Lahoud v Lahoud

NEW SOUTH WALES SUPREME COURT

CITATION: Lahoud & Anor v Lahoud & Ors [2005] NSWSC 509

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): 3606/01

HEARING DATE{S): 17-20 and 23-25 May, 2005

JUDGMENT DATE: 30/05/2005

PARTIES:
Joseph Lahoud - First Plaintiff/First Cross Defendant
Joseph Lahoud & Associates Pty Ltd - Second Plaintiff/Second Cross Defendant
Victor Lahoud - First Defendant/First Cross Claimant
Castle Constructions Pty Ltd - Second Defendant/Second Cross Claimant
Solidare Pty Ltd - Third Defendant/Third Cross Defendant

JUDGMENT OF: Palmer J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
S.D. Epstein SC, D. Knoll - Plaintiffs/Cross Defendants
R.J. Weber SC, L.V. Gyles - Defendants/Cross Claimants

SOLICITORS:
Baron & Associates - Plaintiffs/Cross Defendants
Aitken McLachlan Thorpe - Defendants/Cross Claimants

CATCHWORDS:
CONTRACT - ORAL TERMS - Formal agreement executed by the parties - whether an oral collateral contract made - question of fact - no question of principle.

ACTS CITED:
Conveyancing Act 1919 (NSW) - s.54A

DECISION:
Judgment for Plaintiffs; Cross Claim dismissed.

JUDGMENT:

Introduction

The principal contestants in this litigation are Victor Lahoud and his younger brother, Joseph. For the sake of convenient reference and without intending any disrespect, I will refer to the members of the Lahoud family by their first names.
Victor and Joseph engaged in a number of substantial real estate developments over several years. Victor is a real estate developer and Joseph is an architect. They fell into dispute and Joseph and his company commenced proceedings against Victor and his companies in the Industrial Relations Commission of New South Wales.
The proceedings were compromised and Terms of Settlement were signed by the parties and their respective senior counsel on 6 February 2001. Under the Terms of Settlement Victor and his companies agreed to pay and transfer to Joseph money and property exceeding $1.5M in value. Victor has paid $570,000 to Joseph but he refuses to perform the rest of the Terms of Settlement. Joseph sues for specific performance and damages.
By his Cross Claim, Victor seeks to set aside the Terms of Settlement because he says it was procured by trickery. He says that Joseph promised, as a precondition of the settlement, to hand over to him their deceased father’s watch and to share with him the expenses of looking after their disabled brother, Riad. He says that these terms were not included in the Terms of Settlement signed by the parties because he and his brother agreed that they were private family matters and that it was not appropriate to include them in a document prepared by lawyers.
Although Victor primarily seeks to have the Terms of Settlement set aside, his secondary claim, made by an amendment to his Cross Claim during the course of the hearing, is for specific performance of what he says is a collateral agreement to the Terms of Settlement, namely, the agreement by Joseph to deliver the watch and to share the cost of Riad’s care. In the alternative to specific performance of the collateral contract, Victor seeks damages for breach of contract.
Victor’s position, as stated at the commencement of the hearing, is that he does not object to anything in the Terms of Settlement and he is willing to perform the agreement therein contained, subject only to performance by Joseph of what he says is the whole of the agreement reached between them, that is, the agreement including the private arrangement.
Joseph denies that there was any agreement between himself and Victor as to delivery of the watch and care of Riad; he denies that anything said on those subjects prior to the execution of the Terms of Settlement was a binding agreement and says further that if there was any such agreement it is unenforceable under s.54A Conveyancing Act 1919 (NSW) for want of writing.
Accordingly, the factual and legal focus of the case is on Victor’s Cross Claim. If the Cross Claim fails on the facts, Victor has no defence to Joseph’s claim for specific performance of the Terms of Settlement. However, if Victor establishes the facts upon which he relies for the collateral agreement, questions arise as to the consequences in law.
The dispute about enforcement of the Terms of Settlement has generated proceedings in the Industrial Relations Commission to set them aside and two sets of proceedings in this Court. An enormous volume of affidavit and documentary evidence has been deployed; it has taken some four years for the case to come to trial; the hearing was listed for ten days; boxes of documents were intended to be tendered. However, resolution of the dispute depends entirely upon what was said between Victor and Joseph in three fairly short conversations on 5 February 2001. No one else was present at these conversations; there is no contemporary note or memorandum of what was said.
Prior to execution of the Terms of Settlement, Victor said something to his legal advisers about his private discussions with Joseph. Those statements are the only evidence which may be capable of corroborating Victor’s account of what was said between the brothers in their private conversations. I will return to that evidence shortly. However, notwithstanding what I will call the corroborating evidence, the fact remains that the determination of this case depends essentially on whether I accept Victor’s account of what was said in the three conversations on 5 February 2001, or whether I accept Joseph’s account.

Family background

Some family background is necessary to understand the context and significance of the matters which have given rise to this dispute. The parties have agreed on a statement of facts relevant to the family history, which is as follows:
“1.    Wadih Lahoud (born 1910) married Hind Lahoud (born 1927) in Lebanon in 1947.
2.     There were six children of the marriage, all born in Lebanon as follows:
        a) Rosemary (born 1948);
        b) Riad (born 1950);
        c) Victor (born 1953);
        d) Houda (born 1955);
        e) Nadia (born 1958); and
        f) Joseph (born 1961).
3.     In 1971, Rosemary married Joseph Younan, an Australian citizen who was visiting Lebanon at the time. Mr Younan returned, and Rosemary migrated with him, to Australia after they were married.
4.     Victor migrated to Canada in 1973 and then to Australia in 1974. Victor lived with Rosemary and Joseph Younan until he went back to Lebanon in 1977.
5.     Until about the beginning of the Lebanese civil war, in about early 1975, the family lived in Wadi Kannoubine and in Tripoli in a complex of 4 units owned by the father, Wadih. The family lived in one unit and the other three were rented out. The building was hit by a missile during the civil war in 1975, and the family then moved to a unit owned by a family friend in a mountain village called Hasroun. The family remained there until they migrated to Australia in October 1977. The building in Tripoli was sold in 1978 and the proceeds transferred to the family in Australia. (There is a dispute as to who in the family received this money, which does not need to be resolved for the purpose of these proceedings.)
6.     Prior to his retirement Wadih worked in Lebanon as a school teacher and also managed several properties, some of which he owned. In late 1976 he retired.
7.     In early 1977 Victor returned to Lebanon to assist in arranging for the rest of the family to come to Australia. Wadih did not work after migrating to Australia. They, Wadih (who was a pensioner in Australia), Hind, Riad, Victor, Houda, Nadia and Joseph, arrived in Sydney on 2 October 1977. At that time an amount in the order of $30,000 (according to Victor) was provided to Victor comprising family funds from Lebanon. Victor says that such monies were applied towards family expenses and have been fully exhausted by mid-1979. Whether these assertions are correct does not have to be determined in these proceedings.
8.     Hind (the mother) died from cancer in November 1977, just three weeks after arriving in Australia. When Hind, the mother, died, Rosemary became the family matriarch.
9.     Riad is intellectually disabled. To the extent that he is unable to do certain matters, Riad has always been assisted by family members (although there is a dispute as to the nature and extent of the assistance provided by Victor on the one hand and other members of the family on the other). He lives on his own, does shopping, cooking and errands and travels independently by public transport. He did not go to school except for a short period after migrating to Australia when he learned English. He is expected to live to a normal age while taking regular medication for epilepsy.
10.    In 1979 Victor commenced a property and construction business in the name of the second defendant (‘Castle’). (There is a dispute as to whether Joseph was involved in the running of the business, which does not have to be resolved in these proceedings.)
11.    In 1981 Wadih caused his share of a parcel of land in Lebanon which he jointly owned with a relative to be sold to that relative. The proceeds of the sale were provided to the family and about 90% of the total proceeds were entrusted to Victor. Victor asserts that the amount was about $125,000. He also asserts and Joseph denies that such monies were fully expended towards family expenses and were fully exhausted by the middle of 1982. Whether these assertions are correct does not have to be determined in these proceedings.
12.    The whole family initially moved in with Rosemary when they arrived in Australia. In early 1982 they moved into a rented house in Chatswood. In late 1982 the family (Wadih, Riad, Victor, Houda, Nadia and Joseph) moved into a new house constructed by Victor in Castlecrag (‘the Castlecrag House’).
13.    Houda remained living in the Castlecrag House until 1983, Nadia until 1984, Wadih (the father) until he died in 1995, and Joseph until January 1998. In 1991 Houda and her family moved into the Castlecrag House. Joseph asserts that Houda looked after Riad and her father, and that she managed the household. There is a dispute as to this assertion which does not need to be resolved for the purpose of these proceedings. In January 1998, Joseph moved to his present home in Neutral Bay.
14.    Joseph studied architecture and graduated in 1987.
15.    After his graduation as an architect in 1987, Joseph was employed by a firm of architects known as Wolski Lycenko Brecknock (‘WLB’). Victor and Castle had been engaging WLB among other firms since about 1981 to carry out architectural work for his and Castle’s business.
16.    In 1992 JVL Pty Limited, now Solidare Pty Limited, was incorporated (there is a dispute as to whether this company has ever traded, which does not need to be resolved for the purpose of these proceedings).
17.    In about the middle of 1993 Joseph commenced his own private practice. A number of property developments were undertaken from 1993 until early 1998. There was a dispute in the 1999 IRC proceedings as to whether Joseph’s involvement was as a joint venturer or as a subcontracted architect. That dispute does not have to be resolved in the present proceedings.
18.    Joseph operated his architectural business practice from the ground floor of the Castlecrag House. There was one project prior to 1993, the Park Avenue project, which was purchased in Joseph’s name, but there is a dispute as to whether Victor and Castle worked on it. That dispute also does not need to be resolved for the purpose of these proceedings.
19.    In July 1995 at the age of 85 Wadih became very ill with pneumonia. He spent three weeks in hospital. He returned home to the Castlecrag House towards the end of July. Joseph asserts that he was cared for principally by Joseph and Houda (this is the subject of dispute, which does not need to be resolved for the purpose of these proceedings). He went back into hospital around 3 weeks later, and died on Sunday 27 August 1995 at 1.15pm in the presence of his family.
20.    In 2002 Victor began renovating the Castlecrag House. Victor moved to Unit 30, 135 Sailor Bay Road, Castlecrag. Riad moved into Unit 6 but subsequently moved into Unit 4.
21.    In January 1999 Joseph commenced proceedings in the Industrial Relations Commission of New South Wales pursuant to section 106 of the Industrial Relations Act in relation to work in connection with 9 specific projects. The proceedings were defended and were ultimately listed for hearing on 5 February 2001. Written terms of settlement were negotiated, and signed by the parties and their respective Queens Counsel on 6 February 2001. The settlement was partly performed. That settlement is the subject matter of the present proceedings.
* Confidential and prepared for purpose of these proceedings only.”

