Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd
[2008] VSC 168
•22 May 2008
Fin
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
F6085
No. 9563 of 2006
| BLOOMINGDALE HOLDINGS PTY LTD and ANTONIO GANGEMI | Plaintiffs |
| and | |
| 63 BUCKLEY STREET PTY LTD and ORS | Defendants |
| AND RICHARD OSBORNE | F6086 Plaintiff |
| and | |
| ANTONIO GANGEMI | Defendant |
| and |
| PASQUALE LANCIANA | Third Party |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16, 21-24, 29-31 January, 4-7, 11-12, 18, 20-21 February 2008 (final written submissions received 6 March 2008) | |
DATE OF JUDGMENT: | 22 May 2008 | |
CASE MAY BE CITED AS: | Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 168 | |
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CONTRACT – Joint venture for property development – Dispute amongst joint venturers – Settlement agreement – Whether procured by duress – Duress not established – Affirmation of settlement agreement in any event.
CONTRACT – Contract not executed by all named parties - Whether concluded agreement reached – Part performance – Subsequent conduct – Enforceable agreement established.
CONTRACT – Abandonment – No abandonment found.
CORPORATIONS LAW – Non-compliance with company constitution – Procedural irregularities – Whether irregular share transfer, resignation of director and appointment of director should be declared not invalid – Declarations made – Corporations Act 2001 (Cth), s 1322(4)(a).
TRADE PRACTICES – Misrepresentation as to a future matter - Whether misleading – Whether failure of another person, knowing of the misrepresentation, to correct it constituted false or misleading conduct – False or misleading conduct established – Fair Trading Act 1999 (Vic), ss 4(1), 9(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs (and also for the Defendant in 6749 of 2005) | Mr R Kendall QC with Mr S Palmer | Isakow Lawyers |
| For the First and Second Defendants (until 29 January 2008) | Mr S Wartski | Klonis Kirby & Co |
| The Second Defendant appeared in person from 30 January 2008 | ||
| For the Third Defendant | Mr A Panna SC with Mr J Mattin | NA Young & Co |
| For the Fourth Defendant (Plaintiff in 6749 of 2005) | Mr P Solomon | Christopher Bunnett |
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TABLE OF CONTENTS
PARTIES AND INTRODUCTION................................................................................... 1
SUMMARY OF ISSUES...................................................................................................... 3
DEMEANOUR AND GENERAL CREDIBILITY OF THE PARTIES........................ 7
FACTS................................................................................................................................... 14
Prior dealings between Mr Lanciana and Mr Gangemi.............................................. 14
The constant need for funds............................................................................................ 19
On what basis did Mr Osborne invest?......................................................................... 20
The first Osborne cheque: $86,040..................................................................................... 22
Charge over Mitchell Street................................................................................................. 29
The second Osborne cheque: $112,960............................................................................... 31
The Thrifty Note.................................................................................................................. 32On what basis did Mr Jafari invest?............................................................................... 43
The First Jafari cheque: $120,000....................................................................................... 45
Mr Jafari’s second payment: $50,000 cash......................................................................... 49
Mr Jafari’s second cheque: $200,000.................................................................................. 52
Repayment of $30,000 to Mr Jafari..................................................................................... 53Purchase of 59 Buckley Street by Mr Jafari................................................................... 58
What were the respective interests of the parties prior to the Heads of
Agreement?........................................................................................................................ 61In what circumstances did Mr Gangemi sign the Heads of Agreement?................. 64
Background.......................................................................................................................... 64
Engagement of Mr Gatto..................................................................................................... 69
The first meeting.................................................................................................................. 73
The second meeting.............................................................................................................. 75
Circumstances in which the third meeting was arranged................................................... 77
The third meeting................................................................................................................. 86Did Mr Gangemi perform his obligations under the Heads of Agreement?
If so, were those acts voluntary?..................................................................................... 90Conduct of Mr Gangemi and Mr Lanciana subsequent to the Heads of
Agreement.......................................................................................................................... 97Transfer by Mr Lanciana of ownership and control of 63 Buckley to
Mr Jafari 115
ARE THE HEADS OF AGREEMENT BINDING?.................................................... 122
Was there a concluded agreement?.............................................................................. 122
Was Mr Gangemi’s signature on the Heads of Agreement, or the
documents signed by him pursuant thereto, procured by duress?......................... 135If the Heads of Agreement were procured by duress, did Mr Gangemi
nevertheless affirm the Heads of Agreement by his conduct?................................. 140Is Mr Gangemi estopped from denying that the Heads of Agreement
are enforceable?............................................................................................................... 143Is Mr Lanciana estopped from relying upon the Heads of Agreement?................ 144
Were the Heads of Agreement terminated or abandoned?...................................... 146
WAS THE TRANSFER BY MR LANCIANA TO MR JAFARI OF OWNERSHIP AND CONTROL OF 63 BUCKLEY VALID?...................................................................................... 148
Mr Gangemi’s resignation as a director....................................................................... 148
Transfer by Mr Gangemi of his share in 63 Buckley to Mr Lanciana...................... 149
Appointment of Mr Lanciana as a director of 63 Buckley........................................ 151
Were Mr Lanciana’s acts as a director of 63 Buckley valid?..................................... 152
MR JAFARI’S DAMAGES CLAIMS............................................................................ 152
IS MR OSBORNE ENTITLED TO SUCCEED IN HIS DEBT CLAIM AGAINST
MR GANGEMI? IF SO, IS MR GANGEMI ENTITLED TO CONTRIBUTION
FROM MR LANCIANA?................................................................................................ 155
SUMMARY OF CONCLUSIONS AND RELIEF....................................................... 157
HIS HONOUR:
I. PARTIES AND INTRODUCTION
The principal matter to be resolved in the proceedings before the Court concerns a fight for the ownership and control of the lands known as 61 Buckley Street, Footscray and 63-67 Buckley Street, Footscray (“the Buckley Street properties”).
There are two proceedings before the Court. In the principal proceeding, the plaintiffs are Antonio Gangemi and his company Bloomingdale Holdings Pty Ltd. Mr Gangemi is a builder and a property developer. He utilised Bloomingdale as the vehicle for his relevant investments and ventures. Unless it is necessary to specify that Mr Gangemi’s conduct was through Bloomingdale, I will refer only to the conduct of Mr Gangemi.
The third defendant Pasquale (Percy) Lanciana is a property developer and businessman. He has known Mr Gangemi since he was at school with Mr Gangemi’s brother. They were once close friends, with Mr Lanciana acting as best man at Mr Gangemi’s wedding in early 2001. They are now enemies.
Mr Gangemi alleges that in early 1997 he and Mr Lanciana agreed to go into business together as joint developers of properties, sharing all of the profits and losses. Mr Gangemi alleges that, in furtherance of this joint endeavour, he was given a 50 per cent shareholding in two of the corporate vehicles utilised for these ventures, Pre Need Services Pty Ltd and Clapana Pty Ltd. Mr Gangemi was also appointed as the sole director of these companies.
Mr Lanciana accepts that he engaged in some joint developments with Mr Gangemi. However, Mr Lanciana contends that other developments which Mr Gangemi alleges were joint developments between them were in fact undertaken by him on his own account, and that the only involvement of Mr Gangemi in those developments was as a builder. Mr Lanciana denies that Mr Gangemi ever held any shares in Pre Need or Clapana. Mr Lanciana contends that, at all relevant times, he owned or controlled all of the issued shares in Pre Need and Clapana, and that the only reason Mr Gangemi was appointed as a director of Pre Need and Clapana was because he (Mr Lanciana) was prohibited from being a director by reason of criminal convictions.
