Amil Dlakic by his tutor Liliane Dlakic v Michael John Vaughan - [2018] NSWSC 1455

Supreme Court

New South Wales

Medium Neutral Citation: Amil Dlakic by his tutor Liliane Dlakic v Michael John Vaughan [2018] NSWSC 1455
Hearing dates: 12-15 March 2018, 12 June 2018
Decision date: 27 September 2018
Jurisdiction: Equity
Before: Robb J
Decision:
1. In principle, the plaintiff has established a right to have the deed described as the “buyback agreement” set aside.

2. In principle, the plaintiff has established a right to be registered as the owner of one share in the company called Davlite Pty Ltd.

3. The plaintiff has failed to establish an entitlement to damages for negligent advice by the defendant in relation to the entry by the plaintiff into loan agreements with Dr and Ms Vince and Mr Aysan Fetin.

4. See paragraphs 471 to 482 for a consideration of the issues involved in completing these proceedings and the making of appropriate case management orders.

5. The parties are to consider the terms of appropriate short minutes of order to give effect to these reasons and to make appropriate case management orders and to list the matter by arrangement with the associate to Robb J for the making of orders.
6. The Court will hear the parties as to whether it is appropriate for costs orders to be made at this stage of the proceedings, and if it is what those costs orders should be.
Catchwords:
CONTRACTS — Buyback agreement — a contract between the parties for the repurchase of a legal practice by the previous vendor

CONTRACTS — Undue influence — whether an agreement should be set aside on the basis of undue influence

CONTRACTS — Unconscionable conduct — Special disadvantage — whether an agreement should be set aside on the basis of the defendant taking advantage of a special disadvantage of the plaintiff — the defendant found to have taken advantage of a special disadvantage suffered by the plaintiff — the plaintiff is entitled to an order setting aside the agreement

RESTITUTION — Ineffective transactions — Contracts rescinded or set aside — Restitutio in integrum — whether setting aside the agreement will achieve what is practically just between the parties to restore them to the position they were in before the agreement

TORTS — Negligence — Professional Negligence — Solicitor and Client — No formal retainer — the plaintiff solicitor alleged that the defendant solicitor failed to advise the plaintiff about personal mortgages in various loan agreements — the plaintiff has not established negligence claims against the defendant

PROFESSIONS AND TRADES — lawyers — duties and liabilities — solicitors are not ordinarily required to advise on the financial or business value of a transaction — a solicitor’s duty to advise may in some circumstances extend to the financial or business value of a transaction

CORPORATIONS — Membership — Transfer of shares — Disposal or transfer without consent — whether a share transfer should be declared void and of no effect CORPORATIONS — Membership — Register — Rectification of register CORPORATIONS — Shares — Rectification of share register — whether the plaintiff is entitled to be registered as a shareholder in the company — whether the register of members of the company should be rectified — the plaintiff is entitled to be reinstated as the holder of one of the two shares in the company
EVIDENCE — Documentary Evidence — Public Documents — ASIC Documents — Evidentiary effect of ASIC extracts and documents lodged with ASIC — ASIC extract as prima facie evidence of the matters stated in it
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: Watson v Foxman (1995) 49 NSWLR 315
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Lauvan Pty Limited & Anor v Bega & Ors [2018] NSWSC 154
Provident Capital v Papa [2013] NSWCA 36
Carey v Freehills [2013] FCA 954, (2013) 303 ALR 445
Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114
Whereat v Duff [1972] 2 NSWLR 147
Whereat v Duff (1973) 1 ALR 363; 47 ALJR 540
Goldsworthy v Brickell [1987] Ch 378; [1987] 1 All ER 853
Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923
Bank of Credit and Commerce International SA v Aboody [1992] 4 All ER 955
Johnson v Buttress (1936) 56 CLR 113; [1936] HCA 41
Jenyns v Public Curator (1953) 90 CLR 113; [1953] HCA 2
Brown v The NSW Trustee & Guardian [2011] NSWSC 1203
Thorne v Kennedy [2017] HCA 49; (2017) 350 ALR 1
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040
Alati v Kruger (1955) 94 CLR 216
Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209
Erlanger v New Sombrero Phosphate Company (1878) 3 App Cas 1218
Re Centura Global Holdings Pty Ltd [2016] NSWSC 62; (2016) 111 ACSR 185Re ABI Australia Holding Pty Ltd [2017] NSWSC 1822Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647Residues Treatment and Trading Co Ltd v Southern Resources Ltd (1989) 52 SASR 54
Gosford Christian School Ltd v Totonjian [2006] NSWSC 725
Forrest v Cosmetic Co Pty Ltd [2008] SASC 152; (2008) 67 ACSR 1
Robertson v Deputy Commissioner of Taxation [2010] NSWCA 58
Category: Principal judgment
Parties: Amil Dlakic (Plaintiff/Cross-Defendant)
Michael Vaughan (Defendant/Cross-Claimant)
Representation:
Counsel:
A Avery-Williams (Plaintiff/Cross-Defendant)
A Kuklik (Defendant/Cross-Claimant)
Solicitors:
Mills Oakley (Plaintiff/Cross-Defendant)
Johnston Vaughan Solicitors (Defendant/Cross-Claimant)

File Number(s): 2016/368205; 2016/321090

Judgment

The plaintiff in these proceedings is Mr Amil Dlakic. Mr Dlakic sues by his tutor Ms Liliane Dlakic, who is his wife. Mr Dlakic is a solicitor by profession.
The defendant is Mr Michael John Vaughan. Mr Vaughan is also a solicitor. The events that have given rise to these proceedings primarily concern the affairs of the firm of solicitors known as Johnston Vaughan Solicitors (Johnston Vaughan). In different capacities over the relevant period, Mr Dlakic and Mr Vaughan were colleagues at Johnston Vaughan.
These proceedings also concern the ownership of the shares in a company called Davlite Pty Ltd (Davlite). At all material times, Davlite has been the proprietor of property known as 1/20 Montgomery Street, Kogarah, (the Montgomery Street property) which are the premises from which Johnston Vaughan has conducted its practice.

Mr Dlakic's claims

By these proceedings, Mr Dlakic makes a number of separate claims against Mr Vaughan concerning the affairs of Johnston Vaughan and Davlite. I will describe the nature of Mr Dlakic's claims in outline in chronological order.
The first claim arose in connection with Mr Dlakic's purchase of the business of Johnston Vaughan from Mr Vaughan by a deed dated 19 July 2010 for a price of $550,000. Mr Dlakic financed his obligation to pay $300,000 of the purchase price by entering into a loan agreement with Dr Peter and Ms Eve Vince on 3 August 2010. Mr Dlakic claims that Mr Vaughan agreed to provide him legal advice in relation to the loan documentation, and that Mr Vaughan was negligent in relation to the advice that he gave Mr Dlakic. Mr Dlakic claims damages.
Secondly in time, Mr Dlakic makes a claim in respect of one of the two shares in Davlite that Mr Vaughan caused to be transferred to Mr Dlakic on about 26 October 2001. Mr Dlakic's claim is that on 27 August 2012 Mr Vaughan represented to ASIC, without Mr Dlakic's consent, that the share in Davlite had been transferred by Mr Dlakic back to Mr Vaughan. Mr Dlakic claims a declaration that the transfer of the share was void, or alternatively an order setting the transfer aside.
The third claim concerns a deed made on 25 November 2014 between Mr Dlakic and Mr Vaughan, pursuant to which Mr Dlakic transferred the firm Johnston Vaughan to Mr Vaughan for the payment of $1.00 (the buyback agreement). Mr Dlakic's primary claim is for an order setting aside the deed of transfer, on the ground that Mr Vaughan unconscionably took advantage of a serious disadvantage from which Mr Dlakic suffered; being a serious depressive illness, or alternatively that Mr Vaughan exercised undue influence in causing Mr Dlakic to enter into the deed in favour of Mr Vaughan.
Mr Dlakic makes a further claim in relation to the transfer of Johnston Vaughan to Mr Vaughan, in that he claims that he executed the buyback agreement on the faith of a misleading and deceptive representation by Mr Vaughan that after the transfer Mr Dlakic would continue to receive the whole of the net income of the firm.
As an alternative to the claim that the buyback agreement be set aside, Mr Dlakic seeks damages from Mr Vaughan for breach of a term of the deed of transfer, under which Mr Dlakic was entitled to receive all of the fees received by Johnston Vaughan after the date of the deed in respect of work done for clients before that date.
Mr Dlakic's fourth claim arises out of a loan taken out by Mr Dlakic in the amount of $160,000 from a Mr Aysan Fetin on 29 April 2015. Mr Dlakic claims that Mr Vaughan asked him to borrow the money to pay for the expenses of Johnston Vaughan, and that Mr Vaughan agreed to provide legal advice to Mr Dlakic in relation to the loan. Mr Dlakic's claim is for damages in respect of the consequences of negligent advice that he says Mr Vaughan gave to him in relation to the loan.
It should be mentioned at this point that Johnston Vaughan Solicitors Pty Ltd, a company apparently controlled by Mr Dlakic, conducted the business of Johnston Vaughan for at least the financial years ending 30 June 2012 to 30 June 2014. The balance sheet for that company as at 30 June 2014 includes the goodwill of the practice as an asset of the company valued at $550,000. The deed of agreement made on 19 July 2010 transferred the goodwill of the firm to Mr Dlakic, and the buyback agreement treated Mr Dlakic as the vendor. The parties conducted the case as if Mr Dlakic was at all relevant times after the transfer deed dated 19 July 2010 the proprietor of the firm, and ignored the evidence that the company may have been the owner of the goodwill of the firm.
Mr Dlakic gave evidence in par 13 of his affidavit in reply of a liquidator being appointed for Johnston Vaughan Solicitors Pty Ltd on 30 June 2015. Nothing was made in the case of the possibility that the goodwill and assets of the firm, Johnston Vaughan, would be an asset of the company, because Mr Dlakic was not entitled to transfer it to Mr Vaughan on 25 November 2014. Mr Vaughan did not assert that Johnston Vaughan Solicitors Pty Ltd, rather than Mr Dlakic, was the correct party to apply for the setting aside of the deed of transfer.
I will consider each of these four claims in detail below, after I have set out the background facts, discussed my conclusions concerning the credibility of the witnesses who have given evidence, and summarised the evidence concerning Mr Dlakic's psychological condition. I will deal with the claim concerning the share in Davlite last, as it raises technical issues that are not conducive to the issue being dealt with chronologically together with the other claims.

