Pino Woolloomooloo Pty Limited v Autore; Costagliola v Autore

[2024] NSWDC 353

District Court

New South Wales

Medium Neutral Citation:

Pino Woolloomooloo Pty Limited v Autore; Costagliola v Autore [2024] NSWDC 353

Hearing dates:

8 - 9, 14 May 2024

Date of orders:

14 May 2024

Decision date:

14 May 2024

Jurisdiction:

Civil

Before:

Neilson DCJ

Decision:

See pars [55] and [58].

Catchwords:

DEBT – Who bears onus in an action in debt – Defendant bears onus of proof of payment in full.

CONTRACT – Whether a document headed “Letter of Understanding and Intent” signed by each party was a binding contract – Each party a businessman and the “Letter” was to reach an agreement between them finalising a joint venture.

DURESS – UNCONSCIONABLE CONDUCT – Whether made out on the evidence.

Legislation Cited:

Nil.

Cases Cited:

Australian Securities and Investments Commission v Kobelt [2019] HCA 18, [145]-[153].

Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24, [55].

Texts Cited:

Carter, Contract Law in Australia 7th ed, (2018), [37-01], [37-06].

Category:

Principal judgment

Parties:

First Proceedings:
Plaintiff – Pino Woolloomooloo Pty Limited
Defendant – Gennaro Autore

Second Proceedings:
Plaintiff – Giuseppe Costagliola
Defendant – Gennaro Autore

Representation:

Counsel:
Plaintiffs – Roche, D. SC.
Defendant – Self-represented.

Solicitors:
Plaintiffs – Cadre Moss.
Defendant – Self-represented.

File Number(s):

2023/00070384; 2023/00314208.

Publication restriction:

Nil.

Judgment

1. HIS HONOUR: There are currently before me two actions. The earlier action in point of time is that joined between Pino Woolloomooloo Pty Ltd (“Pino Woolloomooloo”) and Gennaro Autore. The later set of proceedings is between Giuseppe Costagliola and Gennaro Autore. Mr Costagliola is the director and the secretary of Pino Woolloomooloo and the director, secretary and sole shareholder of Pino 119 Proprietary Limited, which is a holder of 510 shares in Pino Woolloomooloo.

2. In essence, Pino Woolloomooloo is a company controlled by Mr Costagliola. Effectively, the plaintiff in each proceeding is Mr Costagliola, and I trust I shall be forgiven for referring to him as, "the plaintiff". The defendant in each proceedings is Mr Gennaro Autore, who I am told will not be appearing today. He appeared when the matter was listed for hearing last Wednesday and Thursday and has been in contact with my Associate both over the weekend and yesterday seeking relief, which I have previously denied to him.

Background

3. I shall refer to Mr Autore as the defendant. In order to understand at least one of the issues joined between the parties, it is important to understand the background of each of them. The plaintiff was born in Naples in May 1982. He is currently 41 years of age. He provides these details of his background in the affidavit that he swore on 10 August 2023, to which I shall refer to as the plaintiff's first affidavit. That background is this:

"In 2009, I obtained a bachelor's degree in business economics at the Federico II University, Italy.

Since that time, I have owned and operated a number of businesses in Italy, primarily in hospitality and wine trading.

In about 2019, I migrated to Sydney, Australia. However, I continue to have business interests and properties in Italy."

4. In his affidavit of 15 March 2024, the defendant gave greater details of his background. He was born in September 1958 in Naples. He is currently 65 years old. His affidavit contains this matter:

"7. In December 1965, I moved to Australia for around two years before returning to Italy. In 1975, I moved to Australia again and have resided here since.

8. In 1975, I completed my tertiary technical studies in Italy. From 1977 to 1979, I studied an Accounting and Business Management course at the University of Melbourne.

9. I have over 30 years' experience as a business owner and advisor in luxury retail, wholesale, hospitality and conceptual ventures. I am currently a consultant for a range of global retail and wholesale luxury fashion and commercial real estate businesses.

10. I'm the founder of the 'Graaf Group' which is a group of companies with diversified interests including property holdings, developments and conceptual ventures in retail and wholesale fashion. I am currently involved as a consultant to all of its business activities.

11. I have an adult son, Alessio - and a daughter, Floriana - in Naples, Italy from my first marriage and two young children in Australia, aged two and one, with my current partner."

5. It appears that the plaintiff and the defendant met in about 2020. In his first affidavit, the plaintiff described his meeting with the defendant in this way:

"7. Shortly after migrating to Australia, I met the defendant, Gennaro Autore, and we became friends.

8. From the time I met him Mr Autore often spoke to me of various business projects that he was involved in and real estate that he (or companies that he controlled) owned or purchased. For example, from time to time in the approximate period July 2019 to July 2021 Mr Autore advised me that his [group of companies] “Graaf Group”:

a. Had sold part of the St. James Trust building, which it owned, to Hermes;

b. Owned a number of fashion outlets around Sydney named "Estro" that sold discounted designer clothing;

c. Had purchased shops 1 and 2 on the Woolloomooloo Wharf in Sydney;

d. Had purchased 20-26 Bayswater Road in Potts Point for $22M and had received development application approval to undertake extensive renovations and open retail outlets and restaurants there."

