Jeans v Cleary

[2006] NSWSC 647

CITATION:	Jeans v Cleary [2006] NSWSC 647 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	13 June 2006, 14 June 2006, 15 June 2006, 19 June 2006
JUDGMENT DATE :	28 June 2006
JUDGMENT OF:	Johnson J at 1
DECISION:	1. Verdict for the Defendant against the Plaintiff; 2. Plaintiff to pay the Defendant’s costs of the proceedings on an indemnity basis.
CATCHWORDS:	DECEIT - claim of forgery of signature on guarantee - whether forgery proved - expert handwriting evidence - claim of forgery rejected - element of reliance in tort of deceit
LEGISLATION CITED:	Evidence Act 1995 Imperial Acts Application Act 1969 (NSW) Civil Procedure Act 2005
CASES CITED:	Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 268 Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 470 Jeans v Commonwealth Bank of Australia (2003) 204 ALR 327 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Jeans v Cleary [2004] NSWSC 1245 Cleary v Jeans [2006] NSWCA 9 Commonwealth Bank of Australia v Jeans [2006] FCA 693 Tresize v National Australia Bank Limited (2005) 220 ALR 706 Integral Energy Australia v EDS (Australia) Pty Limited [2006] NSWSC 600 Derry v Peek (1889) 14 App Cas 337 Banditt v The Queen (2005) 80 ALJR 421 Gould v Vaggelas (1985) 157 CLR 215 Clark v Urquhart (1930) AC 28 Toteff v Antonas (1952) 87 CLR 647 Briginshaw v Briginshaw (1938) 60 CLR 336 Helton v Allen (1940) 63 CLR 691 Rejfek v McElroy (1965) 112 CLR 517 Bannister v Walton (1993) 30 NSWLR 699 Neat Holdings Pty Limited v Karajan Holdings Pty Limited (1992) 67 ALJR 170 Director of Public Prosecutions v Hester (1973) AC 296 Doney v The Queen (1990) 171 CLR 207 R v E (1996) 39 NSWLR 450 R v Baskerville (1916) 2 KB 658 R v Whitehead (1929) 1 KB 99 Gawne v Gawne (1979) 2 NSWLR 449 R v Doney (2001) 126 A Crim R 271 R v Hannes (2000) 158 FLR 359; [2000] NSWCCA 503 Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (1988) 14 NSWLR 523 Colgate-Palmolive Co v Cussins Pty Limited (1993) 46 FCR 225 White Constructions (ACT) (In Liquidation) v GB White and Ors [2004] NSWSC 303 Zaravinos v Houvardas [2004] NSWCA 421 Oshlack v Richmond River Council (1998) 193 CLR 72 Rosniak v Government Insurance Office (1997) 41 NSWLR 608
PARTIES:	John Anthony Jeans (Plaintiff) Stephen Thomas Cleary (Defendant)
FILE NUMBER(S):	SC 20049/04
COUNSEL:	Mr JM Ireland QC (Plaintiff) Mr AG Bell SC; Mr DA McLure (Defendant)
SOLICITORS:	Moloney Lawyers (Plaintiff) JK O'Sullivan (Defendant)
LOWER COURT DATE OF DECISION:	---
LOWER COURT MEDIUM NEUTRAL CITATION:	---

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Johnson J

28 June 2006

20049/04 John Anthony Jeans v Stephen Thomas Cleary

JUDGMENT

1 JOHNSON J: The Plaintiff, John Anthony Jeans, claims damages from the Defendant, Stephen Thomas Cleary, for the tort of deceit. He alleges that the Defendant forged the Plaintiff’s signature on a personal guarantee in June 1998. The guarantee formed part of security offered for a very substantial commercial loan facility advanced in 1998 by the Commonwealth Bank of Australia (“the Bank”) to the Plaintiff’s company, Deangrove Pty Limited (“Deangrove”) for a development project (“the Holloways Beach Project”). The Defendant was and remains an officer of the Bank.

2 The Defendant denies that he forged the Plaintiff’s signature on the guarantee. The principal issue to be determined in these proceedings is the factual question concerning the authorship of the disputed signature.

3 This is the latest chapter in protracted litigation between the Plaintiff, the Defendant and the Bank in the Federal Court of Australia and in this Court.

Proceedings in the Federal Court of Australia

4 The Holloways Beach Project failed. In 2000, the Plaintiff and Deangrove sued the Bank in the Federal Court of Australia alleging misleading and deceptive conduct and claiming damages and an order setting aside the Plaintiff’s guarantee of Deangrove’s indebtedness under the commercial loan facility. The Bank cross-claimed against the Plaintiff under his guarantee.

5 For the purpose of the Federal Court proceedings, the Plaintiff admitted in pleadings that he had signed the guarantee. In three affidavits sworn on 13 March 2000, 25 September 2002 and 17 March 2003 and filed in those proceedings, the Plaintiff swore that he had signed the guarantee which he was seeking to have set aside. A copy of the guarantee was exhibited to the affidavit of 25 September 2002.

6 The trial began before Sackville J on 17 March 2003. On the third day of the trial, Mr Adam Bell SC, for the Bank, asked the Plaintiff under cross-examination to confirm that the signature on the guarantee was his. When his attention was drawn to the document, the Plaintiff said that it was not his usual signature and that it was different from the signature by which he had attested the fixing of Deangrove’s common seal on another page of the same document. The Plaintiff applied to Sackville J for leave to withdraw admissions in the pleadings that he had executed the guarantee. The application was refused on 28 March 2003: Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 268. The trial continued on the existing pleadings.

7 On 16 May 2003, Sackville J dismissed the claims of the present Plaintiff and Deangrove and entered judgment for the Bank on its Cross Claim against the present Plaintiff for $4,749,813.30: Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 470. An appeal to the Full Federal Court was dismissed on 19 December 2003: Jeans v Commonwealth Bank of Australia (2003) 204 ALR 327. The only ground of appeal was that Sackville J should have allowed the present Plaintiff to withdraw his admissions. On 10 December 2004, the High Court of Australia refused special leave to appeal against the decision of the Full Federal Court.

Proceedings in Supreme Court of New South Wales

8 On 4 March 2004, the Plaintiff sued the Defendant in the present proceedings, alleging that the signature on the guarantee was forged and claiming as damages the amount of the Federal Court judgment.

9 The Defendant applied by Notice of Motion for summary dismissal on the basis of issue estoppel, Anshun (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589) estoppel or abuse of process. Mathews AJ rejected all three grounds and dismissed the motion for summary dismissal: Jeans v Cleary [2004] NSWSC 1245. Mathews AJ held that there was no privity of interest between the Bank and the Defendant and that the doctrine of issue estoppel did not apply (paragraph 27). With respect to Anshun estoppel, her Honour found that the Plaintiff’s failure to dispute the signing of the guarantee until the third day of the hearing was unreasonable in the Anshun sense (paragraph 41). However, her Honour concluded at paragraph 45:

“Had the matter ended there, I would have found that this was a case of Anshun estoppel. However in this case Mr Jeans, in his amended statement of claim, alleges that he was relying on Mr Cleary's fraudulent misrepresentation (that he had witnessed Mr Jeans signing the guarantee) when he accepted, in the earlier stages of the Federal Court proceedings, that the signature on the guarantee was his own. This is a matter which has not been previously ventilated. On its face, it appears to be a strange proposition, and it may well encounter serious factual and legal hurdles. But this is not the occasion for exploring those issues. I am concerned here with estoppel. And in my view there is no legal basis for shutting Mr Jeans out from asserting this matter. Nor is there any realistic possibility of severing this off from the other allegations in the statement of claim. Indeed this course has never been suggested.”

