Re Premier Bay Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2017 00129

BETWEEN

DFG SERVICES PTY LTD & ORS	Plaintiffs
v
PREMIER BAY PTY LTD & ORS	Defendants

AND BETWEEN

PREMIER BAY PTY LTD & ORS	Plaintiffs
v
DFG SERVICES PTY LTD & ORS	Defendants

AND

MAURO MONTALTO	Plaintiff
v
DFG SERVICES PTY LTD & ORS	Defendants

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	30, 31 October, 1, 2, 9, 10, 16, 17, 20, 22 and 23 November 2017
DATE OF JUDGMENT:	13 April 2018
CASE MAY BE CITED AS:	Re Premier Bay Pty Ltd
MEDIUM NEUTRAL CITATION:	[2018] VSC 168

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CONTRACT – Property Development Agreement – Specific enforcement – Agreement involved landowners making available land for development by the developer – The Agreement provided Lots 1, 2 and 3 of the landowners’ land to be included in the property development – Landowner refuses to carry out the obligations under the agreement – The developer seeks specific performance.

CONTRACT – Property Development Agreement – Rectification for unilateral mistake – Landowner claims that Lot 1 was not to be included in the contract – Landowner seeks to have the Agreement rectified – Consideration of ‘special circumstance’.

GUARANTEE – The landowner under the Property Development Agreement is a company – Its two directors guaranteed the obligations of the landowner – One of the directors seeks to have the guarantee set aside on equitable grounds.

DAMAGES CLAIM – Negligence – Breach of retainer – Breach of duty of care – Wrongs Act 1958 – The landowner seeks damages against its solicitors and accountant, in the event the contract is not rectified, for failing to ensure that Lot 1 was not included in the development.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J W S Peters QC with Mr S Rosewarne	Hall & Wilcox
For the First and Second Defendants	Mr S M Anderson QC with Ms K O’Gorman	Holding Redlich
For the Third Defendant	Mr J P Slattery	Piper Alderman
For the Fourth Defendant by Counterclaim	Mr J Tsalanidis	Colin Biggers & Paisley
For the Fifth Defendant by Counterclaim	Mr S R Senathirajah SC	Wotton & Kearney

TABLE OF CONTENTS

Introduction and summary................................................................................................ 1
The parties............................................................................................................................ 4
The development................................................................................................................. 5
Planning................................................................................................................................ 7
The relevant events............................................................................................................. 7
Mr Montalto’s pleaded case............................................................................................. 23
Findings between DFG and the defendants.................................................................. 30
Counterclaim against Crowe Horwath........................................................................... 30
Counterclaim against Sladen........................................................................................... 31
The witnesses..................................................................................................................... 32
Mr Montalto’s special disability..................................................................................... 33
Evidence of Dr Tailby....................................................................................................... 34
Evidence of Dr March....................................................................................................... 36
Evidence of Mr Montalto.................................................................................................. 37
Alleged conversation no 1................................................................................................ 39
Response of Mr Levinge and Mr Dooling..................................................................... 41
Mr Montalto’s evidence continued................................................................................. 43
Alleged conversation no 6................................................................................................ 45
Response of Mr Jeremiah, Mr Di Felice, and Mr Brown.............................................. 48
Alleged conversation no 5................................................................................................ 52
Alleged conversations no 2 and no 3.............................................................................. 52
Response of Mr Dooling and Mr Levinge..................................................................... 57
Mr Montalto’s evidence continued................................................................................. 61
Alleged conversation no 4................................................................................................ 65
Response of Mr Levinge, Mr Dooling, Mr Di Felice (and Mr Brown)....................... 67
Mr Montalto’s evidence continued................................................................................. 70
Alleged conversation no 5................................................................................................ 71
Response of Mr Brown..................................................................................................... 72
Evidence of Mr Montalto continued............................................................................... 73
Evidence of Mr Stephen Hay........................................................................................... 81
Evidence of Mr Levinge................................................................................................... 86
Cross-examination of Mr Levinge................................................................................. 106
Evidence of Mr Dooling................................................................................................. 119
Cross-examination of Mr Dooling................................................................................. 120
Evidence of Anthony Coralluzzo.................................................................................. 125
Evidence of Colin Brown................................................................................................ 126
Evidence of Alexander Duonis...................................................................................... 136
Evidence of David Hart.................................................................................................. 139
Evidence of Mauro Montalto......................................................................................... 143
Evidence of Victor Di Felice.......................................................................................... 147
Evidence of Robert Jeremiah......................................................................................... 158
Did Mr Montalto know lot 1 was included in the development?............................ 165
Evidence that lot 1 is included...................................................................................... 169
Contradicting witness evidence.................................................................................... 177
Reliance on Mr Montalto’s evidence............................................................................ 178
Failure to call witnesses................................................................................................. 213
Should the contract be rectified?................................................................................... 218
Counterclaim against Sladen and Crowe Horwarth.................................................. 231
The claim against Mauro................................................................................................ 239
Mauro’s defence and counterclaim............................................................................... 242
Relevant principles of equity........................................................................................ 244
Mauro’s evidence............................................................................................................ 251
Evidence of other witnesses relevant to Mauro’s case.............................................. 265
Closing submissions of Mauro...................................................................................... 279
Submissions of DFG........................................................................................................ 282
Consideration of Mauro’s evidence.............................................................................. 287
Influence of Mr Montalto................................................................................................ 290
Failure to call witnesses................................................................................................. 291
Authorities........................................................................................................................ 292
Credibility of witnesses.................................................................................................. 293
Findings............................................................................................................................ 294
Consideration of the unconscientious defence........................................................... 295
Conclusion........................................................................................................................ 299
DFG’s entitlement to relief............................................................................................. 299

HIS HONOUR:

Introduction and summary

In the early 1990s, Tommaso Montalto, through a family-owned company, Premier Bay Pty Ltd (Premier Bay) — of which Mr Montalto and his son, Mauro, were directors — purchased a farm north of Melbourne on the Donnybrook Road, east of the Hume Highway. The farm consisted of three lots totalling some 264 hectares. The lots (1, 2 and 3) ran from west to east along the northern side of Donnybrook Road.

Without any disrespect to Mauro Montalto, to avoid confusion with Mr Montalto, I have hereinafter referred to him as Mauro.

With the growth of Melbourne, the farm became a potential site for a residential subdivision. In 2010, landowners in the area were approached by developers to make their farm available for subdivision. The Dennis Family Group (DFG) are experienced property developers. In 2010, Mr Montalto was introduced to DFG by Stephen Hay. Mr Hay is a director of Northside Land Sales, a real estate company specialising in broad hectare and land sales.

Proposals to develop the farm as a residential subdivision were put to Mr Montalto. On 6 July 2011, Premier Bay executed an exclusivity and confidentiality deed with DFG, which enabled DFG to commence working on the development.

In 2013, Mr Montalto caused Premier Bay to enter into a development agreement, by way of joint venture with DFG, that provided for the farm to be subdivided, development works to be carried out, and for the subdivided lots to be sold.

Under the development agreement, Mr Montalto and his son, Mauro, who was also then a director of Premier Bay, were required to provide a personal guarantee for Premier Bay’s obligations under the development agreement. Premier Bay was also required, upon request, to give a mortgage over the land to secure its obligations and to finance the development.

The relevant companies in DFG now seek specific performance of the obligations of Mr Montalto, Mauro, and Premier Bay.

Mr Montalto and Premier Bay have refused to give the mortgage, as they allege that the development agreement was signed by mistake.

In substance, Mr Montalto alleges that he informed DFG that he was agreeable for lots 2 and 3 to be developed by DFG, but not lot 1. He alleges that he asked, and DFG agreed, that lot 1 would be included in the concept plans only, but otherwise remain and be not subject to development by DFG. DFG deny that they were ever so informed or agreed to such a proposal. They contend that Mr Montalto agreed to make lots 1, 2 and 3 available for development by DFG.

In the negotiations between Mr Montalto and DFG, Mr Montalto and Premier Bay were assisted by Mr Montalto’s accountant, Colin Brown, of Crowe Horwath, and his solicitors, Harwood Andrews, now trading as Sladen Legal (Sladen).

Mr Montalto contends that he specified to DFG, Mr Brown, and his solicitors, Sladen, five conditions upon which Premier Bay would participate in the development and that DFG agreed to those conditions.

Mr Montalto and Premier Bay contend that, if DFG succeed in their claim for specific performance, then Crowe Horwath and Sladen should compensate him in damages, as they failed to carry out his instructions to include the five conditions in the development agreement.

The five alleged conditions were as follows:

(1)Gina Webling, who was (and is) a tenant residing in a house on lot 2, needed to be relocated to the house on lot 1 — if lot 1 was to be developed at a future date, and if at that time, it would not be appropriate for Gina to remain in the house on lot 1 (with land), then Gina would need to be relocated elsewhere (with land), and DFG were to arrange this.
(2)In the event that lots 2 and 3 were developed, Mr Montalto would continue to farm lot 1, as lot 1 was not developable due to the quarry buffer from the neighbouring property, which impacted upon it.
(3)Lot 1 was to be included in the preliminary drawings for the conceptual design phase of the development, but only so that it was part of the formulation of an initial concept design for the hypothetical future development of lot 1. Mr Montalto alleges that he stated that he wanted to see how it could look as part of an overall development, as he ‘did not like to go back and add things on in the future’, but that by being included in the concept sketches, lot 1 was not included in the development.
(4)Premier Bay was to retain a free right of sale in respect of:

(1) lot 1 (free of any obligations to DFG), so that it could be sold as farm land as a potential development site, or to anyone Premier Bay chose; and

(2) a small parcel of land on lots 2 and 3, if it became necessary for Premier Bay or Mr Montalto to raise funds at a future date.

(5)The Montalto name would be used in relation to the development of lots 2 and 3 and, in particular, in respect of street names.

DFG, Mr Brown, and Sladen deny that Mr Montalto informed them of the five conditions, or that DFG agreed to them.

Mr Montalto further contends that he caused Premier Bay to sign, and he signed, the development agreement between DFG and Premier Bay in the mistaken belief that it only provided for the development of lots 2 and 3, and not lot 1; and that DFG were aware that he was under this mistaken belief.

Mauro, for his part, seeks to have the development agreement set aside insofar as it relates to him. He says that he was under the undue influence of his father, or was otherwise at a special disadvantage when executing the development agreement, and that it is unconscionable for the relevant DFG companies to enforce the guarantee against him. At the hearing, the claim of undue influence was not pressed.

Mr Montalto, Premier Bay, and Mauro also claim that they are not obliged to execute the mortgage until planning is approved; at the stage of filing their defences, and at the time the trial commenced, the minister was yet to grant planning approval. By the end of the trial, planning approval had been obtained.