Background

In order to provide a framework for my consideration of the credibility of the evidence given by the witnesses and the resolution of the individual claims, I will first set out my findings concerning the primary facts that were either uncontroversial or can be supported by the objective evidence. As an exception to this approach, I propose to include aspects of the evidence given by Mr Steven D’Apice, who is an independent witness whose evidence I have accepted as being true.
Mr Vaughan was born on 11 January 1948.
Mr Dlakic was born on 6 March 1977.
Mr Vaughan was admitted as a legal practitioner on 9 July 1982. He purchased the practice Johnston Vaughan from Mr Gregory Johnston in May 1988 for the sum of $300,000.
Davlite was incorporated on 22 August 1988. Davlite has always had two ordinary issued shares. Initially one share was held by each of Mr Johnston and Mr Vaughan. Mr Johnston was a director of the company until 16 June 1999. Mr Vaughan has been a director of the company since 13 September 1988. He has been the sole director since 26 October 2001. Mr Vaughan has been the secretary of the company since 13 September 1988, save for the period between 26 October 2001 and 23 August 2012, when Mr Dlakic was the secretary.
Davlite purchased the Montgomery Street property from Mr Johnston on 30 May 1989 for the sum of $400,000.
Mr Dlakic graduated with a bachelor of laws degrees from Bond University in 1998, and was admitted as a legal practitioner in this State on 7 April 2000.
After having worked for a short time for another firm, on 20 September 2000 Mr Dlakic commenced employment as a solicitor at Johnston Vaughan under the supervision of Mr Vaughan. Mr Dlakic started on a salary of $35,000 per year. Mr Dlakic's salary rose slowly and by 2010 he was earning about $70,000 per year as a full-time solicitor with 10 years post admission experience. As Mr Vaughan said at par 15 of his general affidavit sworn on 20 June 2017, he "did not consider anything but modest pay rises for [Mr Dlakic] in respect of [Mr Dlakic's] services to the firm". (It is to be noted that Mr Vaughan swore an initial general affidavit on 20 June 2017 and on the same day swore specific affidavits in response to the affidavits of Steven D’Apice, Michael Karam, Mr Dlakic, Zhu Min Ma and Paulus Saleem Nahkle. He swore a further affidavit on 14 March 2018). The evidence concerning the relatively low salary received by Mr Dlakic is relevant to a claim by Mr Dlakic that he was given one share in Davlite in October 2001 in return for a salary sacrifice on his part.
A form lodged with ASIC suggests that in October 2001 one share in Davlite was transferred from Mr Johnston to Mr Dlakic and Mr Dlakic was appointed as the secretary of Davlite.
According to Mr Dlakic, in 2003 he purchased an office at 56/301 Castlereagh Street, Sydney, for a price of $199,000. (I will include in this statement of background facts some evidence given by Mr Dlakic as an indication of the financial dealings in which he engaged over the period. In his initial general affidavit, Mr Vaughan at pars 21 to 31 made a number of bald assertions concerning Mr Dlakic's financial dealings, all of which were designed to establish either that Mr Dlakic had been profligate, or he had earned more money than he had acknowledged. These paragraphs of Mr Vaughan's affidavit were rejected because they were defective in form. Nonetheless, in his affidavit in reply Mr Dlakic has responded to these allegations. The responses were admitted into evidence. Although Mr Dlakic's responses were relatively perfunctory, I have included concessions made by Mr Dlakic, as otherwise this background would be deficient because of an absence of any treatment of Mr Dlakic's financial dealings unrelated to Johnston Vaughan).
Mr Dlakic commenced his relationship with his wife, Liliane, in 2006 and the couple married on 21 December 2010. Ms Dlakic has three children from a former marriage. The children have lived with the couple since they commenced cohabiting in 2008, and Mr Dlakic has acted as their father and taken care of the children since that time; including by paying quite substantial amounts in private school fees.
In about 2008, Mr Dlakic said that he sold a property owned by him at 149 Rocky Point Road, Ramsgate for a price of $515,000. He said that he entered into a margin lending arrangement with CommSec Margin Lending with a limit of $1,000,000. He acquired $800,000 worth of shares in Rio Tinto using his $500,000 capital from the sale of the Ramsgate property, and a borrowing of $300,000 under the margin lending facility. The shares were valued at $139 per share, but the value fell to $28 over about two months. The lender sold the shares, and Mr Dlakic was left with about $80,000-$90,000. These assertions by Mr Dlakic were not corroborated by any documentary evidence.
On 19 July 2010, Mr Vaughan, Davlite and Mr Dlakic entered into a deed of agreement. The recitals referred to Mr Vaughan as being the owner of the legal practice known as Johnston Vaughan, and Davlite as being the employer of the staff. It was also recited that the books would be ruled off on 19 July 2010, and Mr Dlakic would be entitled to all monies generated by the practice from that date and would be responsible for all the expenses generated from that date. Recital 4 stated: "… The fees and costs and disbursements earned prior to 19 July 2010 are the property of the vendor". Recital 5 provided that Mr Vaughan would continue to work for Mr Dlakic for a period of three years at a salary of $150,000 per year plus superannuation. Recital 8 required Mr Dlakic to incorporate a company to employ the staff, and be responsible for all "long service leave, holiday pay arising out of the employment of the staff and any of their entitlements past and future".
The operative part of the deed provided as follows:

1.   In consideration of the payment to the vendor of the sum of $550,000 the vendor will transfer to the purchaser all of his right title and interest in the practice known as Johnston Vaughan Solicitors of 1/20 Montgomery Street, Kogarah.
2.   The purchaser will be entitled to the fees, costs and disbursements brought into the practice as from 9 AM on 19 July 2010 (the date of transfer).
3.   That the past fees, that is fees, costs and disbursements brought in to the practice prior to the date of transfer will be the property of the vendor…
4.   The purchaser will engage for a period of three (3) years the services of the vendor as a solicitor and pay to the vendor the sum of $150,000 per year plus superannuation and the vendor will have 4 weeks paid leave per year and the usual sick leave allowance. The vendor will work diligently for the purchaser for the term of the engagement.
5.   The purchaser forgives any claim for long service leave entitlements for himself as a result of the sale of the practice to the purchaser.

On 19 July 2010, Davlite leased the Montgomery Street property to Mr Dlakic for a term of three years ending on 18 July 2013 for a rent of $1300 per week.
On 22 July 2010, Mr Dlakic paid Mr Vaughan $250,000 by way of bank cheque in partial payment of the price for the transfer of the firm. Mr Dlakic raised part of the $250,000 by borrowing $191,000 from his parents. Mr Dlakic's parents had an existing mortgage of $690,000 over their Randwick home, which was increased to an amount of about $880,000 so that the parents could assist Mr Dlakic to buy the firm. The balance of the $250,000 was made up from Mr Dlakic's personal savings.
Mr Dlakic claimed that it was his responsibility to make the whole of his parents' mortgage payments, not just in relation to the $191,000 that he borrowed from them in 2010.
At the time of the purchase, Mr Dlakic was given a list of the client receivables as at the date of transfer that Mr Vaughan expected to receive. The total amount was $192,330.90 (see Exhibit AD-1 Tab 10, which also includes an unverified list of payments totalling $426,400 that Mr Dlakic claimed were received by the firm between 19 July 2010 and approximately 2014 that were paid to Mr Vaughan).
The $300,000 balance of the purchase price was borrowed by Mr Dlakic from Dr Peter and Ms Eve Vince under a loan agreement dated 3 August 2010.
By clause 1.1 of the loan agreement, the $300,000 was to be repaid on or before 25 October 2010 (so the loan was for a short term of about three months).
By clause 1.2, the interest rate was to be 45% per annum, such interest rate to reduce to 25% if paid on time. Interest payments at the lower rate were stated as being $1438.36 per week, and $2589.04 per week at the higher rate.
Clause 5.1.2 required Mr Dlakic to pay separate application fees of $19,500 to each of Dr and Ms Vince.
The parties treated the total payments required to be made by Mr Dlakic under the loan agreement for the short term of the agreement as being equivalent to an interest rate of 87% per annum (although that is not consistent with the interest rates that appear on the face of the agreement, and could only be an effective interest rate having regard to other costs and the short-term period of the loan).

Mr Dlakic's parents were required to grant a mortgage over their home at 251 Avoca Street, Randwick, to secure Mr Dlakic's liability under the loan agreement.
Mr Dlakic was also required to give mortgages over properties that he had at 149A Rocky Point Road, Ramsgate and 56/301 Castlereagh Street, Sydney.
Mr Dlakic's parents were also required to enter into a deed of guarantee in favour of the lenders.
Mr Dlakic failed to repay the $300,000 due to Dr and Ms Vince on 25 October 2010.
According to Mr Dlakic, at an unspecified date in 2010, he leased an Aston Martin motor vehicle for an amount of $800 per week.
According to Mr Dlakic, in about August 2010 he purchased what has become the family home at 7/46 Towns Road Vaucluse at auction. Because of rulings on evidence, there is no evidence as to the price. Mr Dlakic said that he paid a 5% deposit and financed the purchase price with a loan from a brother-in-law and a bank loan. Settlement took place in late January or early February 2011. Mr Dlakic said there was a $22,000 or $23,000 interest penalty for late settlement. Mr Dlakic said that the property was leased for approximately $1400 per week until about May 2014.
Mr Dlakic also said that at about this time he leased a Porsche motor vehicle for an original lease fee of about $1500 per month, which was later reduced to about $1300 per month.
Davlite and Mr Dlakic entered into an undated lease of the Montgomery Street property commencing on 8 December 2011 for a period of three years with a three-year option and rent inclusive of GST of $74,360 per annum, increasing at 5% or the CPI whichever was greater on each anniversary of the lease.
The debt owed by Mr Dlakic to Dr and Ms Vince continued to increase in accordance with the terms of the loan agreement until 8 December 2011, when Mr Dlakic entered into a further agreement with the lenders in which he agreed to pay $316,828 on 9 December 2011, and further payments of $37,500 on each of 20 December 2012, 20 March 2013, 20 June 2013 and 20 September 2013.
The primary payment was financed by a loan of $350,000 that Mr Dlakic received from Jaara Investments Pty Ltd (Jaara). Mr Dlakic has stated that he still owes Dr and Ms Vince the amount of $150,000 plus interest.
In the financial year ended 30 June 2012, Johnston Vaughan Solicitors Pty Ltd had a total income of $818,843.
On about 23 August 2012, Mr Vaughan lodged with ASIC a Change to company details (Form 484) which, although completed in a confusing way, as will be explained below, appeared to advise ASIC that Mr Dlakic had resigned as the secretary of Davlite, and Mr Dlakic's share in the company had been transferred to Mr Vaughan.
In late 2012, Mr Dlakic refinanced the Jaara debt with the National Australia Bank. He said that the payments required in respect of the new loan were approximately $23,000 per month, being $10,000 per month in principal, over $7600 per month in interest, and about $5000 per month to MLC for life and disability insurance premiums.
After Mr Dlakic became the principal of Johnston Vaughan, when fees were received from clients for work done before the date of the transfer, the whole of the amount was paid to Mr Vaughan without withholding any amounts for GST or income tax. (It is to be noted that Mr Vaughan, in his affidavit that specifically responded to Mr Dlakic's affidavit, simply denied many of the paragraphs in that affidavit. Mr Vaughan did not deny par 109, in which Mr Dlakic made the assertion that I have just related).
In the financial year ended 30 June 2013, Johnston Vaughan Solicitors Pty Ltd had a total income of $998,788.
Davlite's tax returns for the financial years ended 30 June 2013 to 30 June 2015 were in evidence. Each of those tax returns claimed that Davlite had nil total income for the year. Davlite, under the control of Mr Vaughan, did not declare as income the rent that it received from Mr Dlakic.
In mid-2013, the Deputy Commissioner of Taxation commenced winding up proceedings against Johnston Vaughan Solicitors Pty Ltd in respect of an outstanding tax debt of $299,245.52. While Mr Vaughan denied Mr Dlakic's evidence to this effect, it is evidenced by a letter dated 13 June 2013 from the solicitor for Johnston Vaughan Solicitors Pty Ltd to the solicitors for the Deputy Commissioner of Taxation. Mr Vaughan did not deny Mr Dlakic's evidence that in June or July 2013, the tax claim was settled for a total amount of $150,000. On 2 August 2013, the proceedings commenced by the Deputy Commissioner of Taxation were dismissed by consent, with the costs of the Deputy Commissioner of Taxation being fixed at $4995. Mr Vaughan also did not deny Mr Dlakic's claim that he financed the settlement by borrowing $70,000 and $30,000 from two of his brothers in law, and $50,000 from a client.
From about mid-2013, Mr Dlakic ceased to cause the trust account of Johnston Vaughan to be reconciled as required by the Law Society's trust account regulations.
On 17 July 2013, Mr Dlakic wrote a letter to Mr Vaughan in which he noted that Mr Vaughan's employment by the firm was due to expire on 19 July 2013. The letter in effect claimed that Mr Vaughan had not earned the level of fees for the firm that were expected. It said that any future employment would be based upon more realistic terms.
Mr D’Apice gave evidence that, in mid-to-late July 2013, Mr Vaughan said to him that Mr Dlakic and he had come to an arrangement "where you are to take me off the books and pay me $2000 a week" (par 23). Mr D’Apice said that he then started paying Mr Vaughan $2000 a week in cash from the next pay period.
In the financial year ended 30 June 2014, Johnston Vaughan Solicitors Pty Ltd had a total income of $1,111,956. The income and expenditure statement for the company that was in evidence showed that in the year director’s fees of $500,000 had been paid, and in the previous year the amount was $278,000.
According to Mr Dlakic, on an unspecified date in 2014, he paid out the residual value of the Aston Martin that he had leased in 2010. In July 2014 he acquired a Jaguar motor vehicle. Also according to Mr Dlakic, around the same time his wife sold a Porsche SUV motor vehicle.
Mr Dlakic said that the property at Towns Road, Vaucluse, was renovated in about June to July 2014.
From mid-June 2014 to about 7 July 2014, Mr Dlakic and his wife travelled to Greece for the purpose of his wife undertaking assisted reproductive surgery.
When Mr Dlakic was in Greece, he received a number of calls from the trust account department of the Law Society.
During the first day Mr Dlakic returned to the office of Johnston Vaughan, he was advised by a representative of the Law Society that an audit would be conducted of his trust account. The audit was conducted between August and September 2014 and a report was provided in October 2014. The report found that Mr Dlakic had been in breach of various strict liability offences relating to non-compliance with proper trust account record-keeping regulations.
The Law Society suspended Mr Dlakic's practising certificate on 30 October 2014. A receiver was appointed to manage the Johnston Vaughan practice.
During July or August 2014, Ms Dlakic informed Mr Dlakic that she was pregnant with triplets, two of which had been found to have massive physical problems, which led to their termination in order to save the third foetus. Thereafter, Ms Dlakic suffered serious health problem including severe internal bleeding that required her to be hospitalised off and on for the next 2 to 3 months. Ms Dlakic and the unborn foetus also suffered a serious infection that led to Ms Dlakic being hospitalised for a period of 12 days. Ms Dlakic suffered a further massive bleeding episode which led to further periods in hospital, and ultimately to a son being borne prematurely on 28 January 2015.
Mr Dlakic was referred for treatment to a specialist psychiatrist, Dr Olav Nielssen, on 10 and 17 November 2014 and 1 December 2014. Dr Nielssen concluded that Mr Dlakic had been suffering from the symptoms of depression for a number of years. In a later report dated 14 May 2016, Dr Nielssen expressed the following opinion:

The diagnosis of major depressive illness is made on the basis of the symptoms reported by Mr Dlakic, and aspects of his presentation at the time of the recent interview. He reported insomnia, anxiety symptoms, fatigue, impaired concentration and loss of confidence. He was anxious and his underlying mood was assessed to be depressed at the time of the initial and recent interviews.

