Luigi Iacullo v Remly Pty Limited and Dominic Iacullo and Lillian Iacullo

[2012] NSWSC 191

Supreme Court

New South Wales

Medium Neutral Citation:	Luigi Iacullo v Remly Pty Limited and Dominic Iacullo and Lillian Iacullo [2012] NSWSC 191
Hearing dates:	28 November to 2 December 2011; 6 to 9 December 2011
Decision date:	07 March 2012
Jurisdiction:	Equity Division
Before:	Black J
Decision:	Parties to make written submissions as to form of orders.
Catchwords:	CONTRACTS - Formation - Discussion of relevant principles. EQUITY - Fiduciary duties - Relevant principles - Whether pleaded duties were established - Whether pleaded breaches were established. EQUITY - Special disadvantage - Whether pleaded special disadvantage established. TRUSTS - Constructive trust - Relevant principles - Baumgartner constructive trust - Whether Plaintiff entitled.
Legislation Cited:	- Conveyancing Act 1919 (NSW) s 66G - Uniform Civil Procedure Rules 2005 (NSW) Pt 20 Div 3
Cases Cited:	- Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51 - Aksu v Ilhan [2011] NSWSC 970 - Astley & Ors v Austrust Ltd (1999) 197 CLR 1 - Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs and mgrs apptd) (in liq) [2009] VSCA 238; (2009) 25 VR 411 - Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; (2007) 160 FCR 35; 62 ACSR 427 - Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; (1954) 92 CLR 424 - Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 - Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 - Beaton v McDivitt (1987) 13 NSWLR 162 - Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566 - Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 - Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362 - Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61; (2001) 523 NSWLR 153 - Boardman v Phipps [1967] 2 AC 46 - Breen v Williams [1996] HCA 57; (1996) 186 CLR 71; 138 ALR 259 - Briginshaw v Briginshaw (1938) 60 CLR 336 - Bristol & West Building Society v Mothew [1998] Ch 1 - BP Refinery(Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266 - Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 - Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 - Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 - Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 - Chan v Zacharia [1984] HCA 36; (1983) 154 CLR 178 - Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 - Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 - Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447 - Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693 - Eric Preston Pty Ltd v Euroz Securities Ltd [2010] FCA 97; (2010) 77 ACSR 135 - Eric Preston Pty Ltd v Euroz Securities Ltd [2011] FCAFC 11; (2011) 274 ALR 705 - Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R1 - Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 - GM and AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113 - Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298 - Harrison v Schipp [2001] NSWCA 13 - Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 - Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 - Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 - Hungry Jack's Pty Ltd v Burger King Corporation [1999] NSWSC 1029 - Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR [11,110] - John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2910) 241 CLR 1 - Keech v Sandford (1726) Sel Cas T King 61; 25 ER 223 - Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 276 ALR 375 - Lac Minerals Ltd v International Resources Ltd (1989) 61 DLR (4th) 14 - Mackay v Dick (1881) 6 App Cas 251 - Malsbury v Malsbury [1982] 1 NSWLR 226 - Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 - News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; 139 ALR 193 - New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 - Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 - Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165; 180 ALR 249 - Ravinder Rohini Pty Ltd v Krizaic (1991) 30 FCR 300; 105 ALR 593 - Ridout Nominees Pty Ltd v Commonwealth Bank of Australia [2003] WASCA 158 - Secured Income Real Estate (Aust) v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 - Sullivan v Moody & Ors (2001) 207 CLR 562 - United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 - Varma v Varma [2010] NSWSC 786 - Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 - Watson v Foxman (1995) 49 NSWLR 315 - West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431
Texts Cited:	- J D Heydon, Cross on Evidence, 8th Australian ed
Category:	Principal judgment
Parties:	Luigi Iacullo (Plaintiff) Remly Pty Limited (First Defendant) Dominic Iacullo (First Defendant) Lillian Iacullo (Second Defendant)
Representation:	Counsel: G. A. Moore (Plaintiff) D. A. Smallbone (Defendants) Solicitors: Kreisson Legal (Plaintiff) Allsop Glover (Defendants)
File Number(s):	07/257623

Judgment

1. These proceedings are one of three proceedings which were heard together before me. The Plaintiff, Mr Luigi Iacullo (to whom I will refer, without disrespect, as "Luigi") seeks a declaration that the First Defendant, Remly Pty Ltd ("Remly"), holds its assets as to 50% on trust for him. Luigi also seeks a declaration that Remly, as trustee, holds a one-half interest in a property at [number omitted] Remly Street, Roselands ("Property A") on trust for him. Luigi also seeks orders that the Second Defendant, Mr Dominic Iacullo (to whom I will refer, without disrespect, as "Dominic") and the Third Defendant, Mrs Lillian Iacullo (to whom I will refer, without disrespect, as "Lillian") cause Remly to account to Luigi for all income and other profits received by Remly. Luigi also seeks an order that Remly be removed as trustee and replaced by Trust Company of Australia Limited.

1. Luigi and Dominic are brothers and Lillian is Dominic's wife. Luigi was previously the one-half owner as tenant-in-common of a property at [number omitted] Moorefields Road, Roselands ("Property O") and Dominic and Lillian jointly owned the other half interest in Property O. Property O is a battleaxe block with a five metre access to Moorefields Road on which a factory building is situated. It was thought to be suitable for residential development and it appears to have been understood throughout the period that the prospects of such a development would be improved by incorporating adjoining properties to Property O in the proposed development. It has now been granted development approval for such a development.

Nature of the evidence

1. There are significant and irreconcilable differences between Luigi's and Dominic's evidence of events that are not explicable merely by the passage of time. There is limited contemporaneous documentation to corroborate either party's account, other than Luigi's file notes of later conversations at a time when a dispute was crystallising, as to which other difficulties arise to which I refer below.

1. In considering the evidence, I have had regard to Dixon J's observations in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 that:

"The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality ... it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences."

1. In Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572, Hodgson JA (Beazley JA and Davies AJA agreeing) observed that:

"There is a long-standing controversy whether the civil standard of proof requires a numerical probability in excess of 50 per cent (see Davies v Taylor [1974] AC 207 at 219), or belief amounting to reasonable satisfaction (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362). My own opinion is that the resolution of the controversy involves recognition that, in deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision. I discussed this in some detail in an article published at (1995) 69 ALJ 731 (D H Hodgson, "The Scales of Justice: Probability and Proof in Legal Fact-finding")."

