He first said it was not worth the paper it was written on until someone (presumably the respondent or Mr Lahood) produced evidence that the loans had been made. He then gave the following evidence: "Q. Did you ask Mr Abdallah why he wanted you in the sense of why it was thought proper that you should guarantee the indebtedness of Mr La Hood to Mr Abdallah. A. These people don't care who guarantees it as long as they can get some money out of somebody. It's not a question of what's right or wrong it's a question of who they can suck the money out of." 32Subsequently, Mr Cassaniti said that he was intimidated into signing the document by threats of violence and repercussions. 33Third, this evidence has to be considered in the context of the following entries in the respondent's blue book: "Sam owes $2730 by the 4-11-03 owes $900 by the 7-10-03 paid = 35 on the 24-9-03 (owed = 2695 on 4-11-03 900 on 7-10-03 (100 on 8-10-03)" 34The respondent, in his evidence in chief identified the $900,000 as the amount owed to him by Mr Cassaniti. He stated the $100,000 represented an amount repaid by Mr Cassaniti. 35The respondent also identified entries in the blue book stating that as at 6 July 2004 Mr Cassaniti owed him $2,427,875. By reference to the blue book he explained he arrived at that figure taking into account monthly interest of $10,000. He explained that an entry on an adjoining page of the blue book, "1,500,000 J" and "900,000 S", represented the dollar amounts owed to him by Mr Lahood and Mr Cassaniti respectively. 36Fourth, a cheque butt for a cheque of $100,000 in favour of High Rise, drawn on the disbursement account but subsequently cancelled bears the notation "repayment". Mr Cassaniti acknowledged that the notation on the cheque butt was in his writing but said the word "repayment" only referred to the fact that the cheque was cancelled. 37Finally, I have made reference earlier to the evidence of Mr Gino Cassaniti. In an affidavit sworn on 9 November 2009, Mr Gino Cassaniti also gave evidence that in about April 2008 he visited Mr Cassaniti in Silverwater Prison. At that meeting a conversation to the following effect took place: "In that conversation, I said 'Mick (Michael) wants his money. He is coming to see me. What can I do?' Sam replied 'Tell him to chase Jabour. I am not going to give him anything anymore, tell him to get it off Jabour. I've got him to sign a million things with me, and if he wants to get smart, I will take his house off him'." 38In addition, on 19 December 2007, Mr Gino Cassaniti signed a letter as the director of the previous trustee stating that the respondent did not owe the previous trustee or any associated trust any money. 39Mr Cassaniti denied the conversation. He said he was in dispute with Mr Gino Cassaniti who he said was a friend of the respondent. The reasoning of the primary judge 40The primary judge in considering the respective submissions of the parties, in particular whether the Loan Agreements were operative in accordance with their terms, had regard to what was said in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-362 and Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 as to the need for reasonable satisfaction not to be produced by inexact proofs, indefinite testimony or indirect inferences: see also Evidence Act 1995 s 140; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449. 41The primary judge described Mr Cassaniti as an unimpressive witness, stating that his evidence on many aspects of the transactions was highly implausible. At [15], his Honour concluded that Mr Cassaniti's evidence should not be accepted unless corroborated by documents, which he said generally it was not. He referred in particular to four matters which he described as examples of why he regarded Mr Cassaniti's evidence as unreliable. First, Mr Cassaniti's evidence of the purpose of the first loan, namely, to assist Mr Abdallah to pay off his mortgage or resolve a problem with the NSW Crime Commission concerning his home, was inconsistent with the statement in the Loan Agreement that the loan was for investment purposes. The primary judge also noted that when the inconsistency was pointed out to Mr Cassaniti, he conceded he did not remember the purpose of the first loan. 42Second, the primary judge noted that Mr Cassaniti was unable to offer any plausible explanation as to why the rate of interest under the second Loan Agreement was half that in the first Loan Agreement made three days earlier, although no better security was taken. Third, he noted that Mr Cassaniti did not make any inquiry as to why the respondent would have sought consecutive payments in such a short period. He referred to Mr Cassaniti's evidence that he believed it was "to do the development", which contrasted with his earlier affidavit evidence that the respondent was not a property developer and Mr Cassaniti's statement that he, Mr Cassaniti, did not know how the respondent made his money. 43Fourth, the primary judge referred to Mr Cassaniti's evidence that he made advances to the respondent because he had been intimidated by threats of violence. He pointed out that the evidence was inconsistent with the description of the business relationship between the respondent and Mr Cassaniti contained in the latter's affidavit evidence. The primary judge also referred to Mr Cassaniti's evidence that he did not believe that the fact that moneys had been advanced by reason of threats made by the respondent was a matter which needed to be included in his affidavit evidence. 44The primary judge concluded that he could place little weight on the loan record schedule to which I have referred in par [13]. His Honour noted that it must have been prepared after 25 June 2005, that Mrs Cassaniti, the person who prepared the document, was not called and that there was no evidence of the basis upon which she characterised the transactions as loans. His Honour noted the absence of tax records and like documents which would have shown the tax treatment of interest paid or payable on such loans but declined to draw any adverse inference from their absence. 45The primary judge noted that the alleged loans were made in circumstances where Mr Cassaniti said he knew that the respondent was not a property developer and did not know how he earned his income. His Honour noted that although Mr Cassaniti said that he knew of the equity the respondent had in his properties, he gave no evidence of valuation or whether they in fact supported the amounts advanced. The primary judge also observed that no interest was paid and no demands were made for repayment until July 2005. 46The primary judge concluded that Mr Cassaniti's indifference to the respondent's occupation and his sources of income, the absence of security and the lack of any attempt to secure repayment, was inconsistent with ordinary experience but explicable if, as the respondent contended, the payments were repayments of advances made by him to Mr Cassaniti or to Cassaniti and Associates. 