The first defendant 63 Buckley Street Pty Ltd (“63 Buckley”) is the owner of the Buckley Street properties. 63 Buckley was incorporated at the request of Mr Gangemi and Mr Lanciana as the vehicle for an investment by them in the Buckley Street properties and the project to develop them (“the Buckley Street project”). Upon its incorporation, Mr Gangemi became the sole shareholder in, and the sole director and secretary of, 63 Buckley. Mr Gangemi contends that this position remains to this day. The central dispute in the proceeding is whether this is so. Mr Lanciana contends that Mr Gangemi transferred ownership and control of 63 Buckley to him in September 2003 and that subsequently, in 2005, he transferred ownership and control of 63 Buckley to the second defendant Kourosh Jafari.
The second defendant Kourosh Jafari is also a property developer. Prior to the disputes giving rise to the principal proceeding, he was a friend of Mr Gangemi. Mr Jafari invested either $300,000 or $350,000[1] for a 25% interest in the Buckley Street project. Following his dealings with Mr Lanciana in 2005, he contends that he is entitled to sole ownership and control of 63 Buckley and, accordingly, is entitled to develop the Buckley Street properties for his sole benefit.
[1]There is a dispute about which amount.
The fourth defendant Richard Osborne was a very close friend of Mr Gangemi. Mr Osborne acted as the master of ceremonies at Mr Gangemi’s wedding in early 2001. Mr Osborne alleges that he agreed with Mr Gangemi to invest $200,000 for a 12.5% interest in the Buckley Street project, upon certain conditions. In broad summary, Mr Osborne contends that he invested $200,000 in the Buckley Street project on condition that this amount, together with interest of $50,000, would be repaid to him by Mr Gangemi if the necessary planning permit to develop the Buckley Street properties was not obtained within 18 months of him investing. Mr Osborne alleges that no permit was obtained within this time and that Mr Gangemi is accordingly indebted to him in the sum of $250,000 plus interest. Mr Osborne’s claims are made in a separate proceeding which was tried together with the principal proceeding. Mr Gangemi denies Mr Osborne’s allegations and contends that the $200,000 invested by him was paid unconditionally to purchase a 12.5% interest in the Buckley Street project.
As I have said, the central issue to be determined is the identification of the person or persons entitled to ownership and control of 63 Buckley. Mr Gangemi contends that the Buckley Street properties are held by 63 Buckley upon a trust for him (Bloomingdale), Lanciana, Jafari and Osborne. Mr Jafari, with the support of Mr Lanciana, contends that he is the sole beneficial owner of 63 Buckley and the Buckley Street properties. Mr Lanciana makes no claim to any interest in 63 Buckley or the Buckley Street properties. Mr Osborne’s principal claim is his debt claim against Mr Gangemi. As an alternative, Mr Osborne seeks a declaration that he is entitled to a 12.5% interest in the Buckley Street properties as beneficiary of any trust found by the Court.
II. SUMMARY OF ISSUES
Following discussions between Mr Lanciana and Mr Gangemi, the land situate at 63‑67 Buckley Street was purchased by Mr Gangemi “or nominee” in mid 2001 with settlement due in July 2002. The land situate at 61 Buckley Street was purchased by Mr Gangemi “or nominee” in April 2002, with settlement due in September 2002. Prior to settlement, 63 Buckley was nominated as the purchaser of each of the Buckley Street properties. The deposits for the purchase of these properties were paid from Pre Need funds.
In the first half 2002, Mr Osborne advanced the sum of $200,000, and Mr Jafari advanced the sum of either $300,000 or $350,000, to Mr Gangemi, Mr Lanciana or persons or entities associated with them or one of them. It was agreed at some stage that the funds advanced by Mr Osborne and Mr Jafari would be applied by Mr Gangemi and Mr Lanciana towards the Buckley Street project. In return, Mr Jafari would obtain a 25% interest in the Buckley Street project and Mr Osborne would obtain a 12.5% interest. There is a dispute as to whether Mr Osborne’s investment was subject to conditions.
The Buckley Street properties remain undeveloped.
As I have said, upon its incorporation Mr Gangemi was the sole director and secretary of, and shareholder in, 63 Buckley. Mr Gangemi contends that this position has never altered. He disputes the validity of all changes to the shareholding in, and officeholders of, 63 Buckley which have been notified to the Australian Securities and Investments Commission (“ASIC”). The end result of these changes is that Mr Jafari is recorded in ASIC’s records as the sole director and secretary of, and shareholder in, 63 Buckley.
Mr Gangemi’s principal contention is that the parties agreed that their respective interests in the Buckley Street project would be held through unit holdings in the “Buckley Street Unit Trust”, which he alleges was created by a trust deed dated 1 February 2003. Mr Gangemi contends that this position remains and seeks declarations to give effect to his contentions. Consequent upon those declarations, Mr Gangemi seeks orders that the Buckley Street Unit Trust be wound up, for the sale of the Buckley Street properties and for the distribution of any net proceeds of sale to the unit holders in proportion to their unit holdings. Alternatively, Mr Gangemi seeks a declaration that 63 Buckley holds the Buckley Street properties on a constructive trust for him (Bloomingdale), Lanciana, Jafari and Osborne; and seeks consequential orders winding up that constructive trust.
Following notices served on Bloomingdale under s 89A(3) of the Transfer of Land Act 1958 (Vic), Mr Gangemi and Bloomingdale commenced their proceeding in order to substantiate caveats lodged on behalf of Bloomingdale prohibiting dealings by 63 Buckley in the Buckley Street properties. These caveats have had the effect of delaying Mr Jafari in his endeavours to develop the Buckley Street properties. In the meantime, Mr Jafari has been funding the obligations of 63 Buckley to the mortgagee of the Buckley Street properties.
Mr Lanciana denies Mr Gangemi’s claims. He contends that, although it was intended that the Buckley Street Unit Trust would come into existence, the trust deed was never executed. Further, he contends that Mr Gangemi did not contribute any money to the acquisition of the Buckley Street properties. Although he denies that the Buckley Street Unit Trust ever existed, Mr Lanciana’s final position, in evidence although not in his pleadings, is that the parties were interested in the Buckley Street project in the proportions of their intended unit holdings. However, Mr Lanciana contends that this position changed when Mr Jafari and Mr Osborne indicated that they wanted their investments to be repaid, and Mr Gangemi agreed to transfer all of his (Bloomingdale’s) interest in the Buckley Street project to Mr Lanciana.
Mr Lanciana’s principal contention is that, following a settlement conference in September 2003 between him and Mr Gangemi, Mr Gangemi executed a document titled “Heads of Agreement” in which Mr Gangemi agreed (amongst other things) to resign as a director and secretary of 63 Buckley, to transfer his shares in 63 Buckley to Mr Lanciana, to transfer any units held by him in the Buckley Street Unit Trust (if in existence) to Mr Lanciana and to withdraw his caveats over the Buckley Street properties. Mr Lanciana alleges that, pursuant to the Heads of Agreement, Mr Gangemi signed documents resigning as a director and secretary of 63 Buckley, transferring his shares in 63 Buckley to him and withdrawing his caveat over the property at 63-67 Buckley Street.[2] Mr Lanciana alleges that he then became the sole shareholder in, and director and secretary of, 63 Buckley and caused further shares in 63 Buckley to be issued to him. Thereafter, in the belief that these transactions were efficacious, he agreed with Mr Jafari to transfer his shares in 63 Buckley to Mr Jafari, to resign as a director and secretary of 63 Buckley and appoint Mr Jafari in his place.