The essence of Victor’s case

Victor’s case is founded upon the assertion that he entered into the Terms of Settlement for the purpose of bringing to an end all disharmony within the family. There were, he says, two categories of issue which were dividing the family. The first, he says, was the commercial dispute between Joseph and himself which was concerned with their business affairs. The second was a dispute about non-business matters, namely, who should have their deceased father’s watch and who should be responsible for Riad’s care.
Victor says that settlement of the non-business dispute was just as important to him as settlement of the business dispute. He says:
“I considered my father’s watch and the care of Riad to be essential terms in the overall settlement of the claims made by Joseph. I decided to settle with Joseph for the sake of family unity. A purely commercial settlement with him would not have done so because the issues of Riad and the watch would have remained, and those issues for a number of years had generated disharmony amongst members of our family. My working relationship with Joseph was to a large degree influenced by family considerations and in that context any resolution of differences was seen by me as settling all issues to secure harmony for the whole family. In agreeing to the terms of settlement, I believed I was giving away to Joseph far more than he would have been awarded by the Industrial Relations Commission had the matter proceeded to trial, but I was willing to do so on the basis of our agreement in respect of the watch and the care of Riad. These private family matters were extremely important to me for the reasons I have set out above.”
It is, therefore, necessary to examine more closely Victor’s contention that the non-business dispute had been a cause of continuing family disharmony for some years.

The evidence about the family dispute

Rosemary, Houda and Joseph said that just before their father’s death, their father gave his watch to Joseph in gratitude for what Joseph had done for him during his illness. Victor said that some years earlier his father had given the watch to him, although his father kept the watch in his possession.
Very shortly after his father’s death, Victor was told by Houda that Joseph had been given the watch. Victor became extremely angry and emotional. A scene in front of family and friends was averted only when Rosemary and Houda placated Victor by telling him that Joseph would give him the watch after the “forty day mass”, that is, the mass which, according to the traditions of the Maronite Rite, is celebrated to pray for the deceased forty days after his or her death.
About the time of the forty day mass, Victor asked Joseph for the watch but Joseph refused, saying that his father had given it to him. Thereafter, Victor says, the retention of the watch by Joseph continued to upset him deeply. His evidence was to the effect that the issue of the watch was one of the matters which caused deep dissension within what had previously been a close and supportive family.
Rosemary, Houda, Nadia and Joseph all gave evidence. Rosemary and Houda confirmed that Victor had been extremely upset shortly after his father’s death when he discovered that Joseph had his father’s watch. However, while all of the sisters were well aware of the commercial disputes which broke out between the brothers in about 1998 and threw the family into disharmony, all of the sisters said that the issue of their father’s watch was never continually agitated within the family by Victor. They said that it was not in itself an issue which divided the family and that, after the initial disagreement in 1995, they had believed that Victor had come to accept that Joseph would keep the watch.
I accept this evidence of Rosemary, Houda and Nadia. Each of them gave her evidence carefully and conscientiously, without inconsistency, prevarication or obvious improbability. Each of them was anxious only to bring about a reconciliation between their brothers. None displayed marked partiality either to Joseph or to Victor. I accept their evidence without reservation.
Joseph, likewise, said that after Victor’s request for return of the watch at about the time of the forty day mass, Victor did not raise the subject with him again. In the light of the sisters’ evidence, and upon my assessment of Joseph’s credit – to which I will return shortly – I accept this evidence.
In summary, I find that if, from 1995 onwards, Victor retained a resentment against Joseph because of Joseph’s retention of their father’s watch, it was not a resentment to which he gave expression within the family nor did that resentment, in itself, bring about family disharmony, although it may have coloured Victor’s attitude to Joseph generally.
On 13 January 1999, Victor wrote a letter to Rosemary, Houda, Nadia and Joseph. The letter was sent to Rosemary’s home. In the letter, Victor complained that none of his siblings was contributing to Riad’s maintenance. He suggested that a trust fund should be established to which each of the children would contribute and that the fund should be used to pay the deposit on a house for Riad and for his ongoing maintenance. The letter concluded:
“If someone has a better idea, I would like to read it. I will not put up with the current situation for much longer.”
Victor says that the question of Riad’s care was an issue which had for some years caused disharmony and division within the family. His sisters, on the other hand, say that each of them shared responsibility with Victor for looking after Riad. Rosemary says that there had been no debate within the family about Riad’s care before she received Victor’s letter of 13 January and that, when she received the letter, she went to talk to Victor about it. Thereafter, she says, the issue of responsibility for Riad’s care was not a cause of any ongoing disharmony in the family.
This evidence is supported by Houda and Nadia. Joseph says that he did not see Victor’s letter of 13 January and never knew that Victor regarded responsibility for Riad’s care as a matter of dissatisfaction. His evidence is in accordance with that of his sisters on this issue.
For the reasons I have already given, I find the evidence of the sisters to be generally reliable and I accept their evidence on this issue. I find that if, from early 1999 onwards, Victor harboured any resentment about responsibility for the care of Riad, it was a resentment which he kept to himself. The question of Riad’s care was not, in itself, an express cause of substantial disharmony within the family. That there was disharmony from 1998 onwards is clear but it was caused by the commercial disputes which had arisen between Victor and Joseph.