The parties

The first plaintiff, DFG (Services) Pty Ltd (formerly Dennis Corporations Pty Ltd) (DFG (Services)), is the project manager and developer for several master plans for residential estates in Victoria and Queensland. The second plaintiff is DF (Woodstock) Developments Pty Ltd (DFWD). It was established for the purpose of developing the master plan residential estates at Donnybrook. The third plaintiff is DF (Woodstock) FRR Pty Ltd (DF (Woodstock) FRR). It is a related entity of the first two plaintiffs, established for the purpose of acquiring some of the Donnybrook land in certain circumstances. The plaintiffs are each parties to the development agreement. I have referred to the plaintiffs collectively as DFG.

The first defendant is Premier Bay. The second defendant is Mr Montalto. The third defendant is Mauro. The defendants are all parties to the development agreement.

The plaintiffs to the first counterclaim are Premier Bay and Mr Montalto. The defendants to the first counterclaim are DFG (Services), the first defendant by counterclaim; DFWD, the second defendant by counterclaim; DF (Woodstock) FRR, the third defendant by counterclaim; the Lantern Legal Group Pty Ltd (formerly Harwood Andrews Pty Ltd) trading as Sladen Legal (a firm) (Sladen), the fourth defendant by counterclaim; and Crowe Horwath (Aust) Pty Ltd (Crowe Horwath), the fifth defendant by counterclaim.

The second counterclaim is brought by Mauro and the defendants are DFG (Services), the first defendant by counterclaim; DFWD, the second defendant by counterclaim; and DF (Woodstock) FRR, the third defendant by counterclaim.

The development

The development is being marketed under the name ‘Peppercorn Hill’ and involves the land owned by Premier Bay, land owned by Tony and Jenny Coralluzzo, and land owned by Delma Investments Pty Ltd (Delma), a company controlled by the Douglas family.

The business model proposed by DFG was as follows. Landowners would retain ownership of the land until it had been subdivided and sold to the ultimate purchasers of the individual residential sites. The land was not transferred to the developer at any stage. The developer would obtain all the necessary approvals to carry out the subdivision. The developer would also act as the project manager under a separate management agreement. In theory, the project manager could have been another third party. As the project manager, the developer was responsible for building, and provision of the necessary services to the building sites, and for carrying out all the construction work on the provision of roads and services. The developer would be responsible for the sale of the lots to the ultimate purchasers. When I refer to land being developed, I am referring to a development under this model which includes the sale of the lots to the ultimate purchasers.

The proceeds from the development are to be divided as follows. Speaking broadly, the developer as the project manager would receive a project management fee of five per cent of the total revenue from the sale of the lots. The costs of the development would also be reimbursed to the developer. The developer would be responsible for providing the funds to carry out the development. Under the development agreement, the developer could use the land that is the subject of the development agreement as security for loans to carry out the development. The sale proceeds (net the costs of the development), would be divided amongst the landowners and the developer on the basis of 25 per cent as a project development fee to the developer, and 75 per cent to the landowners. Of the 75 per cent going to the landowners, a third (that is, 25 per cent of the whole profit) would be distributed under the consortium unit trust agreements, discussed below.

The development is subject to the following contractual framework. Separate development agreements have been entered into between DFG and each of the landowners. Further, a number of agreements have been entered into that govern the relationship between the contributing landowners, these are the consortium unit trust agreements, which are collectively referred to as the ‘CUT agreements.’

The CUT agreements provide a mechanism to ensure that profits from the development will be shared between the landowners throughout the duration of the development. This allows the landowners, whose land is to be developed towards the end of the development, to receive amounts of profits from earlier sales of land owned by other landowners, and likewise the owners whose land is developed early in the development receive amounts from later sales.

Pursuant to the CUT agreements, each of the landowners (including Premier Bay) have been issued with units in the Woodstock Consortium Unit Trust based on the ‘Developable Area’ of the ‘Land’ that the landowner contributed to the development. That is, the land that can be sold, and thereby create profits for distribution to the unitholders.

The units issued to Premier Bay have been calculated on the basis that lots 1, 2 and 3 of Premier Bay’s land is included in the development. The CUT agreements (like the development agreement) also define the ‘Land’ of Premier Bay to mean lot 1, lot 2 and lot 3.

Premier Bay and Mr Montalto do not seek rectification of the CUT agreements in this proceeding, despite the fact that lot 1 is treated as part of the development in the CUT agreements.

Planning

The planning process included a public hearing in June 2016 by Panels Victoria. The Metropolitan Planning Authority presented the precinct plan to Panels Victoria. Panels Victoria heard submissions on the precinct structure plans. Planning Victoria endorsed the precinct plan and, following some minor amendments by the Municipal Planning Authority, they went to the Minister for planning approval (who has since approved the plan), which would result in the rezoning of the land.

The dispute between Mr Montalto and DFG arose soon after Mr Montalto attended the public hearing of Panels Victoria on the development.

The relevant events

In listing the events, I note that some of the matters that I will mention were not in dispute and some were. Insofar as they were in dispute, I have found them to be as follows. The evidence relevant to the disputed matters is discussed later.

As mentioned above, Premier Bay owned three lots along the Donnybrook Road.

The total area of Premier Bay’s land is 263.76 hectares, comprising: lot 1, 61.03 hectares; lot 2, 79.93 hectares; and lot 3, 123 hectares.[1]
[1]Exhibit P1.

The lot immediately to the west of lot 1 was owned by Boral and was being held by Boral as a potential quarry site.

In or around mid-2000, Peter Levinge of DFG was approached by Mr Hay with a proposal to create a master-planned residential estate in the Donnybrook area. Mr Levinge is, and was, the managing director of DFG. Mr Hay conducts a business known as Northern Side Land Sales and specialises in putting together land development proposals. Mr Levinge was principally assisted in his dealings with Mr Montalto by Terry Dooling, an employee of DFG. Reference was also made during the hearing to Bert Dennis, a member of the Dennis family. He did not give evidence.

In late 2010, Mr Hay arranged for a bus tour to be conducted of various residential developments in the west of Melbourne that had previously been undertaken by DFG. Mr Montalto attended this bus tour, driving behind the bus in a car with Lou Di Bella. Mr Di Bella is a friend of Mr Montalto’s and owns land further west of Premier Bay’s land, along the Donnybrook Road.

In early December 2010, Mr Dooling made enquiries about whether land on the Donnybrook Road immediately west of lot 1, which was then owned by Boral, was subject to any quarry licences. These enquiries revealed that there were no existing approvals or licences in place to quarry the Boral land, however, there was the possibility that a permit to quarry could be obtained or applied for.

On 15 December 2010, DFG gave a presentation to a number of landowners from the Donnybrook region, including Mr Montalto, at the offices of North Side Land Sales. The attendees were given a hardcopy handout and there was a power point slideshow.

The hardcopy handout provided at the meeting said that the Precinct Structure Plan (PSP) area was likely to cover consortium land, that is, the land subject to the CUT agreements and land south of Donnybrook Road.[2] The handout contained a copy of a ‘Quarry buffer map’ at page 34. The map showed that lot 1, part of lot 2, as well as parts of the land of other landowners, fell within a potential quarry buffer zone. The handout said that ‘[t]he potential quarry buffer impact on land supply requires management.’ The handout did not say that the land within the buffer zone was not developable. However, evidence was given (discussed below) that if the land was within a quarry buffer, there would be limitations on the extent to which the land could be developed.
[2]CB 147.

As a result of enquiries that Mr Dooling had made in relation to the Boral land prior to the 15 December 2010 meeting, he arranged for the quarry buffer map to be removed from the slideshow presentation given that day. The slide was removed from the presentation, but as the handout was being printed externally, they were unable to remove this map prior to the handout being given to the landowners.

Mr Hay informed the landowners present at the meeting that he had met with representatives of Boral who had informed him that the quarry buffer was not going to have a negative effect on the proposed development, because Boral was looking at selling its property if it did not get involved in the proposed development itself. Subsequently, Boral sold the land to Mirvac. Mirvac is developing the land in a subdivision that is complementary to the proposed subdivision on lot 1, with a major road running across the Boral land, over lot 1, and then onto lot 2.

Following on from this initial meeting, the development proposal moved ahead slowly. On 29 April 2011, Mr Levinge sent an e-mail to Mr Montalto and Mr Brown, which attached cash flow models from the development of the land owned by Premier Bay.

In or around mid-2011, DFWD entered into an exclusivity and confidentiality deed with Premier Bay. Prior to doing so, Mr Montalto sought oral and written advice from Lou Farinotti, a solicitor at Holding Redlich Lawyers, in relation to the terms of the proposed exclusivity deed. Mr Farinotti gave written advice to Mr Montalto, enclosing a copy of title searches relating to Premier Bay land (being lots 1, 2 and 3) and explained the basis of the offer made by DFG, which was the subject of the exclusivity and confidentiality deed. Mr Montalto was advised that ‘… you should only proceed [with the confidentiality and exclusivity deed] if the Dennis offer is basically acceptable to you.’[3]
[3]Transcript of hearing, Re Premier Bay Pty Ltd (10 November 2017) T625 XXN.

The exclusivity and confidentiality deed, subsequently executed by Mr Montalto on behalf of Premier Bay, defined ‘Land’ as lot 1, lot 2 and lot 3 and included an offer to develop the land.

The exclusivity and confidentiality deed was later extended on 19 August 2011, 23 September 2011, 7 March 2012, and by further deed dated 21 May 2012. These documents were signed by Mr Montalto on behalf of Premier Bay and referred and applied to the entirety of the Premier Bay land.

By email dated 7 July 2011, Mr Levinge informed various persons from DFG that the quarry buffer outline in the map attached to the email (similar to the map at page 34 of the handout given to landowners at the December 2010 presentation) could be ignored, as Boral had confirmed to him that it would not be looking to quarry the Boral land.

On 15 July 2011, Mr Montalto signed a letter from Premier Bay to the Department of Sustainability and Environment, which noted that he was the ‘owner of approximately 263.71 hectares located at 1145 Donnybrook Road’ and which authorised the Department to release native vegetation time stamping data to DFG.[4]
[4]Transcript of hearing, Re Premier Bay Pty Ltd (10 November 2017) T542 XXN.

On 26 July 2011, Greg Bursill of DFG received an email from officers of the Department of Sustainability and Environment in relation to the release of time stamping data to DFG. The email, when referring to the Premier Bay land, noted that ‘the property is two parcels of land located between the grid references G4–G6 and K4–K6 on this map.’

