ETTRIDGE v OZYJIWSKY - [2013] SADC 77

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ETTRIDGE v OZYJIWSKY
[2013] SADC 77
Judgment of His Honour Judge Slattery
7 June 2013
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS
The plaintiff and the defendant entered into an agreement called a ‘Private Loan Agreement’ under which the plaintiff loaned to the defendant the sum of $100,000 for use by the defendant in trading on the foreign exchange market, using an electronic aid called a ‘robot’.
Under the terms of a written private loan agreement, the plaintiff was to provide $100,000 to the defendant for the purposes of trading on this market, and the defendant was to contribute $140,000 of his own funds. Under the agreement, the plaintiff was entitled to a share of the profits derived from the defendant’s trading. Under its terms the agreement required the defendant to repay the sum of $100,000 to the plaintiff after 20 days trading, unless the plaintiff agreed that the loan could be rolled-over for a further period.
The defendant failed to repay the loan amount of $100,000 on demand being made by the plaintiff.
The defendant alleged that the agreement entered into was not a loan agreement but rather a joint venture, and that the losses sustained as a result of the trading are therefore to be borne by both parties.
The defendant incurred significant losses in his trading on the foreign exchange market.
Held: the plaintiff is entitled to recover the sum of $100,000.
The relationship between the plaintiff and the defendant was that of lender and borrower, and the funds provided by the plaintiff to the defendant are governed by the terms of the private loan agreement, executed by both parties, and not by any other extraneous or implied term.
"Ad hoc implications in written contracts" Lücke, H (1973) 5 Adel L Rev 32, referred to.
United Dominions Corp Limited v Brian Pty Ltd (1985) 157 CLR 1; John Alexander’s Clubs Pty Ltd v White City Tennis Club Limited (2010) 84 ALJR 446; LG Thorne & Co. Pty Ltd v Thomas Borthwick and Sons (Australasia) Limited (1955) 56 SR (NSW) 81; Maybury v Atlantic Union Oil Co. (1953) 89 CLR 507 ; Dairy Vale Foods v Manfield [1998] SASC 6992 ; SVI Systems Pty Ltd v Best and Less Pty Ltd [2001] FCA 279 ; Hoyts Pty Ltd v Spencer (1919) 27 CLR 133; Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387; Anaconda Nicholl Limited v Edensor Nominees Pty Ltd [2004] VSCA 167; Codelfa Constructions Pty Ltd v Statewide Authority of NSW (1982) 149 CLR 337; BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 ; Breen v Williams (1996) 186 CLR 71 ; Renard Constructions (ME Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, considered.

ETTRIDGE v OZYJIWSKY
[2013] SADC 77
Introduction

In this action, the plaintiff was represented by solicitors and counsel. The defendant was self represented. That being the case, I recognise that I am under a particular obligation as a Judge to ensure that I canvass all issues especially those defences canvassed by the defendant as well as any other defence that may have been available to him. This is the way that I have approached my task in this matter. One consequence of this is that I have canvassed in this judgment a number of defences which had not been pleaded by the defendant and upon which I have not received any submissions from the plaintiff. Notwithstanding, and having regard to my decision in this matter, I am satisfied that the plaintiff has not suffered any prejudice as a result.
This action concerns a claim for repayment of the sum of $100,000 by the plaintiff against the defendant. The basis of the claim for repayment is said to be the terms of a private loan agreement executed by the plaintiff and the defendant on 17 April 2012. That agreement was executed by the plaintiff and the defendant in the presence of the plaintiff’s accountant Mr Dichiera (Dichiera) and is Exhibit P1. The document was drawn by Dichiera on instructions from the plaintiff. There is no contest of this agreement or that it is executed by both of the parties to this action.
In the particulars to paragraph 6 of the Statement of Claim, the plaintiff says that the express terms of the private loan agreement provided the following:-
“(a) the plaintiff agreed to provide a temporary personal loan to the defendant in the sum of $100,000
(b) the defendant agreed to trade daily (5 days per week) for a period of one month using the plaintiff’s loan of $100,000 together with the defendant’s monies of $140,000
(c) the defendant agreed to repay the temporary personal loan of $100,000 plus 60% of the resulting profits achieved by trading a sum of $100,000 to the plaintiff at the end of one month or as agreed between the parties.”
It is common ground between the parties that the trading referred to here was trading on the foreign exchange money market using an electronic aid called a ‘robot’. This method and the meaning of these terms will be addressed later in these reasons.
The plaintiff’s case is that the agreement was more than a mere loan agreement. It created a relationship between the plaintiff and the defendant under which the plaintiff was allegedly entitled to receive repayment of his personal loan to the defendant as well as a share of the profits made by the defendant in trading during a period of one month in which the loan existed. Thus, it may be seen, that the plaintiff was to share the benefit but not the burden of the trading (according to the plaintiff’s case).
The case for the plaintiff is that the defendant is in breach of the private loan agreement because the defendant has refused to repay to the plaintiff the sum of $100,000 at the end of one month from the time when the loan was made and as a result the plaintiff suffered loss and damage. The defendant denies the plaintiff’s claim.
In evidence it became clear that not only does the plaintiff allege the failure to repay the sum of $100,000 but that also the defendant “traded” in breach of the oral part of their agreement by trading for more than one hour per day by not closing all trades at the end of the day and risking more than 5% of the capital at any one time.
The defendant’s position is that he rejects that the $100,000 provided to him by the plaintiff was a loan and says that in fact the venture was a joint venture.
For the reasons which I set out hereunder, I find that the agreement reached between the plaintiff and the defendant was indeed a loan agreement, that the defendant breached the agreement by failing to repay the sum of $100,000 in accordance with its and that the defendant is liable to repay this sum to the plaintiff.
A preliminary issue: foreign exchange trading
Part of the relationship between the plaintiff and the defendant involves trading on the foreign exchange trading market. The foreign exchange trading market may be described in a summary form as investments in the movement in the value of currency according to the exchange rate of currencies in the international market.
As in the form of all futures trading, a profit or loss may be made depending upon the movement, up or down in the market and depending upon the position (positive or negative) taken by the investor in that market.
Also similar generally to other trading of this type, an investor requires a capital sum to be used in an investment and in respect of which a call may be made having regard to the movement in the market. That is, if a market moves negatively against the investor so as to decrease the value of the investor’s position in the market, then the investor may have one of several options. The investor could close out the investment position and crystallise the loss at that time or alternatively, the investor could maintain a position in the market in the hope (however speculative that hope might be) of trading out of the negative position created by the movement of the market against the investor’s position.
Self evidently, a decision to remain in the market also carries with it a decision to accept the risk that the market may continue to move negatively against the position of the investor. The question is whether the investor is in a position to open other positions in the market so as to neutralise that increasingly negative position created by the adverse movement in the market. If the position is reached that the market moves against the investor’s entrenched positions then losses are sustained and margin and other calls are made on the investors to cover the trading losses.