On 25 November 2014, Mr Dlakic (as vendor) and Mr Vaughan (as purchaser) entered into a deed that was described as "contract sale of business" (the buyback agreement). The deed provided:

RECITALS
1.   The Vendor and Purchaser have agreed that the Business known as Johnston Vaughan Solicitors conducted from premises at 1/20 Montgomery Street Kogarah, will be sold to the Purchaser.
2.   The Vendor agrees to Transfer all files, documents and Trust money held by various clients to the Purchaser and the Purchaser will be responsible for the files and money transferred from the date of this Deed.
3.   The Vendor has been suspended from practicing and is no longer able to act as a Principal in the practice known as Johnston Vaughan Solicitors.
4.   The Vendor will be liable for all liabilities arising out of the transferred files up until the date of this Deed.
5.   The Vendor has the option to require the Purchaser to transfer the practice known as Johnston Vaughan to the Vendor in the event that an unrestricted Practicing Certificate is issued to the Vendor within 2 years of this deed.
Now this Deed witnesses that:
1.   The Vendor will transfer to the Purchaser the client files, goodwill, Trust Account money and trust account ledgers and journals to the purchaser for the payment of $1.00, payment of which is acknowledged.
2.   The Vendor will sign all documents and do all things to transfer the entire files past and present to the Purchaser at the Purchaser's request.
3.   The Purchaser will be responsible for the client files, Trust Account money from the date of this Deed excluding liability which arose prior to the date of this Deed.
4.   The Vendor will be entitled to receive all money prior to the date of this Deed for all work done in the client's file as they are received by the practice. The purchaser will pay those monies received to the Vendor as they are received by the Purchaser, less any money owing in respect of the aforesaid client files including disbursements.
5.   That the Vendor will be liable and indemnify the purchaser for the wages, annual holiday leave, superannuation and long service leave owing to the staff Karen Newell, Steven D’Apice and Salim Milinkic until the date of this deed.

Davlite and Mr Dlakic entered into an undated lease of the Montgomery Street property for a period of five years from 8 December 2014, with an option to renew for a period of five years, and a rent inclusive of GST of $86,028.80 per annum, with a rent review of the greater of 5% or the CPI at each anniversary of the lease. By clause 20(a) a bond equal to 3 months’ rent was payable. This lease is notable for the fact that the premises from which Johnston Vaughan operated was leased by Davlite to Mr Dlakic after the date upon which Mr Dlakic transferred the firm to Mr Vaughan.
On 3 July 2015, stamp duty was paid in respect of a surrender of lease of the Montgomery Street property from Davlite to Mr Dlakic and the surrender was registered on 14 July 2015. The surrender was signed by Mr Vaughan on behalf of Davlite and Mr Dlakic on his own behalf. The surrender was given the date 30 October 2014, which was the date that Mr Dlakic's practising certificate was suspended.

Contentious issues of fact

At this point in the chronological consideration of the background facts, the Court's ability to set out the facts in a reasonably comprehensive way based upon the objective evidence, and without preferring the evidence of one party to that of the other, becomes limited. The first reason is that Mr Dlakic makes a number of assertions in his primary affidavit that are simply denied in their entirety by Mr Vaughan, without Mr Vaughan offering any alternative version of events. Mr Vaughan's affidavit that specifically responds to Mr Dlakic's primary affidavit largely either denies identified paragraphs, or ignores other paragraphs entirely. I have assumed that Mr Vaughan does not dispute the paragraphs that he has ignored, but it often appears in relation to paragraphs that have been denied that the denials should have related only to part of Mr Dlakic's assertions, and a more positive response was called for in response to other parts of his assertions.
The second reason for the difficulty is that Mr Vaughan's compliance with a notice served on him to produce the records of Johnston Vaughan concerning income and expenses, particularly for the period after the buyback agreement, appears to have been deficient. It would be expected that the records kept by a properly functioning law practice would have provided objective proof, either for or against, of a number of significant claims made by Mr Dlakic. Whether or not it is ultimately established that relevant records exist and have not been produced, it must be stated that the absence of the records has hampered the ability of the Court to make a number of necessary findings precisely and accurately.
In order to facilitate an understanding of the issues that are the subject of factual dispute, it will be convenient to set out the claims made by Mr Dlakic.
First, Mr Dlakic claims that, in the period leading up to the buyback agreement, Mr Vaughan regularly assured him orally that the purpose of the buyback agreement was to give Mr Vaughan control of the firm's files, but that "all the money that the firm earns will go to you" (par 193), and "I will give you every cent that comes through the general account" (par 194). Mr Vaughan denies that he made these statements.
Then, Mr Dlakic claims that, shortly after he signed the buyback agreement, Mr Vaughan took him to the bank to open new general and trust accounts in Mr Vaughan's name, but that when that was done, Mr Dlakic was given an authority to access the new general account so that he could "see all the money that comes through on the Internet when you login on your NetBank, and you can just take out all the money when you need it" (par 208). Mr Vaughan denied that these events occurred.
Mr Vaughan did not deny Mr Dlakic's evidence that, in six withdrawals between 13 and 23 February 2015, Mr Dlakic withdrew a total of $26,261 from the new general account and transferred it to his cash management account. Mr Vaughan did deny Mr Dlakic's claim in par 211 that the withdrawals were in respect of fees paid to the firm after the buyback agreement for work undertaken both before and after that agreement was made.
Mr Vaughan denied a claim made by Mr Dlakic in par 212 of his primary affidavit that, in late February or early March 2015, Mr Vaughan withdrew Mr Dlakic's authority to operate the Johnston Vaughan general account.
Mr D’Apice gave evidence that from late February or early March 2015, with the agreement of Mr Vaughan, Mr D’Apice commenced to pay Mr Dlakic $200 each Thursday. That arrangement continued until late May or early June 2015, when Mr Vaughan ordered Mr D’Apice to stop paying to Mr Dlakic the $200 per week.
Mr Vaughan did not respond to Mr D’Apice's evidence of his instruction to cease paying Mr Dlakic the $200 per week.
Mr Dlakic gave evidence that, following the buyback agreement, he received some very small amounts in respect of fees paid to Johnston Vaughan for work done before the date of the buyback agreement, and in par 224, Mr Dlakic refers to a spreadsheet exhibited to his affidavit that he originally prepared on 1 October 2014, and updated over the period to 22 May 2017, which takes the form of an aged debtors list in respect of amounts that Mr Dlakic claims represented fees owed by clients that should have been paid to the firm and remitted to Mr Dlakic. The total amount of the list is $1,922,981.44. Mr Dlakic qualified his evidence by explaining in relation to some entries that part of the fees payable by clients accrued before the date of the buyback agreement, and part accrued afterwards. Mr Vaughan simply denied the paragraph, without offering any positive explanation concerning what fees were owed to the firm and what amounts were received.
Mr Dlakic gave evidence of being aware, by reason of having reviewed some of the Johnston Vaughan trust account ledgers in about October 2015, that some of the fees itemised in the spreadsheet (with a total of about $339,430.35) had been received by Johnston Vaughan. Strangely, Mr Vaughan did not respond to these paragraphs.
There is one receipt that I am satisfied occurred, because evidence was given as to its receipt by Mr Steven D’Apice, who was a conveyancer employed by Johnston Vaughan at the time, and who also was responsible for all office records concerning receipts in reconciliation to the trust account cash books and journals, all trust account bookkeeping, and the records necessary to complete PAYG and GST declarations. Mr D’Apice gave evidence that in about September 2015, Mr Dlakic attended the office and negotiated the amount of fees to be paid by a client, Mr Paul Calleja, which enabled an amount of approximately $191,000 to be released from the firm's trust account. Mr D’Apice gave evidence that, of this sum, about $180,000 was paid to Mr Vaughan. Mr D’Apice annexed to his affidavit what he called an expense sheet that was given to him by Mr Vaughan. The document lists eight payments totalling $178,439.11.
It must be noted that two of those payments were described as "Michael Vaughan – rent" for $43,866.25, and "rent in advance" for $24,360. This payment to Mr Vaughan occurred long after the time when the lease of the Montgomery Street property to Mr Dlakic had been surrendered.
In his specific response to Mr D’Apice's affidavit, Mr Vaughan did not respond to the evidence concerning the release of Mr Calleja's fees from the trust fund or that about $180,000 was paid to him. Mr Vaughan denied Mr D’Apice's evidence that Mr Vaughan instructed him to pay the bills and expenses listed in the document and said (par 21): "I say that the Plaintiff was to pay his obligations to the staff and the rent from the Calleja money. The annexure marked "A" is not a document made by me and the writing on it is the handwriting of the Plaintiff". Irrespective of who was the author of the document annexed to Mr D’Apice's affidavit, Mr Vaughan's response is a clear admission that the money was paid to Mr Vaughan for alleged expenses of Johnston Vaughan at a time long after the date of the buyback agreement.
Mr Vaughan did not respond to evidence given by Mr Dlakic that, in about March or April 2015, he was told that the lender Jaara, to whom Mr Dlakic still owed a residual loan of $65,000, threatened to call in the loan if it was not refinanced.
On 27 April 2015, a firm of solicitors, on behalf of a lender called Mr Aysan Fetin, sent a letter of offer to Mr Vaughan on behalf of Johnston Vaughan Solicitors Pty Ltd. The letter offered a loan of $160,000 to Johnston Vaughan Solicitors Pty Ltd, supported by a guarantee by Mr Dlakic and a second unregistered mortgage secured by a caveat over Mr Dlakic's home at Towns Road, Vaucluse. The term of the loan was to be six months at an interest rate of 33% per annum, reducing to 30% per annum if payments were made on time. The necessary documents for execution were provided to Mr Vaughan under cover of a separate letter from the lender's solicitor dated 27 April 2015. The documents have been executed on behalf of Johnston Vaughan Solicitors Pty Ltd and Mr Dlakic.

An authority to pay addressed to the lender's solicitor signed by Mr Dlakic on 28 April 2015 includes a direction to pay $65,000 to Jaara and the balance of $55,241.95 (after various other payments) to the Johnston Vaughan general account that Mr Dlakic had used when he was the principal of Johnston Vaughan and that was still under his control.
Mr Vaughan denied the evidence given by Mr Dlakic at par 249 of his principal affidavit that Mr Vaughan asked Mr Dlakic to pay the balance of the loan funds to him because "I need most of it to pay office bills like tax and liabilities".
Mr Dlakic gave evidence that he paid the running expenses of Johnston Vaughan after the date of the buyback agreement. Mr Vaughan comprehensively denied the truth of this evidence without offering any positive explanation of his own.
Mr Vaughan did not deny that the statements of account exhibited to Mr Dlakic's affidavit, and referred to in par 230, for the bank account that had previously been Mr Dlakic's general account for Johnston Vaughan, for the period 16 October 2014 to 20 July 2015, were genuine. Mr Vaughan did deny Mr Dlakic's subsequent evidence concerning the significance of the transactions referred to in the statements of account. The statements of account do not directly prove payments to Mr Vaughan. Mr Dlakic gave somewhat complicated evidence in pars 231 to 234 of payments made by him for the benefit of Johnston Vaughan, including rent payments totalling $11,823, almost the whole of the balance of $55,095.95 from the loan made by Mr Fetin, the amounts deducted from the Calleja money, four direct debits of $6181.28 for professional indemnity insurance premiums, wages of $51,115.80 (including the Christmas wages for the staff in the sum of $20,299.50), and further operating expenses of $95,338.03.
Significantly, Mr Vaughan denied all of these assertions by Mr Dlakic except for the evidence in par 232 that Mr Dlakic paid the four professional indemnity insurance premiums in the period from 25 November 2014 until 2 March 2015 in the total sum of $24,725.12.
Mr D’Apice gave evidence that he observed in his capacity as paymaster, that Mr Dlakic paid all the bills of Johnston Vaughan from the time that Mr Vaughan became principal. These expenses included Mr Vaughan's wages, the Christmas 2014 staff wages of over $20,000, rent and other incidental expenses that were drawn from Mr Dlakic's general account.
Mr D’Apice said that Mr Dlakic continued to run and operate Johnston Vaughan from the general office account until about February or March 2015. In about late February or early March 2015, Mr Vaughan said to Mr D’Apice: "Amil's pulling too much money from my general account. I am not going under because of him", or words to that effect. Shortly after that, Mr D’Apice attended with Mr Vaughan to the bank to set up a new office general account that Mr Dlakic did not have authority to operate.
Mr Vaughan responded to Mr D’Apice's evidence concerning Mr Dlakic having paid the bills of the legal practice by saying that Mr Dlakic paid some accounts but not all of the accounts and he did not pay the rent.
Mr Vaughan did not respond to the evidence given by Mr Dlakic in pars 256 to 269 of his principal affidavit concerning the default of Johnston Vaughan Solicitors Pty Ltd under the loan from Mr Fetin.
Apparently for the reason that Johnson Vaughan Solicitors Pty Ltd had been ordered to be wound up, Mr Fetin commenced proceedings in this Court against Mr Dlakic, and on 18 July 2016 consent orders were made by Darke J. Those orders included an order 13 that judgment against Mr Dlakic be given in favour of Mr Fetin in the sum of $198,044.93. The Court also ordered Mr Dlakic to give Mr Fetin possession of his home at Vaucluse, and made orders for the conduct of the sale of that property.
By email to the Equity Registrar dated 26 August 2016, Mr Fetin's solicitor advised that Mr Dlakic had repaid the mortgage debt in full that day, and requested that the Court not issue the writ to the Sheriff.
Mr Dlakic gave evidence in par 267, to which Mr Vaughan has not responded, that he paid a total sum of $290,000, including principal and interest of $198,044.93 and costs of $92,314.88. He said that he was only able to settle the possession proceedings by borrowing further funds which have yet to be paid back.
On 19 May 2016, Mr Vaughan wrote a letter to Mr Byran Collis on behalf of the liquidator of Johnston Vaughan Solicitors Pty Ltd, in which Mr Vaughan gave reasons why the $1.00 payment was fair "consideration given with respect of the sale of the business Johnston Vaughan Solicitors Pty Ltd". Although that letter is consistent with the company rather than Mr Dlakic being the owner of the goodwill of Johnston Vaughan at the date of the buyback agreement, Mr Vaughan did not in the proceedings raise this as a ground for denying Mr Dlakic the relief that he claimed.