The email was relied upon by Mr Montalto in support of his contention that he had only agreed with DFG to include lots 2 and 3 in the development. DFG submit that the reference to ‘two’ parcels of land is not probative given that: the provided grid references cover lot 1, lot 2 and lot 3; Mr Montalto signed various documents, both before and after the date of the email, all of which made reference to the entirety of the Premier Bay land; and the email is irrelevant to Mr Montalto’s state of mind, given there is no evidence that he ever saw the email.

On 5 October 2011, Mr Montalto attended two meetings at the offices of Hall & Wilcox, the solicitors for DFG. This was the first occasion on which Mr Montalto met any representative of Sladen, the lawyers who would be acting for him in the development.

The first meeting was attended by Mr Montalto, Mr Brown, Robert Jeremiah (a partner from Sladen), and Paul Goldin (a solicitor from Sladen). Mr Goldin took detailed notes of the meeting.[5] The notes do not contain any reference to the five conditions which Mr Montalto alleges were an agreed term of his agreement with DFG.
[5]CB 230–235.

The second meeting held at Hall & Wilcox on 5 October 2011, immediately after the first meeting, was attended by Mr Montalto, Mr Brown, Alex Duonis (a tax specialist accountant from Crowe Horwath), and Mr Jeremiah. Mr Duonis took notes of the second meeting. The notes contain no reference to Mr Montalto’s five conditions.

Mr Jeremiah made a note of a telephone conversation with Mr Montalto on 4 November 2011. During this conversation, Mr Jeremiah says that he was instructed by Mr Montalto that all communications with him and Premier Bay were to be made through Mr Brown.

On 10 October 2011, Mr Dooling of DFG emailed Mr Brown a further cash flow model in relation to the Premier Bay land. The cash flow was premised on Premier Bay contributing a gross land size of 263.76 hectares, with 211.01 hectares of net developable area (being 80 per cent of gross land size), to the proposed development. The area of 263.76 hectares encompasses lots 1, 2 and 3.

On 19 December 2011, representatives of DFG gave a presentation at the Kooyong Lawn Tennis Club to a number of landowners, including Mr Montalto and his neighbours, David and Liz Douglas, and Tony and Jenny Coralluzzo, about the proposed development of the Donnybrook land. Mr Hay, Mr Brown, Mr Goldin and Mr Jeremiah also attending the 19 December 2011 presentation. Mr Jeremiah made a presentation on the commercial aspects of the proposed development, such as the development agreement and the CUT agreements. Mr Jeremiah thought that he may have been invited to the presentation by DFG. Mr Goldin also attended and made notes of the meeting.

The maps and plans that were shown during the 19 December 2011 presentation made reference to the entirety of the Premier Bay land (including lot 1) forming part of the proposed development.

Shortly after the Kooyong presentation, on 22 December 2011, a draft development agreement was emailed to Sladen by the lawyer for DFG, David Hart. At this stage, Sladen was retained by Premier Bay to act for it in the negotiations with DFG and with drafting the development agreement to be executed between DFG, Premier Bay, Mr Montalto, and Mauro Montalto. Mr Hart’s email said that the draft versions of the development agreement and the project management agreement had been prepared for discussion with the landowners.

Within Sladen, Mr Jeremiah had arranged for Victor Di Felice to act for Premier Bay in the negotiation and drafting of the development agreement and the CUT agreements. Mr Di Felice did not attend the meeting on 5 October 2011, nor did he attend the subsequent Kooyong presentation.

Mr Di Felice received the draft development agreement from Mr Hart in December 2011. Mr Di Felice reviewed the terms of the agreement, made comments, and suggested amendments.

It was around this time that Mr Montalto alleges that he agreed with Mr Levinge and Mr Dooling to provide to DFG only lots 2 and 3 for development and stipulated five conditions that included lot 1 being part of the concept plan. As discussed below, Mr Levinge and Dooling deny that there was any mention of the five conditions on this occasion or any other.

On 7 March 2012, Mr Hart sent to Mr Di Felice, an updated exclusivity and confidentiality agreement for execution by Premier Bay.[6]
[6]CB 303.

On 16 March 2012, Mr Di Felice sent to Mr Brown, with copies to Mr Jeremiah and Mr Goldin, an email attaching the draft subscription agreement, draft mortgage securing the landowner’s obligation to pay the subscription sum, and a draft amended development agreement. The latter was amended with tracked changes. Under the heading ‘Next steps,’ Mr Di Felice said that he strongly recommended that ‘you review the documents and that before their release to Dennis Family, we discuss any queries you may have.’ The letter continued:[7]

The information we have been given relating to your discussions with Dennis Family to date have been at a general level and therefore in relation to the drafting of the documents (particularly the development agreement), in many cases we have made assumptions as to the terms based on our experience in similar matters. As a result, there may be matters which have been discussed directly with Dennis Family which will necessitate amendment to the documents and it would be preferable that this occur before the documents are given to Dennis Family for their review.

[7]CB 304–305.

On 3 April 2012, Mr Montalto and Mr Brown met with Mr Di Felice at the offices of Sladen. The meeting went for some 3½ hours. Mr Di Felice made notes of the meeting.[8] According to Mr Di Felice, amendments and comments that he had sent to Mr Brown regarding the development agreement were discussed. He said that they effectively reviewed the whole of the comments and amendments that he had made to the agreement.[9] Mr Di Felice says that they discussed security, and whether the landowners would have sufficient funds to meet their obligation to make various payments, both to the developer and to other landowners. Mr Di Felice said he was given instructions to respond to the developer’s lawyer with the amendments. The alleged five conditions, including the separate treatment of lot 1, were not mentioned in Mr Di Felice’s notes.
[8]CB 361.
[9]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T938 XN.

On 7 April 2012, Mr Di Felice emailed Mr Hart attaching the amended development agreement with ‘our amendments tracked.’[10] Mr Di Felice confirmed that no changes were made to the development agreement as to the definition of land following the meeting with Mr Montalto and Mr Brown.
[10]CB 362.

On 24 April 2012, Mr Hart emailed Mr Di Felice, responding to his email of 7 April 2012. The email contained comments on the amendments proposed by Mr Di Felice. Mr Di Felice asked Mr Goldin to arrange either a meeting or a phone call to discuss the amendments with Mr Montalto and Mr Brown.

Mr Hart had asked for a detailed explanation of the situation regarding the caveats lodged by Carmela Montalto, Mr Montalto’s mother, over lots 1, 2 and 3.[11]
[11]CB 419.

On 21 May 2012, Mr Montalto signed an extension to the exclusivity agreement with DFG on behalf of Premier Bay. Mr Di Felice said that he was not asked to provide any advice on the exclusivity agreement and confidentiality deed. On 7 March 2012, Mr Di Felice received an unsigned draft of the deed and, on 7 June 2012, he received a signed copy of the deed from Mr Hart. Mr Di Felice said that he assumed he had been sent these documents as a matter of courtesy, because Mr Hart was aware that Sladen was acting for Premier Bay, who was a party to the exclusivity agreement and confidentiality deed.

On 23 May 2012, Mr Di Felice emailed Mr Goldin asking him to organise a meeting or a teleconference with Mr Montalto and Mr Brown, and that he needed to go through some development agreement issues with them.

On 23 May 2012, Mr Goldin replied by email to Mr Di Felice informing him that Mr Hart’s comments on the development agreement had been sent to Mr Brown, and that he would arrange a time with Mr Brown.

On 24 May 2012, Mr Di Felice held a ‘lengthy’ teleconference with Mr Montalto and Mr Brown. Mr Di Felice said that they worked through the letter of comments that had been provided by Mr Hart. Mr Di Felice made handwritten comments on a copy of Mr Hart’s letter of 24 April 2012 during the teleconference with Mr Montalto and Mr Brown.[12] Mr Di Felice specifically raised the issue of the caveats that had been lodged by Carmela, over the Premier Bay land. Mr Di Felice was informed that there was an ongoing court proceeding relating to the caveats, and that the claim was due to be heard in August or September 2012; and that nothing would be executed, in terms of the development documents, until the claim had been resolved.[13]
[12]CB 427–433.
[13]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T942 XN.

Following this telephone conference, on 2 June 2012, Mr Di Felice emailed the development agreement and CUT agreement, with tracked amendments, to Mr Hart.[14]
[14]CB 438.

On 19 July 2012, a meeting was held at the offices of Floridia Cheese attended by Mr Dooling, Mr Hart, Mr Montalto, Mr Brown, and Mr Di Felice. Mr Hart gave evidence that Mauro also attended for part of the meeting, although Mauro says he was not present. Mr Di Felice made a note of the meeting.[15] Mr Di Felice said that this meeting followed receipt of the most recent version of amendments to the development agreement that Sladen had sent Mr Hart, and that the meeting was to review those amendments and to go through the whole of the development agreement.[16] After the meeting, further amendments were made to the development agreement.
[15]CB 441.
[16]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T944–945 XN.

By 26 July 2012, DFG were aware that Boral did not intend to apply for a permit to quarry the land and instead proposed to sell it. The land was bought by Mirvac, as part of a neighbouring development that will share the services for the Peppercorn Hill development, such as water, gas, sewerage and electricity. The service corridor is to run from west of the railway line east along the front of lots 1, 2 and 3 (encroaching a way on the lots) along Donnybrook Road.

On 13 September 2012, Alexandra Tighe of Holding Redlich Lawyers sent an email to Mr Montalto, attaching copies of title searches conducted in relation to each of lots 1, 2 and 3 evidencing the withdrawal of caveats that had been lodged over those titles by Mr Montalto’s mother. This email was subsequently forwarded from Mr Montalto’s iPad to Mr Brown.[17] Mr Montalto claimed that he had never used his iPad to send emails, it was simply used as a record of correspondence. As discussed below, Mr Di Felice noted that the withdrawal of caveats related to all three lots.
[17]CB 442.

On 19 October 2012, representatives of DFG gave a presentation to Mr Montalto, Mauro, and other members of the Montalto family at Premier Bay’s offices at Floridia Cheese, and provided an update on the proposed development. A slide show was presented at the meeting and a handout was provided to attendees. The various maps and plans that were shown during the 19 October 2002 presentation made it plain that the entirety of the Premier Bay land (including lot 1) was to be part of the development, and it was noted that a key assumption underpinning the proposed returns from the development was that there was a combined 518 hectares of net developable area. The handout provided to attendees included a cash flow model in relation to the Premier Bay land that was based upon 263.76 gross hectares and 211.01 hectares of net developable area (that included lot 1).

On 30 November 2012, the Boral land was sold to Mirvac. Mr Montalto conceded that he knew of this fact for a ‘[c]ouple of years.’[18]
[18]Transcript of hearing, Re Premier Bay Pty Ltd (9 November 2017) T518 XXN.

