Rhagodia Pty Ltd v National Australia Bank Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST

No. 5258 of 2008

IN THE MATTER OF: RHAGODIA PTY LTD (ACN 086 554 485)

BETWEEN:

RHAGODIA PTY LTD (ACN 086 554 485)	Plaintiff
v
NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937)	Defendant

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	10 July 2008
DATE OF JUDGMENT:	14 August 2008
CASE MAY BE CITED AS:	Re Rhagodia Pty Ltd
MEDIUM NEUTRAL CITATION:	[2008] VSC 295

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CORPORATIONS – Statutory demand – Application to set aside statutory demand – Genuine defence – Defence raised but equivocal, lacking precision, inconsistent with undisputed contemporaneous documents and inherently unlikely – Failure of applicant to address contemporaneous undisputed documents - Appeal from Master dismissing application – Appeal dismissed – s 459H Corporations Act 2001.

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Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
JML Constructions v Raymond Terrace (2000) 33 ACSR 669
Moyall Investments Services v White (1993) 12 ACSR 320
Petelin v Cullen (1975) 132 CLR 355
Roadships v Tree (2007) 64 ASCR 671
Spencer Constructions Pty Ltd v GAM Aldridge Pty Ltd (1997) 76 FCR 452
Taylor v Johnson (1983) 151 CLR 422
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr E W Woodward	Darrer Muir Fleiter
For the Defendant	Mr M J Galvin	Dibbs Abbott Stillman

TABLE OF CONTENTS

INTRODUCTION AND SUMMARY............................................................................................ 1

THE AFFIDAVITS............................................................................................................................. 2

THE EVIDENCE................................................................................................................................. 2

THE MASTER’S FINDING........................................................................................................... 21

RELEVANT LEGAL PRINCIPLES............................................................................................... 22

THE PARTIES’ ARGUMENTS..................................................................................................... 25

RHAGODIA’S SUBMISSIONS.................................................................................................... 28

THE AFFIXING OF THE SEAL..................................................................................................... 31

THE FAILURE OF MR HUNT TO GIVE EVIDENCE............................................................. 31

MR ABDOU’S LETTER OF 11 JULY 2002................................................................................... 32

THE PORT MELBOURNE PROPERTY...................................................................................... 32

THE LOAN APPLICATION.......................................................................................................... 33

WITNESSING THE AFFIXING OF THE COMMON SEAL................................................... 33

MR ABDOU’S FIRST NAME........................................................................................................ 34

THE SECURITY DOCUMENTS AND THE BANK’S OFFER................................................ 34

MR ABDOU TOLD OF BANK’S OFFER.................................................................................... 34

RHAGODIA’S APPLICATION TO RE-OPEN ITS CASE...................................................... 34

ONUS ON RHAGODIA................................................................................................................. 35

ANNEXURE...................................................................................................................................... 36

Ruling 10 July 2008..................................................................................................................... 36

HIS HONOUR:

INTRODUCTION AND SUMMARY

I have before me an appeal against the order of a Master made 5 June 2008 dismissing an application by Rhagodia Pty Ltd (“Rhagodia”) to set aside a statutory demand made by the National Australia Bank Ltd (“NAB”) alleging Rhagodia owes NAB $714,754.04.[1] The liability is alleged to arise under a guarantee and indemnity dated 6 August 2002 given by Rhagodia in favour of Haddad & Co Pty Ltd (“Haddad & Co”) of $417,798.92; under a Consumer Guarantee dated 6 August 2002 given by Rhagodia in favour of Irene Abdou of $290,605.12 and from the creditor’s costs of $350 making a total of $714,754.04.[2]
[1]The statutory demand is dated 27 February 2008, Exhibit HA 2 to the affidavit of Hanny Abdou sworn 20 March 2008
[2]The affidavit of Giles Bailey Pridmore affirmed 27 February 2008 accompanying the statutory demand affirmed the basis of the debt alleged in the notice

In summary, for the following reasons, I have found as follows. Rhagodia bears the onus of establishing that it has a genuine defence to the bank’s claim.[3] I find that Rhagodia’s defence to the bank’s claim as deposed to by Mr Abdou is equivocal, lacks precision, is inconsistent with undisputed contemporaneous documents and is inherently improbable.
[3]Moyall Investment Services v White (1993) 12 ACSR 320 at 324 per Ryan J; Paratoo Pty Ltd v Frizzell (Unreported, SCWA FC, Ipp J (with whom Malcolm CJ agreed), 21 October 1997, p2 of 4)

In circumstances where Rhagodia’s defence is contradicted by the contemporaneous undisputed documents, including a letter signed by Mr Abdou, the establishment of the defence requires an explanation of the contemporaneous and undisputed documents that is consistent with the defence. The applicant has not provided such an explanation.

In my opinion, the defence does not have sufficient prima facie plausibility to merit further investigation as to its truth. In my opinion, Rhagodia’s defence as deposed to is devoid of substance and warrants no further investigation.

I am not satisfied that there is a genuine dispute between Rhagodia and NAB about the existence or owing of a debt to which NAB’s demand relates within the meaning of s 459H of the Corporations Act 2001.

I dismiss the appeal and order that the plaintiff pay the defendant’s costs of and incidental to the appeal, including any reserved costs.

THE AFFIDAVITS

The application to set aside the statutory demand was supported by the affidavits of Hanny Abdou sworn 20 March 2008 (“Mr Abdou’s first affidavit”), sworn 15 May 2008 (“Mr Abdou’s second affidavit”), sworn 16 May 2008 (“Mr Abdou’s third affidavit”), sworn 9 July 2008 (“Mr Abdou’s fourth affidavit”), and of Gary Trowsdale sworn 20 March 2008 (“Mr Trowsdale’s affidavit”).

In opposition to the application, NAB relied upon the affidavits of Timothy Alexander McVitty sworn 16 April 2008 (“Mr McVitty’s first affidavit”) and sworn 8 July 2008 (“Mr McVitty’s second affidavit”).

THE EVIDENCE

Mr Abdou is the sole director and company secretary of Rhagodia. He says that in about late 1998/early 1999 his wife Irene Abdou (“Irene”), from whom he is now divorced, purchased a residential property at 6 Romilly Avenue, Lower Templestowe, Victoria (“the Templestowe property”). He says that he believes that NAB lent approximately $400,000 to Irene to enable her to purchase the Templestowe property and a mortgage to NAB was recorded as having been registered over the property on 19 March 1999. Mr Abdou says that he recalls that Irene and he moved into the Templestowe property in or about February 1999 following settlement of her purchase. He says the Templestowe property needed renovations. Towards the end of 1999, Irene and he discussed with his personal business banker, Franklin Lamonaco, who was employed by NAB at its Werribee branch, the possibility of Irene obtaining a further loan from NAB to fund renovations at the Templestowe property. He says that he believes that in late 1999, NAB agreed to loan Irene a further sum of $300,000 (approximately) to fund renovations at the Templestowe property. He says he believes that those funds were drawn upon by Irene.

Mr Abdou says Haddad & Co is trustee of a discretionary trust known as “the I Lagoutatzis & H Abdou Family Trust”. Mr Abdou says that in late 1999, he believes that NAB had also entered into an informal overdraft facility with Haddad & Co. He says that he believes these overdraft funds were also used by Irene to fund renovations at the Templestowe property. He says that Irene was the sole director of Haddad & Co at all times up until the deregistration of Haddad & Co on 13 April 2007. He, however, refers to it as “our trust company.”[4] He says that NAB also entered into a registered fixed and floating charge over Haddad & Co on 3 March 1999.
[4]Mr Abdou’s fourth affidavit [4]

Mr Abdou says that the renovations at the Templestowe property were finished in or about August 2000 and he believes that Irene’s loan from NAB was being repaid in accordance with its terms up until this time. He says that towards the end of 2000 the business which he worked for, “Tele Choice”, began to suffer financial pressure. He says that Rhagodia as trustee for the H & S Abdou Family Trust, held units in a unit trust and the unit trust in turn conducted the “Tele Choice” business. He says that Rhagodia does not carry on any business activity itself and there are two other unit holders in the unit trust that own and conduct the Tele Choice business.

Mr Abdou says that the Tele Choice business involved the retail sale of motor mobile telephones and other telecommunication products and in late 2000 the business had suffered as a result of the business failure and subsequent insolvency of One.Tel Limited.

He says that he believes that by late 2001, Haddad & Co’s overdraft with NAB amounted to approximately $270,000. He says he recalls Irene being contacted at about this time by the credit people within NAB, wanting to deal with the loans that were in place. He says he recalls Irene and himself visiting NAB at its credit section in the city and he believes he may have been asked to sign documents associated with Haddad & Co’s overdraft being formalised and increased to $300,000.

Mr Abdou says that thereafter he believed that Irene’s loan from NAB was being serviced in accordance with its terms until early 2002. He says that from early to mid 2002 he was seriously ill and he was in and out of hospital. During this time, he says he believed that Irene was obliged to repay approximately $7,000 per month to NAB in respect of her loans. He says, however, that Irene was struggling to pay. Mr Abdou says that in mid July 2002 he can recall Irene being contacted by NAB’s collections department. He says they apparently indicated that NAB was concerned about Irene’s loans and Haddad & Co’s loans. He says NAB requested that Irene and he attend a meeting at its collection department. He says that Irene and he went to a meeting at NAB’s city office where a NAB representative, whose name he believes was Tim McVitty, asked Irene and him why Irene’s loans were not being repaid. Mr Abdou says he explained on Irene’s behalf the cash flow problems that the Tele Choice business was suffering as a result of the collapse of One.Tel Limited and that this in turn impacted on Irene’s ability to source funds.