47In considering the respondent's evidence, the primary judge noted that there had been significant changes in his evidence over time and that "significant parts of that evidence have been, at best, inaccurate": judgment par [24]. He noted what he described as his shifting evidence, first that he did not recall signing the first Loan Agreement and that the signatures did not look like his signature, as compared to his admission in his defence that he signed the Loan Agreements and the varied explanations he gave as to the circumstances in which that occurred: see par [20] above. In particular, the primary judge noted that the respondent acknowledged there was no reference to tax reasons or money laundering in his affidavit evidence. However, the primary judge stated that an inference of late invention on this issue was not so readily drawn given the respondent would be reluctant to disclose these matters without the protection of a certificate under s 128 of the Evidence Act. 48In dealing with a claim that a loan in an amount of $550,000 was made, the primary judge referred to Mr Cassaniti's denial that this occurred but reiterated his reservations with his evidence. In this context, he referred to the evidence of Mr Andre Abdallah to which I have referred above. He referred to criticism of this evidence by RFS2 on the basis that there was no reference to Mr Andre Abdallah's advance in the respondent's evidence, as distinct from his reference to loans from his other brothers, Brian and Ayssor Abdallah and, further, the fact that the blue book recorded the existence of the loans in late 2003 or early 2004. The primary judge concluded that this was not inconsistent with the evidence of Mr Andre Abdallah accepting that the respondent did not begin to keep records in the blue book until 2003. The primary judge accepted the evidence of Mr Andre Abdallah. 49The primary judge also refused to accept RFS2's submission that the claim that a loan of $550,000 had been made should be rejected because of the absence of any receipt or the taking of any security. The primary judge concluded that it was not surprising there was no receipt in a cash transaction of the nature in question and pointed to the fact that the respondent later took security, albeit in a "somewhat informal way": judgment par [33]. 50The primary judge accepted that the absence of any evidence as to the source of the balance of the funds to make the alleged loan weakened the respondent's case and said that he had regard to it. The primary judge said he also had regard to the attacks on the respondent's credit, particularly his failure to refer to the loan in his first four affidavits and the changes in his evidence relating to the execution of the Loan Agreements. 51The primary judge rejected the submission that the evidence of Mr Gino Cassaniti concerning the handing over of the $550,000, referred to at par [15] above, was inconsistent with the respondent's evidence. He noted that Mr Gino Cassaniti's evidence was limited to a denial of seeing $500,000 or more, not a denial of being handed a bag containing that amount. 52His Honour rejected RFS2's contention that the respondent's evidence was that the loan of $550,000 was paid back before the entry into the first Loan Agreement. He noted that the evidence was not that the amount was paid back before mid-2002, but that it was paid back before 2003 and was given in answer to a question directing the respondent's attention to whether he had been chasing Mr Cassaniti in late 2003. 53In relation to the alleged $900,000, loan the primary judge noted there was no reference to it in the first affidavit of the respondent. The primary judge referred to the evidence of Mr Ayssor Abdallah and the submission by RFS2 that his evidence was inconsistent with the respondent's claim that part of the $900,000 was the cheque made out to Blue Jeans. He rejected this submission. 54The primary judge referred to the evidence of Mr Brian Abdallah that he loaned the respondent $150,000 in 2003, and his subsequent qualification of that evidence that he provided $100,000 initially and subsequently a further $50,000. He expressed the view that this did not impeach the credit of Mr Brian Abdallah and he accepted him as a credible witness. His Honour noted RFS2's submission that there was no documentary evidence to support the $200,000 cheque to Blue Jeans and the $150,000 cash advance to the respondent. He stated that he had regard to this absence, although he stated it was of limited significance in relation to Mr Brian Abdallah as he accepted his evidence that the payment was made. He also indicated that he was not prepared to draw any inference arising out of the respondent's failure to call Mr Lahood to corroborate the August 2003 meeting, as there was nothing to suggest that Mr Lahood was in the respondent's camp. 55The primary judge referred to material in the blue book, accepting the respondent's evidence that the entries included loans to Mr Cassaniti as well as Mr Lahood. He regarded it as significant that the book was prepared for the respondent's private use and there was no reason for him to falsify it. He also referred to the Certificates of Title provided to the respondent, noting that although Mr Cassaniti denied supplying them to the respondent in cross-examination, he did not make such a denial in the affidavits filed by him. He also referred to the notation "repayment" on the cheque butt referred to in par [36] above. He rejected Mr Cassaniti's explanation that repayment meant cancelled as distinct from its ordinary meaning, and stated that it supported the inference that Mr Cassaniti was indebted to the respondent which was consistent with the respondent's case. 56The primary judge declined to place any reliance on the letter signed by Mr Gino Cassaniti which stated that the respondent was not indebted to RFS2, but preferred the evidence of Mr Gino Cassaniti over that of Mr Cassaniti in relation to the conversation which took place at Silverwater Prison referred to in par [37] above. 57In these circumstances the primary judge reached the following conclusions: "[54] I have concluded that, having regard to the evidence which I have reviewed above, RFS(2) has not established on the balance of probabilities that the three Loan Agreements were operative in accordance with their terms, and RFS(2)'s case as to the first three payments must fail. ... [56] I have had regard to the fact that the finding that an apparently regular agreement signed by the parties is a sham, or at least is not intended to have legal effect should be reached with caution, since that is not a common occurrence. However, I consider that it is also unlikely, on all the evidence before me, that a party engaged in the business of money lending would make unsecured loans, with its own monies, in the order of $2.8 million in numerous payments over a 13 month period to a borrower who claimed to be, but the lender believed was not, a property developer; where the lender did not know how that borrower earned an income; and where the lender did not take any step to follow up repayment of either principal or interest during that period." 58So far as the subsequent payments were concerned, the primary judge rejected Mr Cassaniti's evidence that at the time of each advance, Mr Cassaniti would say "This money is payable on the terms in our Loan Agreement": judgment pars [65]-[66]. He noted that the respondent denied that such conversations took place and concluded, having regard to his view of the credit of Mr Cassaniti, that he was unable to accept Mr Cassaniti's evidence on this issue. 59The primary judge also rejected the submission that the records kept by Mr Cassaniti demonstrated that the payments from the Cassaniti and Associates' accounts were in fact loans to the respondent. His ultimate conclusion on the subsequent payments was as follows: "[68] I do not consider the loan files lead to a characterisation of the subsequent payments as monies owing to RFS(1), for the reasons I have set out above. In my view, the character of RFS(1)'s dealings with Mr Abdallah, as they emerged from the evidence to which I have referred above, were so substantially inconsistent with loan transactions as to require a finding that, on the balance of probabilities, the subsequent payments by Cassaniti & Associates to Mr Abdallah or High Rise Developments were not monies 'otherwise owing' by Mr Abdallah or entities of which he was a shareholder or director to RFS(1). In any event, I have held above that, on the balance of probabilities, the Loan Agreements were not intended to have operative legal effect and this deprives the 'all monies' provisions in those agreements of such effect. [69] RFS(2) contends that evidence of amounts lent by Mr Abdallah to Mr Cassaniti personally does not affect RFS(2)'s contractual claim for the recovery of its 'loans' to Mr Abdallah. I do not accept that submission. In my view, once it is established that Mr Abdallah had advanced substantial funds to Mr Cassaniti or any other person associated with RFS(1), then it is more difficult to accept RFS(2)'s claim that the Loan Agreements are operative in accordance with their terms; Mr Cassaniti's evidence of conversations in which Mr Abdallah acknowledged that the payments to Mr Abdallah were subject to those Loan Agreements is less plausible; and it is less likely that the monies paid to Mr Abdallah in fact had the character of a 'loan' or an 'advance' so as to be repayable by Mr Abdallah." 