[2]At this time, Mr Gangemi had not lodged a caveat over 61 Buckley Street.
Mr Gangemi admits that he signed the Heads of Agreement, a handwritten resignation of his position as director and secretary of 63 Buckley and an incomplete share transfer form. He denies that he signed the withdrawal of Bloomingdale’s caveat over 63-67 Buckley Street and alleges that the withdrawal of caveat lodged by Mr Lanciana is a forgery. Mr Gangemi alleges that his signature to all of these documents, including the withdrawal of caveat if in fact he did sign it, was procured by duress. Further and alternatively, Mr Gangemi contends that the Heads of Agreement are void and unenforceable because they have not been signed by all intended parties and are incomplete in essential respects.
Mr Gangemi also alleges that if the Heads of Agreement were ever binding they ceased to have effect before Mr Lanciana purported to transfer ownership and control of 63 Buckley to Mr Jafari. In this respect, Mr Gangemi contends that Mr Lanciana is either estopped from relying upon the Heads of Agreement or any transactions pursuant to them, or that the Heads of Agreement were terminated or abandoned by the parties.
On these grounds, Mr Gangemi pleads that the transactions whereby Mr Lanciana transferred ownership and control of 63 Buckley to Mr Jafari are invalid and of no effect, and that Mr Jafari is wrongly claiming to be in control of 63 Buckley, wrongly denying the existence of the Buckley Street Unit Trust and has wrongly dealt with the Buckley Street properties by further encumbering them with the payment of Mr Jafari’s personal debts.
Mr Lanciana disputes the claims of duress, forgery, estoppel, termination and abandonment. As to the duress claims, he contends that if (which is denied) Mr Gangemi’s signature was obtained by duress he has, with full knowledge of the duress and with the benefit of legal advice, elected to affirm the Heads of Agreement and the transactions by him pursuant to them in resigning as a director and secretary of 63 Buckley, transferring his shares in 63 Buckley to Mr Lanciana and withdrawing Bloomingdale’s caveat over 63-67 Buckley Street; and by other conduct subsequent to this in which Mr Gangemi and his lawyers have acknowledged the efficacy of, and relied upon, the Heads of Agreement.
Mr Jafari denies Mr Gangemi’s allegations and relies upon his dealings with Mr Lanciana as giving him full ownership and control of 63 Buckley, in the absence of any trust obligation. Alternatively, Mr Jafari contends that Mr Gangemi is estopped from denying that he is entitled to full ownership and control of 63 Buckley. In this regard, Mr Jafari alleges that Mr Gangemi told him in or about September 2003 that he was “out of the [Buckley Street] project” and that Mr Jafari was free to deal with Mr Lanciana. In this context, Mr Jafari alleges that he told Mr Gangemi that he intended to acquire full ownership and control of 63 Buckley from Mr Lanciana and that Mr Gangemi raised no objection to the proposed purchase by Mr Jafari.
Further, Mr Jafari claims damages from Mr Gangemi on a number of grounds, including alleged false and misleading conduct inducing him to invest in the Buckley Street project, damages resulting from the actions of Mr Gangemi in causing Bloomingdale to lodge caveats over the Buckley Street properties and damages for breach by Mr Gangemi of his duties as a director of 63 Buckley.
As I have said, Mr Osborne is both a defendant in the principal proceeding and a plaintiff against Mr Gangemi in his own proceeding seeking to recover of a debt of $250,000 and interest. In the event that Mr Osborne is successful in his debt claim, Mr Gangemi claims contribution or indemnity from Mr Lanciana in respect of any judgment sum. It is only if Mr Osborne fails in his debt claim that he makes an alternative claim for a declaration that the has a 12.5% interest in the Buckley Street properties.
III. DEMEANOUR AND GENERAL CREDIBILITY OF THE PARTIES
The evidence is in many respects confused and incomplete. This is to be expected. There are four parties, each with a different story to tell. The critical events occurred between four and ten years ago. The parties were in frequent oral contact on many issues, both business and personal. At many relevant times, the parties dealt with each other as close friends. The parties did not adhere to formalities such as holding company meetings and passing resolutions. There are virtually no contemporaneous file notes. In these circumstances, it is unlikely that the parties would have a clear and specific recollection of particular conversations.
The solicitors for the parties were involved at relevant times in respect of significant issues. None of the solicitors gave evidence. Nor were any file notes made by solicitors as to relevant events available or placed in evidence. Evidence from the solicitors would have been of great assistance in resolving a number of the factual disputes which arise on the evidence.
As a result of these matters, it is necessary to treat the evidence of oral recollection with caution, and, wherever possible, to determine factual disputes by reference to the probabilities arising from the whole of the evidence, in particular from contemporaneous documents and non‑contentious established facts. However, there are some issues where the demeanour and general credibility of the parties assumes a greater significance.
Mr Gangemi gave evidence over many hours. At times, he endeavoured to portray himself as an unsophisticated businessman who did not pay any attention to details. At other times, he sought to rely upon his business acumen and experience. Although his recollection of critical conversations was poor, he was nevertheless prepared to forcefully deny the evidence of others which was unhelpful to his case. He was consistently evasive on important matters and often dissembled. For example, he said that he was confused or did not understand unambiguous questions on issues which I am satisfied he well understood. He gave many inconsistent responses to the same or similar questions, often within seconds or minutes of the issue first being raised with him in cross-examination. He hid in generalities, conclusions and non‑committal responses. I am satisfied that he gave false evidence on a number of important issues. The reasons for this will become apparent when the facts are considered below.
In contrast, Mr Lanciana was generally an impressive witness. He gave direct answers. He made numerous concessions against his interest. His evidence was consistent in nearly every respect. He presented as a hard-nosed businessman who was aggressively entrepreneurial. On the other hand, he was careless when it came to recording financial transactions and corporate dealings.
It was submitted on behalf of Mr Gangemi that Mr Lanciana was nevertheless a witness who lacked any credibility because he “is a thoroughly disreputable and dishonest person”. In this regard, reliance was placed upon a number of matters, most of which were candidly admitted by Mr Lanciana and some of which were the subject of his own evidence-in-chief.
I accept that there are a number of collateral matters involving misleading, unethical or dishonest conduct by Mr Lanciana.
Mr Lanciana’s has a history of criminal convictions, including a conviction for theft of a person’s wallet in order to use his identity to set up a false electricity account for the purposes of stealing electricity in order to grow marijuana.
The evidence establishes that, on a number of occasions, Mr Lanciana has engaged in misleading conduct in order to minimize or avoid taxation or stamp duty on relevant transactions.
Mr Lanciana acted as a de facto director of a number of companies, in particular Pre Need, at times when he was, by reason of his criminal convictions, disqualified by s 206B(2) of the Corporations Act 2001 (Cth) from managing corporations. In this respect, he was assisted by Mr Gangemi, who knowingly acted as a “puppet” director of companies under the effective control and management of Mr Lanciana, when he knew that Mr Lanciana was disqualified from managing those companies by reason of his criminal convictions. This conduct reflects poorly on Mr Gangemi, as well as Mr Lanciana.
