Fohec Pty Ltd v Kahila

Setting aside the factual and legal complexities raised by the parties, these proceedings are a dispute between two brothers, George Kahila and David Kahila, about whether David is personally liable for the repayment of a loan made by George’s company to David’s company. If David is liable, then there is a further dispute over what property his obligation is secured. Without disrespect, I will refer to the protagonists by their given names.

The plaintiff (Fohec Pty Ltd) is a company of which George is the sole director, secretary and shareholder. RSA Civil Pty Ltd was a company of which David was sole shareholder and director. It has since been wound up in insolvency.

There is no dispute that in December 2018, Fohec advanced $250,000 to RSA Civil by way of a loan repayable in three months (and from which Fohec deducted prepaid interest and fees). As the hearing progressed, it also became apparent that there could be no dispute that David had executed a suite of loan documents in the presence of his solicitor, Mr George Bazouni of New South Lawyers, in relation to the advance from Fohec to RSA Civil. Those documents included a mortgage, which incorporated the terms of a memorandum of common provisions (MCP) that also included a guarantee by David of RSA Civil’s obligations to Fohec.

There is also no dispute that the executed loan documents were never physically delivered on behalf of RSA Civil and David to Fohec or its agents. What is hotly in dispute between the parties is whether or not, despite the physical non-delivery, David is bound by the mortgage.

Assuming that he is bound, the next question is over what property David’s obligations under the mortgage are secured. This aspect of the dispute also involves David’s wife, Chantell, the second defendant.

There are two properties which are in issue:

The third and fourth defendant/cross-claimants are debtors of RSA Civil, who as part of their commercial arrangements with that company had the benefit of a deed of guarantee and indemnity from David for any amounts RSA Civil might owe to them. Subject to the reservation of some costs issues, the third and fourth defendant/cross-claimants’ claims were resolved by consent orders which I made on the fourth day of the hearing, with payments out of the funds held in Court being made to those defendant/cross-claimants.

In summary, for the reasons which follow, the Court has determined:

Mr D Allen of Counsel appeared for Fohec. Mr P D Reynolds of Counsel appeared for David and Chantell. Mr D Harris of Counsel appeared for the third and fourth defendant/cross-claimants.

The proceedings were conducted by reference to Fohec’s statement of claim filed on 10 May 2023. Mr Reynolds made it clear throughout the hearing that his clients were holding Fohec to its pleading. However, as the hearing developed, and it became apparent that there could be no dispute that David had executed the loan documents in the presence of Mr Bazouni, the issue of whether or not the loan documents (in particular the mortgage) were deeds that became binding on delivery came sharply into focus.

After the conclusion of oral submissions, the hearing resumed on 10 October 2023 for the purposes of dealing with an amendment application by Fohec. The proposed amended statement of claim did two things. First, it abandoned claims against David and Chantell under s 37A of the Conveyancing Act 1919 (NSW) in relation to both Pemulwuy and Kellyville which had been pressed during the hearing. Second, it added this pleading:

While Mr Reynolds opposed the amendment, he properly accepted that he was unable to point to anything else his clients would have done differently by way of evidence at the hearing if that allegation had been before the Court. He accepted that, as matters stood then, the new allegation raised legal arguments that could be dealt with by additional written submissions. Given those concessions, the Court gave leave for the amended statement of claim to be filed and a timetable was ordered for the exchange of further written submissions to conclude the hearing.

The Court finds the following facts. Except where indicated otherwise, they were either uncontroversial or not seriously contestable, including being evidenced by contemporary records.

On 11 July 2006, David acquired Pemulwuy for $300,000. This was prior to his marriage to Chantell.

Between 2006 and 2008, Chantell and David had conversations in which they agreed they would hold Pemulwuy as joint tenants.

On 18 May 2010, George was convicted at the Downing Centre Local Court of offences including obtaining money by deception.

On 20 January 2011, George was convicted at Sydney District Court for offences including using a copy of a false instrument.

On 1 July 2011, David caused Chantell to be added to the title of Pemulwuy as a joint tenant with him for no consideration.

Fohec was incorporated on 18 October 2011 and is in the business of private lending.

On 25 February 2016, RSA Civil was incorporated. David was its sole director and shareholder.

On 20 September 2016, a mortgage was given to ANZ over Pemulwuy, in part to fund the purchase of Kellyville.

On 31 October 2016, Chantell’s purchase of Kellyville as sole registered proprietor settled for $1.95 million. Mortgages were given over Kellyville securing loans to which both David and Chantell were listed as parties.

By November 2018, David was in discussions with George about the latter providing a loan in lieu of another lender. On 19 November 2018 at 8:49pm David texted George:

George’s text response was “can I call you later”.

On 20 November 2018 at 11:08am, the office manager for RSA Civil, Ms Elizabeth Memory, emailed George (copied to David) RSA Civil’s aged receivables as at 20 November 2018.

On 25 November 2018, David texted an invitation to George to attend Christmas eve celebrations at his (David’s) house, and an invitation to the RSA Civil Christmas party.

On 26 November 2018 at 5:32pm, David texted George:

On 29 November 2018 at 3:29pm, Ms Memory emailed George, copied to David, a copy of RSA Civil’s asset register including to inform George which assets were still subject to finance and which were not.

After some exchanges on 3 December 2018, on Tuesday, 11 December 2018, David texted George “running out of time dude”, to which George replied “righto … I’ve progressed it. We’ll have it done by Friday.”