Mr Abdou says that at the meeting with Tim McVitty, Mr Abdou requested that NAB accept reduced payments from Irene of $5,000 to $6,000 per month. He says that in response Tim McVitty said to him that NAB wanted Irene to re-finance her loans and in particular, combine Irene’s loans and Haddad & Co’s overdraft. He says he recalls Tim McVitty saying to Irene and himself that if Irene’s loans were consolidated and Haddad & Co’s overdraft were combined and Mr Abdou agreed to personally guarantee the loans, then NAB would allow Irene time to sell the Templestowe property and make repayments.

Mr Abdou says that in response he said to Mr McVitty that he would think about NAB’s proposal and would get back to them. He said that NAB was going to put paperwork together and that they needed to meet with NAB in a week’s time.

Mr Abdou says that he subsequently decided that he was prepared to go along with NAB’s proposal and guarantee Irene’s existing loans and Haddad & Co’s existing overdraft.

He says that in about early August 2002 Irene and himself again met with Tim McVitty in NAB’s city office. He says he recalls telling Tim McVitty that he was prepared to personally guarantee Irene’s loans as well as Haddad & Co’s overdraft together with Irene. He says at that meeting Tim McVitty asked him if Rhagodia would also personally guarantee Irene’s loans and Haddad & Co’s overdraft. He says he replied that Rhagodia would not provide such a guarantee.

He says that one of the reasons for this refusal was that he always avoided Rhagodia giving any guarantee or security in respect of any borrowings by any other companies which he was associated with or by others.

He says he recalls Tim McVitty saying words to the effect that he accepted Mr Abdou’s refusal of security from Rhagodia. Mr Abdou says that Mr McVitty then produced a set of documents for signing. He says Mr McVitty intimated that these were the documents which consolidated Irene’s loans with NAB and Haddad & Co’s loan with security being a freehold mortgage over the Templestowe property and a personal guarantee from Irene and myself. He says there may also have been a charge over Haddad & Co.

Mr Abdou says that when they were handed the documents for signing he indicated that he wanted to double check with his accountant Gary Trowsdale (“Gary”) at Davis Accountants and Financial Advisors on his mobile telephone. He says he recalls Tim McVitty saying this was okay and he then did telephone Gary from the meeting. He says he clearly recalls asking Gary whether or not he should sign the documents given to him by Tim McVitty. He says that Gary said to him that so long as there was no reference to Rhagodia it should be alright for him to sign them. Mr Abdou says that while he was still on the telephone call to Gary he said to Tim McVitty:

“’Rhagodia is not being required to sign any, are they?’ and Mr Tim McVitty replied: ‘No, it’s not’.”

Mr Abdou says that after Tim McVitty’s reply he passed this assurance on to Gary, who was still on the phone and he said that was fine. He says he then concluded that call. He says that Irene and himself signed the legal documents given to them by Tim McVitty. He says he clearly recalls him turning through the various pages and pointing to Irene and to himself where they had to sign. He says that Tim McVitty also signed, witnessing their signatures on those documents.

Mr Abdou says that following the meeting with Tim McVitty, he remembers Irene placed the Templestowe property on the market. He says that in late 2002, he recalls Irene sold the Templestowe property for $1.3M on a terms contract, which involved the purchaser paying $65,000 immediately, with the balance payable in 12 months’ time. He says the purchaser moved into the Templestowe property but then defaulted on the terms contract and the sale was never completed.

He says that in mid 2003, he recalls receiving a telephone call from a person from NAB, whose name he cannot now recall, asking him why Irene had not sold the Templestowe property yet. He says at the time he was aware that Irene had put the property back on the market because of the default by the purchaser. He says NAB person was making threats that if the property was not sold the bank was going to foreclose. Mr Abdou says at the time he was experiencing health problems and this was also causing difficulties at home. He says he contacted his accountant Gary and asked him if he could talk to NAB on behalf of Irene and Haddad & Co which Gary agreed to do.

Mr Abdou says that a short time later, he recalls Gary telephoning him and saying that he had spoken with NAB and in the course of that conversation the NAB person had made a reference to Rhagodia as being involved in the loan transactions as a guarantor. He says that when he heard this he was dismayed and stated to Gary that this was absolutely wrong. He says that he recounted how when these documents had been signed at the bank office, he had specifically spoken with Gary about the issue of Rhagodia not signing, and he pointed out how Tim McVitty at NAB had given him this assurance. He says it was agreed that Gary would again contact NAB and ask them to send out to him copies of the documents that Mr Abdou had signed regarding Irene’s loans and Haddad & Co’s overdraft.

Mr Abdou says that Gary then obtained copies of the documents from NAB and Mr Abdou saw the Consumer Guarantee of 6 August 2002 and the Guarantee and Indemnity dated 6 August 2002.[5]
[5]Exhibits HA 5 and HA 6

Mr Abdou says that he told Gary that:

(a)He did not sign the Consumer Guarantee nor the Guarantee and Indemnity on behalf of Rhagodia;
(b)He did not witness the affixing of Rhagodia common seal on the Consumer Guarantee nor the Guarantee and Indemnity;
(c)He had never placed Rhagodia’s common seal on any document with NAB;
(d)Irene’s signature as a director of Rhagodia was wrong as she had never been a director;
(e)There were all sorts of different handwriting on the guarantee documents, most of which were not his; and
(f)He believed the documents had been wrongly put together and “dishonesty must have been involved.”

He says that he remembers pointing out to Gary that he had never taken Rhagodia’s common seal with him to the meeting with NAB when the bank documents were signed. He says he told Gary this would have meant that he had collected the seal from his office (Gary held the secretarial folder) and how could he have ever telephoned Gary from the bank meeting to ask confirmation from him that Rhagodia was not being required to give any security if he had had the seal with him. He says that Gary told him that he remembered this telephone call which involved Mr Abdou confirming that Rhagodia was not being asked to sign anything and further states that the bank’s personnel had confirmed this. Mr Abdou says that he then went to NAB and was informed that Mr McVitty was no longer employed in the collections department. He says he saw someone at the bank and complained to that person that he had just been given copies of documents involving loans from NAB which showed his signature incorrectly as witnessing Rhagodia’s common seal and signing on behalf of Rhagodia. He says he was furious at the time and he recounted how he had signed documents only in his own capacity. He says he explained the history of his meeting with Tim McVitty, ringing Gary from NAB’s office, Tim McVitty’s response and the decision not to sign on behalf of Rhagodia and finally, the signing of the documents.

He says he told the NAB representative that he had never signed any documents on behalf of Rhagodia nor placed Rhagodia’s seal on any documents and indicated there must have been “foul play” involved. He says he was very angry and the person he was speaking to got him a glass of water and asked him to sit down. He says he was then left alone in the room at NAB’s city office for about an hour. He says that then the person returned and told him that NAB would look into the matter and would be in contact with him.

Mr Abdou says he remembers leaving the meeting stunned but expecting that NAB would come back to him with a proper response to his serious allegations.

Mr Abdou says that following that meeting in December 2003 he did not hear from NAB. He says that he is aware that NAB subsequently took possession of the Templestowe property and it was sold in 2004. He says that since that time NAB has never contacted him in relation to the Consumer Guarantee or the Guarantee and Indemnity and he has had no communication with NAB in relation to those documents until the demand was served on Rhagodia. He says no letters have been written to Rhagodia nor to himself and nor he believes to Irene. He says no formal demands for payment has been made. He says that most importantly he has never received any proper response or explanation for what had happened.

Mr Abdou says at the time of signing the Consumer Guarantee and the Guarantee and Indemnity he was definitely led to believe by NAB that he was merely signing legal documents to give effect to his personal guarantee in respect to Irene’s loans and Haddad & Co’s overdraft and that Rhagodia was not being required to provide any security whatsoever by way of guarantee or otherwise.[6]
[6]Mr Abdou’s first affidavit

Mr Trowsdale in his affidavit gives evidence of his knowledge about the structure of Rhagodia and advice he had given to Mr Abdou about avoiding Rhagodia giving a guarantee.

Mr Trowsdale says that in about early August 2002 he received a telephone call from Mr Abdou. He says that Mr Abdou told him that Mr Abdou was at a NAB office with bank officers and was prepared to sign some documents relating to NAB loans that had been made to Irene and Haddad & Co. He says that Mr Abdou explained to him that he had agreed to personally guarantee Irene’s loans and Haddad & Co’s overdraft but he had wanted to be sure that Rhagodia was not being required to provide security for these loans. He says he remembers this clearly as it was consistent with previous discussions he had with Mr Abdou.

Mr Trowsdale says he told Mr Abdou that there should be no problem signing the documents as long as Rhagodia was not referred to in those documents. He says that he recalls that when he this to Mr Abdou, Mr Abdou then asked a rhetorical question of other persons whom he was in the room with:

“Rhagodia is not being required to sign anything, are they?”

He says he recalls Mr Abdou saying to him words to the effect of:

“No, no it’s okay, Rhagodia is not included.”

Mr Trowsdale says that he then said that it should be okay for Irene and Mr Abdou to sign.

Mr Trowsdale says that in late 2003 he recalls receiving a telephone call from Mr Abdou saying that he had been contacted by someone from NAB complaining that Irene had not sold the Templestowe property. As a consequence Mr Trowsdale contacted NAB and discussed the position of Irene’s loan and the overdrafts held by Haddad & Co. He says that in the course of that discussion with the NAB representative reference was made to Rhagodia having guaranteed these loans. Mr Trowsdale says he recalls being puzzled by this because he remembered at the time that he had specifically spoken with Mr Abdou regarding the issue of Rhagodia not signing.

He says that he spoke to Mr Abdou and informed him that the NAB representative stated that Rhagodia had a responsibility in relation to the NAB loans made to Irene and Haddad & Co. He says that Mr Abdou said to him that this must surely be a mistake and he asked him to contact NAB again and ask them to send out a copy of their documents relating to these loans. He says he obtained copies of the Consumer Guarantee and the Guarantee and Indemnity.

