EDPI Pty Ltd v Rapdocs Pty Ltd

[2007] NSWSC 195

CITATION:	EDPI Pty Ltd v Rapdocs Pty Ltd [2007] NSWSC 195
HEARING DATE(S):	5-9 & 16 February 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	12 February 2007
DECISION:	Cross claim for specific performance and declaratory relief based on agreement dismissed for want of clean hands. Plaintiff entitled to title deeds. Plaintiff entitled to half costs, including on indemnity basis from date of offer.
CATCHWORDS:	EQUITY – Equitable defences – clean hands – where agreement of which enforcement sought involved procuring a breach of trust – where cross-defendant declines to plead want of good hands – discretion of court - washing hands – where no suggestion of cleansing until closing submissions. COSTS – offer of compromise – where costs of proceeding increased by successful offeror’s pursuit of issue on which it fails.
LEGISLATION CITED:	(NSW) Uniform Civil Procedure Rules r 42.14(2)
CASES CITED:	Hillier v Sheather (1995) 36 NSWLR 414 Jones v Sutton (No 2) (2005) NSWCA 203 Kennedy v The Queen [1864] 1 WW& a’B(E) 145 Kettles and Gas Appliances Limited v Anthony Hordern & Sons Limited (1934) 35 SR (NSW) 108 Leather Cloth Company Ltd v American Leather Cloth Company Ltd (1865) 11 HLC 523 Morgan v Johnson (1998) 44 NSWLR 578
PARTIES:	EDPI Pty Ltd (plaintiff) Rapdocs Pty Ltd (first defendant) John James (second defendant)
FILE NUMBER(S):	SC 5172/04
COUNSEL:	D Murr SC w D Baran (plaintiff) G Sirtes (defendants)
SOLICITORS:	Barclay Benson (plaintiff) Hancock Alldis & Roskov (defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Monday, 12 February 2007

5172/04 EDPI Pty Ltd v Rapdocs Pty Ltd

JUDGMENT (ex tempore)

1 HIS HONOUR: On 2 December 2002, Mr Nader Zoljalali, who is the sole shareholder in the plaintiff, EDPI Pty Limited, and Mr David Smith and Mr John James, who are the shareholders in the first defendant Rapdocs Pty Limited (Mr James personally being the second defendant), entered into what may loosely be called a joint venture arrangement for the acquisition and development of a large block of land at 470 - 472 Pennant Hills Road, Pennant Hills. The development, for which development approval had already been obtained by the existing owner, involved the subdivision of the property into four lots: three relatively small residential lots numbered lots 1, 2 and 3 at the rear of the property, which at that time were vacant, and a fourth large lot, on which stood a heritage building called Limona, which was to be converted into six units and on which a further 15 units were to be built, under SEPP 5 (Seniors Living) as a retirement living project. At issue in these proceedings is who is entitled to lots 1, 2 and 3. EDPI contends that the substance of the arrangement was that Mr Smith and Mr James would arrange funding for the acquisition of the property and the carrying out of the subdivision, and retain the benefit of lot 4 and the SEPP 5 development on it, while in return for introducing the opportunity, EDPI would receive the benefit of lots 1, 2 and 3. The defendants say that the substance of the agreement was that in addition to their retaining the benefit of lot 4 and the SEPP 5 development, EDPI was to hold the benefit of lots 1, 2 and 3 as trustee of a unit trust for each of Mr Smith, Mr James and Mr Zoljalali, as to one-third each.

2 When contracts for the purchase of the Pennant Hills property were exchanged on 7 February 2003, the purchasers were Lifetime Retirement Projects (No 2) Pty Limited (LRP2) (as trustee of a unit trust used by Mr Smith and Mr James to raise finance from investors for the project) as to 70 percent, and EDPI (as trustee of the EDUT) as to 30 percent, as tenants in common. The 70/30 division represented at least approximately an apportionment according to the value that lot 4 bore to lots 1, 2 and 3. On completion of the subdivision, certificates of title issued in the name of EDPI for lots 1, 2 and 3, and in the name of LRP2 for lot 4.

3 In these proceedings EDPI claims orders for the delivery up to it of the certificates of title to lots 1, 2 and 3. Those certificates of title were, at the time when proceedings were instituted, in the possession of Mr James, but with the exception of one which has been released on an interlocutory application to EDPI, are now in the custody of the Court. Rapdocs cross-claims for a declaration that it is beneficially entitled to 20 of the 30 issued units in the EDUT (alternatively, to a beneficial two-thirds interest in lots 1, 2 and 3) and an order for transfer of those units or interest to it. Those orders are sought by way of giving effect to the agreement that the defendants contend was struck between Mr Smith, Mr James and Mr Zoljalali on 2 December 2002. No point has been taken in the proceedings that Rapdocs was incorporated after the alleged agreement was made.

4 As the registered proprietor of lots 1, 2 and 3 - which EDPI now is, the subdivision plan having been registered - EDPI is prima facie entitled to the title deeds for those lots. Accordingly, the real issue in the proceedings is on the cross-claim, namely, whether the agreement was as propounded by Rapdocs. If that issue is resolved in Rapdocs’ favour, a subsidiary issue arises as to whether, in the circumstances, it should be enforced by a court of equity.

5 There is in evidence what purports to be a unit certificate, evidencing the issue of 20 units in the Earth Developments Unit Trust (“EDUT”) to Rapdocs. A family trust of Mr Zoljalali, called the Zoljalali Family Trust, holds 10 units in the EDUT. If the unit certificate in the name of Rapdocs is authentic, it would conclude the main issue in favour of the defendants. If not, there may be significant consequences for the credit of those who have propounded it. It is, therefore, convenient first to resolve the question of the authenticity of this unit certificate.

6 The unit certificate bears the date 6 February 2003. It was purportedly sent as an attachment to an email dated Saturday, 8 February 2003 at 2.10 pm from Mr Zoljalali to Mr Smith and Mr James. The unit certificate shows the unit holder as Rapdocs, states its ACN, and asserts that it relates to 20 units in the EDUT.

7 Rapdocs was incorporated on 6 February 2003. However, it was incorporated under the name Plus 55 Retirement Resorts Pty Limited on that day. Mr Smith had been provided with a copy of a draft of the deed of trust for the EDUT, and had made a number of annotations on it. The evidence does permit me to say precisely when, but it is instructive that in the schedule relating to unit holdings, which identified the initial units as 10 issued to Mr Zoljalali, the annotations suggested that what was contemplated was a total of 100 units, of which EDPI would hold 33, and Plus 55 (so described, not as Rapdocs), 66.