10 Mathews AJ found that there was no Anshun estoppel to bar the present claim.

11 With respect to abuse of process, Mathews AJ concluded (paragraph 47):

“Were it not for the matter I have just raised [concerning Anshun estoppel] , I would have acceded to this proposition. However Mr Jeans's assertion that Mr Cleary's fraudulent misrepresentation was responsible for Mr Jeans' inability to have the genuineness of the signature ventilated in the Federal Court, raises a fresh issue which he is entitled to have adjudicated and determined. Accordingly I find that there is no abuse of process.”

12 Mathews AJ declined to dismiss the proceedings on the basis that no reasonable cause of action was disclosed. Her Honour noted that the Plaintiff’s case was founded upon the existence of the Federal Court judgment, as it established the loss which was sought to be recouped in the present proceedings and that, accordingly, it was not necessary for the Plaintiff to seek to set aside that judgment in order to maintain the present proceedings (paragraph 49).

13 On 9 February 2006, the Court of Appeal, by majority (Handley JA and Young CJ in Eq, Bryson JA dissenting) dismissed an appeal from the judgment of Mathews AJ: Cleary v Jeans [2006] NSWCA 9.

14 On appeal, the Defendant did not challenge that part of the decision of Mathews AJ concerning privity of interest (paragraph 6).

15 The Defendant challenged her Honour’s findings and conclusions concerning Anshun estoppel and abuse of process. In the course of rejecting the Defendant’s submissions on these issues, Handley JA (Young CJ in Eq agreeing) said at paragraphs 29-31:

“[29] If the respondent establishes that he was induced by the appellant’s fraudulent representation in the attestation clause to conduct his case in the Federal Court until the third day of the trial on the basis that he had executed the guarantee and thus estop himself, as against the Bank, from alleging otherwise he was ‘unable properly to contest’ the decision to enforce the guarantee against him and lacked ‘a full opportunity’ to litigate the signature issue against the Bank.

[30] Although proof of his damages will require the respondent to establish that the signature on his guarantee was not genuine, for the reasons given, these proceedings are not a collateral attack on the judgment of the Federal Court and are not an abuse of process.

[31] The same conclusions flow from the principles which determine causation in deceit. If the respondent proves that he and his solicitors assumed, without carefully checking, that his signature on the guarantee was genuine because it had been attested by the appellant any carelessness on their part in failing to check his signature will not be an answer.”

16 Handley JA concluded at paragraph 35:

“On the facts pleaded the misrepresentation continued to operate on the respondent until the third day of the trial but by then he was locked in because of the estoppel. Thus, on the case pleaded, the estoppel which prevented him obtaining leave to amend was a result of the fraud. In principle therefore the prior judgment cannot be an answer to this action.”

17 In a separate judgment agreeing with Handley JA, Young CJ in Eq said at paragraphs 68-69:

“[68] In the instant case, the kernel of the plaintiff's case is that Mr Cleary's alleged fraud caused the plaintiff loss in bringing about the plaintiff's conduct in making an admission which directly caused him to suffer a verdict in the Federal Court.

[69] In this sense there is not really a collateral attack on the Federal Court judgment at all.”

18 In his dissenting judgment, Bryson JA concluded that the Plaintiff’s case was so fantastic as to be scandalous and an abuse of process (paragraphs 56-57). His Honour would have allowed the appeal and ordered that the present proceedings by summarily dismissed.

19 I have referred in some little detail to the judgments of Mathews AJ and of the Court of Appeal given that a number of issues considered in those judgments remain alive in the present proceedings.

Pending Proceedings Before the Federal Court of Australia

20 Reference should be made to a further limb of the litigation between the Plaintiff and the Bank. Following the delivery of judgment in the Federal Court proceedings, the Bank commenced bankruptcy proceedings against the Plaintiff in the Federal Court of Australia. I was informed that the bankruptcy petition, which is the subject of those proceedings, was extended by order of Hely J and will expire on 9 July 2006.

21 The bankruptcy proceedings are listed for hearing before Rares J on 5 July 2006. If the bankruptcy petition remains undetermined prior to its expiry on 9 July 2006, the Bank will lose the benefit of any relation-back period based on the occurrence of the act of bankruptcy which founds the petition: Commonwealth Bank of Australia v Jeans [2006] FCA 693 at paragraph 12. I was informed that the sole basis upon which the Plaintiff could resist the bankruptcy petition at the hearing before Rares J would be a judgment in his favour in the present proceedings.

22 Given the relationship between the proceedings, it is appropriate that I determine the present proceedings expeditiously so that the issues raised in the present proceedings are resolved before 5 July 2006.

23 The present proceedings involve the final hearing of the Plaintiff’s claim for relief. It was common ground that I was to determine the present claim on the evidence before me and that I was not bound by any findings made by Sackville J in the proceedings between the Plaintiff, Deangrove and the Bank (T245.38; T258.1; s.91 Evidence Act 1995).

The Tort of Deceit

24 The essential elements of the tort of deceit may be summarised in the following way (Tresize v National Australia Bank Limited (2005) 220 ALR 706, at 716 [38]; Integral Energy Australia v EDS (Australia) Pty Limited [2006] NSWSC 600 at paragraph 3):

(a) a representation of fact (which can be as to the representor’s opinion or intention or the law) that is conveyed to the claimant by the representor’s words or conduct;

(b) knowledge on the part of the representor that the representation is false or, failing that, (a) the absence of a genuine belief that it is true or (b) recklessness as to whether it is true or false: Derry v Peek (1889) 14 App Cas 337; Banditt v The Qu e en (2005) 80 ALJR 421 at 422-3 (paragraph 2);

(c) an intention on the part of the representor that the claimant (or a class including the claimant) should act upon the representation;

(d) actions by the claimant in reliance upon the representation that were induced by the representation: Gould v Vaggelas (1985) 157 CLR 215; and

(e) damage as a result of that reliance.

25 The measure of damages in deceit will be based on the actual damage directly flowing from the fraudulent inducement: Clark v Urquhart (1930) AC 28 at 67-68. In an action for deceit, a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentation made by the Defendant: Toteff v Antonas (1952) 87 CLR 647 at 650; Gould v Vaggelas at 220; Jeans v Cleary [2006] NSWCA 9 at paragraphs 32-34.

26 In the context of the present case, the principal factual question for determination is whether the Defendant forged the Plaintiff’s signature on the guarantee.

Onus and Standard of Proof

27 The Plaintiff bears the onus of proof on the balance of probabilities in these civil proceedings: s.140(1) Evidence Act 1995. The nature of the cause of action (in deceit) and the gravity of the matters alleged (forgery) are to be taken into account in deciding whether the Court is satisfied that the Plaintiff has proved his case: s.140(2) Evidence Act 1995.

