Raouf Abdel-Messih as trustee for the Abdel-Messih Superannuation Fund v Qaqish

[2024] WASC 304

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   RAOUF ABDEL-MESSIH as trustee for THE ABDEL-MESSIH SUPERANNUATION FUND -v- QAQISH [2024] WASC 304

CORAM:   HILL J

HEARD:   1-2 MAY 2023

DELIVERED          :   22 AUGUST 2024

FILE NO/S:   CIV 1973 of 2020

BETWEEN:   RAOUF ABDEL-MESSIH as trustee for THE ABDEL-MESSIH SUPERANNUATION FUND

First Plaintiff

RAGAA ABDEL-MESSIH as trustee for THE ABDEL-MESSIH SUPERANNUATION FUND

Second Plaintiff

ROBERT ABDEL-MESSIH as trustee for THE ABDEL-MESSIH SUPERANNUATION FUND

Third Plaintiff

REUBEN ABDEL-MESSIH as trustee for THE ABDEL-MESSIH SUPERANNUATION FUND

Fourth Plaintiff

AND

MUIN QAQISH

Defendant

Catchwords:

Guarantee and indemnity - Claim by plaintiffs under contract of loan and guarantee against guarantor - Whether money advanced was a loan or an investment - Whether parties agreed to vary interest rate payable under agreement - Whether defendant has any defences to claim under Corporations Act 2001 (Cth) - Whether guarantee is an unfair contract - Turns on own facts

Legislation:

Competition and Consumer Act 2010 (Cth) sch 2 pt 2-3

Contracts Review Act 1980 (NSW) s 9
Corporations Act 2001 (Cth) s 588H, s 1317S, s 1318

Fair Trading Act 2010 (WA) s 25, s 26

Result:

Judgment entered for the plaintiffs

Category:    B

Representation:

Counsel:

First Plaintiff	:	R J Christensen
Second Plaintiff	:	R J Christensen
Third Plaintiff	:	R J Christensen
Fourth Plaintiff	:	R J Christensen
Defendant	:	In Person

Solicitors:

First Plaintiff	:	Arns & Associates
Second Plaintiff	:	Arns & Associates
Third Plaintiff	:	Arns & Associates
Fourth Plaintiff	:	Arns & Associates
Defendant	:	In Person

Cases referred to in decision:

AIBI Holdings Pty Ltd v Virtual Technology Services Pty Ltd [2022] FCA 696

Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377

Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5

Bendigo and Adelaide Bank Ltd (ACN 068 049 178) v Pickard [2019] SASC 123

Blacket v Barnett [2017] NSWSC 1032

Bonython v Commonwealth (1950) 81 CLR 486

Castronova v Tjung [2024] NTSC 55

CIT Credit Pty Ltd v Blayn Norman Keable [2006] NSWCA 130

Coghlan; Breusch v Watts Development Division Pty Ltd (1987) 10 NSWLR 311

El Khoury v Harsany; Taouk v Assure (NSW) Pty Ltd [2018] NSWSC 1774

John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451

Karpik v Carnival plc [2023] HCA 39; (2023) 415 ALR 491

Naegeli v Dalton and Schaeffer as Executors of the Estate of the late John Herman Schaeffer [2023] NSWSC 466

Petelin v Cullen (1975) 132 CLR 355

Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1

Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, (2004) 219 CLR 165

Warrington Management Pty Ltd v Kingslane Property Investments Pty Ltd [2019] WASC 2

Watson v Foxman (1995) 49 NSWLR 315

Table of Contents

Introduction

Pleadings

Delay in judgment

Onus and general observations on credibility

Onus and standard of proof

Approach to the evidence

Observations on witnesses

Raouf Abdel-Messih

Muin Qaqish

Issues for determination

Relationship between the parties

Entry into the 2012 Loan Agreement

Entry into the 2014 Loan Agreement

Terms of the 2014 Loan Agreement

Delay in repayment of loan

Discussions to vary rate of interest under Agreement

Is the 2014 Loan Agreement enforceable against Mr Qaqish?

What was the agreed purpose of the funds advanced by the plaintiffs?

Is Mr Qaqish bound by the guarantee in the 2014 Loan Agreement?

Was the failure to register the plaintiffs' charge (or caveat) against the Westminster Property a breach by Mr Qaqish of the 2014 Loan Agreement?

Are the terms of the 2014 Loan Agreement unfair?

Is Mr Qaqish entitled to relief against liability on the basis of any other statutory provision?

Did the parties agree to vary the interest rate under the 2014 Loan Agreement?

Conclusion

HILL J:

Introduction

1. In September 2014, the plaintiffs (as trustees of their family superannuation fund) advanced $900,000 to ProMEQ Pty Ltd (ProMEQ), a company associated with the defendant, Mr Qaqish.  Under the terms of the written agreement between the parties, Mr Qaqish guaranteed ProMEQ's obligations under the agreement, including the obligation to repay the plaintiffs.  ProMEQ has not repaid the plaintiffs and the plaintiffs seek to enforce the guarantee in these proceedings.

2. Mr Qaqish denies the money received by ProMEQ was a loan and says it was an investment in property developments being undertaken by ProMEQ. Mr Qaqish, who represented himself at trial, raised a number of additional matters in defence to the plaintiffs' claim. These included the contention that the inability to repay the plaintiffs arose because of the unexpected decline in the property market, as well as an assertion that the terms of the agreement are unfair contract terms, as that term is defined in sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL). Mr Qaqish also says that in about September 2016, the parties agreed to vary the amount of interest payable on the amount advanced by the plaintiffs and that the relevant interest rate is 6% per annum and not the 8% per annum claimed by the plaintiffs.

3. For the reasons that follow, it is my view that:

   (a)the money paid by the plaintiffs to ProMEQ was a loan pursuant to the terms of an agreement dated 18 September 2014 (2014 Loan Agreement);

   (b)pursuant to the express terms of the 2014 Loan Agreement, Mr Qaqish guaranteed ProMEQ's performance of the 2014 Loan Agreement, including the obligation to repay the plaintiffs.  This has not occurred;

   (c)the terms of the 2014 Loan Agreement are not unfair contract terms and are enforceable against Mr Qaqish; and

   (d)any agreement to vary the interest rate from that specified in the 2014 Loan Agreement was conditional on repayment in full by 31 October 2016 and then 30 June 2018.  Neither occurred.  On this basis, there has been no variation of the interest rate specified in the 2014 Loan Agreement.

4. Given these findings, judgment should be entered for the plaintiffs in the amount of $450,000 together with interest calculated at 8% per annum compounded monthly.

Pleadings

1. For most of the duration of these proceedings, both the plaintiffs and defendant were self-represented litigants.  Shortly after the proceedings were entered for trial, solicitors entered an appearance for the plaintiffs and counsel appeared at the trial on behalf of the plaintiffs.  Mr Qaqish appeared for himself at the trial. 

2. The pleadings filed by the parties were prepared by each of them as self-represented litigants.  As a result, the pleadings are not in a conventional form.  However, both the statement of claim and the amended statement of defence set out the matters which each party asserts are relevant to the determination of these proceedings.

3. The plaintiffs' claim arises in respect of a loan agreement dated 18 September 2014 between the plaintiffs (as lender), ProMEQ (as borrower) and the defendant (as guarantor).[1]  The plaintiffs plead that under the terms of the 2014 Loan Agreement:

   (a)the plaintiffs agreed to loan $900,000 to ProMEQ on the basis that ProMEQ would provide the plaintiffs with security by way of a mortgage over 10 Halland Way, Westminster (Westminster Property);[2] and

   (b)the defendant guaranteed ProMEQ's due and punctual performance of the 2014 Loan Agreement, including the obligation to repay the loan in full when it became due for repayment.[3] 

   [1] Amended statement of claim, Pleadings and particulars [1.1].

   [2] Amended statement of claim, Pleadings and particulars [1.1].

   [3] Amended statement of claim, Pleadings and particulars [1.2].

4. The plaintiffs say that on 18 September 2014, they advanced $900,000 to ProMEQ which was due for repayment on or before 19 April 2016.

5. The plaintiffs plead that ProMEQ defaulted on its obligations under the agreement in a number of respects,[4] most notably in failing to repay to the plaintiffs the sum of $450,000 together with interest of $374,779,[5] which is calculated at 8% per annum.[6]  The plaintiffs also contend ProMEQ failed to register a mortgage over the Westminster Property and used the proceeds from the sale of the Westminster Property for purposes other than repayment of the loan, including the payment of $200,000 off the defendant's personal loan.[7]  On the sale of the Westminster Property, the secured loan became an unsecured loan.[8]

   [4] Amended statement of claim, Pleadings and particulars [1.5].

   [5] Amended statement of claim, Relief claimed [1.1].

   [6] Amended statement of claim, Relief claimed [1.4].

   [7] Amended statement of claim [1.5].

   [8] Amended statement of claim [2.3.2].

6. In July 2020, ProMEQ went into liquidation.[9]  No dividend was paid to the plaintiffs from the winding up.[10]  As a consequence, the plaintiffs seek payment from the defendant of the balance owing to the plaintiffs under the 2014 Loan Agreement; namely, the unpaid loan amount of $450,000 together with accrued interest at the rate of 8% per annum compounded monthly.[11]

   [9] Amended statement of claim [2.3.1].

   [10] Amended statement of claim [2.3.3].

   [11] Amended statement of claim [3].

7. In response to the plaintiffs' claim, Mr Qaqish filed two documents: an 'affidavit of defence' filed 16 December 2020 and an amended statement of defence filed 20 May 2022.  In essence, Mr Qaqish says that:

   (a)the amounts advanced by the plaintiffs to ProMEQ were investments and not loans;[12]

   (b)the terms of the 2014 Loan Agreement are 'onerous and unfair';[13]

   (c)in September 2016, the plaintiffs agreed to accept a 'lower investment return' and that the funds would be released on the sale of further properties and the availability of funds;[14]

(d)he made a number of offers to the first plaintiff, which were all rejected;[15]

(e)the claim by the plaintiffs is 'unfair and unreasonable' given the history of the matter and the state of the property market, which was out of his control;[16] and

(f)he did not understand he was a guarantor under the 2014 Loan Agreement and was not provided with an opportunity to seek legal advice or review the 2014 Loan Agreement.[17]

[12] Affidavit of defence (Papers for the Judge, page 11).

[13] Affidavit of defence (Papers for the Judge, page 7).

[14] Affidavit of defence (Papers for the Judge, page 8).

[15] Affidavit of defence (Papers for the Judge, page 9).

[16] Affidavit of defence (Papers for the Judge, pages 10 - 11).

[17] Affidavit of defence (Papers for the Judge, page 12).

1. Mr Qaqish relied on a number of statutory provisions in support of his contention that the guarantee should be set aside as unconscionable and unfair. These included s 588H, s 1317S and s 1318 of the Corporations Act 2001 (Cth) (Corporations Act), s 9 of the Contracts Review Act 1980 (NSW) (Contracts Review Act) and s 25 and s 26 of the Fair Trading Act 2010 (WA) (Fair Trading Act).[18]  The factual matters raised by Mr Qaqish in support of this contention were:[19]

   (a)economic pressures and impacts outside his control;

   (b)Mr Qaqish did not understand he was a guarantor and was not provided with an opportunity to seek legal advice or review the 2014 Loan Agreement;

   (c)the 2014 Loan Agreement is a standard form contract, which is only for the benefit of the plaintiffs;

   (d)the decline of the property market; and

   (e)the manner in which the plaintiffs sought to recover the funds paid under the 2014 Loan Agreement when cash funds were not then available.

   [18] Affidavit of defence, D and E (Papers for the Judge, pages 19 - 21).

   [19] Affidavit of defence, D.1 - D.4 (Papers for the Judge, page 20).

Delay in judgment

1. The hearing of this matter took place in May 2023.  Regrettably, I have not been in a position to finalise my reasons for decision as quickly as I would have liked.

2. In order to properly assess the parties' cases and the evidence that was given at trial, and to ensure this has not been impaired by the delay between the hearing and the publication of these reasons, I have done the following.

3. First, I have refreshed my memory by reading the transcript of the witnesses' evidence and re-listening to portions of the oral recordings of their evidence.  During the course of the trial, I made contemporaneous notes, including my observations of each witness.  My assessment of the witnesses has been assisted by my review of these notes, the transcript, as well as the documents that were tendered in evidence. 

4. Second, I had the benefit of oral closing submissions from counsel for the plaintiff and from Mr Qaqish.  I have taken into account their submissions, including in relation to the findings of fact that each contends should be made. 

5. Third, the plaintiffs' claim was, almost entirely, a documentary case.  It was characterised by counsel for the plaintiff as a 'relatively straight-forward action to recover a debt'.[20]  It was Mr Qaqish's response to the claim that relied on the oral evidence given by the parties.  My conclusions as to the credit and reliability of Mr Abdel‑Messih and Mr Qaqish are primarily based on the consistency of their evidence, including whether their evidence was consistent with contemporaneous documents and the facts that have been objectively established.

   [20] Plaintiffs' outline of submissions filed 25 April 2023 [1].