60The primary judge also found that the third Loan Agreement was void for uncertainty or incompleteness. He also concluded that if the payments were in fact loans, they appeared to have been made by Cassaniti and Associates rather than the previous trustee and, in those circumstances, RFS2 was not entitled to recover the monies. The submissions of the parties 61The grounds of appeal are lengthy and it is not necessary to set them out in the present case. Rather, it is convenient to deal with the matters by reference to the headings adopted by RFS2 in its submissions. A The submissions of RFS2 62RFS2 made four principal submissions. First, that the analysis by the primary judge of the evidence surrounding the alleged loans by the respondent was so infected by error that it was unsafe and should be rejected. Second, in finding that RFS2 had not established that the Loan Agreements were intended to take effect according to their terms, the primary judge effectively reversed the onus of proof. Third, the primary judge should have required clear and cogent proof of the respondent's claim that there were large cash transactions and sham Loan Agreements. Finally, it was contended that the failure to make specific findings whether the $550,000 or the $900,000 advances occurred, obscured the "reasoning process" of the primary judge and, more importantly, led him to fail to consider the argument that the previous trustee had made advances to the respondent, but that from mid-2003 the respondent treated any such advances as repayments of debts he believed Mr Cassaniti owed him. 63At the hearing, senior counsel for the appellant acknowledged that there was what he described as unusual features in the case for RFS2. He accepted there was considerable evidence against his client's position but the Court could not be satisfied that, absent the errors he contended were made by the primary judge, the primary judge would not have reached a contrary conclusion and in those circumstances there should be a retrial. 64In relation to the alleged $550,000 loan, RFS2 referred to the fact that it was only referenced in the fifth affidavit sworn by the respondent. This was notwithstanding the fact that the transactions surrounding the alleged $900,000 loan were referred to in an earlier affidavit. RFS2 noted that the primary judge made no reference to this fact. 65RFS2 also pointed to the fact that there were no contemporaneous documents evidencing the alleged $550,000 loan and, further, that the respondent gave no evidence as to where he derived $350,000 of the money required to make up the loan or where he obtained the $200,000 which he said came from his own funds. Further, it submitted that Mr Gino Cassaniti did not corroborate the respondent's evidence that the money was handed over in a bag at the offices of Cassaniti and Associates. 66RFS2 also submitted that not only did the respondent not depose to Mr Andre Abdallah providing the $350,000, that assertion was inconsistent with the respondent's entry in the blue book, noted in par [17] above, both as to amount and to the fact that the "$300,000 + 3, 3, 3, 3, 3, 3 3" entry appeared immediately below the date of 7 October 2003. RFS2 also referred to the fact that letters from the respondent's solicitors outlining the evidence to be adduced in respect of the $550,000 advance made no reference to any loan given by Mr Andre Abdallah. 67RFS2 submitted that the primary judge was not entitled to discount the importance of the date in the blue book on the basis that that was when the respondent commenced to keep a note of the transactions. It submitted that the respondent admitted using the blue book in 2002 and that if the entry was intended to reflect an earlier transaction, it would have recorded a total sum and not the additions. It should be noted, however, that the respondent did not say that he commenced using the blue book in 2002. His evidence was that it was in his possession in 2002 but that he did not commence using it until 2003. 68RFS2 criticised the primary judge for failing to give reasons for accepting the evidence of Mr Andre Abdallah. It pointed out that he was an admitted drug dealer who claimed to have been dealing with the proceeds of crime and that his actual evidence was that he gave the respondent $200,000. The latter submission does not record the evidence of Mr Andre Abdallah with complete accuracy. I have set out his evidence in par [16] above. Mr Andre Abdallah said that he gave the respondent $200,000 and $50,000 every time he got money. RFS2 also referred to the fact that Mr Andre Abdallah said the loan was made in 2002 because it was "around the same time my brother, my other brother gave it to him later". RFS2 pointed out that there was no evidence that the respondent received any loan from any other brother in 2002. However, the statement made by Mr Andre Abdallah was somewhat ambiguous and he later said that he could place the loan by reference to a drug shipment. 69RFS2 also referred to what it described as the failure by the trial judge to mention that Mr Andre Abdallah could not recall when he received repayment or the interest payable. It also submitted that the primary judge failed to mention what was described as an inconsistency between the evidence of the respondent that the loan was repaid in 2002 and the evidence of Mr Andre Abdallah that it had not been repaid. However, there was not in truth an inconsistency. The respondent's evidence was directed to the loan of $550,000 he said he made to Mr Cassaniti. The evidence of Mr Andre Abdallah simply stated that the respondent still owed him $200,000. Senior counsel for the appellant acknowledged this at the hearing but submitted that it was critical to consider this issue in circumstances where there was nothing else to support the $550,000 loan. 70Senior counsel for the appellant also submitted that he was not saying the evidence of Mr Andre Abdallah was glaringly improbable, but rather that the primary judge should have exposed the reasoning why he accepted it having regard to what was said by this Court in Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187; (2006) 66 NSWLR 186. 71RFS2 also criticised the primary judge for stating that the evidence of Mr Gino Cassaniti did not exclude him seeing a bag containing cash being handed over. It submitted, first, it was inconsistent with the affidavit evidence of the respondent. In fact it was not. The respondent in his affidavit of 16 April 2011 said, "I provided the cash to Sam in a bag, who gave the bag to Gino who placed it in a safe that was in Sam's office". The respondent did not say that Mr Gino Cassaniti saw the cash. RFS2 also pointed to the fact that no questions were asked of Mr Gino Cassaniti in re-examination concerning this issue. In that context, senior counsel for RFS2, relying on the decision of this Court in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, submitted the failure to lead any evidence from Mr Gino Cassaniti as to whether he saw a bag being handed over entitled the primary judge to draw an inference that his evidence on this topic would not have assisted the respondent. 