28 Accordingly, the standard of proof to be applied is the civil standard, proof on the balance of probabilities, being qualified having regard to the gravity of the questions to be determined. The test has been said to be whether the issue has been proved to the reasonable satisfaction of the Court, such satisfaction not being produced by inexact proofs, indefinite testimony or indirect inferences: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 701; Rejfek v McElroy (1965) 112 CLR 517 at 521. The Court should be comfortably satisfied on the balance of probabilities before such a finding is made: Bannister v Walton (1993) 30 NSWLR 699 at 711-712.

29 The rationale for this approach was explained in Neat Holdings Pty Limited v Karajan Holdings Pty Limited (1992) 67 ALJR 170 where Mason CJ, Brennan, Deane and Gaudron JJ said at 170-171 (footnotes excluded):

“The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involved criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary ‘where so serious a matter as fraud is to be found’. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.”

Outline of Cases of Plaintiff and Defendant

30 The Plaintiff’s case against the Defendant consists of the following elements:

(a) the Plaintiff did not sign page 12 of the guarantee: Amended Statement of Claim (“ASC”), paragraph 11;

(b) the Defendant forged the Plaintiff’s signature on page 12 of the guarantee and falsely signed it as a witness: ASC, paragraph 12(a);

(c) the Defendant’s conduct amounted to a representation that the Plaintiff had signed the guarantee witnessed by the Defendant: ASC, paragraph 12A;

(d) the Plaintiff and his legal advisors relied on the representation and made no enquiry into the genuineness of the Plaintiff’s signature: ASC, paragraph 20B;

(e) the Plaintiff attempted to raise in the Federal Court proceedings the allegations that the Defendant had forged the signature on the guarantee, but was not allowed to do so: ASC, paragraph 21;

(f) the Plaintiff has suffered loss, namely, the judgment in the Federal Court against him: ASC, paragraph 23.

31 The Defendant’s answer to the Plaintiff’s case may be summarised as follows:

(a) the Plaintiff did sign page 12 of the guarantee on 3 June 1998 in the presence of the Defendant and another person (Mr Bruce);

(b) in any event, the refusal of the Federal Court to allow the Plaintiff to raise the allegation was not caused by the Plaintiff relying on any representation by the Defendant;

(c) irrespective of who signed page 12 of the guarantee, the Plaintiff was bound to indemnify Deangrove for its debt to the Bank and therefore, the Plaintiff has not suffered any loss.

Evidence in the Proceedings

32 The evidence of the following witnesses was relied upon in the Plaintiff’s case:

(a) affidavits of the Plaintiff sworn in these proceedings and dated 22 September 2005 and 19 May 2006 - the Plaintiff was subjected to a substantial challenge concerning his credibility and reliability in cross-examination;

(b) affidavits of Robert Hugh Butler sworn in these proceedings and dated 4 and 25 May 2006 - Mr Butler was the Plaintiff’s former solicitor and was instructed by him at the time of the Federal Court proceedings between 2000 and 2003 - Mr Butler was cross-examined briefly with respect to the Plaintiff’s 1998 diary, an issue to which I will return later in this judgment;

(c) the affidavit of Stephen Dubedat sworn 17 August 2005 and various reports of Mr Dubedat (Exhibits G, H, J, K) - Mr Dubedat is a document examiner who gave evidence concerning the disputed signature on the guarantee - he gave evidence concurrently with the Defendant’s expert, Mr Paul Westwood - the expert evidence will be considered later in this judgment.

The Plaintiff seeks damages in the sum of $6,129,816.31 being the quantum of his debt to the Bank following judgment in the Federal Court proceedings (Exhibit M).

33 The Defendant relied upon evidence of the following witnesses:

(a) affidavit of the Defendant sworn 10 March 2006 - the Defendant was cross-examined in the course of which a challenge was made to his credibility and reliability;

(b) affidavit of Carla Felicita Collingwood sworn 23 May 2006 - Ms Collingwood was not required for cross-examination - she was the solicitor for the Bank in the Federal Court proceedings between 2000 and 2003 - her evidence established that a copy of the guarantee containing the disputed signature was provided to the Plaintiff’s legal representatives in February 2001 and again in July 2001 - she stated that a Notice to Produce issued to the Plaintiff requiring production of diary notes referred to in his affidavit of 13 March 2000 - the Plaintiff produced a transcript only of diary notes and not copies of original diary entries - the significance of what was produced, and not produced, with respect to the Plaintiff’s 1998 diary will be considered later in this judgment;

(c) John Robert Bruce was called to give evidence - his affidavit sworn on 31 January 2002 for the Federal Court proceedings was tendered (part Exhibit 3) together with his evidence given in those proceedings on 2 April 2003 (part Exhibit 3) - Mr Bell SC adduced further oral evidence from Mr Bruce and was granted leave, for certain purposes, to treat Mr Bruce as an unfavourable witness under s.38 Evidence Act 1995 - Mr Bruce’s evidence related to a meeting on 3 June 1998 with the Plaintiff and the Defendant and the signing of documents at that meeting - Mr Bruce was cross-examined briefly by Mr Ireland QC;

(d) the affidavit of Paul Denison Westwood sworn 10 March 2006 was read and a number of reports of Mr Westwood alone or a joint report with Mr Dubedat were tendered (Exhibit K, Exhibits 5, 6, 7 and 8) - Mr Westwood gave evidence concurrently with Mr Dubedat - the expert evidence will be considered later in this judgment.

34 In addition to the affidavits and oral evidence of witnesses referred to above, the evidence included the following significant documents or groups of documents:

(a) three volumes relating to the Federal Court proceedings before Sackville J - two volumes containing court documents and one volume containing the transcript of proceedings in the Federal Court in March and April 2003 (Exhibit A);

(b) a selection of documents including correspondence between the Bank and the Plaintiff, Mr Bruce, Deangrove and their legal representatives, a range of internal Bank memoranda and reports and other documents relating to the Bank’s commercial loan facility for the Holloways Beach Project (Exhibit L);

(c) a Spirax notebook which constituted the Plaintiff’s 1998 diary (Exhibit B);

(d) a typed summary of extracts from the Plaintiff’s 1998 diary prepared by the Plaintiff and provided to his solicitor, Mr Butler, in February 2000 (Exhibit C);

(e) the original guarantee document containing the disputed signature (Exhibit 4);

(f) extracts from the Defendant’s diary for 8-10 June 1998 (Exhibit D);

(g) an internal memorandum dated 24 June 1998 from the Defendant (Exhibit E).

The Plaintiff’s Case

35 There are three evidentiary foundations for the Plaintiff’s case:

(a) the evidence of the Plaintiff himself that he did not write the disputed signature;

(b) entries in the Plaintiff’s 1998 diary (Exhibit B) which the Plaintiff contends are contemporaneous notes confirming, in material respects, his account of events on 3 June 1998;

(c) the evidence of Mr Dubedat, document examiner, expressing the opinion that the disputed signature was probably written by a person other than the Plaintiff.

36 The Plaintiff contends that he did not write the signature appearing on the guarantee. In circumstances where the disputed signature was witnessed by the Defendant, the Plaintiff argues that there is an irresistible inference that it was the Defendant who forged his signature on the guarantee.

The Plaintiff’s Background and Experience

37 The Plaintiff has had long experience in business. Since 1975, his business interests have extended to the operation of a used-car dealership known as “Tony Jeans Used Cars” (T25.54-26.2), money lending and finance broking, buying and selling second mortgages, buying and selling properties and the management of an amusement park (T26.4-21).