At 4:31pm on Tuesday, 18 December 2018, David sent George the account details for RSA Civil and then texted “Please confirm you have it. Did u get it?”

The evidence also included a summary of text messages between David and George for the period between 18 December 2018 and 20 December 2018 taken from George’s phone and which included:

As will be apparent from that table, on 19 December 2018 George arranged for the funds for the advance to be paid into his solicitor’s trust account. Fohec’s solicitor was Mr Peter Skouteris of Andresakis & Associates.

In [34] to [43] below I set out the events which occurred on Thursday, 20 December 2018.

By no later than the morning of Thursday, 20 December 2018, George had, at David’s request, made an appointment for David to see Mr Bazouni to obtain advice as to the loan documents.

At 12.26pm George emailed Mr Bazouni under the subject heading “PRIVATE FUNDING DOCS ATTACHED – RSA CIVIL AND KAHILA” and attachments “PRIVATE FUNDING DOCS – RSA CIVIL.pdf” with the message:

George’s signature block described him as business development manager of Chess Financial Group.

I describe the documents emailed to Mr Bazouni and the executed loan documents in more detail in [65] to [83] below.

At 12.57pm David texted George “on my way to you”.

Shortly thereafter, and probably no later than 1.35pm (see [40] below) and definitely before 2.15 pm (see [41] below), David met George. George gave David a set of the loan documents to take to Mr Bazouni for advice and execution. These findings are based on three matters:

At 1:35pm George emailed Mr Skouteris with the subject line “cheque directions”. The message was:

Between 2:15pm and 3:30pm, as recorded by Mr Bazouni, David met with Mr Bazouni and signed the loan documents given to him by George (including the mortgage) in the presence of Mr Bazouni.

Shortly (given David’s urgent need for the advance as appears from the text messages in [27] to [31] above) after leaving Mr Bazouni’s office, David telephoned George and said "I've just signed the loan documents at George Bazouni's office. Please transfer the funds as soon as possible." The reasons for this finding are in [129] to [134] below.

An Andresakis & Associates trust account statement in the name of Fohec records an EFT payment of $234,500 on 20 December 2018 to RSA Civil with the bank account details set out in George’s email of that day (see [40] above). For the reasons set out in [136] below, the Court finds that transfer occurred after David’s call to George recorded in the preceding paragraph.

On Friday, 21 December 2018, George texted David with the name of the entity to which loan repayments were to be made, being “Evolution Mortgage” and its bank account details.

For the reasons set out in [153] to [156] below, the Court finds that between March 2019 and September 2020 repayments totalling $57,000 were made by RSA Civil to Fohec in respect of the advance.

On 1 April 2019, George sent David the same details as those in [44] above.

On 2 April 2019, George texted David saying “Bro please do not write interest on loan when transferring money across. Please write loan to GK.” To which David replied “Ok dick head lol”.

On 20 May 2019, a new company called RSA Civil Construction Pty Ltd was registered with Chantell as the sole director, secretary and shareholder. She held those positions until 13 September 2022.

On 2 March 2020, David ceased to be a shareholder, director and secretary of RSA Civil.

On 3 February 2021, Mr D Frisken was appointed liquidator of RSA Civil.

In his report to creditors dated 3 May 2021, Mr Frisken reported that RSA Civil had no assets, and liabilities of $2,318,289. Fohec is not listed as a creditor in the report.

On 9 June 2021 at 3:56am, George emailed what was described as a “statement of account” to David at an RSA Civil email address saying:

The statement of account is numbered as “Statement No. 3”. George accepted in cross-examination that this was in fact the first time he had sent a statement to David and that the reference to “No 3” was “an error”.

The statement records the loan of $250,00 having been drawn down on 19 December 2018, with three months interest paid in advance and legal and establishment fees totalling $18,800 being debited on 19 December 2018.

The statement also records on 19 December 2018 a debit of $231,200 with the description “balance of $231,200 transferred to client account”.

The statement refers to the loan being extended for a further three months on 19 March 2019 and extended for a further six months on 22 June 2019 so as to expire on 21 December 2019. This statement also records the expiry of the loan and increase in interest rate upon default on 21 December 2019. Allowing for the $57,000 in payments which Fohec accepts (as does the Court) were made to it, the balance of the loan is recorded as $401,194.

More than two weeks later on 26 June 2021, David sent this email to George, copied to his (David’s) solicitor in these proceedings Mr Nicholas Hallasso:

On 19 November 2021, the sale of Pemulwuy was settled. David’s 50 percent share of the net proceeds of sale was paid, by agreement with several caveators (including the fourth and fifth defendants and Fohec) into the controlled monies account of Madison Marcus Law Firm pending further order of the Court. They were subsequently paid into Court.

On 22 August 2022, Fohec sent David a further account statement for the period 19 March 2019 to 22 August 2022 showing a total balance owing of $776,561.25.

On 24 October 2022, Chantell obtained a loan from the Commonwealth Bank in the sum of $2,300,000 secured over Kellyville and another property at Kenthurst.

By summons filed on 7 November 2022, these proceedings were commenced by Fohec against David. Other parties were subsequently joined.

On 1 March 2023, Fohec sent David an account statement for the period 19 March 2019 to 21 March 2023 recording a balance owing of $876,714.41

On 8 May 2023, Chantell’s sale of Kellyville was completed. Chantell applied the net proceeds to the purchase of another property in her sole name.