In foreign exchange trading, as with all other similar forms of trading, there are particular aspects of nomenclature that should be explained. The most important is what is called a “pip”. Movements in the market, positively or negatively, are called pips of movement. A positive movement in the market will create a pip of profitability. A negative movement in the market will cause a pip of loss. However a pip of movement has a multiple affect. The defendant explained in his evidence and I accept that if for example, a trader was trading at an investment of $1 in the movement in the market, if there was a pip of movement the $1 would have a multiple effect of 100. That is, for every pip of movement of $1, the multiple effect is $100. That effect may occur positively or negatively. Therefore, for every pip of movement there is a multiple of a positive or negative effect. I have used that example as an easy example to understand. The investors in the foreign exchange market did not generally deal in investments of movements of $1 but rather in percentages of a cent however, for present purposes, to explain the risk at being 100 to 1 in terms of $1 lot sizes of investment adequately explains the risk in the foreign exchange market.
A second aspect in relation to the type of investment that was occurring here is that a particular form of software has been developed over time which, for reasons that were never explained, is called a “robot”. Trading using the robot software allowed a trader to make investments in the market which would be continually analysed by a computer system using the software so that the computer system itself would identify adverse or positive movements in the market. That software, through the guidance of the user of the computer, could be used to “hedge” a negative movement in the market. That is, by use of the software, an investor could immediately limit the investor’s losses in the market by requiring a converse position to be opened in the market to hedge the negative movement and to balance the losses in the negative movement by the hedge investment.
Of course this is subject to skill, timing and available capital. As in all such trading, an investment may, according to the level of adverse movement in the market in the positions owned by the investor, be required to answer a call to cover the losses sustained by the investor in the market. That is why the investor must have a level of capital available to answer such call.
Trading in the foreign exchange market as I have described is obviously high risk. It is not an area suited to investor novices, requires particular diligence, skill and judgment and also requires participants to be able to cover losses as and when those losses arise.
The legal issues
The case for the plaintiff is outlined in his pleadings is that the defendant made certain statements about foreign exchange (Forex) trading to him, including that the defendant had never lost money on Forex trading, that he would trade for 1 hour each day for 20 days per month, that he would risk 5% up to a maximum 10% of total trading fund, that he would endeavour to make a profit of 1% on his total net trading funds each day and that in order to trade effectively in the Forex market it was necessary to have a net trading balance in the order of $200,000 to $250,000. The plaintiff asserts that the effect of all of these statements upon him led to the plaintiff entering into an arrangement with the defendant to trade in the Forex market. Due to the intervention and the insistence of his accountant Dichiera, the plaintiff did not enter into any formal legal relationship with the defendant on Forex trading except to be a lender to the defendant under a loan agreement. The plaintiff further pleads the written loan agreement (Exhibit P1) earlier referred to in these reasons.
The defendant’s defence is that the arrangement that was reached between the parties was a joint enterprise and not a loan. The defendant asserts that the name of the written agreement namely: “private loan agreement” does not truly reflect the actual agreement reached between the parties.
The questions for determination
In my view, the questions for determination are these:-
1.   What was the relationship between the plaintiff and the defendant that gave rise to the “private loan agreement” that both the plaintiff and the defendant admitted was executed on or about 17 April 2012;
2.   Was the private loan agreement to be viewed in the broader context of another type of relationship between the parties, whether it be a joint venture agreement or some other agreement under which, by one method or another, the private loan agreement was to be construed;
3.   Having regard to the terms of the private loan agreement, was the position of the plaintiff that he was entitled to obtain the benefit but not the burden of the Forex trading done by the defendant using the $100,000 provided by the plaintiff to the defendant for the purposes of trading;
4.   Was the private loan agreement properly to be construed as a monthly turn over agreement or was it an agreement that would continue on and roll on month to month.
The witnesses
There were only three witnesses called in the trial. The plaintiff and the defendant gave evidence. The plaintiff also called his accountant Dichiera. The defendant did not call any other witnesses.
In the views that I have formed, it is not necessary for me to resolve this matter based upon the credit worthiness of the evidence given by the parties. That said the plaintiff and the defendant were both unimpressive witnesses. I do not accept the plaintiff’s evidence unless his evidence was corroborated by other admissible evidence especially by the other independent evidence including the contemporary documents. In my view, the approach of the plaintiff was at all times to give evidence which supported his case. One example is that he portrayed himself as a conservative investor. He emphasised a number of times that he pleaded with the defendant to stop trading because that trading was unsuccessful. This is in the face of documentary evidence in which the plaintiff was encouraging the defendant to continue trading to recover losses. The plaintiff purported to suggest that this position was supportive of his interest in obtaining profit from the trading but that his interest was always to recover his $100,000 loan.
The plaintiff gave evidence that on 29 April 2012 he had telephoned the defendant and upon finding out that the defendant had been losing money, asked him to stop trading.[1] However email records indicate that the plaintiff did not want the defendant to stop trading but actually urged him to continue trading despite the position. In an email dated 3 May 2012, the plaintiff wrote: “remember… everything we really want… is on the other side of fear.”[2] Whatever might have been the plaintiff’s intention by this clumsy misuse of the aphorism of Marcus Aurelius, objectively the intention of the plaintiff was to urge on the defendant to continue trading and, it may be assumed, to make profit for the plaintiff.
[1] T108.32-T109.4.
[2] Exhibit D16.
Likewise, diary entries the plaintiff says were made at the time of the event were demonstrably done later and appear directed to events that might be thought by the plaintiff to be important in a trial. I have read the diary entries relied upon by the plaintiff. They show no signs of having being written at the time of the alleged events. They read like a rote script. They plainly appeared to me to be a reconstruction of the events made by the plaintiff.
For different reasons I do not accept the evidence put by the defendant. He dissembled at every opportunity. He refused to answer direct questions and became more evasive, argumentative and difficult the longer he was cross examined. The defendant refused to confront the situation that he largely had created and would try to avoid difficult questions at every opportunity. I found the defendant less impressive as a witness than the plaintiff but both were unimpressive witnesses.
I found that Dichiera was a witness of truth. The evidence that he gave was forthright and I accept the version of events that he gave in its entirety. Despite the fact that he was the plaintiff’s accountant, I found that he was not a partisan witness and gave his evidence in an objective manner.
In order to explain my findings in the matter, I will set out hereunder a detailed factual chronology of the events as I find them to have occurred having regard to the evidence and the documents.
A chronology of events
As at 2010, the plaintiff and the defendant had known each other socially for about 14 or 15 years. It is not necessary to make a precise finding in relation to the length of time. It is clear that during 2010, the plaintiff described himself as a property investment educator. He worked for a company that ran free seminars to give people information about how to invest in property. He invited guests along to those seminars.
The plaintiff’s company is called Sandpipe Investment Property Solution and he has been involved in the business of that company for about 4 and a half years.
