WFM Motors Pty Limited v Bar M Pty Limited

[2022] NSWSC 1500

Supreme Court

New South Wales

Medium Neutral Citation:

WFM Motors Pty Limited v Bar M Pty Limited [2022] NSWSC 1500

Hearing dates:

16, 17, 20, 21 September; 14 December 2021

Decision date:

04 November 2022

Jurisdiction:

Equity

Before:

Kunc J

Decision:

Judgment for plaintiff; cross-claim dismissed

Catchwords:

GUARANTEE AND INDEMNITY – Contract of guarantee – Enforcement – Factors affecting validity of guarantee – Unconscionability – Unjust contracts – Statute

CONTRACTS – Unjust contracts – Contracts Review Act 1980 (NSW) – Unjust

CONSUMER LAW – Unconscionable conduct – In connection with goods or services – In connection with financial services – Unconscionable conduct within the meaning of the unwritten law – Distinction between unconscionable conduct within the unwritten law and statutory unconscionability – Meaning of “unconscionable conduct” – Australian Securities and Investment Commission Act 2001 (Cth)

EVIDENCE – Death of a witness – Weight to be given to evidence where witness died before cross-examination completed

Legislation Cited:

Australian Securities and Investment Commission Act 2001 (Cth)

Contracts Review Act 1980 (NSW)

Evidence Act 1995 (NSW)

Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (NSW)

Cases Cited:

Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419

Galati v Deans [2021] NSWSC 1094

Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343

Manly Council v Byrne [2004] NSWCA 123

Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964

Marsden v Amalgamated Television Services Pty Limited [2001] NSWSC 510

Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41

Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36

Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153

Ronchi v Portland Smelter Services Ltd [2005] VSCA 83

Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49

Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O’Donnell [2011] NSWCA 389

Williams v Commonwealth Bank of Australia [2013] NSWSC 335

Category:

Principal judgment

Parties:

WFM Motors Pty Ltd (Plaintiff/Cross-Defendant)
Bar M Pty Ltd (First Defendant)
Walter Toppi (appointed by order of the Supreme Court of NSW to represent the estate of the late Giovanna Toppi) (Second Defendant/Cross-Claimant)
Paola Toppi (Third Defendant)

Representation:

Counsel:
PR Jammy (Plaintiff/Cross-Defendant)
NJ Kidd SC (Defendants/Cross-Claimant)
Solicitors:
HWL Ebsworth (Plaintiff)
Beazley Lawyers (First and Third Defendants)
Levitt Robinson Solicitors (Second Defendant/Cross-Claimant)

File Number(s):

2020/267822

Publication restriction:

Nil

Judgment

Summary

1. For nearly three decades Ristorante Macchiavelli was an iconic Sydney restaurant. Equally iconic was its proprietor, the late Giovanna Toppi (the Second Defendant (Giovanna)). Her daughter, Paola (the Third Defendant), followed her mother into the restaurant business. Without intending any disrespect, in this judgment the parties will be referred to by their given names.

2. These proceedings concern Giovanna’s liability to the Plaintiff, WFM Motors Pty Ltd (WFM), which sues Giovanna under a third party guarantee and mortgage provided by her as security for a loan of $1,100,000 advanced to a company, Bar M Pty Ltd (the First Defendant) (Bar M), of which Paola is the director. The mortgage was over an investment property owned by Giovanna in Macleay Street, Potts Point (the Property). Bar M and Paola have admitted their liability to WFM in respect of the loan. WFM was the landlord of premises at Rushcutters Bay where Paola operated her restaurant called Bar M (the restaurant).

3. By a cross-claim, Giovanna applied for relief from enforcement of the mortgage and guarantee under the Contracts Review Act 1980 (NSW) (CR Act), the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) and, or in the alternative, the general law of unconscionable conduct.

4. Two very different pictures of Giovanna were sought to be drawn by the parties. Giovanna’s case was that she was an elderly, vulnerable, poorly educated mother with limited English, who was a victim of the unconscientious conduct of her daughter and WFM. WFM submitted that what Giovanna may have lacked in formal education was more than made up for by a business acumen amply demonstrated by her successful career as a Sydney restaurateur over many years. Giovanna, according to WFM’s case, had volunteered to assist her daughter and her daughter’s business and well understood, and had received independent legal advice about, the legal obligations which she assumed towards WFM.

5. A complicating feature in what was by no means a straightforward case was the circumstances surrounding the giving of Giovanna’s evidence. The trial was conducted remotely due to the Covid pandemic. Taking Giovanna’s evidence remotely proved far from satisfactory. That is not a criticism of her or of any of the legal representatives on both sides of the record. Her evidence was adjourned early in her cross-examination for three months so it could be completed in person. Unfortunately, and unexpectedly, Giovanna died during the adjournment. Her son, Walter Toppi, was substituted as representative of her estate. An important question for the resolution of these proceedings has become how the Court should treat Giovanna’s evidence, including so much of it (in fact most of her evidence) as had not been the subject of cross-examination.