Onus and general observations on credibility

Onus and standard of proof

1. The plaintiffs bear the onus of proof in relation to their claim to enforce the guarantee.  Mr Qaqish bears the onus of proof in relation to his claim that the contract is an unfair contract, as well as the various matters raised by him in his defence.[21]

   [21] AIBI Holdings Pty Ltd v Virtual Technology Services Pty Ltd [2022] FCA 696 [99]. If the contract is a consumer contract or small business contract, the plaintiffs will bear the onus of proving the matter in s 24(1)(b) of the ACL.

2. At all times, the standard of proof is the balance of probabilities.

Approach to the evidence

1. In this case, while much of the relevant evidence is documentary, both parties gave evidence of oral conversations that led to entry into the 2014 Loan Agreement, as well as the previous agreement between related parties.  These conversations are relevant to Mr Qaqish's characterisation of the money advanced by the plaintiffs as being an investment and not a loan. 

2. Previous authorities have discussed the approach that should be taken by the court in these circumstances.[22]  In considering the evidence in this case, I have applied the following principles.

   [22] Blacket v Barnett [2017] NSWSC 1032 [243] - [257] (Hallen J). See also Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5 [26] (Tottle J).

3. Human memory of what was said in a conversation is fallible for a variety of reasons.  Ordinarily, this increases over time, particularly where disputes or litigation intervene.  This is because the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said.  All too often, what is actually remembered is little more than an impression from which plausible details are then again, often subconsciously, constructed.[23] 

   [23] Watson v Foxman (1995) 49 NSWLR 315, 318 - 319 (McLelland CJ in Eq).

4. The credibility of a witness and their veracity may be tested by reference to objective facts which can be proved independently; in particular, by reference to the documents in the case.  Documents will often provide more valuable information than the attempted recollection of the facts by witnesses with an interest in the outcome of the litigation.  This is particularly the case when the documents are accepted as genuine and were prepared by a person who had no reason to misstate the facts in these documents.  Often, the only safe course in such cases is to place primary emphasis on the objective factual surrounding material, the inherent commercial probabilities and the contemporaneous documents.  Documents will often provide more valuable information than the attempted recollection of the facts by witnesses with an interest in the outcome of the litigation.  This is particularly the case when the documents are accepted as genuine and were prepared by a person who had no reason to misstate the facts in these documents.

5. Contemporaneous statements and documents are likely to be a more accurate reflection of events than later statements.  This is because false memories can intrude, especially when the person recalling events has tried to assemble recollections logically.  In doing so, the person can attempt to have some rational explanation as to what has happened. 

6. In considering the evidence of the witnesses, I also recognise that:[24]

   Memory is a constructive and reconstructive process.  What is remembered about an event is shaped by how that event was experienced, by conditions prevailing during attempts to remember, and by events occurring between the experience and the attempted remembering.  Memories can be altered, deleted and created by events that occur during and after the time of encoding, during the period of storage, and during any attempts at retrieval.

   [24] McClellan P, 'Who Is Telling the Truth? Psychology, Common Sense and the Law' (2006) 80 Australian Law Journal 655, 665, quoting Australian Psychological Society, Guidelines Relating to Recovered Memories (2000).

7. In determining the terms of an oral agreement in the absence of a contemporaneous record or other corroboration, the court must be alive to the reality that the words that were spoken are capable of bearing different and potentially opposing meanings depending on the nuance and emphasis that is given to particular words.  A person's appreciation of the significance of these matters must necessarily be considerably diminished if there is a significant delay between the date when the conversation took place and the hearing at which the evidence of that conversation is given.  As Hammerschlag J stated in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd:[25]

   Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence.  Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding.  In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof.  Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved.

   [25] John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 [94].

8. In this case, I have carefully assessed the oral evidence of the witnesses in the context of the contemporaneous materials, the facts that are either not in dispute or can be objectively established, and considered the apparent logic of the events in accordance with these observations.

Observations on witnesses

1. Only two witnesses gave evidence at trial: the first plaintiff, Mr Raouf Abdel-Messih, and Mr Qaqish. 

Raouf Abdel-Messih

1. Mr Abdel-Messih was 73 years old at the time of the trial.  He was born in Cairo, Egypt and migrated to Australia in 1983.  After his arrival in Australia, he obtained a master's degree in engineering from the University of New South Wales.

2. After obtaining his degree, Mr Abdel-Messih moved to Port Hedland for work.  While he was working in Port Hedland, he came to Perth on holidays and attended a church established by his brother for the Arabic-speaking community.  Mr Abdel-Messih met Mr Qaqish through this church.  After working in Port Hedland for about 25 years, Mr Abdel-Messih retired and moved to Perth permanently in 2010. 

1. In examination in chief, Mr Abdel-Messih gave somewhat long and rambling answers to the questions he was asked.  On many occasions, his answers were not confined to the questions he was asked.  At times during his examination in chief, Mr Abdel-Messih became quite upset.  In contrast, when cross-examined by the defendant, he was defensive and, on occasions, quite aggressive in responding to questions.

2. It was clear from his evidence that Mr Abdel-Messih feels extremely hurt and betrayed by these events.  This was for two main reasons.  First, because the funds that he lent to ProMEQ and Mr Qaqish were his superannuation funds that had been deducted from his salary and accumulated over 25 years.  In his own words:[26]

   [B]y nature, I am risk adverse.  And in my age and my condition, the superannuation means a lot to me.  That was money earned over 25 years and I have suffered greatly.  I have suffered to be remote in remote area and have my family in Perth for education.  And I have – it wasn't easy thing to come to me so I was very careful that anything I will do, it will be having 100 per cent security, not a slightest inch that I have any risk in anything I'm doing.

   [26] ts 28.

3. Second, Mr Qaqish sold the property which had been offered as security under the 2014 Loan Agreement and had not repaid the amount advanced to ProMEQ.  As Mr Abdel-Messih described it, he was waiting for repayment and then discovered 'it was all fibs'.[27]

   [27] ts 83.

4. There were aspects of Mr Abdel-Messih's evidence that were unclear as well as contradictory.  The most notable example of this was his evidence of when he was first told that the three units developed at the Westminster Property had been sold.  Mr Abdel-Messih was asked two questions in examination in chief as to whether he first learnt of this at a meeting on 1 August 2017.  In answer to the first question, he denied this was the case,[28] but in answer to the second question, agreed it was.[29] 

   [28] ts 47.

   [29] ts 62 - 63.

5. While I accept that Mr Abdel-Messih was an honest witness who genuinely believed the matters on which he gave evidence, I consider the best evidence is the documentary evidence.  In considering the reliability of Mr Abdel-Messih's evidence, given his strong feelings about what has occurred, I have weighed his evidence against the contemporaneous documents and the facts which have been objectively proved. 

Muin Qaqish

1. Mr Qaqish has a Bachelor of Engineering and Business from Curtin University as well as a Diploma in Business Marketing Real Estate from West Coast TAFE.[30]  Prior to commencing his tertiary education, he attended the academically selective school, Perth Modern.

   [30] Exhibit 2.25.

2. Mr Qaqish's LinkedIn profile, which he wrote and accepted was correct,[31] states that upon graduating from university, he was initially employed in various project manager roles in the construction industry, before moving to an executive general manager role in healthcare and then to a state contract manager role with Lake Maintenance.[32]  In these roles, he has had responsibility for, among other things, negotiating sub-contracts.  Mr Qaqish lists his skills as including contract negotiation and contract management, as well as business and general management.[33]

   [31] ts 144.

   [32] Exhibit 2.25.

   [33] Exhibit 2.25, TB145, TB146.

3. Since 2004, Mr Qaqish, through two separate entities (Simplex and ProMEQ), has undertaken a number of property developments in the Perth metropolitan area.[34] 

   [34] Exhibit 4.5 (Simplex), Exhibit 4.6 (ProMEQ).

4. Even taking into account the fact that Mr Qaqish was a self-represented litigant, there was a marked contrast in the manner in which Mr Qaqish gave his evidence in examination in chief as compared to cross‑examination.  In examination in chief, Mr Qaqish appeared to be upset at what had occurred.  In contrast, in cross‑examination, Mr Qaqish was confident in the answers he gave and, on occasions, became aggressive.  On many occasions, particularly in relation to questions about the drafting of an agreement entered into on 27 June 2012 (2012 Loan Agreement) and the 2014 Loan Agreement, and when asked who prepared certain documents, his response was that he did not recall.  He also had a tendency to refer to himself in the third person when answering questions; for example, as the director of ProMEQ.

5. It was apparent from Mr Qaqish's evidence that he believes the failure to repay the plaintiffs occurred as a result of events that were out of his control; namely, a downturn in the property market.  He did not consider it was fair for the plaintiffs to seek repayment when he had made significant losses. 

6. It was also clear that Mr Qaqish views himself as the victim in this situation.  He described having lost his ministry and position in the church as well as his company, and contended that his loss was greater than that of the plaintiffs.[35]  In his view, the plaintiffs needed to wait for repayment and that Mr Abdel-Messih's 'behaviour and stubbornness' brought further financial harm to both the plaintiffs and himself.[36]

   [35] ts 113.

   [36] ts 109.

7. This view is not only inconsistent with the terms of the 2014 Loan Agreement, which Mr Qaqish accepts he signed, but also fails to recognise or acknowledge that the plaintiffs showed significant patience in not taking steps to enforce the 2014 Loan Agreement until more than two years after it was due for repayment.

8. On occasions, Mr Qaqish was deliberately vague or obtuse in the responses he gave to the questions that were asked of him.  For example, when asked whether he used $200,000 of the funds received from the sale of the Westminster to repay a loan 'you say was owed to yourself', he responded that 'I repaid it to the director' before agreeing that this was a reference to himself.[37]  Similarly, when he was asked about a series of payments he made from ProMEQ to himself after the loan to the plaintiffs had fallen due, he initially did not accept this had occurred.  When he was taken to evidence demonstrating the payments had been made, he then said these payments were for an investment that occurred before any agreements were entered into with the plaintiffs.[38] 

   [37] ts 171 - 172.

   [38] ts 176.

9. On at least one occasion, Mr Qaqish's evidence was false.  Mr Qaqish initially denied that the $200,000 paid to him from the proceeds received by ProMEQ from the sale of the Westminster Property had been used to reduce his personal home loan.[39]  He was then taken to various documents which showed this evidence was false.[40] 

   [39] ts 173.

   [40] Exhibit 5.4 - Exhibit 5.9.

10. A number of the propositions that Mr Qaqish put to Mr Abdel‑Messih in cross-examination proceeded on an incorrect factual basis.  By way of example, Mr Qaqish put to Mr Abdel-Messih that he could not have employed him at Joondalup City Roofing (JCR) in 2012 as he (Mr Qaqish) had not commenced work there until 2013.  He suggested to Mr Abdel-Messih that his recollection was incorrect.  When it was put to Mr Qaqish in cross‑examination that his LinkedIn profile stated that he commenced with JCR in 2011, Mr Qaqish initially responded that he would need to double-check his payslips before acknowledging there was a period where he was consulting to JCR but still working out of his West Perth office.  While the dates of Mr Abdel-Messih's employment at JCR have little relevance to the issues for determination in these proceedings, Mr Qaqish's cross-examination of Mr Abdel-Messih on a false factual basis and his failure to make appropriate concessions during his own cross-examination reflect poorly on him.

11. For these reasons, I consider Mr Qaqish was an unsatisfactory witness whose evidence cannot be accepted as generally reliable.  Unless there is independent corroboration, I do not accept or place any weight on his oral evidence.

Issues for determination

1. From the pleadings that have been filed, there are four issues that require determination:

   (a)Is the 2014 Loan Agreement enforceable against Mr Qaqish?

   (b)Are the terms of the 2014 Loan Agreement unfair within the meaning of the ACL?

   (c)Is Mr Qaqish entitled to relief against liability on the basis of any other statutory provision?

   (d)Did the parties agree to vary the interest rate payable under the 2014 Loan Agreement from 8% per annum to 6% per annum?  How is interest to be calculated under the 2014 Loan Agreement?

Relationship between the parties

1. The first and second plaintiffs are husband and wife.  They have four adult children, two of whom are joined to these proceedings as the third and fourth plaintiffs.[41]  The plaintiffs are joint trustees of the family's superannuation fund, the Abdel-Messih Superannuation Fund (Fund), which was established in June 2014.[42] 

   [41] ts 23.

   [42] Exhibit 2.24.

2. Mr Abdel-Messih met Mr Qaqish through church.  At the time they met, Mr Qaqish was employed as a project manager with a construction company and had a number of roles within the church, including as a youth leader, music conductor and counsellor.[43]

   [43] ts 23 - 24.

3. From about February 2004, Mr Qaqish operated a property development business, which traded under the name 'Simplex Projects'.  This business was a partnership of two separate companies, ProMEQ and Molouky Pty Ltd (Molouky).[44]  Mr Qaqish was the sole director, company secretary and shareholder of ProMEQ from its incorporation until its deregistration on 31 October 2020.[45]  Molouky is a company associated with Mr Qaqish's brother, Mousa Qaqish, who was the sole director, company secretary and shareholder of this company.[46] 

   [44] Exhibit 4.5.