Prior to that time he was a self employed mortgage broker working in a mortgage broker franchise called “Go Loans”. He operated that business from 2000 until 31 December 2010 at which time that business was sold.[3]
[3] T60.
The plaintiff gave evidence that he met the defendant at a networking marketing presentation meeting that was held 2 or 3 times in a period of six months. The programme under discussion at those meetings was called “One Cell Net” which was a multilevel marketing programme that offered mobile phones. He also met the defendant at something called the “Syndicate Club” which was a network marketing programme. The plaintiff was involved in that syndicate club for a period of 6 or 8 years but his involvement ceased in about 2010. He saw the defendant infrequently after that time.[4] The plaintiff understood that the defendant was involved in “futures” trading generally although he was not aware of any detail. The defendant did not seriously challenge this factual position.
[4] T61.
However the defendant recalls speaking with a Mr Trevor Fuggle in early 2011 about the development of what he called a “robot” for trading. Mr Fuggle was a specialist software writer in the employ of Telstra.
I previously generally described the trading robot. It was a piece of software dedicated specifically to Forex trading. The defendant claimed to have had input from time to time to the development of this robot. It is unnecessary for me to determine whether or not that was the case. No evidence was led from Mr Fuggle.[5]
[5] T209-210.
Sometime in early 2011, the plaintiff became reacquainted with the defendant. The plaintiff recalls that sometime in early 2011, when he saw the defendant, during their conversations the defendant raised the fact that he was doing Forex trading on the S and P 500[6] Index.[7] All that the plaintiff could recall was that the defendant told him that the system he was using at the time was the piece of software called a robot which was on his computer. The plaintiff said that the defendant explained what he was doing in the S and P 500 Index trading and said he was making good profit. On occasions he said that he could make $500 or $600 before breakfast.[8]
[6] Standard and Poors 500 Index.
[7] T62.4.
[8] T62.17-27.

In or about April 2011 the plaintiff was contacted again by the defendant. The defendant told the plaintiff that he was changing his trading method to trade on the Forex market because it had a lot bigger market and better return.[9] In the period after 2011 there were a number of conversations between the plaintiff and the defendant over the telephone. There was also contact though emails. The plaintiff alleged and the defendant did not deny that the defendant sent to the plaintiff regular simulated trading statements all showing profits and many comments upon those simulated trading statements about Forex trading, how great the robot programme was and how easy things were (inferentially to make money).[10]
[9] T62.32-33.
[10] T63.9-12; Exhibit P2.
I have reviewed the content of Exhibit P2. The email documents that constitute the exhibit are largely self explanatory but it is apparent and at the least implicit that on any fair reading of the emails, the defendant was attempting to convince the reader of them about the benefits of the Fuggle Robot, the benefits of the programme generally and the potential profitability of Forex trading using the programme.
Also in the conversations after April 2011, the defendant informed the plaintiff about the Fuggle Robot software programme and how it was developed by Trevor Fuggle. In particular, the plaintiff was told by the defendant that the Fuggle programme could achieve faster trading than by trading manually through the computer.[11]
[11] T63.29-T64.2.
In these conversations, the defendant informed the plaintiff that a trader could trade whether the market was going up or down and the greater the volatility, the greater the chances of making decent profits. A trader using the software could buy and trade and then follow the trade and the computer would react if the trade was heading in a direction unfavourable to the trade. The effect would be that the computer would then authorise a trade and buy hedge trades in the opposite directions so as to capitalise in the change or movement of the market.
The plaintiff was told by the defendant that this sort of trading is called “scalping” because it is done over a very short period of time and a trader could buy and sell 4 or 5 trades in a matter of a minute.[12]
[12] T64.4-17.
The simulated trading statements were only that; they were simulated and they were not actual trading statements. However some of the trading statements that were forwarded by the defendant were actual trading statements. They showed very positive results. They were described by the defendant in cross examination as “gimme”.[13] The defendant admitted in cross examination[14] that the “gimme” type of trading result was the exception rather than the rule and that the various positions achieved would be quite different from those types of results. It is to be noted that a significant number of the emails received by the plaintiff from the defendant enclosing trading information disclosed “gimme” trades.
[13] T238.4
[14] T38-T39 et seq.
As an example, on 6 May 2011, the defendant sent to the plaintiff an email stating that $154,764.20 profit had been made in a 21 hour trading period. The defendant disclosed to the plaintiff a simulated trading statement providing data backing up the claim.[15] In and about these messages delivered between the defendant and the plaintiff (and others on the email list) the defendant continually made a number of statements about his trading approach. For example, in an email of 23 August 2011[16] received by the plaintiff from the defendant (again on the circularised email list) the defendant announced that, amongst other things, he would not do particular trading if he had to risk 10% of the bank which he thought was far too high. What was circularised at that time was a simulated trading statement which again disclosed profitable trading.[17]
[15] Exhibit P2; T69.
[16] Exhibit P2.
[17] Exhibit P2; T71 et seq.
I am satisfied that the defendant was circularising the plaintiff and others in order to interest them in the potential of the Fuggle Robot as well as to interest them in some form of trading arrangement using the Fuggle Robot and, perhaps, using the services of the defendant. I am satisfied that the defendant’s intentions were not merely altruistic. I am satisfied that the defendant was attempting to position himself (quite understandably) to be a principal participant in any trading that might occur using the Fuggle Robot. By this time, the defendant appears to be growing more confident in his ability and certainly more confident in the developing Fuggle Robot. It is also clear from the content of Exhibit P2 and from the evidence that the Fuggle Robot was still in the evolving stage. It had not reached finality of development.
There is also some confusion in relation to the plaintiff’s evidence. The plaintiff gave evidence[18] that sometime after 23 August 2011, discussions occurred between him and the defendant about limits of trading. The plaintiff said that he and the defendant discussed the limit to which they would trade and that the defendant assured him that he would never risk more than 5% of the amount in the trading account at any one time, he said that 5% could be a number of trades (i.e. 2, 3, 5, 10 or 20 trades) but that however many trades were involved the defendant would never expose more than 5% of capital at any one time. The plaintiff was satisfied that the defendant was attempting to convince him of his conservative approach.
[18] T74.14-20.
It is difficult to identify precisely when this conversation may have occurred. On one basis, having regard to what was being communicated between the plaintiff and the defendant, there would be little cause for this conversation to occur in early April to mid June 2011. However it is also consistent with the content of Exhibit P2 in which the plaintiff was being told in the email communications that the defendant would never risk more than 10% of the bank. It is sufficient for current purposes to find that this type of conversation may have occurred from time to time but in the most general fashion.
I do accept however that an issue arose as between the plaintiff and the defendant sometime after 23 August 2011 that the plaintiff did ask the defendant on at least one occasion had he ever lost money in the market. Self evidently this is a naïve question asked by anybody who would profess any expertise in investments. Surprisingly, and this was not challenged in the defendant’s evidence or any other way, the plaintiff said that the defendant assured him that when looking at the simulated trading over the same 12 month period, there was never any loss. The plaintiff said that he was impressed with that result.[19]
[19] T75.4-10.
