Jafari v 23 Developments Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2010 02148

KOUROSH JAFARI (ON HIS OWN BEHALF AND AS THE TRUSTEE OF THE ESSENCE UNIT TRUST)	Plaintiff
v
23 DEVELOPMENTS PTY LTD (ACN 112 616 976) & ORS	Defendants

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATES OF HEARING:	16, 20–23, 27–30 NOVEMBER, 4 DECEMBER 2017
DATE OF JUDGMENT:	30 JULY 2018
CASE MAY BE CITED AS:	JAFARI v 23 DEVELOPMENTS PTY LTD
MEDIUM NEUTRAL CITATION:	[2018] VSC 404

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JOINT VENTURE – Nature and extent of agreement – Inability of proposed vendors to perform – Agreement terminated or abandoned – New agreement between purchaser and third party – Whether new or amended agreement between pre-existing parties – No binding agreement.

MISLEADING AND DECEPTIVE CONDUCT – Whether representations made – Whether omission committed – Reliance – Loss – Fair Trading Act 1999 (Vic), s 9.

LEGAL PRACTITIONERS – Sale of property – Joint venture – Solicitor acting for purchaser – Alleged representations – Alleged failure to inform proposed vendors – Whether solicitor liable to proposed vendors – Whether vendors separately represented.

EQUITY – Sale by mortgagee in possession – Registered proprietors provided effective vendor finance for amount of residue – Whether vendor’s lien in favour of registered proprietors – Transfer of Land Act 1958 (Vic), s 77(3)(d).

REAL PROPERTY – Sale – Alleged non-disclosure of pre-existing use – Alleged non-disclosure of risk of contamination – Whether misleading or deceptive conduct – Fair Trading Act 1999 (Vic), s 9 – Trade Practices Act 1974 (Cth), s 52.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Willis SC with Mr J Barrington	George Liberogiannis & Associates
For the First and Second Defendants	Mr M Clarke QC	Holman Webb Lawyers
For the Third Defendant	Mr P Booth	Obst Legal

TABLE OF CONTENTS

A.. Introduction.................................................................................................................................. 1

B.. Background................................................................................................................................... 3

C.. Earlier attempts to rescue the Development........................................................................... 6

D.. The Original Agreement and related dealings..................................................................... 11

E... The ultimate agreement and related dealings...................................................................... 56

F... Post-contractual events............................................................................................................. 70

G.. Jafari’s claims: principal issues............................................................................................ 121

G.1... Did Pizarro represent to Jafari, in or around September 2008, that he could assist Jafari and 63 Buckley to obtain finance for the Development, in particular by quickly selling units in the Development through Melbourne Properties (“the Pizarro Representation”) and, if so, was the Pizarro Representation misleading or deceptive or likely to mislead or deceive within the meaning of s 9 of the Fair Trading Act 1999 (Vic)?................................... 121
G.2... What was the nature of the relationship between Jafari and Fetter and, in particular: 124
G.2.1.. Did Fetter act for Jafari at any time?................................................................. 124
G.2.2.. Did Jafari have independent solicitors acting for him in respect of his dealings with Pizarro until August 2009?................................................................................. 124
G.2.3.. Did Jafari represent to Fetter that he had independent solicitors acting for him and 63 Buckley, and that he had obtained legal advice in respect of his dealings with Pizarro until August 2009?............................................................................................... 125
G.2.4.. Did Fetter advise Jafari to seek independent legal advice?........................... 125

G.3... On or around 26 April 2009, did Fetter represent to Jafari that there was no material difference between the use of the words “joint venture” (or “JV”) and “profit share” in the context of the draft term sheets and the draft joint venture agreements (referred to above as “the Proposed Terms”) exchanged between the parties (“the First Fetter Representation”)?............................................................................................................................................ 126
G.4... Did Fetter have a duty, and omit, to advise Jafari of the difference in law between an interest in a partnership or joint venture agreement and a mere contractual interest in the share of a profit of a project (“the Fetter Omission”)?................................................................. 127
G.5... Did Jafari, 63 Buckley, Pizarro and 23 Developments enter into an agreement on or around 28 April 2009, and, if so, what were its terms?............................................................ 128
G.6... In entering into the Original Agreement, did Jafari and 63 Buckley rely on any or all of the:............................................................................................................................................ 140
(1)....... Pizarro Representation?...................................................................................... 140
(2)....... First Fetter Representation?............................................................................... 140
(3)....... Fetter Omission?.................................................................................................. 140

G.7... Is the Original Agreement unenforceable, or void ab initio?.................................... 142
G.8... Was the Original Agreement terminated in May 2009?............................................ 143
G.9... Around the time of the Original Agreement, was there a collateral agreement between Jafari, 63 Buckley and Pizarro, and, if so, what were its terms?.......................................... 144
G.10. In or around May 2009, did Fetter represent to Jafari and 63 Buckley that offering a reduced or nominal price to Perpetual for the Properties would not alter Jafari’s or 63 Buckley’s position or security, as at all times each of them would retain their interest under the Original Agreement (“the Second Fetter Representation”)?..................................................... 145
G.11. In or around early May 2009, did the parties to the Original Agreement vary that agreement to permit 23 Developments to purchase the Properties directly from Perpetual, and what were the terms of any such variation?.......................................................................... 147
G.12. What were the terms of the Perpetual Contract?........................................................ 147
G.13. What was the effect of the Irrevocable Authority?..................................................... 148
G.14. Did any vendor’s lien (“the Vendor’s Lien”) arise in favour of Jafari or 63 Buckley by virtue of:........................................................................................................................................ 148
(1)....... The Perpetual Contract?..................................................................................... 148
(2)....... Any vendor finance provided by Jafari and 63 Buckley?.............................. 148

G.15. On or around 26 May 2009, did the parties to the Original Agreement vary that agreement, with the effect that 23 Developments agreed to hold 49 percent of the Properties, or a proportion of the Properties equivalent to the Vendor’s Lien, on trust for Jafari and 63 Buckley?............................................................................................................................ 157
G.16. On or around 26 May 2009, did Jafari, 63 Buckley, 23 Developments and Pizarro enter into a joint venture agreement on the same terms as the Original Agreement (save that the purchase of the Properties was from Perpetual and not from Jafari and 63 Buckley), pursuant to which 23 Developments agreed to hold 49 percent of its interest in the Properties, or a proportion of the Properties equivalent to the Vendor’s Lien, on trust for Jafari and 63 Buckley?............................................................................................................................ 157
G.17. In entering into variations of the Original Agreement, consenting to the Perpetual Contract, and entering into the Irrevocable Authority (together, “the Alleged May 2009 Agreements”), did Jafari and 63 Buckley rely on any or all of the:..................................................... 157
(1)....... Pizarro Representation?...................................................................................... 158
(2)....... First Fetter Representation?............................................................................... 158
(3)....... Fetter Omission?.................................................................................................. 158
(4)....... Second Fetter Representation?........................................................................... 158

G.18. Did Jafari and 63 Buckley act to their detriment in agreeing to the Alleged May 2009 Agreements?..................................................................................................................... 158
G.19. Did Pizarro, Fetter and 23 Developments make ongoing representations to Jafari and 63 Buckley in order to induce them to enter into the Alleged May 2009 Agreements, to the effect that if Jafari and 63 Buckley entered into the Alleged May 2009 Agreements, and 23 Developments and Pizarro were able to purchase the Properties for less than their market value, then 23 Developments would hold an interest in the Properties on behalf of Jafari and 63 Buckley?....................................................................................................................... 160
G.20. Did Jafari and 63 Buckley act to their detriment in signing the Irrevocable Authority? 161
G.21. Are 23 Developments, Pizarro and Fetter estopped from denying that 23 Developments holds an interest in the Properties on constructive, resulting or implied trust for Jafari and 63 Buckley?....................................................................................................................... 161
G.22. Did Jafari and 63 Buckley enter into the Original Agreement on the basis of the unilateral mistake, induced by the First Fetter Representation and the Fetter Omission, to the effect that Jafari and 63 Buckley would be considered at law to be a joint venture partner with 23 Developments in the Properties and the Development (“the Mistake”)?............... 162
G.23. By reason of the Mistake, is Jafari entitled to rectification of the Original Agreement so that it constitutes a partnership or a joint venture agreement giving rise to an interest on the part of Jafari and 63 Buckley of 49 percent in the Properties?.......................................... 163
G.24. By reason of the Mistake, do 23 Developments and Pizarro hold 49 percent, or a just and equitable proportion, of the Properties on constructive or resulting trust for Jafari and 63 Buckley?............................................................................................................................ 163
G.25. By causing or permitting the Properties to be offered for sale by the mortgagees in possession in 2011 to Asana, and in 2012 to Romex, did 23 Developments and Pizarro breach: 163
(1)....... Their duties as partners or trustees?................................................................. 163
(2)....... The Pizarro Representation?.............................................................................. 163
(3)....... The Original Agreement?................................................................................... 163

G.26. By failing to perform certain work to progress the Development, and failing to service the mortgage on the Properties, did 23 Developments and Pizarro breach:................. 164
(1)....... The Pizarro Representation?.............................................................................. 164
(2)....... The Original Agreement?................................................................................... 164

G.27. Have Jafari and 63 Buckley suffered loss and damage, and, if so, in what amounts? 165
G.28. Was Jafari contributively negligent in respect of any loss and damage suffered by him?............................................................................................................................................ 166

H.. Pizarro’s counterclaim............................................................................................................. 167

H.1.. Prior to 26 May 2009, did Pizarro and 23 Developments enquire of Jafari and 63 Buckley, and therefore have a reasonable expectation of being informed as to:................... 168
(1)....... Whether the Properties were contaminated?.................................................. 168
(2)....... What business had been conducted on the Properties in the past?............. 168

H.2.. Did Jafari and 63 Buckley falsely represent to 23 Developments and Pizarro, prior to 26 May 2009, that there would be no problems with contamination of the Properties?.... 169
H.3.. Prior to 26 May 2009, did Jafari know or suspect, and failed to disclose (“the Failure to Disclose”), that the Properties were:............................................................................. 171
(1)....... Heavily contaminated?....................................................................................... 171
(2)....... Decommissioned dry cleaners, and therefore highly likely to be contaminated? 171

H.4.. Were the 2009 Contamination Representation and the Failure to Disclose misleading or deceptive conduct, or likely to mislead or deceive, within the meaning of s 9 of the Fair Trading Act or s 52 of the Trade Practices Act 1974 (Cth)?........................................... 173
H.5.. Appropriate relief............................................................................................................ 176

I.... The Trust.................................................................................................................................... 177

J.... Other matters............................................................................................................................ 189

K.. Credibility................................................................................................................................. 189

L... Conclusion................................................................................................................................. 191