8 A resolution to change the name of Plus 55 to Rapdocs was, according to the ASIC extract, adopted on 7 February 2003 and lodged on 14 February 2003. There is no evidence of the communication by Mr Smith, Mr James or anyone acting on their behalf of the name of Rapdocs or its ACN to Mr Zoljalali, or to his accountant Mr Belz, before 21 March 2003, when Mr Smith sent an email to Mr Belz, with a copy to Mr Zoljalali, as follows: “Gentlemen, the ACN number for Rapdocs is, 103633478 …“. That of itself tends to suggest that the ACN had not been advised to the recipients earlier than that date.

9 The only theory which has been advanced as to how Mr Zoljalali or his accountant might have known the name or ACN of Rapdocs by 8 February, let alone by 6 February 2003, is that the defendants’ accountant, Mr Christopher Burns, might have provided that information. But although Mr Burns swore an affidavit, which was read in the proceedings, his evidence does not assert that he provided any such information at that time.

10 In those circumstances, I conclude that there is a high degree of improbability that the name of Rapdocs and its ACN were known to Mr Zoljalali or Mr Burns by 8 February 2003 (the date of the email to which the certificate was purportedly attached), let alone by 6 February 2003 (the date which the certificate purportedly bears).

11 As I have said, the unit certificate was purportedly sent as an attachment to an email dated 8 February 2003 from Mr Zoljalali, to Mr Smith and Mr James. An expert examination of Mr Zoljalali’s computer by Mr Mercer reveals that no email was sent from that computer containing or referring to the graphic file which constituted the purported attachment, nor was any email sent from that computer which contained the words “scanned and attached the signed certificate of units in the trust fund”, or, “will post the original to David’s office”, which appeared in the purported email. Mr Mercer concedes that his examination does not exclude the possibility that such an email was on the computer at some earlier time, and has since been lost or deleted prior to his examination. It is to that extent theoretically possible that the email could have been deleted or the file name changed and it is also theoretically possible that it resides on some other computer operated by Mr Zoljalali at the time. However, Mr Zoljalali denies that he has deleted or changed the file name of any such email or that he used another computer for the purpose of sending emails at the relevant time.

12 Moreover, and more significantly, an expert examination of Mr Smith’s computer, by an expert retained on behalf of the defendants, Mr Westwood-Hill, reveals no evidence of any email received by Mr Smith and sent by Mr Zoljalali on 8 February 2003 at 2.10 pm. This is of significance, because Mr Smith was an addressee of the purported email. Mr Westwood-Hill said that no conclusion could be reached from his examination of Mr Smith’s computer as to the validity of the purported email in February 2003.

13 In their principal affidavits sworn in the proceedings, both Mr Smith and Mr James say in relatively identical terms that they had a meeting on 20 March 2003 with Mr Zoljalali and his account, Mr Belz, at which questions about changes to the trust deed were raised, and at which they said they would send Mr Belz the ABN for Rapdocs. Both say that following this meeting they and Mr Zoljalali went to lunch to celebrate, and that during this lunch Mr James asked to be sent a copy of the unit certificate and Mr Zoljalali responded, “I will send you a copy of your unit certificate in the trust”. Mr Smith deposes that he received a copy of the certificate from Mr Zoljalali by email shortly afterwards. Mr James says that he was shown it by Mr Smith after Mr Smith had received it from Mr Zoljalali and that, having seen it, he was satisfied that Mr Zoljalali had arranged for EDPI to fulfil its part of the arrangement, and was then happy to proceed with the purchase.

14 All this is inconsistent with either Mr Smith or Mr James having received the certificate by email on or about 8 February. No satisfactory explanation was offered for referring with such specificity to the circumstances in which a copy of the certificate was purportedly received by email shortly after 20 March, without any reference to its having been received much earlier, on or about 8 February.

15 There has been no examination of Mr James’ computer. He says it was discarded when lodged for repairs due to some malfunction, and replaced by another.

16 It is, to say the least, curious that there is another email sent by Mr Zoljalali to Mr Smith and Mr James on 20 February 2003, which contains parts highly similar to those in the purported email of 8 February 2003:

John, David,
I have scanned and attached certificates of currency obtained today from GIO Public Liability and Royal & Sun Alliance Construction Risk.
Please let me know if you require faxed copies.
Regards
Nader Z.

17 This is to be compared with the purported email of 8 February 2003, which reads:

John, David,
I have scanned and attached the signed certificate of units in the trust.
Please let me know if you require faxed copies.
I will post the original to David’s office.
Regards,
Nader Z.

18 I have not found any other email addressed in the style of “John, David,” despite the extensive email correspondence in evidence.

19 I conclude - principally from the computer examinations and the absence of any examination of Mr James’ computer - that there is a very high degree of improbability that the purported email was sent by Mr Zoljalali to Mr Smith and Mr James on 8 February 2003.

20 After the subdivision plan was lodged and approved and certificates of title issued, Mr Zoljalali became concerned that the titles to lots 1, 2 and 3 were in the custody of Mr James. On 19 August 2004 his solicitor, Mr Isaacs of Barclay Benson, sent a letter to Mr James demanding delivery of the title deeds for the three properties by 20 August 2004. The solicitors for Rapdocs, Hancock Alldis & Roskov, replied on 25 August 2004, asserting that that the title deeds were held by Rapdocs and that Rapdocs held 20 of the 30 issued units in the EDUT. Barclay Benson responded on 25 August, denying that Rapdocs held any units in the trust and asking that evidence be provided of ownership by Rapdocs of 20 to 30 units in the trust.

21 Mr Westwood-Hill’s examination of Mr Smith’s computer reveals that on 26 August 2004, at about 8.31 am, an email was viewed on Mr Smith’s computer from Mr James to Mr Smith forwarding the purported 8 February email from Mr Zoljalali, including a JPEG attachment, which contained an image of the disputed unit certificate. Later that morning, at 10.31 a copy of that unit certificate was sent by facsimile by Hancock Alldis & Roskov to Barclay Benson. The timing of the only occasion that the evidence discloses that the unit certificate was seen on any computer is therefore immediately before its production in answer to a demand that evidence of the unit holding be provided.