72RFS2 also criticised the primary judge for discounting the significance of the absence of any receipt for the $550,000 on the ground that there was no basis for assuming that there would be a receipt for a transaction of that nature. RFS2 submitted that this statement carried with it the erroneous assumption that each party to the transaction was aware that it involved the proceeds of crime. It also submitted that the primary judge was incorrect in stating that the Certificates of Title were provided as security for the $550,000 loan, submitting that even on the respondent's case they were handed over following the execution of the guarantee. 73RFS2 also contended that the primary judge did not deal adequately with the attack on the credibility of the respondent. It referred again to the failure to identify the source of the $350,000 that formed part of the $550,000 loan and the change in evidence of the respondent relating to the execution of the Loan Agreements. It submitted that the primary judge was incorrect in stating that the initial evidence of the respondent was that he could not recall signing the documents. However, in fact that was his initial evidence at the hearing, as the paragraph in his affidavit which stated that the signature was a forgery was not read. Further, by the time of the hearing the respondent had admitted execution of the Loan Agreements in his defence. RFS2 also submitted that the primary judge was incorrect in stating that the respondent only claimed the purpose of the Loan Agreements was tax evasion and to protect Mr Cassaniti from an investigation for money laundering after the provision of the certificate under s 128 of the Evidence Act. At the hearing, senior counsel for RFS2 also submitted that the primary judge did not deal with the fact that there was no entry of $550,000 in the blue book in assessing the respondent's credibility. 74In his submissions at the hearing, senior counsel for RFS2 referred to the respondent's statement in evidence that in describing the Loan Agreements as forgeries, he was intending to convey they never recorded a loan from Mr Cassaniti and the Loan Agreements were a "formality". It was submitted this was an unusual and convenient explanation, but the real difficulty was that the primary judge did not deal with it. 75So far as the $900,000 loan was concerned, RFS2 pointed out that there was no reference to it in the respondent's initial affidavit. RFS2 submitted that although the primary judge referred to this, it did not seem to play any further part in his analysis. 76RFS2 criticised the treatment by the primary judge of the evidence of Mr Ayssor Abdallah. It submitted that his evidence to the effect that the respondent asked him for a cheque for $200,000 in favour of Blue Jeans and told him that Blue Jeans was Jabour Lahood, was inconsistent with the respondent's claim that Mr Cassaniti requested the cheque be made out to Blue Jeans. It criticised the conclusion of the primary judge to the effect that it was common ground that the ultimate recipient of the cheque was a company associated with Mr Lahood and that Mr Ayssor Abdallah's evidence was not inconsistent with that of the respondent. RFS2 submitted that this conclusion ignored the fact that the evidence was that Mr Lahood was a friend of the respondent and, more importantly, that Mr Ayssor Abdallah was asked to participate in a loan to Mr Lahood and not Mr Cassaniti. It submitted the primary judge also failed to consider the fact that Mr Ayssor Abdallah failed to corroborate the respondent's evidence that Mr Ayssor Abdallah handed the cheque to Mr Cassaniti and was present when the $200,000 cash was handed over. 77So far as Mr Brian Abdallah was concerned, RFS2 submitted that his evidence as to the amount of the loan ($100,000) and the date (late 2002 or early 2003), was inconsistent with the respondent's evidence that the loan was made in August or September 2003 and was in an amount of $150,000. RFS2 submitted that the primary judge erred in concluding that the fact that there were two loans totalling $150,000 demonstrated that there had been no invention by Mr Brian Abdallah. It submitted that the reference by Mr Brian Abdallah to an additional $50,000 was clearly compound interest and that in reaching his conclusion, the primary judge did not deal with the difficulty arising from the fact that the advance was said to have been made six months earlier than the alleged loan of $900,000. 78RFS2 also challenged the conclusion of the primary judge that the blue book entry supported the loan being made. It pointed out there was no record of the individual transactions said to make up the loan. It submitted the primary judge gave no reasons as to why he accepted the evidence that $900,000 of the amount recorded as owing in the blue book was owed by Mr Cassaniti, as distinct from being monies due by Mr Lahood covered by the guarantee which referred to an amount of $2.6 million. RFS2 contended that the blue book entry was no more than the respondent's view that Mr Cassaniti owed him $900,000. It said that this view was not supported by individual entries in the blue book. RFS2 submitted that the entries in the blue book were consistent with the respondent forming the view that Mr Cassaniti owed him $900,000 and, in those circumstances, that the respondent created the entries to support this claim. 79So far as the primary judge's conclusion that it was unlikely the previous trustee would have made unsecured advances of $2.8 million to an entity which was not a property developer and whose sources of income were unknown, RFS2 contended that the previous trustee was "an accounting firm not a bank" and that security by way of charge was taken. It also submitted that the primary judge failed to take into account that Mr Gino Cassaniti had executed some of the loan documents. 80Further, it was said the primary judge erred in failing to consider these matters against the finding of fact that the $550,000 loan had not been made. RFS2 submitted that by not making this comparison the primary judge failed to consider the argument that advances were made by the previous trustee but the respondent formed a personal view that Mr Cassaniti owed him $900,000 (as a result of other business transactions such as those involving Mr Lahood) and therefore was not liable to the previous trustee. It submitted that failure to undertake this analysis affected par [73] of the judgment. It is by no means clear why the conclusion in par [73], to the effect if any loans were made to the respondent they were made by Cassaniti and Associates rather than the previous trustee, is affected by this reasoning. 