On 4 September 2023, Fohec sent David an account statement for the period 19 March 2019 to 21 September 2023 recording a balance owing of $1,308,997.04.

The most important evidence in this case was material produced on subpoena by Mr Bazouni, who neither party called as a witness.

Mr Bazouni produced two categories of documents:

As to the second category, I have used the word “version” because Mr Bazouni answered the subpoena addressed to his firm electronically, the subpoena having called only for copies rather than original documents. It is therefore impossible to say whether what Mr Bazouni has in his possession is a colour copy of the executed loan documents or the original executed loan documents.

George’s position was that, to his knowledge, the original executed loan documents bearing David’s and Mr Bazouni’s signatures and initials were with Mr Bazouni. David’s position (at least at one point) was that he had taken the originals with him from Mr Bazouni but was no longer able to find them.

The documents sent to Mr Bazouni by George began with a page that said:

In what follows, I shall refer to the sections “Review of security documents” and “Collection of security documents” as the Instructions. I shall next set out the relevant features of the loan documents, including the notes made on his working copy by Mr Bazouni. I also note that everyone at the hearing (and by reference to a notation made by Mr Bazouni also him) observed that the solicitor referred to in the section headed “Review of security documents” was the wrong solicitor. It should have been Mr Skouteris, but nothing ultimately turns on the error.

The first document is the mortgage over Pemulwuy between David as mortgagor and Fohec as mortgagee, as well as over the assets of RSA Civil and of David. Somewhat curiously, Fohec is described as mortgagee both as to 80/100 tenants in common and 20/100 tenants in common, although again nothing ultimately turns on this.

The mortgage records its commencement date as 19 December 2018 for a principal amount of $250,000 repayable three months later. The mortgage referred to a second registered mortgage over Pemulwuy and charges over the assets of RSA Civil and David. The document describes RSA Civil as the borrower and David as the guarantor.

There is an execution section headed “mortgagor execution” which provides for a witness and nothing more. However, there is a further execution page after Schedule A to the mortgage signed by David on behalf of RSA Civil (described as “Borrower 1/Mortgagor”) in the presence of Mr Bazouni and by David in his own right (described as “Guarantor 1/Mortgagor) expressed as signed, sealed and delivered by David in the presence of Mr Bazouni. There are identical execution provisions to Schedule B to the mortgage. Schedule A expressly incorporates the MCP, Clause 28 of which is the guarantee provision.

The documents include one headed “cheque directions” executed by David on behalf of RSA Civil in the presence of Mr Bazouni. This is the document executed on behalf of RSA Civil stating “the Borrower authorises Fohec Pty Ltd to pay the Principal Amount as follows….”. This records an amount to be transferred to the borrower (after payment out of various lender’s fees) of $231,200. Next to the space on the form for borrower’s bank details to be inserted, Mr Bazouni (there was no dispute that this was Mr Bazouni’s handwriting) records “already transferred by lender to borrower”. I find this is what David told Mr Bazouni.

The loan documents include a Debtor’s Advice Declaration dated 20 September 2018 executed by David and witnessed by Mr Bazouni concerning David’s understanding of the mortgage and including the statement that he “had the opportunity of obtaining legal advice from an independent Australian legal practitioner prior to executing the Mortgage as to the legal effect of the Mortgage and my obligations under it”.

The next document is an Australian Legal Practitioner’s Certificate dated 20 December 2018 and executed by Mr Bazouni including the statement that “I have explained to the nature and the effect of the Mortgage to be executed by him/her and each of its terms and the legal effect of the Mortgage and its terms.”

On the “acknowledgement of legal advice by proposed guarantor” Mr Bazouni added:

Attached to Schedule A are some pages showing Mr Bazouni’s notes on the documents emailed to him by George. These include his note that he was with David from 2:15pm to 3:30pm on 20 December 2018 and a note, which the Court is satisfied reflects what he was told by David, that “David has ‘900k’ of his personal money in an account and does not want to use it because he is sick of putting his own money into RSA Civil. RSA Civil owed 400k from clients which it will receive just after Christmas and pay the loan of 235k (paid interest in fees in advance) to his brother (George Kahila) (the Director of the Lender). Can pay the loan tomorrow if I want to using my 900k – no issue – I also have cars and boats paid off over $1,000,000 – loan repayment no issue”.

In relation to the check list of required supporting documents there is a note “all documents have been provided to the broker. George Kahila”.

In relation to the mortgage itself, Mr Bazouni notes that the commencement date of 19 December 2018 is “yesterday” and that Kellyville is not being provided as security. He notes the interest rates are approximately 20% and 40% per annum and records “go to a mainstream lender” which the Court accepts is what he advised David. In relation to the prepaid interest of $13,500 he has marked it as “paid”. He has also noted the charged assets as including the “plant, equipment” of RSA Civil and next to David’s name “cars plus anything else in your name”.

In the Australian Legal Practitioners Certificate next to the entry “signatory told me that he/she signed the Mortgage of his/her own free will”, Mr Bazouni has written (and the Court finds that he provided this advice) “seek independent financial advice”, i.e. he advised David to seek independent financial advice.

On the Guarantor’s Advice Declaration, Mr Bazouni has circled the words “undue influence or pressure” in the expression “the Guarantee has been freely and voluntarily executed by me and without undue influence or pressure from any third party” with the words “no one forced me to sign these documents”. The Court finds that this reflects Mr Bazouni’s explaining this section to David and the latter’s reply to the effect that no one had forced him to sign the documents.