Mr Trowsdale says after he got these documents he telephoned Mr Abdou informing him that the document showed his and Irene’s signatures on behalf of Rhagodia and that Mr Abdou responded:

“I did not sign as Rhagodia. That can’t be right. They can’t be the right documents.”

He says he remembers Mr Abdou sounding completely stunned and saying he did not sign any documents on behalf of Rhagodia.

He says that he recalls Mr Abdou subsequently arriving at his office and showing him the letter and the documents which he had received from NAB. He says he recalls Mr Abdou saying that these documents were wrong and that he expressly never signed anything for Rhagodia in connection with NAB loans to Irene and Haddad & Co. He says that Mr Abdou told him that he would sort things out with NAB.

Mr Trowsdale says that for a number of years thereafter Mr Abdou had told him on several separate occasions that he had not heard anything further from NAB other than they had sold the property in Templestowe. He says he did tell him that he went and saw NAB and complained to them about the reference to Rhagodia and that the bank had said that they would get back to him and that this had not occurred.

Mr Trowsdale says he did not hear anything further from NAB after getting the copy of the documents in December 2003 until Rhagodia received the statutory demand dated 27 February 2008.[7]
[7]Mr Trowsdale’s first affidavit

Mr McVitty swears that he is an employee of the National Australia Bank and that during 2001 and 2002 he was working for the Asset Structuring Unit of the bank which, inter alia, was responsible for the review and handling of customer facilities which had fallen into default.

He says that as at July 2001, Hanny and Irene Abdou and interests associated with them had two facilities in place with the bank, both of which were in default. He says these were as follows:

(a)An overdraft for Haddad & Co which had a limit of $300,000 and which was over its limit;
(b)A home loan to Irene Abdou in respect of the Templestowe property the repayments for which had fallen into default. He says the Haddad & Co overdraft was secured by a guarantee of Hanny and Irene Abdou. He says the home loan was secured by a mortgage over the Templestowe property.

He says that he understood that Haddad & Co had previously operated a retail mobile phone business that was no longer trading. He says that through their company Rhagodia, the Abdous now had a 25 percent share in Business Service Brokers Pty Ltd (which had also been a customer of the bank), a company operating a business known as Tele Choice in the retail telecommunications industry.

He says that as a result of these facilities falling into default the files relating to them were put on watch status, referred to the Asset Structuring Unit of the bank and put under his control.

He says that during the second half of 2001, the bank was informed by Mr Abdou that he and his wife were attempting to sell the Templestowe property and, primarily for that reason, the bank did not take any steps at that stage to enforce its security.

Mr McVitty says that in early 2002, with the Templestowe property still remaining unsold, the bank entered into negotiations with Mr Abdou in relation to the facilities referred to above. He says that in April 2002 the bank was advised by the Abdous that:

(a)the Haddad & Co debt would be reduced as a result of the sale of a property in Kensington;
(b)they were looking to obtain a refinance of both existing facilities from alternative financiers.

This information was contained in a letter dated 8 April 2002 from Irene Abdou, but signed by Mr Abdou, to Mr McVitty.[8]

[8]TAM 1

Mr McVitty says that after Mr and Mrs Abdou had apparently failed to obtain a refinance over the next few weeks, he again made contact with them and he says at that stage they had engaged Tim Hunt & Associates Pty Ltd to represent them in relation to their facilities.

He says that on 20 June 2008, Mr Hunt wrote to him suggesting that the overall debt could be reduced by the sale of a property in Port Melbourne which was owned through the Tele Choice business thereby indirectly giving the Abdou family a 25 percent interest in that property.[9]
[9]Exhibit TAM 2

Mr McVitty says that after considering this letter, he wrote a letter of 28 June 2002 to Mr Hunt advising that the bank would be prepared to consider restructuring the Abdou family facilities as follows:

(a)A home loan to Irene of $800,000;
(b)An overdraft to Haddad & Co of between $205,000 and $225,000 which was to be repayable in six months, it being envisaged that the Abdou share of the Port Melbourne property would basically fund this repayment; and
(c)Those facilities would be secured by guarantees from Hanny Abdou and Rhagodia, which was the entity holding the Abdous’ interest in the Port Melbourne property. In the event that the loan was to be transferred from Haddad & Co to Mr and/or Mrs Abdou, Haddad & Co was also required to be a guarantor.

The letter said that the customer was to outline its requirements in respect of the name of the borrowing entity. A footnote to that requirement said:

In the event the borrower’s name remains unchanged, the bank will require the inclusion of Hanny Abdou and Rhagodia Pty Ltd (the H & S Abdou Family Trust) as guarantors. Should the loan be transferred to the individuals’ names, the Bank will require the inclusion of Haddad & Co Pty Ltd and Rhagodia Pty Ltd (and their respective trusts) as guarantors. Should the current Home Loan remain intact (see 3 below), the name of the borrowing entity cannot change, and the Bank will require the additional guarantors (H Abdou and Rhagodia Pty Ltd).[10]

[10]Exhibit TAM 3

A number of conditions were attached to the loan including the provision of full details of the Port Melbourne property, the provision of a proposal in relation to the realisation of Mr Abdou’s share of the Port Melbourne property and an update of financial information from Business Service Brokers Pty Ltd and Mr Abdou.

Mr McVitty says that on 4 July 2002, he received a letter from Tim Hunt & Associates advising that the Abdous wished to accept the bank’s proposal in full.[11] Mr McVitty says he also received a letter from Mr Abdou dated 11 July 2002 providing further details in relation to the ownership of the Port Melbourne property. He says the letter confirmed that the Abdous’ interest in that property was held through Rhagodia.[12] The letter was signed by Mr Abdou and expressly referred to Mr McVitty’s letter of 28 June 2008 which sought information from the Abdous, full details of the Port Melbourne property and other information.
[11]Exhibit TAM 4
[12]Exhibit TAM 5

Mr McVitty says he also received a letter from Tim Hunt & Associates dated 11 July 2002 enclosing some of the financial information which he had requested together with the completed loan application form in respect of the home loan and Mr Abdou’s letter of 11 July 2002.[13]
[13]Exhibit TAM 6

He says that in August 2006, the Abdous facilities were restructured as he indicated and the guarantees were executed. He says Rhagodia also provided to the bank a fixed and floating charge over its assets and undertakings.[14]
[14]Exhibit TAM 7 and is a copy of that charge dated 6 August 2002

Mr McVitty says that he has read the affidavits of Hanny Abdou and Gary Trowsdale both sworn 20 March 2008. He denies that Mr Abdou refused to allow Rhagodia to provide security for the restructure facilities offered to the Abdous and denies that Mr McVitty “intimated” or indeed explicably stated that the security documents being executed were confined to a mortgage over the Templestowe property and a personal guarantee given by Hanny and Irene Abdou.

Mr McVitty says that the provision of security by Rhagodia was integral to the refinancing, given its interest in the Port Melbourne property. He says the requirement for Rhagodia to provide security was made clear in the bank’s letter of offer dated 28 June 2002 and that offer was accepted by Tim Hunt & Associates on behalf of Mr and Mrs Abdou in its letter of response to his offer.

Mr McVitty says he has no recollection of the telephone conversation where Mr Abdou says he called Mr Trowsdale on his mobile phone and asked about Rhagodia acting as a guarantor.

Mr Abdou swore two further affidavits (the Abdou’s second and third affidavits) in response to Mr McVitty’s first affidavit. He refers to Mr Hunt’s letter of 28 June 2002. He deposes to his meeting with Mr Hunt and how Mr Hunt informed him that he previously worked at NAB. He says that Mr Hunt offered to assist Mrs Abdou with re-negotiating the loan from NAB.[15]
[15]Mr Abdou’s second affidavit [3]

Mr Abdou says that Mr Hunt and he met a few times and he spoke with him by telephone several times but Mr Hunt never showed him a copy of the 28 June 2002 letter. He says he has never seen that letter prior to being shown a copy of it as an exhibit to Tim McVitty’s affidavit. He says that Tim Hunt never showed him a copy of any correspondence between NAB and himself although he does recall him telling him about the two loans being proposed by NAB to Haddad & Co and Irene and NAB’s requirement that he personally guarantee the two loans. He says he never instructed Tim Hunt to agree to Rhagodia providing any form of security to NAB or entering into any agreement with NAB whatsoever.

Mr Abdou refers to the debenture document given by Rhagodia and says that Tim McVitty did not say to him at the meeting at the bank words in substance that he was producing a debenture charge over Rhagodia for signing. Mr Abdou says that he believes that Tim McVitty directed him to sign the last pages of the debenture document without telling him what the document was. He says that based on his discussions with Tim McVitty at the time of signing, he understood that the documents he was signing were his personal guarantee and the guarantee from Haddad & Co and had nothing to do with Rhagodia.[16]
[16]Ibid [9]

He says at the time he signed these documents, Rhagodia’s common seal was not on the last page of the debenture document nor was the common seal placed on that document during the meeting and the handwriting on the last page of the debenture document stating “Rhagodia Pty Ltd” above the signature and the word “Director” are not his handwriting and these words were not placed on the debenture document during the meeting.[17]
[17]Ibid [10]

Mr Abdou says the handwriting on the first page of the debenture document stating the “date of trust” to be “11 December 1997” is not his handwriting. He says the date of the H & S Abdou Family Trust is not 11 December 1997 but rather 10 December, 1996. He exhibits a copy of the H & S Abdou Family Trust.[18] Mr and Mrs Abdou are named as the trustees, the primary beneficiaries and the appointor.
[18]Exhibit HA 7

Mr Abdou says that Rhagodia’s common seal was not on page 14 of the Consumer Guarantee and the common seal was not placed on that document during the meeting. He says that when he signed on page 14 of the Consumer Guarantee he recalls being asked by Tim McVitty to write his name which is “Hanny Abdou”, his address and the word “Director.” He says he assumed that he was signing as director of Haddad & Co.