6. The plaintiff's first affidavit then commences to discuss how the plaintiff and the defendant came to be involved with each other. The plaintiff said this:

"9. In about September 2020, Mr Autore said to me that he made a deal with the restaurant owners who operated the Italian restaurants known as 'Via Napoli' in Sydney, and that they would be opening a restaurant in the premises that he (or one of the companies that he controlled) owned at Shop 2, 6 Cowper Wharf, Woolloomooloo.

10. In about October 2020, the restaurant opened as 'The Amalfi Way'.

11. About six months after The Amalfi Way opened, Mr Autore said to me that his relationship with its owners had deteriorated, and that he had concerns about continuing a relationship with them. It was at that time that Mr Autore and I began discussing going into business together, to take over the premises in Woolloomooloo, being The Amalfi Way premises.

12. At that time, I had been planning to open a separate restaurant to be named 'Pino' in Sydney's CBD (Pino Sydney)."

7. In his affidavit, the defendant confirmed that he had formed a friendship with the plaintiff since their first meeting. That meeting was through a mutual friend that they had in Italy. Eventually, the plaintiff took on the restaurant that was previously known as The Amalfi Way on the Cowper Wharf in Woolloomooloo. That was operated under the name of a company called Audacia Enterprise Pty Ltd.

8. The plaintiff and the defendant also cooperated in the project that the plaintiff had contemplated, the restaurant that he would call Pino Sydney. In fact, it appears that the two of them became actively involved in that project. The two sets of proceedings relate, in the first case, to the giving up by Pino Woolloomooloo Pty Ltd of the restaurant on the Cowper Wharf in Woolloomooloo and the second proceedings relate to the breakdown of the business relationship between the plaintiff and the defendant about proposed restaurant in Sydney.

First Proceedings

9. In the first set of proceedings the plaintiff claims a debt of $240,000 arising from a contract entered into between Pino Woolloomooloo Proprietary Ltd and Mr Autore. The only issue tendered for my determination is an allegation by the defendant that he has wholly paid the sums payable under a contract entered into with Pino Woolloomooloo Pty Ltd and, therefore, he is not indebted as alleged. In the second set of proceedings the plaintiff denies that a written document dated 30 September 2022 is a binding agreement entered into between the plaintiff and the defendant.

10. If that defence be unsuccessful, the defendant alleges that even if the signing of the document in question gave rise to a legally enforceable agreement, any such agreement is void or voidable because of duress, and in the alternative, because of unconscionability.

11. The written agreement in the first action bears date 29 August 2022 at page 76 of Exhibit GA-1 to the affidavit of the defendant. Clause 2 of the document, which is headed, "Audacia Enterprise Pty Ltd - Sale of Shares," and beneath that, the words, "TERM SHEET".

12. Clause 2 says this:

"The Term Sheet relates to the:

a) Acquisition by Autore (or his nominee) of 100% of the shares in Audacia that are currently held by Pino Woolloomooloo (being 50% of the total shares in Audacia) (Share Transfer);

b) And the resignation of Costagliola as director and secretary of Audacia (Resignation); (together, the Proposed Transaction).”

13. Audacia Enterprise Pty Ltd was the company that ran the restaurant at Cowper Wharf which was named Il Pontile, replacing The Amalfi Way. Pino Woolloomooloo Pty Ltd was one of the main shareholders of Audacia Enterprise Pty Ltd.

14. Clause 4 of the term sheet provided that Autore agreed to pay to Pino Woolloomooloo Pty Ltd the amount of $365,000 as consideration for the proposed transaction. That sum of $365,000 is described in the document later as the "Purchase Price". Clause 5 is in the following terms:

"The Purchase Price will be paid by Autore to Pino Woolloomooloo in instalments as follows:

(a) Upon execution of this term sheet:

a. $56,250 (First Instalment) (Note: the first instalment is taken as paid; on or about 25 August 2022, Autore paid to Pino Woolloomooloo's nominee (Presto 1119 Pty Ltd (Presto) $125,000 in full satisfaction of an invoice....from Redco 400 Pty Ltd....to Presto 119 Pty Ltd (the Presto Payment). The Presto payment comprised:

“(i) $18,750, being the amount owed by Patphi Pty Ltd to Presto for the Presto payment, which Autore has loaned [sic] to Patphi Pty Ltd;

(ii) $50,000 which has been repaid by Presto to Autore;

(iii) $56,250 which was paid by Autore on behalf of Presto and remains (Presto Loan);

The parties agree that the Presto loan is taken as repaid by Presto 1119 Pty Ltd, to Autore, in full and final satisfaction of the first instalment) [sic].

b $20, 24,750, (Second Instalment) (note: the second instalment is taken as paid, in consideration for Autore indemnifying Pino Woolloomooloo against any unpaid Superannuation, Entitlements, owed by Audacia, at the time of execution of this term sheet).