Mr Lanciana admitted forging Mr Gangemi’s signature on a number of credit applications relating to the supply of materials or services to Pre Need or Clapana. Mr Lanciana gave evidence that he signed Mr Gangemi’s signature with Mr Gangemi’s consent, because Mr Gangemi was unavailable to sign the necessary credit applications. Taking the evidence as a whole, I think that it is extremely unlikely that Mr Gangemi gave his consent to Mr Lanciana signing his name to the credit applications. I find that he did not do so. The evidence establishes that, although he was the sole director at relevant times, Mr Gangemi left control of all of the financial dealings of Pre Need and Clapana to Mr Lanciana, and did not seek to involve himself in their financial affairs until he became concerned about their tax liabilities and the use by Mr Lanciana of company funds for personal purposes, in about April 2003. I find that Mr Lanciana did forge Mr Gangemi’s signature when suppliers requested director’s guarantees. Whilst there is no evidence that any of these guarantees were ever called upon, these are serious matters which reflect poorly on Mr Lanciana as a person and a witness.
The Court will refer these matters to the Attorney‑General to take any necessary action or make any necessary referrals to the appropriate statutory authorities.
In my view, the credibility of Mr Gangemi and Mr Lanciana should, wherever possible, be determined on an issue by issue basis having regard to the probabilities affecting that issue. Where an issue cannot be determined on the probabilities, I will consider the demeanour and the credibility of Mr Gangemi and Mr Lanciana respectively on that issue. If there is no reason to prefer the evidence of one against the other on this ground, I will determine the issue by reference to the general demeanour and credibility of Mr Gangemi and Mr Lanciana. In doing so, I will prefer the evidence of Mr Lanciana to that of Mr Gangemi. Although there are a number of established collateral matters indicating that Mr Lanciana is prepared to engage in dishonest or misleading conduct, his evidence as a whole accords more with the probabilities. With minor exceptions, it was consistent throughout. As I have said, the same cannot be said of Mr Gangemi. He gave evasive evidence, dissembled when it suited him and gave inconsistent evidence on important matters. I am satisfied that he told deliberate untruths in respect of a number of matters, in particular concerning signatures which he has falsely denied are his and in connection with the settlement of his disputes with Mr Lanciana by the document titled “Heads of Agreement” dated 9 September 2003. These matters are considered in detail below.
Further, I find that Mr Gangemi gave false evidence in making allegations of forgery against Mr Lanciana. In my view, Mr Gangemi deliberately seized upon admissions made by Mr Lanciana, that he forged Mr Gangemi’s signatures on some credit applications, as a springboard for making a number of allegations of forgery against Mr Lanciana in connection with other documents which do not suit Mr Gangemi’s case.
In considering any contention by Mr Gangemi that a document purportedly bearing his signature was not in fact signed by him, but contains a forgery of his signature, it is necessary to take account of the following matters.
First, there are many examples of Mr Gangemi’s genuine signature in evidence – both in photocopy and original form. Further, there are many examples of Mr Gangemi’s genuine signature on affidavits sworn by him and filed in the proceeding. I informed the parties that I would examine Mr Gangemi’s signature on these affidavits and would take them into account in deciding any issue as to whether a purported signature of Mr Gangemi is in fact his genuine signature or is a forgery. The parties consented to this course.
Further, I asked Mr Gangemi to put forward a selection of original documents containing his genuine signature, signatures purporting to be his but where he was uncertain as to whether they were in fact his genuine signature and signatures that he contends are forgeries. As a result, an original documents folder containing 27 documents bearing signatures in these categories was prepared and marked as an exhibit.[3] I have examined all of the signatures in evidence, both original and photocopy, in an endeavour to ascertain whether Mr Gangemi’s genuine signature is consistent and therefore able to be recognised by a non-expert such as myself. Having done so, I have reached the firm conclusion that Mr Gangemi’s genuine signatures contain many variants and inconsistencies. There are full versions, short versions and versions in between. There is much inconsistency within each of these versions. There are even material differences between Mr Gangemi’s signatures when affixed at the same time and on the same page of documents.
[3]In fact, some of these documents were separately marked as exhibits and are not included in the folder, but are referred to in the index to it.
Second, there are a number of documents in evidence which Mr Lanciana admits contain his forgery of Mr Gangemi’s signature. I have examined these and compared them to the documents in the original documents folder and to copy documents in evidence where no dispute arises as to the authenticity of Mr Gangemi’s signature. To my eye, there is a very material difference between the admitted forgeries and the alleged forgeries. The admitted forgeries are obviously amateurish and bear no resemblance to any version of Mr Gangemi’s signature. The alleged forgeries have many similarities to Mr Gangemi’s genuine signature.
Third, I raised in the course of openings in the case whether any expert handwriting evidence would be called to assist the Court to determine allegations by Mr Gangemi that his signature had been forged on particular documents. I was told by counsel for Mr Gangemi that no expert evidence would be called. The matter rested there until Mr Gangemi was cross-examined. In cross-examination, counsel for Mr Lanciana asked Mr Gangemi if he knew Mr Neil Holland, a handwriting expert. Mr Gangemi said that he knew of Mr Holland and that he was a handwriting expert. Counsel for Mr Lanciana asked Mr Gangemi if any documents relevant to this case had been given to Mr Holland for his examination. Mr Gangemi replied that they had been.
Following this evidence, an application to re-open Mr Gangemi’s case to call expert handwriting evidence was foreshadowed, but ultimately not proceeded with. In the first instance, Mr Gangemi’s counsel sought leave to show original exhibits containing Mr Gangemi’s signature or purported signature to a handwriting expert for the purpose of further examination, with a view to expert evidence being prepared and an application made to call that evidence. Orders were made permitting the original exhibits to be shown to the handwriting expert. Further, other documents were shown to the handwriting expert. However, following this further examination, no application was made to call any expert evidence.
In these circumstances, I infer that the expert document examiner engaged on behalf of Mr Gangemi could not give evidence which would have assisted him to establish his allegations of forgery. In this regard, I note that it was at one stage proposed to make application to re-open Mr Gangemi’s case to call his solicitor to explain why the handwriting expert was not called to give evidence. However, no such application was made.
Mr Osborne presented as an honest witness. With a few exceptions, he gave direct answers to all questions put to him and willingly made concessions against his interest. His evidence was consistent throughout. There are some aspects of Mr Osborne’s evidence which are mistaken. However, in general, I prefer his evidence to that of Mr Gangemi where there is direct conflict. The reasons for this will become apparent.
Mr Jafari gave evidence in difficult circumstances. By the time he entered the witness box, his legal representatives had withdrawn due to lack of funding. Further, his difficulties were increased because English is obviously not his first language. As a result, Mr Jafari gave a number of confused or non‑responsive answers to questions. I am satisfied that this was not due to any deliberate evasion, but was caused by a lack of understanding of the questions. This was particularly so when cross-examined by junior counsel for Mr Gangemi who spoke in a rapid fashion with varying degrees of audibility. At times, this caused me difficulties in comprehending the question asked.
Once Mr Jafari understood the question, he gave consistent evidence. He impressed me as a witness who was doing his best to recall relevant events.