81Finally, on this issue, RFS2 submitted the critical question the judge should have considered was whether he accepted the evidence of the respondent that he had executed the Loan Agreements and received the associated advances as part of a subterfuge to avoid tax or money laundering investigations in circumstances where: "(i) the respondent had previously sworn an affidavit that the signatures on the documents were forgeries; (ii) the respondent had previously sworn in oral evidence before the trial judge that he had no recollection of signing the documents but that he was from time to time asked to sign blank documents by Mr Cassaniti; (iii) the claim of knowing execution of the document for the subterfuge was made only as the respondent's third or fourth version of evidence. (iv) there was no corroboration for this claim, even from Gino Cassaniti the witness called by the respondent" 82RFS2 submitted that the primary judge was incorrect in concluding that the third Loan Agreement was void for uncertainty. It submitted that objectively it was intended to adopt the terms of the second Loan Agreement. Alternatively, it was submitted that RFS2 was entitled to receive the monies paid out on a restitutionary basis. B The respondent's submissions 83The respondent approached the matter in a somewhat different fashion, submitting that if the Court was of the view the $900,000 loan was made, the necessary inference was that the $550,000 loan was also made. 84The respondent referred to what he described as concrete pieces of evidence in support of the proposition that the $900,000 advance was made. He identified these as the cheques drawn in August/September 2003 including the payment to Dean Kortis, the cheque butt with the notation "repayment" on it, the guarantee document, the Certificates of Title deposited with him, Mr Gino Cassaniti's letter and the blue book. 85The respondent submitted that once it was recognised that $900,000 was advanced in 2003, the inescapable inference was that $550,000 was advanced earlier. 86In relation to the issues raised by RFS2 concerning the $350,000 said to have been borrowed to make up the $550,000 loan, the respondent submitted the figure of $321,000 which appeared in the blue book was a similar amount and the date of 7 October 2003 in the blue book was irrelevant. The respondent did not elaborate on this submission. 87In relation to the complaint concerning the acceptance of Mr Andre Abdallah's evidence, the respondent pointed to the fact that the primary judge noted that Mr Andre Abdallah was a drug dealer and had money available because a shipment of drugs had come in. The respondent pointed to the fact that Mr Andre Abdallah's initial evidence was that he advanced $350,000 to him. It should be noted that this evidence was in answer to a leading question. 88The respondent submitted that the primary judge did take into account the fact that Mr Gino Cassaniti did not corroborate the fact that the respondent handed $550,000 over to Mr Cassaniti in his presence. 89The respondent pointed out that the absence of receipts was not uncommon in dealings between the parties to the proceedings. In addition, the respondent submitted that the primary judge took into account the variations in his evidence. He pointed out that at the time of his first affidavit he denied owing money to either Mr Cassaniti or RFS2. 90The respondent pointed out that although Mr Ayssor Abdallah did not corroborate his evidence concerning the handing over the cheque in favour of Blue Jeans or cash of $200,000 to Mr Cassaniti (see pars [25] and [26] above), he did not contradict it. He submitted without elaboration that the inconsistencies in the evidence of Mr Brian Abdallah was illusory. 91The respondent emphasised the fact that the payments made by him in August/September 2003 were not recorded by RFS2 or Mr Cassaniti as repayments. The respondent submitted that the previous trustee was in the business of lending money and in these circumstances it was inexplicable how the payments came to be overlooked. In addition, he submitted that the entry of $900,000 in the blue book suggested that the payments made by Mr Cassaniti were not loans. The respondent submitted this was supported by the following matters: "(i) the failure of the Appellant to require the Respondent to complete even basic paperwork other than the 3 loan agreements themselves; (ii) the entry into 3 loan agreements in a matter of days; (iii) the inexplicably varying rates of interest and other terms between the 3 loan agreements; (iv) the failure to require any documentation (including new loan agreements) to be signed after December 2002; (v) a failure to enquire as to the purposes for which moneys were being borrowed; (vi) the advance of large amounts of money with the weakest of security; (vii) a failure to protect such security as was obtained; (viii) a failure to establish what security the Defendant was offering, his equity in any security and a failure to obtain valuations of any property purportedly offered as security; (ix) a failure to require the Defendant to keep to the terms of the agreements over a lengthy period of time; (x) a failure to pursue the principal moneys or interest payments." 92In his submissions at the hearing counsel for the respondent referred to the conversation which took place at Silverwater Prison: see par [37] above. He submitted what was of importance was that Mr Cassaniti did not deny that he owed the respondent money. The primary judge found that he preferred the evidence of Mr Gino Cassaniti as to the terms of the conversation over the evidence of Mr Cassaniti. 93Counsel for the respondent referred to the Certificates of Title held as security. He submitted that in the seven subsequent affidavits sworn by Mr Cassaniti, he gave no explanation as to why he signed the guarantee or delivered the Certificates of Title to the respondent. It should be noted, however, that ultimately Mr Cassaniti denied that he handed over the Certificates of Title. 94In relation to the guarantee given by Mr Cassaniti, counsel for the respondent submitted it should be read as acknowledging his (Mr Cassaniti's) liability in respect of both debts due by him and by Mr Lahood to the respondent. As a matter of construction, it is difficult to draw the conclusion that the words "the debt" in the second sentence of the guarantee is referring to a debt other than the debt of Mr Lahood referred to in the first sentence. 95In relation to the security referred to in the Loan Agreements, counsel for the respondent noted that it was extremely weak security and that no caveat was lodged until 2009, just prior to the proceedings being brought. Consideration 96In the well-known passage in the judgment of the High Court in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, the High Court reaffirmed the advantage that the trial judge had in seeing and hearing the witnesses at trial. However, the High Court explained that that did not, and could not, prevent the performance by the Court of Appeal of its functions, particularly when incontrovertible facts or uncontested testimony demonstrated that the trial judge's conclusions were erroneous even though they appeared to be based on credibility findings, or where the decision at trial was glaringly improbable or contrary to compelling inferences: Fox v Percy supra at [28]-[29]. 97In the present case, RFS2 did not contend that the conclusion reached by the primary judge was glaringly improbable. Rather, it contended that the primary judge either failed to take into account or did not refer to important pieces of evidence which, had they been considered, could have led him to a contrary conclusion. In addition, it contended the primary judge failed to expose his reasoning on critical matters to the extent it was unsafe for the verdict to remain. It was for these reasons that a retrial rather than a judgment in favour of the appellant was sought. 98In dealing with these issues there are a number of matters which should be borne in mind. First, the fact that a particular item of evidence was not taken into account will not automatically result in a retrial. It is only where the evidence not taken into account demonstrates that the primary judge had too fragile a base to support his or her finding based on credibility that the findings will be overturned and a new trial ordered. This is because in those circumstances there will not have been a determination of the appellant's case based on the real strength of the evidence: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) [1999] HCA 3; (1999) 73 ALJR 306 at [63]-[64]; Fox v Percy supra at [90]; Nominal Defendant v Clancy [2007] NSWCA 349 at [6]. 