However, again that is only dealing with simulated trading. There was no evidence as to how “simulated” that trading may have been. It is possible and perhaps likely that the trading was not simulated at all but was trading “after the event” i.e. positions having been established after the movement in the market became obvious and not when particular positions were exposed to losses or gains. There was no evidence on the matter and I need not develop it further. However, at this time when the questions were being asked of the defendant by the plaintiff about losses in the market, the context was simulated trading and other trading. There was no evidence to suggest that in the simulated trading losses were made. The question is whether losses were made by the defendant in his own personal trading.
The defendant’s very positive outlook in relation to the matter was based upon the development of the Fuggle Robot. That was the essential feature of the defendant’s position and was the “rock” upon which the foundation of his trading scheme was built. Absent the Fuggle Robot, the position may well have been very different.
That position did become apparent as at Christmas 2011. The defendant admitted that at that time, he fell out with Trevor Fuggle.[20] The defendant did not inform the plaintiff of this fact. It is difficult to assess the relationship between Fuggle and the defendant prior to Christmas 2011 but a reasonable inference arises that the defendant and Fuggle were working on the development of the Fuggle Robot although it is also a reasonable inference that the majority of the work was being done by Fuggle. It appears that the inspiration for the operation of the robot belonged to Fuggle and that the input by the defendant was more in the nature of trading issues.
[20] T226.28-29.
There is very little reliable evidence of what transpired between late 2011 and 2 February 2012. The events as they transpired in that period were not pursued in evidence or in cross examination and I will leave those matters to one side. For the reasons which follow, it is my view that there appears to have been some significant developments in the position of defendant because of the loss of his contact with and therefore reliance upon Trevor Fuggle. In my view this is potentially important in light of the defendant’s position subsequent to January 2012 and in particular the basis upon which he could make any representation to any third party about either the Fuggle Robot or Forex trading.
On 2 February the plaintiff and his accountant Dichiera met with the defendant at the defendant’s home. The plaintiff said the parties were together for a period of time, well over an hour and questions were asked by the plaintiff and Dichiera of the defendant about his trading criteria. The plaintiff says the defendant demonstrated the operation of the robot so that Dichiera in particular could understand how it worked.[21] The defendant explained the method by which the robot was used for trading and the advantages of using the robot as against doing trading by manual method. The methodology of achieving the results was displayed and explained.
[21] T82.14-18.
The question of profitability arose during those discussions. The plaintiff says that the defendant informed them that if he achieved one half to one percent profit per trading period of 1 hour per day then he would be happy with that result. He also said that he would only ever expose 10% at a time being 10% of the trading account funds into that trading.[22]
[22] T82.31-T83.3.
Dichiera says that after the usual introductions, he said that there was a lot of discussion over a period of 3 to 4 hours. He said that what was shown by the defendant would suggest to him that the Fuggle Robot was a foolproof system and that there was no risking of big money. The understanding he obtained was that there was only ever going to be a risk of a small amount of capital and no more than 5% of the total capital sum.[23] Dichiera says that the defendant emphasised on a number of occasions that he would risk no more than 5% of the capital.[24] He said that the session that was done showed that it was closed at the end of the day so that there was nothing left overnight. That gave real comfort to Dichiera.[25]
[23] T186.24-27.
[24] T186.31-33.
[25] T187.11-13.
Somewhere in the discussions, and it is not entirely clear where in the discussions or who raised it, there was a discussion about a structure called the Fenix Club.[26] It appears to have been raised by the defendant but the plaintiff sent an email to the defendant on 5 February 2012 outlining suggestions for the structure of the Fenix Club.[27] It was on or about this time that the plaintiff said that he first saw the Fenix unit trust list of names.[28]
[26] Exhibit D17.
[27] Exhibit D17.
[28] Exhibit D14.
What is clear is that the Fenix Club was explained to be a list of members who may be interested in doing Forex trading using the Fuggle Robot. What was not said to the plaintiff by the defendant at any time in February 2012 was that the Fuggle Robot was no longer necessarily available to the defendant in respect of his trading.
There was then a meeting at the Snooty Fox Hotel in North Adelaide on 14 February 2012 at 7:00pm. This was associated with the launch of the Fenix club and was described by the plaintiff as a prelaunch presentation to potential investors. The plaintiff attended as did the defendant. There were about 50 other people present at the launch. The plaintiff attended with his partner Sharon and his accountant Dichiera.
The plaintiff says that Graeme Hollidge, solicitor, was acting as the chair of the meeting and he introduced Trevor Fuggle to the meeting. Fuggle was introduced as the person who had developed the robot and he had his computer at the launch and through an overhead screen, Fuggle was demonstrating how the robot traded in a form of live trade situation.[29]
[29] T84.38-T85.5.
The plaintiff says also that someone from Switzerland was introduced to the meeting. He made an explanation about Forex trading and said that he had never seen any robot achieve the results that the Fuggle robot achieved.
There were other speakers and there were discussions about who were to be directors of the Fenix Club. The defendant addressed the meeting and explained his method of training including that he would ever only expose 5% of his trading funds.[30] The defendant informed those present about the development of the robot with Trevor Fuggle over a period of many months and finally they were at a point where they were confident they would achieve some really, really great results. The evidence of the plaintiff suggests that the defendant was still claiming ownership of some aspect of the Fuggle robot despite the fact that the defendant and Fuggle had fallen out at a time prior to Christmas 2011.
[30] T86.2-14.
In the context of making those statements, the plaintiff alleges that the defendant made comment about the possibility of doubling people’s investments within 3 months, that traders would never trade more than 1 hour per day because of the need to stay alert and fully concentrate and that trading would never risk more than 5% of total funds available. The end result was to attempt to achieve one half of 1% profit on the account in that 1 hour of trading per day.
In cross examination, the plaintiff was asked and rejected the suggestion that there may have been discussion at the meeting about Forex trading being high risk. This may be thought to be implicit in light of what the plaintiff could recall was discussed at the meeting.
Dichiera gave evidence about his attendance at the Fenix Club meeting at the Snooty Fox Hotel on 14 February 2012. He was really there to see what the whole thing was all about but said that he did pick up that there was friction between 7 principals of the Fenix Club who were present.[31] He was not aware of the source of that friction. He could not remember much else about the meeting.
[31] T189.16-18.
The defendant rejected the version of events put forward by the plaintiff about the meeting at Snooty Fox on 14 February 2012. He said that a Mr Andrew Kerry specifically raised the question of losses on trading at this meeting.[32] The defendant also initially rejected any suggestion that he had spoken at the meeting. However, when pressed, he did admit that he did speak to the meeting. He rejected any suggestion that he said anything about limiting trades to 5% of the pool because he says that is something he could not do[33] and said that his role was really to introduce Trevor Fuggle because he was the person who brought Fuggle to the meeting in Adelaide, that he wanted to introduce Fuggle to everybody and he just told his little story on how he and Fuggle came to cross paths and how the robot evolved over the previous 14-15 months.[34]
[32] T217.16-19.