Events Leading Up to 3 June 1998

38 For the purpose of these proceedings, the Plaintiff has sworn two affidavits dated 22 September 2005 and 19 May 2006. Much of the Plaintiff’s account of events leading up to 3 June 1998 is not controversial and is confirmed by contemporaneous documents (Exhibit L). The Plaintiff recounts that, in 1998, he was the sole director and shareholder of Deangrove, a company formed to undertake the Holloways Beach Project near Cairns in Queensland. John Richard Bruce was a practising architect at that time. The Plaintiff and Mr Bruce had agreed in the latter part of 1997 that Mr Bruce would carry out architectural work for the project. The Plaintiff states that he and Mr Bruce had a verbal agreement that if a nett profit was made by Deangrove upon the Holloways Beach Project, then he would receive 50% of that nett profit. Deangrove’s solicitor in Queensland for the purposes of the acquisition of the Holloways Beach land was Wendy Cull.

39 The Plaintiff and Deangrove applied to the Bank for a substantial commercial facility for the purpose of the Holloways Beach Project. Negotiations took place from late 1997 into early 1998 for this purpose.

40 Initial consideration on behalf of the Bank to finance the Holloways Beach Project for Deangrove took place in discussions between the Plaintiff and Mr Hocking, a member of the Bank’s “mobile sales force”.

41 The Defendant was the relationship manager within the Bank for Mr Bruce’s architectural practice and also for a company called Vanmeld Pty Limited which was a trustee of a discretionary trust associated with the Plaintiff’s family.

42 On 4 February 1998, Mr Hocking initiated an unsecured advance of $100,000.00 to Deangrove under his personal authority by way of an overdraft.

43 On 2 March 1998, the Bank issued an amended offer of finance to Deangrove for facilities totalling $7,550,000.00 for a term of 13 months. The facility comprised $1.4 million to purchase the development site and $6.15 million for the development. Conditions of the offer included unlimited personal guarantees from the Plaintiff and Mr Bruce in favour of the Bank for the money to be advanced to Deangrove. On 8 April 1998, the Plaintiff and Mr Bruce signed a written acceptance of the terms offered by the Bank for finance for the Holloways Beach Project.

44 In about April 1998, management of Deangrove’s account with the Bank was transferred to the Business Banking Centre and specifically to the Defendant. Between 9 and 24 April 1998, the Defendant was on annual leave. In his absence, his assistant, Mr Langley, took a number of steps including, on 22 April 1998, submitting an application to the Bank’s Loan Processing Centre for urgent preparation of the documents necessary to proceed with the facility. On his return to work on 24 April 1998, the Defendant was made aware that security documents had been requested by Mr Langley and also of an increase in Deangrove’s overdraft facility.

45 On 1 May 1998, the Bank’s Loan Processing Centre communicated with the Defendant that a number of matters needed to be clarified prior to documents being prepared. The question was raised whether the proposed guarantors were “vulnerable” so that special procedures were required in accordance with the Bank’s practice.

46 On 20 May 1998, the Plaintiff wrote a letter to the Defendant enclosing an application for a drawdown from the Bank in respect of the Holloways Beach Project. According to the Plaintiff, in early June 1998, he was anxious to proceed on behalf of Deangrove with the purchase of the land. No contract had been exchanged. Mr Millot had indicated to him that NZI Securities would only proceed with the mortgagee sale of the land if it could be finalised before the end of the financial year.

47 By early June 1998, the parties were nearing a settlement of the purchase of the acquisition of the land at Holloways Beach. Wendy Cull was acting as solicitor for Deangrove. Mr Robert Hynes was acting as solicitor for Japanese interests, including Mr Hayashi of HIS Travel.

48 On 2 June 1998, Mr Lehmann of the Bank’s Loan Processing Centre forwarded documentation to the Defendant. The documents included individual forms of unlimited guarantee on the part of the Plaintiff and Mr Bruce and three copies of the tripartite agreement proposed between Deangrove, the Bank and BM Culley, the builder for the Holloways Beach Project. Mr Lehmann’s memorandum noted that Mr Bruce was a “vulnerable guarantor” and referred to Bank procedures applicable to signature by such a guarantor.

49 The Plaintiff stated that in early June 1998, he had several telephone conversations with the Defendant concerning the proposed simultaneous exchange of contracts and settlement of the purchase by Deangrove of the land for the Holloways Beach Project.

The Plaintiff’s Account of Events on 3 June 1998

50 The events of 3 June 1998 are critical to the determination of the present proceedings. In his affidavit sworn 22 September 2005, the Plaintiff gave the following account of the events of that day (paragraphs 16-21):

“16. In my first conversation with the defendant, words were said to the following effect:


Myself: ‘When are we signing up the documents for the purchase of Holloways beach?’

Cleary: ‘They still are being prepared. I haven’t yet received them.’

17. On the same day I had another telephone conversation with the defendant in which words were said to the following effect:


Cleary: ‘The documents should be ready in about 15 minutes. I won’t be available until 2 o’clock.’

Myself: ‘I’ll come in straight away and collect them.’

Cleary: ‘Fine’.

18. I went to the Bank’s offices where Mr Cleary was located at level 7, Cnr George and Market Streets, Sydney some time before 2:00 pm on 3 June 1998. I spoke there to a receptionist and there was a conversation to the following effect:


Myself: ‘My name is Tony Jeans. I am here to collect some documents.’

Receptionist: ‘Here they are’.


19. I was then handed an envelope by the receptionist which contained some documents. I opened the envelope and looked at them and read the covering letter dated 2 June 1998. The documents had pencil markings on them. I had the common seal of Deangrove with me. I signed a number of documents on behalf of Deangrove and affixed the company seal on its behalf to a number of documents.

20. Annexed hereto and marked ‘A’ is a form of guarantee dated 12 June 1998. On [sic] June 1998, I applied the common seal of Deangrove to that document which appears on page 13 and my signature which also appears on that page beside the common seal. The signature on page 12 of the document purporting to be mine is not my signature and I did not sign that document on 3 June 1998 or at any other time.

21. I did not meet with Mr Cleary at the Bank’s offices on 3 June 1998 at the time that I signed the documents which I have identified in this affidavit. I left the documents with the receptionist at the Bank.”

51 It will be seen from this account that the Plaintiff denies having any face-to-face meeting with the Defendant on 3 June 1998. He admits signing a number of documents associated with the loan facility for the Holloways Beach Project. He denies signing page 12 of the guarantee, although he admits that his signature appears at page 13 of the same document under the common seal of Deangrove.

52 In his affidavit of 22 September 2005, the Plaintiff gave the following account of his alleged discovery of the forged signature whilst he was giving evidence before Sackville J in March 2003 (paragraphs 22-28):

“22. I subsequently commenced proceedings against the Bank in the Federal Court of Australia and by cross-claim in those proceedings the Bank claimed from me as a guarantor of the obligations of Deangrove pursuant to the guarantee a copy of which is annexure ‘A’ hereto.

23. The trial of those proceedings commenced before Sackville J on 17 March 2003 and proceeded for three days, a substantial part of which was occupied with me being cross-examined by counsel for the Bank.

24. During the course of my cross-examination on 24 March 2003, I was shown by counsel a copy and later the original of the form of guarantee annexure ‘A’ held by the bank upon which I was sued.