On 20 December 2012, Mr Di Felice emailed David Hart attaching documents setting out the information required to complete the subscription deed, unit trust deed, and unitholders agreement.[19] Mr Di Felice said that, at this stage, there was still uncertainty regarding which landowners would be in the consortium.
[19]CB 461.

On 15 January 2013, Mr Dooling emailed Mr Montalto, the ‘first cut’ of the proposed development program. The email, being a ‘phasing plan,’ showed that lot 1 was to be developed as part of a sequential development of all the landowners’ developable land.

In early 2013, discussions began about executing the development agreement. As the development agreement with Premier Bay had effectively been resolved, Mr Hart suggested that Premier Bay execute the development agreement and that it be held by Mr Hart, in escrow.

A meeting was held between Mr Di Felice and Mr Jeremiah with Mr Brown and Mr Montalto. At this meeting, Mr Jeremiah explained the implications of the development agreement being held in escrow and how it could be used as an incentive for the other landowners to more quickly wrap up where they were up to.[20] The intent was that the developer could say to the other landowners: ‘One of the other landowners has already signed up. You’re holding things up, effectively.’[21]
[20]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T948 XN.
[21]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T948 XN.

On 28 February 2013, Mr Hart emailed Mr Di Felice asking for the terms upon which he would hold the development agreement in escrow.

On 8 March 2013, Mr Hart emailed Mr Di Felice, with a copy to Mr Dooling, advising of the developable areas for Delma (104 hectares), Premier Bay (208 hectares), and Coralluzzo (37 hectares). On 8 March 2013, Mr Di Felice replied to Mr Hart saying that: ‘One of the gaps we had was Developable Area, so I will now confirm that with our client.’[22]
[22]CB 475–476.

Mr Di Felice said that 208 hectares essentially must include the three lots (lots 1, 2 and 3) because it was greater than the gross area of lots 2 and 3. The gross areas of lots 2 (79.73) and 3 (123) total 202.73 hectares.

As discussed earlier, the developable land is calculated at approximately 80 per cent of the gross area of the land. Thus, speaking roughly, being informed that the developable area was 208 hectares would have indicated that the gross area subject to the development agreement was some 260 hectares. The total gross area of lots 1, 2 and 3 was in fact 263.76 hectares.

On receipt of the information about the developable area, Mr Di Felice forwarded the email to Mr Brown.[23] In the email to Mr Brown, forwarding the email from Mr Hart, Mr Di Felice said:[24]

Also, DFG has now informed us of the total developable area included in the consortium. Ultimately, only the Premier Bay and Coralluzzo land is currently included. At this stage it seems the other land owners have opted not to be part of the consortium. The total area included is 245ha, with Premier Bay having 208 ha and Coralluzzo having 37ha. This is significantly different to what was initially expected, and even significantly different to what [Mr Montalto] had said at our most recent meeting.[25] You/[Mr Montalto] may need to consider whether this affects the total projected return from being involved in the consortium.
Feel free to contact me with any queries. Paul and I will call you later today to run through the information we need.

[23]CB 477.

[24]CB 477.

[25]Mr Di Felice said that the most recent meeting referred to, was the meeting where they discussed escrow, referred to at paragraph 81 above.

On 22 March 2013, Mr Hart emailed Mr Di Felice about finalising the CUT documents and confirming that Premier Bay’s executed development agreement was to be delivered to Mr Di Felice shortly.[26] Mr Di Felice responded, setting out the terms of escrow whereby the executed development agreement would be held by Mr Hart, and the development agreement would not be deemed to be entered into until it has been fully executed and exchanged.[27]
[26]CB 481.
[27]CB 480.

On 27 March 2013, Mr Di Felice emailed Mr Hart, attaching several documents relating to the CUT agreement and the development agreement, but not the development agreement itself.[28]
[28]Exhibit 4D, 2.

At 4.54 pm, on 28 March 2013, Mr Di Felice sent an email to Mr Hart attaching a copy of a letter then being delivered to his office with attachments. At 4.55 pm, on 28 March 2013, Mr Di Felice sent an email to Mr Hart saying that he had been instructed that ‘our client’ delivered the development agreement directly to Mr Hart’s office.[29]
[29]Exhibit D2, 2.

On 2 April 2013, Mr Hart emailed Mr Di Felice, referring to Mr Di Felice’s email of 28 March 2013, advising that the development agreement had been delivered in that day’s mail, and enclosing a copy of the development agreement as Mr Di Felice had requested.[30]
[30]CB 482.

The time at which the development agreement was executed is in issue between the parties. As discussed below, I find that the development agreement was executed by Premier Bay prior to 2 April 2013, at a meeting that took place at the Floridia Cheese factory, attended by Mr Montalto, Mr Brown, and Lou Farinotti of Holding Redlich lawyers, and was then held in escrow by Mr Hart.

On 10 April 2013, a signing ceremony was held at Floridia Cheese at which Mr Montalto, Mauro, Mr Di Felice, Tony and Jenny Coralluzzo, and representatives of DFG and others attended. The CUT documents, consisting of a Woodstock Consortium Trust Deed dated 10 April 2013, a Woodstock Consortium Unitholders Agreement dated 10 April 2013, and a Subscription Deed dated 10 April 2013, were signed at this meeting.

Who attended and what took place at this meeting is a matter of dispute, which is discussed below.

Pursuant to the terms of the CUT agreements, Premier Bay as landowner agreed that MCRD Pty Ltd, as trustee for the Montalto Donnybrook Trust, would subscribe for 208 units in the Woodstock Consortium Trust. It should be noted that 208 units corresponds in number to the 208 hectares of developable land that Premier Bay was to have in the development that included lot 1.

Under the Montalto Donnybrook Trust, Mauro is a primary beneficiary. Mauro is also a shareholder in MCRD, the trustee for the trust.

DFG has held and continues to hold regular meetings with the landowners involved in the development. Mr Montalto claimed he has attended meetings, except for maybe four or five in the six years that they have been happening. At these meetings, landowners have been provided with updates about the progress of the development, and presented with reports and maps about the development. In the ‘Landowners Presentation,’ forming part of the report given in February 2016, various maps were included showing roads and services being built over, and development occurring on, each of lots 1, 2 and 3.

On 1 July 2014, Delma agreed that it would contribute its land, and become part of the development and the Woodstock Consortium. To give effect to this, various amending agreements were entered into and other documents signed; the Woodstock Consortium Subscription Deed was varied, and Woodstock Consortium Pty Ltd, Premier Bay, and Tony and Jenny Coralluzzo executed a ‘Deed of Variation — of the Subscription Deed — Woodstock.’ The Deed of Variation was executed by Mr Montalto and Mauro, on behalf of Premier Bay.

In June/May 2016, Planning Victoria held a public hearing to discuss the PSP. On day 11, on 10 June 2016, Mr Montalto and Mr Levinge attended the PSP panel hearing.

Mr Montalto raised with Mr Levinge concerns that he had about the proposed development at this meeting.

On 8 September 2016, Mr Montalto presented a written list of his concerns entitled ‘Redevelopment — Matters of Concerns — Montalto’ at a meeting with representatives of DFG, held at his offices. Anna Tran-Bursill of DFG took notes of the meeting.[31] Mr Montalto was represented by Will Elder, a solicitor from Phillips & Wilkins.
[31]Exhibit P10.

On 13 October 2016, a further meeting was held at Mr Montalto’s offices, attended by Mr Montalto, Mr Elder, Mr Levinge, Greg Bursill, Bonnie Levinge, and Ms Tran-Bursill, at which Ms Tran-Bursill took comprehensive notes. At this meeting, Mr Montalto says that he did not want lot 1 to be in the development agreement.

On 25 May 2017, proceedings were commenced by DFG. DFG claimed relief against Premier Bay, Mr Montalto, and Mauro, in the form of a declaration that lot 1 forms part of the land subject to the development agreement; specific performance of the development agreement; indemnity; damages in addition to or in lieu of specific performance; costs on an indemnity or, alternatively, standard basis; any such further order as the Court deems fit.

Mr Montalto’s pleaded case

Mr Montalto pleads in defence to the claim of DFG and counterclaims against:

(a) DFG (Services), the first defendant to the counterclaim;

(b) DFWD, the second defendant to the counterclaim;

(c) DF (Woodstock) FRR, the third defendant by counterclaim;

(d) Sladen, the fourth defendant by counterclaim;

(e) Crowe Horwath, the fifth defendant by counterclaim.

Mr Montalto admits that he, Premier Bay, and Mauro signed the development agreement. He admits that the land to be developed, referred to in the development agreement, included lot 1. Mr Montalto says that he believed there was a further term in the development agreement dealing with how lot 1 was to be treated separately.

Mr Montalto says that, at the time he and Premier Bay signed the development agreement, they had no knowledge that the development agreement defined the land to include lot 1, as well as lots 2 and 3, and believed that it did not and should not have been included in the land to be developed.

Mr Montalto says that he and Premier Bay were of the mistaken belief that the development agreement:

(a) applied to lot 1 only to the extent that it provided for the formulation of an initial concept design for a hypothetical future development that would include lot 1;

(b) applied to lots 2 and 3 to the extent that it provided a free right of sale to Premier Bay (free of any obligation to DFG) should it become necessary for Premier Bay to sell a small parcel of the land comprising lots 2 and 3 at a future date to any third party;

(c) did not apply to lot 1 to the extent that it provided for the development of the land comprising lot 1; and

(d) did not apply to lot 1 to the extent that it limited Premier Bay’s free right of sale of lot 1 unencumbered to any third party.

In support of these allegations, Mr Montalto alleges six conversations, set out below, took place where Mr Montalto alleges that the above arrangement was discussed. I have numbered these conversations for ease of reference.

Conversation no 1:[32] Mr Montalto alleges that, at a meeting with Mr Levinge, Bert Dennis, and Mr Dooling around the end of 2010, DFG gave Mr Montalto a brochure which contained (at page 34) a map that showed a quarry buffer impacting on lot 1. Mr Montalto says that his neighbour, Mr Di Bella, asked a question about the quarry buffer. Mr Montalto alleges that, in response to his question about the buffer zone, one of the DFG representatives said words to the effect that ‘the blue line is a buffer because of the quarry next door and that land is not developable.’[33] Mr Montalto alleges that, at no time after this meeting, did any representative of DFG, or any other person, explain to him that the quarry buffer had an impact on lot 1, and that lot 1 was developable land.
[32]Second Further Amended Counterclaim, 31 October 2017 (SFACC) particular (ai) to [7].
[33] SFACC, particular (ai) to [7].

Conversation no 2:[34] Mr Montalto alleges that, at an initial meeting held with Mr Dooling and Mr Levinge sometime around the end of 2011 and the beginning of 2012, Mr Montalto offered lots 2 and 3 to DFG as lots to be subject to a development agreement and said, in respect of lot 1, words to the effect that:
[34]SFACC, particular (aii) to [7].