Defendant’s response to notice to produce

It will be convenient to end this consideration of the background facts by dealing with the absence of detailed evidence of the work done by Johnston Vaughan for clients, the amounts of fees billed, and the amounts of fees paid by clients at relevant times. Evidence of those matters may have been significant or helpful in relation to many issues in these proceedings, as it would have assisted the Court to have an objectively based understanding of the real nature of the firm's practice. That evidence would have been necessary to enable the Court to determine whether, and if so to what extent, Mr Vaughan did not pay Mr Dlakic fees received by Johnston Vaughan in respect of work done for clients before the date of the buyback agreement. It would have been material to an assessment of whether the consideration of $1.00 payable under the buyback agreement was inadequate. It would have been material to an understanding of the likely outcome of an accounting that will be necessary if the Court makes an order setting aside buyback agreement.
It would also have been material for the Court to have evidence of the expenses of Johnston Vaughan at relevant times, and the extent to which those expenses were either paid by Mr Dlakic or were met from fees received by the firm to which Mr Dlakic was entitled under the buyback agreement.
The Court has not had the benefit of any of this evidence, and has not had comprehensive evidence covering these material financial issues.
On 7 August 2017, Mr Dlakic served a notice to produce on Mr Vaughan, which relevantly sought production of the following categories of documents:

4.   A copy of the MYOB data files for the legal practice known as "Johnston Vaughan" and/or "Johnston Vaughan Solicitors" for the period    September 2000 to date, including but not limited to the payroll, general ledger and profit and loss;
5.   A copy of the timesheets, work in progress billed or unbilled, ledgers, taxation invoices, bills of costs and software files known as "Timeslips" for the legal practice known as "Johnston Vaughan" and/or "Johnston Vaughan Solicitors" for the period September 2000 to date.
6.   In respect of all legal practice trust accounts operated by the law practice known as Johnston Vaughan and/or "Johnston Vaughan Solicitors", a copy of:
a.   Withdrawal authorities;
b.    Withdrawal receipts;
c.    Withdrawal ledgers,
d.    Trust account folders – being lever arch folders for clients alphabetically listed A – Z;
e.   Kalamazoo trust account records – which were located in the office of Johnston Vaughan Solicitors occupied by Stephen D’Apice (this includes all records of trust account transactions for closed trust account client files), and
f.   Audit reports – including reports by external examiners;
for the period from September 2000 to date.

Mr Dlakic took the view that Mr Vaughan's response to the notice to produce was tardy and inadequate. Mr Dlakic raised the issue with the Court at a pre-trial conference held on 20 February 2018. At that time the Court was informed by counsel for Mr Dlakic that the parties were conferring about the issue and that it was hoped that full production could be made before the commencement of the hearing.
On the first day of the hearing, the Court was informed that shortly before the hearing Mr Vaughan had served on Mr Dlakic some 2200 further documents that were copies of tax invoices, but all dated on the date of printout, and many documents were not complete in relation to the information that should have been included in the original documents when forwarded to clients.
The first morning of the hearing was devoted to dealing with the consequences of Mr Vaughan's response to the notice to produce. An affidavit by Mr Vaughan sworn on 8 March 2018 and an affidavit of Mr Dlakic's solicitor, Mr Hugo Nicholas Antony Paul sworn 12 March 2018, were read in respect of the issue. I permitted counsel for Mr Dlakic to cross-examine Mr Vaughan on the adequacy of his response to the notice to produce.
I do not propose in these reasons for judgment to deal with this issue in any comprehensive way. The reason is that the result of the exercise was inconclusive. The available evidence does not permit the Court reliably to form a judgment about the extent to which documents falling within the categories sought in the notice to produce exist, what has been produced, or the comprehensiveness of what has been produced. All that the Court knows is that, as a matter of fact, the legal representatives for Mr Dlakic have sought to be in a position where they could tender on his behalf reasonably comprehensive business records of relevant transactions, but they have not been able to do so.
The subject matter of Mr Vaughan's 8 March 2018 affidavit was his attempt to obtain from the Law Society a list of clients prepared by Mr Dlakic in about November 2014 and handed by him to the manager appointed by the Law Society, certain aspects of the firm's billing and record keeping practices, and an explanation of the three tranches of production of documents in response to the notice to produce, together with additional documents produced in March 2018. As I understand it, on 6 March 2018, with the assistance of a law student who Mr Vaughan claims to be more computer literate than himself, Mr Vaughan produced from the firm's server a series of WIP reports as at 17 July 2010, then every six months and finally the date of the buyback agreement, 25 November 2014. Mr Vaughan also gave evidence that on 6 and 7 March 2018, with the assistance of the student and his secretary, he conducted a search on the firm's server for documents containing the word "tax invoice". The search revealed 2163 documents which all appeared to be tax invoices. Mr Vaughan said that he was not aware that these invoices were stored in the particular archive folder. The documents were provided to Mr Dlakic's solicitor in electronic form on 8 March 2018.
In his affidavit in response, Mr Paul explained that the invoices that had been produced could not be copies of genuine original invoices, as they were missing essential information and, for example, recorded payments being made both before and after the date of the invoice (par 5). Mr Paul expressed the opinion (par 7) that there had been little meaningful compliance with the notice to produce. Mr Paul's office has assembled the documents produced into 21 lever arch folders. Then, in pars 10 to 24 of his affidavit, Mr Paul expressed opinions as to difficulties and inadequacies with the production that had occurred.
At the end of her cross-examination of Mr Vaughan, Mr Dlakic's counsel put it to Mr Vaughan that he had not taken compliance with the notice to produce seriously, he had deliberately withheld documents until February, and that he knew that there were further documents that he was refusing to produce in answer to the notice to produce. Mr Vaughan denied each of these suggestions.
However, in the cross-examination Mr Vaughan accepted that the initial tranches of production of documents were inadequate because he had not caused the firm's server to be searched properly.
The ultimate result has been that the evidence that Mr Dlakic has been able to tender has in many cases not been the best evidence that ought to have been available, if the records of Johnston Vaughan had been properly kept in a conventional way at all relevant times, and if a proper response had been made to the notice to produce. The Court is at a loss to know whether in fact there are more documents that ought to have been produced but have not been produced. The Court does not know whether more complete and accurate versions of the documents that have been produced can still be produced.
The Court has no choice but to determine the issues that are before it on the basis of the evidence that has been tendered, but it should do that having regard to the appearance that Mr Dlakic's case has been impaired by the failure of Mr Vaughan to comply with the notice to produce in a complete and timely way. As it is clear that there has not been production of all of the documents that would have been prepared and retained in the ordinary course by a well-run firm of solicitors, the Court should be solicitous to an appropriate extent when considering the fact that in some respects Mr Dlakic has not been able to tender the best evidence that should have been available.
The deficiency in production will also have the effect that some issues that may otherwise have been capable of being determined finally on the evidence at the hearing will now need to be dealt with as part of an accounting process, if Mr Dlakic succeeds in one or other of his claims arising out of the buyback agreement.
I will return to this issue below, when I come to consider the orders that should be made at this stage of the proceedings and the appropriate regime for its future case management.

Mr Dlakic's credit

As I have recorded above, Mr Dlakic has prosecuted these proceedings by his wife as his tutor. Mr Dlakic candidly informed the Court at the beginning of both of his affidavits that his wife helped him to prepare the affidavit.
As I have also observed above, and will consider in more detail below, by November 2014 Mr Dlakic had been diagnosed as suffering from severe depression. A medico-legal report prepared by Dr Leonard Lee dated 27 July 2018, in respect of proceedings instituted by Mr Dlakic for total and permanent disability claims with AMP and MLC, described the following result of a mental state examination conducted by Dr Lee on 27 July 2015:

17. Mr Dlakic was a pale, obese man who spoke rapidly and was at times difficult to follow. At other times, he became emotionally flattened and spoke very slowly. He reported symptoms consistent with a major depression characterised by inability to function at work and socially, loss of self-confidence, impaired concentration, insomnia and anhedonia. He said his condition is not improving with medication and he doubts that he could ever return to any form of work.

Dr Lee included in the history that he obtained from Mr Dlakic at par 15 that: "He is extremely forgetful".
Dr Lee gave as his opinion in par 18: "… His mental functioning is described as impaired as is his short-term and long-term memory and concentration".
To my observation, the views expressed by Dr Lee are consistent with the way that Mr Dlakic gave his evidence in the witness box, at least to the extent that the matters observed by Dr Lee could expect to be exhibited in the course of giving evidence.
Relevantly, Mr Dlakic conceded in the history that he gave to Dr Lee that he was extremely forgetful, and Dr Lee accepted in expressing his medical opinion that Mr Dlakic's short-term and long-term memory was impaired.
It follows from this evidence, and Mr Dlakic's concession that he prepared his affidavits with the help of his wife, that there may have been some reconstruction in the preparation of the affidavits.
When I deal with the specific claims made by Mr Dlakic, I will set out some of the evidence of conversations between Mr Dlakic and Mr Vaughan that are included in Mr Dlakic's affidavits. Notwithstanding that the evidence is expressed to be as to the effect of the conversations, it will be seen that they are set out in relatively minute detail, even though the conversations span a period commencing in the year 2000, and cover the period during and after the development of the serious depression from which Mr Dlakic suffers.
The concerns expressed by McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 must be especially acute in the present case. His Honour said:

…Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration. That is the position in the present case…

The following observations made by Hammerschlag J in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 are also apposite:

[94] Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.

[95] The sensation of feeling an actual persuasion, after a contest, that an event has happened or that something exists is one which is well known and recognised by experienced trial judges for what it is.