22 Many variants of Mr Zoljalali’s signature are in evidence. Some were in evidence before there was any issue about his signature, and others have been put in evidence subsequently for the purpose of making good submissions based on his signature. Those signatures demonstrate, as one would expect, a range of variations. However, the signature which appears on the disputed unit certificate, is, so far as I can tell, identical to three others: first, a signature appearing on an expert report prepared by Mr Zoljalali for proceedings in the Consumer Tenancy and Traders Tribunal dated 17 October 2003 (although Mr Zoljalali’s evidence suggests that the signature on the report in evidence is a copy, it has the appearance of an original, and it may be that what he provided to Mr James was a copy); secondly, a signature contained in a signature stamp file in GIF format created by Mr James by lifting it from the signature page of the CTTT report and laying it onto a signature page of a word file, which Mr James forwarded by email to Mr Zoljalali on 24 October 2003, explaining how he had created it and how to use it; and thirdly, a signature contained in a graphic signature file, which was attached electronically to an email sent by Mr James to Mr Zoljalali on 2 July 2004, again explaining how the signature file could be used.

23 From these matters, it is clear that the signature, which is the origin of the electronic reproductions in the files created by Mr James, was first made on 17 October 2003, or thereabouts. It follows that it did not exist in February 2002, but that from at least 24 October 2003, Mr James had in his possession an electronic facsimile of that signature. It follows that he had it on 26 August 2004 and, indeed, had used it as recently as 2 July 2004. I conclude that there is a very high degree of improbability that on or about 6 February 2003 Mr Zoljalali created a signature identical to that which was later created on 17 October 2003, and happened to be electronically stored by Mr James thereafter.

24 The combined improbability of the name and ACN of Rapdocs being known to Mr Zoljalali or Mr Belz on 8 February 2003; the purported email being sent on 8 February 2003, when there is no record of it in any relevant computer; the creation of a signature on or about 6 February 2003 identical to one created on 17 October 2003, of which Mr James happened to have an electronic facsimile; and the coincidence that a copy of the purported email forwarding the unit certificate was accessed on 26 August 2004, when evidence of the issue of units had been called for; satisfies me very comfortably that the email of 8 February 2003 and the unit certificate are fabrications.

25 This conclusion necessarily tells strongly against the credit, both of Mr Smith, who deposed to having received the unit certificate by email shortly after 20 March 2003, and Mr James who, on all the evidence, is the person who created the forgery on or about 26 August 2004, but persisted in denying it in his evidence before the Court, even when Mr Smith was prepared to concede that it must be a forgery. Mr James descended to some considerable dissembling in endeavouring to find differences between the substantially identical signatures.

26 However, this is not conclusive of the issue as to the agreement of 2 December 2002. While it is of no assistance to the defendants’ case that I conclude that one has deliberately forged, and another has given evidence which appears quite false in connection with, the unit certificate, it does not follow that there was no such agreement made on 2 December 2002 as they assert. Resolution of that question then requires reference to other parts of the evidence.

27 Before turning to that, it is useful to record a little more of the background.

28 Parisi Homes Pty Limited is a corporation of which Mr Zoljalali is the sole director and shareholder. Prior to 2 December 2002 he had negotiated with the agent for the vendor of the Pennant Hills property, and had received an indication that an offer of $3.25 million would be acceptable to the vendor. However, no binding contract had been exchanged. Mr Zoljalali had also received a “mandate” from a finance broker, setting out terms upon which the broker would seek to raise finance for him, but quite plainly he did not have finance approval, and did not himself have the wherewithal to proceed with any such development.

29 He inquired of his solicitor, Mr Freeman, whether he might know anyone who might be interested and, as a result, was introduced to Mr Smith and Mr James. They met for the first time in Mr Zoljalali’s office at Pymble on 2 December 2002. Mr Zoljalali’s version, in short, is that having explained the project, he left the room so that Mr Smith and Mr James had some time to themselves, and on his return, they proposed the use the trust, of which they were trustees for a group of investors, to develop lot 4, and that they would offer Mr Zoljalali the three residential blocks as his share of the deal.

30 It was not in dispute that the three residential blocks were together worth something in the order of $1 million of the total purchase price of $3.25 million. In addition, Mr Zoljalali was offered the possibility, without certainty, of being awarded the building contract for the lot for development. Mr Zoljalali says that he asked whether they really meant that “the three blocks will be transferred to my vehicle on the registration of the subdivision”, and whether they were “really sure” about that, and on being told that they were, that it was a “good deal” for him.

31 The defendants’ version, as presented in their affidavits, was that Mr Zoljalali said:

I would like to be in a joint venture with you [Mr Smith] and John for the three lots and build the village on lot 4

and,

I have a trust and it can hold the three residential lots for the three of us. I don’t have the experience to do this but you do, so let’s do it.

32 However, as the evidence emerged, Mr Smith and Mr James said that they referred to a “blind trust”, and at least Mr Smith said that he stressed the need for secrecy as to their involvement, which arose from the following circumstances.

33 Mr Smith, Mr James and a Mr Davidson, who does not otherwise largely feature in the proceedings, became the three directors of LRP2, which was incorporated on 14 January 2003, and which was intended to be and became the trustee and project manager of the Lifestyle No 2 Retirement Project, an unregistered managed investment scheme intended to have up to 20 investors, raising up to $3.4 million for the purpose of the acquisition and development of lot 4. Under the trust deed dated 20 January 2003 of Lifestyle No 2 Unit Trust, LRP2 held its assets upon trust for the investors, who acquired units in the unit trust, which ultimately would convert into units in the development with the benefit of leases to occupants. LRP2 was entitled to a management fee of $3,000 per week for managing the project; at the outset, to 2 percent of project funds which were about $3.8 million; and on completion, to 10 percent of project revenues, less amounts already paid. In the feasibility study, the project revenues were anticipated to be in the order of $11.57 to $14.83 million, and LRP2’s 10 percent success fee was estimated at up to $1,047,000.

34 At no time did Mr Smith or Mr James intend personally to invest in the trust, although they were prepared to guarantee its borrowings. When completion of the purchase of the Pennant Hills property took place in April 2003, the purchase money was funded, as to $1.8 million by LRP2 from the moneys raised from investors, and as to a further $1.8 million by a loan from St George Bank, the primary obligation to repay which was that of LRP2 as trustee of the Lifestyle trust.