(b) $44,000 by electronic funds transfer, (EFT) on or before 7 September, 2022 (Third Instalment) to:

Account name: Pino Woolloomooloo.

BSB, 032000.

Account number: 20174872.

(Pino Woolloomooloo Bank Account).

(c) By EFT transfer of $120,000 to the Pino Woolloomooloo bank account, on or before 15 October 2022, (Fourth Instalment).

(d) By EFT transfer of $120,000 to the Pino Woolloomooloo bank account, on or before 15 September 2022, (Fifth Instalment).”

15. It is accepted by the plaintiff that the third instalment was paid. The plaintiff's claim is for the fourth and fifth instalments, which it says are unpaid.

16. Paragraphs 7 and 8 of the Statement of Claim in the first proceedings are these:

"7. In breach of the Contract, the Defendant failed to pay to the Plaintiff the Fourth Instalment by 15 October 2022, or at all.

8. In breach of the Contract, the Defendant failed to pay to the Plaintiff the Fifth Instalment by 15 October 2022, or at all."

17. The defence, which has been verified by the plaintiff in an affidavit sworn on 30 March 2023, is this:

"7. In answer to paragraph 7 of the SOC, the defendant:    

(a) Denies that he is in breach of the Term Sheet as alleged or at all;

(b) Says that he caused the payments set out below to be paid to the plaintiff into accounts nominated by the defendant's director in full and final satisfaction of any amounts owed by the offended to the plaintiff under the Term Sheet;".

18. Thereunder is a table:

No.	Date	Amount
1	31 October 2022	$20,000
2	7 November 2022	$10,000
3	22 November 2022	$60,000
4	1 December 2022	$60,000
5	19 December 2022	$30,000
6	29 December 2022	$30,000
7	12 January 2023	$30,000
Total	$240,000

19. After the table, the plea continues:

"(c) Otherwise denies that paragraph.

8. In answer to paragraph 8 of the SOC, the defendant:

(a) Denies that paragraph; and

(b) Repeats and relies upon the matters referred to in paragraph 7 above."

20. At the time that he swore the affidavit there was a firm of solicitors acting for Mr Autore. In fact, that firm remained on the record until the day before or the day of the commencement of the trial. They had given a notice of intention of ceasing to act but their services were terminated by a notice filed by Mr Autore in these proceedings. Mr Autore sought to represent himself and was permitted to do so.

21. One thing that is common ground is that the BSB number of the Pino Woolloomooloo bank account was incorrect, and the number should have been 062000.

22. The affidavit upon which Mr Autore relies was, as I earlier indicated, sworn on 15 March 2024 when the defendant was legally represented. Paragraph 132 of that affidavit contains a list of payments which the defendant says he made to the plaintiff. The paragraph commences thus:

"As at 21 January 2023, I have paid Mr Costagliola the sum of $332.600, comprised of the following amounts:

Date	Amount	Bank Account Transferred to
a)	9 September 2022	$44,000	Pino Woolloomooloo Bank Account
b)	31 October 2022	$20,000	GC HSBC Account
c)	7 November 2022	$10,000	GC HSBC Account
d)	11 November 2022	$28,600	GC HSBC Account
e)	22 November 2022	$60,000	GC HSBC Account
f)	1 December 2022	$60,000	GC HSBC Account
g)	19 December 2022	$30,000	GC HSBC Account
h)	29 December 2022	$30,000	GC HSBC Account
i)	12 January 2023	$30,000	GC ANZ Account
j)	16 January 2023	$20,000	GC ANZ Account
Total	$332,600

23. One ought to note immediately that the first payment, about which there is no issue, was paid into the Pino Woolloomooloo bank account, as had been provided in the Term Sheet, the written contract, about which there is no issue. The remaining payments do not tally either with what was required to be paid by the plaintiff under the written agreement, the Term Sheet, nor were they paid into the account into which they were to be paid. However, the payments can be tallied with the payments that the plaintiff says were due to be paid to him under the second contract, the subject of the second action, and were paid into the account provided for in the relevant document relied upon by the plaintiff in the second action.

24. Furthermore, the defendant's only obligation under the contract which he admits was to pay $240,000 and, yet, here, he admits having paid $332,600. I will have more to say about the payments that were due to be made under the document relied upon by the plaintiff in the second action but, clearly, they do not conform with the obligation that the defendant had under the written agreement which is the subject of the first action. Having viewed all the evidence it appears to me that the plaintiff's contention is correct and that the payments numbered (b) to (j) in the table which I have just quoted are referable to the second set of proceedings and not the primary proceedings.