These considerations are of particular relevance to Mr Dlakic’s evidence of conversations with Mr Vaughan concerning the terms upon which Mr Vaughan allegedly provided advice to Mr Dlakic in relation to the Vince and Fetin loans; to oral assurances made in connection with the buyback agreement; and the basis upon which the share in Davlite was transferred to Mr Dlakic.
Notwithstanding these concerns, I formed the opinion from listening to Mr Dlakic in cross-examination that he was attempting to give genuine and truthful evidence to the best of his ability.
I accept that in most instances the evidence given by Mr Dlakic reflected his genuine present recollection of the relevant events. However, Mr Dlakic’s evidence must be treated with due scepticism given the consequences of his psychological disabilities and the consequential effect on the process whereby his affidavits were prepared and his recollection of events established. I have attempted to exercise particular care to measure the plausibility of Mr Dlakic’s evidence against the background of the objective circumstances, and have looked carefully for corroboration in the evidence given by the other witnesses called in Mr Dlakic’s case.
There are a number of additional concerns that have caused me to exercise caution in weighing the significance of the evidence given by Mr Dlakic.
A serious residual concern that I have is that I consider that Mr Dlakic has exaggerated Mr Vaughan's moral responsibility for Mr Dlakic's suffering, and he has failed to accept his personal responsibility in that regard.
There is some evidence that Mr Dlakic's psychological disabilities commenced in about 2010, although they were un-diagnosed until November 2014. Notwithstanding that, it would appear that Mr Dlakic's psychological disabilities grew gradually, and Mr Dlakic made a significant number of financial decisions that were, to my mind, plainly imprudent and could even reasonably be described as prodigal. There was no evidence that these actions by Mr Dlakic were caused by Mr Dlakic’s deteriorating psychological condition, and he did not claim that they were.
The credibility of Mr Dlakic's evidence has been diminished by his failure to volunteer in his primary affidavit an objective history of his financial dealings unrelated to Johnston Vaughan. A significant focus of Mr Dlakic's primary affidavit was evidence of events allegedly involving Mr Vaughan by which Mr Dlakic sought to suggest that Mr Vaughan had encouraged Mr Dlakic to engage in financially improvident transactions, and then Mr Vaughan had exacerbated Mr Dlakic's difficulties by failing to assist him financially, or failing to pay him money to which he was entitled. Whether or not those claims are true, Mr Dlakic omitted to give a balanced picture of his financial dealings. I refer in particular to his margin lending investment in 2008, his purchase of the Town's Road Vaucluse property in 2010, and his leasing of the Aston Martin and Porsche vehicles at about that same period. These latter transactions occurred in broadly the same time span that Mr Dlakic borrowed the $300,000 from Dr and Ms Vince on onerous terms.
Consequently, I have concluded that there is a real risk that Mr Dlakic has, over time, come to a reconstructed memory of Mr Vaughan's conduct which paints Mr Vaughan as the sole villain in Mr Dlakic's affairs.
As will be seen, there are aspects of Mr Dlakic's evidence that I am not prepared to accept, primarily on the basis that the evidence that has been offered to the Court is not sufficiently complete or plausible to be persuasive. The clearest example of this problem is the evidence given by Mr Dlakic in support of his professional negligence claim against Mr Vaughan concerning the circumstances in which Mr Dlakic borrowed the $300,000 from Dr and Ms Vince. Mr Dlakic has chosen to commit himself to aspects of his case that are so thinly supported by the evidence that his choice has impaired his credibility.

Mr Vaughan's credit

I regret to have to say that I found Mr Vaughan to be an unsatisfactory witness.
The abiding sense that I gained listening to Mr Vaughan's cross-examination was that he was bemused as to how he could explain his conduct, both in respect of his unconscionable treatment of Mr Dlakic, and the fundamental inconsistencies between his own affidavit evidence and the objective facts.
Mr Vaughan's evidence was unsatisfactory in a structural sense, in the manner of its being given in cross-examination, and its fundamental inconsistency with the objective evidence.
I mean by the observation that Mr Vaughan's evidence was structurally unsatisfactory that his specific affidavits in response to Mr Dlakic's witnesses' affidavits consisted of bald denials, absences of any response, and perfunctory explanations. In many cases Mr Vaughan simply denied the entirety of a paragraph, when it appeared perhaps reasonable for him to have denied part of the paragraph (say, a conversation attributed to him), but where the denial of the whole of the paragraph appeared to be irrational, in that Mr Vaughan had denied conventional evidence of circumstances that plainly called for some positive response. There seemed in many cases to be a serious inconsistency between occasions when Mr Vaughan denied whole paragraphs and then did not respond to other paragraphs dealing with related circumstances.
Consequently, I am not prepared to give significant weight to most of the evidence given by Mr Vaughan in his affidavits.
I do not consider that Mr Vaughan conscientiously responded to the notice to produce served upon him by Mr Dlakic, which I have considered above. Mr Vaughan, as a very experienced solicitor, must have understood that the documents sought by Mr Dlakic were essential to the proper and efficient determination of these proceedings. Broadly, the documents should have been retained by a properly operated legal practice, and should have been able to be gathered for production in a relatively simple way. I did not find Mr Vaughan's attempt at explaining why he was unable to produce the documents at all convincing. This has caused me to entertain the suspicion that Mr Vaughan was not prepared to address his obligation to produce the documents conscientiously because he was aware of the likely damage that production would do to his defence of Mr Dlakic's claims.
The evidence justifies a conclusion that it is likely that Johnston Vaughan received substantial fees from clients for work done before the date of the buyback agreement, which on the clear terms of that agreement were required to be paid by Mr Vaughan to Mr Dlakic. Very little of those receipts were in fact paid to Mr Dlakic. It is hard to conceive that Johnston Vaughan does not have records that would prove the receipt of these funds.
It is also hard to conceive of why Mr Dlakic would have continued to pay very substantial amounts towards the expenses of Johnston Vaughan after the date of the buyback agreement, if there were not a side agreement between Mr Dlakic and Mr Vaughan that Mr Dlakic would continue to receive the net profits from the firm's practice after the date of the buyback agreement. Although, because of the dearth of records, the evidence is incomplete and inexact concerning the amount of the fees received for work done after the buyback agreement, and as to the expenses of Johnston Vaughan paid by Mr Dlakic, the evidence is sufficient to establish that there must have been significant fees received and significant expenses that were in fact paid by Mr Dlakic.
Yet Mr Vaughan point blank denied that there had been any failure by him to remit to Mr Dlakic fees payable for work done before the date of the buyback agreement, or that there was any side agreement concerning the operation of Johnston Vaughan after the buyback agreement.
Not only are these denials incredible in themselves, but they heighten the significance of the failure of Mr Vaughan to properly comply with his obligations in respect of the notice to produce.
Additionally, Mr Vaughan's credit is undermined by his apparent failure to cause Davlite to declare the income in rent that it received from Mr Dlakic. Mr Vaughan’s instruction to Mr D’Apice that he be paid his salary in cash also gives rise to grounds for suspicion about Mr Vaughan’s honesty.
Quite astonishingly, Mr Vaughan claimed that the payments made by Mr Dlakic, a man who was obviously in dire financial circumstances, of Johnston Vaughan's expenses were a gift (T 248.12-23, 250.22-28, and 252.8-19).
It is in my view clear that Mr Vaughan caused the surrender of the lease that Davlite granted to Mr Dlakic just before the buyback agreement to be backdated from July 2015 to the date that Mr Dlakic's practising certificate was suspended on 30 October 2014, to avoid the possible discomfort to Davlite of Johnston Vaughan Solicitors Pty Ltd being ordered to be wound up. Notwithstanding the surrender, Mr Vaughan still required Mr Dlakic to pay rent to Davlite (including out of the fees payable by Mr Calleja that I have considered above).
In my view Mr Vaughan sacrificed the credibility of his evidence by too frequently denying the obvious significance of events that were comprehensively proved by the objective evidence.
Consequently, I have not accepted Mr Vaughan’s evidence except to the extent that it is corroborated by evidence that I am prepared to accept, or its acceptance is warranted on the basis that it is the most consistent conclusion to draw by reference to the objective evidence.

Credit of other witnesses

Mr Vaughan did not challenge the credibility of the witnesses called in Mr Dlakic’s case in his final submissions, other than that of Mr Dlakic himself.
Mr D’Apice was the most significant of those witnesses to the conclusions that have been reached in this judgment. I have described Mr D’Apice’s role in Johnston Vaughan above. The office was a small one and Mr D’Apice had the opportunity on a day-to-day basis to observe the relationship between Mr Dlakic and Mr Vaughan, and to converse with them on the subjects relevant to these proceedings. I found Mr D’Apice to be a straightforward and convincing witness. His evidence was germane to the issues and its substance dovetailed with significant aspects of the evidence given by Mr Dlakic in a manner that enhanced its plausibility. There was no suggestion that Mr Dlakic and Mr D’Apice concocted this evidence together. As I have observed above, I have had no hesitation in accepting Mr D’Apice’s evidence.
Ms Zhu Min Ma (also known as Annie Ma) is the estranged wife of Mr Vaughan. She married Mr Vaughan on 5 August 2013 and separated from him on about 2 May 2016. The principal relevance of her evidence was her recounting of statements made to her by Mr Vaughan, some of which I have recorded in this judgment. It was suggested on behalf of Mr Vaughan that Ms Ma was antipathetic to Mr Vaughan as a result of the acrimonious breakdown of their relationship. Mr Dlakic responded by suggesting that Ms Ma had given evidence against her own interests in so far as success by Mr Dlakic in the proceedings was likely to reduce the pool of assets that were available between Ms Ma and Mr Vaughan on the dissolution of their marriage.
Ms Ma appeared to me to be a nervous witness but I have seen no reason to discount her evidence. While it would be appropriate for the Court to approach her evidence with caution because of her apparent animosity towards Mr Vaughan, her evidence as to statements made by Mr Vaughan appears to be credible given the substance of what she recalled that he said. There was no suggestion that Ms Ma concocted her evidence in collaboration with Mr Dlakic. I found the relatively few parts of Ms Ma’s evidence that I have relied upon to be inherently credible.
The other witnesses called for Mr Dlakic included Mr Paulus Saleem Nahkle and Mr Michael Karam who each gave matter-of-fact evidence as independent witnesses in a credible way, and I am prepared to accept their evidence for the limited purposes for which I have found their evidence helpful.
Ms Karen Newell, who is Mr Vaughan’s long-time secretary, gave limited evidence in Mr Vaughan’s case. From her recollection she denied various statements attributed to her in the evidence of Mr Dlakic, and said that she could not recall a particular statement attributed by Mr D’Apice to Mr Vaughan. Ms Newell’s evidence was not of great significance, and I am prepared to accept that she gave her evidence to the best of her recollection. It would not be appropriate to reject her evidence, as Mr Dlakic suggested, on the ground of her long-term relationship with Mr Vaughan.

Evidence of Mr Dlakic’s mental state

Two questions arise in relation to Mr Dlakic's mental state. The first concerns his objective mental health at relevant times. The second concerns the outward manifestation of any psychological problems experienced by Mr Dlakic, which is relevant to the question of whether Mr Vaughan was aware in his dealings with Mr Dlakic that Mr Dlakic was under a serious psychological disadvantage.
Mr Dlakic tendered the expert medico-legal reports of four consultant psychiatrists prepared for the purposes of other legal proceedings in which Mr Dlakic is engaged. I have set out an extract from the report of Dr Leonard Lee in my consideration of the background above. Mr Vaughan did not cross-examine any of the expert psychiatrists, and did not attempt to contradict their evidence.
Only Dr Olav Nielssen saw Mr Dlakic in 2014, being on 10 and 17 November 2014 and 1 December 2014. According to Dr Nielsen's 29 May 2015 and 14 May 2016 reports, he also saw Mr Dlakic on 9 and 16 March 2015 and 21 March 2016.
As well as being seen by Dr Lee on 27 July 2015, Mr Dlakic was also seen by Prof Ian Coyle on 5 October 2016 and Prof Phillip Morris on 20 December 2016.
The expert psychiatrists all concur in the opinion that Mr Dlakic suffers from Major Depressive Disorder with Anxious Distress, although they formulate his psychiatric condition in slightly different terms.
Although reliant upon the history given by Mr Dlakic, all four experts accepted that Mr Dlakic's psychological symptoms started to emerge in about 2010, even though he did not realise that he had a severe psychological disability until 2014, and his symptoms were otherwise not diagnosed.
As Dr Lee recorded in par 9 of his 27 July 2015 report:

In 2014, realising that he could not continue, he consulted Dr Lucille Been. She was so concerned as he was overwhelmed by tears that she wanted him to immediately be assessed by the Hornsby Mental Health Unit. He refused, but he promised to attend the Emergency Department at the Wahroonga Sanatorium, where he underwent cardiac investigations, chest x-ray and MRI scan and when these were normal, the doctor said that he had extreme symptoms of stress…

Dr Nielssen said in his 29 May 2015 report, concerning his treatment of Mr Dlakic commencing on 10 November 2014:

It emerged that he has been suffering from symptoms of depression for a number of years. He reported that he first noticed insomnia in about 2010, and had experienced anxiety symptoms that he attributed to physical illness from late 2011. He reported having a range of blood tests and heart and other tests, which showed no abnormality. He reported increasing fatigue in the last two years, accompanied by impairment in concentration and problem solving. He described the loss of confidence in his own ability and the avoidance of difficult tasks.
Factors contributing to being depressed include the estrangement from his brother, who it seems had become jealous of his success, his parents disapproval of his marriage, and his wife's health problems, which included difficulty conceiving and keeping a pregnancy, financial stress and his very high workload.