Jafari v 23 Developments – Defined terms

DEFINED TERM	MEANING	PAR DEFINED
23 Developments	23 Developments Pty Ltd	5
63 Buckley	63 Buckley Street Pty Ltd (in liquidation)	2
the 2008 Contamination Representation	A representation that contamination would not present any material difficulties	527
the 2009 Contamination Representation	A representation that contamination would not present any material difficulties	529
the 2009 Deed	Deed establishing the Trust, executed by Jafari on 27 May 2009 as trustee and by power of attorney of his mother	570
the Alleged May 2009 Agreements	Alleged variations to the Original Agreement, Jafari and 63 Buckley’s consent to the Perpetual Contract and the execution of the Irrevocable Authority	G.17
Asana	Asana Investments Pty Ltd	364
Bolden	Christopher Bolden	41
Bonvino	Grace Bonvino	139
Bright	Richard Bright of Alpha Environmental	331
Brown	Les Brown of m3 Property (Vic) Pty Ltd	319
the Brown Valuation	Valuation undertaken by Brown dated 23 February 2017 valuing the Properties at $1.2 million as at May 2009	319
the Caveats	Caveats lodged on behalf of Bloomingdale Holdings Pty Ltd preventing Jafari from dealing with the Properties	21
Colonial	Colonial First State Investment Ltd	15
the Colonial Facility	Loan, initially $504,000.00 to 63 Buckley for a 2 year term	15
the Development	Proposed development of the Properties	1
Dexel	Dexel Engineering Pty Ltd	584
Elzain	Anthony Elzain of Maxcon	335
Estate Master	A software program used by valuers	248
Faars	Faars Pty Ltd	17
the Failure to Disclose	Alleged failure by Jafari to disclose that the Properties were heavily contaminated or that they were a decommissioned dry cleaners and therefore highly likely to be contaminated	H.3
Fairview	Fairview Developments Pty Ltd	151
Fetter	Michael Fetter of Fetter Gdanski	6
the Fetter Omission	Alleged omission by Fetter to advise Jafari of the difference in law between an interest in a partnership or joint venture agreement and a mere contractual interest	G.4
the First Contract of Sale	Contract of sale of the Properties for $1.2 million dated 1 May 2009	176
the First Fetter Representation	Alleged representation by Fetter that there was no material difference between the words “joint venture” and “profit share” in the context of the Proposed Terms	G.3
the First FVG Valuation	Valuation undertaken by FVG Property Consultants and Valuers dated 18 July 2008 valuing the Properties “as is” at $2.5 million	32
the First Hosking Valuation	Valuation undertaken by Hosking dated 17 August 2009 valuing the Properties at $2.3 million	241
the First PRP Valuation	Valuation undertaken by PRP Valuers and Consultants in July 2008 valuing the Properties “as is” at $1.4 million with a permit or $1.3 million without a permit	31
Gangemi	Antonio Gangemi	21
HG & R Securities	HG & R Securities Pty Ltd	97
Hosking	Michael Hosking of Egan National Valuers (Vic)	241
the Irrevocable Authority	Authority executed by Jafari on 26 May 2009	216
Jafari	Kourosh Jafari	1
the Joint Contamination Report	Joint report prepared by Bright, Taylor and Elzain concerning the contamination of the Properties	335
the Joint Valuation Report	Joint expert report of Hosking and Brown concerning the value of the Properties	320
Kamal	Victor Kamal	27
Kamal’s Contract	Contract of sale of the Properties for $1.12 million dated 18 June 2008	36
Klonis	Harry Klonis of Klonis Kirby & Co	22
Landmark	Landmark Investments Pty Ltd	44
Low	Simon Low	325
Maxcon	Maxcon Constructions Pty Ltd	145
McDonnell	Keith McDonnell	38
Melbourne Legal	Melbourne Legal Partners Pty Ltd	234
Melbourne Properties	Melbourne Properties Investments Pty Ltd	44
Meng	Dezhi Meng of Asana	364
the Mistake	Alleged unilateral mistake of Jafari and 63 Buckley in entering into the Original Agreement alleged to have been induced by the First Fetter Representation and the Fetter Omission	G.22
Needham	Gary Needham of Melbourne Legal	234
the Neighbouring Properties	69 – 79 Buckley Street, Seddon	17
Nematollahi	Kia Nematollahi	128
the Original Agreement	The Terms Sheet, the Side Agreement and the First Contract of Sale	178
Oriti	Tony Oriti	43
Perpetual	Perpetual Nominees Ltd	15
the Perpetual Contract	Contract of sale of the Properties for $1.6 million dated 26 May 2009	223
Pizarro	Mario Pizarro	5
the Pizarro Representation	Alleged representation by Pizarro to Jafari that he could assist Jafari and 63 Buckley to obtain finance for the Development by quickly selling units in the Development through Melbourne Properties	G.1
the Planning Permit	Planning permit TP06/0318-A (V1)	24
Preston Rowe	Preston Rowe Paterson Melbourne Pty Ltd trading as PRP Valuers and Consultants	31
the Properties	59, 61 and 63 – 67 Buckley Street, Seddon	3
the Proposed Terms	Multiple iterations of a draft terms sheet for the sale of the Properties	113
the Purported 2008 Deed	Deed alleged to have been signed by Jafari in 2008 establishing the Trust	553
the Report	Report prepared by Bright concerning soil sampling conducted on the Site dated 15 November 2010	331
Romex	Romex Management Pty Ltd	367
the Second Fetter Representation	Alleged representation by Fetter that offering a reduced or nominal price to Perpetual would not alter Jafari’s or 63 Buckley’s position or security under the Original Agreement	G.10
the Second FVG Valuation	Valuation undertaken by FVG Property Consultants and Valuers dated 5 August 2008 valuing the Properties ”as is” at $1.6 million	238
the Second Hosking Valuation	Valuation undertaken by Hosking dated 12 August 2010 valuing the Properties at $3 million	308
the Second PRP Valuation	Valuation undertaken by Preston Rowe dated 3 December 2010 valuing the Properties at $800,000.00	357
the Side Agreement	Agreement dated 29 April 2009 providing that the balance of the purchase price is not payable at settlement and forms part of vendor finance	172
the Site	The site on which the Properties were located	77
Smith	Michael Smith	548
Surf Shack	The Surf Shack Restaurant Pty Ltd	39
Sutherland Farrelly	Sutherland Farrelly Pty Ltd	30
Taylor	Benjamin Taylor of Alpha Environmental	335
the Terms Sheet	The terms sheet dated 28 April 2009	168
Tract Consultants	Tract Consultants Pty Ltd	584
the Trust	the Essence Unit Trust	2
the Vendor’s Lien	Lien over the Properties arising in favour of Jafari and 63 Buckley respectively	G.14
Winteray	Winteray Limited	44

HIS HONOUR:

A. Introduction

The plaintiff, Kourosh Jafari (“Jafari”), was a property developer until things went wrong with the proposed development the subject of this proceeding (“the Development”). The Development was plagued with many difficulties and was never completed. By this proceeding, Jafari seeks relief relating to the Development.[1]
[1]Jafari has also been involved in various other proceedings in relation to the Development, including 63 Buckley Street Pty Ltd v Keeron Nominees Pty Ltd [2011] VSCA 289 (Maxwell P and Robson AJA); Keeron Nominees Pty Ltd v 63 Buckley Street Pty Ltd (Unreported, Supreme Court of Victoria, Almond J, 14 September 2011); Gangemi v Osborne; Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd (in its own capacity and as trustee of the Buckley Street Unit Trust) [2009] VSCA 297 (Nettle, Mandie and Harper JJA); Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2008] VSC 168 (Hargrave J). See also Faars Pty Ltd v Wellington Capital Ltd [2009] VSC 255 (Williams J).

Jafari sues in his own right and as trustee of the Essence Unit Trust (“the Trust”). An issue in this proceeding is when the Trust was created. The determination of this issue is relevant to whether Jafari has standing, in his capacity as trustee, to bring claims which otherwise might have been made on behalf of the fifth defendant, 63 Buckley Street Pty Ltd (in liquidation) (“63 Buckley”).[2] Jafari alleged 63 Buckley was the trustee of the Trust from 4 August 2008 to 1 May 2009, and that Jafari replaced that company as trustee.
[2]63 Buckley was wound up on 2 August 2013. The liquidator, Peter Goodin, chose not to take an active role in the trial of this proceeding. Any issues between Jafari and 63 Buckley concerning any right of 63 Buckley to be indemnified out of any property of the Trust were deferred until after the hearing and determination of all other issues between the parties. But see par 595 below.

The Development involved the proposed construction of a multi-storey building, consisting of residential and student apartments[3] on adjacent properties located at 59, 61 and 63 to 67 Buckley Street, Seddon (“the Properties”). Jafari was the registered proprietor of 59 Buckley Street and 63 Buckley was the registered proprietor of the remainder.
[3]The smaller apartments were referred to in the evidence as either student apartments, studio apartments or student studios. For consistency, they will be referred to as student apartments.

The Properties, in the inner-west of Melbourne, are a short distance from Victoria University. Jafari had investigated the appropriateness of student-type accommodation in this location and was convinced that it would be commercially successful. However, in 2008, before the Development had commenced, Jafari found himself in financial difficulty.

His claims against the first defendant, 23 Developments Pty Ltd (“23 Developments”), and its sole director, the second defendant, Mario Pizarro (“Pizarro”), arose out of their attempts to rescue the Development.

As part of these attempts, the third defendant, Michael Fetter (“Fetter”), a practising solicitor, was engaged to advise, and to prepare or settle some documentation.

The fourth defendant is the Registrar of Titles, and was joined for formal reasons only.

In broad summary, Jafari alleged he entered into a “joint venture partnership” with 23 Developments and Pizarro, pursuant to which 23 Developments was to acquire the Properties from Jafari and 63 Buckley. This agreement was alleged to have been coupled with a commitment on the part of 23 Developments and Pizarro to fund the Development to “construction commencement” and enter into a development agreement. Jafari alleged that 23 Developments and Pizarro breached the agreement, and also made misleading or deceptive statements in trade or commerce leading up to its execution; both of which caused him loss.

Further, Fetter was retained in April 2009. It was alleged his retainer was to advise, and to prepare or settle documents, with respect to the alleged joint venture partnership and the acquisition of the Properties pursuant to that arrangement. Jafari alleged that Fetter made misleading representations in trade or commerce and omitted to properly advise Jafari, when he had a duty to do so, concerning Jafari’s agreement with 23 Developments and Pizarro. Jafari alleged this also caused him loss.

Further, Jafari alleged that if the agreement entered into with 23 Developments and Pizarro did not give him the partnership interests for which he contended, then he executed the agreement based upon a unilateral mistake which was induced by Fetter. On this basis, Jafari contends he is entitled to rectification of the agreement and relief against Fetter.

Underscoring each of Jafari’s claims is a claim for significant loss, by reason that the Development did not go ahead.

By way of counterclaim, 23 Developments alleged that each of Jafari and 63 Buckley engaged in misleading or deceptive conduct in trade or commerce. In essence, it was alleged that there was a failure to disclose the existence of heavy contamination or the previous use of the old shop at 59 Buckley Street (which had been a dry cleaners), and that, before execution of a contract to purchase the Properties, it was represented to 23 Developments that there would be no problems with contamination. As a result, 23 Developments contended that any agreement alleged by Jafari was void from the outset. Further, a claim was made for loss on the basis that 23 Developments would never have purchased the Properties if it had not been misled.

For the reasons that follow, on Jafari’s claims, there will be judgment for the defendants. On the counterclaim, there will be judgment for 23 Developments in the sum of $219,393.59.

B. Background

Jafari had been involved in property developments since the early 1990s. These were relatively modest developments on residential blocks.

In mid 2001, business associates of Jafari purchased 63 to 67 Buckley Street, with settlement due in mid 2002. In April 2002, the same associates purchased 61 Buckley Street, for settlement in September 2002. 63 Buckley, which was incorporated in March 2002, was nominated as the purchaser in each case, and became the duly registered proprietor. 63 Buckley borrowed $504,000.00 from Colonial First State Investment Ltd[4] (“Colonial”) for a 2 year term (“the Colonial Facility”), secured by mortgages to Perpetual Nominees Ltd (“Perpetual”)[5] and a charge over the company.
[4]As manager of the Colonial First State wholesale pooled mortgage fund.
[5]Initially, a mortgage was taken in July 2002 over 63 to 67 Buckley Street. In September 2002, a mortgage over 61 Buckley Street was executed. Perpetual was the nominee for Colonial.

On 10 July 2003, Jafari purchased 59 Buckley Street for $377,500.00. By this time, there had been a falling out between the business associates, which had provided Jafari the opportunity to acquire this property himself. Jafari borrowed $302,000.00 from the Commonwealth Bank to fund the purchase. Settlement occurred on 10 December 2003.