25. Correspondence which passed between the parties confirms, in my view, that other than the monies paid by the defendant to the plaintiff, after the payment of the $44,000, about which there is no issue, were referable to the second alleged agreement and not to the accepted first agreement. On 20 December 2022, at 3.31pm, Ms Lauren Brain, a solicitor with Cockburn & Co, sent an email to Mr Glen Whiteman and copied it to a number of people. Mr Whiteman was present in Court during the hearing and was seeking to give advice to Mr Autore when he was cross-examining Mr Costagliola and otherwise, when he was trying to make submissions. I understand that he is a manager of some sort of the defendant's group of companies. His email address was "[email protected]".

26. The substance of the email is this:

"Dear Gennaro and Glen,

We refer to the agreement dated 29 August 2022, in relation to the share sale agreement for Audacia Enterprise Pty Ltd.

Term 5 of that agreement required Gennaro to pay to Pino Woolloomooloo:

1. $120,000 on or before 15 October 2022;

2. $120,000 on or before 15 December 2022.

We are instructed that neither payment has been made.

Our client requires those amounts owed to be paid as a matter of urgency. Please advise when payment should be expected."

27. To that letter there was no reply. On 10 January 2023 Ms Brain sent a further email at 12.32am to Mr Whiteman in these terms:

"Dear Gennaro and Glen,

I refer to the below email sent on 20 December 2022 at 3.31pm. To date, we have received no response.

If funds are not remitted by 4pm on Friday, 13 January 2023, then we will be advising our client of next steps and may rely on this correspondence on the question of costs of that exercise."

28. A response was sent later that day at 8.39pm. It was sent by Mr Glen Whiteman who describes himself in the email as chief financial officer of the finance department of the Graaf Group. The substance of the email is this:

"We are providing our formal notice of dispute to your assertions as outlined in your below email. Please direct any further correspondence in this matter to our solicitor at Clarke Kann, Mr Chris Kintis..."

29. According to paragraph 132 of Mr Autore's affidavit in these proceedings, he had substantially paid most of the money owed to Pino Woolloomooloo Pty Ltd by the end of December 2022. However, there is no assertion on behalf of the defendant that the whole $240,000 was not outstanding or an assertion that only a small amount remained to be paid. The silence about the payment is deafening.

30. In between the emails sent by Ms Brain to Mr Whiteman are messages passing between the parties. On 3 January 2023, the plaintiff sent to the defendant a WhatsApp message, which can be found with its answer from the defendant on pages 82 to 84 of the plaintiff's first affidavit in Italian. They are translated in Exhibit D.

31. The WhatsApp message is this, being sent at 8.44pm on 3 January 2023:

"Hi, Gennaro, I just got off the phone with Carmine, who was calling me a thousand times because he received a message from you, from which it would appear that I received more money than I actually have told them. Obviously, I have the bank movements that prove that state of affairs, but this puts me in an extreme difficulty, especially since they have now asked me to advance the money for the Audacia agreement, of which I initially wanted to take responsibility over from them and Claudette, but as you know, I have received neither the first $120 nor the second $120. I think you know me by now, and you know I am always open to any kind of dialogue, but now I really don't know what to say. I have seen your calls too, and I will call you back as soon as I have finished talking to Carmine, who is about to call me back."

32. At 9.32pm, the defendant sent this message back to the plaintiff:

"Giuseppe, let's meet in the morning.

Maybe I have a solution.”

Again, there was no protestation at that time that the monies had been substantially paid.

Legal Principles and Consideration – First Proceedings

33. The problem for the defendant is that in an action in debt, which this is, the onus of proof of payment lies upon him, not on the plaintiff. This is the result of the development of the common law from its medieval origins. The relevant principle can be found in Carter, Contract Law in Australia 7th ed, (2018). It is this, commencing at [37-01] on page 855:

"The action to recover a debt due for payment has a far longer history than the action to recover damages for breach of contract. Although the distinction between debt and damages is less important now than for earlier, for two main reasons it is still significant. First, there are procedural advantages in recovering a sum payable as a debt due. Generally, a plaintiff can invoke a procedure under which judgment can be obtained with a minimum of supporting evidence. A claim is issued specifying the amount due and advising the defendant that default judgment may be given if the defendant fails to defend the matter. By contrast, to recover more than a nominal sum by way of damages, the plaintiff must often produce detailed evidence of loss, which may include evidence of market values, and so on.

There is also a difference in the onus of proof, where a plaintiff alleges that a debt is due, but payment is pleaded as a defence, the onus is on the defendant. By contrast, a plaintiff who seeks damages for breach of contract must prove the breach and the loss for which compensation is sought. It was also noted earlier that a plea of tender may 'answer' (provide a defence to) the claim that there was a breach on the part of the defendant, but the plea of tender is not a defence to a claim for a contract debt.

Second, the High Court explained in Young v Queensland Trustees Ltd (1956) HCA 51; 99 CLR 560 at 567:

'The common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit.'

For example, the rules dealing with mitigation of loss frequently impact on the assessment of damages. However, they are not relevant if the plaintiff is entitled to recover a contract debt.