Given the unanimity of the expert psychiatric evidence, it will be sufficient to record the following extract from the report of Prof Phillip Morris dated 20 December 2016:

Amil Dlakic was last psychologically well in 2010. Since then his mental health has deteriorated significantly. From 2010 he was exposed to a number of stressful experiences. He faced serious family conflict when he married his wife on 21/12/2010. His parents and brother were vehemently opposed to his marriage to a woman of a different religious faith (Christian), and a divorcee with children from a previous marriage. The family opposition did not subside and has persisted with intensity. At this time he bought out the owner of the legal practice he was working in and became the principal of this firm. He took on substantial financial debt to achieve this purchase and found it difficult to manage the finances of the practice. This placed him under severe work-related stress. When the Law Society investigated his practice and he subsequently lost his practising certificate he was unable to work to finance his practice and other financial liabilities. In addition he and his wife were unable to conceive a child normally and they sought IVF in Greece. This produced a pregnancy but his son was born premature and has experienced developmental delays and deafness as a consequence. This has placed more distress on Amil Dlakic and his family over the past 18 months.
Since 2010 the accumulation of all the stressors has resulted in him developing a major depressive disorder accompanied by severe anxiety features. His depressive disorder has persisted from 2010 through to the present. There has been no improvement in the condition and it now has become chronic. The disorder is characterised by symptoms of depressed mood, loss of interest, anhedonia, tearfulness, significant weight gain, insomnia, fatigue, feelings of worthlessness, hopelessness and loss of confidence and motivation, poor concentration and indecisiveness, and frequent thoughts that life is not worth living. He has frequent panic attacks, he become anxious when thinking of his legal practice, he tries to avoid thinking of legal work to avoid anxiety, he avoids associating with people involved with his former workplace including staff and clients, he feels emotionally numbed or withdrawn, he is constantly 'on edge' and irritable, and is easily provoked to angry outbursts. He has become socially withdrawn and avoidant. He has lost libido and has poor sexual performance. The psychiatric condition has caused frequent discord with his wife and children.

In his primary affidavit, Mr Dlakic gave evidence, which I accept, concerning the events in his life which the expert psychiatrists accepted lead Mr Dlakic to be diagnosed with major depressive disorder in November 2014.
Mr Dlakic also gave the following evidence concerning the outward manifestation of his increasing psychological difficulties:

155.   By mid-2013 to late 2014 the pressure had become so great upon me both mentally and financially that I did not know what I was going to do about my predicament…
156.   It was during this time that I started yelling and crying in the toilet at work. I felt completely helpless. I was constantly sad and often inconsolable. The Defendant observed me crying at work. I recall in mid-2013 the Defendant knocked on the toilet door and said to me: "Mate, stop crying and yelling. Get back to work. We have got bills to pay and carrying on like a little girl is not going to fix anything," or words to that effect…
…
158.   During the period between mid-2013 and 2014 I would come to work and many days I would close my office door and cry. I was unable to properly focus on my work. I would leave the lights off in my windowless office. I wanted peace and quiet in an attempt to escape from my reality of financial dysfunction.

Q. And so you've never been involved in any family law cases where - for example - husbands and wives had a company that they held together to own assets?
A. I may have been but I don't understand company law.
Q. So you don't understand that a person who holds a share in a company is a, in a sense, part-owner of that company?
A. I had made a mistake in putting him on as a shareholder.
Q. But you did put him on as a shareholder?
A. I did.
Q. You certainly intended at that time for him to be recognised in the register as a shareholder?
A. That was the effect of it.
Q. Indeed, he was recognised in the register as a shareholder. He was never a director though, was he?
A. Of that I'm not sure.
Q. You've got the company extract in front of you.
A. He was supposed to be a director, not a shareholder. That's now thinking back but it's 17 years ago. When Mr Johnston, he said, "I want" - I was told that I needed two shareholders and two directors by an accountant. I'm pretty sure it was an accountant and it was just a mistake that he ended up not a director but a shareholder, and all the documents are in his hand.
Q. So as at 2001--
A. Yes.
Q. --October 2001, you knew that Mr Dlakic was indeed a shareholder of Johnston Vaughan - of Davlite, sorry, my apologies, of Davlite Pty Ltd?
A. Of Davlite, but only as a trustee for me.
…
Q. So as at 2001 you thought Mr Dlakic was both a shareholder and a director of Davlite Pty Ltd?
A. Yes.
Q. When is it that you realised he was not a director of Davlite Pty Ltd?
A. I didn't realise that he was a shareholder and not a director until these papers came through and until I saw an application for finance in 2012 where he showed Davlite as an asset of his.
Q. Just pausing there, do you say that it was at 2012 that you first realised that he was a shareholder and not a director?
A. I didn't look as to who was - I don't - I can't speak for director but I realised that being a shareholder and adding that Davlite as an asset of his was wrong, and I went to him immediately and said, "You must - you've made a claim or an application for finance and you've included Davlite in that, and you've got nothing to do with it," and he said, "I'm sorry. I won't do it again."

This evidence of Mr Vaughan’s understanding of how many directors and shareholders were required for Davlite, and what the nature of Mr Dlakic’s involvement was, and his knowledge of that involvement, can best be described as confused. Although in his later affidavit, Mr Vaughan attempted to correct his earlier affidavit and say that he never intended to make Mr Dlakic a shareholder in Davlite, in cross-examination he clearly accepted that he did intend to make Mr Dlakic a shareholder, and that he did so, but he said that he did not intend thereby that Mr Dlakic would effectively gain an interest in the property from which the firm practised. But then, Mr Vaughan asserted that Mr Dlakic “was supposed to be a director, not a shareholder”, before again accepting that Mr Dlakic was a shareholder (but only as trustee for Mr Vaughan).
Mr Vaughan at pars 20 and 21 of his 14 March 2018 affidavit (and similarly at par 41 of his 20 June 2017 affidavit) says that around 23 August 2012, Mr D’Apice informed him that he saw Davlite on a mortgage application by Mr Dlakic, to which Mr Vaughan said he was shocked because to his mind Mr Dlakic had “nothing to do with the ownership of Davlite”. Mr Vaughan then states the following at pars 22 to 25 in his 14 March 2018 affidavit:

22   I immediately obtained the ASIC forms to remove Amil as a shareholder, and I filled them in. Those forms are behind Tab 15 of the Exhibit AD-1 to Amil’s Affidavit.
23   I then went to Amil’s office and we had a conversation which included words to the following effect:
I said:   ‘I am very cranky about you trying to mortgage my company. And I am taking steps to take you off it immediately.’
He said:   ‘I am sorry Michael, I won’t do it again.’
24   I did not have the conversation set out in paragraph 141 of Amil’s Affidavit. I did not promise Amil that the firm was his.
25   I asked Amil to sign a document and he did so. I do not now recall what that document was. I then lodged the ASIC forms.

Mr Vaughan’s response to this evidence in his 20 June 2017 affidavit in reply to Mr Dlakic’s affidavit was limited to denying pars 148 and 149 and not responding to pars 150 and 152.
In his 14 March 2018 affidavit, Mr Vaughan added:

21.   In about 23 August 2012, Steven D’Apice said to me words to the following effect:
“I saw Davlite on a mortgage application by Amil.”
22.   I was shocked by this. Because in my mind Amil had nothing to do with the ownership of Davlite.
23.   I immediately obtained the ASIC forms to remove Amil as a shareholder, and I filled them in. Those forms are [the Change to company details (Form 484) signed by Mr Vaughan on 23 August 2012].
24.   I then went to Amil’s office and we had a conversation which included words to the following effect:
I said:   “I am very cranky about you trying to mortgage my company. And I am taking steps to take you off it immediately.”
He said:   “I am sorry Michael, I won’t do it again.”
25.   I did not have the conversation set out in paragraph 141 of Amil’s Affidavit. I did not promise Amil that the firm was his.
26.   I asked Amil to sign a document and he did so. I do not now recall what that document was. I then lodged the ASIC forms.

Mr Vaughan did not give evidence that a general meeting of shareholders of Davlite was held, or that any notice of such a meeting was given to Mr Dlakic. He did say that he filled in the Form 484. He did not say that he gave Mr Dlakic an opportunity to read whatever documents were put before Mr Dlakic to sign. Mr Vaughan did not give evidence that Mr Dlakic in clear terms expressed his consent to the share in Davlite that he held being transferred to Mr Vaughan. Although Mr Vaughan said that Mr Dlakic signed a document that was put before him, Mr Vaughan has not identified the document, and now says that he cannot recall what the document was. The document that purports to be the minutes of the general meeting of the members of Davlite that was apparently attached by Mr Vaughan to the Form 484 is not signed. Mr Vaughan did not say that the unsigned document that he attached to the form was an unsigned version of the document that Mr Dlakic signed. He did not explain how it could have been that he attached an unsigned version of the document that Mr Dlakic signed, if that is what happened. In the result, the Court cannot make a finding as to the identity of any particular document as having been signed by Mr Dlakic. Consequently, as Mr Dlakic has not conceded that he signed any document, the Court cannot find that he did so. It does not matter whether or not Mr Dlakic did sign a document, because no such document has been identified and produced to the Court. There is not even secondary evidence of the contents of such a document. The Court should not draw an inference that Mr Dlakic in fact signed the purported minutes of the general meeting of the members, and for some unexplained reason Mr Vaughan wrongly attached a draft and not the signed copy. Mr Vaughan has not given evidence that would justify such an inference being drawn.

Ms Ma’s evidence of a conversation with Mr Vaughan

Ms Ma gave the following evidence relevant to the issue of the ownership of the share in Davlite that was transferred to Mr Dlakic:

18 In or about Christmas 2015 I was cleaning the home. I came across a piece of paper in the Defendant’s office. Annexed hereto and marked with the letter “A” is a copy of the above document that I found titled: ‘Knight Frank: Entitlement on Development 18-28 Montgomery Street, Kogarah’ that appears to have been prepared by property consultants Knight Frank. I showed the Defendant the above document. I said to him: “What’s this about?”, or words to that effect. The Defendant said to me words to the following effect: “I have been approached by developers. They want to buy my Kogarah office from me for over $1,500,000 for a large unit site utilizing the building where my office is in the middle of. They will use both the buildings next door to me. I knew this was going to happen so I had Amil’s interest in Davlite Pty Limited deleted. I’ve forced Amil to give his share back to me in Davlite to me. I now need to get him off the lease. The good news is that the council has changed the zoning too”, or words to that effect.

This evidence tends to support a conclusion that Mr Vaughan considered the share that had been transferred to Mr Dlakic as being “his” share, in the sense of being beneficially owned by Mr Dlakic. This conclusion is reinforced by the concept contained in the statement attributed to Mr Vaughan that he required Mr Dlakic “to give his share back to” Mr Vaughan.

Matters relevant to beneficial ownership of share

A number of matters arose from the evidence that have an objective bearing on the likelihood that Mr Vaughan transferred the share in Davlite to Mr Dlakic beneficially, and whether Mr Dlakic understood that he was the beneficial owner of the share.
The significance of these matters is clouded by the fact that it was Mr Dlakic’s evidence that from the time of the transfer to some unspecified time during the course of the proceedings Mr Dlakic believed that he was the beneficial owner of both shares in Davlite. He gave that evidence notwithstanding that the Annual return of a company (Form 316) completed by Mr Dlakic on 8 March 2002 recorded the transfer of only one share from Mr Johnston to Mr Dlakic. If Mr Dlakic believed that he was the sole shareholder in Davlite, then Mr Dlakic could have used the shares in Davlite or the Montgomery Street property as security for the loan to buy the firm, or to repay the Vince loan, without needing Mr Vaughan’s consent; he should have been entitled to dividends related to the rent payable by Johnston Vaughan; after Mr Dlakic purchased Johnston Vaughan, Mr Dlakic should not have had to pay rent if he chose not to; and Mr Vaughan would not have retained any interest in Davlite that could be the subject of the gift in favour of Mr Dlakic in Mr Vaughan’s will.
The significance that the ownership of the shares in Davlite had on these matters would be different if (as was the fact) both Mr Dlakic and Mr Vaughan were the apparent owners of one share in Davlite each.
At the end of the day, the evidence that emerged in relation to these issues was inconsistent, and I do not consider that the manner in which the parties dealt with these matters during the hearing resolved the inconsistencies.
On the issue of whether Mr Dlakic believed that he was the owner of the shares in Davlite and accordingly entitled to offer the shares in the company or the property that it owned as security, there was positive evidence that in 2008, 2009 and 2010 Mr Dlakic sought to borrow money on the security of Davlite. Mr Michael Karam was at the time a finance consultant who sought to assist Mr Dlakic to borrow money. He gave evidence that in the latter part of 2008, Mr Dlakic approached him to assist Mr Dlakic to borrow $1,100,000 to buy Johnston Vaughan from Mr Vaughan, under a proposal that was not finally implemented. Mr Karam arranged finance that involved a security over the Montgomery Street property, a property in Ramsgate owned by Mr Dlakic and his brother, and the property owned by Mr Dlakic in Castlereagh Street Sydney.
Mr Karam’s evidence on this issue is corroborated by an email dated 12 January 2009 from an officer of Westpac to grant Hawkswell, Mr Dlakic’s finance broker, which advised of Westpac’s conditional approval to a number of loans, one of which was described as: “(3) DAVLITE PTY LTD… BBBL – VR $525.0k”.
Mr Karam gave evidence that, after the loan approval had been obtained, Mr Dlakic said to him in January 2009: “Michael Vaughan does not agree to this arrangement. You know how I was going to give him $1.1 million for the business? He will not let me mortgage Davlite even though I can”.
Mr Karam also gave evidence that Mr Dlakic spoke to him about arranging a loan against Davlite to pay out the $300,000 debt to Dr and Ms Vince, Mr Karam could not arrange finance without Mr Dlakic using Davlite as security. Mr Dlakic informed him that Mr Vaughan would not agree to Davlite being used as security.
These events are difficult to understand if Mr Dlakic believed that he was the sole owner of the shares in Davlite. They are intelligible if Mr Vaughan retained one of two shares (which he did).
Mr Dlakic was asked why he needed permission from Mr Vaughan to mortgage Davlite, and if that request indicates that he believed Mr Vaughan owned Davlite (T 156):