Discussions between legal advisers on 5 February 2001

The proceedings between Joseph and Victor in the Industrial Relations Commission were listed to commence on 5 February 2001. There is no doubt that in the few days leading up to 5 February the sisters, particularly Houda and Rosemary, tried very hard to bring about a reconciliation between their brothers, who had not been speaking to each other for some time.

By the morning of 5 February, through the efforts of the sisters, the ice between the brothers had been broken and they had agreed to talk to each other before the proceedings in the Industrial Relations Commission commenced.
The brothers and their legal advisers arrived at the Commission just before the proceedings were due to start. Victor was accompanied by Mr Holmes QC, his Junior, Mr Crow, and his solicitor, Mr Callanan. Joseph was accompanied by Mr West QC, his Junior, Mr I. Neil, and his solicitor, Mr Chaffey. Shortly after the parties arrived, the brothers indicated that they wished to speak privately and, by consent, the matter was stood down to permit settlement discussions to proceed.
Mr West’s affidavit evidence is that just before the private discussion between the brothers commenced, he said to Joseph in the presence of Messrs Neil and Chaffey:
“If you are intending to reach a settlement, there are some ground rules you will need to observe. You must be very clear with Victor that the settlement is not legally effective until all the terms of the settlement are agreed and are recorded in a document executed by the parties. A deed is probably the better way to go about it. There may be things that you and Victor want to discuss and settle that go beyond the issues covered in the affidavits. If there are other matters then you should be sure to cover everything in your settlement. It should all be written down so there can be no dispute about what was agreed. There should be no side deals. Everything that you agree should be recorded in the settlement document.”
Mr West was not required for cross examination.
Mr Neil’s affidavit evidence about the conversation was as follows:
“Joseph: ‘Victor can twist things and they come back to you in all sorts of ways.’
Mr West: ‘One way you can deal with that is to ensure that nothing that is said is binding on anyone until there is a final agreement on everything and to insist that the final agreement must be reduced to writing and signed by both of you.’
Mr West continued [or Mr Neil said]: ‘There can be no handshake agreements. Everything that you agree must be contained in the final document.’
Joseph: ‘I understand. I will participate in private discussions if they are conducted on that basis. I am happy for you to approach Victor’s lawyers with that proposal.’”
Mr Neil was required for cross examination but this evidence was not challenged. Mr Chaffey could not recall what was said in these discussions. He was not called for cross examination.
Joseph’s evidence is that just before having the first private meeting with Victor on 5 February he had the following conversation with his legal advisers:
“Neil: ‘We have spoken to the other side they have agreed that any discussions with Victor are on a without prejudice basis. You are free to talk about whatever you want to, you should not feel at all constrained. There will be no agreement on anything until everything is written down, documented and signed.
Joseph: ‘I understand. Everything must be written down.’”
Mr West says that after the first round of private discussions between the brothers he was told that they proposed to continue their discussions at the home of their sister, Houda. He then advised Joseph that, in the course of negotiations, he should give consideration to the tax consequences of any proposed settlement. After giving that advice, Mr West says that he spoke to Mr Holmes QC and the following conversation took place:
“West: ‘I understand that the brothers wish to speak to each other and to their sister. I think that is a good idea because the sister may be able to ‘knock their heads together’. I have told Joseph that he should negotiate on the basis that there will be no settlement until all is recorded in a final document.’
Holmes: ‘I have had a similar conversation with my client.’”
Mr Neil says that he was present when Mr West said to Mr Holmes words to the effect:
“West: ‘We are instructed that Joseph accepts the proposal that he speak in private with his brother – but there are some conditions. The conditions are that there will be no binding agreement on anything that the brothers may discuss unless and until there is a final agreement on everything, and then it must be set out in writing and signed by both parties before it becomes binding on anyone. Those must be the ground rules for any private discussion.’
I observed the respondents’ legal representatives then speaking with the first defendant (Victor) in the corner of the Antechamber. After some time, one or more of them returned. Mr West and I came forward. I cannot recall if Mr Chaffey was present. One of them then said: ‘Your proposal is sensible. The ground rules are a good idea. We are instructed to accept your conditions.’”
Mr Neil says that the following conversation then took place between Joseph, Mr West, Mr Chaffey and himself:
“West: ‘Listen to what he has to say. Remember the ground rules. The only thing you do not want is to find that you are fixed in agreement about one thing but do not have a final agreement. That is what the ground rules are there for.’
Joseph: ‘Don’t worry. I understand the ground rules.’
Neil: ‘Remember the ground rules, and don’t commit yourself to anything until you’ve agreed on everything. Do not get tricked into making an agreement with him. Listen carefully to what Victor has to say and tell us everything that is discussed.’”
Mr Holmes QC and Mr Crow say in their affidavits that they cannot recall what was said in their discussions with Mr West QC and Mr Neil on 5 February 2001. Mr Holmes was required for cross examination but still could not recall the conversations. He was not in a position to confirm or deny the terms of the conversations as alleged by Messrs West and Neil.
I have no doubt that Mr West and Mr Neil did, as they say, give clear and strong advice to Joseph prior to the commencement of private discussions with Victor that everything agreed between himself and Victor should be put in the document which would form the Terms of Settlement. I have no doubt also that Mr West informed Mr Holmes that it was fundamental to the settlement discussions that whatever was agreed should be put in writing. I accept that Mr Holmes agreed with that statement.
I accept also the statement attributed to Mr Holmes by Mr West, which was not denied by Mr Holmes, namely, that Mr Holmes had had a conversation with Victor in which he advised that there would be no settlement until everything was recorded in a final document. It is, in any event, inherently probable that Mr Holmes would have given such advice to Victor in the circumstance of a negotiation in the absence of legal advisers. What is clear from the conversations between the parties’ lawyers and between the lawyers and the clients is that everyone understood and agreed on ‘the ground rules’, i.e. that everything agreed had to be recorded in the signed Terms of Settlement.