Also in December 2003, another company associated with Jafari, Faars Pty Ltd (“Faars”), purchased 69 to 79 Buckley Street, Seddon (“the Neighbouring Properties”) for $1.2 million.[6] The Neighbouring Properties were developed first. Construction began in September 2006. A 4 storey apartment block, consisting of 66 apartments, 35 car spaces, an office and 2 shops, was completed in November 2007.
[6]Attached as annexure “A” is a map showing the Properties, the Neighbouring Properties and other nearby properties.

Returning to issues relating to the Properties, in July 2004, 1 of the business associates obtained a planning permit for the Properties. This permit allowed the construction of a 4 storey residential building with 24 units.[7] The permit was subject to any design changes which might have become necessary as a result of the environmental audit required by condition 4 of the permit.[8]
[7]The permit was not approved by the City of Maribyrnong, but was the subject of a successful application for review under the Planning and Environment Act 1987 (Vic), s 79: Pre-Need Services Pty Ltd v Caldecott (Victorian Civil and Administrative Tribunal, unreported, 20 July 2004, Member Davies).
[8]Ibid, order 1(c). Condition 4 provided: Prior to the commencement of any works, use and development and certification/issue of a statement of compliance under the Subdivision Act 1988 for the residential use hereby permitted, for the land either:
(a)A certificate of environmental audit must be issued for the land in accordance with Part IXD of the Environment Protection Act 1970, or
(b)An environmental auditor appointed under the Environment Protection Act 1970,
must make a statement in accordance with Part IXD of that Act that the environmental conditions of the land are suitable for the sensitive (residential) use.

The ultimate result of the fallout between Jafari’s business associates was that he became the sole director and shareholder of 63 Buckley, effective 1 May 2005.[9]
[9]The transfer of the shares in 63 Buckley was settled on 31 July 2005.

In June 2005, Colonial agreed to extend the Colonial Facility for a further 12 months. As a result of combining the loan facilities for 61 and 63 to 67 Buckley Street with Jafari’s debt referable to 59 Buckley Street, the Colonial Facility was increased to $840,000.00. Also in 2005, $140,000.00 was raised by way of second mortgage over the Properties. Jafari used part of these funds to pay, in advance, the 12 month interest on the Colonial Facility.

Notwithstanding Jafari’s control of the Properties by this time, on 17 August 2005 and 18 January 2006, caveats were lodged (“the Caveats”) on behalf of Bloomingdale Holdings Pty Ltd, a company related to 1 of Jafari’s business associates, Antonio Gangemi (“Gangemi”). The Caveats effectively prevented Jafari from dealing with the Properties, including raising further finance or proceeding with the Development.

The lodging of the Caveats gave rise to a proceeding in this court. In September 2006, Jafari retained Harry Klonis (“Klonis”) of Klonis Kirby & Co to act for him and 63 Buckley. Amongst various matters, Hargrave J decided, in Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd,[10] that the Caveats had been lodged without reasonable cause.[11] His Honour also ordered that both Jafari and 63 Buckley were entitled to compensation under s 118 of the Transfer of Land Act 1958 (Vic).[12]
[10][2008] VSC 168.
[11]At [479], [495].
[12]Ibid.

Not only did the dispute concerning the Caveats cause delay and increase holding costs, according to Jafari the relevant events caused his credit status to be “ruined”. Further, the dispute took up a great deal of Jafari’s time and resources. Indeed, Jafari represented himself and 63 Buckley for a substantial part of the trial before Hargrave J.[13]

C. Earlier attempts to rescue the Development

[13]For the first 6 days of trial, Jafari and 63 Buckley were represented by counsel, instructed by Klonis Kirby & Co. From 30 January 2008, until the end of the hearing on 21 February 2008, Jafari represented himself and 63 Buckley.

In May 2008, upon the removal of the Caveats, Jafari intensified his attempts to progress the Development. By this time, it had become necessary for Jafari to borrow money from certain members of his family to fund the Development, including to meet his obligations to Colonial, and he had “virtually exhausted” his financial resources. As a result, he sought to engage others to attract the capital necessary to proceed. Jafari did so in circumstances where a revised planning permit had been issued,[14] allowing an increased total of 71 units (48 student apartments and 23 larger residential apartments) (“the Planning Permit”).
[14]Planning permit TP06/0318-A (V1).

Also in May 2008, Colonial appointed a controller to 63 Buckley pursuant to its charge.[15] Colonial also had the Properties valued. Charter Keck Cramer valued the Properties collectively at $1.5 million, with a forced sale price valuation of $1.25 million.[16] This valuation recorded that the Properties were not registered on the Environment Protection Authority’s “Priority Sites Register” and that a visual inspection had not revealed any obvious pollution or contamination. The valuation noted that if subsequent investigation showed contamination, the valuation may require revision.
[15]See par 15 above.
[16]This valuation was admitted into evidence as recording the facts that occurred at the time. No expert evidence was led, for the purposes of s 79 of the Evidence Act 2008 (Vic), to seek to establish that the opinions expressed in the valuation ought to be accepted by the court as to the true value of the Properties.

On 21 April 2008, Perpetual served notices of default under its mortgages on Jafari and 63 Buckley.

On 16 June 2008, Jafari reached an agreement with property developer, Victor Kamal (“Kamal”), for a joint venture with respect to the Properties. A handwritten document was executed by both parties that day, by which Kamal agreed to pay $1.12 million (plus goods and services tax) for a 50 percent interest in the Development.[17] The document contemplated formal contracts, which were to be “based on 50/50 JV”.[18]
[17]There were further terms agreed, but the detail is not material.
[18]JV being a reference to joint venture.

Accordingly, in June 2008, Jafari instructed Klonis to prepare a contract for sale to Kamal. Klonis prepared the contract, together with a vendor’s statement pursuant to s 32 of the Sale of Land Act 1962 (Vic).

Also on 16 June 2008, Perpetual caused its solicitor to make statutory declarations to the effect that the notices of default had been served on 21 April 2008,[19] and that Perpetual was entitled to exercise its power of sale with respect to the Properties in accordance with the relevant provisions of the Transfer of Land Act and the mortgages. There was never any suggestion from Jafari or 63 Buckley in this proceeding that Perpetual was not entitled to so act.
[19]See par 26 above.

At around this time, Colonial appointed a real estate agency, Sutherland Farrelly Pty Ltd (“Sutherland Farrelly”), to sell the Properties.

In July 2008, 2 valuations were obtained with respect to the Properties.[20] The first, prepared for an associate of Kamal, was completed by Preston Rowe Paterson Melbourne Pty Ltd (“Preston Rowe”), trading as PRP Valuers and Consultants (“the First PRP Valuation”). This valuation gave a site value “as is”, with a permit for 59 student apartments, 22 residential apartments and 2 retail premises, of $1.4 million. It also gave a site value “as is”, without a permit, of $1.3 million.
[20]The authors of these valuations were not called to give evidence. Accordingly, the evidence was admitted as factual rather than as formal opinion evidence under s 79 of the Evidence Act: see fn 16 above.

The second valuation was by FVG Property Consultants and Valuers (“the First FVG Valuation”). This valuation was addressed to Kamal and gave a valuation for the Properties “as is” of $2.5 million. Certain observations must be made about the First FVG Valuation.

First, the valuation date was 18 July 2008. Under the heading “Valuation Considerations, Ownership History”, the authors stated they were in receipt of a copy of a contract of sale of the Properties, dated 18 July 2008, with a contract price of $2.5 million. No such contract of sale was in evidence. Indeed, the existence of such a contract is contrary to the evidence before the court.[21] The authors were not called, and no explanation was given as to how they were led to believe that a contract of sale for $2.5 million was entered into. Critically, under the heading “Valuation Rationale/Approach, Direct Comparison Approach”, express reference was made to the recent sale price as at 18 July 2008 of $2.5 million. No other properties were referred to, for the purposes of comparison, under this section of the First FVG Valuation.[22] It is clear on the face of the document that this supposed contract of sale was significant, if not critical, to the opinion that the value of the Properties was $2.5 million.
[21]Jafari admitted he did not sign a contract of sale for $2.5 million in July 2008. There was no evidence to suggest a contract for $2.5 million was ever signed.
[22]In another section, 4 properties were referred to as comparative sales evidence, 2 located in Footscray, 1 in Brunswick and 1 in North Melbourne.

Secondly, it was recorded that no investigation had been conducted as to possible contamination. The valuation continued:

If contamination of the land is, subsequent to our valuation, found to exist, this would seriously impact upon the assessed value resulting in a reduction of our valuation assessment. The valuation should be referred back to the valuer for comment should a soil survey reveal any contamination. Our valuation has been based upon the assumption that the land is not contaminated.
(Emphasis added.)

As stated below,[23] contamination was subsequently found to exist.[24]

[23]See par 325 below.

[24]For completeness, the First FVG Valuation contained the statement that it should be read in its entirety, “inclusive of our summary and annexures”. Although it contained an index referring to “Annexures”, and the last page of the document was headed “Annexures”, in fact no annexures were attached. Further, there was also a reference (in par 6.1) to “the appendix of this report”. Equally, the document as tendered did not include an appendix.

For at least the reasons set out above, the First FVG Valuation was self-evidently unreliable, and important assumptions underlying the reasons for the opinion that the Properties collectively had a value of $2.5 million as at July 2008 were not soundly based.

Returning to the sale of the Properties, the contract of sale was executed by Kamal on 18 June 2008,[25] and a deposit of $110,000.00 was paid (“Kamal’s Contract”). The vendors were stated to be Jafari and 63 Buckley. Kamal’s Contract was for the outright purchase of the Properties. When it was put to Jafari that Kamal’s Contract was for the whole of the interest in the titles to the Properties, Jafari said that that was not correct. Although Jafari accepted Kamal’s Contract made no mention of any 50 percent interest and that there was no other contract of sale, he stated (contrary to the written terms) that it was for Kamal’s 50 percent interest in the joint venture. Jafari also expressed the belief that there “would have been a joint venture partnership”. If that evidence was intended to refer to a written document, none was produced. In any event, Kamal could not complete the transaction. The forfeited deposit was applied by Colonial to moneys outstanding pursuant to the Colonial Facility.
[25]Klonis certified the document to be a true copy of the contract of sale dated 18 June 2008. There was no suggestion it was signed at a later time. The purchase price was recorded as $1.1 million, rather than $1.12 million. Although the purchaser was stated to be Amal Albert (Kamal’s wife), as trustee for the Nile Trust or nominee, Jafari gave evidence that it was Kamal’s signature on the contract.

There was evidence concerning an attempted auction of the Properties, in around August 2008, by Sutherland Farrelly. The auction was disrupted by Jafari. It is unnecessary to go into the detail of that disruption, beyond stating that there is no evidence this process resulted in an offer for the Properties. As a result of the failed auction attempt, on 25 August 2008, Sutherland Farrelly recommended to Colonial that Perpetual sell the Properties by public tender.

Following Kamal’s failure to complete, in September 2008, Jafari commenced negotiations with another property developer, Keith McDonnell (“McDonnell”). Initially, Jafari intended to use Klonis’ services to prepare a further contract of sale. This did not occur because Colonial and Perpetual decided they wanted to conduct a tender process in order to dispose of the Properties.

McDonnell, through his company The Surf Shack Restaurant Pty Ltd (“Surf Shack”), submitted 2 tenders, 1 for the sum of $925,000.00 (which it was believed would pay all outstanding amounts with respect to the Colonial Facility), and the other for $2 million, which was “provided in the event the [lower] tender was not accepted”. The higher offer was accepted and, on 15 October 2008, Surf Shack entered into a contract with Perpetual as mortgagee in possession, paying a deposit of $200,000.00.

Surf Shack also failed to complete its contract. Accordingly, by the end of 2008 the contract was rescinded. The deposit was forfeited and also applied to the Colonial Facility.