He says the handwriting on page 14 of the Consumer Guarantee stating “Rhagodia Pty Ltd ACN 086 554 485 as trustee for the H & S Abdou Family Trust” above the signature is not his handwriting and was not written on the Consumer Guarantee during the meeting.[19]
[19]Ibid [13]

He says the handwriting on page 11 of the Consumer Guarantee stating “Hanny Abdou” is not his handwriting.[20] He says the handwriting on the Certificate and Acknowledgement from Guarantor annexed to the Consumer Guarantee stating “Hany Abdou” is not his handwriting.[21]
[20]Ibid [14]
[21]Ibid [15]

He says the handwriting on the Acknowledgement from Guarantor/s annexed to the Consumer Guarantee stating “Hany Abdou” and “For and on behalf of Rhagodia Pty Ltd ACN 086 554 485 as trustee of the H & S Abdou Family Trust” is not his handwriting and was not written on that document during the meeting.[22]
[22]Ibid [16]

As to the Guarantee and Indemnity, he says that at the meeting Rhagodia’s common seal was not on the Signature Section for Companies part of the Guarantee and Indemnity[23] and the common seal was not placed on that document during the meeting.[24] He says where he signed on the Signature Section for Companies part of the Guarantee and Indemnity, he again recalls being asked by Tim McVitty to write his name, which is “Hanny Abdou”, his address and the word “Director”. He says that he assumed that he was signing as a director of Haddad & Co.[25]
[23]Exhibit HA 6
[24]Ibid [17(a)]
[25]Ibid [17(b)]

He says the handwriting on the fifth page of the Signature Section for Companies part of the Guarantee and Indemnity stating “Rhagodia Pty Ltd” is not his handwriting and was not written on that document when it was signed during the meeting.[26]
[26]Ibid [18]

He says the handwriting on the Signature Section for Individuals of the Guarantee and Indemnity stating “Hany Abdou” is not his handwriting.[27]
[27]Ibid [19]

He says the handwriting on the Certificate and Acknowledgment from Guarantor annexed to the Guarantee and Indemnity stating “Hany Abdou” is not his handwriting.[28]
[28]Ibid [20]

He says the handwriting on the Acknowledgment from Guarantor/s annexed to the Guarantee and Indemnity stating “Hany Abdou” and “For and on behalf of Rhagodia Pty Ltd ACN 086 554 485 as trustee for the H & S Abdou Family Trust” is not his handwriting and was not written on that document when it was signed during the meeting.[29]
[29]Ibid [21]

As to Irene’s signing, he says during the meeting he recalls Tim McVitty turning to the relevant pages of the documents and Irene being asked by Tim McVitty to sign shortly after he had signed the documents.[30]
[30]Ibid [22]

In Mr Abdou’s third affidavit he deposes that he went to Tim Hunt’s office on 6 May 2008 where Mr Hunt produced his file in relation to the loans that Haddad & Co and Mrs Abdou obtained from NAB. He says that Mr Hunt flipped through the pages on his file and on the file he saw a copy of the 28 June 2002 letter and a copy of the letter dated 4 July 2002 from Tim Hunt to Mr McVitty. He says he looked through Mr Hunt’s file in his presence and there was no correspondence, file notes or other records on that file that indicated that Mr Hunt had ever informed Mrs Abdou or himself about the contents of the 28 June 2002 letter or the 4 July 2002 letter or that Tim Hunt had provided a copy of the 28 June 2002 letter or the 4 July 2002 letter to Mrs Abdou or himself. He says that when he looked through the file there was also no copy of the loan application or copies of other enclosures to the 4 July 2002 letter on the file. Mr Abdou does not address his letter of 11 July 2002 or Mr Hunt’s letter of 11 July 2002,

He says that Tim Hunt said to him and he believes that he had no recollection of the correspondence with NAB in relation to the loans to Haddad & Co and Mrs Abdou. In particular, Mr Hunt said to Mr Abdou that he had no recollection of providing Mrs Abdou and himself with a copy of the June 2002 letter or the July 2002 letter and he said that he had no recollection of discussing the contents of those letters with Mrs Abdou or himself.[31]
[31]Mr Abdou’s third affidavit

After the Master gave his order of 5 June 2008, Mr McVitty swore another affidavit dated 8 July 2008. I gave special leave for NAB to rely upon it.[32] Mr McVitty refers to Mr Abdou’s second affidavit. He repeats that he has no recollection of the conversations to which Mr Abdou refers. He says further that he is uncertain that the documents were signed at his office. He says it is quite possible that they were signed at Mr and Mrs Abdou’s Templestowe property.[33] He denies the allegation of Mr Abdou that he directed Mr Abdou to sign the last page of the debenture without telling him what the document was. Mr McVitty says that, notwithstanding that he does not specifically recall the particular occasion of the signing of the documents in question, he is able to say that it has never been his practice to ask or direct a bank customer or a guarantor to sign a bank document without first informing the customer or guarantor what he or she is signing.
[32]Rule 77.05(7)(b)
[33]Mr McVitty’s second affidavit [3]

As to the allegations regarding the affixing of Rhagodia’s common seal, Mr McVitty says he has no recollection of whether the common seal was placed on the Guarantees and Debenture at the time those documents were signed. However, he does say that he can categorically say that he has never placed a company seal on a NAB document for a customer or guarantor.

Mr McVitty says that prior to witnessing a guarantee for NAB, it has always been his practice:

(a) to go through the key terms of the guarantee with each guarantor; namely the debts that each guarantor is guaranteeing and the amount of the basic liability;

(b) to draw the guarantor’s attention to the warning printed on the cover page of the document; and

(c) to ask the guarantor if he or she wants to obtain independent legal and/or financial advice and give the guarantor the opportunity to do so. He says that in the case of a completely new customer to NAB, the usual practice is to insist that the guarantor obtain independent legal and/or financial advice and have the guarantee witnessed by the solicitor who explains the guarantee.[34]

[34]Ibid [8]

Mr McVitty says that having regard to his practice, he was able to say, notwithstanding that he does not recall the specific event, that when the documents in the present case were executed, he:

(a) went through the key terms of the guarantee, and, in particular in the case of the consumer guarantee, drew Mr Abdou’s attention to the fact that both he and Rhagodia were guaranteeing his wife (Mrs Abdou’s) debts to a basic liability of $800,000;

(b) drew Mr Abdou’s attention to the warning; and

(c) asked Mr Abdou if he wanted to obtain independent legal and/or financial advice, though he would not have insisted on it because Mr Abdou (Rhagodia’s director) was an existing NAB customer and to his knowledge had previously signed guarantees.[35]

[35]Ibid [9]

Mr McVitty says that he firmly believes that he would have undertaken this procedure for its guarantee. He says he would have followed the same procedure with respect to the debenture.

Mr Abdou, in his fourth affidavit sworn 9 July 2008, responded to Mr McVitty’s second affidavit. I gave Rhagodia special leave to rely on the affidavit.[36] He says that he is unable to offer an explanation as to how the common seal came to be placed on the document. He says his wife and he are estranged and she has been unwilling to discuss this matter with him. He says the common seal of Rhagodia was not placed on any of the documents by him and neither the seal nor the name of the plaintiff was written on the signature pages when he signed the document.
[36]Rule 77.05(7)(b)

He says the documents were signed at NAB’s city office. He further deposes that Mr McVitty did not give any explanation to him of the documents other than an intimation that these were documents which consolidated Irene’s loan with NAB and Haddad & Co’s loan, and security being the freehold mortgage over the Templestowe property and a personal guarantee from Irene and himself. He says he did not read the documents and Mr McVitty merely flipped through them to the signature pages as he signed them. He says he did not see any reference in the documents to Rhagodia and Mr McVitty did not say anything about Rhagodia being a party to any of the documents. He repeats what he said in paragraph 23 of his first affidavit, that he understood there may have been a charge from Haddad & Co.[37]
[37]Mr Abdou’s fourth affidavit [3]

He again refers to his telephone conversation with Mr Trowsdale and concludes that, based on these assurances, he believed that the documents Mr McVitty produced to him and that he was signing related to his personal guarantee and the guarantee from “our trust company Haddad & Co Pty Ltd” and had nothing to do with Rhagodia.[38]
[38]Mr Abdou’s fourth affidavit [4]

THE MASTER’S FINDING

The Master found that Rhagodia had not raised a plausible explanation requiring investigation on the evidence before the Court. In particular he found as follows:

“The Plaintiff is required to put before the Court a plausible contention requiring investigation which would raise the same sort of considerations as ‘a serious question to be tried’[39]
The Plaintiff’s sole director denies that he agreed for the Plaintiff to act as guarantor for a loan given by the bank to the director’s wife. The guarantee was signed by the director and has the company seal affixed to it. The Plaintiff relies on a telephone conversation of its director with the Plaintiff’s accountant which allegedly occurred when the director was in the Defendant’s office and in the course of signing the guarantee on his own behalf. The accountant deposes that he advised the director that there was no problem signing the documents as long as the Plaintiff was not referred to in the documents. Whilst on the phone, the director swears that the bank officer said to him that the Plaintiff was not required to sign anything. The director deposes that he did not witness the fixing of the common seal nor did he place the common seal on any documents that the Defendant relies on.
The bank officer denies that the Plaintiff’s director refused to allow the Plaintiff to provide security for the loan. He has no recollection of any conversation between the director and the company accountant.
The Plaintiff has not raised a plausible explanation requiring investigation on the evidence before the Court. There is no explanation as to how the seal of the Plaintiff was affixed to the guarantee. The director signed on behalf of the Plaintiff. The director has not sworn that he did not read the guarantee nor that he did not understand the guarantee. On 28 June 2002, the Defendant wrote to the Plaintiff’s agent, Mr Tim Hunt at Tim Hunt & Associates, requiring the Plaintiff to act as a guarantor. The director denies on oath ever seeing that letter, but in a letter, dated 11 July 2002 the director refers to that letter. Prior to the director’s letter on 4 July 2002 Mr Hunt wrote to the Defendant accepting the Defendant’s proposal of 28 June 2002. There are no affidavits by Mr Hunt filed on behalf of the Plaintiff.”