(a) ‘I’m happy to farm lot 1 for another 30 years or 40 years, seeing as it’s not developable’ (referring to the quarry buffer that impacted lot 1 from the neighbouring property and prevented lot 1 from being developed).

(b) ‘If you take what I’m offering, I’ve given you twice what you have now,’ meaning that the land comprising lots 2 and 3 was approximately double the land that the other adjoining landowners had — at the time of the conversation — offered to DFG for development.

(c) ‘I want lot 1 included in the concept plans, but it is not part of the development. But I want it included in the plans so it can be added in years to come, after the quarry has gone.’

Conversation no 3 (five conditions): Mr Montalto alleges that, at a further meeting with Terry Dooling and Peter Levinge, which was held sometime around the end of 2011 and the beginning of 2012, Mr Montalto told DFG that he would enter a development agreement with DFG on the following five preconditions (the five conditions). These have been set out above, but will be repeated here, namely, that:[35]
[35]SFACC, particular (ii) to [7].

1.Gina Webling, who was (and is) a tenant residing in a house on lot 2, needed to be relocated to the house on lot 1 — if lot 1 was to be developed at a future date and if, at that time, it would not be appropriate for Gina to remain in the house on lot 1 (with land), then Gina would need to be relocated elsewhere (with land), and DFG were to arrange this.
2.In the event that lots 2 and 3 were developed, Mr Montalto would continue to farm lot 1, as lot 1 was not developable due to the quarry buffer from the neighbouring property, which impacted upon it.
3.Lot 1 was to be included in the preliminary drawings for the conceptual design phase of the development, but only so that it was part of the formulation of an initial concept design for the hypothetical future development of lot 1. Mr Montalto alleges that he stated that he wanted to see how it could look as part of an overall development, as he did not like to go back and add things on in the future. But that by being included in the concept sketches, lot 1 was not included in the development.
4.Premier Bay was to retain a free right of sale in respect of:
(1)lot 1 (free of any obligations to DFG), so that it could be sold as farm land to a developer, as a potential development site, or to anyone Premier Bay chose; and
(2)a small parcel of land on lots 2 and 3, if it was necessary for Premier Bay or Mr Montalto to raise funds at a future date.

5.The Montalto name would be used in relation to the development of lots 2 and 3 and, in particular, in respect of street names.

Conversation no 4:[36] Mr Montalto alleges that, at the meeting on 12 April 2013 (referred to as the signing meeting), the development agreement was executed and, immediately before Mr Montalto executed the agreement:
[36]SFACC, particular (iii) to [7].

(a) Mr Montalto said to Sladen, in the presence, and within the hearing distance of Burt Dennis, Mr Levinge, Mr Dooling, and Mr Bursill: ‘Have I got the free right to sell?’ and ‘Lot 1 is separate?’;

(b) Mr Jeremiah of Sladen said to Mr Montalto: ‘[y]es you have the free right to sell, it’s here,’ and he gestured towards the development agreement;[37]

(c) No person took Mr Montalto through the pages of the development agreement, or any other agreement, in order to explain the meaning of its terms to Mr Montalto, or otherwise drew any term of the development agreement to Mr Montalto’s attention.

[37]During the trial, Mr Montalto said that he had mistakenly recalled that he said this to Mr Jeremiah, but understood now that it was Mr Di Felice who was at the meeting from Sladen.

Conversation no 5:[38] Mr Montalto alleges that, sometime around the end of 2011, in a meeting held at Premier Bay’s offices at 327 Settlement Road, Thomastown, Mr Montalto advised Mr Brown of the five conditions that Premier Bay and Mr Montalto had for entering into a development agreement with DFG, which Mr Montalto had previously explained to the representatives of DFG, as set out at alleged conversation no 3 (the five conditions).
[38]SFACC [30].

Conversation no 6:[39] Mr Montalto alleges that sometime around the end of 2011 or the beginning of 2012, and in a meeting held at Sladen’s offices on William Street, Melbourne — which was either the first or second meeting that Mr Montalto attended at Sladen’s offices for the purpose of providing instructions and receiving advice under the retainer with Sladen — Mr Montalto explained the five conditions in the presence of Mr Brown.
[39]SFACC [31].

Thus, as regards to DFG, Mr Montalto makes allegations regarding the alleged conversations no 1 (the Kooyong presentation), no 2 (not clear where the conversation took place), no 3 (the five conditions) (not clear where the conversation took place), and no 4 (the signing meeting).

As regards to Sladen, Mr Montalto makes allegations regarding the alleged conversations no 4 (the signing meeting) and no 6 (the five conditions), which took place at Sladen’s offices.

As regards Mr Brown, Mr Montalto makes allegations regarding the alleged conversations no 5 (the five conditions), in the meeting at Settlement Road, and no 6 (the five conditions), in the meeting at Sladen’s offices.

Mr Montalto alleges that at no time prior to execution of the development agreement did:

(a) any representative of DFG;

(b) any representative of Sladen; or

(c) any representative of Crowe Horwath, who Mr Montalto says were engaged to:

(i) advise Mr Montalto or Premier Bay in the negotiations with DFG, drafting and execution of the development agreement; and/or

(ii) instruct Sladen on their behalf, and convey to Premier Bay and Mr Montalto the advice received from Sladen regarding negotiations with DFG, and the drafting and execution of the development agreement;

inform Premier Bay or Mr Montalto that:

(d) the development agreement defined ‘Land’ to include lot 1 as well as lots 2 and 3;

(e) the development agreement applied to lot 1 in any way other than to the development of lot 1 only by way of the formulation of an initial concept design for a hypothetical development;

(f) that the belief of Premier Bay and Mr Montalto, as referred to above at paragraph 106, was mistaken.

As discussed below, Mr Montalto gave evidence that, not only did these conversations take place, but that Mr Levinge and Mr Dooling of DFG agreed that they could work with Mr Montalto’s proposal/conditions.

Mr Levinge, Mr Dooling, Mr Brown, and the solicitors from Sladen all gave evidence denying the alleged conversations, insofar as they are alleged to have been present and to have heard the conversations.

Findings between DFG and the defendants

I set out the findings, in substance, that I have come to on the major issues between the parties. I do so now as the oral evidence was substantial, and will be dealt with below. I also deal below with why I have not accepted the evidence of Mr Montalto in regard to the alleged conversations with DFG officers, Mr Brown, and Sladen.

I am not satisfied that, at the time the development agreement was executed, Premier Bay and Mr Montalto were operating under the mistaken belief that lot 1 was not included in the development agreement.

If, contrary to my finding, Mr Montalto and Premier Bay did hold the mistaken belief that lot 1 was not included in the development agreement, I am not satisfied that DFG had knowledge of such a mistaken belief.

Accordingly, I find that Premier Bay and Mr Montalto have not established that the development agreement should be rectified as sought.

I find that Premier Bay and Mr Montalto have failed to execute the mortgages in breach of the development agreement.

I find that DFG is entitled to specific performance requiring Premier Bay and Mr Montalto to perform their obligations under clause 15 of the development agreement to provide them with a mortgage.

I find that the guarantee and indemnity contained in clauses 30.1 and 30.2 of the development agreement should not be declared void, as against Mauro, on the grounds of unconscionable conduct.

I find that Mauro has failed to establish that he was under a special disadvantage as alleged.

Counterclaim against Crowe Horwath

I am not satisfied that Mr Montalto informed Mr Brown (of the fifth defendant by counterclaim, Crowe Horwath), sometime around the end of 2011, of the five conditions.

I am not satisfied that Mr Montalto, in the presence of Mr Brown, informed the fourth defendant by counterclaim (Sladen), sometime at the end of 2011 or the beginning of 2012, of the five conditions.

I am satisfied that Mr Montalto at all material times was aware that lot 1 was to be included, and was included, in the development agreement.

I find that Crowe Horwath was not obliged to ensure that Mr Montalto knew, comprehended, and understood the content of any documents that he executed or procured to execute.

I am not satisfied that Mr Brown knew (actually or constructively) that Mr Montalto had a special disability as alleged.

I find that Mr Montalto has failed to establish that he was under a special disability as alleged.

I find that Premier Bay and Mr Montalto have failed to establish that Crowe Horwath breached any duty of care owed to Premier Bay or to Mr Montalto.

I find that Mr Montalto has failed to establish that he would not have executed the development agreement, if he had been informed that lot 1 was to be included in the land to be developed.

Counterclaim against Sladen

I am not satisfied that Mr Montalto informed Sladen, sometime around the end of 2011 or the beginning of 2012, of the five conditions.

I find that it is not necessary to find whether or not Sladen was under a duty to ensure that Mr Montalto knew, comprehended, and understood the content of any documents that he executed or he procured Premier Bay to execute.

I find that it is not necessary to find whether or not Sladen was retained, or was under a duty to read the development agreement to Mr Montalto, or to explain to him the effect of each term of the development agreement.

I find that it is not necessary to find whether or not Sladen ensured that Mr Montalto knew, comprehended, and understood the contents of the development agreement prior to execution.

I find that it is not necessary to find whether or not Sladen complied with the retainer and discharged its duty by receiving instructions from, and providing advice to, Mr Brown on behalf of Mr Montalto.

Accordingly, I will give judgment to the plaintiffs, dismiss the counterclaim, and dismiss the third party claims.

The witnesses

DFG called the following witnesses:

(a) Stephen Hay;

(b) Peter Levinge;

(c) Terry Dooling;

(d) David Hart;

(e) Anthony Coralluzzo.

Mr Montalto called two expert witnesses on his ability to read, Dr Tailby and Dr March, and he gave evidence himself. He called no other witnesses.

Crowe Horwath called:

(a) Colin Brown;

(b) Alexander Duonis.

Sladen called:

(a) Robert Jeremiah;

(b) Victor Di Felice.

Mr Montalto’s special disability

Before going to the negotiations leading up to the signing of the development agreement, it is necessary to address Mr Montalto’s ‘special disability.’ Mr Montalto claims that he only has the reading ability of a grade three student, despite having gone to school until grade 10. Mr Montalto says that, accordingly, he relied on Mr Brown to inform him of the terms of business documents that he was called on to sign or read. Mr Brown had acted as the accountant and advisor to Mr Montalto’s father, and to Mr Montalto, for over 40 years. Mr Montalto says that he took Mr Brown to important business meetings, so that Mr Brown could inform him of what he was being asked to sign or read, and to assist Mr Montalto in understanding what was being discussed.