   [45] Exhibit 4.1.

   [46] Exhibit 4.4.

Entry into the 2012 Loan Agreement

1. In 2010, Mr and Mrs Abdel-Messih moved to live in Perth permanently.  From this time, they saw Mr Qaqish on a more regular basis at church.  Mr Abdel-Messih said that when they saw each other, Mr Qaqish spoke about property development and suggested that he (Mr Abdel-Messih) lend Mr Qaqish's company money from his superannuation funds.  At that time, Mr Abdel-Messih's superannuation funds were with his employer and paid a return of approximately 6.5% per annum (prior to the deduction of management fees). 

2. In late 2011 or 2012, Mr Abdel-Messih and Mr Qaqish discussed the possibility of money being provided by Mr Abdel-Messih to Mr Qaqish's company.  There was a significant difference in their recollections as to who raised this, what was discussed and whether the written agreement they entered into reflected their discussion. 

3. Three matters are not in dispute.  First, Mr Abdel-Messih gave $700,000 to Mr Qaqish in about April 2012.  At that time, the parties did not document the basis on which these funds were advanced.  Second, an agreement dated 27 June 2012 between Mr and Mrs Abdel‑Messih (as lender), Simplex Projects (as borrower) and the defendant (as guarantor)[47] has been signed by all parties.  Third, on 27 June 2012, Mr Abdel-Messih emailed Mr Qaqish a copy of the signed agreement.[48]  In the covering email, Mr Abdel-Messih stated 'Please find attached the loan agreement, thank you very much for helping me out here'.[49] 

   [47] Exhibit 2.3.

   [48] ts 75.

   [49] Exhibit 3.6B.

4. The recitals to the 2012 Loan Agreement record that, as at 27 June 2012, Simplex Projects was indebted to Mr and Mrs Abdel‑Messih in the sum of $700,000 and that the parties wished to formally record the terms of their agreement.  Under the terms of the 2012 Loan Agreement, Simplex Projects acknowledged that Mr and Mrs Abdel‑Messih lent it $700,000 on 17 April 2012, which was a secured loan (cl 1.1) for the purpose of property developments (cl 1.4).  The loan was required to be repaid on or before 18 April 2014 (unless there was a default).[50]  Interest of 8% per annum was payable on the loan, with payment of interest not required until the completion of the loan term.[51]  The security that was offered for the loan was a mortgage over 20 Salmar Way, Westminster.[52] 

   [50] Exhibit 2.3, cl 2.1.

   [51] Exhibit 2.3, cl 4.1, cl 4.2.

   [52] Exhibit 2.3, cl 7.1, cl 7.2.

5. The 2012 Loan Agreement recorded that it was entered into at the request of Mr Qaqish and that he guaranteed the 'due and punctual performance' of all of the terms of the 2012 Loan Agreement, including the obligation to repay the loan in full on the date of repayment.[53]

   [53] Exhibit 2.3, cl 9.1.

6. Mr Abdel-Messih's evidence was that Mr Qaqish approached him and said that if he (Mr Abdel-Messih) lent his company money, he (Mr Qaqish) would 'guarantee for you eight per cent return'.  Mr Qaqish told him that his projects generally went for one year but that if Mr Abdel-Messih left the funds with him for two years, he could 'run it around a few times' to 'maximise my profits'.[54]  Mr Abdel-Messih asked how much profit he was making and was told between 15 - 20% so could 'comfortably give you eight per cent, guaranteed'.[55]

   [54] ts 25, 67.

   [55] ts 25.

7. Mr Abdel-Messih said that if he believed there was the 'slightest inch of any risk' in the transaction, he would not have drawn any amount from his superannuation funds to give to Mr Qaqish.  In agreeing to give Mr Qaqish this amount, he placed significant weight on the fact that Mr Qaqish was a '[r]egular at the church' who had the 'good ethics of a Christian man' and whose 'word is like the Bible'.[56] 

   [56] ts 25.

8. In relation to the documentation of the transaction, Mr Abdel‑Messih explained that in June 2012, both of them were working at JCR.  Mr Abdel-Messih was working there on a part-time basis through an introduction from Mr Qaqish.[57]  One day, Mr Qaqish came into Mr Abdel-Messih's office and suggested that they document the loan and not involve lawyers to save money.  Mr Abdel-Messih agreed to this and went online to search for a template contract.  On a site called 'Law Live', he found a template for a secured loan agreement, paid for a template and emailed it to Mr Qaqish who filled in the relevant details (including the details of the company and the security, as well as the interest rate).  Once the document had these details inserted, Mr Qaqish came into his office with the final agreement and both of them signed it.  Mr Abdel-Messih took the contract home for Mrs Abdel-Messih to sign and returned with the signed agreement the next day.  He gave the signed agreement to Mr Qaqish, who asked his brother (Mousa Qaqish) to witness the signatures.[58]

   [57] ts 26, 29.

   [58] ts 27.

9. In relation to the email that he sent to Mr Qaqish enclosing the signed agreement, Mr Abdel-Messih explained he was thanking Mr Qaqish for filling out the document, because he could not have included all of the required details in the agreement.[59] 

   [59] ts 75.

10. Mr Qaqish's recollection of these events was significantly different.  His evidence was that Mr Abdel-Messih approached him and asked to invest in his company.  In examination in chief, Mr Qaqish said that on 27 June 2012, Mr and Mrs Abdel-Messih 'entered into the loan agreement by investing into [Simplex Projects]' an amount of $700,000 (with a subsequent amount of $50,000 for the construction and development of the properties).[60] 

    [60] ts 123.

11. Mr Qaqish said that he initially gave Mr Abdel-Messih a 'builder‑investor agreement' which he described as 'an industry standard agreement, caveat for property and building investments'.[61]  This document recited that Mr Abdel-Messih had a project that he wanted to undertake, provided for the parties to be reimbursed their contributions, and provided for them to share equally in the profits from any development.  Mr Abdel-Messih denied he had ever seen this document or that Mr Qaqish gave him a copy.[62] 

    [61] ts 123, Exhibit 3.7.

    [62] ts 76.

12. In cross-examination, Mr Qaqish denied he ever offered Mr Abdel-Messih the return of his money plus 50% of the profits, or that he had prepared or read the builder-investor agreement.  He said this agreement was prepared by his 'business partner' (which, he accepted, was a reference to his brother Mousa Qaqish),[63] that he just presented Mr Abdel-Messih with a typical investment agreement given to all investors,[64] and did not know what the document said.[65]  When asked why he gave Mr Abdel-Messih a document he had not read, Mr Qaqish said this was because he was a 'very generous' man.[66]

    [63] ts 153 - 154.

    [64] ts 153.

    [65] ts 152.

    [66] ts 154.

13. Mr Qaqish accepted Mr Abdel-Messih did not sign the builder-investor agreement or agree to its terms and that they subsequently entered into the 2012 Loan Agreement.[67] 

    [67] ts 123 - 124.

14. Mr Qaqish accepted he signed the 2012 Loan Agreement and initialled each page but said that he did not read or seek to understand its terms.[68]  Mr Qaqish said that when he was given the 2012 Loan Agreement by Mr Abdel-Messih, he 'just signed and initialled on good faith and on good face'.  Subsequently, he accepted that having signed the 2012 Loan Agreement, he will 'live by the agreement'.[69]  Mr Qaqish did not agree that he had completed any details in the 2012 Loan Agreement because Mr Abdel-Messih 'did not see me enter the actual information in there'.  He could not recall who entered the information and said it could have been him or his brother.[70] 

    [68] ts 147 - 148.

    [69] ts 190.

    [70] ts 148.

15. Mr Qaqish sought to distinguish the 2012 Loan Agreement from the work he did as part of his employment on the basis that in his employment, he was only dealing with sub-contractors and did not deal with 'contract laws or anything like that'.[71]  Mr Qaqish accepted he agreed to pay 8% interest per annum as a term of the 'verbal agreement that [he] had with Mr Abdel-Messih', but denied this was calculated on a compound basis.[72]

    [71] ts 148.

    [72] ts 148.

16. In relation to the email he received from Mr Abdel-Messih on 27 June 2012, Mr Qaqish's evidence was that Mr Abdel-Messih was thanking him for helping him to invest.[73]

    [73] ts 124.

17. For the following reasons, I reject Mr Qaqish's evidence and accept Mr Abdel-Messih's evidence.

18. First, the terms of the 2012 Loan Agreement record that moneys were advanced by Mr Abdel-Messih prior to this agreement being signed.  Mr Qaqish did not give any evidence as to the initial conversation or conversations that led to this occurring, or why the 2012 Loan Agreement was signed more than two months after these funds were advanced.

19. Second, Mr Qaqish's evidence was inconsistent.  On the one hand, he contended he had given Mr Abdel-Messih a copy of the builder‑investor agreement which reflected their standard investment terms but then denied he ever agreed to share the profits equally with Mr Abdel-Messih.  Profit-sharing is a term of the document which he initially said he prepared and gave to Mr Abdel-Messih, before denying he had prepared or read it.  I also note that it has never been suggested that at that time, Mr Abdel-Messih had land which he was seeking to develop (which is a recital to this document).

20. Third, there is no evidence before the court that any third parties had invested in Simplex Projects or entered into what Mr Qaqish claimed was an industry standard agreement.  The documentary evidence before the court does not support Mr Qaqish's evidence.  In particular, the report to creditors from the voluntary administrator does not refer to any investors (or any creditors other than the ATO, the plaintiffs and Mr Qaqish) or suggest there has ever been any investors in ProMEQ.[74]

    [74] Exhibit 3.3, TB174.

21. Fourth, the 2012 Loan Agreement includes a number of details which, I accept, were not known by Mr Abdel-Messih.  These include the name and details of Simplex Projects, and the address of the property that was proposed as security.  Mr Qaqish did not positively deny completing these details and did not call his brother to give evidence, even though his brother was available to give evidence and a witness outline had been served.[75]  Given these matters, I infer and find that Mr Qaqish completed the 2012 Loan Agreement.

    [75] ts 117 - 119.

22. Fifth, there is no evidence that at the time Mr Qaqish was given the template or draft loan agreement, he raised any issue with Mr Abdel-Messih that this document did not reflect their agreement.  Any dispute as to whether the 2012 Loan Agreement (and the subsequent agreement) reflected the arrangement between the parties only arose after the plaintiffs sought payment of the amount outstanding under the 2014 Loan Agreement.

1. Sixth, at the time of entry into the 2012 Loan Agreement, Mr Qaqish had been working in the construction industry for almost 15 years, including in roles where he was responsible for sub‑contractors and contract management.  He is an intelligent man with tertiary qualifications.  I do not accept he would have simply signed an agreement put in front of him without reading or considering its terms.

2. In about February 2013, Mr Qaqish told Mr Abdel-Messih he needed another $100,000 for a project.  At that time, Mr Abdel-Messih did not have $100,000 but agreed to lend Mr Qaqish another $50,000, which was paid in February 2013.[76]

   [76] ts 29.

3. Initially, Mr Qaqish accepted he prepared a number of schedules setting out the amounts that were outstanding under the 2012 Loan Agreement, which calculated interest on a monthly compound basis.[77]  Subsequently, Mr Qaqish sought to minimise his involvement in the preparation of the schedules.[78]  I accept and find that Mr Qaqish prepared these schedules and provided them to Mr Abdel-Messih.

   [77] ts 149.  See Exhibit 3.6 - Exhibit 3.6A.

   [78] ts 150.

4. In February 2014, ProMEQ entered into a loan agreement with Police & Nurses Ltd (Police & Nurses) for a maximum amount of $934,682.[79]  This loan was guaranteed by Mr Qaqish.  Mr Qaqish agreed he read this document before he signed it, sought legal advice and that the terms of the agreement were explained to him.[80]  His evidence was that he understood what a guarantee was in relation to this loan and that he was willing to enter into it because he understood the guarantee.[81] 

   [79] Exhibit 5.2.

   [80] ts 167; Exhibit 5.2A.

   [81] ts 168.

5. Mr Qaqish sought to distinguish between agreements entered into with Police & Nurses and other financial institutions from the agreements he entered into with Mr Abdel-Messih and the plaintiffs.  It was not clear as to the basis for this distinction or why he considered the counterparty to the guarantee affected his obligations under any guarantee.[82]

   [82] ts 164.

Entry into the 2014 Loan Agreement

1. In April 2014, the initial loan fell due for repayment.  It was not repaid at that stage.

2. It is not in dispute that an agreement dated 18 September 2014 between the plaintiffs (as lender), ProMEQ (as borrower) and Mr Qaqish (as guarantor) was signed by all parties and witnessed by Mr Mousa Qaqish.[83]  However, once again, there was a significant difference in the recollections of Mr Abdel-Messih and Mr Qaqish about the circumstances in which the 2014 Loan Agreement was entered into.

   [83] Exhibit 2.1.