99So far as the failure to give reasons is concerned, the general requirement for a trial judge to expose his or her reasons, at least in cases where appellate review is available, is well established: Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257-259, 269, 274, 280-281; Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 160, 171, 182; Nominal Defendant v Clancy supra at [13]; Zurich Australian Insurance Ltd v Raman [2009] NSWCA 221; (2009) 53 MVR 273 at [74]-[75], although the latter case dealt with expert evidence. 100RFS2 placed particular reliance on what was said by Ipp JA in Goodrich Aerospace Pty Ltd v Arsic supra at [29]-[31]: "[29] Often important issues of credibility involve sub-issues. Often, objective facts, or facts that are probable, are capable of having significant bearing on the sub-issues. In cases of this kind, it is incumbent upon trial judges to resolve the sub-issues and to explain, by reference to the relevant facts, the conclusions to which they have come. This having been done, they should then turn to the ultimate facts in issue and explain how their decisions on the sub-issues have assisted them in forming a conclusion on the ultimate issue. It is only when adequate reasons of this kind are given that an unsuccessful party will be able to understand why the judge has believed his or her successful opponent. [30] In the influential case of SS Hontestroom v SS Sagaporack (1927) AC 37 at 50, Lord Sumner said that one of the material questions in determining whether the credibility finding in that case was erroneous was: '...Is there any glaring improbability about the story accepted, sufficient in itself to constitute 'a governing fact, which in relation to others has created a wrong impression,' or any specific misunderstanding or disregard of a material fact ... that has had the same effect?' It is in this context that the following remarks of Hayne J in Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816 at 1835 [130]; 221 ALR 402 at 428 [130] are particularly relevant: '...Rather, because the primary judge was bound to state the reasons for arriving at the decision reached, the reasons actually stated are to be understood as recording the steps that were in fact taken in arriving at that result. Understanding the reasons given at first instance in that way, the error identified in this case is revealed as an error in the process of fact-finding. In particular, it is revealed as a failure to examine all of the material relevant to the particular issue.' [31] A failure by a judge, when making a demeanour finding, to deal with an improbability constituting a 'governing fact' in the SS Hontestroom sense may constitute 'an error in the process of fact-finding' as explained by Hayne J." See also Nominal Defendant v Kostic [2007] NSWCA 14. 101However, it must be borne in mind that it is not necessary for a trial judge to state expressly his or her reasons for each factual finding made which led to, or was relevant to, his or her ultimate conclusions of fact: Soulemezis v Dudley (Holdings) Pty Ltd supra at 271, 273-274, 279-281; Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority supra at 171, 182; Nominal Defendant v Clancy supra at [13]. As was said in Soulemezis at 280 by McHugh JA, as his Honour then was, what is necessary is that the essential ground or grounds upon which the decision rests should be articulated. Further, in this context, what was said by McHugh J when a member of the High Court in Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 at 178 must be borne in mind: "Consequently, where a trial judge has made a finding of fact contrary to the evidence of a witness but has made no reference to that evidence, an appellate court cannot act on that evidence to reverse the finding unless it is satisfied 'that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion': Watt or Thomas v. Thomas [1947] AC 484, at p 488." 102I have outlined the material facts as they emerged in the proceedings above. What the primary judge was confronted with was a series of transactions of an unusual nature, either not documented at all or inadequately documented. The primary judge clearly set out his reasons for declining to accept the evidence of Mr Cassaniti by reference both to his demeanour and the apparent implausibility of his evidence. To the matters to which the primary judge referred might be added these matters. First, none of the cheque butts tendered indicated the transactions were loans, much less loans from the previous trustee. Second, the primary judge's conclusion that he should not draw any inference adverse to RFS2 from the absence of books and records of the Trust evidencing the transactions, was if anything favourable to RFS2. In accepting Mr Cassaniti's evidence that records were stolen from his office as a reason for the failure to produce any such records, the primary judge did not refer to Mr Cassaniti's later evidence that records were kept as to the source of funds for the Trust but he did not have access to them: see par [13] above. 103It is in that context that the criticism of the reasoning process of the primary judge falls to be considered. 104The first matter complained of was that the primary judge failed to make specific findings as to whether the $550,000 or the $900,000 advances occurred. 105If what is suggested was that the primary judge was required to make a specific finding that an advance in the sum of $550,000 was made, I do not agree. What he was required to do was to form a view that the payments said to be loans were in fact repayments of advances made by the respondent. The relevance of the $550,000 loan was that if made, it supported the contention that the payments made out of the accounts of Cassaniti and Associates at the time of the Loan Agreements were repayments of past advances made by the respondent. The primary judge concluded that there had been prior advances by the respondent and the payments made around the time of the Loan Agreements were a repayment of those advances. It was not necessary for him, in those circumstances, to make an express finding about the actual amount of the advance or how much was outstanding from time to time. 106In dealing with the $550,000 loan, the primary judge noted at par [28] that Mr Cassaniti denied that the advances were made, but referred to his reservations concerning his evidence. He described the $321,000 entry in the blue book as consistent with the borrowing of $350,000 by the respondent from Mr Andre Abdallah. He accepted Mr Andre Abdallah's evidence, describing it as broadly supportive of the respondent's account of the $550,000 transaction. He took into account the absence of any evidence as to the source of the $200,000 said by the respondent to have been provided from his own funds and the matters reflecting adversely on the credit of the respondent: judgment par [34]. The primary judge also rejected a submission by RFS2 that if such a loan were made, it was repaid prior to the entry into the Loan Agreements: judgment par [36]. 