In December 2008, Jafari was trying to save the development of the Neighbouring Properties as well. The mortgagee in possession was intending to sell the Neighbouring Properties for what Jafari believed was an undervalue and Jafari lodged a caveat in an attempt to protect his position. In early 2009, Faars commenced a proceeding and Jafari retained a solicitor, Christopher Bolden (“Bolden”), and a barrister to act for Faars. Jafari acknowledged that Bolden acted for him with respect to this proceeding for a “few months”. Jafari’s attempt to prevent the sale by the mortgagee in possession was unsuccessful.[26]
[26]See Faars Pty Ltd v Wellington Capital Ltd [2009] VSC 255, [5] (Williams J).

There were further matters the subject of evidence leading up to Jafari’s negotiations with Pizarro. It is unnecessary to record them. The upshot of the position in late 2008 was that:

(1) Jafari had exhausted his own financial resources and his ability to raise further funds.

(2) Since June 2008, Perpetual was, and remained, the mortgagee in possession of the Properties.

(3) In the attempt to sell the Properties to Surf Shack, the means by which the sale was to be conducted had been dictated by Colonial and Perpetual, with Perpetual (and not the registered proprietors) as the vendor.

(4) Jafari had lost any real prospect of profiting from the development of the Neighbouring Properties.

D. The Original Agreement and related dealings

Jafari was introduced to Pizarro by a friend, Tony Oriti (“Oriti”) in August 2008. Oriti had known Pizarro for some 20 years and spoke very highly of him. He explained to Jafari that he had told Pizarro of Jafari’s predicament. Several meetings followed.

During the course of those meetings, Pizarro told Jafari that he had been involved in real estate for many years and had developed and sold hundreds of properties. Pizarro said he owned a real estate agency called Melbourne Properties Investments Pty Ltd (“Melbourne Properties”), and another company engaged in providing accounting services, Landmark Investments Pty Ltd (“Landmark”). He also said he had previously owned a finance company. Pizarro said he was also involved in a company called Winteray Limited (“Winteray”), which was to be floated on the Australian Stock Exchange. According to Jafari, Pizarro said Winteray was “capturing tens of millions of investors” and would be capable of raising money quickly.

In a summary entitled “Winteray Investment Opportunity”, published by Winteray around that time, on 27 October 2008, Winteray had become an authorised representative of another company pursuant to an Australian financial services licence. Pizarro provided a copy of the summary to Jafari. Pizarro told Jafari that Winteray was investing large amounts of money in resources. Pizarro said that he[27] and another co-director favoured investing in property and he was trying to convince the Winteray board to invest in the Properties.
[27]Pizarro became a director of Winteray on 27 November 2008.

The summary also stated that Winteray was described as a company whose objective was to invest in projects, including in the area of sustainability, energy, resources and property. The summary stated that Pizarro had been engaged in property development for over 10 years, and that he had developed over 200 projects, each involving between $2 million and $60 million.[28]
[28]In the summary, Pizarro was described as an executive director. Pizarro denied he was anything other than a non-executive director.

During the course of these early discussions, Jafari told Pizarro that he had other prospective joint venture partners with whom he was negotiating. Jafari also told Pizarro about his background, including that, according to Jafari, he was very well connected with the Ayatollah Khomeini in Iran.[29] Jafari said the Iranian Government needed new or reconditioned oil rigs and that Jafari could assist Pizarro to arrange a deal with the Iranian Government if Pizarro could arrange the oil rigs. Jafari said there was a lot of money to be made. In response, Pizarro said he would make inquiries within Winteray concerning the prospect of supplying rigs.
[29]This was the spelling used in Pizarro’s witness statement. In an email around this time, Jafari referred to “Ayatollah Khamenei”.

Jafari also discussed the Neighbouring Properties, and asked whether or not Pizarro knew of anyone who would be interested in investing. In that regard, Jafari said he was willing to do a 50/50 share agreement or was willing to sell the Neighbouring Properties completely. Again, Pizarro said he would make inquiries.

In around September 2008, Jafari contacted Pizarro and invited him to inspect the Neighbouring Properties.

During this inspection, Jafari received a telephone call from McDonnell. During that conversation, Jafari shouted at McDonnell. In response to queries from Pizarro after the conversation, Jafari explained that he had not lost any money to McDonnell, but McDonnell had caused him to waste a lot of time. Jafari also told Pizarro that McDonnell would lose his deposit.[30]
[30]The evidence of Pizarro suggested that this conversation took place in around September 2008. The fact that McDonnell was already in a position whereby Surf Shack was to lose its deposit suggests that this conversation might have occurred later in 2008: see pars 39-40 above.

A “few weeks later”, while discussing the Neighbouring Properties, Jafari asked Pizarro whether he was interested in investing on a 50/50 basis in the Properties. Jafari said Pizarro could do this by paying $750,000.00 to Colonial, and assisting in developing the Properties together. Pizarro said that he was not in a position to do so, but, again, stated he would make inquiries.

At some stage in 2008, Pizarro reviewed the documentation regarding the Colonial Facility and told Jafari that he thought Colonial was “screwing” him. Pizarro indicated that he would provide funding to sue Colonial, in return for 50 percent of any moneys received. Jafari told Pizarro that he was in a vulnerable position as a result of his existing court cases and that everybody had been taking advantage of the situation. However, he acknowledged he needed the money and eventually agreed to the 50 percent proposal. In fact, this proposal went nowhere. Pizarro never funded Jafari in order to enable him to sue Colonial.

Returning to the discussions about the Properties, Pizarro asked Jafari whether he had a current valuation. On Pizarro’s account, which Jafari emphatically denied, Jafari stated that he had 2 valuations: the real valuation for around $1.4 million (that is, the First PRP Valuation); and another valuation for $2.5 million (that is, the First FVG Valuation), which Jafari said was valued for someone else who was interested in the Property a few months before.

Pizarro gave unchallenged evidence that Jafari identified Kamal as the person who obtained the First FVG Valuation.[31] According to Pizarro, Jafari also said that Kamal had signed a contract to purchase the Property for $2.5 million,[32] but had withdrawn from the deal and lost his deposit. Jafari refuted this, stating that he told Pizarro that Kamal had entered into a joint venture partnership. Pizarro gave evidence, which Jafari also contested, that Jafari informed him that the First FVG Valuation had been obtained from a “friendly valuer” of Kamal’s, that it was inflated and that it had been obtained for the sole purpose of obtaining extra finance.
[31]See also par 32 above.
[32]Pizarro said he was never shown a copy of the alleged contract with Kamal.

In my opinion, Pizarro’s account that these discussions all took place before he was provided with the 2 valuations in question does not sit comfortably with the contemporaneous written communications.

As to the relevant correspondence, on 8 December 2008, Jafari sent the First PRP Valuation to Pizarro. The covering email stated it was the valuation for the Properties, without suggesting that the First PRP Valuation was inaccurate in any way. However, on 19 December 2008, Jafari sent the First FVG Valuation, stating in the covering email that previously he had sent the wrong valuation, and that Jafari would explain the matter to Pizarro when he saw him next.

Under cross-examination, Pizarro said that, after the later email, Jafari told him that the First PRP Valuation was wrong insofar as the First FVG Valuation was the right valuation for finance purposes. Pizarro gave evidence that he understood the First PRP Valuation to be the real valuation. Jafari refuted this suggested limitation as to the purpose of the First FVG Valuation. He said the First PRP Valuation had a limited purpose, and that he explained to Pizarro that Kamal had obtained the First PRP Valuation to use it as a negotiation tool to seek to bring down the purchase price in his discussions with Jafari. Jafari stated that he told Pizarro at the time that the correct valuation for all purposes was the First FVG Valuation.

The difficulty with Pizarro’s evidence is that, if Jafari had already explained to him the status of both valuations in the manner suggested, then it might be expected that Jafari would have either sent them together, or only sent the First FVG Valuation. Also, upon Jafari sending the First PRP Valuation, it might be expected that Pizarro would have pointed out that Jafari had sent the wrong valuation. In addition, if Jafari had previously explained that the First FVG Valuation was for finance purposes only, then there would appear to be no good reason, on 19 December 2008, for Jafari to state that he would explain why the First PRP Valuation was wrong the next time they met. On no version of the events given by Jafari or Pizarro was it suggested that Jafari gave 2 different explanations for the First FVG Valuation (that is, initially for finance purposes and then, after this email, for all purposes).

Further, after Jafari sent the email on 19 December 2008, Pizarro did not respond by stating he already knew the true position with respect to both valuations. Furthermore, it makes little sense that, after 19 December 2008, Jafari would need to explain which valuation was the right valuation for finance purposes, if this had already been explained prior to either valuation being sent.[33]
[33]Unless he chose to change his explanation which, as I have said, was not suggested by Jafari or Pizarro.

Moreover, I have serious doubts about Jafari being so clear cut about the Properties not being worth $2.5 million (and only being worth around $1.4 million) given that he was seeking, desperately, to convince Pizarro that there was a lot of money to be made if Pizarro could arrange for the purchase of the Properties. Certainly, Pizarro’s subsequent willingness to use a value of $2.5 million as a basis for negotiation[34] and his stated position only some 9 months later[35] suggest that Jafari had advanced the proposition that Pizarro was going to get a good deal “based on the valuation of $2.5 million”.
[34]See pars 113, 151(1), 158 below; cf par 131.
[35]See par 264 below. See also pars 230-231 below and the reference by Pizarro to discussions about the valuation of the Properties being “higher than $2 million”.

Finally, Pizarro’s account does not sit comfortably with the counterclaim. In support of 23 Developments’ claims based on alleged misleading or deceptive conduct, it was alleged the First FVG Valuation existed in August 2008, “which placed a value on the [Properties] of $2.5 million”. It was further pleaded that Jafari provided a copy of the First FVG Valuation to Pizarro. There was no reference anywhere in the counterclaim to the First PRP Valuation at $1.4 million. How or why this was so pleaded, in circumstances where Pizarro’s evidence was that he understood the “real” valuation was at $1.4 million, was not explained.

I expect that, given the significant lapse of time since these events, Pizarro was mistaken as to how the events unfolded. I also expect that later events concerning the value of the Properties[36] may have clouded Pizarro’s recollection of what was said in these initial discussions.
[36]See pars 238-239 below.

That said, Jafari’s evidence is also problematic. His asserted reason for Kamal obtaining the First PRP Valuation[37] does not align with the incontrovertible facts. Kamal had already committed, at an agreed price, to purchase a 50 percent interest in the Development (including the Properties) before the First PRP Valuation was obtained.[38] Indeed, the instructions to Preston Rowe to prepare a valuation were not given until 2 days after Kamal had signed the contract to purchase the Properties.[39] In addition, Jafari had both valuations in his possession in December 2008. It makes no sense at all, if (as he said) the First FVG Valuation was the correct valuation, that he provided the First PRP Valuation alone to Pizarro in the first instance, and without qualification.
[37]See par 57 above.
[38]See pars 27, 31, 36 above.
[39]The First PRP Valuation expressly recorded that instructions were given, on 20 June 2008, by a finance company “for First Mortgage Security Purposes”, as part of Kamal seeking to obtain finance for the purchase. Under cross-examination, it became apparent that Jafari had overlooked this fact when he gave his evidence initially as to Kamal’s purpose in obtaining the First PRP Valuation. Notwithstanding this fact, and the obvious problem with his previous evidence, Jafari maintained this position (albeit he then asked to see Kamal’s Contract, but cross-examining counsel moved to another topic).

Further, the First PRP Valuation was not infected with the fiction of a sale of the Properties in mid July 2008 for $2.5 million.[40] Although, at trial, Jafari pleaded ignorance as to how this assumption came to be included in the report, if Jafari had reviewed the First FVG Valuation at the time, he would have known that it was prepared on an erroneous premise. Not only did Jafari say he did not know the basis upon which the fictitious sale became part of the First FVG Valuation, he said he did not recall reading the “little paragraph” in question. When pressed on this issue, Jafari stated he was not aware that the First FVG Valuation was based, in part, on the purported contract of sale for $2.5 million.
[40]See par 33 above.