3. Mr Abdel-Messih's evidence was that at around the time the 2012 Loan Agreement was due for repayment, Mr Qaqish came into his office at JCR and asked him to renew the loan for another two years.  Mr Qaqish had calculated the balance of the loan and interest payable to Mr and Mrs Abdel-Messih to be $866,755.26 as at March 2014 (on the basis that repayment was due in April 2014).[84]  As at September 2014, approximately $900,000 was outstanding.[85]  Mr Qaqish initially asked Mr Abdel-Messih to reduce the interest rate to 6% per annum before suggesting it be left at 8% per annum.[86]  After this discussion, Mr Qaqish came back to his office with a new contract based on the 2012 Loan Agreement.  This document was in the name of Mr and Mrs Abdel-Messih, with the borrower described as ProMEQ rather than Simplex Projects.  A different property (the Westminster Property) was inserted as security.  The document is otherwise in identical terms to the 2012 Loan Agreement, including having the logo of 'Law Live' on the front page.

   [84] Exhibit 3.6.

   [85] Exhibit 3.6A.

   [86] ts 30.

4. Mr Abdel-Messih told Mr Qaqish that he had established a self‑managed superannuation fund, the Fund, on 11 June 2014 which should be the party to the agreement.[87]  Mr Qaqish made this amendment, and the parties signed the agreement. 

   [87] ts 30.

5. Mr Abdel-Messih denied ever having a discussion with Mr Qaqish about sharing profits from property development and said the 2014 Loan Agreement correctly reflected their agreement.[88]

   [88] ts 38.

6. In contrast, Mr Qaqish's evidence was that the initial 'investment' was returned in full once the properties were sold and that Mr Abdel‑Messih then agreed to 'rollover the same investment'.[89]  Mr Qaqish accepted the parties to the 2014 Loan Agreement had changed from Mr and Mrs Abdel-Messih to the plaintiffs as trustees of the Fund, but said that he saw the 2014 Loan Agreement as a 'continuation of the initial investment of the first agreement'.[90]  Mr Qaqish agreed he initially proposed a lower interest rate (of 4 - 6% per annum) but said that Mr Abdel-Messih suggested the interest rate be kept at 8% per annum with the amount to be invested in various properties to maximise profit returns.[91]

   [89] ts 128.

   [90] ts 128.

   [91] ts 128.

7. Mr Qaqish's evidence was that he did not read the 2014 Loan Agreement and signed it 'on good faith' because Mr Abdel-Messih was a community church member, an unofficial elder of the church and the brother of the senior pastor and another elder of the church.[92]  At the time he signed the 2014 Loan Agreement, he did not take any independent advice and said that he did not know that he was giving a personal guarantee or that he had agreed to give the plaintiffs security over the Westminster Property.[93]

   [92] ts 140.

   [93] ts 188 - 189.

8. Mr Qaqish agreed he saw the words 'secured loan agreement' on the front page of the 2014 Loan Agreement when he signed it but that he did not pay attention to the fact that he was a party to the agreement as guarantor.[94]  He did not recall creating the agreement, completing any amendments or 'data entry' in the agreement or presenting it to Mr Abdel-Messih to sign.[95]  Mr Qaqish claimed he did not understand the terms of the 2014 Loan Agreement which he signed. 

   [94] ts 161.

   [95] ts 162 - 163.

9. Mr Qaqish accepted that at the time he signed the 2014 Loan Agreement, he had some understanding of what a guarantee was but this was 'specific to bank loan agreements, not this sort of agreement'.[96]  He agreed that if he was dealing with a bank, a person who was a guarantor was legally liable to pay back the money.  He did not think this applied if he was dealing with someone who was not a bank because he had never dealt with anyone other than a bank for loan funds.[97]

   [96] ts 164.

   [97] ts 164.

10. For the following reasons, I reject Mr Qaqish's evidence and accept Mr Abdel-Messih's evidence.  I find that the discussions which occurred prior to entry into the 2014 Loan Agreement occurred in late August or September 2014.  This is consistent with the objective factual evidence as to the amount which was required to be repaid under the 2012 Loan Agreement, the establishment of the Fund, and the date of the 2014 Loan Agreement.

11. First, the 2014 Loan Agreement includes a number of details which, I accept, were not known by Mr Abdel-Messih at that date.  These include the change in borrower (from Simplex Projects to ProMEQ), the name and details of ProMEQ, and the address of the property that was proposed as security.  Mr Qaqish did not positively deny completing these details.  I specifically reject Mr Qaqish's evidence that he did not know he agreed to give security over the Westminster Property.  There is no evidence that Mr Abdel-Messih had any knowledge about the Westminster Property (or in fact the change in borrower) prior to entry into the 2014 Loan Agreement.  The only person who knew the proposed borrower was ProMEQ and what assets ProMEQ had at that time, which included the Westminster Property, was Mr Qaqish.  I accept and find that Mr Qaqish inserted the details into the 2014 Loan Agreement and gave it to Mr Abdel-Messih to sign.

12. Second, Mr Qaqish gave no explanation as to how the plaintiffs became parties to the 2014 Loan Agreement.  Mr Abdel-Messih's evidence is cogent and consistent with the objective evidence that the Fund was established in June 2014.

13. Third, Mr Qaqish's evidence that the 'original investment' was repaid before there was an agreement to 'roll over' the funds is not supported by the documentary evidence as to the timing of these payments, as set out below.

14. Fourth, there is no evidence that before or at the time the 2014 Loan Agreement was signed, Mr Qaqish told Mr Abdel-Messih this document did not reflect their agreement.  Any dispute as to whether the 2014 Loan Agreement (and the previous agreement) reflected the arrangement between the parties only arose after the plaintiffs sought payment of the outstanding amount.

15. Fifth, at the time, it is clear that Mr Qaqish knew and understood what a guarantee was.  I do not accept that his understanding was limited in the manner he suggested.  In particular, he did not explain why he considered a guarantee with a private individual or company would be different to that entered into with a bank or financial institution.

16. Sixth, at the time of entry into the 2014 Loan Agreement, Mr Qaqish had been working in the construction industry for more than 15 years, including in roles where he was responsible for sub-contractors and contract management.  He is an intelligent man with tertiary qualifications.  I do not accept he would have simply signed any agreement that was put in front of him without reading it or considering its terms.

17. Mr Abdel-Messih's evidence was that after the 2014 Loan Agreement was signed, Mr Qaqish paid him $900,000 and that he immediately paid it back to Mr Qaqish's company.[98]  He explained that Mr Qaqish told him that in order to repay the original loan, he needed to release money from other sources and was required to guarantee the money would be returned.  Mr Qaqish told Mr Abdel-Messih that he needed him to write a cheque for $450,000 which would be held by these parties as a guarantee.  Mr Abdel-Messih wrote out a cheque for $450,000 and gave it to Mr Qaqish.[99]

    [98] ts 30.

    [99] ts 30.

18. Mr Qaqish denied that he required Mr Abdel-Messih to promise to relend $900,000 before he paid this amount back to him.[100]  He could not recall whether Mr Abdel-Messih gave him a cheque for $450,000.  He subsequently agreed he received a cheque for $900,000 from Mr Abdel-Messih before he repaid $900,000 to him, but could not recall why this had occurred.[101]

    [100] ts 157.

    [101] ts 158.

19. Banking records of the Fund were tendered at trial.[102]  These records show two things.  First, the balance of the original amount owed by Mr and Mrs Abdel-Messih (of $900,000) was repaid in two amounts: a cheque for $450,000, which was deposited on 9 September 2014, and a bank transfer on 18 September 2014 for $450,000.  Second, $900,000 was paid to ProMEQ by cheque from the Fund dated 14 September 2014.  This cheque was deposited on 18 September 2014. 

    [102] Exhibit 2.2.

20. In my view, the plaintiffs' banking records provide the best evidence for what occurred.  On the basis of these records, I accept and find that an initial repayment of $450,000 for the funds advanced under the 2012 Loan Agreement occurred on 9 September 2014.  Mr Qaqish required Mr Abdel-Messih to provide him with a cheque for $900,000 before he repaid the remainder of the funds advanced under the 2012 Loan Agreement.  He agreed to hold this cheque and not cash it in until instructed by Mr Abdel-Messih.  The remaining repayment (of $450,000) together with the deposit of the cheque for $900,000 occurred on 18 September 2014, after the 2014 Loan Agreement was signed by the parties.

Terms of the 2014 Loan Agreement

1. The recitals to the 2014 Loan Agreement state that the Fund and ProMEQ 'wish to formally record the terms of all borrowings past, present or future that might be made' and that the terms of the 2014 Loan Agreement apply to all borrowings (Recital C).

2. The 2014 Loan Agreement expressly records that the sum of $900,000 was lent by the Fund to ProMEQ, the loan 'was made' on 25 September 2014, and that the loan is secured.[103]  It also records a representation by ProMEQ that the purpose of the loan is to 'enable [ProMEQ] to Property developments (sic)' and that it will not be used for any other purpose without the Fund's prior written approval.[104]

   [103] Exhibit 2.1, cl 1.1.

   [104] Exhibit 2.1, cl 1.4.

3. It was an express term of the 2014 Loan Agreement that:

   (a)the loan was required to be repaid on or before 19 April 2016, or on default, or upon the occurrence of any other event which entitled the Fund to require repayment;[105] and

   (b)ProMEQ offered to secure the loan by a charge over the Westminster Property by way of a mortgage.[106] 

   [105] Exhibit 2.1, cl 2.1.

   [106] Exhibit 2.1, cl 7.1, cl 7.2.

4. Clause 4 of the 2014 Loan Agreement sets out the parties' agreement as to the payment and calculation of interest.  This clause provides that:[107]

   (a)interest was payable on the loan at a rate of 8% per annum;

   (b)interest was required to be repaid at the completion of the loan term;

   (c)interest was required to be paid within 7 days of the expiry of 'each Interest Period' calculated on the balance outstanding at the beginning of each Interest Period; and

   (d)any instalment payments received were to be applied as follows; first, to the payment of any interest outstanding at the time, and second, as to the balance of the loan.

   [107] Exhibit 2.1, cl 4.1, cl 4.2.

5. Clause 9 of the 2014 Loan Agreement sets out the personal obligations of Mr Qaqish under the agreement.  It states that the 2014 Loan Agreement was entered into at his request and that in consideration of the Fund making the loan to ProMEQ and entering into the agreement, Mr Qaqish guaranteed the 'due and punctual performance' of all of the terms of the 2014 Loan Agreement, including the obligation to repay the loan in full on the date of repayment.[108]  Mr Qaqish covenanted and undertook to 'promptly pay on demand' by the Fund the amount of the loan, and agreed that on a demand being made, it became a debt which was immediately due and payable.[109]  Mr Qaqish also acknowledged that the Fund could serve a demand for payment on him even if no demand for payment had been made to ProMEQ.[110]

   [108] Exhibit 2.1, cl 9.1.

   [109] Exhibit 2.1, cl 9.2.

   [110] Exhibit 2.1, cl 9.2.

6. Following execution of the 2014 Loan Agreement, Mr Abdel‑Messih did not take any steps to register a caveat over the security.  He explained that he thought this would be done by Mr Qaqish.[111]  When asked why he believed this was the case, he referred to cl 7.4(c) of the 2014 Loan Agreement.[112]  This clause contains an acknowledgement by ProMEQ that it will comply with all applicable laws in providing the security and bear the costs of compliance with those laws.

   [111] ts 38 - 39.

   [112] ts 78 - 79.

Delay in repayment of loan

1. The funds received from the plaintiffs were used by ProMEQ for the development of the Westminster Property as well as the purchase and development of three properties in Armadale, being 3A Serls Street, 3B Serls Street and 43 Forrest Road.

2. In about March 2016, Mr Qaqish provided Mr Abdel-Messih with a loan schedule summary setting out the calculation of the interest that was then payable.  At that stage, there was a disagreement between them as to how interest should be calculated; namely, whether interest was to be compounded daily or monthly.  On being provided with this document, Mr Abdel-Messih agreed to the calculation of the interest on a monthly compound basis and signed this document, together with the other plaintiffs.[113]  Mr Qaqish did not recall who prepared the document, although, he recalled a conversation about the amount of interest that was payable.  To the extent it is relevant, I find that Mr Qaqish prepared this document.

   [113] Exhibit 3.6A; ts 65.

3. Prior to the loan becoming due for repayment in April 2016, Mr Abdel-Messih contacted Mr Qaqish to ask for an update on the development which was the subject of his security.  Mr Qaqish told him that the development had been completed and that three units had been constructed on the site which were in the process of being sold. 

4. On 2 May 2016, Mr Abdel-Messih emailed Mr Qaqish asking for an update on the repayment of the loan.[114]  In the email, he referred to the 'business loan repayment' and the previous update he had received from Mr Qaqish that repayment would be delayed until settlement of the units had occurred.  In response, Mr Qaqish referred to the units being for sale and said that he hoped to have the full amount by June, after these units were sold.[115]  He indicated he could immediately pay $450,000, with the balance to be paid from future sales.  Mr Qaqish referred to a discussion between them in person about the return from the development which he described as 'quite disappointing' as it had only returned a net profit of $35,000.  Mr Abdel-Messih asked for $450,000 to be transferred into his bank account and provided his bank account details.[116]  Mr Qaqish indicated the balance would be transferred once more sales settled.[117]

   [114] Exhibit 2.4, TB39.