[39]Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ASCR 785

Under r 77.05(7) of Chapter 1 of the Supreme Court Rules the appeal is by re-hearing de novo of the application to the Master. Nevertheless I have taken into account the reasons of the Master.

RELEVANT LEGAL PRINCIPLES

Section 459G of the Corporations Act 2001 provides:

COMPANY MAY APPLY
(1)[Order setting aside demand] A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2)[Time limit] An application may only be made within 21 days after the demand is so served.
(3)[Affidavit and copy of application] An application is made in accordance with this section only if, within those 21 days:
(a)an affidavit supporting the application is filed with the Court; and
(b)a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

Section 459H of the Corporations Act 2001provides:

DETERMINATION OF APPLICATION WHERE THERE IS A DISPUTE OR OFFSETTING CLAIM
(1)[Court satisfied of dispute or offsetting claim] This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.

In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[40] Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:[41]

The Court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim.
No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised.

[40][2008] VSCA 70

[41]Ibid [56] – [57]

Dodds-Streeton JA further said:[42]

As the terms of s 459H of the Corporations Act 2001 and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice. A selective focus on a part of the formulation in South Australia v Wall,[43] divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less.

[42]Ibid [71]

[43](1980) 24 SASR 189

In Eyota Pty Ltd v Hanave Pty Ltd,[44] McClelland CJ of the Supreme Court of New South Wales said:
[44](1994) 12 ACSR 785 at 787-788

It is, however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” (cf Eng Mee Yong v Letchumanan),[45] or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall.[46]
[45][1980] AC 331 at 341 (PC)
[46](1980) 24 SASR 189 at 194
But if it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments[47] Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:
[47][1994] VR 290 at 366-7
These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.

In Re Morris Catering (Aust) Pty Ltd[48] Thomas J said:
There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court’s examination are the ascertainment of whether there is a “genuine dispute” and whether there is a ‘genuine claim’.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple – to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).

I respectfully agree with those statements.

[48](1993) 11 ACSR 601 at 605

In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[49] Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) cited this passage with apparent approval[50] and noted it was also cited by the Full Federal Court in Spencer Constructions Pty Ltd v GAM Aldridge Pty Ltd:[51]
[49][2008] VSCA 70
[50]Ibid [64]
[51](1997) 76 FCR 452

The observations of McClelland CJ are of particular relevance in assessing Rhagodia’s response to NAB’s case.

THE PARTIES’ ARGUMENTS

It is convenient to set out the bank’s claim before examining whether or not Rhagodia has established that it has a genuine dispute with respect to that claim. The bank’s case is primarily established by undisputed contemporaneous documents.

In about July 2001, Mr and Mrs Abdou and their company, Haddad & Co, had two facilities with the bank, both of which were in default. Haddad & Co had an overdraft of some $300,000, which was over its limit. Mrs Abdou had a home loan in respect of the Templestowe property of about $700,000, which had also fallen into default. The Haddad & Co overdraft was secured by a guarantee of Mr and Mrs Abdou. The home loan to Mrs Abdou was secured by a mortgage over the Templestowe property, which was the family home of Mr and Mrs Abdou. The facilities were moved to the Asset Structuring branch of the bank and put on watch status.

During the second half of 2001, the bank was informed by Mr Abdou that he and his wife were attempting to sell the Templestowe property. Early in 2002, with the Templestowe property still remaining unsold, the bank entered into negotiations with Mr Abdou in relation to the two facilities. The bank was advised, in April 2002, by Mr and Mrs Abdou, that the debt of Haddad & Co would be reduced by the proceeds from the sale of a property in Kensington and that they were looking to refinance both existing facilities from alternative financiers. This information was contained in the letter dated 8 April 2002 purportedly from Mrs Abdou but signed by Mr Abdou. Mr and Mrs Abdou failed to obtain finance and the bank again contacted them in relation to the facilities. At this stage, Mr and Mrs Abdou engaged Tim Hunt & Associates Pty Ltd to represent them in relation to their facilities. By a letter dated 20 June 2008, Mr Hunt wrote to Mr McVitty of the bank suggesting that the overall debt could be reduced by the sale of a property in Port Melbourne which was owned through the Tele Choice business.

On 28 June 2002, Mr McVitty of the bank wrote to Mr Hunt advising that the bank would be prepared to consider restructuring the Abdou family facilities as follows:

(a) A home loan to Irene Abdou of $800,000.

(b) An overdraft of Haddad & Co of between $205,000 and $225,000 which was to be repayable in six months, it being envisaged that the Abdou share of the Port Melbourne property would basically fund this repayment.

The letter expressly provides that those facilities were to be secured by guarantees from Mr Abdou and Rhagodia, which was the entity holding the Abdou’s interests in the Port Melbourne property. In the event that the new loan was to be transferred from Haddad & Co to Mr and/or Mrs Abdou, Haddad & Co was also required to be guarantor.

A number of conditions were attached to the loan offer, including the provision of full details of the Port Melbourne property, the provision of a proposal in relation to the realisation of the Abdou’s share of the Port Melbourne property and an update of the financial information from Business Service Brokers Pty Ltd and Mr Abdou.

On 4 July 2002, the bank received a letter from Tim Hunt & Associates advising that Mr and Mrs Abdou wished to accept the bank’s proposal in full.

On 11 July 2002, the bank received a letter from Tim Hunt & Associates enclosing some of the financial information which the bank had requested, together with completed loan application forms in respect of the home loan. The letter also enclosed a letter dated 11 July 2002 signed by Mr Abdou giving full details in relation to the ownership of the Port Melbourne property. Mr Abdou’s letter headed “Haddad & Co Pty Ltd and Hany and Irene Abdou Realisation of the interest in Port Melbourne” referred expressly to the bank’s letter of 28 June 2002 which had sought information from the Abdous about the Port Melbourne property. Mr Abdou stated in the letter:

Re: Haddad & Co Pty Ltd and Hany & Irene Abdou –
Realisation of Interest in Port Melbourne

Further to your letter of 28 June 2002 I confirm that I have a 25% shareholding in a property in Lorimer Street Port Melbourne. The property is unencumbered and owned by Tele Choice Pty Ltd, refer copy of Certificate of Title enclosed, of which I am a director.
Tele Choice Pty Ltd shareholding is owned by Business Service Brokers Pty Ltd (BSB) of which I am also a director. Of BSB’s 12 shares issued my company, Rhagodia Pty Ltd, holds 3 shares, being 25% of the equity of the company and therefore also 25% owner of the Port Melbourne property owned by Tele Choice Pty Ltd. Refer copies of ASIC extracts enclosed.
The other shareholders in Tele Choice are interested in acquiring my 25% share in the Port Melbourne property. It is proposed to sell my 25% interest in this property in coming months. The current market value of the property is understood to be in excess of $600,000 making my share in excess of $150,000. Sale proceeds together with profit distributions from BSB for the June 2002 owing to me will enable me to clear the Interest Only facility in full by the expiry of the 6 month term.
In view of the above I undertake to clear the Interest Only facility in full by the expiry of the 6 month term.
Should you have any questions please call me on 0412 588 588.

On 2 August 2006, Mr and Mrs Abdou signed documents relating to the new facility, including the guarantee and indemnity dated 6 August 2002 given in favour of Haddad & Co and the consumer guarantee dated 6 August 2002 given in favour of Irene Abdou. Mr Abdou’s signature, signed as a director of Rhagodia, and Rhagodia’s common seal was affixed.

Rhagodia’s defence is that at the meeting with the bank on the execution of the guarantee document, Mr Abdou was asked by Mr McVitty on behalf of the bank whether Rhagodia would be prepared to guarantee the facilities and that Mr Abdou informed Mr McVitty that it would not and that Mr McVitty accepted Ms Abdou’s refusal of security from Rhagodia. Mr Abdou says Mr McVitty then produced documents for signing and he signed the documents in the belief based on the express representations of Mr McVitty that Rhagodia was not a guarantor. Further, he says that he telephoned his accountant during the meeting and confirmed to him in a conversation that was overhead by Mr McVitty that Rhagodia would not be a guarantor. Mr Abdou denies affixing the common seal. Mr Abdou says that the company seal was kept at the accountant’s office. He says the seal of Rhagodia was not placed on any of the documents when he signed them.

Mr Abdou says he did not see the bank’s letter of 28 June 2002 which offered to renew facilities on the basis of Rhagodia giving guarantee. Mr Abdou says he has inspected Mr Hunt’s file and spoken to Mr Hunt about the bank’s claim. He says he saw no reference in the file that Mr Hunt informed him of the 28 June letter.

RHAGODIA’S SUBMISSIONS

Mr Woodward, who appeared on behalf of Rhagodia, submits that Mr Abdou’s evidence about what occurred moments before signing the guarantees provides a sustainable basis for essentially two alternative defences to NAB’s claims under the guarantees: first, a defence based on non est factum, and secondly a defence on a unilateral mistake induced by a misrepresentation by Mr McVitty on behalf of NAB.