[33] T250.24-27.
[34] T251.
The plaintiff was aware of the Fenix Club from at least 21 August 2011. On that day he had received an email from the plaintiff circulated also to Mr Hollidge and Mr Peter Smith.[35] It is not in contest that Mr Hollidge and Mr Smith became directors of Fenix Club Pty Ltd.
[35] Exhibit P6.
Dichiera gave evidence that contradicted the initial assertions of the defendant that he did not speak or that if he did speak he did not provide much information. Dichiera’s recollections were that what was said by the defendant at the Fenix Club meeting was much the same as he had heard at the defendant’s home a couple of weeks earlier.[36]
[36] T189.9.
Within about 10 days of the meeting at North Adelaide, the plaintiff attended at the defendant’s home. This was on or about 23 February 2012. The plaintiff says that he merely dropped into the defendant’s home to discuss Forex trading and he and the defendant had discussions about scenarios and trading arrangements that the defendant was proposing. Obviously enough, by this time, the defendant had made a suggestion that the plaintiff and the defendant should throw in their resources together to do Forex trading. At this meeting, the plaintiff says that the defendant invited him to invest directly with him and share the profit.[37]
[37] T88.28-T89.28.
It was on this occasion that the defendant informed the plaintiff that there had been a disagreement between the defendant and the other members of the Fenix Club. The defendant informed the plaintiff that the other members of the Fenix Club wanted to take control of the robot.[38] In my view, the statement that the other members of the Fenix Club wanted to take control of the robot is inaccurate. The plaintiff had fallen out with Fuggle prior to Christmas 2011. Whatever had occurred with the robot after that time was entirely at the discretion of Fuggle and there was no suggestion that in some way the defendant attempted to assert any intellectual property right in the robot or that he took steps to assert and protect such intellectual property rights.
[38] T89.9.
In the view that I have formed, it was necessary for the defendant to inform the plaintiff as soon as possible that his relationship with Fuggle had ended and that he did not have access to the Fuggle robot. Up until at least February 2012, that had been the basis upon which all of the discussions had occurred between the plaintiff and the defendant.
Dichiera also gave evidence that at about that time, he had a conversation with the plaintiff about how the plaintiff and the defendant might move forward in relation to the possibility of doing Forex trading. Dichiera gave evidence that he was always of the view that the plaintiff should not have “thrown in” his capital with the defendant and so marrying his fortunes to the skills of the defendant.[39] Dichiera’s attitude was that the only relationship between the plaintiff and the defendant should be the plaintiff lending money to the defendant for his use and there being an obligation to repay. Dichiera gave evidence that from his point of view, and this was his advice to the plaintiff, the arrangement was never intended to be anything like a joint venture. He said that the defendant was always in control doing the trading and that as he understood the position, he had the platform, “the Fuggle robot”, ready to go to trade as he had explained to the plaintiff.[40]
[39] T192.
[40] T193.21-25.
At the meeting on 23 February 2012 at the defendant’s home, the plaintiff said that discussions were occurring about different scenarios and trading arrangements. Options were discussed about sharing profit, for example 50% each and that other people might be invited to invest. It is the case that at that meeting the plaintiff became aware of the fallout between the defendant and the Fenix Club.[41]
[41] T89.1-4.
Nothing appears to have happened in the next two weeks but on 14 March 2012 there was another meeting between the plaintiff and the defendant at the defendant’s home. Present at the meeting were the defendant, the plaintiff, the plaintiff’s partner Sharon as well as his partner’s brother and sister-in-law Kevin and Cathy. The plaintiff’s partner, her brother and his wife were not called to give evidence in the matter.

The plaintiff purported to have made a note of this meeting. I have reviewed the notes and I have previously expressed my view in relation to the reliability of both the content and contemporaneity of those notes. However, for current purposes it is necessary to make some findings about what occurred at this meeting. The plaintiff says that what was discussed at the meeting was essentially the same things that had been discussed previously; 5% maximum exposure of funds, trading for one hour, half percent profit per trade and other similar strategies. It is pertinent however to note that the defendant continued to mention the Fuggle robot in action in the computer. I am satisfied that by this time the defendant did not have authority to be using the Fuggle robot. The plaintiff’s partner and her brother and sister-in-law were there because they were interested in talking about or discussing Forex trading. It was in that context that the defendant reiterated what had previously been discussed. In those circumstances that, on balance, it may be said that these topics were discussed.
The defendant gave evidence about the meeting but his evidence was of little assistance. He would not confirm one way or the other in examination or cross examination whether he said anything about the 5% maximum exposure. He attempted to avoid questions on the topics raised by the plaintiff in his evidence. Importantly he did say that by that time he already had, and was attempting to use, new software[42] and was no longer using the Fuggle robot. This was not known by the plaintiff. This is a very important point in this matter.
[42] T211.35.
Consistent with the way in which the matter had developed, in the two week period or so after 14 March, there were a number of discussions by telephone between the plaintiff and the defendant.[43] It was in those discussions that the plaintiff and the defendant commenced to formulate how the plaintiff would become involved with the defendant. Understandably, the plaintiff was only prepared to invest a moderate amount of money, $20,000 to the scheme but the plaintiff’s evidence on precisely what the scheme was to be was unclear. The plaintiff said[44] that the discussion was about how much money he was going to lend to the defendant for Forex trading. I cannot accept that version of events. It is not consistent with Dichiera’s evidence because Dichiera was the person who insisted that the arrangement be through a loan agreement and not by some direct investment into the capital of some joint venture arrangement.
[43] T94.
[44] T94.
In my view, on balance, it is more likely that at that time the plaintiff and the defendant were discussing a direct form of investment by the plaintiff. That said, because of the paucity of evidence, I am unable to make any finding about how that direct investment would eventuate.
The plaintiff gave evidence that there was some discussion about the plaintiff investing in the Fenix Club itself however that seems to have come to an end because of the defendant falling out with the members of the Fenix Club.
At about that time, that is on or about 14, 15, 16 or 17 April 2012 (the date is not clear), the defendant made a suggestion to the plaintiff that there would be a greater “critical mass” of opportunity if for example, the plaintiff contributed $100,000 with his (the defendant’s) $140,000 to be able to leverage and therefore make bigger profits. The arithmetic is reasonably simple. Using 5% of $240,000 would achieve a bigger profit than by trading using $140,000 plus $20,000.[45] The defendant was unable to give clear evidence on the topic.[46]
[45] T94.29-28
[46] T268.
What also appears to have been happening is that between March and April 2012, the defendant was involved in training himself with a new software manufactured by a Mr Luck.[47] The plaintiff did not know of this development and the defendant did not attempt to inform him about it. The plaintiff was under the impression that the defendant continued to use the Fuggle robot.