Relevantly, a liquidated sum has two essential characteristics:

(1) It is fixed by the contract; and

(2) It is due for payment by the defendant."

34. Further, the work from which I have been citing says this, commencing at [37-06] at page 858:

"Instalment payments. Contracts frequently provide for the payment of money by instalments. For example, A might lend $1,000 to B and B might promise to pay a specified amount, say, $110 per month for 10 months. Another form of instalment payment is found in severable contracts. For example, a buyer may agree to pay a specified amount for each delivery made by the seller under a contract for the sale of goods by instalments. Other examples can be found in leases, time charter parties and so on where the contract fixes an amount to be paid at specified intervals. In respect of these contracts the plaintiff may recover each instalment payment as a contract debt when it falls due for payment.

Two features of contracts which provide for instalment payments deserve emphasis. First, the plaintiff may sue for and recover each payment when it falls due without waiting for all payments to become due. Moreover, an action for one instalment does not bar a subsequent claim when the latter falls due."

35. However, in the current case, clearly, the two payments are both outstanding and there is no further sum payable under the agreed contract that relates to the first set of proceedings. For those reasons the plaintiff is entitled to succeed in that claim.

Second Proceeding

36. I then turn to the second action. The first issue, of course, is whether there was a binding agreement. The document in question comprises two pages. It bears date 30 September 2022 and is titled "Letter of Understanding and Intent” between the plaintiff and the defendant. It has been signed by both the plaintiff and the defendant on 30 September 2022 at its end together with some handwritten notes made upon the typed document – which are indicated in italics below. It is found on pages 42 and 43 of the annexure to the plaintiff's first affidavit:

“30 September 2022

Letter of Understanding and Intent

between Gennaro Autore and Giuseppe Costagliola

Understanding

Dear Giuseppe,

Following our telephone conversations, and meeting over recent days, I propose the following points to facilitate your exit from your past intentions and plans to start a business (located at Shop 8A, 400 George St) in Sydney on the following basis;

1^st Payment

Gennaro will pay to Giuseppe a total sum of $586,000 according to the following schedule:

1. $58,600 (10%) upon signing of this LOI to be paid next week [handwritten change initialled]

2. $200,000 on 31^st October 2022

3. $200,000 on 30^th November 2022

4. $127,400 on 15^th December 2022

2^nd Payment

Gennaro will pay to Giuseppe a total sum of $400,000 according to the following schedule:

1. $200,000 on 31^st March 2023

2. $200,000 on 30^th June 2023

Furniture, Fittings, Tiles etc

Should we agree to return the restaurant furniture and fittings to Italy prior to 31^st March 2023, then the costs of the furniture shall be deducted from the second payment total of $400,000

The costs associated with returning the furniture to Italy shall be shared equally between Gennaro and Giuseppe

If the furniture is returned to Italy, and the cost of the furniture is refunded, then Gennaro agrees to pay $75,000 on 30^th June 2023 being a contribution to Giuseppe’s fees associated with the return of the furniture.

Further Understanding

Giuseppe renounces (as having no effect) all prior agreements and MOU’s about the planned business (located at Shop 8A, 400 George St) in Sydney upon signing this LOI

Giuseppe indemnifies Gennaro from any past or future claims from any partner who may have been involved in the planned business, up until the date of this LOI

Giuseppe agrees to resign as Director of Presto 1119 Pty Ltd upon signing this LOI

Giuseppe agrees to transfer his shares of Presto 1119 Pty Ltd upon signing this LOI

Gennaro agrees that the trade name PINO will not be used at the planned business location

Signatures

Gennaro Autore: [signature handwritten]

Giuseppe Costagliola: [signature handwritten]

30/03/2022

(1) * IF POSSIBLE IT WILL BE DONE ON WEEKEND.”

37. There was a revised payment schedule relating to that document. It was proposed by the defendant to the plaintiff in an email sent on 17 November 2022. The substance of the email is this:

"Following yesterday's telephone call below find the payment schedule agreed to clear the amount as per the agreement.

We also agreed that the Pino furniture will be returned to Italy."

38. The revised payment schedule can be found on page 51 of the annexure to the first affidavit of the plaintiff and comprises two boxes:

Description	Amount	Status
Agreed amount	$586,000.00
10% deposit	$58,600.00	Paid
Carried Forward Balance	$527,400.00
Two payments of $60k Friday after 6pm	$120,000.00
Carried Forward Balance	$407,400.00
Fortnightly payments of $360k (refer at payment schedule below)	$360,000.00
last payment	$47,400.00

Payment Schedule
Date	Amount	Payment Ref
3-Dec	$60,000.00	Payment 1
18-Dec	$60,000.00	Payment 2
2-Jan	$60,000.00	Payment 3
17-Jan	$60,000.00	Payment 4
1-Feb	$60,000.00	Payment 5
16-Feb	$60,000.00	Payment 6
3-Mar	$47,400.00	Payment 7
Total	$407,400.00

39. It is common ground that the plaintiff and defendant had been working to establish a restaurant together with a retail outlet at premises in 400 George Street, Sydney. From the oral evidence I have heard there was reference to windows opening onto King Street, so I assume the building in question is on the corner of George Street and King Street in Sydney. The restaurant was to be called the Pino Restaurant and the retail outlet next to it was to be a retail outlet, as I understand it, for one of the defendant's clothing companies. One will see when one looks at the list of payments made, as set out in the affidavit of the defendant (see [23] above), that payments numbered ‘b’, ‘c’ and ‘d’ amount to $58,600, which was the amount to be paid, "Next week," under the written agreement or, if possible, if it could be done, by the weekend following 30 September 2022.