   [115] Exhibit 2.4, TB39.

   [116] Exhibit 2.4, TB38.

   [117] Exhibit 2.4, TB38.

5. Between 6 and 9 May 2016, ProMEQ transferred $450,000 to the plaintiffs' bank account in three separate payments of $150,000.[118]

   [118] Exhibit 2.5, TB42.

6. On 17 September 2016, Mr Abdel-Messih sent a further email to Mr Qaqish asking about the outstanding balance.  In the email, he set out his calculation of the then outstanding interest on the balance of $450,000, namely $161,063.01, and asked what ProMEQ's intention was in repaying the balance of the loan and accrued interest.[119] 

   [119] Exhibit 2.5, TB42, TB43.

7. Mr Qaqish responded on the same day and offered to meet.[120]

   [120] Exhibit 3.10A, TB287.

8. On 19 September 2016, Mr Qaqish and Mr Abdel-Messih met.  During this meeting, Mr Qaqish told Mr Abdel-Messih that he was still waiting on the sale of the two additional units at the Westminster Property and that he would pay him when these units were sold.[121]

   [121] ts 40.

9. After the meeting, Mr Qaqish sent an email to Mr Abdel-Messih offering to pay the 'Outstanding Balance of the Initial Loan' of $450,000 and half of the gross profit of $34,690 from the property development.  Mr Qaqish also offered to pay the balance on the settlement of the sale of future properties or on the refinancing of his current loans, whichever was earlier.[122] 

   [122] Exhibit 2.5, TB41.

10. On 20 September 2016, Mr Abdel-Messih responded rejecting Mr Qaqish's proposal, which he believed mischaracterised his position as a shareholder receiving a return based on the yield of the property development.  He reiterated that the Fund had a 'secured business loan at 8% per annum'.  Mr Abdel-Messih indicated he was prepared to consider a lower return than the agreed interest rate of 8% per annum but that Mr Qaqish's offer was not acceptable.[123]  Mr Qaqish responded on 21 September 2016 and they agreed to meet again on 23 September 2016.[124]

    [123] Exhibit 2.5, TB40.

    [124] Exhibit 2.5, TB40.

Discussions to vary rate of interest under Agreement

1. Mr Abdel-Messih and Mr Qaqish met at Mr Qaqish's office in Subiaco at 10.00 am on 23 September 2016.  Mr Qaqish told Mr Abdel‑Messih that he wanted to agree on a mutual figure.  He referred to the decline in the property market and that he was not making the profit that had been anticipated.  Mr Qaqish told Mr Abdel‑Messih that he needed him to reduce the interest rate from 8% per annum.  After some further discussion, Mr Abdel-Messih agreed to reduce the interest rate to 6% per annum but wanted a deadline on when the loan was going to be repaid.  Mr Qaqish responded by saying 'I guarantee it that payment will be by the end of October.  End of October, payment will be made'.[125]  Mr Abdel-Messih agreed to this and Mr Qaqish amended the interest calculations to reflect an interest rate of 6% per annum instead of 8% per annum.[126]

   [125] ts 41 - 42.

   [126] ts 168 (Qaqish).

2. Mr Qaqish accepted that he did not repay the loan by the end of October 2016 and did not pay any further amount to the plaintiffs after this date.[127]

   [127] ts 168.

1. When asked whether all three properties that had been developed at the Westminster Property had been sold at this stage, Mr Qaqish initially could not recall whether this was the case.[128]  On being shown a copy of a letter from the liquidator to Mr Abdel-Messih dated 23 July 2020,[129] Mr Qaqish accepted that all three properties had been sold three or four months before September 2016, and that he knew this at that time.[130]  From the sale proceeds of the properties at the Westminster Property, ProMEQ paid Mr Abdel-Messih $450,000, Police & Nurses $410,000, and Mr Qaqish $200,000 in repayment of his director's loan.  Other amounts were paid to Simplex Projects for the construction of other properties that were then under development.[131]

   [128] ts 168.

   [129] Exhibit 2.19.

   [130] ts 169.

   [131] ts 172 - 173.

2. On 24 September 2016, Mr Abdel-Messih emailed Mr Qaqish saying that he was 'happy to accept the proposed settlement of the business loan agreement as per your attached spread sheet'.[132]  The spreadsheet annexed to the email was entitled 'Loan Schedule Summary' for the 'Abdel-Messih Superannuation Fund Investment 2014 ‑ 2016'.  It reflected a borrowed amount of $900,000 and an interest rate of 6% per annum calculated on the loan balance up to and including October 2016.[133]

   [132] Exhibit 2.6; Exhibit 3.11.

   [133] Exhibit 3.11, TB305.

3. On 1 November 2016, Mr Qaqish emailed Mr Abdel-Messih with an update on the properties.  He advised Mr Abdel-Messih that one of the properties had sold and was due for settlement at the end of the month and that once sold, he would have some funds available 'to settle account'.[134]  In evidence, Mr Qaqish explained that he was referring to the sale of one of the Armadale properties and denied being intentionally vague about which property he was referring to.[135]

   [134] Exhibit 3.10A, TB296.

   [135] ts 170.

4. Mr Abdel-Messih followed up with Mr Qaqish on 5 December 2016 noting that he had expected to hear from him about the sale of the property.  In response, Mr Qaqish told him that the proposed purchaser had requested an extension for finance until 16 December 2016.[136] 

   [136] Exhibit 2.7.

5. Mr Abdel-Messih emailed Mr Qaqish again on 23 April 2017[137] explaining that while he understood that Mr Qaqish had been 'caught in an unexpected hard and difficult time', he needed the money immediately.  When he did not receive any response from Mr Qaqish, he emailed him again on 27 May 2017.  In response to the second email, Mr Qaqish told him that he could not pay the outstanding amount, three banks had refused him refinancing, and he did not know what else to do except 'wait on the sales to happen'.[138]

   [137] Exhibit 3.10.

   [138] Exhibit 2.8; Exhibit 3.12.

6. There is no evidence before the court that in May 2017, Mr Qaqish had sought and been refused refinancing.  The letters refusing his applications for refinancing that were tendered at trial are dated November 2017 and November 2018.[139]  Mr Qaqish explained that, at this time, he did not have any funds to inject into the business as he had to pay his own mortgage and had minimal income.[140] 

   [139] Exhibit 3.9.

   [140] ts 130.

7. On 30 July 2017, Mr Abdel-Messih contacted Mr Qaqish again reminding him that they needed to meet urgently and asking that he not ignore this request.  On 31 July 2017, Mr Qaqish responded by telling Mr Abdel-Messih that he had nothing more to add to his previous response but agreed to meet with him on 1 August 2017 at a café in Maylands.[141]  In reply, Mr Abdel-Messih said that this was not what had been agreed nor a condition of their agreement and that this response was unacceptable.  Mr Abdel-Messih asked him to come up with payments or a plan of set payment dates, failing which he would enforce the agreement.[142]

   [141] Exhibit 2.10, ts 46.

   [142] Exhibit 2.10, TB53.

8. On 1 August 2017, when Mr Abdel-Messih arrived at the café, Mr Qaqish was already there with his brother, Mousa Qaqish.  At this meeting, Mr Qaqish told Mr Abdel-Messih that the property market was stagnant and that 'we have to be realistic'.  Mr Qaqish said that he could not sell the properties and wanted him to take properties instead of cash.  When Mr Abdel-Messih asked what he was being offered, Mr Qaqish told him that he had 'two houses in Armadale worth $700,000' and 'another block of land in Armadale worth again $700,000'.[143]  Mr Qaqish said Mr Abdel-Messih could take either of these, which was more than what he was owed, and pay the difference back to him.  When Mr Abdel-Messih asked why Mr Qaqish was talking about the Armadale properties when his security was the Westminster Property, Mr Qaqish told him that the units at the Westminster Property had been sold and the proceeds injected in the Armadale projects.  Mr Abdel-Messih responded by saying Mr Qaqish had stolen his security and taken the money.  Mr Abdel-Messih then left.[144] 

   [143] ts 46.

   [144] ts 47.

9. Mr Abdel-Messih's evidence was that this meeting was the last time he spoke to Mr Qaqish where, in his words, he 'discovered that [Mr Qaqish] sold my property - my security and didn't pay me' and that all subsequent communication between them has only occurred through the church mediators.[145] 

   [145] ts 53 - 54.

10. Mr Qaqish could not recall whether he told Mr Abdel-Messih at this meeting (or beforehand) that all the properties at the Westminster Property had been sold.[146] 

    [146] ts 176.

11. To the extent that it is relevant, I accept and find that it was at this meeting on 1 August 2017 that Mr Qaqish told Mr Abdel-Messih that all three properties at the Westminster Property had been sold.  This is more consistent with both the conversation that occurred at this meeting as well as the evidence that this was the last time they met in person. 

12. Later on 1 August 2017 at 6.47 pm, Mr Abdel-Messih emailed Mr Qaqish asking him to update the schedule of payments to include a calculation of the amount that would be due at the end of the year.  Mr Abdel-Messih expressed the view that this would hopefully be the last update and that the amount would be paid before the end of the year.[147]

    [147] Exhibit 2.10.

13. Following this meeting and email, a number of attempts were made by various officers of the church to mediate the dispute between the parties.  The first attempt was in September 2017 by Mr Qaqish's brother, Mousa Qaqish, where he proposed that Mr Qaqish repay the full amount by 30 June 2018 and if paid prior to that date, the interest rate would be adjusted to 6% per annum.  On 13 October 2017, Mr Abdel-Messih responded to this offer in an email to Mr Mousa Qaqish (which was copied to Mr Qaqish).  Mr Abdel-Messih agreed to adjust the interest rate if the full amount was re-paid by the end of June 2018 but explained three issues he had with the proposed repayment plan.  First, the offer was subject to the sale of two properties at Armadale which had 'nothing to do with me as an investor'.[148]  When asked why he referred to himself as an 'investor' in the email, Mr Abdel-Messih said this was a 'misspelled word' and that he meant 'lender' but 'used the wrong word'.[149]  Second, he required new security to be provided, as the original security provided in the 2014 Loan Agreement had since been sold.  Third, interest needed to be paid regularly, to prevent the outstanding balance from accumulating further.

    [148] Exhibit 3.13.

    [149] ts 70.

14. The next attempts at mediating the dispute between the parties occurred in February or March 2018 when Mr Abdel-Messih asked a church committee to 'get involved' to see whether the matter could be resolved.[150]  Following discussions between this committee, Mr Qaqish and his brother Mousa Qaqish, Mr Qaqish made a further offer to Mr Abdel-Messih.  In his response to the committee and Mr Qaqish rejecting this offer, Mr Abdel-Messih referred to both the interest rate in the 2014 Loan Agreement (of 8% per annum) as well as the adjusted interest rate of 6% per annum 'as I have agreed to discount it'.[151]  The primary issue between the parties at that stage was whether any conditions (such as the provision of security and lodgment of caveats) should be imposed on any agreed resolution.[152]  Mr Abdel-Messih insisted on both of these conditions and required a response within 24 hours, which was not forthcoming.

    [150] ts 47 - 48.

    [151] Exhibit 2.13, TB65.

    [152] Exhibit 2.13, TB64.

15. Shortly after sending his response, Mr Abdel-Messih received a call from his brother Daniel who was on the church committee.  Daniel told him that Mr Qaqish had agreed to give him security over both 3A and 3B Serls Street, Armadale to replace the security under the 2014 Loan Agreement.  Mr Abdel-Messih agreed to accept this and prepared a declaration to be signed by Mr Qaqish alone.  Mr Abdel‑Messih accepted that he did not sign this document.[153] 

    [153] ts 88 - 89.

16. The declaration calculated the outstanding balance of the loan at $593,478.60 (from September 2014 until September 2016) at an interest rate of 8% per annum.  It also provided for security over two properties (Lot 2 on survey strata plan 57671, Vol 2732, Folio 391 and Lot 3 on survey strata plan 57671, Vol 2732, Folio 392) as replacement security for the Westminster Property.  The copy of the declaration that was tendered in evidence was unsigned and undated.[154]  Mr Abdel-Messih's evidence was that Mr Qaqish signed this document, which was witnessed by Dr Aimen, a member of their church.[155] 

    [154] Exhibit 2.14.

    [155] ts 51.

17. Mr Abdel-Messih said that after he received the signed declaration, he took it (together with a copy of the 2014 Loan Agreement) to Landgate to lodge a caveat against three properties: Lot 22 on Plan 2801, Lot 2 on survey strata plan 57671, Vol 2732, Folio 391 and Lot 3 on survey strata plan 57671, Vol 2732, Folio 392.[156]  On the front page of the caveat is a handwritten note which states '14/3/18 SIGNED AS A WITNESS ONLY.  TM'.[157]  On 11 April 2018, following the issue of a requisition notice, the caveat was amended to remove the reference to Lot 22 on Plan 2801.

    [156] ts 51.

    [157] Exhibit 4.9.