Mr Brown denies that he was ever informed by Mr Montalto of his alleged special disadvantage, nor did he know of it. Further, Mr Brown denies that Mr Montalto ever informed him that Mr Montalto was relying on Mr Brown to inform him of the terms of any written documents.

For the reasons discussed fully below, I am not satisfied that Mr Montalto relied on Mr Brown as alleged by Mr Montalto.

Mr Montalto called Dr Tailby and Dr March to give evidence in support of his claim of special disadvantage.

Evidence of Dr Tailby

Dr John Day Tailby, a clinical neuropsychologist, gave an expert report dated 26 September 2017,[40] and an updated version dated 1 November 2017.[41] Dr Tailby assessed Mr Montalto’s ability to read and comprehend written English texts. Dr Tailby administered the Wechsler adult intelligence scale, and the Wechsler individual achievement test, which Dr Tailby explained are industry standard tests for assessing aspects of general intelligence and specific literacy skills.
[40](Titled: Expert Report of Chris Tailby dated 18 September 2017).
[41]Exhibit D14; Exhibit D15.

Dr Tailby found that Mr Montalto performed in the ‘extremely low’/impaired range for single word reading. On spelling abilities, he also scored in the ‘extremely low’/impaired range. On the reading comprehension test, Mr Montalto’s performance fell into the ‘borderline’ impaired range. Mr Montalto performed better than 3 per cent of his peers or, conversely, his reading ability fell below 90 per cent of his peers for age. Mr Montalto’s listening comprehension abilities fell in the ‘low average’ range. Mr Montalto’s general intellect and memory test scores ranged from ‘borderline’ impaired to ‘superior’.

Dr Tailby said that Mr Montalto’s clinical history and test results suggested that Mr Montalto has developmental dyslexia. Dr Tailby stated in his report:

Mr Montalto exhibits very poor single word reading, decoding and spelling abilities, difficulties with comprehension of passages of written text; and reduced verbal reasoning abilities. These deficits occur against a backdrop of average nonverbal reasoning abilities and average to superior memory abilities. He has a long history of using work-arounds to compensate for his reading and writing difficulties. It was not possible to corroborate the history provided by Mr Montalto with an informant report. Nevertheless, the caveat notwithstanding, the history provided by Mr Montalto and the clinical and psychometric presentation are characteristic of developmental dyslexia.

Dr Tailby was provided with the development agreement dated 10 April 2013 and the email from Mr Di Felice to Mr Brown dated 16 March 2012 at 4.16 am. Dr Tailby was asked to give his expert opinion on Mr Montalto’s ability to read either of those documents. Dr Tailby gave the opinion that, ‘given his reading impairment, Mr Montalto would not be capable of reading and comprehending a document similar to the email or the development agreement without assistance from another person,’ and ‘that in order for Mr Montalto to understand and comprehend the contents of a document similar to the email and the development agreement he would require the assistance of an individual familiar with the types of matters dealt with in these documents, who could read them aloud to him and who could translate the jargonistic and technical language into lay terms as necessary.’[42]
[42]Exhibit D14, 7.

Dr Tailby agreed that it is likely that Mr Montalto ‘could have extracted that there were three lots’ comprising ‘land’, as stated in schedule 1 to the development agreement.[43]
[43]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T372 XXN.

Dr Tailby was cross-examined on how he could verify results that relied on Mr Montalto’s subjective answers and truthfulness. Dr Tailby agreed that, in some instances, he would not be able to verify whether Mr Montalto was giving his full effort on the tests administered. In other instances, Dr Tailby said that failure is a marker of invalid effort.[44] Dr Tailby said that, even if the information given by Mr Montalto was inaccurate, he did not think his opinion would be invalidated as such information only contributed to his diagnosis and, in determining the percentile of Mr Montalto’s abilities, Dr Tailby said that was solely based on the tests administered.[45]
[44]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T354 XXN.
[45]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T354 XXN.

Dr Tailby said that, in forming his opinion, ‘it’s not only that they are failing the tests, so to speak, but it’s the nature in which the failures occur. So it’s more just the quantitative information of the test; it’s also — I’ll just repeat myself. It’s the nature of the failures.’[46]
[46]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T353 XXN.

Evidence of Dr March

Dr Evrim March is also a clinical neuropsychologist. Dr March tested Mr Montalto and prepared an expert report dated 15 September 2017.[47] Dr March assessed Mr Montalto’s reading ability at grade three level, stating that, on reading and comprehension tests, Mr Montalto misses meaningful aspects of written texts. Dr March was of the opinion that Mr Montalto suffers from dyslexia; that is, difficulty in reading and associated writing difficulty.
[47]Exhibit D16 (Titled: Expert Report of Dr Evrim March dated 23 August 2017).

Dr March was also provided with the development agreement dated 10 April 2013, and the email from Mr Di Felice to Mr Brown dated 16 March 2012 at 4.16 am. Dr March was asked to assess Mr Montalto’s ability to read either of those documents. Dr March stated that:[48]

Mr Montalto is not capable of reading and comprehending a document similar to the email and development agreement. Both documents include relatively uncommon (i.e., low frequency) words. The documents, in my opinion, require at least upper high school level of reading. Mr Montalto’s reading capacity is well below this level …

[48]Exhibit D16.

Dr March continued:[49]

Mr Montalto has adequate vocabulary knowledge and abstract verbal reasoning. He has also age-appropriate verbal memory. He has relied on auditory means throughout his life. Assistance would be required in the form of verbally explaining written contents of a document. For important and crucial information, it is recommended that Mr Montalto then repeat the content in his own words to confirm that his understanding reflects the content of the document.

[49]Exhibit D16.

Dr March was also cross-examined on the validity and accuracy of her opinion, and on the potential for Mr Montalto to have manipulated the test outcomes. Dr March said that as well as Mr Montalto’s truthfulness, her assessment was based on her clinical impression of Mr Montalto and on the test performances, and that when administering tests, steps can be taken to ‘actually ascertain that the person is not exaggerating their symptoms or performances or in other words malingering.’[50] Dr March did not agree that she was not able to tell if Mr Montalto was being honest in performing the tests.
[50]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T421 XXN.

As to understanding the definition of ‘land,’ as set out in schedule 1 of the development agreement, Dr March did not agree that Mr Montalto would be able to discern that lots 1, 2 and 3 are to be treated in the same manner.[51]
[51]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T435–436 XXN.

Evidence of Mr Montalto

Mr Montalto gave evidence in chief as follows.

Mr Montalto arrived in Australia with his parents from Sicily when he was six. He attended primary school in North Melbourne and, subsequently, a few years at St Michael’s, a Catholic school in North Melbourne. He was good at maths but hopeless at English. He quickly picked up speaking English, but had difficulty reading and writing English. He left school at 18½, having repeated year 10 at a private school in Geelong. He classified his writing and reading in English at 20 per cent.

In 1965, Mr Montalto went to work for his father at Floridia Cheese, a business started by his parents and named after the village that they came from in Sicily, where he did deliveries for some 10 years. Mr Montalto had trouble reading street names, or writing down the addresses and names of customers. He was able to look up street names with difficulty and give each address a number. He would then write that number on the relevant invoice and, by using the numbers, find the location that he had worked out from the Melway. Mr Montalto would not write the names on the invoices unless it was easy.

After about 10 years, he gave up deliveries and worked in the factory assisting his father. Mr Montalto then took over running the business when his parents retired and moved to a farm. In 1985, Mr Montalto purchased the business from his parents.

Mr Montalto has now handed part of the business down to his two sons, who are directors of the company. His two daughters also work in the business.[52]
[52]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T384–385 XN.

The Premier Bay land was purchased by Mr Montalto’s father, Mauro, approximately 34 years ago, and it was subsequently purchased by Mr Montalto around four years later in about 1989, although his father continued to farm the land. Rob and Gina Webling worked the farm for Mr Montalto’s father, and Mr Montalto has also relied on them to run the farm. Rob and Gina have lived on lot 2 since about 1990. Gina figures in Mr Montalto’s dealings with DFG, mentioned above in relation to condition no 1, which will be dealt with later.

Currently, Mr Montalto farms about 200 to 300 head of cattle, 150 sheep, and 15 head of buffalo, for cheese.

Mr Montalto first became aware that developers were interested in the Donnybrook land about seven years ago when a neighbour of his, Mr Di Bella, told him of their interest. Mr Di Bella recounted a meeting regarding what could happen in the area, as well as an inspection trip that Mr Montalto said he had not been invited to.

Mr Montalto was told by Mr Di Bella of another trip coming up, and Mr Montalto asked Mr Di Bella to let him know so that he could come as well. Mr Di Bella informed Mr Montalto of the next trip in about September/October 2010. By car, Mr Di Bella and Mr Montalto followed a bus carrying other landowners in the area. The trip was organised by DFG. The trip inspected other DFG developments on the western side of Melbourne towards Werribee.

DFG provided information on what was involved with developments and what DFG could do with land. Mr Montalto met Mr Levinge, Bert Dennis, and Mr Dooling. Mr Montalto said that it was Mr Levinge and Mr Dooling who mainly did the talking.[53]

Alleged conversation no 1

[53]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T388 XN.

Evidence of conversation no 1 relates to the alleged conversation of the quarry buffer zone with Peter Levinge and Terry Dooling.

Following the bus tour, there was a meeting at St Kilda Road towards the end of 2010. The parties agreed that the date of the meeting was 15 December 2010. Mr Montalto said that he was informed of the meeting by Mr Di Bella, and attended with Mr Di Bella. Both Delfin Homes and DFG gave presentations. Mr Levinge, Mr Dooling, and Bert Dennis were present from DFG.

Mr Levinge and Mr Dooling gave a presentation explaining how land was broken up, how many people would be effected, including departments, banks, water works, and all the different parties involved. Mr Montalto and the others attending were given a brochure, which Mr Montalto identified in the court book.[54]
[54]CB 114–156.

Mr Montalto took the brochure home, studied it, and noticed the map of the quarry buffer zone.[55] Mr Montalto noticed that the zone, delineated by a sort of oval line, fell over lot 1.[56] Mr Montalto said that the quarry was not mentioned at the meeting.
[55]CB 148.
[56]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T392 XN.

Although Mr Montalto said that he took the map home and noticed the circle, he said that, at first, he did not say anything to DFG about it, as he was not at the meeting as an invited guest. Mr Montalto eventually asked Mr Di Bella if the line could be explained. At the following meeting, which Mr Montalto thought was ‘[t]owards the September, towards the end of year ’10,’ Mr Di Bella then asked the presenters, on Mr Montalto’s behalf, what the circle shown on the map was.[57] DFG explained that it was a quarry buffer, which meant that you could not build within 500 metres of a quarry area, and that the circle was the perimeter to identify the buffer area. Mr Montalto said that Mr Levinge and Mr Dooling would have confirmed that to be the case.[58] Nothing further was said about the buffer zone at what Mr Montalto referred to as the second meeting.
[57]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T395 XN.
[58]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T393 XN.