Finally, on the front page of the working copy of the MCP, Mr Bazouni has recorded “incomplete memorandum – I printed out the memorandum from the email George Kahila sent me – it goes to clause 31.2 not 12.1”.

In these proceedings I have applied the legal principles which I summarised in Saravinovska v Saravinovski (No 6) [2016] NSWSC 964:

To these I would respectfully add and have applied this recent summary by Leeming JA (sitting at first instance) in Dedakis v Deligiannis; The estate of Rebecca Deligiannis (also known as Rebeka Deligiannis) [2024] NSWSC 1018;

Each of George, David and Chantell were cross-examined. I do not accept Mr Allen’s submission that the resolution of these proceedings does not turn on George’s credit. Each party relied upon evidence of conversations which were disputed and were not the subject of contemporaneous file notes or other documentary corroboration. Furthermore, the present antagonism between George and David was obvious. For reasons which will become apparent, it was ultimately only necessary for the Court to come to a view about the credit of George and David.

As might be expected, each party asserted the honesty of its own witnesses and challenged the reliability of the opposing witness or witnesses. For the reasons which follow, the Court concludes in relation to each of George and David that their evidence should only be accepted if it is inherently probable, against interest or otherwise corroborated by an independent witness (of which there were none) or contemporaneous documents.

In relation to George:

As to David’s credit, the Court’s concern originally arose not so much as to his honesty, but his unreliability due to a poor memory in relation to the events central to this case.

David originally instructed his solicitor (as appears from his solicitor’s affidavit sworn at an early interlocutory stage) that he (David) had no recollection of signing the loan documents and that he did not believe that he had done so. Through his solicitor he said “he has a recollection of being given documents by George that George wanted him to sign, however, he does not recall signing them and does not believe he did so”.

Mr Reynolds submitted that it was to David’s credit that when Mr Bazouni’s documents eventually became available, even in the witness box David said he did not recall telling Mr Bazouni the things which Mr Bazouni plainly recorded as matters of instructions from David. David’s explanation for his poor memory was consequences of a period of drug addiction.

I do not accept Mr Reynolds’ submission. For the reasons set out in [130] to [134] below, I have concluded that David took refuge in non-recollection when the only alternative would have been to make concessions in the face of what was clear from the documents produced by Mr Bazouni. As I record in [133] to [134], I am satisfied that David was prepared to lie to avoid liability to Fohec.

There were other unsatisfactory aspects of David’s evidence. For example, when his attention was drawn to the communications between RSA Civil’s office manager, Ms Memory, and George attaching an asset register obviously sent as part of establishing RSA Civil’s creditworthiness (see [28] above), David was reluctant to accept that the assets in the register were RSA Civil’s.

He also said he was unable to recall what, in my respectful view, would be fairly obvious matters as to whether or not he had provided RSA Civil with any working capital or plant and equipment.

As for Chantell, much of her evidence was characterised by answers to the effect that she did not recall or was “not one hundred percent sure”. She sometimes gave the impression of trying to avoid answering questions, but I formed the view that on many occasions this was because she may not in fact have known the answer. It has not proved necessary for the Court to come to a concluded view as to her credit. As the case against her has turned out (see [157] and following below), none of her evidence has proved to be of dispositive importance.

Because no particular legal significance is sought to be ascribed to them by any party, it is not necessary for the Court to resolve the various disputes in relation to conversations prior to what occurred on 19 and 20 December 2018.

The parties’ evidence of conversations must be assessed against what little can be gleaned from the documentary record and what the parties ultimately accepted could not be contested, including:

Against that background, it is instructive to set out the course of the relevant affidavit evidence.

In an affidavit sworn on 21 October 2022 in anticipation of commencement of the proceedings, George said:

In an affidavit sworn on 27 April 2023, George said:

In an affidavit sworn on 15 May 2023, George said:

In affidavit sworn on 24 July 2023, David said in response to George’s affidavits, including those from which I have quoted in the preceding paragraph:

In his affidavit in reply sworn on 4 September 2023, George said

Given the legal issues that have been raised, the critical piece of evidence for Fohec’s case is George’s evidence that David rang him and said: “I have just signed the loan documents at George Bazouni’s office. Please transfer the funds as soon as possible”. After some preliminary observations and setting out the parties submission, that is the issue which will then be addressed.

The parties accept that sometime on 20 December 2018 by a payment from its solicitors’ trust account, Fohec advanced $234,500 of a total loan of $250,000 to RSA Civil. From that the Court was initially confronted with a dispute on every significant factual and legal point. This was not least because David had contested (by non-admission) that he had signed the loan documents until his affidavit of 24 July 2023 (see [102] above) and Mr Bazouni’s documents being sought late and only produced on 28 August 2023, only days before the hearing. The discovery that David had in fact signed the loan documents should have caused both sides of the record to rethink and perhaps simplify their case theories fundamentally.

So it was that they persisted with what in my respectful view was a distracting dispute about the legal characterisation of what occurred. By its amended statement of claim, Fohec says that by sending the loan documents to Mr Bazouni on 20 December 2018 it was thereby offering to lend $250,00 to David on terms. It further says that David’s verbal confirmation on that date that he had received and signed the loan documents was an acceptance of the offer, which meant that Fohec and David agreed to be bound by the terms of the loan documents. Alternatively, by its amendment, Fohec submits that the loan documents were executed as a deed and delivered upon execution by David, or alternatively when David informed George that he, (David) had signed the loan documents.