[47] T227.1-6.
It appears that at about this time i.e. on or about 16 April, the plaintiff received from the defendant a document prepared by a company called Velocity Trade Limited called “Velocity Trade Introducing Broker Agreement”. It is an agreement made between Velocity Trade Limited and the defendant. It sets out the terms of remuneration to the defendant for introducing other investors to Velocity Trade Limited. That company had apparently not been mentioned to the plaintiff prior this time.[48]
[48] See Exhibit P3.
The plaintiff says that from the outset i.e. from about 14 April 2012, he wanted the arrangement between him and the defendant to be a loan agreement. I am unable to accept that version of events. In my view, having heard the evidence of Dichiera, I am satisfied that it was Dichiera who was kept up to date from time to time by the plaintiff about the discussions that were going on between the plaintiff and the defendant and about the amount of money that might be put forward by the plaintiff in relation to Forex trading. It was Dichiera who advised the plaintiff against a direct investment and in favour of a loan arrangement.
Dichiera also then became aware that the amounts to be provided by the plaintiff began to vary. It changed from $20,000 to $40,000 to $100,000.[49]
[49] T196.19-T197.10.
Dichiera said that he realised that the plaintiff was being asked to throw in his lot with the defendant on a basis that was not recorded anywhere and under which the amounts of the investment were varying from time to time from $20,000 to $40,000 and now to $100,000.[50]
[50] T196.19-T197.10.
As a result, Dichiera says that he urged the plaintiff to get his arrangements with the defendant formalised and to get some written record of what was their agreement. I accept the evidence of Dichiera and I reject the evidence of the plaintiff insofar as it is inconsistent.
It was Dichiera who told the plaintiff to strictly prepare a formal agreement as a loan agreement so that the plaintiff would not lose control of his own money.[51] Dichiera gave advice to the plaintiff that if the arrangement was to be in the nature of a joint venture then the parties would have been required to have obtained an ABN and also to set up an investment structure. In those circumstances Dichiera insisted that there be a formal loan agreement executed and that there be formal terms for repayment of the loan and for distributions of profit. Dichiera gave evidence that he was concerned about the defendant absconding with the money belonging to the plaintiff and insisted that the plaintiff ensure that the defendant had a 40% equity in his home. From Dichiera’s point of view the agreement must always be a loan agreement.[52]
[51] T96.8-9; T97.31-34; T197.35.
[52] T200.21-26.
After discussing the matter with Dichiera, the plaintiff then rang the defendant, told him of Dichiera’s recommendations and said that he would need to follow Dichiera’s recommendations on the matter. He told the defendant about the loan document and the defendant’s attitude was that he would be happy with whatever the plaintiff came up with.[53]
[53] T96.33.
Soon after Dichiera spoke to the plaintiff a meeting took place between Dichiera, the plaintiff and the defendant at the plaintiff’s home. A loan agreement had been prepared. It is Exhibit P1. It was put before the defendant. Two copies were prepared and each of the defendant, the plaintiff and Dichiera as witness signed each copy. The plaintiff kept one copy and the other was given to the defendant.[54] Dichiera has a recollection at the time of that meeting that he questioned the defendant about whether he had ever made any losses. Dichiera recalls asking him (the defendant) a direct question to the effect: “…look, have you ever made a loss?” The response from the defendant was: “no, I have never made a loss at the end of a trade.”[55]
[54] T100.2-5.
[55] T199.23-25.
I accept the evidence of Dichiera. The plaintiff gave similar evidence and to the extent that his evidence is corroborated by Dichiera’s evidence, I accept the plaintiff’s evidence on that point.
The defendant claims that when the meeting on 17 April 2012 took place, he was trading using the new robot that had been written by Mr Luck from Melbourne. He did not inform the plaintiff that this is what was occurring. The defendant acknowledges reading and then signing the agreement[56] and soon after the agreement was signed the money was transferred to the account of the defendant from the plaintiff.
[56] T225.12-1.
The questions were asked of the defendant about trading losses by Dichiera because he was very concerned about the defendant’s capacity to repay the $100,000. In my view, the questions asked by Dichiera and the answers given are of little assistance because they are so general and non-specific. There is no indication about what might be meant by the concept of a “loss” over what period in what type of trading, in what type of system and in what area.
The terms of Exhibit P1 speak for themselves but it is clear from Clause 6 that the agreement applies only for a period of one month (20 trading days) and each party has the option to reinvest their funds and continue for a further period of one month. Clause 4 of the agreement requires the defendant to repay the temporary personal loan of $100,000 plus 60% of trading profits at the end of the month or at a date agreed between both parties.
There was reason for concern in the mind of Dichiera about the capacity of the defendant to pay. That is because it is the defendant who accepts the liability to make the repayment and it is not the case that the fund is to be put in an identifiable place under the control of both the defendant and the plaintiff. Rather, the defendant has full control of the funds subject to his obligation to repay the loan.[57]
[57] T196.1-6.
The plaintiff made the payment of $100,000 to a bank account controlled by the defendant. The payment was made on 20 April 2012.[58] The defendant then transferred the sum of $100,000 to his Velocity Trading Account on the same day.[59]
[58] Exhibit P4; T107.11.
[59] T107.36-38; T109.1-2.
It was not until 4 days later that the defendant commenced trading. It is clear on the evidence that the defendant commenced trading at midnight on 24 April 2012.[60]
[60] T108.13-15.
The plaintiff says that after 17 April 2012 he did not receive trading statements for the first few days but then received some trading statements.[61] However the plaintiff had spoken to the defendant on Anzac Day in 2012. The defendant sent to the plaintiff an email showing that he had made significant profit. The defendant thought that it was something like $8,000.
[61] T100.19-27.
Nothing transpired between the plaintiff and the defendant in the next 4 or so days. The next that the plaintiff heard from the defendant was on 29 April 2012 when the defendant telephoned the plaintiff. The defendant was in great distress and said to the plaintiff that he was losing money. He told the plaintiff that the problem was he was not familiar with some of the new buttons that Luck had incorporated into the robot. The plaintiff asked him to stop trading and learn the system before he would continue trading. The defendant refused to take that advice, said he would keep trading but was confident he could recover his losses.[62]
[62] T108.32-109.4.
On 3 May 2012 the plaintiff sent to the defendant an email in the form of Exhibit D16. The email could reasonably be understood to be an encouragement to the defendant to continue trading (apparently in an attempt to recover losses).
On 5 May 2012 the plaintiff and the defendant had a telephone discussion in the morning of that day. The defendant informed the plaintiff that he was even more troubled with his trading, that he was unable to recover his losses and that he wanted the plaintiff to come to his home to help.[63] The plaintiff visited the defendant’s home in accordance with his request. At that time the plaintiff and the defendant spoke with Phil Luck in Melbourne via Skype. Luck made some desultory comments about the defendant and being amazed at how the defendant could have got himself into such a terrible situation in such a short time.[64] The defendant says he does not remember that conversation.[65] On balance I find that the conversation occurred.