These principles were in turn applied by Nicholas J in Aksu v Ilhan [2011] NSWSC 970 at [37]ff.

1. It is also important to have regard to the fallibility of human memory, which increases with the passage of time, particularly where disputes or litigation intervene. As McLelland CJ in Eq noted in Watson v Foxman (1995) 49 NSWLR 315 at 318-319, each element of the plaintiff's cause of action:

"must be proved to the reasonable satisfaction of the court, which means that the court 'must feel an actual persuasion of its occurrence or existence'. Such satisfaction is 'not ... attained or established independently of the nature and consequence of the fact or facts to be proved' including the 'seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding': Helton v Allen (1940) 63 CLR 691 at 712.

Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action ... in the absence of some reliable contemporaneous record or other satisfactory corroboration."

Those observations were subsequently applied in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41] and Varma v Varma [2010] NSWSC 786 at [424]-[425].

1. Luigi gave affidavit evidence and was cross-examined at some length. I have significant reservations as to the reliability of Luigi's evidence. He swore several affidavits in the several proceedings, which set out detailed accounts of relevant conversations in direct speech. These included affidavits sworn on 12 November 2007, 14 November 2007, 22 April 2010 and a detailed affidavit in reply sworn on 4 October (or possibly 4 November) 2010, nearly seven years after the earliest of the events in question and a year before Luigi gave evidence in the proceedings. Luigi swore a further affidavit on 20 April 2011 arranging conversations from his earlier affidavits in chronological order, and also swore further affidavits giving evidence of conversations in direct speech in the course of the hearing. However, Luigi had difficulty recalling some conversations in cross-examination, unless his attention was first drawn to the passage of his affidavit in which he had set them out, and also referred in cross-examination to the fact that conversations had occurred up to seven years ago to qualify his recollection of events (T111, T114). Luigi's account in his affidavits of critical meetings and conversations was, on occasion, less comprehensive than his file notes: for example, his account of the meeting on 12 September 2006 (Luigi 4.11.10 [72]; Luigi 20.4.11 [66]).

1. In cross-examination, Luigi was clearly conscious of the matters that he sought to establish in his case and often gave non-responsive and self-serving answers. He was reluctant to concede matters that he regarded as adverse to his interest, only doing so when the cross-examination left him no alternative. For example, his concession that Dominic had never told him that he could take "as long as he liked" to put money into the development (T137-138) was only given after lengthy questioning, and he was reluctant to concede that his legal advisers had taken the position that Dominic and Lillian should be required to account for monies withdrawn from the partnership account on his instructions (T139-141). There were also aspects of Luigi's evidence that were strikingly implausible. For example, he denied that Dominic was "disappointed" in his conduct as a brother in respect of another development ("Hogben Street development"), notwithstanding that Luigi had taken up an investment in that development to the exclusion of Dominic and had agreed to a request that he not disclose Dominic's exclusion from that development for a considerable period.

1. There are also other matters which give rise to concern as to the reliability of Luigi's evidence:

• Luigi amended his account of conversations in different versions of his affidavits in a manner that causes concern. For example, an earlier affidavit referred to a conversation about the "joint property we both own" (which plainly referred to Property O). Luigi's file note of the conversation (CB 10/1094) also referred to the words "joint property" having been used, consistent with his earlier affidavit. A later affidavit setting out the same conversation in substantially the same terms referred to "the development we both own" in place of the reference to the "joint property we both own", extending the conversation from referring to the property to referring to a wider development. Luigi contended in cross-examination that the concepts were the same and denied that he had changed his affidavit evidence to improve his case. In my view, these concepts were distinct and the change in language was likely to have been intended to strengthen Luigi's case, particularly where it involved a departure from the terms of the file note which was otherwise reflected in his account of the conversation.
• Notwithstanding lengthy affidavits filed in the proceedings and the fact that it is now 7 years since the relevant events, Luigi claimed in the course of the proceedings to recall additional matters that would avoid difficulties in or strengthen his case. For example, Luigi's affidavit evidence did not deny that Dominic had said, in September 2006, that Dominic had told Luigi two years before how he could fix the dispute between them, and did not suggest that Luigi had contested the accuracy of that statement when Dominic made it. Luigi asserted in cross-examination that he had in fact denied that statement when Dominic had made it although he had not recorded that denial in his affidavits (T132). I deal with this matter further in paragraph 54 below.
• Luigi also swore a further affidavit dated 2 December 2011 in the course of the hearing containing details of conversations between him and Dominic in relation to Dominic's exclusion from the Hogben Street development which seemed to me to be an attempt to tailor his evidence to support that of another witness called in his case, Mr Murr. I deal with this matter further in paragraph 26 below.

1. Luigi also gave evidence that he maintained extensive file notes of conversations in the ordinary course and relied on those file notes in support of his account of events in 2005 and 2006. He did not rely on such file notes in respect of conversations in the earlier period, although there is no suggestion that his practice as to taking file notes changed in the period. Although he gave evidence that he had moved several times during the period and had not commenced looking for those file notes for the earlier period until late in the hearing, I consider that his failure to tender such file notes in respect of the earlier period is of some significance where he has systematically relied on such file notes in support of his account of events in the later period (although the truthfulness of those file notes is not accepted by Dominic and they have the difficulties to which I refer below). I should proceed on the basis that Luigi would have searched for and led such file notes in evidence if that evidence was likely to assist him. In these circumstances, the Court should at least be less likely to draw inferences favourable to Luigi from other evidence in respect of the relevant matters: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419; Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 at [134] (in respect of documentary evidence); Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 276 ALR 375 at 393-394. JD Heydon, Cross on Evidence , 8 th Australian ed at [1215] notes that an unexplained failure by a party to tender documents may in appropriate circumstances lead to an inference that the missing material would not have assisted that party's case.

1. There is also an issue as to the reliability of the file notes on which Luigi relies in respect of events in 2005 and 2006. It was put to Luigi in cross-examination, and he denied, that he had prepared these file notes after the dispute arose (T122-124; T245-246; T251). One file note addresses events over a twenty-one day period (LDA 80) and all of the file notes are in detailed narrative form. It appears that the file notes were prepared after the conversations to which they refer, although Luigi's evidence is that they were prepared on the evening or the next morning.