For his part, David admits that in December 2018, by reason of a conversation between George (in his capacity as a director of Fohec) and David (in his capacity as direct of RSA Civil), those companies reached an oral agreement that Fohec would lend funds to RSA Civil. David says that pursuant to that agreement, whatever its other terms may have been, Fohec caused $234,500 to be transferred to RSA Civil.

As I have noted, the case had been pleaded and prepared on the basis that the actual execution of the loan documents was in issue. Curiously, there was no allegation in terms that the loan documents had been executed by David until the introduction of the amendment (see [11] above). The parties ultimately conducted the hearing on the basis that David had in fact executed the loan documents, although there was a faint suggestion (which the Court rejects) that the Court should find based on the incomplete copy from Mr Bazouni’s file, that David had ceased initialling the MCP on page 26 of 41 (which on this theory meant that David had not initialled the pages containing Clause 28, being the guarantee provision).

As the case was in fact conducted in relation to David, the dispositive issue was presented as whether or not David was bound by the loan documents, or, more precisely, the mortgage, pursuant to which he was both a mortgagor and guarantor. If he was, then the Court was asked to resolve a subsidiary dispute as to quantum.

I should also record that while ultimately not relevant to the outcome, the parties were diverted at various points of the case by the question of what had happened to the original executed loan documents.

Finally, there was some evidence and debate concerning whether or not interest was payable on the advance. At the factual level, this turned on David’s evidence (which the Court rejects as uncorroborated) that George had told him that interest would not be charged. This debate goes nowhere because in the case as argued, David gave that alleged statement no legal significance. For example, there is no cross-claim alleging that by virtue of the alleged representation, Fohec is estoppped from denying that interest was not payable in whatever arrangement was being reached between the parties.

No case was presented by David that if he was bound by the mortgage there was some reason why he was not bound to pay interest as specified in the mortgage. Furthermore, subject to argument about the quantum of repayments, David’s case was run on the basis that if his defences were unsuccessful, then Fohec was entitled to the funds in Court.

Mr Allen’s case for Fohec rested on four propositions.

First, the loan documents had been signed and, where relevant, sealed. They had been delivered upon execution or when David told George that he had signed the loan documents. The court should accept George’s evidence that David rang him to tell him that.

Second, by reference to the ordinary principles of contract, the provision of the loan documents to Mr Bazouni as David‘s solicitor constituted an offer. David’s acceptance of that offer was his execution of the loan documents or telling George that he (David) had executed the documents.

Third, there was insufficient evidence for the Court to conclude whether the advance had been paid on 20 December 2018 before or after the execution of the mortgage. If it had been paid before execution of the loan documents, then there was no problem of past consideration because, either the mortgage was a deed or, in the alternative, the payment was sufficiently contemporaneous with the execution of the loan documents to be part of the one and the same transaction.

Fourth, the Court should find by reference to RSA Civil’s own records that $57,000 had been repaid by RSA Civil to Fohec in respect of the advance.

David’s factual and legal submissions may be summarised as follows.

George’s contention that the advance was made to David should be rejected. It is convenient that I immediately record that I do reject it, to the extent it was a contention of any relevance. As I have already observed, the parties essentially focused on David’s liability under the loan documents. However, under the loan documents, including the mortgage, it was quite clear that RSA Civil was the borrower of the advance.

The Court should find that any loan was interest free. For the reason given in [111] above, I reject this submission as irrelevant.

Turning to the events on 20 December 2018, the Court should find that, contrary to George’s evidence, David did meet George. This is corroborated by the text message set out in [31] above and that fact that David was apparently able to give Mr Bazouni a complete copy of the loan documents. While ultimately not a point going to more than credit, as I have recorded in [39] above, I accept this submission.

The Court should also find that the advance was made to RSA Civil before David had executed the loan documents. This is because of George’s email to Mr Skouteris at 1:35pm on 20 December 2018 (see [40] above) and because of the two occasions in Mr Bazouni’s notes where he records (as the Court accepts) David told him that the funds had been paid. I consider this submission further in [132] to [134] below.

The Court should accept David’s evidence that he became angry in Mr Bazouni’s office, especially concerning the interest.

It was further submitted that the Court should accept Mr Bazouni’s notes as accurate. Neither party suggested that they were inaccurate as far as they went and, as I have set out in [66] above, I accept them as accurate.

Consistently with accepting George’s evidence that he became angry in Mr Bazouni’s office, the Court should also accept David’s account of his conversation with George after David had left Mr Bazouni’s office.

In relation to what Mr Reynolds’ referred to as the contract case, it was submitted that there had been no verbal acceptance. Even if the Court was satisfied that David had told George that he (David) had signed the loan documents, that was no more than signalling the start of the steps required by the Instructions. In any event, even if the contract came into existence at that point (which was denied), there was no contract because the funds had been advanced before that. Past consideration was not good consideration.

In relation to the question of the mortgage’s status as a deed, it was contended:

Finally, as to quantum, it was submitted RSA Civil’s MYOB records showed that $144,600 had been paid. With the exception of one matter resulting in a concession by David of $7,600, the balance of the figures had not been cross- examined upon. This meant the Court should find that $137,000 had been repaid.