It must be said that there were a number of occasions where Mr Jafari made emotional speeches and sought to argue his case, often venting his frustration at what he perceived as the failure of his counsel (when still acting for him) to bring out in cross‑examining Mr Gangemi, matters he believes were important. In my view, these occasional lapses by Mr Jafari do not affect his credibility as a witness. He was an unrepresented witness giving evidence in a language foreign to him in circumstances where he had some dissatisfaction with his previous representation and was intimidated by the fact that the two parties with opposite interests to him, Mr Gangemi and to a lesser extent Mr Lanciana, were both represented by senior and junior counsel. In my view, Mr Jafari’s dissatisfaction with his legal representatives, as expressed, was without any real substance. However, I am satisfied that his dissatisfaction was subjectively genuine.
As appears below, I have in general preferred the evidence of Mr Jafari to that of Mr Gangemi where there is direct conflict. Mr Jafari’s evidence was specific and generally consistent. Mr Gangemi’s evidence was often inconsistent and unspecific, often amounting to no more than conclusions or denials. I am not prepared to find that Mr Jafari lied to me on any matter, let alone on a consistent basis as contended for by Mr Gangemi. Of course, I accept that Mr Jafari is or may have been mistaken as to some matters. However, on critical matters, I accept his evidence.
IV. FACTS
As will become apparent, there are a substantial number of important factual issues in dispute. As I have said, the evidence is in many respects confused and incomplete, and at times points to polar outcomes. In resolving the factual disputes, there are some incongruities in the evidence that I will identify. It is not possible to make all of the facts fit together with complete consistency. Where this is so, I have made findings on the evidence when considered as a whole.
(1) Prior dealings between Mr Lanciana and Mr Gangemi
As I have said, Mr Gangemi alleges that in early 1997 he and Mr Lanciana agreed to go into business together as joint developers of properties, sharing all of the profits and losses. Mr Gangemi alleges that, in furtherance of this joint endeavour, he was given a 50 per cent shareholding in two of the corporate vehicles utilised for these ventures, Pre Need Services Pty Ltd and Clapana Pty Ltd. Mr Gangemi was also appointed as the sole director of these companies. Mr Lanciana accepts that he engaged in some joint developments with Mr Gangemi. However, Mr Lanciana contends that other developments which Mr Gangemi alleges were joint developments between them were in fact undertaken by him on his own account, and that the only involvement of Mr Gangemi in those developments was as a builder.
Mr Lanciana denies that Mr Gangemi ever held any shares in Pre Need or Clapana. Mr Lanciana contends that, at all relevant times, he owned or controlled all of the issued shares in Pre Need and Clapana, and that the only reason Mr Gangemi was appointed as a director of Pre Need and Clapana was because he (Mr Lanciana) was prohibited from being a director by reason of criminal convictions.
Prior to the acquisition of the Hoddle Street properties, there were a number of other properties acquired by Pre Need, Clapana or other companies controlled by Mr Lanciana for the purposes of development or investment. These included properties at Kororoit Creek Road, Williamstown (a townhouse development); a property in Walter Street, Williamstown (which was sold for a capital gain); a property in Anchor Place, Prahran (which was the subject of an apartment development by Clapana); a property in Mitchell Street, Maidstone (a factory site which is rented on a negatively geared basis); a property in Stevedore Street, Williamstown (an investment property comprising vacant land); a property in Bute Street, Footscray (upon which a townhouse development was completed) and a property in Hoddle Street, Richmond (which was developed as residential apartments).
Insofar as these properties involved building works, those works were performed under the supervision of Mr Gangemi.
Mr Lanciana contends that Mr Gangemi’s only involvement in the Kororoit Creek Road project and the Anchor Place project was as a builder, and that he was paid $1,000 per week for this. Mr Lanciana contends that Mr Gangemi had no interest whatsoever in the Walter Street property. Mr Gangemi denies this and says he was an equal partner with Mr Lanciana in the Kororoit Creek Road, Walter Street and Anchor Place properties. Mr Gangemi alleges that this flowed from his equal shareholding in Pre Need and Clapana.
Mr Lanciana acknowledges that the Mitchell Street property, the Stevedore Street property, the Bute Street properties and the Hoddle Street property were all acquired as joint undertakings by him and Mr Gangemi, with each of them being equally entitled to share in the profits and equally obliged to share in the losses. Their interests were held, or were intended to be held, through unit holdings in separate unit trusts established or intended to be established for each of those properties.
The Bute Street properties were developed in conjunction with Mr Brendan Blott, the solicitor acting for Mr Lanciana and Mr Gangemi at that time. Mr Blott has been paid some money towards his share of the profit on that development. However, no other profit entitlements have been distributed, and the final accounts for the Bute Street properties have not been finalised. The undistributed profits are held by Pre Need.
At all relevant times until Mr Lanciana and Mr Gangemi fell out and commenced their dispute in or about April 2003, Mr Brendan Blott of the legal firm Wilckens and Roche represented Mr Lanciana, Mr Gangemi, Pre Need, Clapana and related interests. After Mr Gangemi and Mr Lanciana fell out, Peter Johnson, who operated from the same offices as Wilckens and Roche and in association with that firm, acted for Mr Lanciana. Mr Gangemi then engaged Alderuccios, solicitors, to act on his behalf.
Mr Lanciana and Mr Gangemi conducted their relations on a very informal basis. Mr Gangemi attended to all building and development matters, including applications for permits and the like. Mr Lanciana attended to all administrative, accounting and financial matters. The central company in the business arrangements between Mr Lanciana and Mr Gangemi was Pre Need. Mr Lanciana “pooled” all of the income from the various projects, including those which he acknowledges were joint projects with Mr Gangemi, in Pre Need.
Putting to one side the assertion by Mr Gangemi that he was entitled to share equally with Mr Lanciana in the profits (and losses) of all of the projects, it is apparent that Mr Gangemi made no demand for a formal accounting or distribution of profits in respect of projects as they were completed. Whether or not Mr Gangemi was interested in all of the developments, or only those of them which are acknowledged by Mr Lanciana as being joint developments, it is clear that they were content to “roll” the profits from one joint project to the next, with a view to extracting those profits at some time in the future.
At the time the Buckley Street properties were acquired, there had been no formal profit distribution in respect of any prior projects. On Mr Lanciana’s case, the only potentially distributable profit was in respect of the Bute Street properties, which had been completed and sold. The Mitchell Street and Stevedore Street properties were investments only, and had not realised any profit.[4] Mr Lanciana and Mr Gangemi were no doubt hoping for large profits from the Hoddle Street development, which was the largest development yet undertaken by them. This is how things stood when the Buckley Street properties were acquired.
[4]This remains the position.
The prior dealings between Mr Lanciana and Mr Gangemi in respect of projects other than the Buckley Street project, and concerning Mr Gangemi’s claim that he was entitled to one half of the issued shares in Pre Need and Clapana, give rise to a whole host of collateral issues. It is unnecessary to decide those collateral issues in this proceeding. This is because it must be kept firmly in mind that this proceeding concerns only claims made by the parties in connection with the Buckley Street project. The case presented at trial on behalf of Mr Gangemi focussed heavily on these collateral issues. There were two reasons for this.
First and foremost, evidence and cross-examination on behalf of Mr Gangemi was directed to these collateral issues because Mr Lanciana pleaded in his defence that Mr Gangemi had made no financial contribution towards the acquisition of the Buckley Street properties, or to development costs (such as consultants and permit fees) paid by Pre Need for the benefit of the Buckley Street project. The case was pleaded and opened on behalf of Mr Lanciana on the basis that Mr Gangemi could not establish the existence of the Buckley Street unit trust and that, accordingly, Mr Gangemi having contributed nothing towards the Buckley Street project, he was entitled to no interest in it.