35 In the feasibility study investors were told, incorrectly and misleadingly, that the vendor of the site was Mr Zoljalali of Parisi Homes Pty Limited, and that the vendor was to retain, out of the total site, a three block residential subdivision at the rear. Thus, the investors were given to understand that the trust would purchase lot 4, while Mr Zoljalali would retains lots 1, 2 and 3. No reference was made, in the material circulated to investors, to the circumstance that the moneys subscribed to or borrowed by the trust, were in fact to be used to fund the acquisition of the entire site comprising the four proposed lots; nor to the fact that two directors of the trustee, Mr Smith and Mr James, would obtain, as they contend, a lot each in the residential subdivision.

36 The central issue for me is whether the dealings between the parties on 2 December 2002 involved an understanding that Mr Zoljalali’s vehicle would hold the three residential lots for him alone, or for him, Mr Smith and Mr James in equal one-third shares. I accept that Mr Zoljalali approached the meeting on 2 December 2002 as someone who wanted to be a principal in the overall development. While that suggests that Mr Smith and Mr James would have to provide some inducement for him to withdraw from that, I do not see that that bears significantly on the probabilities of the competing versions; even one residential lot was worth about $350,000 which would have been a significant reward for Mr Zoljalali.

37 I accept that it is unlikely that Mr Smith and Mr James said at that meeting, which was their first with Mr Zoljalali, anything which would clearly have conveyed the gross impropriety of the exercise on which they were embarking, in an egregious intended breach of trust. On the other hand, it is not unlikely that without expressly referring to the impropriety of what they proposed, they raised the topic in a way which may have conveyed to Mr Zoljalali a need for secrecy without explicit detail of the impropriety.

38 I also accept that it is improbable that so generous an offer would have been made to Mr Zoljalali as the first step in negotiations. In essence, on his version he was being offered land to the value of $1 million or more, with no risk attached, when Mr Smith and Mr James were proposing to take the ultimate possibility of a success fee of about $1 million, but with all the risks of the development of lot 4 attached to it, in circumstances where Mr Zoljalali was not contributing one cent to the acquisition commercially. That seems a most improbable arrangement.

39 It is then necessary to turn to what happened after 2 December 2002, to see how that illuminates the assessment of the probabilities of what happened on that day. On 17 December 2002, Mr James sent Mr Smith an email, following a conversation with Mr Zoljalali that afternoon, which included the following:

6. Nader expects to get the vacant land (as we discussed), the building contract and something through the syndication out of his involvement plus, as I pointed out, some invaluable experience and a track record.

He needs to exchange so we need to finalise the syndication, asap, or the window of opportunity will close.

40 I do not think that this ultimately advances either case significantly. The parenthesised words “as we discussed” are at least capable of suggesting that there were some conditions or qualifications attached to Mr Zoljalali’s expectation of getting the vacant land. Those words are, of course, capable of other explanation, but the email can be reconciled with either case.

41 On 21 January 2003, the solicitor Mr Freeman forwarded to Mr Zoljalali a draft letter from EDPI to LRP2 for Mr Zoljalali’s perusal and instructions. Relevantly, it read:

We refer to recent discussions in relation to the abovementioned property and note that it has been agreed by and between our respective companies that in consideration of EDPI Pty Limited (EDPI) introducing the property to Lifestyle Retirement Projects No. 2 Pty Limited (Lifestyle) and in further consideration of EDPI allowing Lifestyle to acquire the property in place of EDPI, that Lifestyle undertakes to EDPI that on the purchase of the property and the registration of the plan of subdivision, it will transfer to EDPI for no consideration the whole of the land contained in proposed lots 1, 2 and 3.

....

Finally we confirm that EDPI will be responsible for the costs of, and will construct the section of the road being listed in plan (blank) from reference chainage 00 to chainage 45 as part of the works required in order to obtain approval from Hornsby Shire Council for registration of the plan of subdivision at the land and property information.

42 Also on 21 January 2003, LRP2 sent to Mr Freeman a letter signed by Mr James, copies of which were forwarded to Mr Smith and Mr Zoljalali, relevantly as follows:

Further to our meeting with Mr Zoljalali and yourself, on Friday, the 17th January 2003, we have confirmed our understanding of the stamp duty attracted by the transfer of the subject site, initially to the Lifestyle and Parisi vehicles as tenants in common in proportional shares to be noted in the contract for sale, and subsequently to the Lifestyle vehicle ... as sole tenant of lot 4 of the resultant subdivision and to the Parisi vehicle ... as sole tenant of lots 1, 2 and 3 of the resultant subdivision, as follows ....

43 On 5 February 2003 Mr James sent an email to his accountant Mr Burns, with a copy to Mr Zoljalali, but much of its content was evidently addressed to Mr Zoljalali. It was entitled “Formation of family discretionary trust”. The penultimate paragraph is of great importance and was as follows (emphasis added):

As discussed, we think it prudent to move to exchange in respect of the subject site prior to close of business on Thursday 6 February 2003, ie tomorrow afternoon. This will necessitate the issuance of units in the EDPI Trust to our vehicle prior to close of business on Thursday 6 February 2003, ie tomorrow afternoon. We will have an ACN number available for this purpose tomorrow morning and will co-ordinate with you during the morning to achieve this outcome and to follow up, and assist if necessary, with the establishment of your position.

44 At 9.49 pm that day, Mr Burns replied to Mr James, with a copy to Mr Zoljalali, setting out the essentials for the formation of a discretionary family trust (which the Zoljalali Family Trust was, but the EDUT was not).

45 At 7.31 am on Thursday 6 February, Mr Zoljalali sent an email to Mr James entitled “EDPI - the trust deed” as follows:

Attached are copies of the trust deed and other relevant docs. Please let me know what I need to do.

46 The attachments included, apparently, the EDPI trust deed, an explanatory memorandum and an application for stamping. A little later that morning, at 9.59 am, Mr Zoljalali sent to Mr James an email captioned “Unitholders agreement”, attaching a document called “Unitholders agreement doc”, as follows (emphasis added):

Further to my earlier email of today containing the EDPI trust details, please find attached a unitholders agreement. Following a conversation to our David Smith earlier this morning I sent a fax to Freeman of which I have also attached a copy here for your information. My accountant is on to set up ‘the Zoljalali Family Trust’ and he has also been instructed to settle the EDPI Trust. I will stay right on top of him and make sure he gets all that stuff done. Please give me an update as to our anticipated movements for the rest of the day as I may need to reschedule an appointment I had made some time ago for 3 this afternoon.