The Court accepts George's evidence that on 20 December 2018 David rang him shortly after 3.30pm and said "I've just signed the loan documents at George Bazouni's office. Please transfer the funds as soon as possible." The reasons for this finding, and taking into account the guarded view I have formed about George’s credit, are:

In reaching this conclusion, the Court rejects David's evidence about what occurred at and after the meeting with Mr Bazouni, including that he (David) signed the loan documents before he had received Mr Bazouni’s advice (it is beyond fanciful to think Mr Bazouni would have witnessed David’s signatures before giving the advice he had been retained to give); that he (David) got angry about the references to interest rates; that he told Mr Bazouni not to send the documents to anyone; and, that he immediately phoned George in an angry rant. None of this is consistent with the documents produced by Mr Bazouni and his notations on them.

David could have refused to sign the documents. Had he done so, I have no doubt given his thorough notes that Mr Bazouni would have recorded that. It also makes little sense that, having signed the documents with the solicitor acting for him, that he would then tell that solicitor not to send them to anybody. Even if this had occurred, again I am confident Mr Bazouni would have recorded such important, and in some respects counterintuitive, instructions.

Such behaviour on the part of David is also quite inconsistent with what he is recorded, and the Court has found, that he told Mr Bazouni. In the face of Mr Bazouni's advice, including presumably about the high interest rates and the suggestion David seek financial advice, Mr Bazouni records David telling him that he (David) could "pay the loan tomorrow if I want to using my $900k - no issue" with a long explanation of why that was so. That advice included what Mr Bazouni recorded next to the extremely broad definition of "Money" as what was repayable pursuant to the MCP: "VERY IMPORTAN(T) EXPLAINED IN DETAIL". Furthermore, in relation to the Guarantor's Advice Declaration, Mr Bazouni records David as acknowledging "no one forced me to sign these docs".

The matters in the previous four paragraphs are also very significant for the Court's view of David's credit more generally. It is possible to take a benign view that the reliability of David's evidence was, as he contended, affected by memory loss due to his history of substance abuse. However, for David to invent what I am well satisfied, given the seriousness of the finding, is a completely false narrative about what happened at and after the meeting with Mr Bazouni takes matters well beyond such a benign conclusion. I find it incredible that David originally denied ever having signed the loan documents in circumstances where he had a done so in the presence of his solicitor over the course of a one hour and fifteen minute conference where that solicitor carefully explained the documents in detail. The Court concludes that David was a witness prepared to say whatever he thought would help him, including to lie, to avoid liability to George.

I am fortified in this conclusion by the confident picture as to repayment that David painted to Mr Bazouni. This picture is in sharp contrast to David's text messages to George about his urgent need for the funds. I conclude from that contrast that David was prepared to say whatever he thought was in his interests, whether true or not, including to his own solicitor Mr Bazouni. Events proved the falsity of what David told Mr Bazouni about how easily the loan could be repaid. I am satisfied that in the witness box David likewise remained prepared to, and did, say whatever he thought would deflect the liability for which he was being sued.

It is next convenient to say something about the mystery of the whereabouts of the original executed loan documents. In doing so I acknowledge that a finding on this is not necessary and the parties, no doubt for their own different forensic reasons, were content to rely on what had been produced by Mr Bazouni. However, these observations may be made:

The next issue is when the funds left Fohec's solicitors' trust account to be advanced to RSA Civil. Given the views I have expressed in [129] above, the Court finds on the balance of probabilities that the transfer occurred after David had told George that the Loan Documents had been signed. In particular:

The question of the timing of the advance was relevant to Mr Reynolds' submission that past consideration would not have been good consideration. By reason of my finding, that submission does not arise. However, even if I am wrong, I accept Mr Allen's submission that the advance and the execution of the loan documents were sufficiently contemporaneous to overcome the application of the past consideration principle. The evidence established a “window” of no greater than two hours. The advance could not have occurred earlier than 1.35pm (the time of George’s email to Mr Skouteris) and the loan documents must have been signed by the conclusion of David’s conference with Mr Bazouni at 3.30pm. Another way of putting that submission is that this is a case where the general proposition that the law does not take notice of periods of less than a day should be applied.

The next question is whether the loan documents (or more precisely the mortgage) are a deed and, if so, whether delivery occurred. I observe in passing that while the mortgage itself left blank the document reference for its terms and conditions, there was no doubt that the parties intended the MCP to apply given it had been provided as part of the suite of loan documents and was incorporated by reference in Schedule A of the mortgage.

It is the case that in one place David executed the mortgage as mortgagor by reference to the word "executed" and elsewhere he did so as "signed, sealed and delivered" as "guarantor 1/mortgagor". However, I do not accept Mr Reynolds’ submission that the status of the mortgage as a deed was equivocal.

Clause 4.1 of the MCP provides:

The MCP also includes the guarantee provisions in Clause 28, to which David is bound because he has executed the mortgage expressly as guarantor. Contrary to Mr Reynolds' submission, "Debtor" includes David. This is because the MCP defines "Debtor" as:

"Mortgagor" is then defined as "the person named in Schedule A as the Mortgagor". Schedule A identifies David as "Guarantor 1" and then defines the "Mortgagor(s)" as "Borrower(s) and Guarantor(s)". In my respectful opinion, those express provisions put beyond doubt that the mortgage is a deed.

The next issue is when did the deed become binding?

In Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 at 9503, Rogers J (as his Honour then was) said:

Before turning to the conduct of the parties, there are at least two textual indications, in addition to the words "signed, sealed and delivered", that the mortgage was intended to become binding, that is to say to have been delivered, on execution. The first is clause 28.16:

While it did not in terms apply because there was only one guarantor, it would be a strange result that in this case the one guarantor might not be bound on execution, whereas if there had been two to sign, one guarantor would have been bound even if the other hadn't signed. A guarantor executing a deed in that situation of multiple guarantors would have been bound at law upon execution “because of the special rules as to deeds”: Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294 at 301 per Powell J (as his Honour then was).