Jafari then sought to lay the blame for the inclusion of the purported contract with the valuers, stating that they had their own responsibilities, including not accepting what they were told without conducting their own due diligence to “do what they have to do”. Leaving aside any duty of the valuers,[41] this non-responsive evidence of Jafari provided no explanation as to how this erroneous assumption was included in the First FVG Valuation. Whether or not Jafari told Pizarro that it was Kamal who had agreed to purchase the Properties for $2.5 million,[42] there can be no dispute that Jafari wrongly represented to Pizarro either orally or in writing (by providing the First FVG Valuation), or both, that the Properties had been sold for $2.5 million in mid 2008. Furthermore, given that Jafari was actively putting forward the First FVG Valuation to be used by Pizarro (at the very least, for fundraising), it seems highly unlikely Jafari had no knowledge of this significant incorrect assumption.
[41]On this factual issue, no representative of FVG Property Consultants and Valuers was called to explain the basis upon which instructions were given for the First FVG Valuation.
[42]It seems highly likely that he would have, given it was Kamal with whom Jafari was dealing in mid 2008.

Finally, with respect to Jafari’s evidence that he told Pizarro the First FVG Valuation was correct for all purposes, this contradicts his own account of these events as set out in an email to Pizarro in December 2009.[43]
[43]See par 288 below.

In these circumstances, when considered in light of subsequent events,[44] I do not accept either version of how these 2 valuations were explained.
[44]See pars 113, 131, 151(1), 158, 231, 264 below.

Dealing with the relevant evidence as a whole, including the obvious difficulties with each version, I find that, at some stage, Jafari did explain that the First FVG Valuation had been obtained by Kamal for finance purposes (as is apparent on the face of the document). I further find that Kamal did in fact seek out a further valuation for finance purposes, in light of the amount of $1.4 million in the First PRP Valuation being unsatisfactory for Kamal’s intentions of raising moneys to purchase the Properties at $1.1 million and to fund the Development.

As to Pizarro’s understanding in late 2008, whilst he knew of the existence of the 2 valuations, he did not know that a contract of sale for the Properties had not been signed for $2.5 million and that Jafari’s representations in this regard were untrue. But, that “sale” having, self-evidently, failed to settle, and having no sensible basis for believing there was another purchaser willing to pay $2.5 million for the Properties,[45] Pizarro was willing to proceed with the First FVG Valuation for negotiation purposes at that time, and possibly for raising future finance, because he believed the overall arrangement would be profitable for entities that he controlled or with which he was associated.[46] Further, it is highly likely, and I so find, that notwithstanding the vastly different values given in the 2 valuations in question, Jafari did try to convince Pizarro that a valuation of $2.5 million was realistic based on Jafari’s forecast profits after the Development had been completed.
[45]Nothing said by Jafari at the time suggested any such purchaser existed.
[46]Not only were there potential profits for Winteray as an investor, but Pizarro foresaw the possibility of Melbourne Properties making substantial amounts by way of selling commission when it came time to sell the apartments.

Another matter raised during these discussions in 2008 was the possibility of contamination. In his witness statement first filed in September 2017, Jafari referred to Pizarro asking him for what purpose the land comprising the Properties had previously been used. According to Jafari’s witness statement, he stated to Pizarro that 59 Buckley Street had an old shop on it, which had been a dry cleaners.[47] However, when giving his evidence in chief orally, Jafari said he told Pizarro that he had been told it was “a small laundromat, laundry shop” and did not suggest he told Pizarro it was a dry cleaners.
[47]Jafari said he had known it was a dry cleaners since about 2003.

Further, Jafari said that Pizarro asked him whether there was a problem with contamination, to which Jafari responded that he did not think so. Jafari claimed he also said to Pizarro at the time:

Gangemi brought this up in court. It was a side issue – the judge ignored it. Anyway, there’s a standard clause in the [P]lanning [P]ermit for an environmental report. We had the same thing at [the Neighbouring Properties] and it was fine. If there’s anything to clean up, it’ll just be part of the building costs and we’ll share that 50/50.

Jafari said that Pizarro agreed with his suggestion, stating “that’s fine”, and never mentioned it again. Jafari said he had no such understanding as to any relationship between a small dry cleaners and contamination.[48]
[48]Though, see fn 86 below.

Jafari was cross-examined at length on this issue. When it was put to him that, when he referred to the old shop he did not use the words “which was a dry cleaner”, Jafari responded that he was “100 percent sure” he “always” used those words. Further, when pressed, on a number of occasions Jafari stated that he referred to the shop as a dry cleaners in the presence of others or another. Not only were such persons not called to give evidence, they were not identified during the course of Jafari’s evidence. Furthermore, when it was pointed out to him that he had referred to a laundromat when giving his evidence in chief rather than a dry cleaners, Jafari, unconvincingly,[49] suggested that to him a laundromat and a dry cleaners was the same thing.
[49]After asserting twice that a laundromat and a dry cleaners were the same thing, Jafari then apologised to the court.

Pizarro’s position was that knowledge of the existence of an old dry cleaners would have put him on notice of a real risk of significant contamination. He denied that Jafari ever told him that there had been a dry cleaners at 59 Buckley Street. According to Pizarro, Jafari responded by stating that the Properties had had on them an old car yard, an old house and an old shop. Further, in Pizarro’s evidence in chief he said that when he asked what the old shop was, Jafari responded that it was an old book shop. However, under cross-examination Pizarro was far from certain that a book shop had been mentioned. Repeatedly, Pizarro responded to questions by stating Jafari said it was “an old shop”, without any reference to the type of shop. When it was put to Pizarro directly that Jafari never said that it was a book shop, Pizarro said he could not be sure and that he was clear an old shop was referred to. Based on this evidence, I am not satisfied Jafari ever referred to the old shop being a book shop.

Pizarro also said at trial that he asked Jafari repeatedly if there were any environmental or contamination issues, to which Jafari stated “no, it did not have any contamination”.

Jafari’s version of these events must be the subject of serious doubt, at the very least, because of the pleadings filed in this proceeding. In Pizarro’s defence and counterclaim, he alleged that he enquired of Jafari and 63 Buckley as to whether the Properties were contaminated and what business had previously been conducted on the Properties.

In Jafari’s reply and defence to counterclaim, prepared by senior counsel who represented him at trial, Jafari admitted that Pizarro had asked him for what purpose the land had been used and that he had replied to the effect that a shop was on the site on which the Properties were located (“the Site”). There was no reference in this pleading to any discussion in 2008 about a dry cleaners. When asked if he could explain this, Jafari said he was not sure why it had been pleaded that way. There was no suggestion that what had been pleaded was contrary to Jafari’s instructions at that time.

Equally, the evidence given by Pizarro at trial went beyond what had been pleaded on his behalf. His defence and counterclaim referred to his enquiries about contamination and alleged that Jafari stated that “there would be no problems with contamination”. This is a fundamentally different allegation to Pizarro’s evidence that a positive representation was made by Jafari to the effect that the Properties did not have any contamination.[50] There was no explanation on behalf of Pizarro as to why the pleading did not reflect his evidence.
[50]See par 71 above.

There is a further reason why it is difficult to accept either version of the discussions in late 2008 concerning contamination of the Properties. The evidence is purporting to accurately record discussions which took place nearly a decade ago, in circumstances where there is no contemporaneous record of what was said.[51]
[51]Compare observations made in Watson v Foxman (1995) 49 NSWLR 315, 318.8–319.5 (McLelland CJ in Equity); referred to with approval in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338, [687] (Tate, Santamaria and Kyrou JJA) and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237, [159] (Warren CJ, Osborn JA and Macaulay AJA).

In summary, each of Jafari and Pizarro gave evidence at trial about what was said in 2008 regarding contamination, in an apparent attempt to further his case, which had not previously been reflected in his pleadings. In light of the absence of any suggestion that either pleading did not reflect the instructions given at the time, each of Jafari and Pizarro’s more recent version of events was far from compelling in material respects.

Assessing the evidence in this context, I am satisfied that the issue of contamination was raised by Pizarro, but that Jafari gave no assurance in the discussions in 2008 that there was no contamination.[52] However, Jafari did say contamination would not be a problem and, at this point in time, did not disclose the existence of an old dry cleaners despite his knowledge of the fact.
[52]As to a later point in time, see par 136 below.

I return to the issue of contamination below.[53]
[53]See pars 136, 309, 325-327, 331, 523-548 below.

Another topic of discussion during the meetings held between Jafari and Pizarro in late 2008 was his prior dealing with others with respect to the Properties. This included an exchange about the role that had been played by Colonial’s solicitors, Gadens, who also acted for Perpetual. Jafari spoke of a solicitor at Gadens in extremely inflammatory terms and told Pizarro that that solicitor “was going to get it”. Jafari also said that he would make that solicitor kiss Jafari’s feet in front of the solicitor’s family.

Further, when Pizarro asked Jafari about the deterioration of his financial position, Jafari responded in substance:

This c… of a friend [Gangemi] and another c… called [the other former business associate of Jafari], and their c… solicitor, Alderuccio’s (sic) ripped me off.

After referring to taking them to court, Jafari continued:
I won a court case against these c…s, they used to be my business partners and now I am going to bankrupt [Gangemi].

In response, Pizarro said it sounded as if Jafari was suing everyone with whom he came into contact. Pizarro also suggested that maybe Jafari was doing something wrong and that he may want to look at how to do things in the future to avoid it happening again. Jafari responded that he was the most honest person in the world and that he had never found a person more honest than him.

By December 2008, Pizarro was having second thoughts. He told Jafari he did not have enough cash to proceed with the original proposal. Relevantly, in July 2010, Jafari swore an affidavit in this proceeding in opposition to an application for security for costs against 63 Buckley.[54] That affidavit recounted what Jafari said occurred in his dealings with Pizarro. In his witness statement, Jafari adopted the relevant paragraphs of this affidavit and then added “some extra details”.
[54]At this time, 63 Buckley was a co-plaintiff with Jafari.

In his July 2010 affidavit, Jafari acknowledged he was under pressure from Colonial in December 2008. According to Jafari’s affidavit, the relevant paragraphs of which were not challenged, in December 2008, Pizarro “changed our original deal”. Pizarro told Jafari he did not have enough cash as his money was tied up in other investments. Pizarro said he would provide the money required to get the project to construction phase, anticipated to be between $500,000.00 and $600,000.00, which would be his equity in the project. In mid December 2008, Pizarro said he would have to bring more money into the “JV” and wanted to change the deal. Pizarro said to Jafari that he wanted Jafari to “forget about receiving [his] equity”. Pizarro said they would both receive 50 percent of the net profit, and that Jafari’s equity would be included in his 50 percent. Jafari then stated in his affidavit:

I felt that I could not negotiate with him anymore, I accepted that.

In short, the operative discussion upon which Jafari and Pizarro decided to proceed in late 2008 made no mention of any partnership between them, or any of their related entities. Further, the discussion made it abundantly clear that Jafari would not have any equity if the project was to go forward, but would only be entitled to a share of the net profit from the Development, and that Jafari accepted this. Although there were numerous discussions after this point in time, it is significant that, on his own evidence, Jafari was not insistent upon anything beyond a mere profit share as at December 2008.

In early January 2009, Jafari and Pizarro agreed to retain a solicitor to record their agreement. Pizarro recommended Kliger Partners, as he had had previous dealings with them and knew a “capable” solicitor at that firm. On 6 January 2009, Kliger Partners emailed Jafari referring to a “lengthy conference” the previous day. The email confirmed some of the discussion and instructions. In his evidence, Jafari said that the purpose of the meeting was for the preparation of a “joint venture partnership”. However, the email, which was entitled “Proposed Joint Venture Agreement”, made no reference to partnership. Indeed, it was scant on detail as to the proposed agreement. The email contained the following advice to Jafari:

Please note that in all the circumstances, your entitlement to deal with the [Properties] is subject to the prior rights and entitlements of [Colonial][55] in its capacity as mortgagee in possession.