The private discussions on 5 February 2001

There is no doubt that the topic which occupied most of the private discussions between Victor and Joseph on 5 February was the resolution of their commercial differences. As appears from the mass of documentary material in the case devoted to financial dealings, both brothers are keenly aware of the value of money. For example, a great deal of the negotiations, both on 5 and 6 February and thereafter, were concerned with the tax implications of the settlement. The issue of the watch and Riad’s care, even on Victor’s account of events, occupied relatively little time.
Victor’s evidence of the relevant discussions with Joseph concerning the watch and Riad was to the following effect.
As soon as the brothers began their first private discussion in the Commission building on 5 February, Victor told Joseph that the dispute was “not a matter of money for me”. He said that he believed that his father had given him the watch and that Joseph had “stolen” it from him. Joseph immediately said that he would give Victor the watch and asked “what else?”. Victor then complained that it was unfair that he alone should bear the burden of caring for Riad. Joseph immediately said that he would share that responsibility equally with Victor. Victor then offered Joseph the additional financial consideration for the commercial settlement which Joseph had been seeking.
According to Victor, the conversation then relevantly proceeded:
“Joseph: ‘So you agree to give me two units from Northbridge and half the profits from Cammeray?’
Victor: ‘And you agree to give me back my father’s watch and share with me equally in caring for Riad?’’
Joseph: ‘Yes. I do.’
At this stage we shook hands and continued to talk.
Joseph: ‘Where do we go from here?’
Victor: ‘The first thing we should do is inform Houda. Better still, let us go and have a coffee at her house, while the lawyers can document an agreement.’
Joseph: ‘Do you think it is a good idea to have a legal document which refers to Riad and our father’s watch?’
Victor: No, it is not, as long as you understand that these matters are preconditions to the settlement.’
Joseph: ‘I agree. It is better that way.’”
Victor then told his legal advisers that a settlement in principle had been reached but the brothers needed to talk further and would go to Houda’s house. He says that he told them:
“The principal elements of the agreement are such that I treat the Cammeray project as a 50/50 joint venture, give Joseph two units in the Northbridge project, he returns my father’s watch to me, and he shares with me the duties of looking after Riad.”
A few minutes later, Victor says, he said to Mr Callanan:
“Victor: ‘I don’t know who will do the documentation. The two private matters, the watch and Riad’s care, are not to be written in the Deed.’
Callanan: ‘I respect that but I am not sure I recommend it. There are personal reasons, of course.’
Victor: ‘The idea came from Joseph. We don’t particularly want to be reminded many years down the track that it took lawyers to tell us how to deal with our brother and our father’s watch. I agree with him.’”
Victor says that after this conversation with Mr Callanan he and Joseph went by taxi to Houda’s house.
Mr Callanan’s evidence is that after the first private discussion Victor told him, Mr West and Mr Neil that he and Joseph had reached agreement in principle but needed to talk about details and would go to Houda’s home for that purpose. According to Mr Callanan, Victor added: “There are some private matters that need to be discussed”, but he did not identify what those matters were.
Mr Callanan does not say that in this conversation Victor instructed him as to the essential terms which had been agreed and that he was not to include in the Deed or Terms of Settlement the private agreement about the watch and Riad. Mr Callanan says that it was much later on 5 February – at about 3.30pm after the brothers had returned from Houda’s house and the proceedings were being adjourned by consent to the following day – that Victor told him for the first time about an agreement for the return of the watch and for sharing responsibility for Riad. I will return to that conversation shortly.
Mr Holmes says that after the first private discussion he was told by Victor: “We have reached agreement in principle but there are some family matters that need to be sorted out and we have to go to our sister’s house”. Mr Holmes does not say that Victor told him what the “family matters” were or that Victor said anything about any pre-conditions or essential terms of a settlement of the commercial dispute.
Mr Crow says that at some (unspecified) time on 5 February Victor told him that he and Joseph “talked about Riad and my father’s watch and we have sorted them out. They are family matters.” I conclude that this conversation occurred after the brothers returned from Houda’s house.
Joseph’s evidence is that the first private conversation with Victor at the Commission lasted about twenty minutes and that during that conversation only aspects of the commercial dispute were discussed: no mention was made of the watch or of Riad. After a short time, Joseph says, Victor agreed in principle to give Joseph the additional financial consideration which Joseph was seeking in the commercial dispute. Joseph firmly denied in cross examination that in the first private discussion he agreed to give the watch to Victor or share the responsibility for Riad.
Joseph’s evidence accords with that of Messrs Holmes and Callanan, who both say that Victor told them only that agreement had been reached in principle and that there were still some private or family matters to be discussed. I conclude that all that was agreed in the first private discussion was the outline of the terms of the commercial settlement. I accept that Victor then suggested that they go to Houda’s house for coffee. I think it is probable that he wished to have the opportunity there to raise in private with Joseph the issues of the watch and Riad’s care, although he did not state this intention to Joseph and only mentioned “private matters” to his lawyers as the reason for going to Houda’s house.
In arriving at my conclusion as to what was discussed in the first private conversation, I have taken into account my findings as to the reliability of each brother’s evidence, to which I will come shortly.
Victor says that the second private discussion about the watch and Riad occurred when the brothers were in a taxi going to Houda’s house. He says that the following conversation took place:
“Victor: ‘In relation to Riad, do you agree that the best way is to have him live with you for a period of six months or a year, and then he lives with me for a similar period?’
Joseph: ‘Yes, I do not have any problem with that. Who goes first?’
Victor: ‘Considering that he has been with me for several years, you can start.’
Joseph: ‘Okay.’
Victor: And if we find a better arrangement in the future, we will consider it, provided the contribution is equal.’
Joseph: ‘That is fine.’”
Joseph asserts that the conversation in the taxi concerned aspects of the commercial dispute and that nothing was said about the watch or Riad. Victor’s evidence about the conversation is improbable if there had been no agreement about the family matters in the first private discussion, as I have found.
The brothers agree that when they arrived at Houda’s house and told her that they had settled their dispute, their sister was overcome with emotion and they spent some time in comforting her. Houda suggested that Rosemary and Nadia should be invited to come immediately. Joseph left very shortly afterwards to collect Rosemary and Nadia made her own way to Houda’s house.
Victor says that when all the family was assembled in the breakfast room he said that he and Joseph had agreed not to proceed with the hearing but the terms of the settlement were private.
Joseph says, on the other hand, that the essential terms of the commercial settlement were stated, one of those terms being that Victor would cause to be transferred to Joseph two units in a real estate development at Northbridge. Joseph told his sisters that he wished to be able to choose one of the units for himself but that Victor refused. According to Joseph, Rosemary said in Arabic:
“Haven’t you heard of the saying which goes like this – one will divide and the other will choose.”
Joseph’s evidence of the discussion about the broad terms of the settlement, the disagreement about Joseph’s right to choose a unit and Rosemary’s comment in Arabic is corroborated by Houda, Rosemary and Nadia. I prefer their evidence to that of Victor. Since the sisters already knew the broad issues of the commercial dispute between their brothers, I think it improbable that Victor and Joseph would have wished to keep private from them the basis upon which those issues had been resolved.
All witnesses agree that shortly after Rosemary’s remark in Arabic, Victor asked his sisters to leave the room so that he and Joseph could have a discussion in private. The sisters went to a bedroom nearby where they remained for a fairly short time, emerging when it was clear that the brothers had finished their private discussion.
The sisters could not hear what the brothers were saying in their private discussion but they agreed that during that discussion neither brother raised his voice nor did there otherwise appear to be any angry disagreement between them.
According to Victor’s affidavit evidence, the private discussion was as follows:
“Victor: ‘When can I expect to get the watch from you?’
Joseph: ‘I’ll give it to you when I am ready.’
Victor: ‘What is that supposed to mean?’
Joseph: ‘When I get my side of the bargain.’
Victor: ‘Okay, that is fair enough.’
We then spoke about Riad:
Victor: ‘In relation to Riad – do you understand why it is best that we do the accommodation part on an alternative basis?’
Joseph: ‘I am sure you’ll tell me.’
Victor: ‘Well, it is not something you can split. You choose to put Riad up in your house or in a 5 star hotel. The same with me. Each one of us is responsible for accommodating him for six months of the year. All other costs and expenses, whatever they might be, are shared 50/50.’
Joseph: ‘I am happy with that.’
Victor: ‘I still think that the best thing to do is to buy him a small house. This will cost more but will be better for you and me privacy wise. This will be better for him as well. For the time being I don’t want to complicate the arrangement.’
Joseph: ‘I agree. Let’s keep it simple.’
Victor: ‘So everything is as we agreed this morning.’
Joseph: ‘Yes. I am ready to go ahead as we agreed.’”
According to Joseph’s affidavit evidence, the private discussion was as follows:
“Victor: ‘I want the watch from you.’
Joseph: ‘The watch is mine. My father gave it to me. You cannot have it. If I decide at some time in the future to consider giving it to you, it will be totally up to me. This has nothing to do with this settlement.’
Victor: ‘That is fine. I understand.’
Joseph: ‘I will not agree to the settlement if I am not allowed to choose the three bedroom unit at Northbridge.’
Victor: ‘You can choose any three bedroom unit left providing it is not unit 18 or 24.’”
All witnesses agree that at no time during the family gathering at Houda’s house on 5 February did either brother say anything to their sisters about the watch or Riad’s care. Indeed, the sisters did not learn anything about the alleged private agreement until some months later, when the brothers were again in dispute, this time about enforcement of the Terms of Settlement.
According to Victor’s affidavit evidence, he and Joseph returned together to the Commission at about 1:00pm. There was a meeting at which the brothers and their solicitors attended. Mr Callanan commenced by saying: “It is important that we record the principles of the private agreement between the two brothers and not what the lawyers may prefer”. There followed a discussion in which Victor made it a pre-condition of settlement that payments to Joseph be fully tax deductible. Victor does not say that the watch and Riad were referred to in this discussion.
Joseph says that he and Victor did not go back to the Commission but, rather, went to a nearby coffee shop and then left to meet their respective legal advisers.
Mr Callanan says that there was a meeting between himself, Victor, Mr Chaffey and Joseph at the Commission’s premises after lunch. He says that the first he heard of any concluded private arrangement between the brothers was in a conversation which occurred at about 3:30pm when he and Victor were sitting at the back of the courtroom. The conversation was as follows:
“Victor: ‘Michael, Joseph and I have agreed that the two private matters shall remain private. They are not to be recorded in any formal deed of settlement.’
Callanan: ‘What were those matters, Victor?’
Victor: ‘Joseph has agreed to return my father’s watch to me which, as you know, is very important to me and also to share with me equally in the care of our brother, Riad.’
Callanan: ‘So these are your instructions to me?’
Victor: ‘Yes they are.’”