[63] T110.10-12.
[64] T110.2-25.
[65] T252.8.
The next day, there was a further telephone conversation between the plaintiff and the defendant. The plaintiff says the defendant called him and told them that if he had made further losses he would repay the $100,000 loan.[66] The plaintiff then rang Luck in Melbourne and Luck made further desultory comments about the defendant. Those matters are of no assistance.[67]
[66] T119.2-4.
[67] T119.31-33.
When the plaintiff had time to consider the position, he decided to proceed to the defendant’s home and speak to him there.[68] The plaintiff went to the defendant’s home with his partner Sharon. He asked for his $100,000. He said that he was there at the defendant’s home to accept the offer to repay the $100,000. The defendant put propositions to the plaintiff in cross examination that the plaintiff knew that he had 168 trades live at the time and he could not close out those trades otherwise there would be a significant loss and all of the money would be lost. The plaintiff said that there was a very heated exchange between them on that day.[69] The defendant offered to give the plaintiff a caveat over his property.[70] The purpose of the offer was to ensure time could be given to try to trade out of the problem.
[68] T165.30.
[69] T166.31-36.
[70] T265.31-34.
However, the position is that at that time the defendant did not dispute that due to the trading the fund was down by $100,000, that there was an obligation to repay the $100,000 loan but that he did not have $100,000. That is, the issue discussed was the sum of $100,000 and not a challenge to the defendant’s legal obligations to the plaintiff.
In my view, there are two issues for determination. The first is whether or not a joint venture existed irrespective of the existence of the loan agreement. The second is, if the answer to the first question is no, what is the meaning of the private loan agreement and what are the obligations that arise under it.
The High Court has now considered on a number of occasions the question of what may constitute a legal joint venture.[71] In United Dominions Corp v Brian, the High Court described a joint venture as follows:-
“The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture… will often be a partnership.
The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a "joint venture" and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other.”
[71] United Dominions Corp Limited v Brian Pty Ltd (1985) 157 CLR 1; John Alexander’s Clubs Pty Ltd v White City Tennis Club Limited (2010) 84 ALJR 446.
This is a definition of a joint venture in the broadest sense and refers generally to an unincorporated joint venture.
In my view, there are a number of important features that characterise a joint venture. These include: no separate legal personality; a contractual relationship; parties holding assets as tenants in common; a right to take in kind, that is each party is at liberty to do as they wish with their share of the profits; several liabilities; limited scope of the project; a declaration of no partnership and separate charges.
The determination of the arrangement between the parties must occur in the background of the private loan agreement. That agreement announces that it is a loan for the sole purpose of trading on the foreign currency exchange by the defendant for the benefit of the plaintiff. The plaintiff is described as a lender and the defendant as the trader. Under the preamble, the defendant agrees to accept the loan to be used for trading on the foreign exchange using the Velocity Trade Account and then the six terms of the loan agreement are there set out. The terms of the loan agreement involve two principal matters. First the commencement of the trading and second the repayment of the loan with profit.
As I have already said, the outstanding feature of the agreement is that it is a success only document from the point of view of the plaintiff. It does not carry with it any burden of unsuccessful trading.
However one characterises the arrangement, it still carries the obligation of the defendant to repay the loan amount. And that is reinforced by the fact that if there are any losses, they are visited upon the defendant with no risk to the plaintiff.
It is also significant that nothing had happened as between the plaintiff and the defendant until such time as this agreement was executed. The agreement came into being because of the insistence of Dichiera that the plaintiff must have some formal document of record showing the relationship between the parties. It was only when the plaintiff and the defendant had executed this agreement that the plaintiff was permitted to commence trading but that trading did not occur until 8 days later. Up until that point, the parties were still negotiating and had not formalised their business arrangement.
In the premises, I find that there is no joint venture before the loan agreement was reached. Therefore, I find that the private loan agreement document is the record of the parties’ arrangement and, it follows, is not a record of any joint venture agreement.
I am unable to identify that the parties are holding this asset as tenants in common. To the contrary: the plaintiff paid over the sum of $100,000 to the defendant who placed that money into his own trading account. There was no right to take in kind because the plaintiff’s right were always postponed to the end of the 20 day trading period. Liabilities were not secured because the plaintiff accepted the benefit but not the burden of the defendant’s trading.
The defendant and the plaintiff may well have commenced their discussions on the basis of a joint venture but that is not the agreement made by them. Their agreement is reflected in the document that both of the parties signed and that was the form of arrangement insisted upon by the plaintiff’s accountant Dichiera. That contract is for a loan arrangement and thus not a joint venture arrangement.
It has always been the defendant’s contention that the agreement reached between the parties was a joint venture and not a loan. Secondary to that assertion, the defendant also submits that the written agreement did not actually represent the true nature of their bargain. However, the defendant did not challenge the private loan agreement or his execution of its terms or the fact that he read and understood the terms of it. The limit of the defendant’s evidence on the topic was that he thought that the plaintiff was giving him $100,000 and he needed some sort of receipt so he took the document as a receipt and so signed it.[72] I am unable to accept that version of events put forward by the defendant. The document is called a private loan agreement. It does not bear any of the hallmarks of a receipt. It records an agreement between the parties. If it was a receipt, it would have been unnecessary for the plaintiff to have signed the document. It would only have been necessary for the defendant to have signed the document and if so, it would not have been necessary for Dichiera to have witnessed the document.
[72] T225.

In those circumstances I am unable to accept the defendant’s version of events on the topic and I accept the plaintiff’s version of events, corroborated as it is by Mr Dichiera.
That being the case, I turn to the second question. In my opinion, the private loan agreement, though very clumsily drawn, does record two matters namely the existence of the loan and secondly, the purpose of the loan. In my opinion, the purpose of the loan (without more) does not create any obligation or burden upon the plaintiff in respect of the detriment of unsuccessful trading. The document deliberately records two obligations in the main. The first obligation to repay the $100,000 at the end of the month’s trading. The second to pay 60% of any profits at the end of the month’s trading.
In my opinion, although the matter is not free from doubt, the proper characterisation of the arrangement is for a private loan agreement with the benefit of the loan being given by the plaintiff to the defendant being reflected in the success fee to be paid by the defendant to the plaintiff at the rate of 60% of the resulting profits achieved on the trading of the sum of $100,000. It is noteworthy in that respect that the success fee is only payable on the success of the trading of the $100,000 and not on the whole of the $240,000. That is, the defendant is separately entitled to retain whatever fee he earns from his proportion of the combined fund of $240,000 ($140,000).
As I understand the defendant’s case, he was attempting to put forward a defence that the agreement between the parties was only partly reflected in the loan agreement signed by them and that there is some other agreement, expressed or implied, when put together with the loan agreement which actually reflects the true situation of the agreement between the parties.