However, in his oral evidence, Mr Lanciana abandoned that position. He conceded that Mr Gangemi had in fact made substantial contributions to the acquisition of the Buckley Street properties and the development costs of the Buckley Street project. This concession was properly, although belatedly, made. Mr Gangemi made his contribution in a number of ways:
(1)Mr Gangemi was a joint guarantor with Mr Lanciana for the finance facility which was utilised to complete the acquisition of the Buckley Street properties.
(2)All of the development costs expended in connection with the Buckley Street project were paid from Pre Need funds. Any profits which had been realised from prior projects in which Mr Gangemi was interested (for example, the Bute Street development) were contained within Pre Need. In that sense, Mr Gangemi contributed to the development costs which were paid by Pre Need.
(3)Each of Mr Gangemi and Mr Lanciana undertook obligations towards Mr Osborne and Mr Jafari in respect of their advances towards the Buckley Street project.
(4)Mr Gangemi invested a considerable amount of his time in connection with the acquisition of the Buckley Street properties and the proposed development of them, including in connection with engaging consultants and prosecuting the application for a planning permit.
As appears hereafter, I am satisfied that it was agreed between Mr Gangemi and Mr Lanciana that they would take an equal share in the Buckley Street project, through whatever structure (trust, company or partnership) was ultimately agreed between them and any other participants in the project.
In these circumstances, it is unnecessary to determine the extent of Mr Gangemi’s interest as a shareholder in, or in the assets of, Pre Need or Clapana at any time. Those issues are to be determined in other proceedings between Mr Gangemi and Mr Lanciana.
The second reason why evidence and cross-examination on behalf of Mr Gangemi was directed at collateral issues arising out of the dealings between him and Mr Lanciana otherwise than in respect of the Buckley Street project was to raise a plethora of credit issues directed at undermining the credibility of Mr Lanciana as a witness. It is unnecessary to resolve all of these issues, and the evidence is in any event incomplete in respect of many of them. They have been taken into account by me in assessing Mr Lanciana’s general credibility as a witness.
(2) The constant need for funds
Mr Lanciana and Mr Gangemi pursued an aggressive property investment and development strategy. The profits of projects were “rolled into” one another and projects overlapped. There was a constant need for funds, with Mr Lanciana juggling funds between different projects and entities and mixing the funds from his own projects, or those of his wife, with projects jointly undertaken by Mr Gangemi. No attention was given to the proper separation of funds and the keeping of separate accounts for different projects. Until they fell out in early 2003, Mr Gangemi showed no interest in the way in which Mr Lanciana managed the finances. I infer that he believed that all was going well, and that profits would eventually begin to flow from the various projects. Further, during this time, Mr Gangemi was acquiring assets from the projects, for example, an apartment in the Anchor Place project on terms that Pre Need paid Mr Gangemi’s interest payments for some time. In addition, Pre Need paid for some renovations to one of Mr Gangemi’s properties.
At some time in late 2001, Gangemi and Lanciana discussed the need to obtain funds to progress the Hoddle Street project. Mr Lanciana told Mr Gangemi that he too should be trying to obtain funds for Hoddle Street and other joint projects, and that he “should not always leave everything to me”. In this context, Mr Gangemi approached Mr Osborne, and later Mr Jafari, and sought funds from them.
(3) On what basis did Mr Osborne invest?
Mr Osborne met Mr Gangemi in about 2000 when they were both holidaying in Malaysia. Mr Gangemi told Mr Osborne that he was a property developer in Melbourne and that he owned a pre-cast concrete yard. A close friendship developed between the two men, and they commenced socialising together often. They met for coffee most days and, when Mr Gangemi married in early 2001, Mr Osborne acted as the master of ceremonies at his wedding.
During the course of their conversations, Mr Gangemi kept Mr Osborne informed about his property development activities. I infer that this was, initially, just part of normal conversation between friends.
At some stage in 2001, Mr Gangemi told Mr Osborne that he had a plan to develop the site of an old car yard in Footscray into a residential unit development. This is the property at 63-67 Buckley Street. Mr Gangemi told Mr Osborne that he intended to do this in conjunction with Mr Lanciana.
Later in 2001, I infer after Mr Lanciana had asked Mr Gangemi to assist with obtaining funding, Mr Gangemi asked Mr Osborne if he wanted to “put money in” to the project to develop “the old car yard”. Following this approach by Mr Gangemi, there were many conversations between the two men about Mr Osborne investing in the Buckley Street project.
As a result of these conversations, Mr Osborne alleges that an agreement was reached between him and Mr Gangemi for Mr Osborne to make a conditional investment in the Buckley Street project. In his evidence of this agreement, Mr Osborne did not give evidence of specific words said in particular conversations. He said there were many conversations concerning the proposal that he invest, and that he and Mr Gangemi spoke almost daily at this time concerning the proposal and other matters. They were close friends and he trusted Mr Gangemi. The best that Mr Osborne could do was give evidence of his recollection of the terms of the agreement reached during the many discussions. As appears below, Mr Osborne’s recollection is generally consistent with, and is no doubt assisted by, some handwritten notes made by Mr Gangemi, and supplemented by Mr Osborne, in May 2003 on the back of a truck rental invoice. Of course, in May 2003, the recollections of Mr Osborne and Mr Gangemi of their discussions in late 2001 and early 2002 are likely to have been more reliable than their present recollections.
Mr Osborne’s evidence concerning the result of these discussions is contained in the following evidence given by him in chief:
Could you please tell His Honour, as carefully and with as much detail as you recall, the content of the discussions which occurred between you on the one part and Mr Gangemi on the other in that period?---Yes. I said that I would contribute the amount of $200,000, which ended up being $199,000 because there was a $1,000 first month’s interest that was taken out, on certain provisos, that being that I would be given a charge over Mitchell Street, that I would be paid my monthly interest that was being accrued from the bank for the $200,000 that if a permit was obtained within 18 months of me giving the money to Mr Gangemi, I would obtain a 12.5 per cent interest in the development and if the permit was not obtained within 18 months, I would be given my $200,000 back, and interest sum of $50,000 and also interest paid of about $1,000, between rate at the time, and also legal into fees and any other fees associated with putting the charge on Mitchell Street, and also the property at Buckley Street would be purchased unencumbered.
Mr Osborne, that’s exhausted your memory on the discussions as best you are able?---Yes.
HIS HONOUR: Am I correct in this, Mr Osborne, that the evidence you’ve just given as to your recollection of the result which was reached after discussions over a period of a number of months?---That was the main crux of the reason why I would hand over the $200,000.
How many conversations were there between you and Mr Gangemi which gave rise to those matters being agreed between you?---That would be hard to answer because we used to meet every night for a coffee, but I would say in quite a few occasions we would discuss the business.
Yes?---But again it’s hard to know because we met socially most nights.
Was there an element of negotiation involved, that is, as to the terms upon which you would advance moneys?---No.
Who proposed the terms that you say were agreed?---I proposed the terms and Mr Gangemi agreed to them. I wasn’t interested in a piece of dirt that didn’t have a permit. It was only worth something if it had a permit. That’s why the clause was put in, 18 months.