[55]This should have been a reference to Perpetual.

Jafari forwarded the email to Pizarro. Pizarro said he did not bother to read it as Jafari had already indicated he did not want to retain Kliger Partners because they were “charging too much”. I accept Pizarro’s evidence that he did not read the passage set out in the preceding paragraph. It is plain Pizarro conducted his negotiations through to the end of April 2009 on the basis that Jafari and 63 Buckley, themselves, were able to sell the Properties as the vendors, notwithstanding that he also knew Jafari was under considerable pressure from the mortgagee to sell the Properties.[56]
[56]See, for example, pars 92, 106, 176(2) below.

After their discussion about Kliger Partners’ costs, Pizarro undertook to send a heads of agreement for a proposed joint venture using a document he had from another deal. Although not in evidence, according to Jafari, Pizarro sent a draft agreement on 6 January 2009. Later that evening, Jafari sent an email to Pizarro suggesting that it would be time consuming to finalise the joint venture contract. He said he would put some heads of agreement together so that they could move quickly to finalise the joint venture agreement. The following afternoon, Jafari sent a draft of his proposed heads of agreement.

The document referred to a “proposed Joint Venture” between “Jafari/or nominee” and “Pizzaro (sic)/or nominee”. The draft agreement was very general in its terms. It stated that the parties would “own 50% each”. It provided for Pizarro to pay the outstanding amount of the Colonial Facility, together with $100,000.00 to Jafari or his nominee. Although it did not expressly say so, the draft contemplated Pizarro or his nominee would purchase the Properties. This is reflected in the clause recording that Pizarro would sell the Properties “as required by the bank prior to the commencement of construction … however this does not limit or prevent ‘[Jafari]’ from the selling process at the predetermine (sic) price”. The document also recorded that Jafari would engage builders, however all the decisions “shall be agreed by both JV partners”. After recording that Jafari was to be paid a weekly amount of $2,000.00 from the commencement of construction, the document concluded with the following:

The project shall commence in 12 months of this agreement being signed by the parties, otherwise the parties shall agree by way of getting three valuation reports to purchase/sell their share to firstly to (sic) the other JV Partner at the value of the second best valuation, secondly to a third party or in an open market for the best price being not lower than the second best valuation.

Jafari asserted at trial that the draft heads of agreement “basically covered” everything that they had discussed and agreed at that stage. Such an assertion runs counter to the contents of his July 2010 affidavit.[57] Contrary to Jafari’s evidence at trial, I find that the draft heads of agreement was an attempt by Jafari to put forward his desired position, but that Pizarro had not previously accepted, and did not subsequently accept, Jafari’s proposal of 6 January 2009.[58]
[57]See par 87 above
[58]For completeness, there was no evidence of any discussion in which Pizarro ever agreed to pay Jafari $100,000.00 in addition to paying out the Colonial Facility, or that Pizarro had agreed to pay Jafari $2,000.00 per week.

Pizarro gave unchallenged evidence that, in “late 2008 through to early 2009”, Jafari was telephoning him almost every day. During those discussions, Jafari asked Pizarro to assist him to meet other potential investors or financiers with respect to the Neighbouring Properties. In 1 of these conversations, in early January 2009, Jafari told Pizarro that the mortgagee had taken possession of the Neighbouring Properties and sold it.

A few days later, Jafari asked Pizarro to meet with him to discuss Pizarro helping Jafari with the Neighbouring Properties. Nothing came of this.

On 12 January 2009, Klonis sent a facsimile to Gadens referring to recent discussions between them. The facsimile referred to the rescission of the most recent contract of sale for the Properties.[59] The facsimile stated that Jafari may have an interested purchaser, and sought instructions with respect to Jafari and 63 Buckley undertaking a sale of the Properties. The facsimile concluded by noting the tender price of the rescinded contract was $2 million. Klonis asked whether, if the Properties were sold for less than $2 million, legal action would be taken against the last purchaser for any loss and damage suffered in the event of a substantially lower price.[60] There was no suggestion that, if the mortgagee in possession sold the Properties for less than $2 million, such a sale would be at such an undervalue as to expose Perpetual to legal liability.
[59]See par 40 above.
[60]This is what appears on the face of the document. However, Klonis may have intended to suggest his clients would take legal action because, assuming Colonial was fully repaid, it would make no sense for it to sue for any lesser sale price.

Pizarro also made inquiries of Gadens directly. On 22 January 2009, he sent an email to Jafari setting out information provided by Gadens with respect to the titles for the Properties and the caveats that needed to be cleared before settlement. The information attached recorded the following:

(1)The appointment of an external administrator to 63 Buckley on 13 May 2008.
(2)A first mortgage over each of the Properties in favour of Perpetual.
(3)A second mortgage in favour of HG & R Securities Pty Ltd (“HG & R Securities”) over each of the Properties.
(4)A caveat lodged by Surf Shack on 31 October 2008 over each of the Properties.
(5)A caveat lodged by Klonis on 11 January 2008 over 59 Buckley Street.[61]
(6)A caveat lodged by City West Water on 18 June 2008 over 1 of the Properties owned by 63 Buckley.

[61]Klonis had lodged a caveat on the basis that he contended the non-payment by Jafari of outstanding fees gave him an entitlement to do so.

In response to this email, Jafari replied that the matters raised would not present any difficulties, but that there was a need to “get the JV and the contract out of the way asap”.

In early February 2009, Jafari remained under considerable pressure. He sent an email to Pizarro attaching a copy of the “bank statement” for the Colonial Facility with the covering message for Pizarro to “act on this asap”. The statement recorded various repayments, including by reason of the forfeited deposits.[62] The balance outstanding as at 1 January 2009 was recorded as $743,764.92.00.
[62]See pars 36, 40 above.

According to Jafari, in early February 2009 Pizarro was more focused on the Neighbouring Properties. On 5 February 2009, as a representative of Melbourne Properties, Pizarro signed off on a rental appraisal addressed “[t]o whom it may concern”. The appraisal contained anticipated weekly rentals for student, 1 and 2 bedroom apartments, together with the proposed coffee shop. These figures had been provided by Jafari and Pizarro agreed with them. He also accepted during cross-examination that such figures were reasonable to anticipate for the Properties once the Development was completed. Based on these estimates, Pizarro considered the Development viable. As at February 2009, he accepted that he was still in discussions about dealing with Jafari with respect to the Properties, but only through Winteray.

On 20 February 2009, Sutherland Farrelly sent an email to Colonial advising that, given that the 2 previous sales of the Properties had been rescinded, the “most appropriate method of sale” was now by public tender. Further, by reference to the current state of the real estate market, the economy in general[63] and feedback received in respect to the Properties, Sutherland Farrelly considered the realisable value of the Properties was in the range of $900,000.00 to $1.1 million (exclusive of goods and services tax). There was no suggestion this information was disseminated to Jafari or Pizarro.
[63]Presumably, a reference to the global financial crisis prevailing at that time.

On 16 March 2009, in response to an email from Jafari on 12 March 2009 suggesting a meeting to finalise the sale of the Properties, Colonial emailed Jafari directing him to advise Sutherland Farrelly if any parties were interested in purchasing the Properties. On the same day, Jafari responded suggesting that no one representing Colonial or Perpetual was willing to talk to him. The email stated:

As you have been informed many times, I have several purchasers, ready to sign up an unconditional contract and pay 10% deposit asap!

Jafari asked the Colonial representative to contact him urgently.

At trial, there was no evidence to suggest that there was any proposed purchaser, in March 2009, ready, willing and able to sign an unconditional contract or to pay a 10 percent deposit.

According to Jafari, he informed Pizarro of the appointment of Sutherland Farrelly and Pizarro responded with a “mandate to act”, in draft, by which Pizarro asked a mortgage broker to arrange a loan facility of $950,000.00. Presumably, this was sent to give Jafari some comfort that things were progressing. However, I do not accept the implication that Pizarro was fully informed of the circumstances surrounding the appointment of Sutherland Farrelly.[64]
[64]See also par 90 above.

In late July 2008, Jafari instructed Bolden to prepare a unit trust deed for 63 Buckley to become trustee of a proposed unit trust. At that time, Jafari was anticipating that the Properties would be sold to Kamal.[517] Jafari gave evidence that he intended that the Properties would be held by 63 Buckley as trustee of the Trust and that he and Kamal would be equal unit holders. At this time, Jafari was keen to progress the matter.[518]
[517]See pars 27-28, 36 above.
[518]On 30 July 2008, Jafari emailed Bolden inquiring about the progress of the unit trust deed.

On 11 August 2008, Bolden emailed Jafari, attaching a document titled “Essence Unit Trust Deed 010808.pdf”.[519] The attached draft was dated 1 August 2008 on the cover sheet, but was dated 4 August 2008 in the third schedule,[520] which schedule set out the particulars to the draft deed. Those particulars included that Jafari was to be the first unit holder, 63 Buckley was to be the trustee and that the date of distribution was 1 July 2087 or such earlier date as may be determined.
[519]There was a further version of this document that Jafari said was located on Bolden’s file. It contained handwritten amendments on it that were made, according to Jafari, by Bolden. Those amendments changed Jafari’s address to an address Jafari was using in 2009 and also replaced the date of 4 August 2008 to 1 May 2009 in the third schedule. This strongly suggests Bolden was using the draft to prepare a further draft when Bolden received instructions in 2009: see pars 161, 180, 233 above and pars 561, 563 below.
[520]Being the “Date of Making this Deed”.

The covering email said that the document had been prepared in accordance with Jafari’s instructions, including that 63 Buckley was to be trustee, the initial capital was to be $100.00 and Jafari was to be the sole unit holder.[521] Bolden stated that he had provided for the units to be issued at 1 cent each, rather than $1.00 each, for a total of 10,000 units because it made disposing or transferring percentage interests easier down the track and would provide greater flexibility. The email directed Jafari to sign 3 copies of the deed, both as unit holder and as director and secretary of the trustee, in the presence of an independent adult witness, with 1 signed copy to be returned to Bolden’s office for safekeeping. Bolden also said Jafari could attend at his office to sign the deed if he so wished.
[521]The discrepancy between the instructions of Jafari that he and Kamal were to be equal unit holders (see par 550 above) and Bolden’s email suggesting Jafari was to be the sole unit holder was not explored in evidence.

Jafari stated that upon receipt, he printed and signed the deed (“the Purported 2008 Deed”) straight away.[522] On the execution page, Jafari has signed both as the “First Unitholder” and as the sole director and secretary of 63 Buckley. Both his signatures were witnessed by a cousin of Jafari, who, Jafari said at trial, was alive and well and living in Melbourne. Notwithstanding that the defendants in this proceeding directly accused Jafari of giving false evidence as to when this document was signed, Jafari’s cousin was not called by Jafari to give evidence. It must be assumed Jafari’s cousin would not have assisted Jafari’s case.[523]
[522]Jafari said he previously believed he executed the deed on 4 August 2008, however he accepted, after reviewing the Bolden file, that it “would have been about a week later”.
[523]Jones v Dunkel (1959) 101 CLR 298, 308.5 (Kitto J), 312.6 (Menzies J), 320.8-321.1 (Windeyer J).

Jafari also gave evidence that, as the sole director of 63 Buckley, he resolved that 63 Buckley “held all its property on the new trust”. A written resolution of 63 Buckley to this effect was signed by Jafari, but not dated. Jafari said in his witness statement that this resolution was prepared and signed “later”. When asked by his senior counsel when the resolution was signed, Jafari simply stated he did not remember. During cross-examination, it was put that the resolution was not signed until about mid 2016. Jafari sought to avoid giving a direct answer, stating:

Whenever that was I signed it, it’s the correct document and it was accepted by the court.