47 It will be apparent from that email that Mr Zoljalali had already sent that morning a facsimile to Mr Freeman, of which no copy is in evidence. Nor is any copy of the unitholders agreement to which that email referred in evidence. But by 12.36 Mr Freeman had amended the letter agreement which had been drafted on 21 January 2003, and had forwarded it to Mr Smith, who signed it and returned it to Mr Freeman at 12.36. The amendments were marked up on the document, as follows:

We refer to recent discussions in relation to the abovementioned Property and note that it has been agreed by and between our respective companies that in consideration of EDPI Pty Limited in its capacity as Trustee of the Earth Developments Unit Trust formed by Deed dated 6th February 2003 (“EDPI”) introducing the Property to Lifestyle Retirement Projects No 2 Pty Limited (“Lifestyle”) and in further consideration of EDPI not proceeding to acquire the Property and allowing Lifestyle to acquire the Property in place of EDPI that Lifestyle undertakes to EDPI that on the purchase of the Property and the registration of the Plan of Sub-Division it will transfer to EDPI for no consideration of the whole of the land contained in proposed Lots 1, 2 and 3.
…
Finally we confirm that EDPI will be responsible for the cost of an will construct a section of the road being listed in the Plan by Cattarin Consulting Civil and Structural Engineers, Drawing No C3 File No 01024 from Chainage 00 to Chainage 45 as part of the works required in order to obtain approval from Hornsby Shire Council for registration of the Plan of SubDivision at the Land and Property Information however Lifestyle shall be responsible for and shall pay all other costs associated with obtaining the sub-division of the Property .
Would you please confirm your agreement to the above terms and conditions of the arrangement between our respective companies by signing your agreement at the foot of this and returning the enclosed copy letter.

48 Contracts for the purchase of the Pennant Hills property were exchanged on 7 February 2003. The contract did not state that either purchaser purchased as trustee.

49 The more probable explanation for the amendments contained in the letter of 6 February 2003 from the draft of 21 January which introduced the reference to EDPI acting in its capacity as trustee of the EDUT, is that Mr Zoljalali was the source of the instructions for those amendments, which were probably conveyed in his facsimile to Mr Freeman earlier that morning.

50 As I have said, the email of 5 February is significant. Its chief significance is that it is probably the only document in the case, but certainly the only document which predates exchange of contracts on 7 February, which is consistent only with one and not with the other version of the understanding between the parties. In speaking of “the issuance of units in the EDPI Trust to our vehicle” it was consistent only with an understanding that the Smith/James interests were to acquire units in the trust of which EDPI was to be trustee.

51 Mr Zoljalali said that he paid no attention to that paragraph of the email, as it was not addressed to him and he took it to be communication between Mr James and his accountant. However, somewhat inconsistently, he conceded that he read Mr James’ response to that email. More significantly, when one comes to examine the emails of the morning of 6 February 2003, they consistently refer to the EDPI Trust and its details, and the only reference to the EDPI Trust prior to those emails is in the penultimate paragraph of the email of 5 February 2003, which Mr Zoljalali professes not to have read. In those circumstances, I am afraid that I am unable to accept that Mr Zoljalali did not read the penultimate paragraph of the email of 5 February 2003. The responses in subsequent emails on the morning of 6 February point to that paragraph having been considered by Mr Zoljalali. The sequence of the ensuing emails, and the inclusion in the letter agreement of 6 February 2003 - as I would infer on his instructions - of reference to EDPI acting in its capacity as trustee of the trust, point to there being an understanding between the parties that Mr Zoljalali’s “vehicle” would acquire 30 percent of the Pennant Hills property, but that it would do so in its capacity as trustee of a trust in which Mr Smith and Mr James would have an interest.

52 Moreover, despite the brazen nature of the enterprise of Mr Smith and Mr James, I cannot contemplate that Mr James would have sent the 5 February email, most of the contents of which were addressed to Mr Zoljalali, expressly asserting the necessity of the issue of units in the EDPI Trust to the Smith/James vehicle, unless he believed that there was already some understanding that that was to happen. Otherwise, it would likely have precipitated a dispute with Mr Zoljalali, on the eve of exchange.

53 Mr Murr of senior counsel, for the plaintiff, suggested that while Mr Smith and Mr James had that understanding, it was not something that they had disclosed to Mr Zoljalali. But why then would they act on 5 February as if it were already agreed, and why would Mr Zoljalali proceed to provide details of the EDUT.

54 Mr Murr also put that whereas on 2 December they told Mr Zoljalali that he would receive the three residential lots, they never intended to honour that agreement. However, I cannot see how on 2 December they could have told Mr Zoljalali that he would receive the three residential lots, contemporaneously not intending to honour that offer, in circumstances where they cannot have foretold what Mr Zoljalali’s reaction would be thereafter, or what documentation he would require, nor predict that he would not withdraw if they did not honour such an offer; and if they had made such a proposal, not intending to honour it, I cannot see why on 5 February, Mr James would suddenly have raised the question of the issue of units to their vehicle in circumstances where, if Mr Zoljalali’s response was to the effect of “Well, that was never our deal”, the opportunity to acquire the property might well have been lost.

55 Further, the reference in the 6 February emails to a unitholders agreement cannot, I think, be explained away in the way Mr Murr suggested, as a reference to the 6 February letter. In no way was the 6 February letter, from EDPI to Lifestyle, capable of being described as a unit holder’s agreement. As Mr Zoljalali was never to be an investor in the Lifestyle Trust, it is unlikely to have been a reference to an agreement between unitholders in the Lifestyle Trust. It is much more likely to have been a reference to an agreement between unitholders in the EDUT.

56 Next, there was a meeting on 20 March 2003 between Mr Smith, Mr James, Mr Zoljalali, and his accountant Mr Belz. There is considerable dispute as to what took place at that meeting, and it is unnecessary for present purposes to resolve the whole of that dispute. However, on 21 March 2003 at 11.36 am, Mr Smith sent an email to Mr Zoljalali, with a copy to Mr James, entitled “EDPI Trust Deed amendments” as follows:

Gentlemen, have forwarded the Rapdocs Pty Limited deed to Ron Burns and arranged for a copy of our information pack for Limona to be sent to him as agreed yesterday. It occurred to me that the changes to the EDPI Trust Deed to restrict the maximum number of units which would be issued by the trustee have not been carried into effect. The maximum number should be divisible by three and the power of the trustee to create more or additional units should be removed from the deed.