Q. If I can take you to paragraph 96 page 114, there you sought to mortgage the Kogarah property owned by Davlite, the offices in effect, and in that paragraph you ask - well, you talk to Mr Vaughan about mortgaging the unit and he says no. Isn’t that right?
A. Yes, sir.
Q. So you don’t go ahead and mortgage the property.
A. Yes, sir.
Q. So in a sense when he said, no, you weren’t permitted to do that, you understood that you couldn’t do that.
A. No, I respected him so much that no matter - I’d rather pay 87% interest than hurt him, than not respect him.
Q. Mr Dlakic--
A. No.
Q. That’s not true, is it?
A. That is. It’s 100% true.
Q. The reality is that you believed he was in charge of the company, he owned it, and therefore when you asked him and he said no that you weren’t able to.
A. Well, why would we be having this discussion if I didn’t have a proprietary interest in it?
Q. My question to you is that you didn’t believe you had an interest in it, didn’t you?
A. Well, correct, sir.
Q. But if you were that concerned about your borrowings at that time, particularly the Dr Vince loan which you previously talked about, and you were that desperate to refinance and use Davlite, surely you could have forced Mr Vaughan to let you use Davlite as security, couldn’t you?
A. Yes.
Q. If you were the sole shareholder you could have upended him as director.
A. Yes.
Q. And you could have forced the company to be used as a security, couldn’t you?
A. Yes.
Q. And you never did that?
A. Yes, I - I’m not that kind of a person.
Q. I put it to you that the reason you never did that is because you truly understood that Mr Vaughan was the owner of the company.
A. No.
Q. Because if you were the 100 per shareholder you could have essentially done what you would have wanted, couldn’t you?
A. Of course.

Mr Dlakic’s case was that, after he acquired Johnston Vaughan from Mr Vaughan, he entered into leases of the Montgomery Street property, and continued to pay rent even after the buyback agreement. He never asked for any dividends from Davlite.
Mr Dlakic was asked in cross-examination and denied that the basis on which he paid rent to Mr Vaughan following the purchase of Johnston Vaughan was that he understood Davlite was Mr Vaughan’s company (T 155):

Q. If I can take you to page 84 - paragraph 84 page 111.
A. Yes, sir.
Q. There you say, don’t you, that you paid as part of the 2010 deed a salary package for Mr Vaughan and, “The rent by me to him for the Kogarah premises.”
A. No, page 84 of my document seems to talk about something else.
Q. Paragraph 84, Mr Dlakic, my apologies, page 111.
A. Page 111. So your question, sir?
Q. So you paid rent to Mr Vaughan as part of the arrangement you entered into, didn’t you?
A. Yes, sir, I did.
Q. And that was because you understood that it was Mr Vaughan’s company.
A. No, sir.
Q. Well, you don’t say there that you asked Mr Vaughan for half of the rent or all of the rent, do you?
A. Not in that paragraph, sir, no.
Q. I put it to you that you didn’t ask Mr Vaughan for all of the rent at any other time.
A. Yes, sir, that’s correct. Until these proceedings, that is correct.
Q. And that is because you understood or believed the company to belong to Mr Vaughan.
A. No, sir, that’s incorrect.

The significance of Mr Dlakic’s payment of rent to Davlite without claiming any entitlement to share in the benefit of the rent must be balanced against the fact that Mr Vaughan denied that Mr Dlakic continued to pay rent to Davlite after 2010 (T 227):

Q. Mr Vaughan, I suggest to you that after 2010 Mr Dlakic did continue to pay rent to Davlite through the period that he was principal of Johnston Vaughan.
A. Wrong.
Q. Mr Vaughan, I suggest that if he hadn't to pay rent, that's something you would have included in your evidence in this Court.
A. Yes.
Q. And there's not one word in your six affidavits to that effect, is there?
A. Wrong.

Mr Dlakic claimed that he relied on representations by Mr Vaughan that he would become the owner of Davlite after Mr Vaughan’s death. He said that in 2016, he read Mr Vaughan’s executed will which was given to him by Ms Ma, and at that time learned that Mr Vaughan had left the shares in Davlite to his daughter. This evidence is also inexplicable if Mr Dlakic believed that he already was the beneficial owner of both shares in Davlite. Mr Dlakic’s position is more understandable if Mr Vaughan continued to be the owner of one of the two shares.
Mr Vaughan denied that he represented to Mr Dlakic at any time from 2000 onwards that he would become the owner of Davlite after his death.

Consideration

There is no evidence that the share in Davlite originally owned by Mr Johnston was effectively transferred to Mr Dlakic in accordance with the requirements of the Corporations Act at the time, by means of the execution of a share transfer that was approved by Mr Vaughan as the sole director of Davlite and entered into the company’s register of members.
However, in the manner that I have discussed above, the effect of the Annual Return of Davlite lodged by Mr Dlakic and the ASIC Current & Historical Organisation Extract is that there is prima facie evidence that Mr Dlakic became the beneficial holder of one share in Davlite.
In his evidence, Mr Vaughan accepted that a share in Davlite was transferred to Mr Dlakic, although Mr Vaughan asserted that it was not his “intention” that Mr Dlakic would be the beneficial owner of the share, and he was to hold the share on trust for Mr Vaughan. Mr Vaughan’s evidence was confused and inconsistent about whether he in fact had agreed that a share in Davlite would be transferred to Mr Dlakic, or whether he was to be appointed a director.
I do not regard the oral evidence of either party to be reliable in so far as the evidence is given as to precise conversations that occurred at the time of the transfer.
I regard the contents of the Annual Return lodged by Mr Dlakic as having significance going beyond the evidentiary effect that it is given as a public document. It was prepared relatively contemporaneously with the events relevant to the transfer of the share, and is likely to have been completed by Mr Dlakic in a way that conformed to his genuine understanding of the arrangement that had been reached between him and Mr Vaughan. Mr Dlakic completed the form in a way that described him as being the beneficial owner of the share. It was not suggested to Mr Dlakic that he dishonestly included the reference to beneficial ownership.
There are a number of aspects of the evidence that are capable of introducing doubt concerning the prima facie position, but I have come to the view that they are not sufficient to displace that result.
I am not persuaded by Mr Vaughan’s confused explanation either that he really intended that Mr Dlakic would be made a director rather than become a shareholder, or that he thought that the applicable company law principles required that Davlite have at least two directors and two shareholders. First, I do not have sufficient confidence in the reliability of Mr Vaughan’s evidence, and consider that it is most likely to be a reconstruction. I do not accept that Mr Dlakic would have produced the Annual Return consistently with him becoming a shareholder, if the real agreement between him and Mr Vaughan was that he would be made a director. There is no explanation for why Mr Vaughan only allowed Mr Dlakic to become a shareholder, if he in fact thought that he needed to appoint an additional director as well is an additional shareholder. More importantly, even if Mr Vaughan was mistaken about the legal requirements, I do not accept that he would have simply made Mr Dlakic a shareholder, if the real agreement was that Mr Dlakic would hold the share on trust for Mr Vaughan, without taking appropriate steps to ensure that the creation of the trust was effectively documented. Whatever the level of legal competence the Court may assume Mr Vaughan had, he clearly had the competence to establish a successful law practice. He must have understood that to simply cause a share in Davlite to be transferred to Mr Dlakic would create the appearance that Mr Dlakic held the share beneficially. Mr Vaughan did not ensure that there was any documentary proof at all that Mr Dlakic held the share on trust for him. I do not accept that Mr Vaughan was so legally naive that he did not understand the need to document the creation of the trust if that is what he intended to achieve.

On the other hand, I accept that it was an unusual course for Mr Vaughan to have taken to have transferred one of two shares in Davlite to Mr Dlakic relatively soon after Mr Dlakic commenced his employment with Johnston Vaughan.
That consideration is, however, balanced by the evidence that Mr Dlakic continued to work for Mr Vaughan for many years at a relatively low salary that is consistent with Mr Dlakic having accepted a salary sacrifice.
Mr Dlakic’s evidence that he thought for many years that he was the sole shareholder in Davlite is also strange, particularly as he completed the Annual Return in his own handwriting and that document recorded that he and Mr Vaughan were the holders of single shares in Davlite.
Mr Dlakic’s belief that he was the sole shareholder in Davlite also does not sit comfortably with the fact that Davlite was paid rent by the firm, including for periods when Mr Dlakic was the principal of the firm, and Mr Dlakic did not ever receive any share of the rent paid through dividends, and he did not pursue his entitlement to receive the profit from Davlite’s ownership of the property from which the firm’s practice was conducted.
Mr Dlakic’s evidence concerning an understanding that the property would be left to him in Mr Vaughan’s will is also not consistent with Mr Dlakic understanding that he was already the beneficial owner of both of the issued shares in Davlite, which was the owner of the property. A belief on Mr Dlakic’s part that he would receive full ownership of the property through Mr Vaughan’s will is to an extent consistent with Mr Dlakic understanding that he was the beneficial holder of one of two shares in Davlite, as that would leave room for Mr Dlakic to receive Mr Vaughan’s share through his will.
Although the aspects of Mr Dlakic’s evidence that I have just considered introduce significant doubt, I consider the effect of Mr Vaughan’s inability to explain in a clear and persuasive way why it was that Mr Dlakic held the share in Davlite that was transferred to him on trust for Mr Vaughan is that the prima facie position that Mr Dlakic held that share beneficially has not been displaced.
The best reconciliation of all of the conflicting evidence that has been given to the Court that I can derive is that Mr Dlakic’s evidence that he believed that all of the shares in Davlite had been transferred to him was an error of recollection, perhaps affected by his psychological condition. Mr Dlakic must have understood that only one share had been transferred to him when he prepared the Annual return that reflected the transfer of the single share to him. A belief that he only held one of two shares would be consistent with his understanding that he could not mortgage the shares in Davlite or the Montgomery Street property without Mr Vaughan’s consent, and it would leave room for Mr Dlakic’s belief that there remained scope for him to acquire full ownership of Davlite through Mr Vaughan’s will. The terms of the Annual return and the evidence of Mr Dlakic’s attempts to raise finance on the security of Davlite provide evidence that Mr Dlakic believed that he was the beneficial owner of one share in the company. While there is force in Mr Vaughan’s claim that it would not have been sensible for him to transfer one of the two shares in Davlite to a junior employed solicitor, that is exactly what he did do. I do not place weight on Mr Vaughan’s confused and inconsistent stated reasons for transferring the share to Mr Dlakic. Mr Vaughan may well have intended that Mr Dlakic would hold the share on trust for him, but I find that he did not convey that intention to Mr Dlakic, and in fact caused Mr Dlakic to believe that he held the share beneficially. The most likely reality is that Mr Vaughan induced Mr Dlakic to continue to work for a relatively low salary because of Mr Dlakic’s belief that he would ultimately receive the practice of Johnston Vaughan, one aspect of which was his belief that he already beneficially owned one of the shares in Davlite. Accordingly, Mr Vaughan will not now be heard to say that the legal position was that Mr Dlakic held the share on trust for him.
It is therefore necessary to address the question whether the prima facie position that Mr Dlakic’s interest in his share was validly transferred to Mr Vaughan has been displaced.
Unlike the position concerning the transfer of the share to Mr Dlakic, there is some positive evidence of the steps that were actually taken in relation to the purported transfer of the share to Mr Vaughan.
Mr Vaughan gave evidence that he filled out the Change to company details (Form 484) and lodged it with ASIC. The evidence justifies a finding, which I make, that the general meeting of members of Davlite that was the purported subject of the unsigned minutes did not take place. Mr Vaughan did not give evidence of Mr Dlakic orally agreeing to his share being transferred to Mr Vaughan. According to Mr Vaughan’s evidence, the only agreement that Mr Dlakic made was that he would not attempt to grant a mortgage over the shares in Davlite again. Mr Vaughan did not give evidence that Mr Dlakic signed a share transfer, or even that he signed the purported minutes of the general meeting of members of Davlite, an unsigned version of which was attached to the Change to company details form.
Although Mr Dlakic gave evidence that he could not remember signing the draft minutes of the general meeting of members of Davlite, he did give the evidence that I have set out above that in response to Mr Vaughan’s insistence he did sign a document that “may have been ASIC papers” that were intended to “take [Mr Dlakic] off as shareholder and secretary of Davlite”.
This evidence gives rise to the question of whether the Court should find that the prima face position that Mr Dlakic’s share in Davlite was effectively transferred to Mr Vaughan has not been displaced because Mr Dlakic gave evidence that he signed a document that was intended to have the effect, even though there is no evidence to establish the content of any document signed by Mr Dlakic; Mr Vaughan has not given such evidence when he had the opportunity to do so; and no explanation has been given as to why the unsigned document that purported to be the minutes of a general meeting of the members of Davlite that did not take place was in fact unsigned.
Although the necessary analysis of the public documents held by ASIC is complicated, I have explained above at pars 339 to 343 that it is only the ASIC historical extract for Davlite prepared on 20 January 2017 that records Mr Vaughan as being the holder of the two shares in Davlite. The circumstances in which ASIC recorded that information are not known. The Change to company details (Form 484) signed by Mr Vaughan on 23 August 2012 stated in Part C4 that it was Mr Dlakic that held the two shares in Davlite (as I have explained above at pars 386 and 387). It was only the misconceived and unexecuted minutes (set out at par 351 above) that in a manner which is not admissible as part of a public document contains an assertion: “That the share held by Amil Dlakic is transferred to Michael John Vaughan”. That statement was not an effective transfer of the share from Mr Dlakic to Mr Vaughan as, putting form aside, it was not executed by Mr Dlakic. Mr Vaughan did not provide any consideration for the transfer, so equity would not specifically enforce any failed attempt to effect the transfer from Mr Dlakic to Mr Vaughan.
Notwithstanding the difficulty in making sense of all of the evidence, I have come to the view that the prima facie effect of the record represented by the ASIC historical extract dated 20 January 2007 is overcome by the positive evidence (as well as the absence of expected evidence), which causes me to conclude that beneficial ownership of the share in Davlite owned by Mr Dlakic was not effectively transferred to Mr Vaughan. The only evidence of what transpired on the occasion when Mr Vaughan claims that the share was transferred to him does not prove that there was a valid transfer. Rather, Mr Vaughan took various steps that were ineffective, and because of the absence of an enforceable promise by Mr Dlakic to transfer the share, supported by consideration, Mr Dlakic remains in equity the owner of the share.