Victor’s affidavit evidence does not refer to this discussion with Mr Callanan. As I have recorded, Victor says that he told Mr Callanan about the private agreement after the first private discussion with Joseph at about 10 o’clock that morning. For the reasons I have given, I prefer the evidence of Mr Callanan.
Mr Callanan says that he and Victor returned to Mr Holmes’ chambers later in the afternoon of 5 February. Present at the conference were Victor and Messrs Holmes, Crow and Callanan. Mr Callanan says that the following discussion occurred:
“Callanan: ‘Malcolm, just before leaving Court, Victor raised two private matters with me and instructed me not to include these matters in any formal deed of settlement. I thought it appropriate that I raise them with you.’
Holmes: ‘Victor, what are these private matters?’
Victor: ‘Joseph and I agreed that he will return my father’s watch to me and also, that he and I will equally share in the care of Riad. However, since these are family matters and private in nature both Joseph and I agreed that we don’t want them to be recorded in the formal terms of settlement.’
Holmes: ‘Victor, you obviously place great importance on your father’s watch. You must show it to me when you get it back. Is this the watch discussed at your father’s funeral and referred to in earlier affidavits?’
Victor: ‘Yes.’
Holmes: ‘I still have my father’s watch. Look, I’ll show you.’”
Mr Holmes can recollect very little about this discussion save that he showed his own father’s watch to those present. He gave this evidence in cross examination:
“Q. Are you able to give us – thinking as carefully as you can about it – any further detail on that of the section of the conversation which led up to the watch being displayed?
A. It was a question from me and a reference to Riad and the watch. Then me sort of jumping, linking the two together and referring to the funeral and then me referring to my father's watch and then me getting it out of the drawer. I was in my Chambers, they were in the Selborne side, I had a big desk in the centre of the room and behind me was a row of shelves and I just turned around and pulled out dad's watch. Of course by then it had given up the ghost and I can't wear it. I just kept it in the drawer.
Q. As far as concerned Victor's father's watch, was some advice sought from you in relation to that matter?
A. Not at all. It is the only time it was ever mentioned to me.
Q. You offered no advice in relation to the issue of either the watch or Riad?
A. No, it was no, I do recall keeping quite distant from a lot of the settlement negotiations. This involved areas of taxation which is an area that I wasn't involved in. They involved discussions with accountants, they involved discussions with the solicitors about matters that I wasn't privy to and so I kept … it wasn't one where I was on top of the settlement.
Q. Is it at all possible that you conveyed any impression to the client or the solicitor that you were giving some advice about the watch or the Riad issue?
A. No, not at all.
Q. Did you receive some form of instruction that those two aspects of the matter should stand outside the written settlement documentation?
A. No.
Q. That was simply not discussed one way or the other, am I right?
A. No, it was not discussed.
Q. Was any view expressed in your presence as to any issue of the legal enforceability of questions relating to Victor's father's watch or the care of Riad?
A. I think later on there might have been some discussions about that and that's when the brief was passed to somebody else because I had been involved.
Q. But not before a problem arose with the enforcement of the terms?
A. That's right.”
Mr Crow recollects that at this conference Mr Holmes showed Victor a watch but Mr Crow gives no other evidence about the conference.
There was no other relevant discussion between the parties on 5 February.

Events on 6 February and the Terms of Settlement

On 6 February the parties and their lawyers continued to negotiate the drafting of an agreement in the form of a deed. The sticking points of negotiation were principally the taxation repercussions on each of the parties and other financial aspects of the commercial dispute. Finally, towards the end of the day, the parties agreed that the drafting of a final deed would require more negotiation but that they could dispose of the proceedings in the Commission on the basis of immediately binding terms of settlement.
A document was prepared and, late in the day on 6 February, it was signed by the brothers and witnessed by Messrs Holmes and West. The Summons in the Industrial Relations Commission which had been filed by Joseph and his company was then dismissed by consent, with no order as to costs.
The relevant provisions of the Terms of Settlement are as follows:
“In consideration of the Applicants agreeing to the orders set out in paragraph 4, the following terms are agreed:
1.     The Second Respondent is to pay to the First Applicant, by bank cheque no later than 6pm Tuesday, 6 February 2001, the sum of $570,00.00. The Respondents have provided written details of the profit calculation for the Cammeray Project, which is Annexure “A” hereto, and verily believe that those details are accurate. …
2.     The Second Respondent is to pay to the First Applicant the sale proceeds of Unit 4 at 135-145 Sailors Bay Road, Northbridge (being the land contained in Folio Identifier 4/SP 53342) and a three bedroom unit at 135-145 Sailors Bay Road, Northbridge presently owned by the Second Respondent, which unit shall be nominated by the First Applicant by 4pm on Thursday, 15 February 2001 but shall not include unit 18 or 24. The First and Second Applicant and the First and Second Respondent agree to the conditions set out in schedule 1 hereof regarding this clause 2.
3.     The First and Second Applicants and the First, Second and Third Respondents agree to the terms set out in Schedule 2 hereof.
4.     The Summons herein be dismissed with no order as to costs forthwith.
…
6.     Terms not to be disclosed except as required with financial advisers and legal representatives of the parties, or under compulsion of law.
7.     The parties to this agreement will enter into a deed in accordance with this agreement.
…
9.     The deed referred to in paragraph 4 will include a term by which:
(a) The Applicants on the one hand, and the Respondents on the other, and each of them release each other from all claims that they have or may have against each other but for those which may arise from, or relate to, these Terms of Settlement or the terms of the deed referred to in paragraph 7;
(b) The First Applicant shall complete whatever documents are required to transfer the shares held non-beneficially or beneficially as the case may be by him in the issued capital of the Second Respondent and the Third Respondent to the First Applicant or his nominee and tender his resignation as director of both companies.”
Schedule 2 provides:
“It [is] the express intention of the parties that this document records and constitutes an immediately binding agreement for the settlement of all aspects of the dispute between the parties NOTWITHSTANDING THAT at the same time the parties contemplate that the agreement will be engrossed in more perfectly drafted documentation which the parties will and hereby agree to execute AND it is agreed that in the event of there arising any dispute between the parties regarding any suggested omission or uncertainty in the terms of this agreement or in the event of there arising any dispute between the parties in the course of the preparation of the more perfectly drafted documentation regarding the form or substance of such documentation the same shall be submitted to senior counsel nominated by the President for the time being of the New South Wales Bar Association for summary determination acting as an expert and not as an arbitrator AND the parties agree to accept such determination as final and binding and to execute such documentation as will carry into effect such determination.”
There is no suggestion that there was any discussion between the parties or their lawyers about the watch and Riad at any time on 6 February prior to the execution of the Terms of Settlement.
On the evening of 6 February Joseph attended Victor’s office and Victor gave him a cheque for $570,000 in accordance with the Terms of Settlement. There was no conversation on that occasion about the watch or Riad.