When pressed, Jafari conceded that it was possible the resolution was signed in mid 2016. It clearly was.

There was nothing before the court with respect to the events in 2008 (or 2009) to suggest the Purported 2008 Deed had been signed at that time. Further, as may be seen below,[524] it was in 2016 that Jafari sought to put everything in order (as he perceived it). Furthermore, I do not accept Jafari’s purported uncertainty as to whether the resolution was signed in 2016, being the year before trial. It is more likely that Jafari’s evidence of his uncertainty may be explained on the basis that Jafari would have perceived that unequivocal evidence to the effect that the resolution was signed in 2016 would not have assisted his case, and would have led to further questions during cross-examination.
[524]See par 560 below.

Further, if, as Jafari says, he executed the Purported 2008 Deed in August 2008, he did not tell Bolden. This is plain from the fact that, on 24 September 2008, Bolden sent a further email to Jafari with an attachment titled “Essence Unit Trust Deed 040808.pdf”.[525] The covering email was in similar terms to his previous email sent 11 August 2008. The email directed that, if Jafari had not already done so, he should sign 3 copies of the proposed deed. Again, Bolden said Jafari should return 1 original signed counterpart to his office for safekeeping.
[525]A letter was sent on the same day to Jafari’s postal address in substantially the same terms.

The attached draft deed included the date 4 August 2008 on the cover sheet as well as in the third schedule. This document was never executed by Jafari.

On 25 September 2008, Jafari emailed Bolden thanking him for his email and apologising for not being in touch. Jafari stated he had been away for a few weeks in China and would see Bolden when he returned the following week. Jafari’s email gave no indication he had already signed the Purported 2008 Deed.

Bolden immediately responded stating he was away the following week and would return on 8 October 2008. He said he looked forward to catching up with Jafari in a couple of weeks. Jafari chose not to do this.[526]
[526]Jafari said in October 2008 he went to visit his sick mother in Iran.

There was no evidence that Jafari took any steps in 2008 to have any executed deed stamped or placed into safekeeping. In fact, the Purported 2008 Deed was not stamped until 28 September 2016. Jafari explained this on the basis that, in 2008, he did not know it was necessary to have the deed stamped. Further, when asked whether he ever gave Bolden the Purported 2008 Deed, as signed in 2008, Jafari said he thought he did not need to give it to Bolden. Jafari then added that Bolden had said, “’Get it witnessed and sign it’, that’s it”. This evidence ignored or misstated Bolden’s written direction that 3 copies should be signed, with 1 executed copy returned to Bolden’s office.[527]
[527]See pars 552, 556 above.

As set out above,[528] Jafari was unable to progress the completed sale of the Properties meaningfully in 2008 and early 2009. However, with negotiations with Pizarro progressing well, Jafari again approached Bolden in April 2009.[529] Around that time, Jafari expressly referred to the “Essence Unit Trust” in his discussions with Fetter.[530] Jafari said he had explained to Fetter, at their first meeting,[531] that the Trust “held my interests and would hold my share in the joint venture”. Jafari suggested he referred to the Trust many times in 2009.
[528]See pars 36, 38-40 above.
[529]See pars 161, 180, 233 above.
[530]See par 147 above.
[531]Jafari referred to the date of 21 March 2009, being the incorrect date of the file note: see fn 90 above.

Whilst it is clear that Jafari mentioned the Trust in April 2009, it is far from clear that the Trust had been established at that time. Neither Fetter’s note,[532] nor the various drafts leading up to the Terms Sheet, indicate that any deed had been executed, or that 63 Buckley was already the trustee of the Trust. Although it is plain that Jafari ultimately intended a trust structure to be in place,[533] the evidence indicates that Jafari never said to Fetter or Pizarro that 63 Buckley was already holding its legal interest in the Properties (which did not include 59 Buckley Street) as a trustee pursuant to a pre-existing trust.
[532]See par 147 above.
[533]See pars 129, 133, 161, 258, 260, 283-284 above; cf pars 261, 301 above.

Equally, when Jafari gave instructions to Bolden in April 2009,[534] he did not tell Bolden that he had already executed a deed of trust in August 2008.[535] In an email sent to Pizarro on 6 April 2009, shortly after a meeting with Bolden concerning the Trust, Jafari stated that Bolden had advised Jafari to “nominate a Trustee for the Unit Trust”. Having referred to this in the email, Jafari continued:

[M]aybe you can be the Trustee until we appoint a company later to do the construction!!??? Tell me what you think??
Please ring me asap to discuss the matter further so I can instruct [Bolden] to register the Unit Holders and the Unit Trust tomorrow hopefully (sic) we can finalise the rest of the deal.
(Emphasis added.)

[534]See par 128 above.

[535]See also par 569 below.

When cross-examined, Jafari said he did not refer to 63 Buckley as the trustee because he “didn’t want [63 Buckley] to be involved at all”. Jafari said, because of his experience in the Bloomingdale proceeding,[536] he wanted to secure his family interest in the Properties. Whilst this may have been ultimately correct, it is likely Jafari saw little utility in taking any steps to transfer 63 Buckley’s beneficial ownership before Hargrave J handed down his decision, in May 2008, as to the ownership of the beneficial interest. Further, the position remained uncertain as Hargrave J’s decision was the subject of an appeal, which was not heard until November 2009.[537]
[536]Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2008] VSC 168 (Hargrave J).
[537]Gangemi v Osborne; Bloomingdale Holdings v 63 Buckley Street Pty Ltd [2009] VSCA 297 (Nettle, Mandie and Harper JJA).

Jafari also referred to advice, apparently given by Fetter, that Jafari’s mother was old and that having her as a unit holder would not assist for refinancing. Jafari said it was for that reason that he suggested his uncle’s son in law, Nematollahi, be the unit holder.[538] When asked whether Jafari ever told Bolden that he already had a trust deed executed with a trustee and unit holders, Jafari said he did not need to say that because “it was already there, everybody was aware of it”. Not only did Jafari not give affirmative evidence of ever telling Bolden of an existing trust, his bald assertions as to the state of affairs and knowledge of other persons can be given no weight in circumstances where there is nothing of substance to support them.[539]
[538]See par 128 above.
[539]See further par 133 above, and Bolden’s reference to the Trust being “proposed” in early April 2009.

Further, when asked what Jafari meant in his email to Pizarro about instructing Bolden “to register” the unit holders and the Trust, Jafari said it meant to “finalise” the unit holders and also the new trustee. When pressed as to what was meant by “register”, Jafari said it was just “a figure of words”. When further pressed, Jafari, implausibly, suggested that the word “register” referred to making or registering amendments. After giving other possibilities as to what “register” meant, Jafari said he could not recall giving the Purported 2008 Deed to Bolden for him “to register”.

The contents of the email sent by Jafari to Pizarro on 6 April 2009[540] strongly suggest that Jafari did not believe that any existing trust was in place and that he was seeking to obtain agreement from Pizarro so that the intended trust could be established. If a trust had already been created, it would be expected that Jafari would have spoken in terms of transferring units or replacing the trustee, rather than speaking (as he did) in terms consistent with setting up a new trust. Further, in the email he sent to Bolden the next day,[541] Jafari made no mention of transferring units or replacing any trustee, but rather spoke in terms of Bolden being able to “finalise” the agreement.
[540]See par 563 above.
[541]See par 129 above.

Jafari’s explanation for his instructions at the time was that he and Pizarro were discussing a number of proposals. Further, he stated that because 63 Buckley was to be the seller, he thought he needed a new trustee of the Trust to act as buyer to pay out the mortgage.

Jafari said that ultimately, after discussions with Pizarro, he “went back to” the Trust holding his family’s interests. He suggested that, at his request, Bolden prepared amendments to the Trust to change the trustee and the unit holder. In fact, in 2009 Bolden prepared a trust deed which made no reference to a trust already being in existence or to any such changes.

The trust deed, which was executed by Jafari on 27 May 2009 both as trustee and under power of attorney for his mother, was in similar terms to the drafts prepared by Bolden in 2008 (“the 2009 Deed”). Both signatures were witnessed by Bolden. The 2009 Deed provided, in part, that:

The Trustee has agreed to act as Trustee of the [Trust] constituted by this Deed.[542]
[542]Recital (1).
…
The First Unit Holders have agreed to take up the number of Units in the [Trust] mentioned in the Third Schedule and have paid or agreed to pay in respect thereof to the Trustee the sum mentioned in the Third Schedule.[543] …
The Trust hereby constituted shall be known by the name set out in the Third Schedule.[544]
…
Units in the [Trust] initially shall be issued for the price of one cent per unit fully paid.[545]
…
The [Trust] hereby constituted shall continue until the date of distribution specified in the Third Schedule unless earlier determined.[546]
(Emphasis added).

In the third schedule, it was recorded that the “First Unit Holders” would be Khanemjan Mohmedi Kartalaie, Jafari’s mother,[547] that the date of making the deed was 1 May 2009,[548] and that the date of distribution was 1 April 2088 or such earlier date as may be determined.[549]

[543]Recital (3).

[544]Clause 2(a).

[545]Clause 4(a).

[546]Clause 10(a).

[547]Item 1.

[548]Item 3.

[549]Item 6.

The provisions set out above make it clear that the 2009 Deed provided for a new trust to be established as at 1 May 2009. They did not amend the details of any pre-existing trust. It is clear that Bolden must have intended this, given the clear language used. Further, it is noted that Bolden changed the date of distribution to the later date of 1 April 2088,[550] consistent with an understanding that the Trust was being created as at 1 May 2009.[551]
[550]Cf par 551 above.
[551]See Perpetuities and Accumulations Act 1968 (Vic), s 5. For completeness, the 2009 Deed included a first and second schedule, which comprised draft documents for “application for units” and “unit certificate” and referred to the date “the 4^th day of August 2008”. No witness was taken to these pages at trial and no submissions relied upon their contents. Presumably, this was because they were identical to the drafts in the first and second schedule of the Purported 2008 Deed, and had simply been copied over. I so find.

Faced with the unequivocal language of the 2009 Deed, and the absence of any reference to a transfer of units or the replacement of a trustee, Jafari responded:

Again, I repeat what I said. My intention was that and I don’t have to pay – it’s enough, I’ve paid enough for lawyers’ mistakes. He made a mistake and obviously you are raising a case against his negligence.

Despite contemporaneous documents to the contrary, Jafari maintained he instructed Bolden simply to transfer the units and appoint a new trustee. In substance, he gave evidence that, to the extent that the documents indicated otherwise, he did not appreciate that at the time and that he relied on his lawyer to act in accordance with his instructions.

Immediately after its execution, Bolden arranged for the 2009 Deed to be stamped. During cross-examination, Jafari was taken to an invoice from Bolden that recorded $200.00 having been paid by way of “Disbursements”. When it was put to Jafari that he knew that this reference to disbursements was for stamp duty, Jafari said that he did not know that, and that he did not know in 2009 that he needed to pay stamp duty. Jafari was taken to further documents referable to the payment of stamp duty, including a trust account receipt for $200.00 for “Anticipated Disbursements – Stamp Duty on Essence Unit Trust (JAFARI)”. Jafari said that the documents were from Bolden’s file and that he had no recollection of Bolden asking for $200.00 for stamp duty. He said Bolden had asked for a “lot more [money] than that”. Jafari then said he could not recall paying the amount of $200.00 on Visa. Ultimately, he resiled from his earlier evidence and said he could not recall whether he knew in May 2009 there was a need to pay stamp duty on the 2009 Deed.

Also under cross-examination, Jafari was queried as to why the issue of the Trust had not been raised until so late in this proceeding. In particular, Jafari was asked whether, in April 2010, when this proceeding was commenced, he was “of the mind that [63 Buckley] was the trustee of the Trust” rather than himself under the 2009 Deed. Jafari said that he was so minded, and that he had completely forgotten about the 2009 Deed he signed on 27 May 2009.[552] Jafari also explained he made no reference to the 2009 Deed, until the document surfaced as a result of a subpoena to Bolden, because he had not recalled it.[553]
[552]See par 570 above.
[553]See par 372 above.