The second textual indication is that the power of attorney which David executed as part of the loan documents which empowered Fohec's solicitors to complete various documents on his behalf was expressed to operate "immediately", which I consider means upon its execution.

Further to these textual indications, on the facts of this case, the Court finds from the objective conduct of the parties on 19 and 20 December 2018 that their intention was for delivery to occur upon execution or, if that be wrong, upon George being notified that the loan documents had been signed. In short, the contemporaneous text exchanges show that David was anxious to receive the funds and George was prepared to make the advance once the loan documents had been signed with George having had the benefit of Mr Bazouni's independent advice. That is what the Court has found occurred.

Whether by way of rebutting the presumption of delivery on execution or simply as going to intention, Mr Reynolds placed particular emphasis on:

I do not accept that any of those matters is sufficient to negative the conclusion which I have reached by reference to the parties' conduct. From a contractual point of view they are all matters for the benefit of Fohec which, as such, it was entitled to waive. The conduct which the Court has found demonstrates such a waiver by George on behalf of Fohec.

That approach also offers some explanation, if any be required, for why there was no follow up by Fohec to obtain the executed loan documents. During cross-examination George tellingly (but wrongly in this particular case) referred to Mr Bazouni as his representative (see [88(7)] above). Mr Bazouni was known to George and George had certainly organised for David to see Mr Bazouni. George obviously considered Mr Bazouni to be in Fohec's camp, so it is unsurprising that he may have been content to leave the executed loan documents with Mr Bazouni as a practical matter, having been told by David that they had been executed.

Finally, I do not accept the submission that the legal obligations evidenced by the loan documents (in particular the mortgage) were disclaimed, waived or abandoned. Any such conclusion is unsustainable when it is part of David's case that RSA Civil was making repayments in 2019 and 2020 (which is accepted by Fohec) and where Fohec sent accounts from 2021.

Turning to the question of quantum, David relied on three RSA Civil MYOB records to establish that repayments totalling $144,600 had been made. The first of these referred to the payee as "GK - Evolution" (being the name he had been given by George for repayments – see [44] above) for payments between April 2019 and September 2020 totalling $64,600. However, David accepted in cross-examination that a payment listed for $7,600 was unrelated to the repayment of the advance. With that deduction, Fohec accepted that $57,000 had been repaid.

The other two MYOB records list the payee as George. One has an identifier of "RSA Civil" and lists payments from May 2019 to 28 February 2020. The other says "Demo" and lists payments from 31 December 2019 to 1 July 2020. David's evidence was that these were payments made to George referable to the advance by means of cash cheques. George denied he had received the payments. Given his denial, nothing can be made of the fact that David was not specifically cross-examined about those two records because the issue was clearly in contest.

While there were text messages in evidence where George said a payment should not be described as interest, and other messages from George chasing David for money, these did not appear to link directly to the payments in the other two MYOB records. Nor was there any satisfactory explanation from David as to why they appeared to be accounted for on separate records but overlapped as to periods of time. If they were repayments for the advance, even by cash cheques, RSA Civil’s own records could have shown them on the same list referred to in [153] above.

Given the view the Court has taken of David's credit and the lack of a corroborated explanation why the records were kept in that form, I am not actually persuaded on the balance of probabilities by those two other records that the payments, if they were made, were repayments of the advance. Accordingly, the Court finds that only $57,000 was repaid by RSA Civil to Fohec in respect of the loan the subject of these proceedings.

Because of the view to which I have come about this aspect of the proceedings, I can deal with it concisely.

By its amended statement of claim, Fohec sought this relief against Chantell:

It will be recalled that Kellyville was held by Chantell as sole registered proprietor, but subject to a mortgage to the ANZ Bank to which both David and Chantell were parties. The loan from ANZ was subsequently refinanced with a loan from the Commonwealth Bank of Australia to which only Chantell was a party.

David and Chantell’s evidence on this aspect of the case was directed to establishing that it had always been their intention that Chantell would be the sole legal and beneficial owner of Kellyville. This was strenuously disputed by Fohec, which pointed to evidence that the funds for the purchase and payment of the loans in respect of Kellyville came, at least in part, from David or RSA Civil or both. To the extent that the presumption of advancement is still part of Australian law (see Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34), Fohec submitted that the presumption had been rebutted such that a portion of Kellyville (which Fohec asserted as 50 percent, with the evidentiary basis for that assertion being quite unclear) was held on either resulting or express trust by Chantell for David.

While the question of whether or not Chantell held any part of Kellyville on trust for David was contested, certain other facts were not. These were that on 8 May 2023, Chantell’s sale of Kellyville was completed with the net proceeds of $570,516.06 being paid to her. Her evidence in the witness box was that she had then applied those funds to the purchase of a new property in her name.

By reason of the facts referred to in the preceding paragraph, the Court accepts Mr Reynolds’ submission that Fohec is not entitled to the declarations sought in its amended statement of claim (see [158] above) because there is no utility in them. In this context, it is important to note that no tracing claim was pleaded or contended for by Fohec in relation to the proceeds of sale of Kellyville.