Events after 6 February

Joseph was content with the terms of the final deed which was to have been entered into pursuant to the Terms of Settlement and on 13 February he and his company executed it. Mr Callanan advised Mr Chaffey on 12 February that Victor agreed with the terms of the deed and Mr Callanan appointed 15 February for the exchange of counterparts.
Victor says that Mr Callanan’s statement to Mr Chaffey that Victor had agreed to the terms of the deed was the result of a misunderstanding. He says that he was not happy with the terms of the deed as he wished to obtain taxation advice. Correspondence between the parties’ solicitors ensued and a dispute arose about whether Victor was entitled to insist upon structuring the settlement in such a way that he received a tax deduction for the payments to Joseph.
The first reference by Mr Callanan to a private arrangement between the brothers is in a ‘without prejudice’ letter dated 7 March 2001 to Mr Chaffey. After stating that the sum of $570,000 paid by Victor to Joseph was based on an incorrect and excessive calculation of the profits of a real estate development, and after repeating Victor’s contention that he was entitled to tax deductibility as a part of the agreement, Mr Callanan continued:
“We understand that there are private matters agreed between our respective clients collateral to the formal agreement which have not been performed to date. Our client has indicated that he reached the private agreement with his brother (without strict legal consideration and contest) for family unity and future relationships. He cannot now understand why other considerations are now preventing the proper expression of the spirit and intent of the agreement.
In all of the circumstances, our client requests that the funds paid to date be held in trust pending resolution of the precise amount to be paid on account of the Cammeray project and resolution and acknowledgment of the spirit and intent of the agreement reached between our respective clients.”
Joseph immediately instructed Mr Chaffey that in the private discussions with Victor on 5 February there had been no agreement on any matter, collateral or otherwise, apart from what appeared in the Terms of Settlement.
On 19 March Victor gave the following written instructions to Mr Chaffey:
“I wish to confirm my instructions in this matter. These are:
1.     That you write to the other side and inform them that due to their non performance, irreparable damage has been caused to our position. Accordingly our consent to the agreement is withdrawn.
2.     That you seek the advice of Mr Holmes, QC, on how best to have the ‘incomplete’ agreement declared null and void.
3.     That you prepare, on my behalf a statement of demand for the repayment of a loan made to Rosemary in 1984.”
Joseph instructed a new solicitor, Mr Blackwell of Messrs Cowley Hearne, who wrote to Mr Callanan on 26 March seeking resolution of the matter and performance of the Terms of Settlement.
On 28 March Mr Callanan responded to Mr Blackwell, enclosing a copy of his 7 March letter to Mr Chaffey and noting that the “other agreements reached privately between our respective clients … have yet to be carried out by” Joseph.
Mr Blackwell responded on 29 March, relevantly saying that the Terms of Settlement recorded the whole of the agreement between the parties.
On 3 April Mr Callanan wrote to Mr Blackwell raising a number of matters not relevant for present purposes and stating:
“Having dealt with your letter we will now deal with the mechanics of finalising this matter. We are instructed that Joseph Lahoud and Victor Lahoud, as a condition of the overall settlement agreed privately between them, agreed to do certain things and exchange items of family personalty, but not reduce those agreements to writing. The nature of those agreements was disclosed to legal representatives on the day of settlement, and despite assurances as to their performance, no effort has been made by Joseph Lahoud to attend to those matters. We are instructed that our client will perform all aspects of the Terms immediately and simultaneously with the satisfaction of these outstanding agreements.”
There are some curious aspects to this statement. First, Mr Callanan’s reference to an agreement to “exchange items of family personalty” does not accord with the private agreement alleged by Victor: there was only one item of “family personalty”, the watch, and it was not to be exchanged for any item of “family personalty” held by Victor.
Second, there is no express reference in Mr Callanan’s letter to the alleged agreement about Riad’s care.
Third, there is a reference to “assurances as to (the) performance” of the private agreements, yet there is no evidence to the effect that after 5 February Victor asked Joseph to perform his promise concerning the watch and Riad and that Joseph assured him that he would do so.
On 6 April Mr Blackwell wrote to Mr Callanan, inter alia, that Joseph denied that there had been any private agreement between the brothers concerning family matters.
On 11 April, Victor wrote to Mr Callanan commenting on Mr Blackwell’s letter of 6 April. He said, inter alia:
“3. Mr Blackwell should be told of the number of times we have attempted to get a response from his client about the silent terms of the agreement.
4. They must be told again that the funds paid by us on 6 February, 2001, should be held in trust until further notice.
5. They must be told that damage has already been caused to our position. The agreement was not intended to be enforced on the parties. It was reached in the spirit of family reconciliation. Having to have the agreement enforced by the Courts negates the most essential element which motivated us to reach agreement. Otherwise, it would have been far better to remain in Court there and then.”
On 17 April Mr Callanan responded to Mr Blackwell’s letter of 6 April. Mr Callanan’s evidence in cross examination made it clear that Victor was closely concerned with the content of the correspondence between the parties so that there can be no doubt that Victor approved the terms of this letter before it was sent. The letter stated, inter alia,
“Our client has instructed us to effect a prompt exchange of the deed and to attend to the matters required of the terms conditional upon your client honouring the collateral agreement. This verbal agreement was made between the two brothers at court before the Terms of Settlement were entered into.
As your client is aware, our client entered into the Terms of Settlement conditional upon your client’s making and honouring this agreement in relation to private family matters.
The terms of this private family agreement were:
1. Your client would immediately give to our client the watch which was previously owned by their father.
2. Your client and our client would sit down and make arrangements suitable to ensure the welfare and wellbeing of their brother Riad for the remainder of his life.”
Two things should be noticed about the terms of the private agreement as stated in this letter. First, the term concerning Riad alleged in the letter differs from the term which is now said to have been agreed. Victor says in his affidavit of 18 June 2004 that in the second private discussion in the taxi and in the third private discussion at Houda’s house the agreement reached about Riad was quite specific: each brother in turn would provide accommodation for Riad for a period of six months, Joseph having the first turn, and “all other costs and expenses, whatever they might be, are shared 50/50”. An agreement in these terms is alleged in Victor’s Further Amended Notice of Cross Claim.
However, in Mr Callanan’s letter no specific agreement about Riad’s care is alleged. On the contrary, all that is alleged is an agreement to have further discussions about Riad’s care.
It is clear from the terms of Victor’s correspondence, both with Mr Callanan and with members of his family, from the terms of his affidavit evidence, and from the way in which he gave his evidence orally that Victor is, by nature, careful and precise in his language and in his manner of expression, almost to the point of being punctilious. In view of the fact that by 17 April he was deeply upset by Joseph’s attitude to the settlement – see e.g. his letter to Mr Callanan at Exhibit P4, p.1357 – and in view of the fact that he saw and approved the terms of Mr Callanan’s letter of 17 April before it was sent, it is difficult to accept that he would not have been careful and precise about stating the terms of the private agreement about Riad as he then believed them to be.
Further, when Victor swore an affidavit in July 2001 for the purpose of his application in the Industrial Relations Commission to set aside the Terms of Settlement for non-performance by Joseph of the “private terms”, he did not give any account of the conversation in the taxi concerning Riad which he alleged in affidavits filed much later: T.178.55. All that is said in the July affidavit is that Joseph said: “I will help you to look after Riad together”; there is no reference to an agreement to share expenses equally: T.178.58-179.9.
Victor denied the suggestion put to him in cross examination that amplification of his evidence to introduce the taxi conversation concerning Riad was a response to an argument advanced by Joseph in the proceedings in the Commission to set aside the Terms of Settlement that any private agreement concerning Riad in the terms described in Mr Callanan’s letter of 17 April was too uncertain to be enforceable. However, it is difficult to resist the inference that that suggestion was well founded.
The second matter which should be noted about the terms of the private arrangement as alleged in Mr Callanan’s letter of 17 April is that Joseph was said to have agreed to give back the watch “immediately”, i.e., without any pre-conditions. Yet Victor did not ask for the watch when he gave Joseph a cheque for $570,000 on the evening of 6 February and there is no evidence that he asked for it at any time prior to Mr Callanan’s letter of 7 March, and even then the request is far from explicit.
In his evidence about the third private discussion at Houda’s house, Victor says that when he asked Joseph “when can I expect the watch back”, Joseph said words to the effect: “when I get my things from the settlement”. Victor said that he did not expect to get the watch until the sale of the unit which Joseph was to receive as part of the settlement: T.180.21–181.23.
The terms of the agreement about the watch alleged in Mr Callanan’s letter of 17 April were inconsistent with Victor’s later evidence. Further, Mr Callanan’s letter demanded immediate delivery of the watch but, according to Victor’s later evidence, he was not to have the watch until Joseph received the proceeds of sale of a certain unit. Sale of that unit was still a distant prospect as at 17 April 2001.