When seeking to explain how he had forgotten the 2009 Deed, Jafari said that he “always screamed to everybody” that 63 Buckley was a trustee company. He said that Needham and the barrister he retained “were aware of these trusts and they never mentioned anything in court and I just forgot” (emphasis added). Jafari continued, stating that he was “very lucky” he found the 2009 Deed, that he had no reason for hiding it, and that he was not hiding anything.

Pausing here, the facts as relayed by Jafari are highly improbable. Needham was first retained by Jafari in July 2009 and was still acting for him in April 2010 when this proceeding was commenced.[554] Jafari said he found the Purported 2008 Deed, already executed, in “boxes that [Jafari] collected from [Needham] when his company went [into liquidation]”.[555] According to Jafari, he had provided Needham with the Purported 2008 Deed, in its executed form, back in 2009 or 2010 and that was why it was “in the boxes”. However, also according to Jafari, there was no copy of the 2009 Deed in Needham’s boxes. This is curious in circumstances where, on any view, when Needham was retained in July 2009, the 2009 Deed governed the situation. Why it was that Jafari consciously turned his mind to providing the Purported 2008 Deed, but somehow overlooked the 2009 Deed, was never satisfactorily explained.
[554]See pars 234, 306 above.
[555]Precisely how Jafari obtained access to Needham’s files was not explored. There was no suggestion the documents were produced by Needham through any court process, such as pursuant to a subpoena or a notice to produce.

When asked by Pizarro’s counsel whether Jafari ever told Needham that 63 Buckley was the trustee of the Trust, Jafari said he specifically recalled doing so. Jafari also said he gave Needham a copy of the Purported 2008 Deed when he first instructed him. He also acknowledged that he discussed the Trust with Needham in 2009, because the Trust was referred to in proposed agreements with Pizarro in the second half of 2009. When it was drawn to Jafari’s attention that those drafts referred to Jafari, and not 63 Buckley, as being the trustee for the Trust,[556] and asked whether Jafari was alarmed at the time, Jafari said in response: “To be honest, I just noticed it now”.[557]
[556]See par 258 above.
[557]Of course, the reference to Jafari as trustee at that point in time was correct given the execution of the 2009 Deed, but Jafari was seeking to explain why he had provided to Needham the Purported 2008 Deed, rather than the 2009 Deed (which Jafari said Needham never received).

Self-evidently, Jafari’s evidence on this topic contained inconsistencies and, if accepted, would disclose glaring oversights and mistakes in 2009 on the part of him and his lawyers. In summary:

(1)The only evidence that Jafari executed the Purported 2008 Deed in August 2008 was Jafari’s own oral evidence.
(2)There were at least 3 witnesses, Jafari’s cousin, Bolden and Needham, who could have been called to corroborate Jafari’s account, but were not.
(3)63 Buckley purchased 61 and 63 to 67 Buckley Street in its own right and, upon Jafari taking ownership and control of 63 Buckley in either May or July 2005,[558] that company continued to hold the Properties from mid 2005 in its own right and not in any other capacity.[559]
(4)It formed no part of Jafari’s case that the Trust was created other than in writing upon the execution of the Purported 2008 Deed, forwarded by Bolden in August 2008.
(5)The contemporaneous documents overwhelmingly indicate that the Trust was not created until the execution of the 2009 Deed.
(6)When cross-examined on a number of matters pertaining to this issue, Jafari was either evasive, non-responsive or contradicted himself.

[558]See par 19 above.

[559]Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2008] VSC 168, [22], [291], [352], [356], [388]-[389], [474], [487] (Hargrave J).

In these circumstances, coupled with the fact that Jafari was, in many respects, an unsatisfactory witness more generally,[560] I am not satisfied that Jafari executed any document establishing the Trust in August 2008 or at any time before the 2009 Deed was executed. The onus was on Jafari to establish the Purported 2008 Deed was signed by him in August 2008.[561] For the reasons stated above, he has not discharged that onus.
[560]See pars 588-591 below.
[561]See fn 294 above.

Jafari’s senior counsel submitted that making such a finding, in light of Jafari’s direct evidence that he did sign the Purported 2008 Deed in August 2008, implies that Jafari was lying when he gave his evidence that the document was not signed in 2016, but was signed in 2008. If this be the correct characterisation of the effect of such a finding on the balance of probabilities to the question at hand, then on this approach I am so satisfied.[562] In short, in my view, Jafari’s evidence on this issue cannot be accepted.
[562]See Briginshaw v Briginshaw (1938) 60 CLR 336, 361.7-362.5 (Dixon J); Evidence Act, s 140(2)(c).

Assessing the evidence as a whole, I find that Jafari decided in 2008 to establish the Trust and intended to finalise it upon the terms of the proposed joint venture with Kamal,[563] and later McDonnell,[564] also being finalised. When such proposed joint ventures did not eventuate, Jafari refrained from taking the further steps necessary to establish the Trust. However, once an agreement was signed with Pizarro, by the Original Agreement, Jafari took steps to establish the Trust (which occurred in May 2009).
[563]See pars 27-28, 36, 550 above.
[564]See pars 38-39 above.

What is set out above deals with the issue of the Trust as argued. However, a further point should be made. Even if, contrary to the findings made, Jafari executed the Purported 2008 Deed in August 2008 and, as a result, 63 Buckley held its interests in the Properties on trust from that point onwards, nothing Jafari signed in May 2009 would have altered this position. The 2009 Deed created a stand alone trust. If 63 Buckley were the trustee of the Essence Unit Trust from August 2008, it remained so, even though a new trust was created in May 2009 with the same name.[565]

J. Other matters

[565]Noting that, upon 63 Buckley being wound up, it automatically ceased holding the position of trustee in the capacity contended for (if it had ever held that position): the Purported 2008 Deed, cl 16(c)(i). Any claim based on Jafari succeeding 63 Buckley as trustee upon 63 Buckley going into liquidation was expressly abandoned at trial: see par 372 above.

In addition to Hosking and himself, Jafari called 2 further witnesses. The first was Luke Chamberlain of Tract Consultants Pty Ltd (“Tract Consultants”). He gave evidence of work Tract Consultants performed for Pizarro’s company, Landmark, and Dexel Engineering Pty Ltd (“Dexel”), a company related to Romex,[566] which acquired the Properties in December 2012.[567] Tract Consultants provided town planning services from around August 2011 to at least March 2014.[568] The work performed resulted in, amongst other things, a planning permit being issued.
[566]Pizarro said he believed Dexel was the proposed building company.
[567]See pars 367-368 above.
[568]For a considerable amount of this work, Tract Consultants’ invoices went unpaid.

The second witness was Meng, whose sister was living with Pizarro in early 2011. Pizarro convinced Meng that purchasing the Properties with a view to development in accordance with the Planning Permit would be a good investment. Pizarro helped Meng set up Asana. As explained above,[569] although Asana executed a contract of sale, it was unwilling to complete the purchase. This ended up costing Meng $135,000.00, plus related costs.
[569]See pars 364-365 above.

The evidence of these 2 witnesses was led on the basis that it was relevant to “partnership duties of loyalty” and fiduciary duties allegedly owed by Pizarro and 23 Developments to Jafari. As I have found that no such duties existed, it is unnecessary to discuss their evidence further, beyond stating that there were no credibility issues with respect to these witnesses.

K. Credibility

Clearly from what is set out above, the credit of both Jafari and Pizarro was central to a substantial number of issues in this case.

In closing submissions, Jafari was described by his own counsel as “a passionate, emotional and, at times, defensive witness”. It was submitted this was understandable given the disputes in this proceeding have consumed a great deal of his life. It was also accepted that Jafari was prone to making speeches while giving evidence. It was suggested this was partly because of his “great familiarity” with the case, partly because he saw each and every issue as being linked and causative, and partly because he was prone to advocate on his own behalf. As to the last of these matters, it was suggested this was also understandable as Jafari had played a role as his own lawyer “for 10 years, both in and out of court, and is a natural-born salesman”. It was acknowledged, quite properly, that Jafari had difficulty recognising the demarcation between his duties as a witness and as a lawyer.[570]
[570]For completeness, it should be mentioned that, regrettably, during Elzain’s evidence it was necessary for me to direct Jafari to desist with his attempts from the body of the court to indicate to Elzain the answers Elzain ought to give to questions put during his cross-examination.

With respect, the admirable attempts by Jafari’s counsel to explain and justify Jafari’s demeanour and credibility generally as a witness could not allay the obvious flaws with much of his evidence. In many respects, Jafari was neither reliable nor credible. This observation applies not only to his evidence, but also to his conduct at the time of the events the subject of this proceeding.[571]
[571]See, for example, pars 32-35, 83-85, 102-103, 107-111, 135 (and fn 86), 193, 348(1) above.

Many examples may be given to support this conclusion. One of the principal difficulties in accepting Jafari’s evidence was his insistence upon the existence from April 2009 onwards of a partnership. In addition to matters set out above,[572] a clear example of this was when Jafari was giving his evidence in re-examination.
[572]See pars 8, 89, 152-156, 220-221 above.

His senior counsel referred him to an email sent by Pizarro in September 2009, which attached a proposed agreement.[573] When Jafari was asked what it was, he asked if he could read it quickly. Having done so, Jafari gave evidence that Pizarro was “suggesting that we should treat [it] as the finalisation of our joint venture partnership”. This was despite the covering email not referring to anything that could be considered remotely connected to a partnership, and the attached draft agreement expressly disavowing that Jafari had any interest in the Properties or the Development other than a profit share, and clearly stating that he was “not an owner of the Development”. In my view, this was just 1 of many instances that demonstrated Jafari’s implacable determination to advocate for his desired outcome rather than faithfully address the facts.
[573]See par 267 above. See also pars 285, 295 above.

Having found that Jafari was, in numerous respects, an unsatisfactory witness, it is also necessary to observe that Pizarro’s evidence was also not entirely satisfactory. Although not to the same extent as Jafari, Pizarro was also prone to tailor his evidence to advance his case on occasions.[574] That said, as a general observation, I found Pizarro to be a more reliable witness than Jafari.

L. Conclusion

[574]See, for example, pars 78, 80, 144, 327, 377 above.

For the reasons set out above,[575] Jafari has established the claim that he and 63 Buckley were entitled to the imposition of a Vendor’s Lien over the Properties to the extent of the unpaid purchase price, reflecting the amount of the effective vendor finance provided to 23 Developments.
[575]See pars 458-480 above.

However, as 23 Developments has a set off for the entirety of this amount,[576] and Jafari has otherwise failed in his claims,[577] there will be judgment in favour of each of 23 Developments, Pizarro and Fetter with respect to Jafari’s claims.[578]
[576]See par 548 above.
[577]See pars 375-457, 481-518 above.
[578]The fourth defendant was only a necessary party: cf Yunghanns v Yunghanns [1999] VSC 254, [59] (Gillard J).

Further, as the liquidator only sought to be heard in the event the court found 63 Buckley was the trustee of the Trust from 4 August 2008 (or thereabouts) until 2 August 2013, and it has been found 63 Buckley was never trustee of the Trust during this period, there is no need to say anything further concerning 63 Buckley.

On the counterclaim, 23 Developments has been successful in proving Jafari and 63 Buckley engaged in misleading or deceptive conduct in trade or commerce.[579] After deducting the amount representing the effective vendor finance,[580] there will be judgment in favour of 23 Developments in the sum of $219,393.59.

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[579]See pars 519-545 above.

[580]See pars 479-480, 548 above.

ANNEXURE A – Map of the Properties and the Neighbouring Properties

See par 17, fn 6 above.

ANNEXURE B – Map of locations in the Second Hosking Report

See par 313, fn 220 above.

[2018] VSC 404

30 JULY 2018