6. For the reasons which follow, the Court has concluded that WFM is entitled to judgment and that Giovanna’s cross-claim fails.

7. Mr P R Jammy of Counsel appeared for WFM. Mr N J Kidd of Senior Counsel appeared for Giovanna and, after her death, for Walter.

Facts

8. What follows are the facts which the Court finds to be uncontested or not seriously contestable, including by reason of admissions or concessions. The essential disputed matters as asserted by the parties are also noted at the relevant point in the chronology of events for context, with the reasons for specific findings cross-referenced to elsewhere in these reasons.

9. From 2015 to 2018, Bar Machiavelli Pty Ltd (Bar Machiavelli), whose sole director was Paola, leased premises in Neild Avenue, Rushcutters Bay (the Premises) from WFM to run an Italian restaurant (the 2015 Lease). The term of the 2015 Lease was for 6 years commencing on 1 December 2015 with a starting annual rent of $235,000 per annum. Bar Machiavelli was a trustee for a unit trust in which the unit holders were G & P Toppi Pty Ltd (G & P Toppi) and companies associated with Mr Bicher and Mr Pellarini (the Bicher entities).

10. G & P Toppi (now known as Cara Nonna Pty Ltd) was incorporated on 4 February 2016 with Giovanna and Paola as directors and Giovanna as a shareholder. So much is evidenced by a historical company extract in evidence. In her brief oral evidence, Giovanna asserted that she knew nothing about the company, but conceded she could have been a director if Paola had made her sign something.

11. On 21 March 2018, the Bicher entities commenced proceedings in this Court against Bar Machiavelli, G & P Toppi and Paola for breach of trust and for debts said to be owed by Bar Machiavelli of approximately $830,000 plus interest (the Bicher trust proceedings). Paola was represented in those proceedings by a solicitor, Mr Philip Beazley.

12. In April 2018, Giovanna was being represented in relation to another matter by a solicitor, Ms Vivian Evans of Uther Webster & Evans. In relation to that same matter, Mr Beazley was acting for Paola.

13. On 25 May 2018, the solicitors for the Bicher entities wrote to WFM informing it of the Bicher trust proceedings. The letter, which was copied to Mr Beazley as Paola’s solicitor, asked that WFM give them notice of any proposed transfer of the 2015 Lease.

14. On 5 June 2018, Ms Evans wrote to Dr Sharon Reutens, a consultant psychiatrist with experience in old age psychiatry:

“We act on behalf of Mrs Giovanna Toppi who has requested that we prepare a Power of Attorney, Revocation of Power of Attorney, Appointment of Enduring Guardian and a new Will on her behalf.

Some issues have been raised by her children in relation to her capacity to provide us with instructions generally in relation to her financial matters and in particular, in relation to the most recent instructions regarding the documents referred to above.

In those circumstances, Giovanna has asked us to arrange an assessment and we in turn spoke to her doctor at St Vincent’s, Dr Timothy Furlong who provided us with your details. You are at liberty to discuss her general health and treatment with Dr Furlong.

We understand that Giovanna is scheduled to attend your Rooms at 9am on Wednesday, 6 June 2018 for the purposes of obtaining a medical report on her current cognitive state and whether or not she has capacity to manage her financial affairs and provide instructions in relation to those matters, a Will, Power of Attorney and Appointment of Enduring Guardian.

We look forward to receiving the Report at your earliest convenience.”

15. Dr Reutens saw Giovanna on 6 June 2018 for two hours.

16. Sometime in June 2018, Paola became sole director and shareholder of Scuie Scuie Pty Limited.

17. On 12 June 2018, Paola (as sole director of Bar Machiavelli) appointed a voluntary administrator to the company on the basis of likely or actual insolvency.

18. Dr Reutens’ report to Ms Evans about Giovanna is dated 25 June 2018 (the Report). Because of its proximity to the events in question in these proceedings, it is necessary to set out some parts of the Report at length:

“EXECUTIVE SUMMARY

Ms Toppi is an eighty one year old woman who lives with her son, Walter. She has a provisional diagnosis of Mild Neurocognitive Disorder and a possible Gambling Disorder. Further investigations are required to confirm the Mild Neurocognitive Disorder. There are inconsistencies between Ms Toppi’s and her son’s account of her gambling, and objective evidence is required to determine if she has a diagnosis of a Gambling Disorder.

Ms Toppi’s [sic] mainly speaks Italian. Although she appeared to understand my questions in the interview and the cognitive screening questions, her results might have been affected by language factors.

Based on the interview, collateral history and results of cognitive screening my opinion is:

1. Ms Toppi has capacity to appoint an Enduring Guardian;

2. Ms Toppi requires further discussion with her lawyer and re-testing to decide if she can confer an Enduring Power of Attorney.