I assume this is Mr Montalto’s evidence in support of DFG conversation no 1. Contrary to the pleading, the representative did not say that the land is not developable, although Mr Montalto did say that the representative of DFG said: ‘you [couldn’t] build within 500 metres of a quarry area.’[59]
[59]Transcript of hearing, Re Premier Bay Pty Ltd (2 November 2017) T393 XN.

Response of Mr Levinge and Mr Dooling

Mr Levinge and Mr Dooling gave the following evidence relevant to the alleged conversation no 1.

Mr Levinge did not attend the bus tour on 8 November 2010, and does not know that Mr Montalto was not invited by DFG.[60]
[60]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T121–122 XXN.

As to the quarry buffer, Mr Levinge said that Boral had made an application for an extractive industries licence, but by December 2010, Mr Levinge understood that there had been no permit issued to undertake quarrying activity.[61] Mr Levinge said there was a possibility that Boral were proposing to apply for a licence and that the land within the buffer zone could not be developed, but that there was no discussion of the quarry buffer at this presentation.[62]
[61]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T99 XN.
[62]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T127–129 XXN.

Mr Levinge agreed that the quarry buffer shown on the map handed out at the 15 December 2010 presentation covers part of the Premier Bay land — lot 1 and part of lot 2. Mr Levinge said that it was not suggested by anyone from DFG that the land within the quarry buffer was not developable.[63] Mr Levinge said that the handout was not part of the presentation made to the landowners, but was a ‘leave behind’ for landowners.[64] At this stage, Mr Levinge agreed that the developable land was in a state of flux.[65]
[63]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T100, 101 XN.
[64]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T124 XXN.
[65]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T126 XXN.

[859]Transcript of hearing, Re Premier Bay Pty Ltd (1 November 2017) T312 XXN.

[860]Transcript of hearing, Re Premier Bay Pty Ltd (1 November 2017) T310 XXN.

[861]Transcript of hearing, Re Premier Bay Pty Ltd (1 November 2017) T309 XXN.

[862]Transcript of hearing, Re Premier Bay Pty Ltd (1 November 2017) T308 XXN.

[863]Transcript of hearing, Re Premier Bay Pty Ltd (1 November 2017) T308 XXN.

Consideration of Mauro’s evidence

As discussed previously, Mr Hart and Mr Di Felice agreed that the development agreement would be executed by Premier Bay and the directors, and then be held in escrow by Mr Hart pending finalisation of the development agreement with the Coralluzzos, and the execution of the CUT documents. Upon this being satisfied, Mr Hart was to release the development agreement from escrow for execution by DFG, to be dated on the date of execution by DFG.

The development agreement would not be deemed to be entered into until it had been fully executed and exchanged in accordance with the agreed process.

Mr Hart asked Mr Di Felice to get Premier Bay to execute the development agreement.[864] Mr Di Felice said that he was not aware that Mr Montalto and Mauro had executed the development agreement, but subsequently became aware that they had.[865] It appears that Premier Bay and the directors executed the development agreement around 22–28 March 2013. It was received by Mr Hart prior to sending his email of 2 April 2013 to Mr Di Felice.
[864]Transcript of hearing, Re Premier Bay Pty Ltd (16 November 2017) T834 XN.
[865]Transcript of hearing, Re Premier Bay Pty Ltd (20 November 2017) T993 XXN.

The development agreement contain a provision for the directors to sign, on behalf of Premier Bay, as a deed. The signing clause said ‘signed by the said guarantor,’ and there was provision for Mr Montalto and Mauro to sign.[866]
[866]CB 516.

DFG had previously stated, through Mr Hart, that DFG would not execute the development agreement with Premier Bay until the agreement with the Coralluzzos was made. The Coralluzzos signed the development agreement relating to their land at the 10 April 2013 meeting. I find that DFG signed the development agreement at that meeting. Accordingly, I find that the development agreement was concluded at the signing meeting on 10 April 2013.

Mauro said that the development agreement was signed by him on 10 April 2013. Mauro says that he signed four signatures. He claims that there was a discussion about the guarantee with Mr Levinge.

Mr Levinge denied having any conversation with Mauro about the guarantee in the development agreement on 10 April 2013. For the following reasons, I accept Mr Levinge’s evidence and find that Mauro’s recollection of the events of 10 April 2013 is mistaken.

Mauro concedes that he knew about the guarantee, and that he was guaranteeing Premier Bay’s obligations. On the other hand, he says that he did not know it applied to him if he ceased to be a director. Mauro said he understood that he would be fulfilling the obligations of Premier Bay; he understood those obligations to be that he would sign off on any sales of property, etcetera, if his father was not available to fulfil his obligations.[867] Mauro agreed that, before the meeting on 10 April 2013, he knew that he was giving a guarantee, but he did not know that it was given on a personal level.
[867]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T884 XN.

Mauro did not give any evidence of how he knew about the guarantee, or of how he came to the view that the guarantee only applied to him as a director, and not to him personally. His evidence was that he did not read the development agreement; I understood by this statement that he was conveying that he had not read any part of it. So how did he come to the view that it only applied to him as a director?

It is reasonable to infer that he acquired his understanding of the guarantee from Mr Brown, Mr Montalto, or Mr Farinotti, and that he asked some questions about what it was that he was guaranteeing, and what were Premier Bay’s obligations. If he became aware of it in some other way, he did not give any evidence as to how he did so.

The development agreement was signed by Premier Bay, Mr Montalto, and Mauro before 2 April 2013. Mauro recalls signing a document around that time. Mauro recalls that Mr Brown, Mr Montalto, and Mr Farinotti were present when that document was signed.[868] I have discussed, in relation to Mr Montalto’s evidence, that Mr Farinotti advised Mr Montalto about signing the guarantee and indemnity given to DFG.
[868]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T919 XXN.

The evidence suggests that, it is possible that a further copy of the development agreement may have been signed on 10 April 2013, in addition to the ones signed earlier and delivered to Mr Hart’s office on 2 April 2013.

Influence of Mr Montalto

I accept that Mauro was not involved in negotiating the development agreement. I accept that Mr Montalto was the guiding mind of Premier Bay and exercised effective control over the business of Premier Bay. On the other hand, I find that Mr Montalto wanted to involve Mauro in the property development, and I do not accept that Mr Montalto would have compelled Mauro to sign the development agreement without satisfying Mauro’s queries. Mauro said that he would not have signed it if he had known that the guarantee was a personal guarantee.

I accept that Mauro received significant financial benefits from his father, but I do not accept that Mauro was financially dependent such that Mr Montalto had special authority over him in relation to the making of business decisions. The evidence was to the contrary. Mr Montalto and Mauro argued over business decisions, and Mauro left his job at Floridia Cheese due to disputes that he had with Mr Montalto. He was persuaded to return with a greater salary.

Mauro submits that his trust and deference to Mr Montalto, on matters of business, is particularly evident in relation to the business of Premier Bay. Mauro says that, in relation to the activities of Premier Bay and the development with DFG, it is clear from the evidence that Mr Montalto (not Mauro) was going to decide whether the development proceeded, and that Mauro was expected to (and would) do whatever Mr Montalto decided.

Prior to the proposed development, Premier Bay held the land as a trustee for the Montalto Family Trust. Mr Montalto effectively controlled that trust as the appointor. Mauro was not involved in running the farm.

I accept that a factor in Mauro executing the development agreement at the request of his father, Mr Montalto, was the trust and confidence that he reposed in Mr Montalto. I also find that Mauro would have been reassured by the presence of Mr Farinotti at the time that he signed the development agreement. More importantly, I find that Mauro would have been keen for the development to proceed so that the family could enjoy the fruits of the development, and that his signing the development agreement would assist in obtaining these fruits. I agree that Mauro would have been reassured to sign the guarantee as he knew that his father had signed, or would sign.

Failure to call witnesses

Mauro did not cross-examine Mr Montalto on matters in support of his case. It was not put to Mr Montalto that he exerted undue influence over Mauro in relation to the signing of the development agreement and the giving of a personal guarantee.

Further, it was not put to Mr Montalto that, when the development agreement was signed by the Premier Bay parties prior to 2 April 2013, he asked Mauro to sign a single sheet of paper for confirmation purposes. It was not put that Mauro did not have the opportunity to read the document before signing it. It was also not put to Mr Montalto that Mauro did not receive legal advice prior to signing.

Mauro gave evidence that Mr Brown was also present on this occasion. It was not put to Mr Brown that Mauro was not able to read the document, or that he did not receive legal advice prior to signing it.

Mauro failed to call Mr Farinotti. Mr Farinotti was not called to confirm that Mauro did not ask him any questions. He did not call him to explain why the circumstances may have prevented him from clarifying the nature of the guarantee (if that was the case). I can only assume that Mr Farinotti’s evidence may not have assisted Mauro. The inference is open that Mr Farinotti was present to advise Mr Montalto and Mauro about the development agreement. I am more able to draw that inference as Mr Farinotti was not called.

I am not able to infer from his failure to call Mr Farinotti that something happened which Mauro says did not.[869] I am entitled, however, to take the failure to call Mr Farinotti into account in deciding whether to accept or reject Mauro’s evidence.[870]
[869]Jones v Dunkel (1959) 101 CLR 298.
[870]Blatch v Archer (1774) 1 Cowp 63; 98 ER 969.

In relation to the 10 April 2013 signing meeting, Mauro did not call either of Mr and Mrs Coralluzzo to support his evidence. Mr Coralluzzo gave evidence of the 10 April 2013 meeting, but was not asked about any discussions between Mauro and Mr Levinge. Mr Montalto did not call the Coralluzzo’s lawyer, who was present also at the signing meeting. I can only assume that their evidence would not have assisted Mauro Montalto.[871]
[871]Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345.

No explanation was given for the failure to call any witness.

Authorities

The legal authorities relevant to failing to calling a material witness have been discussed above in relation to Mr Montalto’s case.

As noted above, ‘all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.’[872] And the failure of a party to call a witness, who may have knowledge of the true facts, can lead to an ‘inference that his evidence “would not have assisted the [party’s] case.”’[873]
[872]Blatch v Archer (1774) 1 Cowp 63, 65; 98 ER 969, 970 (Lord Mansfield).
[873]Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345, 413 [168] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ); see also, 432–3 [233] (Heydon J).

Credibility of witnesses

I found Mr Levinge to be an honest and forthright witness. I could not say the same for Mauro. I gained the distinct impression that he was seeking to downplay his obvious intelligence, and to display a level of ignorance which is incompatible with his successful running of a business that has 60 to 70 employees.