25. When shown the guarantee, I gave evidence before Sackville J to the effect that whilst I acknowledged that the signature beside the common seal of Deangrove that appears on page 13 of the guarantee was my own, the signature that appears on page 12 purportedly witnessed by Mr Steven Cleary was not my signature.

26. Prior to the guarantee being put to me in cross-examination on 24 March 2003, I had not looked carefully at either of the signatures on the document. I was not given a copy of the guarantee in June 1998. I did not have a copy of the guarantee when my solicitors were first instructed in the Federal Court proceedings in 2000.

27. Until 25 March 2003, I believed that I had duly executed the guarantee. My instructions to all of my previous legal advisers did not challenge the authenticity of the signatures which appear on the document as a result of my belief until 24 March 2003 that I had signed the document on 3 June 1998.

28. If I had examined that signature prior to 24 March 2003 I would have instructed my legal advisers to raise an issue concerning the due execution of the guarantee by me.”

53 The Plaintiff characterised his claim against the Defendant in the concluding paragraph of his affidavit (paragraph 31):

“I claim damages against the defendant in these proceedings for all sums represented by my liability to the Bank established in the Federal Court proceedings as well as all legal and other costs associated therewith. I also seek an award of exemplary damages.”

54 The above account given by the Plaintiff in these proceedings is to be contrasted with earlier statements by him in pleadings and on oath in the Federal Court proceedings. The Bank’s Cross Claim in the Federal Court alleged that the Plaintiff guaranteed to pay the Bank the secured monies and the Plaintiff’s Defence to the Cross Claim filed on 12 July 2001, and repeated in his Amended Defence to the Cross Claim filed on 16 August 2001, admitted this allegation (Exhibit A, pages 28, 32). The Plaintiff filed a Statement of Claim in the Federal Court on 26 October 2000 which contended that he had executed the guarantee (Exhibit A, page 4D). An Amended Statement of Claim filed on 3 October 2002 in the Federal Court stated that the Plaintiff entered into the guarantee (Exhibit A, page 7).

55 The Plaintiff’s affidavit sworn 13 March 2000 for the Federal Court proceedings included the following in paragraph 14 (Exhibit A, page 54A):

“From the Diary I am able to say that I had a meeting with Steve Cleary at 2pm on 4 June 1998 for the purpose of signing documents. I am not able at this time to say what documents were signed however from other searches conducted by me I say that Deangrove Pty Limited and I signed the following documents:
…
(c) Guarantee by myself of the facility. I do not appear to have a copy of this document at the present time.”

56 In his affidavit sworn 25 September 2002 for the Federal Court proceedings, the Plaintiff said at paragraph 41(ii) (Exhibit A, page 335):

“41. On 12 June 1998 I signed:-
…
(ii) I signed a guarantee for the benefit of the CBA a true copy of which is exhibit ‘AJ-A’;
…”

57 The reference to “12 June 1998” as the date of execution arises because that was the date ultimately placed on the various documents which were signed on 3 June 1998. For present purposes, nothing turns on the reference to the date “12 June 1998” in this affidavit.

58 In his affidavit sworn 17 March 2003 for the Federal Court proceedings, the Plaintiff said at paragraph 34 (Exhibit A, page 345):

“On 3 June 1998, I had telephone conversations both with Steven Cleary and Peter Hocking. At 2:00 pm on that day at Mr Cleary’s request I went to the bank’s offices in Sydney and was provided with security documents including the guarantee which is the subject of these proceedings. I signed the documents in the reception area where Steven Cleary had left them for me. Mr Cleary was not there and he did not witness my signature on the documents at that time. I had no conversation with Mr Cleary at the time I signed the security documents.”

59 In this affidavit, which was sworn on the first day of the hearing before Sackville J, the Plaintiff asserted for the first time that the Defendant was not present on the afternoon of 3 June 1998 when he signed the various security documents. I will return to the significance of this change in the Plaintiff’s case later in this judgment. For present purposes, it is sufficient to note that the Plaintiff at this time still admitted that he had signed the security documents. There was no assertion that he did not sign the guarantee.

60 The Plaintiff’s denial of the signature on the guarantee, culminating in an allegation of forgery against the Defendant, unfolded in the following way. On 24 March 2003, the Plaintiff was under cross-examination by Mr Bell SC for the Bank. He was asked (Exhibit A, T231.17):

“Now, could you turn please to page 403 of this volume. You recognise that don’t you, being a document which runs from page 403 to 415. There is a copy of the guarantee which you signed in respect of the debts of Deangrove? --- That’s correct.
Although it’s dated 12 June 1998, you in fact signed in [sic] on 3 June 1998, didn’t you? --- I believe that to be the case.
Your signature appears on page 414 or a copy of it at least? --- A signature appears there, yes. It’s not the same as my normal signature, which is on 415.
There is no doubt that it’s your signature though, is it? --- I can’t confirm that right now, because it’s different from my normal signature.
You told me a minute ago that this was a copy of a guarantee which you signed in respect of debts of Deangrove, do you remember saying that? --- No, I didn’t say that. I was looking at it and then I recognised it as a copy of the guarantee. Then I looked at the last page 415, which my signature appears on and then you’ve just shown me this signature. I don’t know - it’s not my normal signature.
You are not seriously suggesting to his Honour that you didn’t sign this guarantee are you? --- I signed page 415, that’s my normal signature. You are asking me if that’s my signature on page 414, and I’m saying that that is not my normal signature.
At page 415 your signature appears under the common seal of Deangrove in order to execute the document on behalf of Deangrove? --- That’s correct.
Are you suggesting to his Honour that you didn’t sign this guarantee in your own personal capacity? --- I am suggesting that that signature there is not my normal signature.
But no, that’s not the question I asked you? --- I understand that - well it doesn’t look like my normal signature, and I’m suggesting that that isn’t my normal signature. I am not suggesting, I am telling you that is not my normal signature.

Have you ever suggested before this moment in these proceedings that you didn’t sign this guarantee on your own behalf? --- No.
And you are not suggesting it now, are you? --- I am telling you that that is not my signature. I have never looked at this document in great detail until today.
Are you suggesting to his Honour that there is now some doubt in your mind as to whether you signed this guarantee in your own personal capacity? --- I am not suggesting - I am saying, that that signature is not my normal signature, and I am suggesting that I wouldn’t have put that signature there. If you look on 415, that is my standard signature and I think if you check the other documents you will find all the way through that my signature is like that.”

61 In these answers, the Plaintiff moved from an admission that he had signed the guarantee to an assertion that the disputed signature did not appear to be his “normal signature” and that it could be contrasted with his “standard signature” which appeared elsewhere in the document.

62 Soon after, Mr Bell SC asked (Exhibit A, T235.5):

“And you’ve never suggested before today that you didn’t in fact sign the guarantee, have you? --- I’m telling you that that’s not my signature and it isn’t.
And you’ve never suggested that before today, have you? --- No, I haven’t, no.”