The lack of utility in the declarations seems to have been accepted, at least implicitly, in Mr Allen’s written submissions for Fohec, which in relation to the case against Chantell included:

There is, in my respectful opinion, a very large gap in factual and legal reasoning between paragraphs 113 and 114. The latter is, significantly, silent on for whom judgment should be given against Chantell, although I have no doubt Mr Allen meant it to be in favour of his client. The parties’ forensic attention had been completely focussed on the question of whether David was the beneficiary of a resulting trust in some proportion of Kellyville with Chantell as the trustee. For the following reasons, I accept Mr Reynolds’ submission that Fohec’s case as to how a finding to that effect should sound in relief for Fohec against Chantell was “obscure and unsupported by the pleadings”. There are procedural and fundamental reasons why Fohec could never get a money judgment against Chantell on the case it has advanced.

First, no judgment against Chantell in any amount is sought in the amended statement of claim.

Second, it is instructive to consider the relevant part of the pleading in the amended statement of claim against Chantell:

While the pleading asserts that at least a proportion of the sale proceeds of Kellyville were held by Chantell on trust for David, the pleadings are devoid of any allegation as to how Fohec is entitled to a judgment against Chantell.

The failure of Fohec’s case against Chantell depends upon something more fundamental than that deficiency in pleading, important as it is. That fundamental difficulty may be demonstrated in the following way. Let it be assumed in Fohec’s favour that:

Assuming all those matters in favour of Fohec, I am unable to identify, and Mr Allen did not identify in his written or oral submissions, any basis on which Fohec would have a cause of action that could give rise to a judgment in Fohec’s favour against Chantell for 50 percent of the net proceeds paid away. No trust or fiduciary obligation owed by Chantell to Fohec was pleaded or maintained against Chantell. David might have had a cause of action against Chantell for breach of trust in paying away the entire net proceeds of sale to her own benefit, but it was certainly never suggested that Fohec was somehow subrogated to any rights David may have had against Chantell. Therefore, while the amended statement of claim included a prayer for “equitable compensation”, assuming that to be what Mr Allen was referring to as the source of the “judgment” claimed in his submissions (see [163] above), no equitable obligation on Chantell’s part to Fohec has been identified which Fohec pleads was breached so as to sound in equitable compensation.

Furthermore, there was no accessorial claim pleaded or maintained against Chantell. It could not have been, because, as a first step, Fohec would have had to establish that David held his interest (assuming there to be one) in Kellyville subject to trustee or fiduciary obligations owed by him to Fohec. This would not be possible because the relationship between Fohec and David was one of creditor and debtor, with the mortgage granting Fohec a proprietary interest in David’s assumed interest in Kellyville. However, it is clear from the mortgage that what it granted to Fohec was a security interest over David’s property, which is not the same as the equitable ownership of a beneficiary under a trust.

In the assumptions set out in [168] above, I have deliberately excluded the issue of whether or not Chantell had notice of Fohec’s interest, on this hypothesis, in David’s equitable interest in Kellyville or the net proceeds of its sale. I have done this for two reasons.

First, notice or knowledge of someone else’s interest in property may be relevant in the following ways in equity:

The amended statement of claim pleads none of these against Chantell.

Second, the Court is not satisfied that Chantell had notice of any interest in Kellyville on the part of Fohec of any juridically relevant kind. I have reached this conclusion conscious of the fact that paragraph 2(k) of the amended statement of claim makes this floating allegation in relation to Chantell:

This allegation is denied by Chantell in her defence.

I have described this as a “floating” allegation because it is not tied into anywhere else in the pleading. Given what I have said in [172] and [173], the allegation is immaterial and would have been liable to be struck out accordingly.

However, assuming it to be material, two things may be said about it.

First, an assertion that Chantell knew that David owed money to Fohec takes Fohec’s case nowhere.

The same conclusion applies if “the first defendant’s indebtedness to the plaintiff” in the allegation is read by reference to the preceding pleading in relation to David in paragraph 1(n) that he “was jointly and severally liable to the plaintiff, under the terms of Mortgage and Loan Agreements entered on or about 20 December 2018”.

In my respectful opinion, in order to take the matter anywhere, Fohec would have had to have pleaded and proven knowledge on the part of Chantell of the arrangements between Fohec and David sufficient to warrant the conclusion that she knew or ought to have known at the time Kellyville was acquired (being when the alleged express or resulting trust in favour of David arose) that Fohec had an equitable interest in David’s equitable interest in Kellyville. The amended statement of claim falls far short of that.

Second, and in any event, while the amended statement of claim contains the pleading set out in [174] above, there is no evidence that Chantell knew, even at the level of generality, that David owed money to Fohec when Kellyville was purchased. Even more pointedly, there is no evidence that Chantell knew that David had mortgaged or charged his real and personal assets to Fohec. Nor was it put to Chantell in cross-examination that she knew of these things either at the time Kellyville was purchased or when she applied the net proceeds of the sale of Kellyville to her own purposes. Even assuming it could have been relevant, there was also no question put to Chantell as to her understanding of the claims made against David in these proceedings.

It follows that it is not necessary for the Court to determine whether or not David had a beneficial interest in Kellyville or the net proceeds of its sale. Fohec’s case against Chantell fails on more fundamental grounds.

As to the case against David, the parties will be given an opportunity to bring in short minutes to give effect to these reasons.

As to Fohec’s case against Chantell, it will be dismissed with costs.

To the extent agreement is not possible, the Court will hear the parties on the question of costs, including arising from the reservation of costs in the orders giving effect to the settlement with the third and fourth defendant/cross-claimants.