Mr Woodward referred to Petelin v Cullen[52] to support the possible defence of non est factum. Mr Woodward conceded that Rhagodia bears a heavy onus under this defence. In Petelin v Cullen,[53] Barwick CJ, McTiernan, Gibbs, Stephen and Mason JJ said:

The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing: it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v Anglia Building Society (Gallie v Lee).[54]
It is otherwise when the defence is asserted against the other party to the transaction who is aware of the circumstances in which it came to be executed and who knows (because the document was signed on his representation) or has reason to suspect that it was executed under some misapprehension as to its character. In such a case the law must give effect to the policy which requires that a person should not be held to a bargain to which he has not brought a consenting mind for there is no conflicting or countervailing consideration to be accommodated – no innocent person has placed reliance on the signature without reason to doubt its validity.[55]

[52](1975) 132 CLR 355 at 359 - 360

[53](1975) 132 CLR 355

[54][1971] AC 1004 esp at 1019

[55]Ibid 359 - 360

On the basis of Mr Abdou’s evidence alone and without reference to the contemporaneous documents, that defence might have been arguable.

Mr Woodward submits that there are a number of bases on which Rhagodia could mount its defence in reliance on Mr McVitty’s alleged representation, including bases that would render the guarantees void or voidable at common law. He relied on Taylor v Johnson[56] and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[57] where the High Court identified elements that may initiate a signed deed or contract such as misrepresentation, duress, mistake.[58] Again on the basis of Mr Abdou’s evidence alone and without reference to the contemporaneous documents, those defences would be open to Rhagodia.
[56](1983) 151 CLR 422 at 432
[57](2004) 219 CLR 165 at [38] – [39], [41], [46], [49], [54] and [57]
[58]Ibid [54]

Mr Woodward submits the evidence established a genuine dispute. He did not deny that the onus of establishing a genuine dispute lies on the applicant.[59]
[59]Moyall Investment Services v White (1993) 12 ACSR 320 at 324 per Ryan J; Paratoo Pty Ltd v Frizzell (Unreported, SCWA FC, Ipp J with whom Malcolm CJ agreed, 21 October 1997, p2 of 4)

Mr Woodward relies on Roadships v Tree[60] where Barrett J of the Supreme Court of New South Wales said in respect of an application under s 459G:

The cases make it very plain that anything beyond fairly cursory factual investigation of the underlying merits is foreign to applications of this kind. The only question before me is whether there exists a genuine dispute as to the existence of the debt referred to in the statutory demand. To the extent that answer to the question of the existence of the debt goes to factual matters of any complexity, an application of this kind is not the occasion for those depths to be plumbed.
In defining the test in that way, I am mindful of well known cases such as Eyota Pty Ltd v Hanave Pty Ltd,[61] Mibor Investments Pty Ltd v Commonwealth Bank of Australia,[62] Re Morris Catering (Aust) Pty Ltd[63] and Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd.[64] As I have said before, these cases make it clear that the task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of the s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor on rational grounds that indicates an arguable case on the part of the company it must find that a genuine dispute exists even where any case, even apparently available to be advanced against the company seems stronger. [65]

[60](2007) 64 ACSR 671

[61](1994) 12 ACSR 785

[62][1994] 2 VR 290; (1993) 11 ACSR 362

[63](1993) 11 ACSR 601

[64](1997) 76 FCR 452; 147 ALR 444; 24 ACSR 353; [1997] FCA 681

[65]Ibid [11] and [24]

Mr Woodward also relied on JML Constructions v Raymond Terrace[66] where Santow J of the Supreme Court of New South Wales said:

… in s 459G proceedings, the trial judge in basing its inferences on findings of fact or assessment of objective fact, can have reached no final view on the credibility of witnesses or have any advantage, palpable or otherwise, from ‘the subtle influence of demeanour’: per McHugh J in Abatos v Australian Postal Commission.[67] That evidence proceeded on written affidavit involving no apparent cross-examination. This indeed is to be expected in s 459G proceedings that fall short of determining the merits of a dispute or resolving it, looking as they do only to genuineness of the dispute.[68]

[66](2000) 33 ACSR 669

[67](1990 171 CLR 167 at 179; 96 ALR 354

[68]Ibid [31]

I accept the propositions there set out. In my view, however, they do not address the real issue in this case: that Rhagodia does not answer or seek to answer the bank’s case. In Moyall Investments Services v White[69] the applicant alleged there were errors in the accounts of the creditor who had served the statutory demand. Ryan J observed in dismissing the application that no explanation had been provided by the plaintiff as to how the alleged error in the accounts arose. He also said the onus was on the applicant in its application under s 459G.
[69](1993) 12 ACSR 320

It is the failure of Rhagodia to explain (or in some cases even address) important aspects of the bank’s case that raise concerns that its defence to the bank’s case is not genuine. The issue is not one of assessing the credibility of Mr Abdou or weighing his version against Mr McVitty’s version. In fact, Mr McVitty is unable to recall what was said when the relevant documents were signed. I will now turn to the aspects of the bank’s case that Rhagodia does not address satisfactorily or at all.

THE AFFIXING OF THE SEAL

Rhagodia does not deny its seal is affixed to the relevant security documents or that Mr Abdou’s signature purports to witness its affixing. Mr Abdou says that he did not take the common seal to the meeting at NAB and his accountant Gary Trowsdale held the seal at his office. Rhagodia offers no explanation as to how the seal got from Rhagodia’s accountant’s office to NAB and was applied to the security documents. Although Mr Trowsdale swore an affidavit relied on by Rhagodia, there is no evidence from the accountant that the seal is missing or was stolen or where it currently is. Rhagodia does not allege the bank somehow got hold of the seal and affixed it to the security documents. In the circumstances of this case, a defence that the seal was improperly fixed to the documents requires more than a mere assertion by Mr Abdou that he did not affix it and it was not affixed when he signed the documents. The seal was in the custody and control of his accountant. It behoves him to offer some explanation of how it got from his accountant’s office to being affixed to the security documents.

THE FAILURE OF MR HUNT TO GIVE EVIDENCE

Mr Abdou alleges that Mr Hunt did not show him the bank’s offer in the letter of 28 June 2002 containing the term that Rhagodia guarantee the facilities.

Mr Abdou does not explain why Mr Hunt has not provided an affidavit confirming the fact that he did not show Mr Abdou the letter, especially when there is evidence that Mr Hunt recently spoke to Mr Abdou and Mr Hunt showed him his file on the loans. Rhagodia and its legal advisers well understood the importance of such evidence as they explain the failure of Mrs Abdou to give evidence. The Master referred in his judgement to no affidavit of Mr Hunt being filed on behalf of the plaintiff. Despite filing a further affidavit from Mr Abdou after the Master’s judgment, Rhagodia did not seek to tender any evidence from Mr Hunt.

MR ABDOU’S LETTER OF 11 JULY 2002

Mr Abdou swears that he was not aware of the bank’s letter of offer of 28 June 2002 and never saw it until it was produced in this case. Mr Abdou wrote a letter on 11 July 2002 that expressly responds to and refers to the letter of 28 June 2002. Mr Abdou does not deny or dispute this letter in any of his four affidavits. On the other hand his four affidavits do not even acknowledge he wrote the letter of 11 July 2002.

The Master in his reasons of 5 June 2008 expressly identified this inconsistency in Rhagodia’s defence. Mr Abdou swore his fourth affidavit after the Master gave his reasons. Mr Abdou makes no attempt to explain how he says he wrote a letter expressly responding to the bank’s letter of offer of 28 June 2002 without seeing the bank’s letter. The clear inference from his letter of 11 July 2002 is that he saw the bank’s letter of 28 June. Mr Abdou has not sought to rebut that inference.

THE PORT MELBOURNE PROPERTY

Mr Abdou does not address the Port Melbourne property in his four affidavits save to say he was not prepared for Rhagodia to give a guarantee. The evidence suggests that Rhagodia’s only material asset was its interest in the Port Melbourne property.

A central part of the offer Mr and Mrs Abdou made to the bank to obtain refinancing of their loans was the sale of their interest in the Port Melbourne property as shown by Mr Hunt’s letter of 20 June 2002, the bank’s offer of 28 June 2002, Mr Abdou’s letter of 11 July 2002 and Mr Hunt’s letter of 11 July 2002. Mr Abdou’s letter of 11 July 2002 was headed “realisation of interest in Port Melbourne”. Mr Abdou does not address the fact that their offer to the bank and the bank’s offer to them was expressly on the basis that Rhagodia’s interest in Port Melbourne was to be realised and used to pay down the short term loan to Haddad & Co. Mr Abdou does not attempt to reconcile his willingness to realise Rhagodia’s interest in the property to repay the short term loan to Haddad & Co with his statement that Rhagodia would not provide a guarantee that may have led to Rhagodia’s interest in the Port Melbourne property being realised.

The sale of Rhagodia’s interest in Port Melbourne was central to the agreement with the bank. It was likely therefore that the bank would require Rhagodia to be a party to the refinancing agreements. Mr Abdou’s defence that he believed Rhagodia was not to guarantee the loans is inconsistent with his providing information about the sale of Rhagodia’s interest in Port Melbourne to pay down the short term loan as agreed with the bank. Mr Abdou does not seek to explain this central element of the refinancing arrangements.

THE LOAN APPLICATION

Mr Hunt wrote to the bank enclosing Haddad & Co’s loan application. The bank requested a statement of position of Mr Abdou. According to Mr Hunt’s letter of 11 July 2002, the loan application was signed and completed by Mr Abdou and returned to the bank. Mr Abdou offers no explanation as to why he provided these documents as requested by the bank, including the statement of his position, and a copy of the certificate of title to the Port Melbourne property, but was unwilling for Rhagodia to be a party to the loan facilities.