57 At 2.38 pm on the same day, Mr Zoljalali replied:

I have no objection to David’s proposed changes - ‘the Earth Development Unit Trust’ Deed, can these changes be effected as an addendum or an annexure/schedule to the deed? Please let me know what needs to be done.

58 Mr Zoljalali said that he was contemplating embarking into further ventures with Mr Smith and Mr James and took these proposed changes to be a step towards those further ventures, with the EDUT as a potential vehicle. On the other hand, the nature of the changes proposed makes clear that what was contemplated was a three way split of the beneficial interest. As at that stage all the units in the trust were held by the Zoljalali Family Trust, the issue of further units to bring about a three way split would necessarily dilute the Zoljalali Family Trust’s indirect interest in the three residential lots at Pennant Hills. Moreover, Mr Smith’s email suggests that the proposed amendment was not a new idea but something which had been previously contemplated, and Mr Zoljalali’s response does not convey any surprise at the proposal. While I do not think that these matters are nearly as significant as the 5 February email, they add weight to the view that there was a pre-existing understanding that the beneficial interest in the EDUT, which was to acquire the three residential lots, was to be split three ways between Mr Smith, Mr James and Mr Zoljalali.

59 After March 2003, there was a substantial amount of conduct of all three parties which suggested that all accepted that Mr Smith and Mr James had some reason to be interested in the way in which the development of the residential lots progressed. The original development approvals for lots 1, 2 and 3 were held by Mr Smith. Mr Zoljalali arranged meetings with the architect and the council to discuss the residential subdivision, specifically to accommodate Mr Smith and Mr James. But perhaps the most significant document in this class is an email dated 2 August 2004, shortly before the relationship broke down, from Mr Zoljalali to Mr Smith and Mr James, in which Mr Zoljalali wrote:

I say: let’s stay true and lay to rest the misunderstandings and handshake deals (obviously they don’t work!!) and start from a clean slate.

....

Thompson Close - subdivision: (i) outstanding balance of final invoice for subdivision works to be shared between the three of us.

60 There is no apparent reason for the final invoice for the subdivision works for Thompson Close, which was the residential subdivision, to be shared between the three unless the three each had an interest in that subdivision.

61 Ultimately, therefore, I conclude that on 2 December the parties agreed, not that Mr Zoljalali would receive beneficially all three residential lots, but that his “vehicle” would receive those lots on the basis that Mr Zoljalali, Mr Smith and Mr James would each have a one-third beneficial interest in that vehicle. Mr Zoljalali’s own evidence refers to the use of the term “vehicle” as does the later correspondence. The 30 percent return which would otherwise be involved to Mr Zoljalali is so enormous and uncommercial in the circumstances as itself to strain credulity. While much of the documentary material is silent on the topic, that is unsurprising in circumstances where Mr Smith and Mr James, who were the ones who had some interest in having it documented, were equally keen to ensure that their proposed breach of trust remained obscured. There is at least one document, namely the email of 5 February 2003, which is consistent only with their version and not with the other, and the correspondence immediately subsequent to it tells strongly against Mr Zoljalali’s protestation that he did not read the relevant part of that email.

62 I have not overlooked, in reaching this conclusion, that in my view the oral evidence of Mr Smith and Mr James is entitled to no credit at all. I have already referred to their respective involvement in the fabrication of, and giving of evidence related to, the purported unit certificate. Mr James persisted in denying the forgery, and as I have said, resorted to dissembling to identify purported differences in identical signatures. He also denied that there was anything inappropriate or improper about their proposed obtaining of a benefit at the expense of the beneficiaries of the Lifestyle Trust. While persisting in his denials, he gave his evidence in a guarded manner, and frequently said that he did not understand questions that were entirely clear. Mr Smith, who on entering the witness box professed that he was an honest man, and honest in his commercial dealings, soon conceded that he was not honest in this transaction, and that it amounted to outright theft of two-thirds of a million dollars from his beneficiaries. But as Mr Murr put, Mr Smith really only conceded what could no longer be denied. In fact, both were embarking on a momentous breach of their fiduciary obligations.

63 However, it is unnecessary to, and I do not, accept in full, either version of the 2 December meeting as set forth in the affidavits. It is sufficient that I conclude that a reasonable bystander would have understood from what passed between the parties on that occasion that Mr Zoljalali’s vehicle was to hold the three residential lots on trust for Mr Zoljalali, Mr Smith and Mr James equally. That Mr Zoljalali had that understanding is indicated by his response to the 5 February email, his instructions for the inclusion of reference to EDPI purchasing as trustee in the 6 February letter agreement, his ready acceptance of proposed amendments to the trust deed which would have had that effect, and his insistence (as late as 2 August 2004) that costs relating to the Thompson Close subdivision should be borne equally by the three of them.

64 It follows that the agreement that I find was made, was one which was intended by Mr Smith and Mr James to obtain for them a benefit at the expense of their beneficiaries, without their beneficiaries’ knowledge or consent. It was a flagrant procurement, or aiding and abetting, of a breach of trust by LRP2 of which they were directors, and the question then arises whether a court of equity should enforce it and grant declaratory or other relief to give effect to it. At one stage, late in the course of the hearing, the plaintiff foreshadowed seeking leave to amend to raise a defence of illegality or unclean hands, but for reasons which are understandable did not persist in that course. However, I made clear that I did not think that that was the end of the issue, since where a court of equity is asked to grant discretionary relief such as specific performance, ultimately the discretion to grant or withhold that relief lies in the Court.

65 Probably the leading authority in this State on “unclean hands” is the decision of Long Innes J in Kettles and Gas Appliances Limited v Anthony Hordern & Sons Limited (1934) 35 SR (NSW) 108, particularly at 126 - 131. The significance of that case, as is pointed out by the authors of the 4th Edition of Meagher Gummow & Lehane (at [3-120]), is that whereas in most cases in which a plaintiff has been declined relief on the basis of unclean hands the plaintiff’s conduct has amounted to some breach of a duty which is owed to the defendant, in Kettles the plaintiff’s impropriety consisted of a dereliction of a duty owed to the public generally. This followed authorities descending from Leather Cloth Company Ltd v American Leather Cloth Company Ltd (1865) 11 HLC 523, in which Lord Cranworth had said (at 542):

Nobody doubts that a trader can be guilty of such misrepresentations in respect to his goods as to amount to a fraud upon the public, and to disentitle him on that ground, as against a lawful trader, to the relief in a court of equity which he might otherwise claim. .... The general rule seems to be that the misstatement of any material fact calculated to deceive the public will be sufficient for the purpose.