Mauro gives evidence of Mr Levinge advising Mauro about the guarantee. On the other hand, Mr Levinge denies having the alleged conversations about the guarantee. Mr Dooling did not hear Mr Levinge discuss the guarantee, nor did Mr Hart or Mr Di Felice.

I found no reason to disbelieve the evidence of Mr Dooling, Mr Hart, or Mr Levinge. I found Mr Dooling and Mr Levinge to be honest, direct, and frank. I was not so impressed with Mauro. I gained the impression that he was attempting to paint his father in a more dominant position than he, in fact, held.

I also take into account the change in Mauro’s defence from alleging that he was not advised about the guarantee, to alleging that he was given the wrong advice about the guarantee by Mr Levinge. That is a major change.

Taking into account the above matters, and in the circumstances where Mauro bears the evidentiary burden of proof, I am not satisfied that Mauro did not receive legal advice about the guarantee.

Findings

I find that Mauro did not execute the guarantee on 10 April 2013 meeting. I find that the documents which he signed were the CUT documents.

I do not accept that he was not provided with a copy prior to the meeting of 10 April 2013. Mauro concedes that he signed the development agreement some two to three weeks earlier.

Those present, when he signed the guarantee, were his father, Mr Brown, and Mr Farinotti. Mauro makes no allegations about any of the people present in failing to advise him of the true nature of the guarantee.

I reject the allegation that Mauro did not have the opportunity to read the development agreement before signing it, when Mr Farinotti was present. There is no reason why Mauro could not read it, if he chose to do so. If he was not given the opportunity to read it, then that could have been confirmed by Mr Farinotti, who was present. But Mr Farinotti was not called to support Mauro’s evidence.

I reject the allegation that Mauro did not have the opportunity to obtain independent legal advice. Mauro agreed that Mr Farinotti was present when he signed the guarantee in the development agreement. I have found that Mr Farinotti was present for the express purpose of advising the directors about the development agreement. Mauro agreed that he could have asked Mr Farinotti about the development agreement, but chose not to do so.

I do not accept that Mauro was told that the agreement was a draft. Mr Farinotti would have corrected that misapprehension. It is likely that, if Mauro had any qualms about the guarantee, then he would have raised them on the first occasion that he was asked to sign the development agreement.

I reject Mauro’s evidence that Mr Montalto asked him to sign a single sheet as confirmation that DFG could proceed with preparing the final agreement. I find that Mauro Montalto signed a complete version of the development agreement.

Mauro knew and believed that the agreement had been checked by his father’s solicitors. He was encouraged to sign it as his father was happy to do so. Mauro Montalto believed that the agreement would be of benefit to him and his family. He knew that it contained a guarantee by him of the company’s obligations.

The evidence suggests that it is possible that a further copy of the development agreement may have been signed on 10 April 2013. In any event, I consider that it is unlikely that Mauro would raise issues with Mr Levinge, that he could have raised with Mr Farinotti on the earlier occasion when he executed the development agreement.

On balance, I am not satisfied that Mr Levinge made the observations about the guarantee as alleged or at all. I accept Mr Levinge’s evidence.

I accept that Mr Montalto was the dominant member of the Montalto family on matters of business. I also accept that, in the main, Mauro trusted and deferred to Mr Montalto on matters of business. I do not accept, however, that Mauro was dependent upon Mr Montalto on such matters. Mauro and his brother managed the day-to-day affairs of Floridia Cheese. Mr Montalto was consulted on major financial matters, which is consistent with Mr Montalto being the majority shareholder. Mauro was not reluctant to debate these matters with his father, but as the ultimate owner, I accept that Mr Montalto usually had his way.

Consideration of the unconscientious defence

There are two issues that I must determine. Whether Mauro was at a special disadvantage vis-a-vis Mr Montalto in relation to Premier Bay’s entry into the development agreement; and secondly, if he was, did DFG knowingly take advantage of his special disadvantage, such that it would be unconscientious for DFG to rely on the guarantee in the development agreement against Mauro.

I deal first with the alleged special disadvantage. As I have said above, I accept that Mauro was not involved in negotiating any of the terms of the development agreement. Mauro was not present when Sladen conferred with Mr Montalto about the terms of the development agreement.

Mauro said that he would not have signed the development agreement containing the guarantee if he had been aware that it applied to him personally, and not just as a director. Mauro was quite prepared to sign the guarantee as a director. He made no suggestion that he was overborne in that regard.

Mauro did not give any evidence to support the allegation that he signed the development agreement under the undue influence of his father. He said nothing about his father pressuring him to sign the development agreement. His complaint about his father’s conduct, on the occasion when he signed the development agreement, is that his father misdescribed it as a draft. He does not complain that he was overborne or in a disadvantaged position. Despite his evidence that his father misdescribed the document, he makes no claim against him in these proceedings.

I can only draw the inference that he was quite happy to sign the development agreement, including the guarantee, as it enabled the family (including himself) to benefit financially. His complaint is as to the nature of the guarantee.

Mauro expected to receive something from the $350 million that was anticipated to flow from the development. It seems likely that he would have been prepared to assist in ensuring that the deal went ahead. He gave no evidence to the contrary.

I am not satisfied that Mauro was at a special disadvantage when he signed the agreement in the presence of his father, and the solicitor, Mr Farinotti. The failure to call Mr Farinotti in the circumstances is striking.

Mauro, in his evidence, makes it clear that his main objection is his alleged misunderstanding of the extent of the guarantee. Accordingly, his case is that he signed under a misunderstanding as to its affect.

Mauro says that his misunderstanding was as a result of the statement made by Mr Levinge on 10 April 2013.

In the case before me, the transaction was not a grossly improvident transaction for Mauro. The transaction was going to generate significant financial benefits for him and his family. The requirement by DFG that the directors ensure that Premier Bay carry out its duties under the development agreement is an entirely reasonable term.

Under the guarantee and indemnity, Mauro remains responsible for Premier Bay’s non-compliance, despite no longer being a director of Premier Bay and having no control of its conduct. Mauro has recourse against Premier Bay for any loss resulting from its non-compliance. It was not contested that any aspect of the guarantee would be unduly onerous on Mauro, now that he is not a director of Premier Bay. In the circumstances, I do not consider that it was improvident for Mauro to have given the guarantee as he did.

In view of the above, I am unable to reach a conclusion that Mauro was subject to a special disadvantage, such that his ability to make a judgment as to his own best interests was seriously affected.[874]
[874]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, 462 (Mason J); Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, 398 [6]; Thorne v Kennedy (2017) 91 ALJR 1260, 1272 [38] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).

If my conclusion is wrong, then the question is whether the disability was sufficiently evident to DFG to make it unconscientious for DFG to procure, or accept, Mauro’s assent and personal guarantee to the impugned transaction.

DFG were aware that Premier Bay had solicitors acting for it. DFG were not aware that the solicitors had not drawn the extent and nature of the guarantee contained in the development agreement to the directors’ attention. There is no reason why they should have been aware of this deficiency.

DFG did not know that Mauro was able to obtain legal advice when he signed the agreement, but chose not to do so.

DFG were aware of Mr Montalto being the dominant mind in the conduct of Premier Bay. DFG were also aware that Mauro had been involved in meetings regarding the development. Mr Levinge thought that Mauro would have signed the development agreement if Mr Montalto had wanted him to, unless he had a real objection to it.[875]
[875]Transcript of hearing, Re Premier Bay Pty Ltd (31 October 2017) T197 XXN.

I find that the circumstances known to DFG would not have raised an awareness that Mauro was under a special disadvantage in relation to the execution of the development agreement. As mentioned above, there was nothing onerous or unfair in requesting Mauro to sign a guarantee, with his father, in support of the development, which was to bring such benefits to the family, and upon which compliance by Premier Bay was critical to the success of the development, both to DFG and to the other property owners.

I do not find anything unconscionable in DFG requiring Mauro to sign a guarantee as a director of Premier Bay. He gave evidence that he was able to read, take legal advice if he chose to do so, and could refuse to sign anything about which he had an objection.[876]
[876]Transcript of hearing, Re Premier Bay Pty Ltd (17 November 2017) T920 XXN.

Mauro said that his decision to enter into the development agreement was because he and his family would financially benefit from the development.

Conclusion

I find that Mauro has not made his defence or his counterclaim against DFG.

DFG’s entitlement to relief

DFG seek:

(a) A declaration that lot 1 forms part of the land, the subject of the development agreement.

(b) An order requiring Premier Bay and Mr Montalto to perform their obligations, under clause 15 of the development agreement, to provide the second plaintiff (DF Developments) with a mortgage.[877]

[877]In the form that appears at CB 656 to CB 687. There was no ‘Planning Approval’ (ie, Gazettal), within the meaning of clause 1.43 of the Development Agreement (CB 491), until after the trial had commenced: see Transcript of hearing, Re Premier Bay Pty Ltd (10 November 2017) T730 XXN.

Pursuant to clause 15 of the development agreement, Premier Bay agreed to grant a mortgage over the land to DFG to secure the performance of all its obligations to DFG, under or in connection with the development agreement.

DFG submit that the granting of the declaration is necessary and appropriate to resolve the real legal controversy between the parties, referring to Fisher and Lightwood’s Law of Mortgage, which notes that, because of the recognition that commercially speaking damages are not an adequate remedy for breach of a promise to give a mortgage,[878] the Court will ordinarily require specific performance of an agreement to provide a mortgage.[879]
[878]Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 (CA) 594–6 (Buckley LJ).
[879]See ELG Tyler, PW Young and Clyde Croft, Fisher and Lightwood’s Law of Mortgage (LexisNexis Butterworths, 3^rd ed, 2014) 38–9. See also Takemura v National Australia Bank Limited [2003] NSWSC 339; (2003) NSW ConvR ¶56-056 [16]–[17] (Young CJ in Eq).

DFG submit that the approach, in relation to granting specific performance of an agreement to provide a mortgage, reflects the long accepted principle that damages at common law are an inadequate remedy in the context of contracts involving land.[880]
[880]See, for example, Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146, 151 (Barwick CJ) (a case, like the current one, involving a developer); ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615, 629–33 (Brooking J).

The failure to provide the mortgage is not a hypothetical breach. The obligation arose when the plaintiffs requested that the mortgage be granted after signing the development agreement.

DFG are entitled to the declaration and an order for specific performance as sought.

In the circumstances, I find that DFG may be entitled to damages caused by the defendants’ failure to carry out their obligations when requested, if any. I will hear the parties on this issue.

I direct that DFG bring in minutes of orders that fully reflect the decisions which I have made. I will hear the parties on costs.

[2018] VSC 168

13 April 2018