107In those circumstances, it is clear that the primary judge had concluded that advances had been made by the respondent to Mr Cassaniti prior to the payments made at the time of the Loan Agreements and, further, that the payments made at that time were in satisfaction of that indebtedness. It follows that to the extent the primary judge failed to find the precise amount of the advances, it was unnecessary for him to do so. 108So far as the $900,000 loan was concerned, the primary judge referred to the evidence of the respondent on this issue to the effect that the payments made to Cassaniti and Associates, Dean Korkis and Patricia Cassaniti in August and September 2003 comprised part of that advance: judgment par [37]. He accepted Mr Ayssor Abdallah's evidence, concluding that there was no inconsistency between his evidence and that of the respondent. He accepted the evidence of Mr Brian Abdallah and concluded that such inconsistency between his evidence and that of the respondent as existed supported, rather than impeached, their credit: judgment par [40]. He dealt with the failure to call Mr Lahood, the entries in the blue book and the giving of the guarantee: judgment pars [46]-[48]. He concluded that the reference in the blue book to the $900,000 indicated at least the respondent's understanding that the earlier amounts paid by Cassaniti and Associates were not loans, since otherwise the $900,000 transaction would not have given rise to a liability in that amount. The primary judge also referred to the evidence of the provision of security and the denial by Mr Cassaniti that he had provided the Certificates of Title, and to the repayment notation on the cheque butt: judgment pars [49]-[50]. He also referred to Mr Gino Cassaniti's evidence of the conversation between him and Mr Cassaniti at Silverwater Prison, which evidence he accepted in preference to that of Mr Cassaniti. The primary judge stated that Mr Gino Cassaniti's evidence tended to undermine the evidence of Mr Cassaniti of subsequent conversations between Mr Cassaniti and the respondent in which the additional payments were acknowledged to be subject to the Loan Agreements: judgment par [53]. As I indicated earlier, he rejected Mr Cassaniti's evidence of this conversation. I have set out the primary judge's ultimate conclusions in par [59] above. 109This review of the evidence shows that the primary judge rejected the contention that the payments made after the Loan Agreements were entered into were advances by the previous trustee to the respondent, but rather, were repayments of advances made by the respondent to Mr Cassaniti. It is correct that the primary judge did not expressly state that an advance of $900,000 was made. However, his acceptance of the evidence of the respondent, that of his brothers and Mr Gino Cassaniti, along with his acceptance of the veracity of the entries in the blue book, indicate that his conclusion was that an advance had been made by the respondent to Mr Cassaniti in about August or September 2003 and that subsequent payments thereafter out of the Cassaniti and Associates' accounts were in repayment of that advance. 110In these circumstances, the criticism made of the failure of primary judge to make express findings in relation to the $550,000 and $900,000 advances are not made out. 111Nor do I think the specific criticisms of the reasoning of the primary judge are made out. Contrary to the submission of RFS2, the primary judge expressly referred to the fact that the loan of $550,000 was not mentioned in the respondent's first four affidavits: judgment par [34]. Even if he did not, a mere failure to refer to this matter does not compel a contrary conclusion to that reached by the primary judge, or much less mean that his conclusion was glaringly improbable. It was not a matter which pointed decisively or even persuasively to a contrary conclusion taken in conjunction with the whole of the evidence: Fox v Percy supra at [90]. 112The criticism by RFS2 of the absence of contemporaneous documents evidencing the loan of $550,000, the absence of evidence of the source of the funds to make the loan and the inconsistency of the evidence of Mr Andre Abdallah with the entries in the blue book were all matters taken into account by the primary judge: judgment pars [26]-[34]. These matters did not incontrovertibly lead to a contrary conclusion to that reached by the primary judge or make his findings glaringly improbable. 113Similarly, it was open to the primary judge to find that although Mr Gino Cassaniti gave evidence that he did not see the actual $550,000 cash handed over, his evidence was not inconsistent with the respondent's evidence that it was contained in a bag which was handed to Mr Cassaniti at his office. The primary judge was not required to draw an inference that Mr Gino Cassaniti's evidence would not have assisted the respondent on this point by virtue of the issue not being raised in re-examination: see Manly Council v Byrne [2004] NSWCA 123 at [52]. 114Whilst submitting that the primary judge was not entitled to discard the importance of the date alongside the $321,000 entry in the blue book on the basis that entries in the blue book only commenced to be made in 2003, RFS2 did not proffer any reason why the primary judge was not entitled to accept the evidence of the respondent to that effect. The acceptance or rejection of the respondent's evidence on this point depended upon the assessment by the primary judge of his credibility and the conclusion which the primary judge reached has not been shown to be glaringly improbable or contrary to incontrovertible evidence. 115I have dealt to a large extent with the criticism of the acceptance by the primary judge of the evidence of Mr Andre Abdallah in pars [68]-[70] above. At pars [31]-[32], the primary judge referred to the fact that Mr Andre Abdallah was an admitted drug dealer and to the other problems associated with his evidence. Notwithstanding this, the primary judge stated he was prepared to accept Mr Andre Abdallah's evidence, no doubt based on his assessment of him in the witness box. It is difficult to see what further analysis the primary judge could or should have undertaken prior to accepting or rejecting Mr Andre Abdallah's evidence. Although RFS2 criticised the primary judge for failing to give reasons why he accepted this evidence, no further analysis was suggested. 116As I pointed out at par [69] above, there was no inconsistency between the statement by the respondent that he had been repaid the $550,000 loan by Mr Cassaniti and the evidence of Mr Andre Abdallah that his loan to the respondent had not been repaid. A further issue which arose was whether the statement by the respondent that the $550,000 had been repaid was inconsistent with the payments made out of the Cassaniti & Associates' accounts to the respondent at the time of the Loan Agreements and the subsequent payments made to the respondent and High Rise up to August 2003 being repayments of that loan. The importance of that question is that such payments could not have been repayments of the $900,000 loan as it was only made on the respondent's evidence in August or September 2003. 117I do not think there was any inconsistency. The respondent's evidence was that Mr Cassaniti commenced repayment of the $550,000 loan at the time of the entry into the Loan Agreements. The evidence was as follows: ""Q. You now claim do you that when you first met Mr Cassaniti he asked you to sign these three loan agreements, is that right? A. Not when I first met him, no. After I gave him the $550,000. ... Q. When you claim you gave him this $550,000 cash, one of the things he said to you was please fill in these three documents? A. When he started to pay me the money back he suggested we fill out agreements so if the police do investigate him it doesn't look like he's money laundering. Okay? That was what I was trying to say." 118So far as the absence of a receipt for the $550,000 was concerned, having regard to the unusual nature of the transactions alleged, the primary judge in my opinion was entitled to discount the absence of such a receipt. 