40. One will note that the first payment was not made until 31 October 2022, and the final payment of the $28,600 was paid on 11 November 2022. The first three payments are equivalent to the first payment of 10%, and the revised payment schedule clearly shows that has been paid by 17 November 2022. Thereafter, the defendant was supposed to pay $60,000 dollars twice monthly, until the final payment of $47,400 was to be paid on 3 March 2022.

41. There are two payments of $60,000, being payments ‘e’ and ‘f’, but then, the payments from ‘g’ to ‘j’ were for $30,000 each - of course, two thirties make a 60. It is only the payment on 16 January 2023 which was different.

42. One should also note that on 30 September 2022 at 2.32pm, the plaintiff sent to Mr Glen Whiteman at the Graaf Group an email enclosing a copy of the signed document as had been requested, and the plaintiff gave to Mr Whiteman his private bank details. They were for an account with the HSBC Bank. The account name was that of Giuseppe Costagliola and the BSB and account number were provided. One will note from the table of payments made by the plaintiff that the payments identified between (b) and (h) were paid to that account. However, a problem developed, and details were subsequently provided of Mr Costagliola's ANZ account, and the final two payments were made into that account, that is, these payments appear to have all been made in response to the "Letter of Understanding and Intent".

Legal Principles and Consideration – Second Proceedings

43. At common law for there to be a valid contract there must be an offer, an acceptance of that offer, consideration and intention to create a legal relationship. One must also have the ability to contract but there is no suggestion that either the plaintiff or the defendant was not sui juris. Furthermore, as I set out at the commencement of these reasons each of these gentlemen was a businessman of some experience. Both had long experience in the hospitality industry.

44. Their relationship had floundered, and it was necessary to wind up the idea of the proposed restaurant at 400 George Street which could not proceed with the plaintiff’s running it himself even with the defendant's assistance. These were two businessmen making a commercial deal. They each signed the document, and the document has terms in it that one would think would be the subject of the arrangement that they had reached. I have no hesitation in finding that the Letter of Understanding and Intent was legally binding upon them. Consideration passed from each to the other. Both of them were dealing in business about a business matter. This was not some social engagement. Of course, the contract is a binding one.

Defences

45. The remaining issue is the offences of duress and unconscionability. Paragraphs 4(d)(v) to (viii) of the defence are:

"(v) Prior to the Defendant signing the Letter, from in and around August 2022, Carmine conveyed threats to the Defendant to the effect that he would harm the Defendant's son, who lived in Italy, in the event that he and his associates, were not repaid monies that they had advanced to the Plaintiff with respect to Pino and Il Pontile (Threats);

(vi) The plaintiff knew or ought to have known that Carmine had made the Threats;

(vii) The Threats induced the Defendant to sign the Letter,

(viii) In the premises, even if the signing of the Letter gave rise to a legally enforceable agreement (which is denied) any such agreement is void, voidable or unenforceable by virtue of duress;"

46. The next paragraph of the defence contains the allegation of unconscionability. It is this:

"(e) further, and in the alternative:

(i) repeats the matters pleaded in subparagraph (d) above;

(ii) in the circumstances:

(A) the Defendant was in a position of special disadvantage to the Plaintiff;

(B) the Plaintiff, in requesting that the Defendant sign the letter and make payment to him in accordance with its terms with the knowledge pleaded in subparagraph (d)(vi) above, took unconscientious advantage of the Defendant's special disadvantage pleaded in subparagraph (e)(ii)(A) above; and

(iii) in the premises even if the signing of the Letter gave rise to a legally enforceable agreement (which is denied) any such agreement is void, voidable or unenforceable by virtue of unconscionability."

47. When pressed to tell me what the threat was and how it was made the defendant referred me to the plaintiff's second affidavit which was sworn on 20 April 2022 and is set out in paragraph 190 of that affidavit, said not by Carmine Iorio but by his brother Marco Iorio - initially, what is quoted is set out in Italian and then the following translation has been made by Mr Costagliola himself. The English translation is this:

"Hi, Alessio. Good morning. It is the second time that I've tried to call you. Can you kindly call me? Last time you said you would call me back and you didn't call me again. I will explain to you quickly my problem. My problem is that I gave the money to you for the sale of shares to your dad. In my view, you have to give me back the money. So let me know how we can find an agreement. I will wait for your call. In those days, I am in Naples so we can have a nice coffee together. Thanks."