That is, there is some other collateral form of agreement that must be considered with the loan agreement or alternatively an implied term or oral term that must be considered with the written document.
There are a number of primary difficulties with this position. The first is that there is no evidence led by the defendant to support what may be considered to be the oral aspects of this suggested arrangement. The defendant made a number of assertions from the witness box and from the bar table of such an arrangement. The defendant’s case rose no higher than mere assertions and it was not sustainable.
The second is that if an agreement collateral to the loan agreement was made, no terms are specified and, leaving aside issues of consideration, certainty of terms and performance, such an agreement would be inconsistent with the terms of the loan agreement.
There is no doubt that evidence of a prior collateral contract is admissible even if the document executed by the party appears, on its face, to be a complete contract between them.[73] The law is well settled that if it is asserted that there is a separate collateral contract, then it is possible to lead evidence of some other undertaking given by a party to the contract which is not recorded on the face of the contract.[74] That said this rule generally creates difficulties because it is often the case that the unrecorded collateral undertaking is a term that would usually be expected to be found within the contract that is signed by the parties. Thus, those undertakings are not referred to as promissory representations but they are required to be promissory undertakings collateral to the contract itself.[75]
[73] LG Thorne & Co. Pty Ltd v Thomas Borthwick and Sons (Australasia) Limited (1955) 56 SR (NSW) 81.
[74] Maybury v Atlantic Union Oil Co. (1953) 89 CLR 507 at 517; Dairy Vale Foods v Manfield [1998] SASC 6992 at [258].
[75] SVI Systems Pty Ltd v Best and Less Pty Ltd [2001] FCA 279 at [109]-[111].
Notwithstanding the above, the rule in Hoyts Pty Ltd v Spencer[76] still remains. That rule is that a collateral contract must not be inconsistent with the main contract.
[76] (1919) 27 CLR 133.
According to my researches, the rule in Hoyts Pty Ltd v Spencer remains and although that rule can be overcome by reliance upon the doctrine of estoppel according to the decision of the High Court in Waltons Stores (Interstate) Limited v Maher[77] there is no evidence before me to justify any finding of estoppel in favour of the defendant against the plaintiff. To the contrary, irrespective of what might have been negotiated between the plaintiff and the defendant in the lead up to the execution of the loan agreement, it was the plaintiff who insisted upon the loan agreement being executed in that form after receiving advice from Dichiera. It was Dichiera who insisted upon that arrangement. Dichiera’s evidence was that the agreement was signed by both the plaintiff and the defendant after each of them had read the document and appeared to fully understand its terms. Leaving aside the question of the subjective assessment made by Dichiera of what the parties may have understood, the important feature here is that the evidence discloses that the defendant read and executed the loan agreement. In those circumstances, I am of the opinion that the defendant’s contention in this respect either on the basis of a pre-contractual term being created as that may be understood from the decision in LG Thorn & Co. Pty Ltd or in respect of an alleged collateral agreement, fails.
[77] (1988) 164 CLR 387; Anaconda Nicholl Limited v Edensor Nominees Pty Ltd [2004] VSCA 167.
In that context it is also necessary to give consideration to the implication of a term in the contract consistent with the defendant’s version of events. This term or terms are not to be implied by law[78] but appear to be those which may be implied in fact to give effect to the parties’ presumed or hypothetical intention.[79] Leaving aside terms implied as a matter of custom and usage, and generic implied terms, I would understand the defendant’s case to be that a term would need to be implied into the loan contract in the nature of an “ad hoc” implied term.[80]
[78] Imposed on contracting parties without regard to their intention.
[79] Breen v Williams (1996) 186 CLR 71 at 90-1, 102-3.
[80] See Lücke (1973) 5 Adel L Rev 32; Renard Constructions (ME Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 236.
In addressing this issue, I must also always be mindful of the approach of the High Court in Codelfa Constructions[81] that the more detailed and comprehensive the contract the less ground there is for supposing that the parties fail to address their minds to the question at issue and so militates the implication of a term.
[81] Codelfa Constructions Pty Ltd v Statewide Authority of NSW (1982) 149 CLR 337 at 346.
A discussion of ad hoc implied terms invariably raises the decision of the Privy Council in BP Refinery (Western Port) Pty Ltd v Shire of Hastings[82] as follows:-
“For a term to be implied, the following conditions (which may overlap) must be satisfied:
1.   It must be reasonable and equitable;
2.   It must be necessary to give business ethicacy to the contract so that no term will be implied if the contract is effective without it;
3.   It must be so obvious that it goes without saying;
4.   It must be capable of clear expression;
5.   It must not contradict any express term of the contract.”
[82] (1977) 180 CLR 266 at 283.
It is not necessary to consider any of the first 4 matters set out above from the decision of the Privy Council in BP (Western Ports). It is necessary only to go to consideration number 5 that the implied term must not contradict any express term of the contract.
As I would understand the defendant’s position, it is that he asks the Court to imply a term or terms into the arrangements between them which would mean that, properly characterised, the arrangement between them is one of a joint venture agreement.
There are many difficulties with this approach. The first is that no terms are suggested. The second is that any terms so implied would be entirely inconsistent with the agreement that has been executed between the parties. The third is that it is impossible to formulate a term as may be sought by the defendant which could in some way affect the operation of the loan agreement and so, upon a further reconsideration of it when looked at together with the implied term means that the agreement is properly to be construed as a joint venture agreement.
For those reasons I am unable to accept the defendant’s submissions in this regard or what I perceive may have been submissions put on behalf of the defendant in relation to this matter.
In paragraph [20] hereof, I set out four questions for determination. I will not repeat them. My decision in relation to those questions are as follows:-
1.   The relationship between the plaintiff and the defendant that gave rise to the private loan agreement dated 17 April 2012 was an arms-length relationship between the plaintiff as a lender of the sum of $100,000 and the defendant as the recipient/borrower of the sum of $100,000 loaned to him by the plaintiff. The terms of that loan agreement were governed solely by the written private loan agreement dated 17 April 2012 and not by any other extraneous or collateral terms or contract or implied term.
2.   The private loan agreement was not to be viewed in the broader context of any other type of relationship between the parties. The private loan agreement recorded the relationship between the parties and was not part of some broader form of agreement. The private loan agreement was to be construed according to its terms.
3.   The plaintiff was entitled to obtain the benefit but not the burden of the Forex trading done by the defendant using the $100,000 provided by the plaintiff to the defendant under the terms of the private loan agreement. The plaintiff was also entitled to the benefit of a personal obligation upon the defendant to repay the private loan in accordance with the terms of the agreement.
4.   The private loan agreement was properly to be construed as a monthly turnover agreement. It was not an agreement that would continue and roll-on month to month, except by agreement between the parties.
In the result, I find for the plaintiff on his claim. In my opinion, the plaintiff is entitled to recover from the defendant the sum of $100,000. I will hear the parties as to ancillary orders including in relation to monies paid into Court and in respect of costs.