63 The Plaintiff’s position had now hardened into a denial that the disputed signature was his.

64 Soon after, the Plaintiff was asked (Exhibit A, T243.22):

“You say it’s not your normal signature. Let me just make sure I understand this evidence. Are you saying that it is not your signature? --- I’m saying that is definitely not my signature.
Definitely not your signature? --- No.
HIS HONOUR: By that I take it, Mr Jeans, you mean you never signed that document, being the guarantee? --- I did sign one portion of it, your Honour.
I’m not talking about the portion on page 13 of the document - you will see the numbers at the top of the page - I’m talking about page 12, and I just want to make it clear in my mind as to what you’re saying. Are you saying that not only does that not look like your normal signature but you did not in fact sign page 12 of the document? --- Well, I wouldn’t have signed it like that, your Honour.


I just wanted to know what you’re saying, so the answer to my question is I did not sign at page 12? --- No.”

65 The Plaintiff was now definite that the disputed signature was not his.

66 The Plaintiff was shown the original guarantee document (Exhibit A, T267.20):

“MR BELL: Mr Jeans, I want to show you this document. Do you recognise it as the original of the guarantee, a copy of which appears at pages 403 to 415 of exhibit A1? --- Yes.
I would just like you to study the signatures on the last two pages of that documents, [sic] and then I’ll ask you some questions about it. Can you tell me when you’ve done that please? --- Yes, I have done that.
Is this a fair statement of your position, Mr Jeans, sitting here now in the witness box, you can’t be sure that it’s your signature that appears on the page where Mr Cleary’s signature appears? --- That’s correct.
But sitting here in the witness box, you don’t deny that it’s your signature, do you? --- It’s not my signature.
Is this the position, you can’t be sure that it’s your signature. Is that a fair statement of the position? --- Well it isn’t my signature. My signature appears on page 13.
Do you deny it’s your signature? --- That is not my signature. That is not how I sign things.
Could that be marked for identification?
HIS HONOUR: Just so I can be clear about it, Mr Jeans. Do you deny that you signed that page, that is to say, page 12 of the document? --- Your Honour’ that’s not my signature.
I understand that, but I just want to be clear that that is what you are saying? --- Yes. That’s correct.”

67 By this stage, the Plaintiff denied that he had written the disputed signature on page 12 of the guarantee.

68 The Plaintiff contends that there is ring of truth in his disavowal of the disputed signature moving from a position of uncertainty to one of certainty at a time when he had an opportunity to consider the original guarantee document. It is said that this development in the course of cross-examination before Sackville J was entirely inconsistent with the Plaintiff having intentionally signed his name differently on 3 June 1998 so as later to permit him to disavow it if he saw it in his interests to do so. The Defendant, on the other hand, submits that the sudden turn of events in the course of cross-examination is, to say the least, unconvincing. The Plaintiff had available to him for some considerable time copies of the guarantee document, one of which he exhibited to his affidavit of September 2002. The Defendant submits that the Plaintiff's sudden recognition, or lack of recognition, of the disputed signature was implausible. It came at a time when the Plaintiff was under substantial challenge in cross-examination and where, the Defendant submits, the Plaintiff may have perceived it in his interests to invoke a new potential line of defence.

69 I will return to these arguments later in this judgment. It is appropriate, at this point, to turn to a document upon which Mr John Ireland QC, for the Plaintiff, placed considerable reliance in evidence and in his submissions, the 1998 diary of the Plaintiff.

The Plaintiff’s 1998 Diary

70 A document which was of critical importance in the proceedings before Sackville J, and in the proceedings before me, is a Spirax notebook which the Plaintiff stated was used by him as a form of diary in 1998 (Exhibit B). He had used that diary to assist him in preparing his affidavits for the Federal Court.

71 The Plaintiff’s diary contains a number of entries which appear relevant to the issues falling for determination in these proceedings. The entries said to relate to 3 June 1998 include the following (Exhibit B):

“(13) Steve Cleary re docs have not got them yet for Holloway.

(14) Peter Hocking called. Said nothing from documents. Has called and put a rocket up them.

(15) Steve Cleary 9378 4332. Docs ready in about 15 minutes. Come in 2.00 pm.

(16) Steve Cleary meeting 2.00 pm. Sign up. Get Wendy Cull to call.

…

(33) Signed up docs in Reception. Steve Cleary left them there for his girl on front desk. Will get him to witness later.

(34) Wendy Cull called to say will send letter out tomorrow. Bank doing its own arrangements not up to her.

(35) Peter Hocking called re docs. All OK now. Has spoken to his boss. All signed off. Cleary has to get letter from Japs to satisfy CBA.”

72 It was accepted that the Plaintiff’s practice was to write notes in the notebook as discrete item numbers. It was common ground between the parties that Items 13 to 16 were written in a different pen to those appearing as Items 33-35. Further, Items 33-35 were written on the last page relating to 3 June 1998 and constituted the last group of items said to relate to that day.

73 Sackville J found that Items 33 to 35 for 3 June 1998 were not written by the Plaintiff until after March 2000. The Plaintiff had relied upon these entries, and in particular Item 33, to support his assertion that there had not been a face-to-face meeting with the Defendant on the afternoon of 3 June 1998. Sackville J rejected the Plaintiff’s account of this issue and held that such a meeting did take place on that day.

74 I have mentioned Sackville J’s finding on this issue because the Plaintiff himself refers to this finding in his affidavit in these proceedings.

75 In his affidavit of 19 May 2006, the Plaintiff said with respect to these entries (paragraphs 8-10):

“8. In the previous litigation between the Bank, Deangrove and myself I am aware that Sackville J in the Federal Court concluded that entries numbered 33, 34 and 35 for 3 June 1998 were not made by me in 1998. With respect, that was not a correct conclusion. I am absolutely sure that entries numbered 33, 34 and 35 were made in June 1998, I believe on the evening of 3 June 1998 or shortly thereafter. Those entries accurately record events on 3 June 1998.

9. I did not add the entries numbered 33, 34 and 35 for 3 June 1998 which appear in annexure ‘A’ hereto for any purpose other than to record what occurred on that day.

10. I did not add those entries in order to bolster my position in any litigation that was later pending or imminent.”

76 It will be recalled that the first time that the Plaintiff alleged that the Defendant was not present at a meeting with him on the afternoon of 3 June 1998 was in his affidavit sworn 17 March 2003. Until that time, the Plaintiff had admitted that a meeting took place with the Defendant and that it was during that meeting that he signed the security documents, including his guarantee.

77 The Plaintiff’s diary contains no internal means to verify when entries were placed in it by him. There is no evidence from any other person who alleges that they saw Items 33-35 in the Plaintiff’s diary at a time close to 3 June 1998. For example, there is no evidence that the Plaintiff’s diary containing Items 33-35 was copied and provided to any person at a time approximate to 3 June 1998. The evidence reveals that, at the request of this then solicitor, Mr Butler, the Plaintiff provided in February 2000 to Mr Butler typed notes which were said to emanate from his diary. With respect to events on 3 June 1998, the typed notes stated (Exhibit C, page 1):

“3/6/98 Conversation Between Tony Jeans (TJ) & Steve Cleary (SC)
SC - called re docs have not yet got them for Holloways
3/6/98 Conversation Between Tony Jeans (TJ) & Steve Cleary (SC)
TJ - called SC 93784332 - docs ready in 15 minutes come in 2pm
3/6/98 Meeting Between Tony Jeans (TJ) & Steve Cleary (SC) 2pm - CBA Cnr Market & George St
Sign up get Wendy Cull to call.”