48. Firstly, there is no suggestion that Mr Costagliola's translation of the Italian into English is incorrect in any respect. The problem that the defendant it has here is that the recording was made on 15 November 2022, when the agreement in question bears date 30 September 2022. No threat has been proved to have been made at any time prior to 30 September 2022 to the defendant's son, Alessio, and whether what I have quoted is a threat is very hard to determine.

49. The law on this issue is clear. In Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24, McColl JA said this, commencing at [55]:

“55   A contract entered into under duress is voidable, not void: Barton v Armstrong (at 614) per Jacobs JA; (at 617) per Mason JA; (at 621) per Taylor AJA; Electricity Generation Corporation T/As Verve Energy v Woodside Energy Ltd [2013] WASCA 36 (at [31]) per McLure P (Newnes JA agreeing); at [201]) per Murphy JA. The logic of this appears to be that, "notwithstanding that pressure is present, there is, ex hypothesi, an element of 'willingness to contract'": Halsbury's Laws of Australia, online edition at [110-5670]; Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 (at 45) per McHugh JA; see also Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366 (at 400) per Lord Scarman.

56    I do not accept Mr Kelly's submission that the review of authorities undertaken by Jacobs JA in Barton v Armstrong (at 606 - 610) supports the proposition that it is not necessary for the other party to a contract sought to be set aside on the basis of duress to have known of that matter. He did not refer to any particular part of his Honour's reasons and there is no express support for that proposition in the pages to which he referred.

57   It is unnecessary to set out the complicated facts of Barton v Armstrong. Suffice it to say, that it did not concern the question whether third party duress could be relied upon by its victim to avoid a contract as against a party with no knowledge of the duress. The critical issue on appeal in this court and the Privy Council was the extent to which it had to be established that Armstrong's threats played a role in Barton's decision to enter into a deed in order for that deed to be set aside. The Privy Council (by majority) held (approving Jacobs JA's dissenting decision in this court) that the deed was void because it was executed under duress in the form of threats to kill and that it was sufficient that the duress was a reason for executing the deed, even if it might have been executed although no threat had been made.

58   The passages in Jacobs JA's reasons to which Mr Kelly drew the Court's attention contain express statements contrary to the proposition for which he contends. Speaking of the nature of the duress which would enable a contract said to have been entered into under its influence to be avoided, Jacobs JA said that that duress "must consist in threats of violence calculated to cause fear of loss of life or of bodily harm or actual violence or unlawful imprisonment or threat thereof to one party ... by the other party to the contract, or by someone acting with his knowledge and with his advantage."

59   Jacobs JA also referred (Barton v Armstrong (at 611)) to Reynell v Sprye (1852) 1 De G M & G 660; 42 ER 710, a case concerning fraud which his Honour considered bore some analogy with those concerning duress, as, too, did the majority in the Privy Council: Barton v Armstrong (at 631). In that case, Lord Justice Lord Cranworth said (1 De G M & G (at 708)); ER (at 727 - 728):

"Once make out that there has been anything like deception, and no contract resting in any degree on that foundation can stand ... where, therefore, in a negotiation between two parties, one of them induces the other to contract on the faith of the representations made to him, any one of which has been untrue, the whole contract is in this Court considered as having been obtained fraudulently."

60   Finally, I would refer to Smith v William Charlick Ltd [1924] HCA 13; (1924) 34 CLR 38 where Isaacs J, who reviewed the general law on the subject of duress in commercial situations described as "ancient principle" (at 56) the statement in 1 Rolle's Abridgment (at 688) (Henry Rolle, Un Abridgment Des Plusieurs Cases Et Resolutions Del Common Ley, 1668, London), that "duress by a stranger by procurement of the party who is to have the benefit is good cause of avoidance" and added, "[i]t is clear that duress created by persons or circumstances unconnected with a party to a contract is no cause for impeaching the bargain with him". Perry J applied Isaacs J's statement in Magnacrete Ltd v Douglas-Hill (1988) 48 SASR 565 (at 593), holding that "[p]ressure by a third party acting independently of the contracting parties cannot constitute duress so as to provide a ground for avoidance".”

50. As I said, there is no threat made before the document was signed, so the signing could not have been under duress, but even if some prior threat had been made to the plaintiff's son, there is no way in which it can be sheeted home to the plaintiff.

51. There is just no evidence that the plaintiff did anything or said anything to anybody which would cause either Carmine Iorio or Marco Iorio to make a "threat" to Alessio, the plaintiff's son in Naples. And whether the offering of the invitation to have a pleasant cup of coffee together is a threat has not been established on the evidence in any event.