18. A second, similar copy of the declaration was also tendered in evidence.  This copy has been signed by Mr Qaqish but has not been witnessed.[158]  There are three differences between this copy and the first declaration.  First, this copy states that the replacement security has been agreed by both the Lender (the plaintiffs) and the Borrower (ProMEQ), as opposed to Mr Qaqish alone (both as guarantor and as proprietor of ProMEQ) agreeing to provide the additional security.  Second, this copy contains an additional paragraph which states:[159]

    The Lender and Borrower both agree that the unpaid outstanding balance of $593,478.60 plus a fixed amount of $56,521.40 totalling a full amount of $650,000 will be paid by end of year 2020, or earlier, depending on availability of funds with Borrower.

    [158] Exhibit 3.15.

    [159] Exhibit 3.15, TB340.

19. Third, this copy is dated 16 March 2018 (as opposed to 14 March 2018).[160]  The number '16' is in a blue type face and a different font to the remainder of the document. 

    [160] ts 54.

20. Mr Abdel-Messih denied including either of the first two matters in the document he prepared for Mr Qaqish to sign.[161]

    [161] ts 52 - 53.

21. Mr Qaqish accepted that he prepared the second of these documents (with the additional paragraphs) but could not recall whether he signed the other document.  His evidence was that '[i]f I don't have my signature there then I don't have my signature there.'  Mr Qaqish recalled having his signature witnessed at the church but could not confirm which document was witnessed.[162]

    [162] ts 187.

22. To the extent it is relevant and for the following reasons, I accept Mr Abdel-Messih's evidence and find that on or about 14 March 2018, Mr Qaqish signed the declaration prepared by Mr Abdel-Messih, which was witnessed by a church member.

23. First, at that time, Mr Abdel-Messih had repeatedly rejected any proposal that repayment of the funds be dependent on ProMEQ and Mr Qaqish having funds available.  There is nothing in the evidence before the court to support a conclusion that he had changed his view.

24. Second, Mr Abdel-Messih's evidence is supported by both the timing of the lodgment of the caveat (on 14 March 2018), as well as its amendment on 11 April 2018 to limit its operation to the two properties referred to in the declaration prepared by Mr Abdel-Messih.

25. Third, Mr Qaqish did not give any cogent explanation as to why he prepared the second declaration at this time, in contrast to the explanation given by Mr Abdel-Messih.

26. On 27 April 2018, the plaintiffs' solicitors issued a notice of demand to Mr Qaqish demanding payment in full of the then outstanding balance of the loan (and interest) of $677,077.06 by 28 May 2018.[163]  Mr Qaqish responded on 24 May 2018 stating that the 'agreement' was onerous, unfair and 'does not fully comply with the law standards and parameters'.  He did not provide any further detail as to the basis for this contention.[164]

    [163] Exhibit 2.15. While this document is undated, both Mr Qaqish's response to the notice as well the subsequent statutory demand issued by the plaintiffs refers to a notice of demand issued on 27 April 2018.  I accept and find that this was the date this notice of demand was issued.

    [164] Exhibit 3.17A.

27. On 1 June 2018, Mr Qaqish wrote to Mr Abdel-Messih informing him that ProMEQ was entering into voluntary liquidation.  In this letter, Mr Qaqish referred to Mr Abdel-Messih's 'never-tiring request for the return of the remaining investment'.[165]  Mr Abdel-Messih's evidence was that he received this letter towards the end of June by registered post.[166]

    [165] Exhibit 2.17.

    [166] ts 57.

28. On 13 June 2018, the plaintiffs' solicitors issued a statutory demand to ProMEQ seeking payment of $679,455.37.[167]

    [167] Exhibit 3.17A, TB362.

29. Administrators were appointed to ProMEQ on 2 July 2018.[168]  On 31 July 2018, ProMEQ was ordered to be wound up in insolvency, with Malcolm Field appointed as liquidator.[169]  In July 2020, the liquidators advised Mr Abdel-Messih it was unlikely there would be any dividend distribution to unsecured creditors, including the plaintiffs.[170]  It is not in dispute that no dividend was paid to the plaintiffs from the winding up of ProMEQ.

    [168] Exhibit 3.3.

    [169] Exhibit 2.22, Exhibit 4.3.

    [170] Exhibit 2.23.

30. On 22 September 2020, the plaintiffs commenced these proceedings.

Is the 2014 Loan Agreement enforceable against Mr Qaqish?

1. Three reasons were advanced by Mr Qaqish as to why he says the 2014 Loan Agreement is not enforceable. First, the 2014 Loan Agreement does not properly characterise what was agreed between the parties; namely, that it was an investment and not a loan. Second, he did not understand that in signing the 2014 Loan Agreement, he was providing a personal guarantee to the plaintiff and did not have an opportunity to seek legal advice before signing. Third, the terms of the 2014 Loan Agreement are unfair and should be set aside under the Contracts Review Act, alternatively, the unfair contract provisions of the ACL.

2. The plaintiffs say that the guarantee provided by Mr Qaqish under the express terms of the 2014 Loan Agreement is enforceable and that none of the reasons advanced by Mr Qaqish support a contrary position.

What was the agreed purpose of the funds advanced by the plaintiffs?

1. Mr Qaqish contended at trial that the intention of the parties in entering into the 2014 Loan Agreement was for the plaintiffs to 'invest in the property market'.  Mr Qaqish submitted that due to the slowdown in the property market between 2014 and 2017, ProMEQ had no cash available to repay the plaintiffs and that all of its assets were 'frozen in the property market'.[171]

   [171] ts 105.

2. As set out above, Mr Qaqish did not adduce any evidence in support of this contention nor did he explain what he contended were the terms of the agreement between the parties.  He did not give evidence of any oral discussion prior to signing the 2014 Loan Agreement which would support a conclusion that the parties had agreed the monies advanced were an investment rather than a loan or the terms of any such investment.  Even if I were to accept his evidence that these funds were a rollover of the earlier investment, which I do not, Mr Qaqish did not give evidence of any oral conversation prior to June 2012.  His evidence was simply that Mr Abdel-Messih asked to invest in his company.  This evidence, if it were to be accepted, is more consistent with an offer to purchase shares in the company.  There is no suggestion that this was ever contemplated or had occurred.

3. In contrast, Mr Abdel-Messih's evidence of the oral conversation that preceded the advance of the funds in 2012 is consistent with the terms of the 2012 Loan Agreement.  Similarly, his evidence of the circumstances in which the loan was 'renewed' is consistent with the matters which have been objectively proven as well as the terms of the 2014 Loan Agreement. 

4. Given these matters, I find that the funds advanced by the plaintiffs in September 2014 were a loan to ProMEQ, as opposed to an investment.  The 2014 Loan Agreement accurately documents the agreement between the parties as to the basis on which these funds were provided.

Is Mr Qaqish bound by the guarantee in the 2014 Loan Agreement?

1. A contract for guarantee is a collateral contract which requires a party to answer for the debt or default of another party and be accountable in the event of their default.[172]  That is, the purpose of the guarantee is to secure performance of the contract.

   [172] Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245, 254.

2. The general principles as to the formation of a contract apply to a contract of guarantee.  This includes the requirement that the agreement is supported by consideration, and that there is an intention to create legal relations between the parties.

3. The advance of money in response to a request has been held to be sufficient consideration for a guarantee,[173] as has contemporaneous consideration.[174]  However, if a guarantee is given to secure a debt which has already been incurred and there is no further consideration, the guarantee will fail for want of valuable consideration.[175]

   [173] El Khoury v Harsany; Taouk v Assure (NSW) Pty Ltd [2018] NSWSC 1774 [46].

   [174] Coghlan; Breusch v Watts Development Division Pty Ltd (1987) 10 NSWLR 311.

   [175] Bendigo and Adelaide Bank Ltd (ACN 068 049 178) v Pickard [2019] SASC 123 [74].

4. In this case, the 2014 Loan Agreement records that the plaintiffs lent $900,000 to ProMEQ at the request of Mr Qaqish and that in consideration for this loan and the plaintiffs' entry into the 2014 Loan Agreement, Mr Qaqish guaranteed ProMEQ's due and punctual performance of their obligations under the 2014 Loan Agreement.[176] 

   [176] Exhibit 2.1, cl 9.1.

5. The evidence before the court is that the amount of $900,000 was received by ProMEQ after (or at least contemporaneously with) the execution of the 2014 Loan Agreement.  On this basis, I accept that there is sufficient consideration for the guarantee. 

6. The question as to whether the parties had an intention to create legal relations is not to be determined by reference to the parties' subjective or uncommunicated thoughts and beliefs.  It is to be determined objectively by considering the terms of the agreement, the status of the parties to the agreement, their relationship to one another and any other surrounding circumstances.[177] 

   [177] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

7. In this case, at the time the 2014 Loan Agreement was entered into, Mr Qaqish was the sole director, company secretary and shareholder of ProMEQ. The 2014 Loan Agreement defines Mr Qaqish as 'the Guarantor' and a separate party to ProMEQ, which is defined as 'the Borrower'. The Recitals summarise the different obligations of the parties and state (in Recital D) that '[t]he Guarantor has agreed to guarantee the Borrower's obligations [to the plaintiffs]'. The only clause of the 2014 Loan Agreement which refers to the Guarantor is cl 9 which sets out in detail the obligations of Mr Qaqish as Guarantor. The 2014 Loan Agreement provides that it is to be signed separately by ProMEQ (in accordance with s 127 of the Corporations Act) and Mr Qaqish.

1. Each of these matters support a conclusion that the parties objectively intended to enter into a contract for guarantee.

2. While Mr Qaqish did not specifically plead a defence of non est factum (that is, that the 2014 Loan Agreement is invalid because he was mistaken as to its character when signing it), his affidavit of defence and evidence effectively sought to raise this defence.  While I have rejected Mr Qaqish's evidence that he was, as a matter of fact, mistaken about the terms of the 2014 Loan Agreement, I do not, in any event, consider that he would be entitled to rely on this defence for the following reasons.

3. As the High Court held in Petelin v Cullen,[178] there are only a very limited class of persons who may avail themselves of this defence.  In that case, the High Court held that:[179]

   [The defence] is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document.  To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part.  Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence.

   [178] Petelin v Cullen (1975) 132 CLR 355.

   [179] Petelin v Cullen 360 - 361.

4. Carelessness, in the context of this defence, is the failure to take reasonable precautions to ascertain the character of a document before signing it.[180]

   [180] Petelin v Cullen 361.

5. Mr Qaqish is an intelligent, well-educated man whose employment responsibilities have included contractual management and negotiation.  There is no suggestion that he was required to rely on others for advice as to the signing of documents. 

6. Apart from contending the funds were advanced as an investment, Mr Qaqish did not explain what he thought the agreement between the parties was and how it differed from what he signed.  While his evidence was that Mr Abdel-Messih rejected an earlier investment agreement in 2012, there was no suggestion that any investment agreement was given by him to Mr Abdel-Messih in September 2014. 

7. On its face, the 2014 Loan Agreement is a 'secured loan agreement'.  On the front page of the document, it describes ProMEQ and Mr Qaqish separately and defines Mr Qaqish as a 'Guarantor'. 

8. Even if I were to accept Mr Qaqish's evidence that he did not read the 2014 Loan Agreement (which I do not), Mr Qaqish gave no evidence of any steps he took, let alone any reasonable steps, to understand the character and obligations arising under the 2014 Loan Agreement before signing it.  Given this, any mistake that occurred, in my view, would be entirely due to his own carelessness.

9. For these reasons, any defence of non est factum cannot be made out.

10. Given these findings, it is my view that the guarantee in the 2014 Loan Agreement entered into between Mr Qaqish and the plaintiffs is a binding contract which is enforceable by the plaintiffs unless Mr Qaqish can establish any of the statutory defences referred to in his defence.  I address these below.

Was the failure to register the plaintiffs' charge (or caveat) against the Westminster Property a breach by Mr Qaqish of the 2014 Loan Agreement?

1. While the plaintiffs did not seek any relief in relation to the sale of the Westminster Property, which had been offered as security for the 2014 Loan Agreement, the plaintiffs contended in their statement of claim that ProMEQ or Mr Qaqish's failure to register a charge against this property was a breach of the 2014 Loan Agreement.

2. I do not agree.

3. Under cl 7 of the 2014 Loan Agreement, ProMEQ agreed to offer a charge over the Westminster Property up to the value of the loan, being $900,000.  Clause 7.6 of the 2014 Loan Agreement contained an acknowledgment that 'the Lender', that is, the plaintiffs, may register the charge as they thought fit.  If this occurred, the plaintiffs were required to bear the costs of the registration.

4. There is nothing in the terms of the 2014 Loan Agreement, including cl 7, which required ProMEQ or Mr Qaqish to lodge a caveat over the Westminster Property to protect the plaintiffs' interest.  On this basis, any failure to lodge a caveat was not a breach of the 2014 Loan Agreement.

Are the terms of the 2014 Loan Agreement unfair?