WITNESSING THE AFFIXING OF THE COMMON SEAL

Mr Abdou claims he did not witness the affixing of the company seal on the documents. He claims that the seal was not affixed to the documents when they were signed by him. Moreover, he claims he did not see any reference to Rhagodia on the documents. However, at the same time, he claims that he did not read the documents. Apart from the company seals and the handwritten references to Rhagodia, the company is expressly identified on the details pages, together with a reference to the H & S Abdou Family Trust. Mr Abdou does not explain how, if he did not read or look at the documents, he can reasonably assert that there was no reference to Rhagodia in them.

MR ABDOU’S FIRST NAME

Mr Abdou submits that his first name is spelt “Hanny”, not “Hany”. He suggests this somehow supports his allegations. However, his letter of 11 July 2002 is signed “Hany Abdou”. His raising of the spelling of his name is disingenuous.

THE SECURITY DOCUMENTS AND THE BANK’S OFFER

The contemporaneous documents establish the bank offered the new facilities on the basis of the guarantee from Rhagodia. The offer was accepted on behalf of Mr and Mrs Abdou. It is inherently likely, therefore, that the documents that the bank prepared to be signed by Mr and Mrs Abdou included a guarantee by Rhagodia. It is inherently unlikely that, in view of the correspondence, Mr Abdou would have been asked on the occasion when the security documents were to be signed whether Rhagodia was prepared to guarantee the facilities when the bank’s offer on the basis of Rhagodia guaranteeing the facilities had previously been accepted on behalf of Mr and Mrs Abdou and supported by Mr Abdou’s own letter of 11 July 2002. Mr Abdou makes no attempt to address this issue.

MR ABDOU TOLD OF BANK’S OFFER

Mr Abdou says that Mr Hunt told him about the bank’s offer, but offers no explanation why Mr Hunt did not tell him of the guarantees required by the bank from Rhagodia.

RHAGODIA’S APPLICATION TO RE-OPEN ITS CASE

At the conclusion of addresses, Mr Woodward sought leave to re-open the plaintiff’s case on the application in order to obtain instructions and an affidavit from Mr Abdou in relation to his letter of 11 July 2002. After hearing argument, I ruled, with reasons, that I would not permit the plaintiff to do so. I annex the ruling to these reasons.

ONUS ON RHAGODIA

Rhagodia bears the onus of establishing that it has a genuine defence to the bank’s claim.[70] Rhagodia’s defence to the bank’s claim as deposed to by Mr Abdou is equivocal, lacks precision, is inconsistent with undisputed contemporary documents and is inherently improbable, to adopt the words of McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd.[71]
[70]Moyall Investment Services v White (1993) 12 ACSR 320 at 324 per Ryan J; Paratoo Pty Ltd v Frizzell (Unreported, SCWA FC, Ipp J with whom Malcolm CJ agreed, 21 October 1997, p 2 of 4)
[71](1994) 12 ACSR 785 at 787 – 788 per McLelland CJ

In circumstances where Rhagodia’s defence is contradicted by the contemporaneous undisputed documents, including a letter signed by Mr Abdou, the establishment of a genuine defence requires an explanation of the contemporaneous and undisputed documents that is consistent with the defence. The applicant has not provided such an explanation. In my opinion, the defence does not have sufficient prima facie plausibility to merit further investigation as to its truth, it is devoid of substance, lacks sufficient objective existence to distinguish it from a merely spurious claim[72] and warrants no further investigation.
[72]T R Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70 per Dodds-Streeton J at [71]

In my opinion, the failure of Rhagodia to address properly or at all or any of the matters referred to above leads me to conclude that I am not satisfied that there is a genuine dispute between Rhagodia and NAB about the existence or owing of a debt to which NAB’s demand relates within the meaning of s 459H of the Corporations Act 2001.

Accordingly, I dismiss the appeal and order that the plaintiff pay the defendant’s costs of and incidental to the appeal, including any reserved costs.

ANNEXURE
Ruling 10 July 2008
The plaintiff has sought leave to reopen its case to address the letter of 11 July 2002 written by Mr Abdou to Mr McVitty being Exhibit TAM5 to the affidavit of Mr McVitty. The National Australia Bank (“NAB”) alleges that the company, the plaintiff, Rhagodia Pty Ltd (“Rhagodia”), is liable to the bank under guarantees that were entered into in August 2002. The guarantees were in respect of two loans. The first was a loan to Mrs Abdou for $800,000 which was subject to a mortgage over the Abdou's family home in Templestowe. The second loan was an interest only loan to the company controlled by Mr and Mrs Abdou, Haddad & Co Pty Ltd (“Haddad & Co”).
Prior to the guarantee being given, the Abdous had fallen into financial difficulties in servicing the mortgage on their home of $800,000-odd and the loan to Haddad & Co Pty Ltd. Mr McVitty of the National Australia Bank was responsible for – these are my words - working out defaulting loans. And the Abdous had enlisted the help of Tim Hunt & Associates to put a proposal to the bank.
It appears that Mr Hunt met personally with Mr McVitty on 7 June and had telephone discussions with Mr McVitty about refinancing the two loans. Mr Hunt wrote to Mr McVitty on 20 June 2002 concerning the financial position of the Abdous. He set out their financial position and said in part that,
In view of this, Hanny [Mr Abdou], was agreeable to selling his share in a property he owns in Port Melbourne with other directors. The property has no debt and is valued at over $600,000. Hanny's 25 per cent share would be available to reduce his indebtedness to the bank to a satisfactory level.
On 28 June 2002, about a week after Mr Hunt's letter, the bank sent a without prejudice letter to Mr Hunt proposing to restructure the loans. The restructure involved the home loan of $800,000 over 25 years plus it proposed doing away with the overdraft that Haddad & Co had and replacing it with an interest only loan for six months. It is quite clear from the letter that it involved a new account, (because the letter refers to it being an interest only) and a new credit account to be opened was referred to on the second page.
The letter also went on to say that the customer was to outline its requirement in respect of the following: the name of the borrowing entity, the type of the home loan and the method of increase to home loan exposure. The footnote to the name of borrowing entity, provide that in the event that the borrower's name remains unchanged, the bank will require the inclusion of Hanny Abdou and Rhagodia Pty Ltd as the trustee for the H & S Abdou Family Trust as guarantors. It said further that should the loan be transferred to the individual names (and that is obviously a reference from the company Haddad's name to the individuals, Mr and Mrs Abdou) the bank will require the inclusion of Haddad & Co and Rhagodia Pty Ltd and their respective trusts as guarantors. It said that should the current home loan remain intact (see 3 below) the name of the borrowing entity cannot change and the bank will require the additional guarantors H Abdou and Rhagodia Pty Ltd.

There were other matters in the letter including a request by the bank for full details of the Port Melbourne property including evidence of Hanny Abdou's ownership/entitlement of a 25 per cent share. The bank also sought information proposed in relation to the realisation of Hany Abdou's share of the Port Melbourne property and provision of an updated statement of position for Hany Abdou.
So it appears at this stage, the bank is accepting the proposal that was put by Mr Hunt that Mr Abdou would realise his interest in the Port Melbourne property and we can infer that such moneys were to be used to pay down the facilities.
Mr Hunt on 4 July wrote to Mr McVitty and said that he had instructions from his clients, to accept the proposal put by the National Australia Bank. He said that he would forward to the bank next week signed statement of positions, signed loan application, full details of the Port Melbourne property together with evidence of Hany's 25 per cent ownership, and also would forward a proposal in relation to the realisation of Hany's share of the Port Melbourne property.
Then we come to the letter the subject of Mr Woodward's application, the letter of 11 July 2002 from Mr Abdou to Mr McVitty which states:
Haddad & Co Pty Ltd and Hany & Irene Abdou –
Realisation of Interest in Port Melbourne
Further to your letter of 28 June I confirm that I have a 25% shareholding in a property in Lorimer Street, Port Melbourne. The property is unencumbered and owned by Tele Choice Pty Ltd, refer copy of certificate of title enclosed, of which I am a director.
Tele Choice Pty Ltd shareholding is owned by Business Service Brokers Pty Ltd (BSB) of which I am also a director. Of BSB's 12 shares issued my company Rhagodia Pty Ltd holds 3, being 25 per cent of the equity of the company, and therefore also 25% owner of the Port Melbourne property owned by Tele Choice Pty Ltd. Refer copies of ASIC extracts enclosed.
The other shareholders in Tele Choice are interested in acquiring my 25% share in the Port Melbourne property. It is proposed to sell my 25% interest in this property in the coming months. The current market value of the property is understood to be in excess of $600,000, making my share in excess of $150,000. Sale proceeds together with profit distributions from BSB for the June 2002, owing to me will enable me to clear the interest only facility in full by the expiry of the 6 month term.
In view of the above I undertake to clear the Interest Only facility in full by the expiry of the 6 month term.

Then also on 11 July 2002 Mr Hunt sent a letter to Mr McVitty further to his facsimile of 4 July (which is filed as Exhibit TAM6).
Please find the following enclosed to enable you to formalise the offer in your letter of 28 June 2002:-
Signed/completed Loan Application form:
Signed/completed Statement of Position:

Letter dated 11 June 2002 from Mr Hany Abdou confirming details of the Port Melbourne property and his proposal in relation to the realisation of his interest in that property.