1. A particular difficulty emerged with one of the file notes on which Luigi relies which gives rise to a wider issue as to the accuracy of those file notes. Luigi relies on a file note of a conversation on 24 April 2006 concerning a conversation about Dominic's purchase of a second property adjacent to Property O ("Property B") (CB 10/1092-1093) which records Dominic having said that he had purchased Property B and that settlement had occurred (necessarily, prior to the date of the conversation on 24 April 2006). However, Remly did not exchange contracts to acquire Property B until 11 May 2006 and settlement did not occur until 11 August 2006. It is highly unlikely that Dominic would have mistakenly advised Luigi that he had settled the purchase of Property B prior to entering the contract to buy that property and there was no apparent advantage to Dominic in lying to Luigi about that matter. If Dominic was not mistaken as to this matter and did not mislead Luigi as to the position in that conversation, then the file note does not accurately record the conversation. For present purposes, it is sufficient that I note that I am not satisfied of the accuracy of this file note or other file notes in this period and therefore not satisfied that these file notes corroborate Luigi's account of the relevant conversations.

1. A the conclusion of Luigi's evidence, and notwithstanding the file notes purportedly corroborating parts of that evidence for the period 2005 and 2006, I was left with the strong impression that much of Luigi's evidence, particularly in respect of events in 2004, was a reconstruction to support his claims in these proceedings. In particular, I am unable to accept Luigi's evidence that, until September 2006, Dominic was content that Luigi should have a half interest in the adjoining properties to Property O, Property A and Property B, on the basis that, at an indeterminate future time, he should make a financial contribution to the costs of acquiring them if he were able to do so. Generally, I consider that I should not accept Luigi's evidence unless it is corroborated by documents (other than the file notes to which I refer above), consistent with other objective evidence or against interest and that evidence does not leave me actually persuaded as to the existence or content of the conversations for which he contends. The narrative of events which follows below should be read on that basis and I will not repeat this finding in respect of the many disputed conversations as to which the only evidence is the uncorroborated accounts of Luigi and Dominic respectively.

1. Mr Michael Murr ("Mr Murr"), who gave evidence in Luigi's case, has a long-standing relationship with Luigi. Dominic has brought a cross-claim in these proceedings against interests associated with Mr Murr which is presently the subject of a reference under Uniform Civil Procedure Rules 2005 (NSW) Pt 20 Div 3. I do not consider that it is necessary for me to reach a finding as to Mr Murr's credit in order to determine these proceedings and I consider it preferable not to do so.

1. Dominic also gave evidence and was cross-examined at length. In cross-examination, Dominic also seemed to me to be conscious of the matters which he sought to establish in his case, although he was generally more willing to address questions in cross-examination in a responsive way than Luigi and was also prepared to concede matters which might, on one view, have seemed adverse to his case, including the fact that he ultimately hoped to re-acquire Property O from its present owner through informal arrangements which might give rise to the exercise of a put option held by that owner in favour of Dominic. I generally prefer Dominic's evidence to Luigi's evidence where there is no other evidence of matters in dispute. I should add that Dominic's evidence, which I accept, is that he has some difficulty reading and writing and he appears to have relied on Luigi to prepare business correspondence over an extended period, including over part of the period in issue in these proceedings, so correspondence tendered in the proceedings was often written by Luigi even where it was signed or co-signed by Dominic.

1. Lillian was not called to give evidence in the proceedings. No submission was made to me that I should draw any inference that her evidence would not have assisted Dominic's or her case so I will not draw such an inference.

The acquisition of Property O

1. I should first deal with some significant events. It is convenient to seek to deal with these matters by topic, which will allow identification of the numerous disputed issues as to the timing of events.

1. The events surrounding the purchase of Property O are largely uncontroversial. Contracts were exchanged to purchase Property O on 1 May 1997 and settlement of the purchase took place on 17 February 1998. The purchase of the property was financed by a loan from GIO, which was only prepared to lend 70% of Property O's value until Dominic and Lillian gave additional security to GIO by way of a mortgage over another property in Vincentia. GIO then approved two loans to fund the purchase, one of which was secured by a mortgage over Property O and the other secured by a mortgage over the Vincentia property.

1. Shortly after the settlement on Property O, Lillian, Luigi and Dominic opened an account with Westpac Bank in which rent received from Property O was deposited and expenses or outgoings in respect of the property were paid and rent received from Property O from the time it was purchased until May 2007 was paid into the Property O bank account (Dominic 18.8.09 tab 50). From about June 2003, Lillian and Dominic made repayments on the Vincentia loan themselves, since the then tenant Property O was vacating the property and no rental income was being received (Dominic 22.7.10 [6.6]).

The breakdown of the relationship - Dominic's exclusion from the Hogben Street development and other matters

1. It appears that the subsequent deterioration of the relationship between Dominic and Luigi arose in part from their involvement in property development with Mr Murr. There are other disputes between Dominic and Mr Murr in respect of those developments.

1. From 1997 on, Luigi and Dominic had invested in property developments carried out by Mr Murr (Dominic 18.8.09 [18]-[19]). The circumstances in which Dominic did not participate in one of those developments, the Hogben Street development, was a critical issue in the proceedings and the witnesses gave radically different accounts.

1. Dominic's evidence is that he was told of the Hogben Street development in mid-2000 (Dominic 27.4.11 [151]-[152]); inspected the Hogben Street development site with Luigi and Mr Murr in mid-2001, and was told that Mr Murr's preference was for the Iacullo family interests to invest through a single family trust, and that Luigi offered to use his family trust for that investment (Dominic 18.8.09 [216]; Dominic 27.4.11 [145]). Dominic's evidence is that shortly after that time, he was told by Luigi that profits from previous developments could be rolled over into that development, but that the brothers would have to put in about another $100,000 and Luigi would arrange funding on the security of other properties which they owned (Dominic 18.8.09 [221]; Dominic 27.4.11 [146]). Dominic contends that a loan made by National Australia Bank for the benefit of Badminton, Luigi's family company, related to this matter (Dominic 27.4.11 [148]-[149]). Dominic's evidence is that he continued to visit the Hogben Street development during the period of its construction (Dominic 18.8.09 [224]; Dominic 22.7.10 [38.3]). In early December 2002, Dominic, Luigi and Mr Murr went to see Dominic's solicitors, Michell Sillar, in respect of what at least Dominic understood was the possibility of their acting on the sale of Hogben Street units (Dominic 18.8.09 [225]). Luigi and Mr Murr deny that meeting was intended to deal with the Hogben Street development although it appears that at least that possibility was raised by Dominic at the meeting (Murr [89] Luigi 7.9.09 [196]). It appears that Mr Murr had no interest in that possibility but did not make that clear to Dominic at the time.