Assessment of credit

Joseph gave his evidence in the witness box in a careful and measured way. Despite a searching cross examination, no inconsistency in his evidence was revealed. His account of events was simple and straightforward: the “private agreement” alleged by Victor had never been made at all; Victor had asked for the watch only once, at Houda’s house; Joseph had refused and that was an end of the matter – Victor did not raise the issue of the watch again; there was never an agreement to share the care of Riad, as Victor alleged.

There was nothing said by Joseph in his correspondence or in his affidavit evidence which contradicted what he had said in the witness box. He was corroborated by his sisters in his evidence that there was no disharmony within the family caused by the issues of the watch and Riad’s care and that the terms of the commercial settlement were openly discussed at Houda’s house. As I have said, I accept the sisters’ evidence without qualification. His evidence about what was discussed in the first private conversation 5 February is supported by the evidence of Messrs Holmes and Callanan.
In short, there is nothing inherently improbable about Joseph’s evidence. There was nothing in his manner of giving evidence which caused me to doubt either his credit or his accuracy of recollection.
On the other hand, however, there are major difficulties in accepting Victor’s credit and accuracy of recollection. I put aside for the moment the corroboration evidence of his lawyers, to which I will return.
First, there are the discrepancies between the evidence of Victor on the one hand and the evidence of Joseph and Messrs Holmes and Callanan on the other as to what was agreed in the first private discussion on 5 February. For the reasons which I have given, I do not accept the evidence of Victor.
Second, Victor said that the issues of the watch and Riad’s care had been causing disharmony within the family for a number of years. As I have found, this was not the case; Victor may have been resentful about the two issues but his resentment was not continually expressed within the family and was not a cause of overt and ongoing disharmony. It is, therefore, difficult to understand how resolution of these two issues in themselves would restore family harmony. A resolution may have caused Victor’s unexpressed resentment to abate, but this was not the way in which Victor expressed the matter.
Third, there are major difficulties in accepting Victor’s evidence that the brothers agreed that their agreement about the watch and Riad should be kept private, not recorded in the Terms of Settlement or otherwise disclosed to their sisters.
If the issues of the watch and Riad’s care were really causing disharmony within the family, it must have been obvious to the brothers that to restore harmony they would have to tell their sisters that these issues had been resolved. Further, as one of the issues concerned the care and responsibility of Riad, it would have been impossible to keep secret from the sisters that an agreement for Riad’s care and accommodation had been made and would have to be put into place.
Victor gave this explanation for the agreement to keep the arrangements private. He said that the agreements were “of extreme importance to both of us”. The cross examination continued:
“Q. Why aren't they in the terms of settlement then?
A. Because we agreed they wouldn't be for family private reasons. Not wanting to be embarrassed in the future, we didn't want them in the written terms of settlement.
Q. What is embarrassing about them?
A. Lots of things can be embarrassing about it.
Q. Start at the beginning and tell me?
A. I would find it embarrassing to have a document that tells me in legal way how I should look after my brother.
Q. But you filed proceedings in this Court to seek enforcement of the promises, haven't you?
A. Yes, this was the result of the denial of the fact, the denial that these things happened that we are where we are now.
HIS HONOUR: Q. Mr Lahoud, could you explain to me what you meant by the last answer but one; you said you didn't want to have a legal document – I am not sure whether I heard correctly – you did not want to have a legal document telling you how you should look after your brother?
A. That would remind us in the future that we couldn't agree, that it took lawyers to tell us how to look after our brother, that type of thing.
Q. You didn't want your brother to be able to use that document to compel you to look after your brother in a certain way?
A. Not at all with respect, your Honour. We both didn't want the private matters to be in a document that in the future can be seen by either of us or by our children or grandchildren to tell us that we couldn't do the right thing to work out between us how to agree on our brother, it took a document and settlement by the Court signed by lawyers to tell us how to do that.
Q. Did you say that to Joseph at the time of these discussions as to your reason that you did not want to have this agreement in a legal document?
A. Yes, I believe it was said.
Q. Do you have a recollection of it being said?
A. I don't recall if all those words were said but I – I took the view that I had to say little since the suggestion came from him anyway and I accepted it, and I thought we both understood that it was in that context that we have made that agreement.”
I do not understand how it could be “embarrassing” to Victor to have a document telling him “in a legal way” how he should look after his brother when Victor himself wrote to his siblings on 13 January 1999 suggesting in some detail a legal structure for the care of Riad, attendant with legal obligations on the part of all members of the family.
I do not accept Victor’s explanation that both brothers wanted a binding legal agreement about Riad’s care yet did not want a document which could be seen by them or anyone else “to tell us that we couldn’t do the right thing …”. A document recording the agreement about Riad need never have been seen by anyone except the brothers and their lawyers and that disclosure in itself would have caused no embarrassment within the family. Further, if Victor’s evidence is accepted, it was not the Court or the lawyers who had worked out the agreement about Riad, but the brothers themselves in private discussions, as the brothers would have known regardless of what any document said.
Victor’s professed delicacy about recording the private agreements in a legal document is unconvincing in light of the fact that it was Victor himself who, in a number of affidavits in the Industrial Relations Commission proceedings, expressly made complaint about Joseph’s retention of the watch and about his own unfair burden in caring for Riad. In other words, it is strange that Victor should wish to ventilate family disputes on the public record yet should think it embarrassing to record that the disputes had been resolved amicably.
It is noticeable that Victor was prepared to say that he expressly stated to Joseph in the private conversations the reasons that the agreements about the watch and Riad should be kept private. However, when pressed for particularity, Victor resiled from the position and then attributed an express explanation to Joseph which is not recorded in Victor’s affidavit evidence.
Victor gave the following evidence shortly afterwards:
“Q. Why would the inclusion of the private arrangement in the terms of the agreement indicate that that agreement had been negotiated by lawyers rather than by agreement voluntarily between the two brothers in your belief at the time?
A. That's the question?
Q. That's the question.
A. Because written things will always be there. You will always see them. You can always look at them.
Q. That's the reason that you say that including the private arrangement in the written terms would indicate that the arrangement had been negotiated by the lawyers not the brothers?
A. No, sorry, I thought it was the difference between – perhaps I should be asked the question again.
Q. Can you tell us why you felt that the existence of a written agreement may indicate that the agreement set out had been reached otherwise than privately?
A. The suggestion to have the agreement about the private matters private was not my idea.
Q. And you don't now know why you agreed to your brother's suggestion?
A. I agreed for the reasons which I said earlier, the reasons being that I wanted to feel – I just wanted them to be private and not be disclosed in the future that they were negotiated as a result of proceedings between the two brothers.
HIS HONOUR: Q. Private from whom?
A. Private from everybody, your Honour.
Q. Including the other members of your family?
A. Yes.
Q. Including your sisters?
A. Yes.
Q. Including Riad?
A. Yes, that's what we had intended.
Q. Who was looking after your brother Riad and how and by what means was a matter that you had raised with all of the members of your family in January 1999, wasn't it?
A. Yes.
Q. Wasn't it something that you felt that all of the family had an interest in?
A. I definitely believed they had an interest in but I believed the interest of the family was to get the work done rather than how it was achieved.
For the reasons I have given earlier, I do not find this explanation convincing.
Victor gave contradictory evidence about the discussion concerning the reasons for not recording the private agreement. In an affidavit sworn on 14 February 2002 Victor says that in the course of the first private discussion “Joseph said ‘do you think that it is a good idea to have a legal document which refers to Riad and our father’s watch?’; [one of us said that it would be degrading to put those things in a legal document]’.” The statement in brackets does not appear in Victor’s account of this conversation in his affidavit of 18 June 2004. He was asked in cross examination about this particular conversation:
“Q. Was anything said about it being a degrading matter?
A. No, it was understood. I believe it was understood.
Q. Nothing was said about a legal document being degrading to either of you?
A. Nothing then, no.”
It is apparent that in his affidavit of 14 February 2002 Victor was prepared to make a statement advancing his case which he did not later adhere to.
Fourth, there is a major difficulty in accepting Victor’s evidence that it was Joseph who suggested that the private agreement should not be recorded in writing.
I accept Mr Neil’s evidence that shortly before the private discussions commenced on 5 February Joseph expressed reservations about Victor’s willingness to adhere to agreements: “Victor can twist things and they come back to you in all sorts of ways”. I accept that Mr West told Joseph that the way to protect himself against that sort of conduct was to insist that there be “no handshake agreements” and that everything agreed must be contained in the final settlement document. I accept Mr Neil’s evidence that Joseph agreed to follow that advice and to participate in private discussions with Victor on that basis.
Nevertheless, if Victor’s evidence is to be accepted, only minutes later Joseph himself volunteered the suggestion to Victor in the first private discussion that the agreements about the watch and Riad, although pre-conditions to the commercial settlement, should be no more than a handshake agreement and should not be recorded in writing. For Joseph to have agreed to such a suggestion if it had been made by Victor would have been improvident in the extreme in the light of his own expressed doubts about Victor’s trustworthiness and in the light of the clear and strong legal advice which he had just received. Yet, according to Victor, Joseph did not merely agree to such a suggestion – he himself initiated it. In my view, Victor’s evidence about this aspect of the discussions is highly improbable.
Fifth, it is likely, in my view, that a great deal of Victor’s evidence in the case has been coloured by an overwhelming resentment that his efforts on behalf of the whole family have been met with indifference and ingratitude, particularly by Joseph. Whether he is justified in feeling this way is not for me to decide. It is pertinent to his ability to give his evidence carefully and accurately, however, that he feels very strongly that he has been wronged by all of his siblings.
As I have said, there are major difficulties in accepting Victor’s evidence about the private agreement. Nevertheless, Mr Weber SC, who appears with Mr Gyles for the Defendants, says that Victor’s evidence should be accepted because it is corroborated by what Victor told his lawyers immediately after the private discussions and before the Terms of Settlement were signed.