66 So, in Kettles, Long Innes J held that the plaintiff, who was entitled prima facie to succeed against the defendant for innocent passing off by the defendant of its goods as the plaintiff’s goods, was debarred from relief by the plaintiff’s false claim that the goods were the subject of a patent, maintained by a stamp “patented” on the plaintiff’s kettles.

67 The Supreme Court of Victoria in Kennedy v The Queen [1864] 1 WW& a’B(E) 145 said (at 156):

We know of no instances in which a court of equity will enforce specific performance where such performance will necessarily involve the committal of a breach of trust - in fact, compel that which a court of equity itself of all acts most seeks to prevent.

68 The present is a much stronger case for declining relief on the grounds of unclean hands than was Kettles. In this case the defendants seek the aid of the Court to gain for themselves the benefit of an egregious breach of fiduciary duty which they instituted and procured. I cannot think of anything more foreign to a Court of Equity than lending the aid of the Court to the enforcement of such an agreement.

69 However, for the defendants, Mr Sirtes asserts that they have “washed their hands”. This cleansing is said to have come about, not as a result of anything that took place before the defendants came to equity seeking equitable relief, but as a result of a statement made, almost at the end of the trial, that the defendants would submit to terms that they held their interests in the residential lots, if the case was otherwise determined in their favour, upon trust for the Lifestyle Trust.

70 In Kettles, Long Innes J discussed the circumstances in which a plaintiff can “wash its hands” before it comes to equity. His Honour said (at 129-130):

Mr Bonney however contended that the plaintiff had effectively washed its hands before it came into court, and relied upon the decision in Benedictus v Sullivan, Powell & Co (12 RPC 25, 32); Mrs Pomeroy Ltd v Scale (24 RPC 177) and the observation of Lord Tomlin in J H Coles Pty Ltd v Need (50 RPC 379) also referred to. Those cases are clearly distinguishable from the present. In Benedictus the misrepresentations had been discontinued for more than a year before the suit was brought, and in Mrs Pomeroy , Parker J, as he then was, held that the misrepresentations had been made by accident and had been after a comparatively short time discontinued, and an undertaking at once given more than a month before the institution of the suit, that they would not be continued; and in J H Coles Pty Ltd v Need it was held that the plaintiff never had any fraudulent intent but that even if it had, that would constitute no reason why it should not - for the protection of the public as well as itself - maintain the suit which was in that case the only way in which it could wash its hands.

In the present case there is no evidence that the plaintiff had washed its hands before suit brought, or in fact at all.

.....
In my opinion the plaintiff has failed to show that it had washed its hands, sufficiently or at all, before it came into equity.

71 Those passages make clear that any cleansing has to take place before the relevant party comes to equity seeking equitable relief. In this case, far from doing so before coming to court, the defendants maintained their position throughout, until their counsel’s closing submissions. They indicated that any application to raise a defence of want of clean hands would be opposed. They offered those terms only as a last ditch response when the Court had itself indicated that the absence of a pleading of want of good hands would not necessarily remove the issue. I am entirely unsatisfied, having regard to the contradictory evidence of Mr Smith and Mr James, that any disclosure or any proper disclosure has been made to the unitholders: while Mr Smith asserts that a disclosure has been made, Mr James on reflection denied it. The offer to submit to terms came only at the very last minute, when every other opportunity of avoiding doing so had been explained. There was no washing of the hands whatsoever before the defendants commenced to seek equitable relief by their cross-claim. The “offer” represents, in my view, I regret, a further cynical step in the defendants’ enterprise. Accordingly, I am not prepared to find that the defendants have, as they assert, cleansed their hands.

72 It follows that, though I accept the defendants’ version of the agreement of 2 December 2002, it is an agreement which a court of equity will not enforce, and I will not grant them relief founded on it. What, if any, steps the unitholders in the Lifestyle Trust might take in due course is, of course, a matter for them, and as they are not parties to these proceedings they are not bound by the outcome.

73 As I am not prepared to enforce the contract on which the defendants rely, there appears to be no reason why the plaintiff, who is the registered proprietor of the three lots in question, should not have custody of the title deeds.

74 My conclusions may therefore be summarised as follows:

1. EDPI as registered proprietor of lots 1, 2 and 3 is prima facie entitled to possession of the title deeds.

2. EDPI acquired its interest in lots 1, 2 and 3 pursuant to an agreement that it would hold them upon trust for Mr Zoljalali, Mr James and Mr Smith (or their vehicle which in due course became Rapdocs), in equal one-third shares.

3. That agreement was wholly inequitable, involving Mr Smith and Mr James procuring and/or aiding and abetting a flagrant breach of trust by LRP2, so as to require that equitable relief founded on it be refused.

4. When the cross-claim was initiated, the cross claimants had done nothing to “cleanse their hands”.

4. The cross-claim should therefore be dismissed for want of clean hands.

75 My orders are:

1. Order that the certificates of title in court in respect of Lot 1 DP 1062109 and Lot 2 DP 1062109 be released out of court to the plaintiff.

2. Order that the cross-claim be dismissed.

3. Stand the proceedings over to this Thursday, 15 February 2007, at 9.30 am for argument as to costs.

4. Reserve liberty to either party to apply by arrangement with my Associate for an alternative date in the event that that time is not convenient.

5. Direct that these orders be entered forthwith.

**********

Friday 16 February (Costs)

76 In Kettles and Gas Appliances Limited v Anthony Hordern & Sons Limited, Long Innes J turned to the question of costs and said (at 131):

In this case the plaintiff has charged fraud against the defendant, and - doubtless for tactical reasons - has persisted in such charge to the last. Had the defendant confined its defence to rebutting that charge, and also the charge of using the name ‘Captain’ of ‘Captain Kettle’, and to relying on the use by the plaintiff of the word ‘Patented’ I should have thought the suit should have been dismissed with costs. The defendant, however, has strenuously denied any infraction of the plaintiff’s rights, and has insisted upon its rights to continue the course of action complained of. I consequently cannot regard the defendant as being wholly successful; the case, therefore, does not fall within any of the classes mentioned by Atkin LJ in Ritter v Godfrey [1920] 2 KB 47 at 60. I have held that the defendant has committed a civil wrong against the plaintiff, and the suit fails not by reason of the merits of the defendant, but by reason of the demerits of the plaintiff. Under these circumstances I think each party should bear its own costs not covered by any order made prior to this date.