1. On the other hand, Mr Murr's evidence was that he told Luigi in mid-1999 that he did not want Dominic involved in future development projects (Murr 22.9.09 [20]) and that he told Luigi in early 2000 not to disclose Mr Murr's interest in the Hogben Street development to Dominic until other developments undertaken by two other entities, IMS and Pacificon, in which Dominic had an interest had been completed and Luigi agreed to that course (Murr 22.9.09 [25]). The Hogben Street Unit Trust was established in July 2001 and Dominic had no interest in that trust (Murr 22.9.09 [26]). Mr Murr's evidence was that Dominic raised the issue of his lack of involvement in the Hogben Street development with Mr Murr in the second half of 2002 and Mr Murr responded by suggesting that Dominic be allocated 20% out of Luigi's 30% share in another development project at Gladstone Street (Murr 22.9.09 [20], [25], [40], [65]).

1. Mr Murr gave evidence in a further affidavit dated 1 December 2011 that he had advised Dominic in late 2001 or early 2002 that he had not been included in the Hogben Street development and that Luigi had been included and of Dominic's response that he was "very, very disappointed". On cross-examination, Mr Murr was emphatic that he had no obligation to tell Dominic who he would permit to invest in a development. However, he confirmed in cross-examination that he had told Dominic in late 2001 and early 2002 and on "plenty of occasions before 2003 and 2002" that Dominic was not to be involved in the Hogben Street development (T214-215).

1. Luigi's evidence was initially that he first told Dominic of his exclusion from the Hogben Street development in 2002 and provided him with half of Luigi's percentage allocation in the Gladstone Street development (Luigi 7.9.09 [191]; T86). After Mr Murr swore the further affidavit dated 1 December 2011 to which I referred above and been cross-examined, Luigi swore a further affidavit giving evidence of a conversation with Mr Murr in late 2001 or early 2002 in which he contended that Mr Murr told him that:

"Dominic came past the other day and in conversation the property next door came up and I told him he wasn't invited in that development. He seemed very disappointed."

Luigi also gave evidence of subsequent attempts to persuade Mr Murr to permit Dominic to be included in the Gladstone Street development, and of Mr Murr agreeing to that course. Luigi also gave evidence of a conversation with Dominic in about July 2002, in which he contended that Dominic's increased participation in the Gladstone Street development and Luigi's reduction of his share, " means that we are squared off with Hogben because as Dad has told you and Michael [Murr] has told you, he did not invite you to participate in Hogben Street ." Luigi also gave evidence of a subsequent conversation with Mr Murr in about Christmas 2002 and then with Dominic involving the increase of Dominic's share in the Gladstone Street Unit Trust to 20% and the reduction of Luigi's share to 10%, on the basis that Dominic " accept[s] that Hogben Street is never to be brought up again ".

1. Luigi's evidence of these further conversations was not included in his several lengthy affidavits sworn earlier in the proceedings, when it had been plain for a considerable time that the circumstances of Dominic's exclusion from the Hogben Street development was a key issue in the proceedings, and was led after Mr Murr had given evidence and Luigi had been present in Court for at least part of that evidence. In my view, Luigi tailored his evidence in his further affidavit to seek to confirm Mr Murr's evidence and this matter reflects adversely on his credit.

1. Dominic subscribed monies to the Gladstone Street Unit Trust in August 2002, April 2003 and July 2003. Dominic's evidence is that Luigi first informed him of his exclusion from the Hogben Street development in August 2003 (Dominic 18.8.09 [83], [202], [226]; Dominic 27.4.11 [171]). Luigi denied that he had not told Dominic of his exclusion from the Hogben Street Unit Trust until after Luigi had completed his subscription for units in the Gladstone Street Unit Trust in July 2003 (T100). I accept Dominic's evidence in preference to Luigi's evidence in this regard, and I consider Mr Murr was mistaken in his recollection of these events. On balance, it seems to me to be consistent with the objective probabilities that the disclosure of Dominic's exclusion from the Hogben Street development was delayed until after July 2003, so as to avoid the risk that Dominic might decline to provide further funding for the Gladstone Street development if he had been told of his exclusion from the Hogben Street development, or at least have sought to make such further subscription conditional on his inclusion in the Hogben Street development.

1. On either view, this matter had been disclosed to Dominic at least by August or September 2003. I do not accept Luigi's evidence that Dominic had accepted the allocation of additional units in the Gladstone Street Unit Trust to him as a resolution of the matter. The events surrounding the Hogben Street development mean that it is, in my view, objectively unlikely that Dominic would have been quick to permit Luigi to participate in the purchase of Property A and Property B (to which I refer below) without his at least making a financial contribution to that purchase from his own funds.

1. The evidence suggests that other factors also contributed to a deterioration in the relationship between the brothers in mid-2003, including the fact that Luigi had borrowed on the security of Dominic and Luigi's parents' home for a loan to invest in a development undertaken by Mr Murr at Sutherland (Dominic 18.8.09 [81]).

The acquisition of adjoining properties

1. I now turn to the events surrounding the purchase of Property A. It appears that Luigi and Dominic had discussed the desirability of acquiring a special purpose entity to acquire properties which adjoined Property O to assist with exploiting Property O's development potential from about April 2003, and Property A was identified as a suitable property for acquisition about that time. A written offer prepared by Michell Sillar solicitors to be submitted to the then owners of Property A in May 2003 indicated that the proposed purchasers would be Dominic, Lillian and Luigi. Dominic accepted on cross-examination that this was the brothers' then intention.

1. A heads of agreement providing for the acquisition of Property A for $520,000 (made up of an option fee of $60,000 and the purchase price of $460,000) was amended and signed by Dominic and Luigi at a meeting with the former owners of Property A on 23 August 2003. Dominic initially contended that Luigi signed the document as a witness but accepted that he also signed it as a co-owner of Property O. Dominic paid the option fee of $60,000 on Property A on 25 August 2003 (Dominic 18.8.09 tab 24). Luigi's evidence is that, on 26 August 2003, he provided a cheque to Dominic being his half-share of the option fee that Dominic put in his wallet but did not bank (Luigi 7.9.09 [116]-[117]).