Mr Vaughan's claims against Mr Dlakic

On about 19 October 2016, Mr Vaughan commenced proceedings in the Local Court of New South Wales at Sutherland against Mr Dlakic for a claim of $46,520.65.
The claim was based on a deed of indemnity dated 20 March 2012 in which, according to Mr Vaughan, Mr Dlakic agreed to indemnify Mr Vaughan in respect of costs arising out of a matter concerning a Ms Lungo, a former client of Johnston Vaughan in certain proceedings. It is sufficient to say that the statement of claim alleged that Mr Dlakic had failed to pay an amount of $44,735.95, which Mr Vaughan had then been required to pay. Mr Vaughan sought to be indemnified for that amount by Mr Dlakic.
In due course, an order was made for the Local Court proceedings to be transferred to this Court.
On 19 December 2016, Mr Vaughan filed in this Court a cross claim in the proceedings. In the cross claim, Mr Vaughan repeated his claim to be indemnified for $44,735.59, and he added a claim for $68,000, which he alleged Mr Dlakic had "diverted from collection" by Mr Vaughan between February and June 2015.
The Court was advised by Mr Vaughan's final written submission (pars 121 and 122) that Mr Vaughan no longer pursues either of these claims.

Conclusion

The position that has been reached is that Mr Dlakic has succeeded in his claims that in principle he is entitled to an order setting aside the buyback agreement and that he is entitled to be reinstated as the holder of one of the two shares in Davlite. He has failed in his two negligence actions against Mr Vaughan, so that in due course orders will be made dismissing those aspects of his claim.
It will be necessary for the parties and the Court to address the issue of the orders that are appropriate to be made in respect of those claims for which Mr Dlakic has been successful.
In relation to the setting aside of the buyback agreement, the Court should not simply make an order to that effect and ignore the consequences. The parties will be given an opportunity to confer about the matter, and in the absence of agreement, to make further submissions to the Court as to the orders that are appropriate.
I have discussed on a number of occasions the apparent significance of the inadequate response by Mr Vaughan to the notice to produce that was served upon him by Mr Dlakic. I have taken the view that the absence of adequate documentation concerning the affairs of Johnston Vaughan has had serious consequences to the conduct of these proceedings. Primarily, it has impaired Mr Dlakic’s ability to make considered choices about the relief that he should pursue. It has also impaired the capacity of the Court to make case management orders for the just, quick and cheap completion of these proceedings. As to this last matter, the Court would hesitate simply to make an order that an accounting take place, without the Court having an adequate understanding of the practical consequences and being able to facilitate an appropriate and cost-effective determination of the remaining issues.
I should make it clear that I do not contemplate that the parties will be permitted to lead further evidence where that evidence could have and should have been led at the hearing, to enable them to remedy any deficiencies in the cases that they have presented. On the other hand, I am satisfied that it will not be appropriate for the Court simply to make case management orders and then leave the parties to pursue the attempt on Mr Dlakic’s part, that has failed thus far, to gather the documents that ought to exist concerning the financial affairs of Johnston Vaughan at relevant times. That is an exercise that should take place first, and should be facilitated by the full force of the Court to ensure that all available documents are produced in a timely and complete fashion. Only then will the Court and the parties have some chance to determine how these proceedings should be brought to a proper conclusion.
Mr Dlakic made an application for the Court to make an order at this stage of the proceedings that Mr Vaughan pay the costs of the accounting that will be necessary, on the basis that it was his failure to comply with the notice to produce that has prevented the accounting effectively being undertaken during the hearing that has now been completed. It is premature for the Court to consider the issue of costs. Mr Vaughan is clearly at risk of an adverse costs order on this issue, but the evidence does not yet establish positively the extent to which Mr Vaughan’s response to the notice to produce was inadequate, or what the consequences have been. It is also likely that a separate accounting exercise would have been necessary in any event.
It will also be necessary for Mr Dlakic to address the observations that I have made above concerning practical matters connected with his application for an order that the register of members of Davlite be rectified, in particular the fact that the register has not been produced to the Court so the Court does not know whether an order for rectification is necessary, or what form it should take.
The parties also do not appear to have addressed the consequences of the Court making orders that will have the effect that Mr Dlakic and Mr Vaughan will hold one share in Davlite each. It seems to be inevitable that the consequence will be that there will be a deadlock between the shareholders, and the consequences to the management of the company will depend upon the terms of the Constitution that are not before the Court.
Though the view could be taken that the consequences of such a deadlock are not matters raised by the pleadings in the present case, it might be material to the entitlement of the proprietor of Johnston Vaughan to conduct the practice from the Montgomery Street property, which is a matter that is germane to the dispute.
The issue of the cost of the proceedings races complex questions, and a decision will be necessary as to whether those questions should be addressed now or at the conclusion of the proceedings.
When I deliver these reasons for judgment, I will discuss with the parties the appropriate short-term orders that should be made to enable the parties to consider these reasons, to confer, and to determine what orders should be made now for the future conduct of the proceedings.
It will be necessary for the parties to arrange with my associate an appropriate time for the making of the necessary orders.

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Decision last updated: 28 September 2018

Medium Neutral Citation:	Amil Dlakic by his tutor Liliane Dlakic v Michael John Vaughan [2018] NSWSC 1455
Hearing dates:	12-15 March 2018, 12 June 2018
Decision date:	27 September 2018
Jurisdiction:	Equity
Before:	Robb J
Decision:	1. In principle, the plaintiff has established a right to have the deed described as the “buyback agreement” set aside. 2. In principle, the plaintiff has established a right to be registered as the owner of one share in the company called Davlite Pty Ltd. 3. The plaintiff has failed to establish an entitlement to damages for negligent advice by the defendant in relation to the entry by the plaintiff into loan agreements with Dr and Ms Vince and Mr Aysan Fetin. 4. See paragraphs 471 to 482 for a consideration of the issues involved in completing these proceedings and the making of appropriate case management orders. 5. The parties are to consider the terms of appropriate short minutes of order to give effect to these reasons and to make appropriate case management orders and to list the matter by arrangement with the associate to Robb J for the making of orders. 6. The Court will hear the parties as to whether it is appropriate for costs orders to be made at this stage of the proceedings, and if it is what those costs orders should be.
Catchwords:	CONTRACTS — Buyback agreement — a contract between the parties for the repurchase of a legal practice by the previous vendor CONTRACTS — Undue influence — whether an agreement should be set aside on the basis of undue influence CONTRACTS — Unconscionable conduct — Special disadvantage — whether an agreement should be set aside on the basis of the defendant taking advantage of a special disadvantage of the plaintiff — the defendant found to have taken advantage of a special disadvantage suffered by the plaintiff — the plaintiff is entitled to an order setting aside the agreement RESTITUTION — Ineffective transactions — Contracts rescinded or set aside — Restitutio in integrum — whether setting aside the agreement will achieve what is practically just between the parties to restore them to the position they were in before the agreement TORTS — Negligence — Professional Negligence — Solicitor and Client — No formal retainer — the plaintiff solicitor alleged that the defendant solicitor failed to advise the plaintiff about personal mortgages in various loan agreements — the plaintiff has not established negligence claims against the defendant PROFESSIONS AND TRADES — lawyers — duties and liabilities — solicitors are not ordinarily required to advise on the financial or business value of a transaction — a solicitor’s duty to advise may in some circumstances extend to the financial or business value of a transaction CORPORATIONS — Membership — Transfer of shares — Disposal or transfer without consent — whether a share transfer should be declared void and of no effect CORPORATIONS — Membership — Register — Rectification of register CORPORATIONS — Shares — Rectification of share register — whether the plaintiff is entitled to be registered as a shareholder in the company — whether the register of members of the company should be rectified — the plaintiff is entitled to be reinstated as the holder of one of the two shares in the company EVIDENCE — Documentary Evidence — Public Documents — ASIC Documents — Evidentiary effect of ASIC extracts and documents lodged with ASIC — ASIC extract as prima facie evidence of the matters stated in it
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Watson v Foxman (1995) 49 NSWLR 315 John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 Lauvan Pty Limited & Anor v Bega & Ors [2018] NSWSC 154 Provident Capital v Papa [2013] NSWCA 36 Carey v Freehills [2013] FCA 954, (2013) 303 ALR 445 Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 Whereat v Duff [1972] 2 NSWLR 147 Whereat v Duff (1973) 1 ALR 363; 47 ALJR 540 Goldsworthy v Brickell [1987] Ch 378; [1987] 1 All ER 853 Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 Bank of Credit and Commerce International SA v Aboody [1992] 4 All ER 955 Johnson v Buttress (1936) 56 CLR 113; [1936] HCA 41 Jenyns v Public Curator (1953) 90 CLR 113; [1953] HCA 2 Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 Thorne v Kennedy [2017] HCA 49; (2017) 350 ALR 1 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 Alati v Kruger (1955) 94 CLR 216 Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209 Erlanger v New Sombrero Phosphate Company (1878) 3 App Cas 1218 Re Centura Global Holdings Pty Ltd [2016] NSWSC 62; (2016) 111 ACSR 185Re ABI Australia Holding Pty Ltd [2017] NSWSC 1822Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647Residues Treatment and Trading Co Ltd v Southern Resources Ltd (1989) 52 SASR 54 Gosford Christian School Ltd v Totonjian [2006] NSWSC 725 Forrest v Cosmetic Co Pty Ltd [2008] SASC 152; (2008) 67 ACSR 1 Robertson v Deputy Commissioner of Taxation [2010] NSWCA 58
Category:	Principal judgment
Parties:	Amil Dlakic (Plaintiff/Cross-Defendant) Michael Vaughan (Defendant/Cross-Claimant)
Representation:	Counsel: A Avery-Williams (Plaintiff/Cross-Defendant) A Kuklik (Defendant/Cross-Claimant) Solicitors: Mills Oakley (Plaintiff/Cross-Defendant) Johnston Vaughan Solicitors (Defendant/Cross-Claimant)
File Number(s):	2016/368205; 2016/321090