1. Mr Qaqish says the 2014 Loan Agreement was an unfair and onerous agreement which placed him at a significant disadvantage because it was an agreement 'purely to invest in the property market'.[181] In support of this contention, Mr Qaqish relied on s 25 and s 26 of the Fair Trading Act. I accept that it was sufficiently clear from his defence that Mr Qaqish intended to raise as an issue whether cl 9 of the 2014 Loan Agreement was an unfair contract term within the meaning of pt 2-3 of the ACL, which applies to contracts in Western Australia entered into on or after 1 January 2011.[182]  While I have rejected Mr Qaqish's contention as to the characterisation of the agreement between him and the plaintiffs, I have considered whether the terms of the guarantee are unfair contract terms under pt 2-3 of the ACL.

   [181] ts 140.

   [182] Fair Trading Act 2010 (WA) s 19, s 38.

2. Before turning to consider the specific provisions of the ACL, it is useful to reiterate the principles that govern the law of contract in Australia.  As a starting point, parties are free to enter into contractual relationships of their choice.  There are, however, limits imposed on this freedom by both the common law and statute.  Limits imposed at common law include the refusal by courts to enforce certain contracts which are contrary to public policy.  Limits imposed by statute include the inability to contract out of certain provisions, including consumer law protections.

3. It has been accepted by the courts that pt 2-3 of the ACL (and its statutory equivalents) is not intended to set aside the fundamental principle of freedom of contract.  This was recognised by Gilmour J in Australian Competition and Consumer Commission v CLA Trading Pty Ltd,[183] who noted that the provisions in pt 2-3 of the ACL (and their counterparts in the Australian Securities and Investments Commission Act 2001 (Cth)) are a statutory exception to the common law approach of giving primacy to parties' freedom of contract. This statutory exception, however, only applies to standard form consumer contracts. The rationale for this exception is that:[184]

   The terms of standard form contracts are not negotiated between the parties.  Terms of such contracts are generally presented on a 'take it or leave it basis', with the consumer facing the alternatives of either accepting the terms without negotiation or not contracting at all.  The latter in many cases will, ordinarily, not be a realistic alternative, given the prevalence of standard form contracts in the modern Australian commercial environment.

   [183] Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377.

   [184] Australian Competition and Consumer Commission v CLA Trading Pty Ltd [48].

4. Part 2-3 of the ACL is directed towards 'addressing abuses of bargaining power by individuals or groups which result in the party with the significantly lesser bargaining power being subject to unfair contractual terms'.[185]  As Burns J stated in Castronova v Tjung:[186]

   The protection afforded to consumers by Part 2.3 of the ACL is not protection from the consequences of entering into an imprudent contractual arrangement.  It need hardly be said that the protection afforded by Part 2.3 is also not intended to insulate a party from the consequences of their actions if they simply do not bother to read a contract, or choose not to seek advice where they may be in doubt about the effect of an agreement or its terms.

   In the present proceedings, 'unfairness', in the sense that this concept is addressed by Part 2.3 of the ACL, is not established by the Court undertaking a subjective assessment of the consequences that flow from a breach of the Contract and determining whether, on unstated moral grounds, that the result for the defendants is 'fair' or 'unfair' in a general sense.  Such an approach would undermine certainty in contracting, and substitute the terms of the bargain made by the parties with terms imposed by the Court based on a general, subjective notion of fairness.  Fairness for the purposes of the provisions of the ACL, where they apply, is to be assessed by application of the criteria found in s 24 of the ACL.

   [185] Castronova v Tjung [2024] NTSC 55 [163].

   [186] Castronova v Tjung [164] ‑ [165].

5. Part 2-3 of the ACL is entitled 'Unfair contract terms'.  It applies to consumer contracts and small business contracts.  In this case, the 2014 Loan Agreement is not a consumer contract.  Accordingly, this part will only apply if the 2014 Loan Agreement is a small business contract.

6. Section 23(4) of the ACL (as at the time of entry into the 2014 Loan Agreement)[187] provided that a contract is a small business contract if:

   (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and

   (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and

   (c) either of the following applies:

   (i) the upfront price payable under the contract does not exceed $300,000;

   (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.

   [187] This definition in the ACL has since been amended by the Treasury Laws Amendment (More Competition, Better Prices) Act2022 (Cth). The new definition of small business contract only applies to contracts made at or after 9 November 2023: ACL s 305. Any reference to the ACL in these reasons is a reference to the relevant provisions at the time of entry into the 2014 Loan Agreement.

7. As was noted by Stevenson J in Naegeli v Dalton and Schaeffer as executors of the Estate of the late John Herman Schaeffer,[188] it is somewhat difficult to apply this definition to a guarantee.  This is because the 'supply' under the guarantee provision of the 2014 Loan Agreement is the promise that Mr Qaqish will ensure the performance of ProMEQ's obligations, including the obligation to repay the sum of $900,000 to the Fund.  The consideration for this guarantee is the promise by the plaintiffs to pay the principal sum of $900,000 to ProMEQ. 

   [188] Naegeli v Dalton and Schaeffer as Executors of the Estate of the late John Herman Schaeffer [2023] NSWSC 466 [352] (referring to the equivalent provisions in s 12BF and s 12BI of the Australian Securities and Investments Commission Act 2001 (Cth)).

8. In this case, the principal sum advanced by the plaintiffs to ProMEQ was $900,000 over a period of more than 12 months.  For this reason, on any argument, the upfront value of the guarantee does not exceed $1 million.  On this basis, I find that the guarantee is a small business contract within the meaning of the ACL.

9. Section 23(1) of the ACL provides that a term of a small business contract is void if the term is unfair and the contract is a standard form contract. 

10. The ACL does not define what constitutes a standard form contract but sets out the factors the court must take into account in determining whether the guarantee is a standard form contract.  Specifically, s 27 of the ACL provided that:[189]

    [189] This test has since been amended by the Treasury Laws Amendment (More Competition, Better Prices) Act2022 (Cth). However, the new test only applies to contracts made at or after 9 November 2023: ACL s 305.

    (1) If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise.

    (2) In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following:

    (a) whether one of the parties has all or most of the bargaining power relating to the transaction;

    (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties;

    (c) whether another party was, in effect required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form which they were presented;

    (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1);

    (e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction;

    (f) any other matter prescribed by the regulations.

11. In this case, Mr Qaqish asserted that the 2014 Loan Agreement was a standard form contract which was 'imposed' on him by the plaintiffs and was only for the benefit of the plaintiffs.  Having asserted that the 2014 Loan Agreement is a 'standard form contract', pursuant to s 27(1) of the ACL, it is necessary for the plaintiffs to prove this is not the case.

12. I have set out above at [78] - [97] my findings as to the circumstances in which the 2014 Loan Agreement was created.  These can be summarised as:

    (a)Mr Qaqish suggested that Mr Abdel-Messih renew the loan that had previously been advanced by Mr and Mrs Abdel-Messih to Simplex Projects;

    (b)Mr Qaqish prepared a draft of the 2014 Loan Agreement based on the 2012 Loan Agreement, with amendments made to both the name of the borrower and the property which was offered as security for the loan.  The 2012 Loan Agreement was a template agreement purchased by Mr Abdel-Messih online and completed by Mr Qaqish; and

    (c)Mr Qaqish presented the draft agreement to Mr Abdel-Messih to sign.  Mr Abdel-Messih noted the change to the identity of the lenders and Mr Qaqish amended the draft to reflect this change.

13. Applying these facts to the matters set out in s 27 of the ACL:

    (a)there is no evidence that Mr Abdel-Messih or the plaintiffs had 'all or most of the bargaining power' relating to the 2014 Loan Agreement or the guarantee;

    (b)the 2014 Loan Agreement was prepared by Mr Qaqish (and not Mr Abdel-Messih).  The document prepared by Mr Qaqish included a guarantee to be given by him.  It was prepared after, and not before, the discussion as to whether the plaintiffs were prepared to advance the loan to ProMEQ took place;

    (c)Mr Qaqish was not required to 'either accept or reject' the terms of the 2014 Loan Agreement or the guarantee, particularly in circumstances where he prepared the document;

    (d)there is no suggestion that the plaintiffs required ProMEQ or Mr Qaqish to 'take it or leave it';

    (e)in circumstances where Mr Qaqish prepared the document, he was given the opportunity to negotiate the terms of the 2014 Loan Agreement.  Mr Qaqish prepared and signed the 2014 Loan Agreement which included cl 9 requiring him to provide a guarantee; and

    (f)the 2014 Loan Agreement was prepared to take account of the particular characteristics of the proposed transaction, including the amount of the loan and the security that was being proposed. 

14. The 2014 Agreement prepared by Mr Qaqish, and in particular the guarantee, while based on a template contract, has none of the characteristics set out in s 27 of the ACL.  Accordingly, I do not consider that the 2014 Loan Agreement can be appropriately characterised as a 'standard form contract'.  On this basis, I do not consider that pt 2-3 of the ACL applies to the guarantee provided by Mr Qaqish under the 2014 Loan Agreement.

15. Even if I am wrong in this conclusion, for the following reasons, I also do not consider that the guarantee is unfair, within the meaning of pt 2‑3 of the ACL.

16. Section 24(1) of the ACL provides that a term of a small business contract is unfair if:

    (a) it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and

    (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

    (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

17. In determining whether a term of a contract is unfair under s 24(1) of the ACL, the court:[190]

    (a)must take into account the extent to which the term is transparent, and the contract as a whole; and

    (b)may take into account such matters as it thinks relevant.

    [190] ACL s 24(2).

18. A term is transparent if it is expressed in reasonably plain language, legible, presented clearly and is readily available to any party affected by the term.[191]

    [191] ACL s 24(3).

19. In this case, the plaintiffs advanced $900,000 to ProMEQ, which was a company of which Mr Qaqish was the sole director and shareholder.  Clause 9 of the 2014 Loan Agreement, which contains the guarantee, is clearly drafted in reasonably plain English and can, in my view, be understood by anyone who reads its terms.  On this basis, I accept that it is transparent.

20. In essence, Mr Qaqish's submission was that it was unfair for the plaintiffs to enforce the guarantee when the property market had declined.  The primary issue with this submission is that a contract of guarantee is not prima facie void or, in and of itself, unfair.  Obtaining a guarantee from directors is common in Australian commercial practice due to the combined effect of limited liability and tax incentives to incorporate small businesses.[192]  The general nature of the obligations that arise under a guarantee is part of the usual knowledge of the overwhelming majority of persons who become company directors, particularly one with the background and experience of Mr Qaqish.

    [192] CIT Credit Pty Ltd v Blayn Norman Keable [2006] NSWCA 130 [42].

21. In my view, the inclusion of a guarantee did not cause a significant imbalance of the parties' rights and obligations under the 2014 Loan Agreement.  This is because the terms of the guarantee are not so weighted in favour of the plaintiffs such as to tilt the parties' rights under the agreement significantly in favour of them.[193]

    [193] Australian Competition and Consumer Commission v CLA Trading Pty Ltd [54].

22. I also consider that the guarantee was reasonably necessary to protect the plaintiffs' legitimate interests.  The obligation by Mr Qaqish to pay any amount to the plaintiffs only arose if there was a default by ProMEQ of its obligations under the 2014 Loan Agreement.  In that situation, the plaintiffs, as the innocent party not in default, would not have the use of the monies they were entitled to be repaid.  In that context, the purpose of the guarantee was to ensure that the plaintiffs did not suffer any loss by reason of any failure by ProMEQ to repay the funds advanced by the plaintiffs.  For this reason, it is clear that the guarantee was reasonably necessary to provide protection to the plaintiffs in the event of a default by ProMEQ.

23. I also do not consider that, for the purposes of s 24(1)(c) of the ACL, the guarantee will cause detriment to Mr Qaqish (whether financial or otherwise) within the meaning of that section if it were to be applied or relied on by the plaintiffs. 

24. On a number of occasions during the trial, Mr Qaqish referred to the detriment suffered by him as matters which were outside his control; namely, the state of the property market at the time repayment was due, the fact that he had no cash available for repayment and that he had presented options to resolve the matter to the plaintiffs which they had refused.  In closing submissions, when asked what specific aspects of the 2014 Loan Agreement were unfair, Mr Qaqish referred to the requirement to repay the loan in cash as opposed to repayment in assets.  This submission was consistent with much of the cross-examination of Mr Abdel-Messih which focused on the commercial offers made by Mr Qaqish and the plaintiffs' refusal to accept them.

1. As stated above, any financial detriment to Mr Qaqish under the 2014 Loan Agreement only arose if ProMEQ failed to repay the funds advanced by the plaintiffs together with the interest payable.  This detriment could be avoided by Mr Qaqish, as the controlling mind of ProMEQ, ensuring that ProMEQ met its contractual obligations.  In this regard, it is ProMEQ and Mr Qaqish who were best placed to manage or mitigate the risk imposed by the guarantee as compared to the plaintiffs.  At the time the 2014 Loan Agreement was entered into, there was a risk that ProMEQ may not be able to meet its contractual obligations, including because of unforeseen events that might occur after the 2014 Loan Agreement was entered into and before the date that repayment was required.  In entering into the 2014 Loan Agreement, the parties allocated these risks between themselves, including by the requirement that Mr Qaqish guarantee the obligations of ProMEQ.