1. Dominic contends, and Luigi denies, that the arrangement for Dominic, Lillian and Luigi to together purchase Property A did not proceed after it came to Dominic's attention that he had been excluded from the Hogben Street development (Dominic 18.8.09 [226]). Dominic's evidence is that he protested that exclusion in a conversation in August 2003 and, a week or so later, advised Luigi that he intended to develop Property O without Luigi's involvement in the absence of any financial contribution by Luigi and made an offer to Luigi that Dominic would develop Property O and Luigi would get $1 million when the development was finished (Dominic 18.8.09 [84]-[85]), to which I will refer below. Dominic dates this conversation in his affidavits in these proceedings as occurring shortly before his receipt of a letter from National Australia Bank concerning an extension to the bank guarantee which he had given to support a borrowing to Luigi (Dominic 18.8.09 [85]). Dominic contends that he offered to put that arrangement in writing; Luigi advised that stamp duty would have to be paid on a document "so we won't need a document, but I want your word that I will be paid"; and that Luigi then accepted a position that Dominic would have nothing to do with Hogben Street and could develop Property O (or the wider development incorporating adjoining properties ("Roselands development")) on his own.

1. On the other hand, in evidence in earlier proceedings before Ward J, relating to an attempt by Dominic to enforce the result of earlier settlement negotiations in the proceedings, Dominic gave evidence of an agreement in November 2003 between Luigi and him that Luigi had no interest in the Property O, but accepted in cross-examination that that agreement was not enforceable so Luigi had remained a half owner of Property O. This appears to be a reference to the suggested agreement that he would develop Property O and Luigi would get $1 million when the development was finished. I accept that the contradictory evidence as to the date of the offer leaves that matter uncertain, but I find, on the balance of probabilities, that such an offer was made in late 2003.

1. A call option for Property A was subsequently documented and entered into on 5 September 2003, in favour of Dominic and Lillian, to Luigi's exclusion, on 5 September and this is also indicative of a significant change between 23 August 2003 when Luigi was party to the heads of agreement with the vendors of Property A and 5 September 2003 when he is not party to the call option.

1. In September 2003, Dominic also declined to renew a guarantee in respect of a borrowing of $100,000 by Luigi from National Australia Bank. There is a dispute, which I do not need to resolve, as to the purpose for which that borrowing was initially made. Dominic's evidence was that the guarantee he gave to the National Australia Bank was for the purposes of Luigi obtaining a loan to assist in Dominic and Luigi's investment in the Hogben Street development, with Badminton Investments (a company associated with Luigi) to hold an interest on trust for Dominic (Dominic 22.7.10 [29]). Luigi's evidence is that the guarantee was for the purpose of Luigi acquiring an interest in the accounting firm at which he works. Neither party sought to lead documentary evidence (for example, of communications with the bank at the time the guarantee was given) to corroborate their respective positions and I do not think it is necessary for me to resolve that dispute in order to resolve the wider issues in the proceedings.

1. Dominic's evidence is that, when Luigi requested that he agree to the extension of that guarantee in late 2003, he told Luigi that " we agreed that Hogben Street would now be yours and that [Property O] would be mine " and that he would not sign the guarantee (Dominic 18.8.09 [86]). The evidence is again in conflict, with Luigi contending that Dominic's unwillingness to renew the guarantee did not reflect any tension or dispute between the brothers. I do not accept that evidence. The loan which had been guaranteed by Dominic was subsequently repaid by Luigi prior to 5 November 2003 (CB 8/406). Dominic's refusal to renew the guarantee is consistent with his evidence concerning the position as to the Hogben Street development and Property A at this time.

1. Dominic's evidence is that although he advised Luigi in late 2003 that he intended to proceed with the purchase of Property A without Luigi's involvement, he subsequently moderated that position to some extent to leave open the possibility that Luigi could be an equal partner in the development if he accounted to Dominic for the interest which Dominic claimed in the Hogben Street development and paid the cost of acquisition of his proportionate interest in Property A (Dominic 18.8.09 [24], [32]).

1. Luigi's evidence is that, in October 2003, he was involved in meeting with the architect who was to assist with the lodgement of a development application for Property O to determine whether Property A should be included in the application and also involved in discussions as to the possible purchase of another adjoining property, Property B (Luigi 12.11.07, LIA5).

1. The vendors of Property A exercised their right to require the exercise of the option to purchase Property A in late October or early November 2003. Luigi's evidence is that, on 4 November 2003, he and Dominic had agreed that he, on behalf of Dominic and himself, would arrange 100% funding for the entire purchase price of Property A, including stamp duty and an amount to pay for the architect and consultants required for the Development Application. By letter dated 6 November 2003, Luigi wrote to St George Bank requesting finance of $250,000 in respect of those costs (CB 8/410).

1. On 6 November 2003, Dominic funded a bank cheque in favour of the vendors of Property A and contracts for the sale of that property were exchanged the next day (Dominic 18.8.09 [98] CB 8/423) and settled on 16 January 2004. Dominic also nominated Remly as purchaser of Property A (CB 8/426). On 7 November 2003, Dominic instructed Michell Sillar to incorporate Remly and establish the Remly Unit Trust, with Dominic and Lillian to be the unitholders (CB 8/432; Ex D3). The draft documents originally prepared by Michell Sillar for the trust deed and associated minutes refer to the creation of a unit trust with the unitholders being Dominic as to one unit and Lillian as to one unit (although a handwritten amendment was made referring to different percentages to which I will refer below) (Ex D3).

1. By letter dated 18 December 2003, Michell Sillar sent updated draft documents relating to a proposed Remly Unit Trust to Dominic (CB 8/455). The version of that letter contained in Luigi's affidavit evidence attached a draft Unit Trust Deed which provided that the unitholders in the trust were Luigi as to 20%, Dominic as to 20% and the Murr family as to 60% (Luigi 4.11.10 [102], LIA 13A; Luigi 14.11.07 [10], LIA44 ). Luigi's evidence was that a draft trust deed containing those percentages was provided to him in late December 2003 or early January 2004 (Luigi 14.11.07 [10], LIA44 ). Mr Murr's evidence was that in late 2003 Dominic provided him with a draft of the Remly Unit Trust deed prepared by Michell Sillar which provided for a 60% interest for the Murr family (Murr 22.9.09 [47]). However, it is plain that a draft trust deed in that form was not an attachment to that letter, which requests Dominic to complete the names of the relevant parties and their percentage holdings, whereas that draft trust deed has that information already completed. The draft trust deed in that form cannot have been prepared until later, and it appears that Luigi and Mr Murr are each mistaken as to their evidence in this regard.