78 Mr Butler said that he did not look at the Plaintiff’s original diary at any stage (T92.51). The typed document (Exhibit C) was prepared as a form of chronology from the notes, diaries and records possessed by the Plaintiff which was intended to assist his then counsel to prepare his affidavit (T92.41). Mr Butler agreed in his evidence here (T94.58) that he gave the following evidence on 31 March 2003 before Sackville J and that the evidence was true (Exhibit A, T492.13):

“Presumably prior to receiving it you had asked Mr Jeans to provide a transcript of his diary in order to help prepare his affidavit of 13 March 2000? --- That’s right.
I assume you asked him to transcribe all the extracts from his diary which he considered relevant to these proceedings? --- Yes, to assist in the preparation of an affidavit by him.”

79 It is appropriate at this point to turn to the Plaintiff’s evidence before Sackville J concerning diary entries 33-35 for 3 June 1998.

80 Mr Bell SC cross-examined the Plaintiff concerning the contemporaneity or otherwise of the notes which had been incorporated in the typed document provided to Mr Butler in February 2000 (Exhibit C). The Plaintiff was asked (Exhibit A, T204.1):

“Now in paragraph 31 of your affidavit sworn yesterday, you say that the notes which are transcribed in annexure A were made at the time of the meetings and conversations to which they refer? --- Mm.
That’s correct? --- Well in the majority. I can’t say to you that what would happen is that someone might ring me. I might write in my diary that Mr Bell had phoned me and then I might have been driving so then I would - if it was something that I needed to record I might later write in there you know what I thought my version of what occurred.
But in so far as there is an entry that’s under a particular day we can take it that that entry was made on that day, is that right? --- Not necessarily. It might have been made later. The day the call took place would be correct but I may not have gone through it an [sic] filled it in till later.
Well you say in paragraph 31 that the notes were made at the time of the meetings and conversations to which they referred. Do you see that? --- Well, I recorded the date that they were made at the time the call was come [sic] . I might have filled in some notes later, it was a running file effectively.
You say that the notes were made at the time of the meeting? --- I understand that.
You want to correct that? --- That’s a mistake, yes.
What do you want to correct and make it so that it is true and correct? --- Well, they might have been made - I can’t put a time on it because I work on those, it’s like a moving file. I carry that notebook with me and I make notes on it and that’s how I operate.
So some of the notes might have been made later than the date on which they appear? --- Absolutely.
How much later? --- I have no idea.
Months later? --- Could be.
Could be months later? --- Mm.
So in so far as there are entries in these day books, we can take it that some of these entries could well have been made months later than the date on which they purport to bear? --- Well, a lot depends. You see ---
Is that right? --- Well, that could be correct, absolutely, yes.
They could have perhaps been made years later, could they? --- I don’t know about years later, but months later.
A year later? --- I just don’t know, I couldn’t tell you. I’ve no idea.
It certainly wouldn’t be correct to say they were made at the time of the meetings and conversations to which they refer then, would it? --- The actual time that is nominated for the date that I was in there. I made notes to take further notes, because what would happen is and what I found happened, is that people would ring you up and they would say something to you, and you would say - fine, just let me write that down - and then later they would call back or something would turn up and what they told you earlier was substantially different, and you’d say - that’s not what he said, I’d better go and check that and you’d write a note to the effect of what you understood the position to be at that time. So I would go and do that.
So some of the notes that appear in your day books, and are transcribed annexure A, virtually could have been made months after the date that they purport to bear? --- If there was need for me to refer to them, certainly. It’s like a file.
Can you identify which of the notes transcribed in annexure A were made months after the event? --- Well I have no idea. I’ve got diaries going back over 20 years.
It follows from that, does it, that his Honour couldn’t rely upon these day books as being contemporaneous notes made on the date that they purport to bear? --- I couldn’t sit here and tell you that every single note was fully completed on that date that it was written, because I might have written it the next day, I might have written it - it’s a file, it’s like having a file.
So you agree with my question, do you? --- I don’t agree ---
HIS HONOUR: You had better repeat the question.
MR BELL: His Honour therefore, can’t rely upon the notes which are transcribed in annexure A as being contemporaneous notes made at the time of the meetings and conversations to which they refer? --- That’s correct, absolutely.”

81 The Plaintiff was still under cross-examination by Mr Bell SC on 24 March 2003 when his attention was drawn to the original diary (Exhibit B). The Plaintiff was asked (Exhibit A, T252.15):

“Now I want to show you your original day book so described for the period starting 3 June 1998.
HIS HONOUR: Mr Jeans, you agree that is your day book covering that period, is that correct? --- That’s correct, your Honour.
MR BELL: The diary starts at 3 June 1998, correct? --- That’s correct.
Item 15 under the date 3 June 1998 states Steve Cleary. There is then a phone number? --- That’s correct.
Do you agree with me so far? --- That’s correct.
Then it says, doesn’t it, ‘Docs ready in about 15 minutes, come in 2.00 pm’, correct? --- That’s correct.
Item 16 says, ‘Steve Cleary meeting 2.00 pm’, correct? --- That’s correct.
It says, ‘That you’re to sign or signing up, get Wendy Cull to call’? --- Correct.
Then item 33 on 3 June 1998 says, ‘Signed up, docs in reception, Steve Cleary them [sic] there for his girl on front desk. Will get him to witness later’. Is that correct? --- That’s correct.
There’s two further entries marked 34 and 35, correct? --- Yes.
Now you see, don’t you, that the entries marked 33, 34 and 35 are made with a different pen to the preceding entries, aren’t they? --- That’s correct.
Entries 33 to 35 were made by you a long time after 3 June 1998, weren’t they? --- They wouldn’t - I don’t think they were made on the day. I couldn’t tell you when but they - I don’t think they were made on the day.
You can’t say how much later they were made? --- Not off the top of my head, no. I don’t know.
You certainly don’t suggest they were made on 3 June 1998? --- No, not with a different pen.
But going back to entries 15 and 16 you say they were made on 3 June 1998, do you? --- Yes absolutely. It was all the same pen.
That what’s happened, isn’t it, that you met Mr Cleary at 2.00 pm on 3 June to sign documents, including your guarantee, correct? --- Well, I can’t say I did meet Mr Cleary. It’s not my recollection of it. I went there to sign these documents but I’m not sure which documents or the content. I knew there was documents [sic] in that bundle but which exact documents I couldn’t tell you.
Items 15 and 16 indicate to you, don’t they, that you signed documents at 2.00 pm on 3 June 1998? --- Correct.”