52. For the same reasons, unconscionability cannot arise. However, the law, again, is quite clear. It is succinctly stated in the joint judgement of Nettle and Gordon JJ, although their Honours were in the minority, in Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1, in stating what the unwritten law was, which is what is only relied upon in the defence. There is no suggestion that their Honour's summary of the equitable principle is in any way incorrect. The relevant part of their Honour's judgment is this:

"Unwritten law

[145]   The equitable doctrine of unconscionable conduct "looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so". The "abiding rationale" of the doctrine is to "ensure that it is fair, just and reasonable for the stronger party to retain the benefit of the impugned transaction”.

[146]   Relief under the doctrine of unconscionable conduct requires that the innocent party was subject to a special disadvantage in dealing with the other party¹ when the transaction was entered into, "which seriously affect[ed] the ability of the innocent party to make a judgment as to [their] own best interests"; and that the other party unconscientiously took advantage of that special disadvantage. The existence of those circumstances at the time of the transaction is what "affect[s] the conscience" of the stronger party and renders the enforcement of the transaction, or the taking of the benefit, "unconscientious" or "unconscionable".

[147]   It is not possible to identify exhaustively what amounts to a special disadvantage. However, the essence of the relevant weakness is that it "seriously affects" the innocent party's ability to safeguard their own interests. Relevant matters may include, but are not limited to, "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary"; as well as "illness, ignorance, inexperience, impaired faculties, financial need or other circumstances" that affect the innocent or weaker party's ability to protect their own interests. It is not sufficient that the matters give rise only to an inequality of bargaining power.

[148]   A party will have unconscientiously taken advantage of an innocent party when the former knew or ought to have known of the existence and effect of the special disadvantage; or, put another way, when the special disadvantage was sufficiently evident at the time of the transaction to make it unconscientious to procure or accept the assent of the innocent party.

[149]   Unconscionable conduct does not require a finding of dishonesty. However, it is not merely concerned with what is "fair" or "just". Unconscionable conduct can include the passive acceptance of a benefit in unconscionable circumstances. And unconscionable conduct can be found even where the innocent party is a willing participant, the question is how that willingness or intention to participate was produced.

[150]   As this Court has recognised and restated a number of times, invocation of equitable doctrines, including unconscionable conduct:

"calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [weaker party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition. ... [']A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case'."

[151]   Here, the issue of special disadvantage must be considered as part of the broader question: whether Mr Kobelt's book-up system took advantage of an inability on the part of some of his customers to make worthwhile decisions in their own interests, which inability was sufficiently evident to Mr Kobelt, or should have been, to render his system exploitative.

[152]   It is sometimes said that unconscionable conduct entails "moral obloquy" or a "high level of moral obloquy". So to describe unconscionable conduct, however, reveals little of the requisite character of unconscionability. Such descriptors are better seen as emphatic expressions of conclusion rather than expressions of applicable standards.

[153]   The doctrine of unconscionability was recently criticised by the Court of Appeal of Singapore for its vagueness and generality. The Court applied a distinction between "broad" and "narrow" unconscionability in an effort to address this issue. The utility of such distinctions, however, is questionable. Certainly, in any given case, a conclusion as to what is, or is not, against conscience may be contestable: so much is inevitable given that the standard is based on a broad expression of values and norms. However, efforts to address the "indeterminacy" of the doctrine by way of further distillations, categorisations or definitions may risk "disappointment, ... a sense of futility, and ... the likelihood of error". This is because evaluating whether conduct is unconscionable "is not a process of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules". Instead, at least in the Australian statutory context, what is involved is an evaluation of business behaviour (conduct in trade or commerce) in light of the values and norms recognised by the statute. The problem of indeterminacy is addressed by close attention to the statute and the values derived from it, as well as from the unwritten law.”

53. Again, because there is no suggestion that on the actual evidence that there was any unconscionable conduct, or that the defendant had any of the "weaknesses" to which the equity applies, a weakness that relates to: poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation when assistance or explanation is necessary. Further weaknesses include: Illness, ignorance, inexperience, impaired faculties, financial need or other circumstances that affect the innocent or weaker party's ability to protect the weaker party's own interests.

54. Indeed, one could be persuaded that from what he said in his affidavit and what he said to me orally that Mr Autore had greater ability in business than did Mr Costagliola. Accordingly, the two pleaded defences fail. Accordingly, the defence in the second matter is also wholly unsuccessful.

Orders

First Proceedings

55. In the First Proceedings, I give judgment for the Plaintiff against the Defendant for $266,152.64.

56. I order the Defendant to pay the Plaintiff’s costs on the ordinary basis until 19 January 2023 and thereafter on an indemnity basis.

57. I order that the Registrar pay the money paid into Court by the Plaintiff pursuant to the order made on 3 August 2023 to the Plaintiff’s solicitor Ms Claudette Chua of Cadre Moss Level 11/131 York Street Sydney to be held by her on trust for the Plaintiff.

Second Proceedings

58. In the Second Proceedings, I give judgment for the Plaintiff against the Defendant for $732,619.70.

59. I order the Defendant to pay the Plaintiff’s costs.

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Decision last updated: 15 August 2024