119Finally, in respect of the $550,000 loan, RFS2 submitted that the primary judge did not adequately deal with the attack on the credibility of the respondent. However, the primary judge did take the changes to the respondent's evidence concerning the reasons for the entry into the Loan Agreements into account in assessing his credibility, describing them as "significant changes" and "at best, inaccurate". It is correct, as RFS2 submitted, that the respondent gave his final explanation prior to the issue of a certificate under s 128 of the Evidence Act. However, the respondent consistently maintained that the Loan Agreements did not record any advances actually made and his reluctance to reveal potential money laundering and tax evasion is understandable. The fact that the primary judge did not deal with the explanation given by the respondent as to what he meant by forgery does not, in my opinion, undermine the credit finding by the primary judge in circumstances where he expressly took into account the unsatisfactory evidence of the respondent on this issue. 120The findings of the primary judge in respect of the $900,000 loan were based on an assessment of the credibility of the respondent compared to that of Mr Cassaniti to which I have referred earlier. The particular criticisms made of the primary judge in relation to this advance were not that he overlooked relevant evidence but rather went to his treatment of it. In circumstances where it was not contended that his findings were glaringly improbable, it does not seem to me that these criticisms were such as to warrant a retrial. 121The first criticism, namely, that the trial judge erroneously concluded that the evidence of Mr Ayssor Abdallah was not inconsistent with that of the respondent is in fact incorrect. Whilst it is correct that Mr Ayssor Abdallah did not corroborate the evidence of the respondent, it was not inconsistent with it. Mr Ayssor Abdallah drew a cheque in the sum of $200,000 in favour of Blue Jeans and it was not put to him in cross-examination that the cheque was not handed to Mr Cassaniti in his presence: see par [25] above. 122RFS2 did not challenge the evidence of Mr Brian Abdallah that he advanced $100,000 to the respondent. However, it submitted that the primary judge was incorrect in finding that his evidence was that an advance of $150,000 was made. The evidence of Mr Brian Abdallah was somewhat ambiguous on this point. At the start of his cross-examination he affirmed he loaned the respondent $150,000. Subsequently, he gave the answer to which I have referred in par [27] above; "it was 100 and the interest I made I gave to Michael so I can make more interest". It was submitted that this answer showed that the amount advanced was $100,000 and the $50,000 was accrued interest. The primary judge took a contrary view and concluded that, consistent with the evidence of the respondent, the total advance was $150,000. In my opinion, having regard to the ambiguous nature of the evidence he was entitled to do so. 123The other issue raised by RFS2 in relation to the evidence of Mr Brian Abdallah was what might be described as the timing point. Mr Brian Abdallah referred to the loan being made about a month after he returned from Lebanon in late 2002 or early 2003, rather than in August or September 2003. The primary judge made no express finding as to when the advance by Mr Brian Abdallah was made, regarding the fact of the advance as what was important. Whilst there is no doubt that there was inconsistency between the evidence of the respondent and Mr Brian Abdallah on this issue, the primary judge did take it into account and his conclusion on the issue was not glaringly improbable. 124RFS2 criticised the primary judge for failing to give reasons as to why he concluded that the reference to a loan of $900,000 in the blue book was a reference to a loan to Mr Cassaniti. The primary judge referred to the entry in the blue book showing $900,000 was owing by Mr Cassaniti. He then considered and rejected the submission that that entry referred to monies due by Mr Lahood, stating that he accepted the respondent on this point. That finding was made in conjunction with the other findings in the judgment of the primary judge which he said supported the fact that a loan was made by the respondent to Mr Cassaniti, namely, the granting of a security (judgment par [49]), the repayment notation on the cheque butt (judgment par [50]) and Mr Gino Cassaniti's evidence of the conversation at Silverwater Prison (judgment par [53]). In my opinion, that process of reasoning adequately indicated why the primary judge accepted the entry in the blue book as correct. 125RFS2 finally submitted that in expressing views as to the unlikelihood of RFS2 advancing $2.8 million in the manner alleged, the primary judge ignored that fact that the previous trustee was "an accounting firm not a bank". The submission fails to recognise that the previous trustee was a trustee. The primary judge, in my opinion, was entitled to conclude that it was inherently unlikely that a trustee acting consistently with its duties would make advances in the fashion in which the alleged advances were claimed to have been made. 126In these circumstances, none of the particular criticisms made of the approach of the primary judge have been made out. 127The most significant criticism of the reasoning of the primary judge was that in considering whether the Loan Agreements were shams he incorrectly reversed the onus of proof. It is correct that the onus of establishing that the agreements were shams was borne by the respondent and to the extent the primary judge proceeded on the basis that RFS2 bore the onus he was in error. Further, it would appear from par [54] of his judgment taken in isolation that the primary judge did fall into this error. 128However, par [54] of the primary judgment must be read with par [56] and the overall approach of the primary judge to which I have referred above. It is apparent from a reading of the whole of the judgment that the primary judge preferred the evidence of the respondent and the witnesses called by him to the evidence of Mr Cassaniti. That led the primary judge to conclude on the balance of probabilities that the payments out of the Cassaniti and Associates' accounts were repayments of advances made by Mr Abdallah, rather than advances made by RFS2. The primary judge having determined that issue on the balance of probabilities was entitled to conclude that the Loan Agreements were not intended to operate according to their terms. Further, in par [68] of the judgment, the primary judge expressly stated that he concluded on the balance of probabilities that the Loan Agreements were not intended to have their stated effect. 129In relation to the advances subsequent to the Loan Agreements, the onus was on RFS2 to prove that they were in fact advances covered by the all monies clause in the Loan Agreements. At [68], the primary judge concluded that this onus had not been discharged. For the reasons given he was entitled to do so. 130In these circumstances, the primary judge did not misuse his position as the trial judge by ignoring uncontroverted facts or uncontested testimony contrary to his conclusions, nor were his conclusions glaringly improbable. It follows the appeal should be dismissed. 131It is unnecessary in these circumstances to deal with the conclusion of the primary judge that if loans were in fact made to Mr Abdallah they were made by Cassaniti and Associates rather than by the previous trustee. If a retrial had to be ordered that was a matter which may have arisen for consideration. However, for the reasons given a new trial will not be ordered. 132Nor is it necessary to deal with the conclusion of the primary judge that the third Loan Agreement was void for uncertainty. Even if it were, the advances would have been recoverable as monies repayable on demand. However, having regard to my conclusion this issue does not arise. Conclusion 133In these circumstances the appeal should be dismissed with costs. 134BEAZLEY P: I agree with the reasons of the Chief Justice and with the orders proposed. 135MACFARLAN JA: I agree with Bathurst CJ. ********** 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: 21 May 2013