2. The fact that offers were made by Mr Qaqish and rejected by the plaintiffs is not, in my view, relevant to the proper construction of the 2014 Loan Agreement nor consideration of the question as to whether its terms are unfair.  Nor are the reasons proffered by Mr Qaqish (which arose after entry into the 2014 Loan Agreement) explaining why he was unable to repay the plaintiffs.  This is because the question as to whether the terms of the 2014 Loan Agreement are unfair must be considered at the date of entry into the 2014 Loan Agreement, by reference to the matters set out in s 24 of the ACL.[194]

   [194] Karpik v Carnival plc [2023] HCA 39; (2023) 415 ALR 491 [52].

3. The offers made by Mr Qaqish attempted to re‑negotiate the terms of the 2014 Loan Agreement, and shift the risk in the timing and amount received from the sale of assets from ProMEQ to the plaintiffs.  Nothing in the terms of the 2014 Loan Agreement required the plaintiffs to accept any of these offers.  For this reason, I do not consider that the failure by the plaintiffs to accept any of these offers is unfair.

4. In my view, none of the matters raised by Mr Qaqish support a conclusion that the terms of the 2014 Loan Agreement are unfair within the meaning of pt 2-3 of the ACL.

5. I specifically reject Mr Qaqish's submission that the plaintiffs used 'unfair tactics' and exerted 'unfair pressure' on him in their attempts to have their loan repaid.  The loan was required to be repaid in April 2016.  At or around this time, Mr Abdel-Messih first enquired about an update on the repayment of the loan.  Enquiries continued to be made by Mr Abdel-Messih from May 2016 until August 2017 regarding the proposed date for repayment.  A notice of demand was not sent until April 2018, two years after the date for repayment.  At this time, numerous promises of repayment had been made by Mr Qaqish which were not fulfilled. 

6. In June 2018, a statutory demand was served on ProMEQ.  At that stage, the loan was significantly overdue and Mr Qaqish had advised Mr Abdel-Messih he was not able to repay the loan.  As the liquidator subsequently stated, by March 2018, Mr Abdel-Messih suspected that ProMEQ was insolvent.  Understood in this context, Mr Abdel‑Messih's issue of a statutory demand cannot be properly criticised.

7. In my view, none of the steps taken by the plaintiffs to enforce repayment of its loan were unfair, nor can any blame properly be laid at the plaintiffs' feet.  The events that occurred in this case are largely due to the failure by Mr Qaqish to address ProMEQ's financial position and prioritise repayment of its liabilities. 

8. In submissions, Mr Qaqish referred to the decision of the High Court in Stubbings v Jams 2 Pty Ltd,[195] which he described as '[a] very similar case'.[196]  In my view, this is not an accurate description.  In that case, the appellant was unemployed, had no regular income and had poor financial literacy.  The respondents were businesses who engaged in asset-based lending.  The appellant guaranteed the obligations of a company which had never traded and had no assets, and secured these obligations by way of a mortgage.  However, the appellant had no income or other means by which he could meet his obligations to the respondents.  In these circumstances, the High Court unanimously considered that it was unconscionable for the respondents to seek to enforce their rights under the mortgage.

   [195] Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1.

   [196] ts 113.

9. In reaching this conclusion, Kiefel CJ, Keane and Gleeson JJ held that:[197]

   The appellant's lack of commercial understanding coupled with his inability to repay the loans from his own income or other assets meant that default in repayment, and the consequent loss by the appellant of his equity in his properties by way of interest payments to the respondents, were inevitable as a matter of objective fact.  The respondents, through their agent, sufficiently appreciated that reality that the exercise of their rights under the mortgages to turn the appellant's disadvantages to their own profit was unconscionable.  Equitable intervention was justified in this case 'not merely to relieve the [appellant] from the consequences of his own foolishness ... [but] to prevent his victimisation'. (footnotes omitted)

   [197] Stubbings v Jams 2 Pty Ltd [5].

10. In contrast, in this case, Mr Qaqish is an intelligent, sophisticated businessperson who, at the time of entry into the 2014 Loan Agreement, had significant experience in property development.  He was employed and there was nothing to otherwise suggest it would be inevitable that he would not be able to repay the loan or would default under the 2014 Loan Agreement.  Unlike the appellant in Stubbings v Jams 2 Pty Ltd, Mr Qaqish was not under any special disadvantage and was capable of assessing the risks involved in entering into both the 2014 Loan Agreement and the guarantee. 

11. At trial, Mr Qaqish placed significant reliance on the fact that he did not seek independent legal advice prior to his execution of the 2014 Loan Agreement.  While I accept that Mr Qaqish did not seek legal advice, I do not accept that he did not have the opportunity to do so.  In this case, it was Mr Qaqish who drafted the 2014 Loan Agreement (including the guarantee) and provided it to Mr Abdel‑Messih to sign, and not the other way around.  In these circumstances, it was open to Mr Qaqish to seek legal advice on the 2014 Loan Agreement prior to entering into it with the plaintiffs. 

12. In any event, there is no statutory or contractual obligation which required the plaintiffs to ensure Mr Qaqish sought legal advice on the terms of the guarantee before entering into the 2014 Loan Agreement.  For this reason, any failure by Mr Qaqish to obtain legal advice does not, of itself, mean that the guarantee cannot be enforced by the plaintiffs. 

13. In this case, there is nothing on the terms of the 2014 Loan Agreement or the circumstances in which it was signed that would give rise to any suggestion that Mr Abdel-Messih was aware of facts or circumstances that would make it unfair or unconscionable for the plaintiffs to seek Mr Qaqish's signature on the 2014 Loan Agreement as Guarantor.  In this regard, it is important to emphasise that Mr Qaqish did not refer to any matters that made the 2014 Loan Agreement unfair or unconscionable at the time it was signed.  All of the matters he relied on arose after entry into the 2014 Loan Agreement and, in particular, at the time the loan fell due for repayment.  The fact that the property market in Perth declined after entry into the 2014 Loan Agreement does not make its terms unfair or unconscionable.

Is Mr Qaqish entitled to relief against liability on the basis of any other statutory provision?

1. None of the other statutory provisions referred to by Mr Qaqish in his defence support his claim to relief against liability under the 2014 Loan Agreement. 

2. First, pursuant to s 17(3) of the Contracts Review Act, this legislation only applies to contracts where the 'proper law of the contract' is the law of New South Wales. There is no equivalent legislation in Western Australia. In this case, the 2014 Loan Agreement does not specify the law which governs the contract. The evidence before the court is that all parties to the contract are based in Western Australia and the contract was entered into in Western Australia. On this basis, I find that the proper law of the 2014 Loan Agreement is the law of Western Australia. The contract does not have any connection with New South Wales and accordingly, the Contracts Review Act does not apply.[198]

   [198] Bonython v Commonwealth (1950) 81 CLR 486, 498.

3. Second, the various sections of the Corporations Act relied upon by Mr Qaqish also do not apply.

4. Section 1317S of the Corporations Act concerns relief from liability for contravention of a civil penalty provision. No such contravention is (or could be) raised by the plaintiffs.

5. Section 1318 of the Corporations Act gives the court power to grant relief where there is a claim for breach of a duty owed as an officer of a company. The purpose of this section is to excuse company officers from liability where it would be unjust not to do so. The section recognises that company officers are businesspeople and that there is risk in commercial decision-making.[199]

   [199] Warrington Management Pty Ltd v Kingslane Property Investments Pty Ltd [2019] WASC 2 [520].

6. In this case, the plaintiffs' claim is not brought against Mr Qaqish in his capacity as a director of ProMEQ. Instead, the plaintiffs seek to enforce a contractual guarantee in the 2014 Loan Agreement, which Mr Qaqish entered into in his personal capacity. Section 1318 of the Corporations Act does not apply to this claim.

7. Finally, s 588H of the Corporations Act sets out the defences available to a director where proceedings are brought against them for insolvent trading. The claim in these proceedings is not such a claim.

Did the parties agree to vary the interest rate under the 2014 Loan Agreement?

1. I accept that a contract can be varied by later agreement (whether oral or in writing).  That is, it is possible for parties to enter into a subsequent contract to vary a clause of a contract, subject to it being proved that there has been a contract to vary.  This requires there to be consideration for any agreement to vary the original contract.

2. It is clear that the parties, at various times in discussing options for a commercial resolution of the dispute between them, canvassed a reduction to the interest rate payable under the 2014 Loan Agreement.  Specifically:

   (a)on 23 September 2016, Mr Abdel-Messih agreed to reduce the interest rate to 6% per annum conditional on payment in full being received by 31 October 2016.  This did not occur; and

   (b)in September 2017, Mr Abdel-Messih again agreed to reduce the interest rate to 6% per annum if the full amount of the loan was repaid by the end of June 2018.  Once again, this did not occur.

3. In my view, these conversations did not have the effect of varying the interest rate under the 2014 Loan Agreement.  This is for two alternate reasons.  First, the agreement to vary the interest can be viewed either as an agreement which is conditional on repayment or an agreement which is subject to a condition subsequent.  On either basis, the condition has not been satisfied.  Second, and alternatively, the effect of the failure of ProMEQ to repay the loan within the time agreed is that there is no valid consideration for any agreement between the parties.  On either analysis, it is my view that there has been no agreement to vary the interest rate payable under the 2014 Loan Agreement.

4. On this basis, interest is payable in accordance with cl 4 of the 2014 Loan Agreement.  This clause provides that interest is payable at the rate of 8% per annum, but does not specify whether interest is calculated on a simple or compound basis, and if so, at what intervals.

5. Clause 4.2 of the 2014 Loan Agreement provides:

   The Borrower will pay interest on the Loan or any balance of the Loan on completion of the loan term.  This will be an Interest Period.  The interest must be paid by the Borrower within 7 days of the expiry of each Interest Period.  The interest is to be calculated on the amount of the Loan outstanding at the beginning of the Interest Period.

6. On its face, there are two ambiguities in this clause.  First, the clause defines an 'Interest Period' as the term of the loan but then requires interest to be paid within seven days of the expiry of 'each Interest Period'.  If the Interest Period is the term of the loan, there can only ever be one Interest Period.  Second, ProMEQ is required to pay interest on 'any balance of the Loan' at the completion of the loan term.  This suggests that if a repayment of some of the balance is made prior to the completion of the loan term, the interest payable will be reduced.  This is confirmed by the subsequent reference in the clause as to how payments by instalments are to be applied (first, towards payment of interest, and then, to the balance of the loan).  However, the clause then goes on to require interest to be calculated on the amount outstanding at the beginning of the Interest Period.  If the Interest Period is the term of the loan, this requires payment of interest on the entire loan to be paid and renders the other provisions otiose.

7. On this basis, it is necessary to make a constructional choice.

8. At the time of entry into the 2014 Loan Agreement, the factual matrix known to both parties included that related parties had previously entered into a similar agreement, and the parties had agreed this clause required interest to be calculated monthly on a compound basis. 

9. In my view, in calculating the interest payable on the loan, Interest Period means a calendar month.  This construction is supported by the following matters.

10. First, this construction gives effect to the requirement in cl 4.1 of the 2014 Loan Agreement that interest to be paid on 'so much of the loan as is outstanding from time to time'.  If interest is only calculated on the full amount of the loan at its commencement, these words would have no work to do.

11. Second, this construction gives effect to the ability of ProMEQ to pay instalments or part of the loan prior to the date for payment under cl 3.1 of the 2014 Loan Agreement and to receive a corresponding reduction in the interest.  This is contemplated by at least some of the provisions of cl 4.2 of the 2014 Loan Agreement.

12. Third, this construction is consistent with other provisions of the 2014 Loan Agreement.  Under cl 2.2 of the 2014 Loan Agreement, the plaintiffs have a discretion to only require partial repayment of the loan on or before the due date for payment.  Adopting the usual principles of construction, it is assumed that the parties' objective intention was that interest would be payable on any outstanding balance.[200]  This construction enables interest to be calculated and paid on any outstanding balance.

    [200] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd.

13. Fourth, this construction is consistent with the conduct of the parties (and their related parties) prior to entry into the 2014 Loan Agreement and their agreement as to how interest should be calculated on an almost identical agreement.

14. On this basis, I consider that under the terms of the 2014 Loan Agreement, interest on the outstanding balance of the loan is required to be calculated at a rate of 8% per annum compounded monthly.

Conclusion

1. This dispute is, at its heart, a simple claim by the plaintiffs to enforce their rights under the 2014 Loan Agreement.  Any complexity that has arisen has been caused by Mr Qaqish's failure to acknowledge his obligations under the 2014 Loan Agreement and his attempts to re‑assign the risks that he agreed to.  None of the matters he has raised in answer to the plaintiffs' claim have any substance.  In addition, any unfairness that Mr Qaqish considers has arisen are not matters for which the plaintiffs are responsible. 

2. For these reasons, judgment should be entered for the plaintiffs.  I will hear from the parties as to the calculation of the amount that judgment should be entered for (taking into account my finding that interest should be calculated at a rate of 8% per annum compounded monthly) and as to costs.  My preliminary view is that the usual order for costs is appropriate; namely, that costs should follow the event, and Mr Qaqish should pay the plaintiffs' costs of the action to be assessed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

KC

Associate to the Honourable Justice Hill

22 AUGUST 2024