1. Dominic's evidence was that he did not see a trust deed in this form until it was produced in the proceedings (T333). Luigi contends that tax invoices issued by Dominic's solicitors indicated that Luigi could not have given the relevant instruction to prepare a trust deed in that form because no conversation giving that instruction was recorded in the invoice. However, the evidence before me does not establish that those invoices were necessarily prepared to such a level of detail that a short conversation would have been separately itemised in them.

1. By email dated 23 December 2003, St George Bank advised Luigi of its approval for two unsecured investment facilities of $125,000 each (CB 8/485). Dominic's evidence is that he did not authorise that arrangement (Dominic 18.8.09 [100]). There is every reason for Dominic not to have been attracted to the funding organised by Luigi from St George since, although that funding was unsecured, Luigi had negotiated with St George on the basis that Dominic would guarantee Luigi's borrowing as well as his own (CB 10/310). Luigi's evidence is that he spoke to Dominic concerning these arrangements on 16 January 2004 prior to settlement and also advised that he expected that Westpac would lend the balance of funding for Property A and Dominic agreed to provide "short term finance" to Remly to fund the purchase of Property A, because the funding organised by Luigi from Westpac and St George was not then available (Luigi 14.11.07 [16]; Luigi 4.11.10 [106]). Dominic denies that conversation (Dominic 18.8.09 [210]).

1. Luigi contends that he "agreed" with Dominic on 21 January 2004 that funding for Property A would be organised with Westpac for $416,000 to be secured over Property A and with St George for $250,000 as an unsecured loan. (Luigi 14.11.07 [20]-[21]; Luigi 17.9.09 [50]-[51]; Luigi 4.11.10 [107]; Luigi 20.4.11 [23]-[27]). Luigi had considerable difficulty in giving a direct answer in cross-examination as to when it was "agreed" that the amount to be borrowed from St George would be applied to subscribe for units in the Remly Unit Trust (T106).

1. Dominic's evidence (Dominic 18.8.09 [193]) is that he responded to Luigi's suggestion of a borrowing from Westpac in words to the effect that:

"I've already bought this property. You haven't put anything in. Why would I want to just borrow again? Are you going to put any money in or not? If you need to borrow to put money in then that's a matter for you."

Dominic also gives evidence of responding to Luigi's attempt to have him borrow further funds in relation to Property A that " You need to put in half the money yourself. I already have enough debt ." (Dominic 18.8.09 [195]). Luigi also gives evidence of a conversation referring to Westpac's approval for a borrowing of $528,000 in which Dominic took the position that he did not want to take on further debt and Luigi responded that " that's ludicrous. You will need to borrow anyway using your equity access loan " (Luigi 20.4.11 [28]). The dispute as to this matter demonstrates the lack of consensus as to the funding for the purchase of Property A at this time.

1. Dominic's evidence is that there were further conversations with Luigi at the end of 2003 and early 2004 concerning the dispute regarding the Hogben Street development and Property A in which he contends he said to Luigi words to the effect that:

"I am not going to carry you any more. Lillian and I will be the directors of Remly, like you and Michael [Murr] were in the other companies. You must put your money in dollar for dollar if you want to be involved in the development and you will have to pay me my entitlement in Hogben Street." (Dominic 27.4.11 [198]).

Luigi denies that Dominic then told him that he would only be an equal partner with Dominic and Lillian in the development of Property A if he came up with his half share of the cost of acquisition of the property (Luigi 4.11.10 [111]).

1. On the balance of probabilities, I am satisfied that Dominic responded to his exclusion from the Hogben Street development and the other areas of tension between himself and Luigi by communicating the position to Luigi in late 2003 that Luigi could not be involved in the purchase of Property A without contributing half of the cost of acquisition of that property and allowing Dominic the interest which he claimed in the Hogben Street development. That finding is consistent with the manner in which Remly was incorporated; the form of the initial draft of the trust deed; Dominic's failure to bank Luigi's contribution (if it was tendered) to the option fee for Property A; and the offer to buy Dominic out of Property O (or the wider development) on its completion to which I have referred above. That finding is inconsistent with the basic premise of Luigi's case.

1. Dominic invited Mr Murr to participate in the Moorefields Road development in January 2004. I have given careful consideration to whether this matter is inconsistent with Dominic's evidence as to his discontent at this time in relation to his exclusion from the Hogben Street development. However, I accept Dominic's evidence that his approach to Mr Murr is explained by the fact that Dominic then understood that his interest in the Hogben Street development was held through Luigi's family trust and that Luigi had appropriated that interest, rather than Mr Murr having excluded him from the development, so that his anger was directed to Luigi rather than Mr Murr (T343).

1. Luigi's evidence is that, on 15 June 2004, Dominic requested that he reimburse half of the costs associated with the purchase of Property A because Dominic did not want to use the property as security and did not want to take on further debt, and Luigi protested that this "does not make any sense" (Luigi 20.4.11 [29]-[30]). Dominic denies Luigi's account of that conversation and claims that he told Luigi that he would need to put in half the money for the purchase of Property A himself (Dominic 18.8.09 [195]-[196]).

1. Luigi was cross-examined at some length as to this conversation. He accepted that Dominic had made clear in this conversation that he did not want the existing loan in respect of Property A to be refinanced and wanted Luigi to put in his own funds for the development; that Luigi agreed to do so, because, he says he had no choice; and that he had first "offered" to put in such funds some 18 months later in 2006 (T108). It was put to Luigi that it was apparent to him that he had been excluded from the development by at least June 2004, but he responded that Dominic had agreed that he could put in funds " when [he] had them available " (T108). Luigi then gave apparently contradictory evidence that Dominic " never said I needed to put funds in " and then that that was first said in 2006 (T108). Luigi then denied that Dominic told him that he wanted Luigi to put up money from his own resources but said that Dominic wanted Luigi to contribute his half " when I had the funds available " (T112) and ultimately accepted that Dominic had told him by June 2004 that he was required to put up the funds from his own resources if he wanted to participate in the venture, with the qualification that there was no time limit on when he did so (T112-113). Given the events over this period, and the fact that (as Luigi conceded) Dominic had then requested Luigi to put in his own funds, I do not think it likely that Dominic would have offered an arrangement which allowed Luigi to defer doing so without any time limit. Luigi also contended in cross-examination that the relationship had soured by the time he offered to put up money in early 2006 because Dominic had "gone behind my back" to purchase Property B (T113). As I noted above, Property B was not purchased until May 2006 or settled until August 2006.