How did you come to specify a charge over the Mitchell Street property? How did you know about the Mitchell Street property?---At the point that I gave my money over to Mr Gangemi, Buckley Street wasn’t settled, so a charge couldn’t be put on that property. So he suggested as an alternative to put in on the Mitchell Street property.
Mr Osborne maintained this position throughout his evidence.
Subsequently, Mr Osborne paid two cheques totalling $199,000 in order to make his investment. There is much dispute about the circumstances surrounding the drawing and banking of these cheques. The reason only $199,000 was advanced was because Mr Osborne deducted $1,000 as the approximate amount of the first month’s interest payable by him on his loan of $200,000 on the security of his house. Thereafter, until in or about September 2003, Pre Need paid Mr Osborne each month an amount equal to Mr Osborne’s interest payment due on his loan of $200,000. The payments were usually made by cheque handed to Mr Osborne by Mr Gangemi.
The first Osborne cheque: $86,040
Mr Osborne said that he gave a cheque for $86,040 payable to Mr Gangemi on or around the date of the cheque (6 February 2002). Mr Gangemi denies this, and says that he knew nothing of the first Osborne cheque until after Mr Osborne had provided it to Mr Lanciana and Mr Lanciana had organised for that cheque to be banked.
In his witness statement, Mr Gangemi denied any involvement in, or knowledge of, the circumstances in which the first Osborne cheque was requested or delivered. The denial was very particular, and includes denials of events which Gangemi says have only recently come to his attention. It is necessary to set out the full content of Gangemi’s denial in respect of the first Osborne cheque:
In early 2002 Lanciana obtained two cheques from Osborne for $86,040.00 and $112,960.00 respectively. I was not present when Lanciana obtained the cheques from Osborne. I have learned recently that Lanciana paid the cheque for $86,040.00 into an account that I believe was styled as follows ‘Mahmood, Mehmood & Gangemi’. I did not pay the cheque into that account. I do not know who paid the cheque into that account but the cheque was deposited into that account without my knowledge. I had agreed to open an account with Mahmood and Mehmood who were mortgage brokers whom Lanciana and I had engaged to raise $6.8 million required to construct the 16 apartment development at 129 Hoddle Street, Richmond Victoria and for the proposed development at Buckley Street. $4.8 million was to be applied for the Hoddle Street development and the balance was for the commencement of the Buckley Street development. I did not know until recently that a cheque for $86,040.00 had been processed through that joint account. I only learned this after I inspected documents discovered by Osborne … It appears that this cheque was processed through the said joint account and the proceeds thereof were transferred from that account to the said mortgage brokers.[5]
[5]Gangemi witness statement [59] (emphasis added).
In cross-examination, Mr Gangemi held to his denial.
Mr Lanciana’s evidence was as follows. In early February 2002, there was an urgent need for funds, in particular for the Hoddle Street project. At this time, he was trying to arrange funding for the Hoddle Street project from a group of Asian investors. One of the brokers trying to arrange a loan was Sam Trantino. Another was Luan Tranh Phan. Through Mr Trantino, he and Mr Gangemi became aware that the Asian investors required a fee equal to 1 per cent of the proposed loan to accompany the loan application for approximately $8.6 million. The amount required was $86,040, which was to be banked into a joint bank account in the name of the Asian investors and Mr Gangemi. Mr Gangemi was involved in dealings with Mr Trantino in connection with opening a joint account with HSBC Bank Australia in the name “Mahmood, Mehmood & Gangemi”.
Mr Lanciana said that he raised the urgent need for funds with Mr Gangemi in early February 2002 and asked Mr Gangemi whether he could assist with obtaining an advance from Mr Osborne or Mr Jafari. As a result of this discussion, Mr Lanciana said that Mr Gangemi gave him Mr Osborne’s telephone number. Mr Lanciana then telephoned Mr Osborne and asked him whether he could provide any of the funds he had agreed with Mr Gangemi to lend. Mr Lanciana said that Mr Osborne responded favourably to this request and that he then asked Mr Osborne for an advance of $86,040 by a cheque payable to Mr Gangemi.
In cross-examination, Mr Osborne agreed that it was Mr Lanciana who telephoned him and asked for the initial advance in respect of his agreement with Mr Gangemi. However, Mr Osborne denied that Mr Lanciana asked him for a specific sum of money.
As I have said, the first Osborne cheque is dated 6 February 2002. On that day, Mr Gangemi attended at an office of HSBC Bank together with one of the proposed investors (Ms Mahmood), Mr Trantino and Mr Phan. They attended in order to open the joint account in the name of “Mahmood, Mehmood & Gangemi”. They met with a female bank officer.
Mr Gangemi’s initial position was that the joint account was opened prior to 6 February 2002 with a sum of $1,000 deposited by the finance brokers. Further, his initial position was that Mr Trantino did not attend at the HSBC Bank with him when he attended to open the account. This evidence was inconsistent with the contemporaneous documents dated 6 February 2002, and Mr Gangemi’s counsel later cross-examined Mr Trantino on the basis that the account was opened on 6 February 2002 and that Mr Trantino was present at the time. When it was put to Mr Gangemi that Mr Trantino was present, and recalls Mr Gangemi handing across a cheque of about $80,000, Mr Gangemi said that Mr Trantino would be lying if he gave that evidence. Earlier, Mr Gangemi had said “I’ve never seen Mr Trantino at the HSBC Bank”. This is one of many examples of Mr Gangemi giving definite evidence where he either has no recollection or a vague recollection, and he perceived that a definite recollection would suit his case. By the time Mr Trantino gave evidence, it was accepted by Mr Gangemi and his legal advisers that he and Mr Trantino were present together at the HSBC Bank on 6 February 2002 when the joint account was opened.
Mr Trantino gave evidence. He said that he met Mr Gangemi and Mr Phan at the HSBC Bank at about 1.30 pm on 6 February 2002. The time is recorded in his diary and there was no cross-examination to the effect that this was a false time. Mr Trantino gave evidence that he recalls that Mr Gangemi “pulled a cheque out of his pocket and handed a cheque over”. He said that he did not actually see the cheque “but it would have had to have been for 1 per cent of the total amount of the loan”.
IX. SUMMARY OF CONCLUSIONS AND RELIEF
In summary, I have reached the following principal findings and conclusions.
First, Mr Lanciana, Mr Gangemi, Mr Jafari and Mr Osborne each invested in the Buckley Street properties and the Buckley Street project in return for an agreed percentage ownership of the Buckley Street properties and an agreed percentage of the ultimate profits of the Buckley Street project. The investments were made in the following manner:
(1)Subject to conditions, Mr Osborne invested $200,000 for a 12.5% interest;
(2)Mr Jafari invested $350,000 for a 25% interest;
(3)Mr Gangemi and Mr Lanciana together invested the amount of the Perpetual loan ($504,000), which was secured by a mortgage over the Buckley Street properties and was guaranteed by them, together with their work and all moneys (including consultants’ fees and permit fees) required to obtain a planning permit to allow the Buckley Street project to proceed. They were to receive in return a 62.% (31.25% each) interest. The Perpetual loan of $504,000 was the joint responsibility of Mr Gangemi and Mr Lanciana to repay from their own moneys or share of the profits of the project;
(4)Once the planning permit was obtained, the Buckley Street project would proceed by way of project funding from an external financier.
Second, it was intended that the investments by Mr Lanciana, Mr Gangemi, Mr Jafari and Mr Osborne would be held through unit holdings in a unit trust to be established and called “The Buckley Street Unit Trust”. However, no such unit trust was ever established.