77 The present case, at least on the cross-claim, bears some similarity to the circumstances that Long Innes J there considered, although the position is somewhat more complicated. In considering the present circumstances in the context of what Long Innes J said, it is necessary to compare the position of the defendant cross-claimant in these proceedings with that of the plaintiff in the passage from Kettles.

78 First, there was an offer of compromise, to which I shall come. Secondly, quite apart from the cross-claim, the plaintiff has succeeded on the claim for delivery up of the certificates of title, and, associated with it, the removal of caveats lodged by the defendants. Thus, the plaintiff has succeeded in obtaining the relief which it initially came to court to get. However, at the final hearing the issues on that part of the claim were minimal and occupied very little time; as a broad assessment I do not think that they involved more than about ten per cent of the case as a whole from its inception until its conclusion, save insofar as specific costs orders otherwise address the issue of costs. In other words, about ninety per cent of the costs with which I am dealing are attributable to the cross-claim.

79 In Kettles, the plaintiff had charged fraudulent as well as innocent passing off and persisted with it to the end. Somewhat similarly, in this case, the cross-claimants not only alleged that there was agreement but also alleged that that agreement had been carried into effect and a unit certificate issued, in which false contention they persisted and never abandoned. Had the cross-defendants confined their defence to rebutting the allegation that it had issued a unit certificate and pursued the question of clean hands then, as in Kettles, the prima facie position (before considering any impact of the offer of compromise) would have been that the suit should have been dismissed with costs. But the cross-defendants strenuously denied that there was any such agreement as the cross-claimants asserted, and on that issue the cross-claimants prevailed; moreover the cross-defendants did not themselves agitate the “clean hands” defence.

80 It was the “agreement” issue that occupied by far the greater part of the case, and while it was to some extent exacerbated by the forgery issue, the cross-defendants must be regarded as having been unsuccessful on the main issue that was litigated. In those circumstances, but for the impact of the offer of compromise, I would be inclined to the view that the defendants should pay ten per cent of the plaintiff’s costs (reflecting the plaintiff’s success on the delivery up issue) and that there otherwise should be no order as to costs.

81 However, the position is further complicated by the offer of compromise, which the plaintiff served on 22 December 2004 and by which it offered to compromise the proceedings on terms of orders for delivery up of the three title deeds, dismissing the cross-claim and that the plaintiff pay the defendant’s costs of the proceedings and cross-claim as agreed or assessed. That offer was not accepted, and the plaintiff has obtained orders not less favourable than the terms of the offer. Accordingly, my starting point must be not the position which I have outlined above as following from Kettles, but that prescribed by (NSW) Uniform Civil Procedure Rules r 42.14(2):

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim:
(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and


(b) assessed on an indemnity basis:

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made.

which would be 23 December 2004.

82 The question therefore becomes whether there is sufficient reason for the Court to otherwise order. It has been said that this question should be approached on the basis that exceptional circumstances will be required to justify a departure from the rule (Morgan v Johnson (1998) 44 NSWLR 578 581-2 (Mason P); Hillier v Sheather (1995) 36 NSWLR 414 422-3 (Kirby P)). One circumstance in which a successful plaintiff offeror may be refused costs under the rule is where the costs are apparently disproportionate to the judgment amount and the proceedings were pursued for an extraneous purpose [Jones v Sutton (No 2) (2005) NSWCA 203].

83 Had the plaintiff limited itself to denying the issue of the unit certificate and asserting a lack of clean hands on the part of the cross-claimants, then there would be no reason whatsoever to “otherwise order”. But it has to be said that the costs of the case have been very substantially increased by the plaintiff’s denial that the agreement between the parties was to the effect alleged by the cross-claimants. Although I am not sure that the case would have been over in one day had that issue not been pressed, it would certainly have been over in half the time which the hearing ultimately took. At least about half of the costs of the case were attributable to the plaintiff’s denial of the agreement, on which issue the defendants succeeded.

84 I do not accept Mr Baran’s submission that it is wrong in principle to look at issues on which parties succeeded and failed for the purpose of determining whether the Court should otherwise order for the purpose of r 42.14. The rule does not prescribe or limit the factors to which the Court can have regard in deciding whether or not to otherwise order. Although, as I have said, it has been said that the question should be approached on the basis that exceptional circumstances will ordinarily be required to justify an “otherwise order”, even those authorities do not say that exceptional circumstances will always be required to justify a departure. The decision in Jones v Sutton, which proceeded essentially on the basis that costs were unnecessarily incurred and that those unnecessarily incurred costs ought not be visited on the unsuccessful offeree, is analogous to the present circumstances. I do not see why the plaintiff should recover its costs of unsuccessfully denying that there was such an agreement as the defendants asserted.

85 As I have said, on a rough basis, I think it can be said that the length of the case was roughly doubled by that issue, and in making that assessment I include the costs of the delivery up and the forgery issues in the other half. To my mind the plaintiff ought not, despite its offer of compromise, have the costs of resisting the cross-claimants’ argument on the agreement issue. It should have half of its costs of the proceedings, assessed on the ordinary basis up to 22 December 2004, and on the indemnity basis thereafter.

86 My orders are:

1. Order that the defendants pay one half of the plaintiff’s costs of the proceedings (including the cross-claim), save in so far as any other costs order already makes provision, such costs be assessed on the ordinary basis up to 22 December 2004 and on the indemnity basis from 23 December 2004.

2. Order that the defendants withdraw Caveat AA922102 affecting the land comprised in lot 1 in Deposited Plan 1062109 and lot 2 in Deposited Plan 1062109 by 16 March 2007.

3. Grant liberty to all parties to apply to extend or abridge the time fixed by the preceding order by arrangement with my Associate.

4. Order that the funds in Court to the credit of these proceedings by way of security for the cross-defendant’s costs be paid out to the cross-defendants forthwith.


**********