1. Dominic gives evidence of a further deterioration in his relationship with Luigi in late 2004, when he discovered that Luigi had purchased a property in the same street as their parents' home. Dominic's evidence was that he was "furious" that Luigi had purchased that property when he had not contributed to the costs of the Roselands development (Dominic 18.8.09 [123]-126]). Dominic claims that he was unwilling to continue to fund an interest for Luigi in Property A while Luigi expended funds on other purchases. Luigi denied in cross-examination that a confrontation about that matter had occurred (T128). Dominic's evidence in this regard seems to me to be inherently probable and I accept it.

1. Dominic's evidence is that, in late 2004, he made a further offer to pay $1 million to Luigi in respect of Property O at the end of the development, less any money then owed to the bank, and that Luigi rejected that offer as "just not fair" (Dominic 18.8.09 [127]). Luigi denied in cross-examination that Dominic had repeated his offer to buy Luigi out of the development on its completion at this time (T128).

1. Dominic relies on a note which he says he made of this arrangement (CB 16/3090) on notepaper headed "Lebanese Chamber of Commerce". The note reads:

"Luigi to receive $1 million at the end of the development: for his 1/2 share in property [number omitted] Moorefields Rd less any money owed to Bank ie $520,000 to GE.

Net amount $740,000."

The reference to "net amount $740,000" was the $1 million figure less half the then mortgage of $520,000 (being $260,000) (Dominic 18.8.09 [125]-[130]). There is a dispute as to when the Lebanese Chamber of Commerce notepaper on which this note was recorded became available to Dominic. Dominic initially gave evidence that the notepad on which his note of the offer to Luigi was made was given to him by Mr Murr (Dominic 18.8.09 [128]). Mr Murr gave evidence that the notepaper on which Dominic had made his note of this meeting did not exist until mid-2005, and had been created for a business lunch at which a particular person would speak at that time. Dominic subsequently revised his evidence to indicate that he received that notepaper around September-November 2004 together with copies of the newsletter of the Australian Lebanese Chamber of Commerce containing an advertisement placed by his business (Dominic 22.7.10 [33]). I am not satisfied that either Dominic's or Mr Murr's recollection of these matters is sufficiently clear or accurate to allow me to place significant reliance on it.

1. A finding that at least some form of dispute between Luigi and Dominic had occurred by late 2004, contrary to Luigi's evidence generally, is supported by Luigi's affidavit evidence of a conversation on 12 September 2006 when, according to Luigi, Dominic said to him " I told you two years ago how you could fix it ". Luigi's affidavit evidence did not indicate that he had taken issue with that statement in that conversation (Luigi 4.11.10 [72]). Luigi then asserted in cross-examination that he had in fact denied that statement when Dominic had made it (T132) but I do not accept that evidence.

1. Luigi's evidence is that, pursuant to an alleged agreement with Dominic in relation to the development of Property O and Property A, he authorised Remly to lodge a Development Application in respect of those properties with Canterbury City Council in August-September 2004. Luigi relies on his involvement in subsequent steps of the project, including meetings with the architect in respect of the possible development and his evidence includes reference to dealings with a number of consultants in relation to the development of Property O in the period from 2005 to September 2006 (Luigi 7.9.09, LI EX 11A-11VW). Luigi also relies on the fact that he sent a letter on behalf of Dominic, Lillian and himself regarding an expression of interest to purchase another property in Campsie in May 2005 to negate the suggestion of a falling out between Dominic, Lillian and himself in 2004 (Luigi 7.09.09, LI EX 22). Dominic denies that he had previously seen the letter or expression of interest or that he had agreed to Luigi being part of the bid or including his name as a prospective purchaser of the property (Dominic 22.7.10 [26]).

1. Luigi contends that these matters evidence his continued involvement as a person with a 50% beneficial interest in the development opportunity for Property A. I do not accept that submission. On the balance of probabilities, I consider that Luigi was involved in these matters because he was a co-owner of Property O and stood to benefit from any development involving Property O, and because Dominic had, at least for some time, left open the possibility of participation in the acquisition of Property A on the basis to which I have referred above. It was in Luigi's interest to offer such assistance because he was a co-owner of Property O and stood to benefit from any development of the site; because Dominic had left open the possibility of his further participation on the basis to which I have referred above; and because Dominic had offered to buy him out of Property O, with a payment to be made at completion of the development. It was in Dominic's interests to accept Luigi's continued assistance if it was offered given his difficulties with reading and writing to which I have referred above.

1. Luigi's evidence is that Dominic requested reimbursement for half the cost of acquisition of Property A in January 2006; Luigi responded that it would have been better if the brothers had financed the purchase of that property by using the money which he had arranged with Westpac and St George; Dominic reiterated that he wanted Luigi to pay his half share and Luigi responded " leave it with me and we'll work on it " (Luigi 4.11.10 [37]). Dominic denies that conversation (Dominic 26.5.11 [41(ii)]). Luigi's evidence is that Dominic followed up on his payment of his half share of Property A in early February 2006 and Luigi again responded " I am working on it " (Luigi 4.11.10 [38], [114].

1. Luigi's evidence is that a further conversation took place on 1 April 2006 in which Dominic and Luigi invited the Murrs to be involved in the Moorefields Road development and Mr Murr indicated he was not interested. Luigi contends that, in a conversation between Dominic and him on that date, Luigi suggested a meeting with Council to sort out noise issues relating to the development application and Dominic responded " Leave it to me. I will sort this out with the solicitors ." Luigi's evidence is that, in subsequent conversations during April 2006, Dominic assured him that Dominic and his solicitor would look after matters relating to the Roselands development (Luigi 4.11.10 [44]-[45]).