Third, Mr Osborne invested $200,000 in the Buckley Street project on the condition that Mr Gangemi and Mr Lanciana would repay his investment, together with $50,000 interest, if the necessary planning permit for the project was not obtained within 18 months of him investing. The planning permit was not obtained within that time, which expired on 4 September 2003, and Mr Osborne is accordingly entitled to judgment against Mr Gangemi for $250,000 together with interest on that amount from 4 September 2003.
Fourth, Mr Lanciana undertook joint responsibility with Mr Gangemi for Mr Osborne’s debt. However, by reason of the Heads of Agreement, Mr Gangemi is not entitled to recover contribution from Mr Lanciana.
Fifth, I reject Mr Gangemi’s claims that his signatures to the Heads of Agreement and the documents signed by him pursuant to the Heads of Agreement were procured by duress. If that is not so, Mr Gangemi has nevertheless affirmed the Heads of Agreement by his conduct or should be estopped from alleging that the Heads of Agreement are not binding by reason of any duress.
Sixth, the Heads of Agreement constitute a binding agreement between Mr Lanciana and Mr Gangemi.
Seventh, the Heads of Agreement were not terminated or abandoned as contended for by Mr Gangemi.
Eighth, pursuant to the Heads of Agreement Mr Gangemi transferred full ownership and control of 63 Buckley to Mr Lanciana. Subsequently, Mr Lanciana transferred full ownership and control of 63 Buckley to Mr Jafari. Although these steps were attended by gross informality and procedural error, they were nevertheless valid or else will be the subject of declarations of validity under s 1322(4)(c) of the Corporations Act 2001 (Cth).
Ninth, each of Mr Gangemi and Mr Lanciana represented to Mr Jafari, in trade or commerce, that the Buckley Street properties would be purchased unencumbered, and thereby engaged in conduct which was misleading or deceptive or likely to be mislead or deceive in contravention of s 11 of the Fair Trading Act 1999 (Vic). Although Mr Jafari makes no claim against Mr Lanciana in this regard, Mr Gangemi has sought contribution or indemnity from Mr Lanciana. In these circumstances, it is appropriate that declarations be made that each of Mr Gangemi and Mr Lanciana has engaged in false and misleading conduct in contravention of s 11 of the Fair Trading Act 1999 (Vic). However, all questions of causation and quantification of any loss or damage suffered by Mr Jafari by reason of this contravention, and all issues concerning contribution or indemnity between Mr Gangemi and Mr Lanciana, should be determined in a separate trial.
Tenth, Bloomingdale had no reasonable cause to lodge its caveats over the Buckley Street properties. These caveats have had the effect of preventing Mr Jafari and 63 Buckley from dealing with the Buckley Street properties in any way. I am satisfied that this has caused each of them some damage. Accordingly, they are entitled to a declaration that Bloomingdale had no reasonable cause to lodge the caveats, and for an order for compensation to be assessed under s 118 of the Transfer of Land Act 1958 (Vic).
Eleventh, there are a number of revenue matters which I will refer to the Attorney-General for investigation and possible referral to revenue authorities. If it transpires that, as a result, Mr Gangemi or Bloomingdale is liable for any duties or taxes arising out of the Heads of Agreement or their implementation, Mr Lanciana must indemnify them in respect of that liability. The only exception to this indemnity is in respect of any stamp duty payable by Mr Gangemi in respect of the acquisition by him of Lot 17 in the Hoddle Street development.
Based on these findings and conclusions, I propose to make the following declarations and orders.
In the Osborne proceeding there will be judgment for Mr Osborne against Mr Gangemi for $250,000 together with interest thereon from 4 September 2003. The third party proceeding by Mr Gangemi against Mr Lanciana seeking contribution for indemnity will be dismissed. I will hear the parties as to the amount of interest and as to costs.
In the principal proceeding, the Court will make the following declarations:
(1)In September 2003 Antonio Gangemi transferred the only issued share in 63 Buckley Street Pty Ltd to Pasquale Lanciana. That share transfer is not invalid by reason of any contravention of the provisions of the constitution of 63 Buckley.
(2)In September 2003, Antonio Gangemi resigned as the sole director of 63 Buckley Street Pty Ltd and appointed Pasquale Lanciana to act as a director in his place. The appointment of Pasquale Lanciana as a director of 63 Buckley Street Pty Ltd is not invalid by reason of any contravention of the constitution of 63 Buckley Street Pty Ltd.
(3)On 1 July 2005, Pasquale Lanciana transferred all of the issued shares in 63 Buckley Street Pty Ltd to Kourosh Jafari and appointed him as the sole director of 63 Buckley Street Pty Ltd. The transfer and appointment are not invalid by reason of any contravention of the constitution of 63 Buckley Street Pty Ltd.
(4)By representing to Kourosh Jafari that 63 Buckley Street Pty Ltd would acquire the properties at 61 and 63-67 Buckley Street, Footscray free of any encumbrances, each of Antonio Gangemi and Pasquale Lanciana engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 9 of the Fair Trading Act 1999 (Vic).
(5)Bloomingdale Holdings Pty Ltd lodged caveats numbered AD824331J and AE12488F with the Registrar of Titles without reasonable cause.
Further, in the principal proceeding there will be judgment:
(1)for the first defendant 63 Buckley Street Pty Ltd and the second defendant Kourosh Jafari for compensation to be assessed under s 118 of the Transfer of Land Act 1958 (Vic);
(2)for the second defendant Kourosh Jafari against the second plaintiff Antonio Gangemi for damages to be assessed in respect of the contravention by Antonio Gangemi of s 9 of the Fair Trading Act 1999 (Vic);
(3)discharging paragraphs 2, 3 and 4 of the orders made by the Honourable Justice Hargrave in the proceeding on 2 April 2007; and
(4)that all claims and counterclaims in the proceeding are otherwise dismissed.
I will hear the parties as to costs of the principal proceeding and to the precise form of the judgment to be entered.
---
SCHEDULE OF PARTIES
| F6085 No. 9563 of 2006 | |
| BETWEEN: | |
| BLOOMINGDALE HOLDINGS PTY LTD (ACN 074 447 859) | Firstnamed Plaintiff |
| ANTONIO GANGEMI | Secondnamed Plaintiff |
| - and - | |
| 63 BUCKLEY STREET PTY LTD (ACN 099 836 361) (IN ITS OWN CAPACITY AS TRUSTEE OF THE BUCKLEY STREET UNIT TRUST) | Firstnamed Defendant |
| KOUROSH JAFARI | Secondnamed Defendant |
| PASQUALE LANCIANA | Thirdnamed Defendant |
| RICHARD OSBOURNE | Fourthnamed Defendant |
| THE REGISTRAR OF TITLES | Fifthnamed Defendant |
| AND BETWEEN: | |
| 63 BUCKLEY STREET PTY LTD (ACN 099 836 361) (IN ITS OWN CAPACITY AS TRUSTEE OF THE BUCKLEY STREET UNIT TRUST) | Firstnamed Plaintiff by Counterclaim |
| KOUROSH JAFARI | Secondnamed Plaintiff by Counterclaim |
| - and - | |
| BLOOMINGDALE HOLDINGS PTY LTD (ACN 074 447 859) | Firstnamed Defendant by Counterclaim |
| ANTONIO GANGEMI | Secondnamed Defendant by Counterclaim |
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