The corroboration evidence

Victor says that immediately after the first private discussion he told Mr Holmes, Mr Crow and Mr Callanan that Victor had agreed to give him the watch and to share the care of Riad. He says that minutes later he told Mr Callanan that the private agreements were not to be recorded in the deed of settlement.
As I have already observed, none of Victor’s lawyers corroborates this evidence. Mr Callanan says that Victor told him that the brothers were going to Houda’s home and that “there are some private matters that need to be discussed”. Mr Holmes’ evidence is to the same effect. As I have noted, that evidence suggests that there had been no concluded agreement about the private matters in the first private discussion.
Mr Callanan says that it was only at about 3:30pm on 5 February that Victor told him what the private matters were and that they were not to be recorded in the settlement agreement. It is of great significance, in my view, that neither Victor nor Mr Callanan says that Victor said in this conversation that the terms of the private agreement were “pre-conditions” of the terms of the commercial contract.
I accept that in the afternoon of 5 February Victor said something to Mr Callanan about private matters which were not to be included in the settlement agreement. I accept that there was a discussion later that day in a conference in Mr Holmes’ Chambers in which reference was made to the private matters and that they were not to form part of the recorded terms of the settlement. However, neither Mr Holmes nor Mr Crow are able to confirm Mr Callanan’s evidence that the precise terms of the private agreement were revealed in the conference.
I cannot accept without reservation that the terms of the alleged private agreement were made clear by Victor to Mr Callanan and Mr Holmes at any time on 5 February. If Victor had told Mr Callanan that Joseph had agreed to return the watch and had agreed to share responsibility for Riad’s care, each accommodating him for a period of six months in turn and each paying 50% of his living expenses, it is difficult to understand why Mr Callanan would not have stated the terms of the private agreement explicitly in his letter to Mr Chaffey of 7 March, and why he misstated the terms of the agreement concerning Riad in his letter of 17 April.
In the absence of a contemporaneous note of Mr Callanan’s conversation with Victor and with Counsel on 5 February, and in light of the fact that Mr Callanan himself became passionately committed to his client’s cause – as evidenced by the terms of a letter which he wrote to Mr Chaffey on 4 February 2001 – I cannot be satisfied that Mr Callanan’s recollection of what was said to him by Victor on 5 February has not been affected by Victor’s subsequent instructions as to what was agreed.
Most importantly, however, there is no evidence from Victor’s lawyers corroborating Victor’s evidence that it was agreed between himself and Joseph that the “private matters” would form part of, and would be a pre-condition to, the agreement resolving the commercial dispute. Indeed, Mr Callanan’s evidence suggests the very opposite: he was instructed that the “private matters” were to remain private and outside the recorded terms of the commercial settlement. That instruction from Victor strongly suggests that whatever “private matters” had been discussed between Victor and Joseph, Victor was of the view that they were to be worked out outside the context of a legally binding agreement – that is, on the basis of a family arrangement binding only in honour.
In short, if I were to disregard the corroboration evidence, I would have no hesitation in concluding that Joseph’s account of the private discussions should be preferred to that of Victor: when Victor’s corroboration evidence is added to the scales, I do not find the balance altered to such a degree that I can come to the opposite conclusion.

Conclusion

Victor bears the onus of establishing that a legally binding “private agreement” was made between the brothers on 5 February 2001 in the terms which he alleges and that the parties agreed that performance of that agreement was a pre-condition to the performance of the commercial agreement expressed in the Terms of Settlement. I am not satisfied on the balance of probabilities that Victor has discharged that onus.
First, for the reasons which I have given, I do not prefer the credit of Victor over the credit of Joseph.
Second, I am not satisfied that the evidence of Victor’s lawyers unequivocally corroborates Victor’s evidence that an agreement was made that Joseph was to hand over the watch immediately and unconditionally and that Joseph was to share responsibility for Riad on the terms alleged.
I am satisfied that Victor raised the question of the watch with Joseph at Houda’s house. It is open to conclude that, despite Joseph’s refusal to hand back the watch immediately, Victor took some hope from what Joseph said that, if the commercial settlement resolved satisfactorily, Joseph might eventually be willing to give him the watch. It is open to conclude that Victor said something to Mr Callanan in the late afternoon on 5 February and in the conference with Mr Holmes to the effect that the issue of the watch would be resolved, and that he has later elevated that possibility into a promise.
I am satisfied also that Victor mentioned the care of Riad in the course of private discussions. Joseph may well have said something to the effect set out in Mr Callanan’s letter of 17 April, that is, that he was willing to “sit down and make arrangements suitable to ensure the welfare and wellbeing” of Riad. Again, it is open to conclude that Victor said to his lawyers later on 5 February that he had come to a satisfactory arrangement about that, and that he has later elevated Joseph’s willingness to discuss Riad’s care into an agreement in the terms which Victor now alleges.
Third, because of Victor’s insistence to his legal advisers that the “private matters” should not form part of the Terms of Settlement, I am not satisfied that whatever was discussed or agreed privately between the brothers was intended by them to be legally binding and, in particular, to be a pre-condition of performance of the Terms of Settlement.
In summary, therefore, Victor has failed to prove the “private agreement” for which he contends, so that the Cross Claim fails on the facts.
Joseph’s contention that the “private agreement”, even if proved, would not be enforceable under s.54A Conveyancing Act for want of writing is a question of pure law. On the facts as I have found them, the question does not arise and it is, therefore, not necessary for me to decide it. If I am wrong in my findings of fact, there will either be a new trial or else the Court of Appeal itself will make a new finding of fact. Either way, the question of enforceability is best left to be decided if and when appropriate factual findings giving rise to the question are made.

Orders

The Plaintiffs are entitled to a declaration in terms of paragraph 3A of the Points of Claim. The Further Amended Cross Claim will be dismissed.
It has not been debated whether and to what extent the further declarations and orders set out in the Points of Claim are now sought or are necessary. I will stand the proceedings over for a short time to enable the parties to discuss the form of relief to be sought by the Plaintiffs and, if possible, to bring in agreed Short Minutes of Order. When the matter is brought back to the Court I will hear the parties as to costs.

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LAST UPDATED: 30/05/2005

[2005] NSWSC 509

30 May 2005