He also said financial statements for BSB would be provided.
Mr Hunt also said he would be providing confirmation of receipt of the Kensington property settlements funds, and signed statutory financial statements for the year ended 30 June 2002 for BSB, and also personal taxation return for Hany and Irene Abdou by 30 November 2002.
Mr Abdou says in his affidavit material that he did not see the letter of offer from the bank of 28 June 2002. He says in his affidavit of 15 May that Tim Hunt in fact never showed him a copy of any correspondence between NAB and himself. Although he does recall him;
telling me about the two loans being proposed by the NAB to Haddad & Co and Irene, and the NAB's requirement that I personally guarantee the two loans.
In his affidavit of 16 May 2008 Mr Abdou says that he looked through Tim Hunt's file in his presence, "And there was no correspondence file or other records on that file to indicate that Tim Hunt had ever informed Irene or myself about the contents of the letter of June 2002". It is fair to infer that Mr Abdou is saying that he was not told about the existence of the letter, nor of its contents.
At the meeting with the bank on 6 August when the guarantee was signed, Mr Abdou recalls, in substance, that he was asked by Mr McVitty whether Rhagodia would be prepared to guarantee the facilities. He says he informed Mr McVitty that Rhagodia would not be prepared to do so, and that Mr McVitty accepted that proposition. Further he refers to a telephone conversation he made to his accountant, to satisfy himself he should sign the documents and asking was it all right to sign. He did not want Rhagodia to be a party and he says that his accountant confirmed that it was all right to sign it so long as Rhagodia was not mentioned as a party. The accountant also had sworn an affidavit in substance confirming that conversation.
Mr Abdou says that Mr McVitty then invited him to sign the documents that were there. He signed a guarantee for Rhagodia which was contrary to the representation made by Mr McVitty. He says he signed it by mistake suffering under the belief, which he had got from what Mr McVitty said, that Rhagodia was not guaranteeing the facilities.
Mr McVitty has denied that a conversation took place that involved Mr McVitty asking whether Rhagodia would be prepared to act as guarantor and Mr Abdou stating that it would not be and Mr McVitty then accepting this. In his recent affidavit he says that he really cannot recall what was said at the meeting. In fact he cannot even swear to where the meeting was held, it may have even been held at the Abdou's family home.
But for the letter of 11 July 2002, the plaintiff may on those facts have a reasonable argument that there is a genuine dispute as to whether Rhagodia had guaranteed the facilities.
There are several important aspects of the letter of 11 July. First of all it refers to the bank's letter of 28 June which contained the bank's offer and the bank's offer was inconsistent with the conversation that purportedly took place on 6 August. The bank's offer was that the facilities would be offered on condition that Rhagodia would be the guarantor. There was no suggestion in the bank's offer that that matter was unresolved. The natural consequence of the bank's offer being accepted would be that the bank would have brought to the settlement on 6 August, documents including documents by which Rhagodia guaranteed the facilities.
Secondly, the letter of 11 July 2002 supplies information that was sought in the bank's letter of 28 June 2008. In particular it sought details about Mr Abdou's interest in the Port Melbourne property and his proposals in respect of it. I have already read the letter of 11 July 2002. That letter goes into detail on the ownership structure. More than that, it enclosed a copy certificate of title and enclosed asset records. It enclosed all the matters sought by the bank. It is difficult to conceive that the writer of the letter could not have been aware of the request to the bank when the material provided so exactly matches what the bank sought.
The other issue that arises from the letter is that the deal with the bank, and this is inherent in the bank's letter itself, involving new facilities, would be made available on the assumption that Rhagodia was going to some way or other realise its interest in the Port Melbourne property and those moneys would be used by Mr Abdou to pay out the fixed loan term facility at the end of its term of six months.
Mr Abdou did not, in his four affidavits, refer to this letter or in any way seek to deal with the inferences that arise from the letter. The inferences being (1) he read the letter of 28 June 2002, (2) that he was promising to use Rhagodia's interest in the Port Melbourne property to pay down the fixed term loan at the end of six months.
The master in his decision referred to the importance of the 11 July letter and in his decision of 12 June 2008, in other matters he said as follows:
The plaintiff has not raised a plausible explanation requiring investigation of the evidence before the court, there is no explanation as to how the seal of the plaintiff was affixed to the guarantee. The director signed on behalf of the plaintiff. The director has not sworn that he did not read the guarantee, nor that he did not understand the guarantee. On 20 June the defendant wrote to the plaintiff's agent, Mr Tim Hunt and Tim Hunt & Associates requiring the plaintiff to act as guarantor. The director denies on oath ever seeing that letter, but in a letter dated 11 July 2002 the director refers to that letter. Prior to the director's letter on 4 July 2002, Mr Hunt wrote to the defendant accepting the defendant's proposal of 28 June 2002. There are no affidavits by Mr Hunt filed on behalf of the plaintiff.

I have been told by counsel, and Mr Woodward accepts, that the master made reference to the 11 July letter on the basis of submissions made by counsel, Mr Galvin counsel for NAB, at the hearing before him. In Mr Galvin's written submissions before me, he says, amongst other things, as follows, in Paragraph 5:
First, Mr Abdou contends that he always avoided Rhagodia giving guarantees or securities in respect of debts of other entities. A number of observations maybe made:
…

(b) … A month earlier he, himself, pursuant to a request from the bank, provided information regarding Rhagodia's interest in the Port Melbourne property, which he proposed realising and reducing the debts of Haddad & Co. and Irene Abdou to the bank (he refers to the letter of 11 August 2002).
(c) This correspondence followed a fax from Tim Hunt & Associates on 20 June 2002 to the bank stating that, 'Hany is agreeable to selling his share in a property he owns at Port Melbourne with the other directors. Hany's 25 per cent share would be available to reduce his indebtedness to the bank to a satisfactory level.' Mr Abdou denies having seen this letter or instructing Mr Hunt in relation to the proposal contained in it, however, he makes no attempt in his several affidavits, even after the master expressly refers to the issue in other matters in his order of 5 June 2008 to explain his letter of 11 July 2008 and reconcile it with his evidence that Rhagodia's assets were not intended to be made available to the bank.

In court I posited the following enquiry. If the agreement involved Rhagodia's assets, and Rhagodia's assets being, in substance, its 25 per cent share in the Port Melbourne property, to pay down the fixed term loan at the expiration of six months, would not the bank have required Rhagodia in some way to be a party to the refinancing? I said that it would be a reasonable inference made from the refinancing proposal, that Rhagodia was to be a party to it.
It has been suggested by Mr Woodward that his client and he himself had not realised the significance of the letter of 11 July 2002 in two respects. First, the letter of 11 July 2002 can be used to infer that Mr Abdou had in fact seen the letter of 28 June 2002 because it refers to it, and more than refers to it, it deals specifically with requested information.
Secondly, of which Mr Woodward refers to as a new point, the inference that, as the fixed term loan was going to be repaid from the proceeds of the Port Melbourne property, the bank would want Rhagodia to be a party to their refinancing. He says that these two things are new and therefore that in fairness to his client he should be able to reopen his case.
The first point to note about that request is that no submissions have been put to me as to what, if anything, Mr Abdou could possibly say about it. It is just pure speculation that he will be able to give evidence about it. The inference at the moment, that Mr Galvin asks the court to infer, is that the court should note that Mr Abdou has sworn four affidavits. He has gone into chapter and verse about whether this and that is his handwriting in every possible nook and cranny of the documents, but he has not sought to refer to the letter of 11 July 2002, the one letter that he wrote to the bank.
The second thing is that the master did raise it in his reasons, and since then both parties have filed further affidavits dealing with the matter, and no attempt was sought to put in a response from Mr Abdou concerning his failure to make any observation about the letter of 11 July 2002.
I should mention the fact that Mr Abdou even went so far as to inspect Mr Hunt's file and to seek to confirm the fact that he was not told of the existence of the letter of 28 June or its contents, save he did concede that he was told that the bank was prepared to make two loans and on the basis that he give a guarantee.
In my view, the point that I raised, that a natural inference might be that the bank would want to secure the obligations of Rhagodia in some way and make it a party to the refinancing, can be inferred from the letter and such requirement is consistent with what was required in their letter of 28 June. In my opinion, that implication has already been, in effect, covered by Mr Galvin in his own submissions in the case where he pointed out that Mr Abdou's case was that Rhagodia's assets were not intended to be made available to the bank and that does not sit very well with the letter of 11 July 2002.
Mr Galvin also expressly refers to Mr Hunt's earlier letter of 20 June 2002 which Mr Woodward quite correctly conceded, in view of the material, that Mr Abdou had authorised Mr Hunt to make that statement to the bank on his behalf. That is, that Mr Abdou was agreeable to sell the property and use the moneys to reduce the facilities provided by the bank.
In my opinion, as Mr Galvin has submitted, the history of the correspondence is the very basis upon which the bank seeks to establish that there is no genuine dispute. The bank officer is unable to recall what precisely was said at the meeting. But what the bank seeks to do is to say that the version put forward by Mr Abdou is inherently improbable, it is fanciful and it is inconsistent with the other objective facts. Furthermore, Mr Abdou has not sought to address one of the most important objective facts, that is his own acknowledgment in his letter of 11 July 2002 that he was prepared to use Rhagodia's interest in the Port Melbourne property to pay down the bank facility.
In my opinion, it would now be unfair to the bank to allow Mr Abdou to prepare an affidavit after the full implications and legal arguments that can be made from the 11 July letter have been fully analysed and explored.
The case for the bank at the moment is that Mr Abdou's affidavits should not be accepted. It would seem therefore a strange state of affairs if the bank had established that was the case that the bank could be disadvantaged by Mr Abdou coming along with a story, as the bank would say, as to how the letter of 11 July should be reconciled with his statements.
The bank's case in substance, at the end of the day, is that Mr Abdou's version of events should not be accepted because he has failed to address the objective evidence which is inconsistent and clearly inconsistent with his version of the events. To now enable Mr Abdou, after hearing all the submissions by the bank, to come along and present an affidavit and pick off the points one by one, would defeat the whole purpose of these proceedings which is to establish whether there is a genuine dispute or not.
I also take into account that Mr Abdou has been assisted at all stages by competent solicitors and able counsel. He has put in four affidavits. I have done many of these cases but I do not think I have come across a case where as much evidence has been put in by an applicant as Mr Abdou has in this case. The affidavits, if you added them together, are very extensive indeed.
So for those reasons, I decline to accede to Mr Woodward's application.

[2008] VSC 295

14 August 2008