1. Luigi's evidence is that a conversation took place on 24 April 2006, initially in relation to evidence for proceedings in the Land and Environment Court concerning a noise complaint against the tenant of Property O, in which Dominic disclosed the purchase of Property A and Luigi protested. Luigi's evidence is that Dominic referred to his exclusion from the Hogben Road development and Luigi contended that had been resolved by allowing Dominic a 20% share in the Gladstone Street development (Luigi 4.11.10 [46]-[49]; Luigi 20.4.11 [60]).

1. Luigi's evidence, supported by his file note (LI EX 11 JJJ), is that Dominic also advised him in April 2006 that he had bought Property B and settled that property because Luigi had no funds to invest (Luigi 4.11.10 [46]; Luigi 20.4.11 [60]). As I have noted above, the contract for purchase of Property B was not made until May 2006 and not settled until August 2006. I can see no reason why Dominic would have been mistaken or lied to Luigi as to that matter, since there was no apparent advantage to Dominic to be gained from the latter course.

1. Luigi's evidence is that he told Dominic on 3 June 2006 that he now had his half of the "acquisition cost of Property A" ready (Luigi 20.4.11 [61]). Dominic denies the conversation (Dominic 26.5.11 [41], [43]). Luigi's evidence is that he again advised Dominic that he wanted to pay his half share of the cost of acquiring Property A and he also wanted to organise funding for Property B at a meeting on 8 June 2006 (Luigi 7.9.09, LI EX 19). Luigi's evidence is that, on 8 August 2006, he advised Dominic that he wanted to pay his half share of Property A and was also in a position to organise funding for Property B (Luigi 4.11.10 [60]-[66], [117]; Luigi 20.4.11 [64]-[65]). Dominic also denies that conversation (Dominic 26.5.11 [43]). Luigi's evidence is that he subsequently approached Dominic on 12, 14 and 15 August 2006 to arrange times to calculate what Luigi should contribute for the acquisitions of Properties A and B after taking into account the amount of $5,000 per month withdrawn by Dominic from the account relating to Property O (Luigi 4.11.10 [67]-[71]).

1. Luigi's evidence is that Dominic first advised Luigi that he was "out of the development" on 12 September 2006. Luigi's evidence is that Dominic then claimed that he had asked Luigi to repay his half of the outstanding GE loan of $523,000 back in January 2006 and Luigi denied that Dominic had made such a request. Luigi's evidence is that Dominic said:

"I have made a decision to treat you simply as a land owner and pay you $1 million for your half share of the property when the development is finished. Lillian wants you out of the development. I have made a decision to treat you simply as a land owner and pay you $1 million for your half share of the property when the development is finished. If you were not my brother, I would pay you nothing."

Luigi's evidence is that Dominic also claimed that he should have been in the Hogben Street development and that it was wrong for Luigi to exclude him from that development, and Luigi responded that Dominic had not been invited to participate in that development by Mr Murr (Luigi 12.11.07 [69]; Luigi 7.9.09 [63]; Luigi 4.11.10 [35]-[36], [72]-[73], [123], [148]; Luigi 20.4.11 [66]-[67]). Luigi's evidence is that he was not asked to contribute to the cost of acquisition of the properties until late 2004 (Luigi 4.11.10 [124]) and Dominic never suggested there should be any change in the financing arrangements up to that period (Luigi 4.11.10 [125]). For completeness, I note that, in an earlier affidavit (Ex D5, [69]), Luigi had put the million dollar offer referred to in his account of this conversation as occurring in September 2007, after his acquisition of Properties C and D which took place in late 2006 or early 2007. I think it likely that this was simply an error.

1. Dominic denies that the conversation referred to in September 2006 relating to the Roselands development took place or that he and Luigi discussed Property A or Property B at that time, although he accepts that there were discussions about the Gladstone Street development and the sale of another property prior to that time (Dominic 26.5.11 [45]).

1. On 19 September 2007, Remly acquired the first mortgage over Property O from GE Commercial Finance Australia Ltd. Luigi complains that the acquisition of this mortgage took place without his knowledge or consent. Luigi subsequently sought to deposit the amount of $204,009.66 into Dominic's personal bank account in October 2007 but that deposit was returned, and Luigi subsequently sought to deposit the funds into another account (Luigi 12.11.07 [65]).

Luigi's acquisition of Properties C and D

1. Luigi subsequently purchased Property C at the end of 2006 or early 2007 and Property D some time in 2007 (T118). Those properties also adjoin Property O.

Dominic and Lillian's withdrawal of monies from the Property O account

1. Various amounts of up to $5,000 were withdrawn by Dominic and Lillian from the Property O account between 2 August 2004 and 1 May 2007. Luigi contends that such monies were withdrawn to fund the purchase of Property A or pay outgoings incurred by Remly in relation to Property A and later in respect of Property B. Dominic's evidence is that the $5,000 withdrawals from the partnership account did not go into the Remly account but into a personal account operated by Dominic and Lillian, which was used for matters other than the purchase of Property A and Property B.

1. If, contrary to my view, the basis for the imposition of a constructive trust had been established, any orders in respect of such a trust would have had to be modified so as to require the payment of contributions which have not been made by Luigi throughout the relevant period as a term of any relief granted.

Orders and costs

1. On the basis of the findings which I have reached above, the proper orders would ordinarily be that the proceedings should be dismissed, and the Plaintiff should pay the Defendants' costs of the proceedings.

1. However, the Defendants have brought a Cross-Claim in the proceedings against the Plaintiff and third parties, which is wider than the issues raised by the Statement of Claim. Aspects of that Cross-Claim have been referred to a referee under Part 20 Div 3 of the Uniform Civil Procedure Rules and other aspects of the Cross-Claim may still have to be determined by the Court. I should therefore hear the parties as to the form of orders to be made having regard to the existence of the Cross-Claim.

1. I direct the parties to send to my Associate draft orders to give effect to my judgment by 4pm on Wednesday 14 March 2012, if agreement can be reached between them as to the form of those Orders. If no such agreement is reached, I direct the parties to send to my Associate draft orders and any submissions addressing the matters referred to in paragraph 135 above by 4pm on Wednesday 14 March 2012; and each party may send to my Associate and serve any submissions in reply by 4pm on Monday 19 March 2012.

**********

Decision last updated: 09 March 2012