82 Soon after, Mr Bell SC took the Plaintiff to Items 33 to 35 in the diary. He was asked (Exhibit A, T265.1):

“MR BELL: You understand that these entries are relevant to the issues that need to be decided in this case? --- That’s correct.
You would regard them as important, would you not? --- Correct.
How is then [sic] that you failed to refer to these entries in your affidavit of 13 March 2000? --- I have no - I can’t - no explanation.
The reason, I suggest, is because you added these entries under 3 June some date after 10 August 2001? --- Well, I can’t comment, I don’t know.
It’s entirely possible isn’t it? --- Possible.
Indeed it’s probably [sic] isn’t it? --- I can’t say it’s probable.
The fact is that you made these entries with the intention of misleading the court into believing that these were contemporaneous notes which you had made of events which took place on 3 June 1998? --- That’s incorrect they weren’t in evidence.
I beg your pardon? --- These documents, were nothing to do with the court.
What documents had nothing to do with the court? --- This diary.
You had this diary with you, didn’t you, when you prepared your affidavit of 13 March 2000? --- Correct.
There is no reference in your affidavit of 13 March 2000 to these entries, is there? --- No.
These events referred to in entries 33, 34 and 35 you recognise as being important to the issues in this case, don’t you? --- That’s correct.
You make no reference to them in your affidavit of 13 March 2000? --- That’s correct.
The reason for that is you have added these entries at some date, I suggest, after 10 August 2001? --- Well I’ve added them when I felt it was appropriate to jog my memory. These documents were not in evidence. They were nothing to do - it was personal, my personal records.
You’ve added entries 33, 34 and 35 in MFI1 for 3 June 1998 with the specific intention of misleading the court into believing that these were contemporaneous entries which related to events occurring on 3 June 1998? --- That’s totally incorrect.
That is why you said in your affidavit sworn last Monday at paragraph 31: ‘These notes were made at the time of the meetings and conversations to which they refer’? --- Well that’s correct.

194 The Defendant submitted that acceptance of an offer to enter into a contract can be inferred from conduct if that inference arises from the objective circumstances: Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (1988) 14 NSWLR 523 at 531, 534-536. Mr Bell SC submitted that such an inference should be drawn from the conduct of the Plaintiff in this case in signing the letter of acceptance to the Bank dated 8 April 1998, requesting temporary accommodation in February and April 1998, signing the guarantee on page 13 on 3 June 1998 and causing Deangrove to draw down on the finance offered in the Bank’s letter dated 2 March 1998.

195 Mr Bell SC submits that such an inference ought be drawn applying the reasonable bystander test: Empirnall Holdings at 531, 534.

196 The Defendant submits that, for the Plaintiff to succeed in these proceedings, he must demonstrate that if he advanced his allegation of forgery against the Bank in the Federal Court proceedings, he would not have had the judgment entered against him. If the Plaintiff had been given leave to advance the allegation of forgery, the Bank would have been entitled to defend it on the basis that irrespective of whether he signed page 12 of the guarantee, he was nevertheless liable according to its terms having bound himself by conduct. On this basis, the Plaintiff would still have been found liable under the guarantee in the Federal Court proceedings.

197 Once again, there is considerable force in the Defendant’s submissions on this point. Even if the Plaintiff had established forgery on the Defendant’s part, very substantial hurdles lay ahead of him in the present proceedings before a verdict and an award of damages would have been made in his favour.

Costs

198 Mr Bell SC made written and oral submissions that, if a verdict was found in the Defendant’s favour, an order should be made that the Plaintiff pay the Defendant’s costs on an indemnity basis: s.98(1)(c) Civil Procedure Act 2005; Part 42.5 UCPR.

199 It was submitted that the Plaintiff had made an allegation of criminal conduct against the Defendant on the flimsiest of evidence and without any rational foundation. Either the Defendant was guilty of a criminal offence or the Plaintiff had deliberately propounded a grave allegation which he knew to be false for the collateral purpose of avoiding, or delaying, a bankruptcy order against him. The case depended on the account of the Plaintiff, an admitted liar, and Item 33 in his diary, which was thoroughly discredited in the Federal Court. The expert handwriting evidence tendered in his favour was, at best, inconclusive. Mr Ireland QC acknowledged that the expert evidence was equivocal. In bringing the case to trial, the Plaintiff can be taken to have known of the rigorous standard of proof he needed to discharge before his allegations could be accepted. The Defendant submitted that it must always have been clear, or ought to have been clear, to the Plaintiff that the evidence would not reach that standard.

200 It was submitted that the case as advanced by the Plaintiff was appropriately characterised by Bryson JA in the Court of Appeal at paragraph 54 as being “in the realm of the fantastic” and “a fairy tale”.

201 Mr Bell SC referred to the judgment of Sheppard J in Colgate-Palmolive Co v Cussins Pty Limited (1993) 46 FCR 225 at 233 and submitted that an indemnity costs order was appropriate in this case having regard, inter alia, to the Plaintiff making allegations of fraud knowing them to be false, the commencement and continuation of proceedings for an ulterior motive and a wilful disregard of known facts. It was submitted that the particular facts and circumstances of the present case warrant the making of an order for costs on an indemnity basis.

202 It was submitted that where a litigant advances an allegation of serious criminal conduct without strong evidence to support it and that case fails, it is appropriate for the Court to consider ordering the Plaintiff to pay the Defendant’s costs on an indemnity basis: White Constructions (ACT) (In Liquidation) v GB White and Ors [2004] NSWSC 303. An order for indemnity costs is also appropriate, it was submitted, where a litigant advances a claim that he knows is false: Zaravinos v Houvardas [2004] NSWCA 421 at paragraph 76. Mr Bell SC submitted that these propositions have application to this case and that an order for indemnity costs ought be made.

203 Mr Ireland QC accepted that, if the submissions of the Defendant adverse to the Plaintiff were accepted at their highest, then the Court would probably accede to an order for indemnity costs (T271.50). He submitted, of course, that those findings ought not be made. In the event that the Plaintiff’s claim failed on a basis which did not involve complete acceptance of the Defendant’s submissions, Mr Ireland QC submitted that an opportunity might be given to make submissions as to costs following the delivery of judgment.

204 The findings made by me involve, in essence, complete acceptance of the submissions made on behalf of the Defendant. Not only have I rejected the Plaintiff’s claim of forgery by the Defendant, but I have found that the Plaintiff himself wrote the disputed signature on the guarantee. Further, I have found that Item 33 in the Plaintiff’s diary was created by the Plaintiff a significant time after 3 June 1998 for the purpose of litigation then on foot and that the Plaintiff was aware that the content of Item 33 was untrue when he wrote it. I have rejected the Plaintiff’s evidence that there was no face-to-face meeting with the Defendant on 3 June 1998 and have found that such a meeting in fact did take place during which the Plaintiff wrote the disputed signature on the guarantee.

205 As Mathews AJ observed at paragraph 45 of her judgment, the Plaintiff’s case in these proceedings involved “a strange proposition” which her Honour foreshadowed “may well encounter serious factual and legal hurdles”. However, having regard to the way in which the case was pleaded, Mathews AJ determined that the Plaintiff was entitled to a hearing of the merits of that claim and the majority in the Court of Appeal agreed with this approach.

206 The hearing on the merits has now proceeded before me. My findings involve an emphatic rejection of the Plaintiff's case. To obtain an order for indemnity costs, the Defendant must point to something more than success in the outcome of the proceedings. It is necessary for the Defendant to demonstrate some relevant delinquency or unreasonableness on the part of the Plaintiff: Oshlack v Richmond River Council (1998) 193 CLR 72 at 89; Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616.

207 Having regard to the findings made by me in the present proceedings, I am well satisfied that the Defendant has demonstrated an entitlement to an order for costs on an indemnity basis.

Orders

208 I make the following orders:

(a) verdict for the Defendant against the Plaintiff;

(b) the Plaintiff is to pay the Defendant’s costs of the proceedings on an indemnity basis.

**********

28/06/2006 - Hearing dates and judgment date inserted in coversheet - Paragraph(s) n/a