3. Ms Toppi requires assistance with financial decision making.

4. Ms Toppi did not demonstrate full Testamentary Capacity.

It is recommended that Ms Toppi undergo investigation for the cognitive impairment, including brain MRI to determine if there is a reversible cause of the deficits. She is recommended to undergo neuropsychological testing using the services of an Italian speaking interpreter.

Further discussion about her Will should utilise the services of an Italian speaking interpreter and it is recommended that Ms Toppi be seen after a period of one to three months to determine if there is consistency in her decision making with respect to her Will.

…

DEMOGRAPHICS

Ms Toppi is an eighty one year old woman who lives with her forty six year old son, Walter. She stated that Walter’s partner sometimes stayed over. Ms Toppi is a self-funded retiree. She has three children: Paola, Caterina, Walter. Ms Toppi told me that she previously owned a business, Machiavelli Restaurant, for over thirty years, and currently had an interest in a business, Bar Machiavelli, run by her daughter, Paola[.]

HISTORY

1. Enduring Power Of Attorney

Ms Toppi stated that she wished to revoke a Power of Attorney she made in 2017 Appointing Walter.

Ms Toppi told me she had first appointed Paola as her attorney, several years ago, she could not recall when.

She stated that Paola “appointed herself. She said ‘sign’ and I signed”. Ms Toppi claimed that no one explained the range of powers an attorney might have when she signed that Power of Attorney. Ms Toppi said that because Paola was the oldest she had always trusted her and anything Paola asked her to sign she had signed.

Ms Toppi stated that about six or seven months ago Walter told her that Paola had suggested they “put me in a home”. Ms Toppi was very upset at this. She said that a friend advised her that because she had signed a Power of Attorney and Guardianship, that Paola could do whatever she wanted with Ms Toppi’s money and she could place her in a home. Ms Toppi said as a result of this information she revoked the Power of Attorney and made a new one three months ago, appointing Walter as her attorney. However, she had recently decided to change it again, “now I want Walter out too”. Ms Toppi initially stated that she wanted the Public Trustee to be appointed, but midway in the interview stated that she wanted to dispense with appointing an attorney altogether “I don’t want someone to tell me what to do. I want to decide for myself”. She stated that an attorney “can decide for me what to do. I don’t want them to do it”.

…

2. Enduring Guardianship

Ms Toppi could recall signing an Enduring Guardianship appointing Paola several years ago, at about the time she signed the Enduring Power of Attorney document. She said that at the time when she signed the Power of Attorney and the Enduring Guardianship appointing Paola, her rationale was that Paola was the eldest and she trusted her. However Paola had “disappointed me” by suggesting that she move into a home. Ms Toppi had not raised the issue with Paola as “I don’t want to have a bad relationship with her”.

…

4. Testamentary Capacity

Ms Toppi’s understanding of the nature and effect of a Will.

Ms Toppi understood a Will to be a document that contained her wishes for distributing her money and property after she died.

Ms Toppi’s understanding of her estate

Ms Toppi stated that her estate included shares in Bar Machiavelli. She had a 30% interest, Paola had a 30% interest and there were two partners of Paola’s who had 40% between them.

She said that her main asset was [the Property] that she estimated to be worth 14-15 million dollars.

Ms Toppi stated that she had one bank held at NAB which she estimated to have about one million and twenty five thousand dollars.

She did not own s. She did not own significant jewellery, art works or other valuables. She owned a car. ….

Pattern of Previous Wills

…

I enquired about the relationship with her children. Ms Toppi stated that she had not spoken to Caterina in the last two years. They had not argued. Ms Toppi said that Caterina was in charge of the family restaurant Machiavelli, which Ms Toppi had put in Paola’s name. She said that Paola had transferred the restaurant to Caterina. She was not quite sure of the circumstances of the transfer, but said that the two sisters stopped talking after this and she no longer spoke to Caterina.

She stated that she did not feel that she needed to bequeath any money to Caterina because Caterina now owned the premises of Machiavelli restaurant in her name and received about $6000 a week in rent.

Ms Toppi stated that she did not think she needed to bequeath any of her estate to Paola because she had helped Paola a lot financially over the years. She said that Paola went broke in her own business and Ms Toppi “put her up” in a restaurant business known as Bar Machiavelli in Rushcutters Bay. She stated that Paola was “never happy”. Ms Toppi stated that because Paola was given 30% of the Bar Machiavelli business she did not feel the need to bequeath any money to her.

Ms Toppi stated that she had never given any money to Walter and wanted to leave him her estate. She said that he had been a dutiful son and had never asked for any money whereas Paola had.

I showed Ms Toppi the 2017 Will. She could not recall having made a Will in December 2017 and appeared upset when I showed it to her, stating that she had never seen it and wanted to know who had made the Will.

She stated that she had not wanted Marco Cunningham to be an alternate executor if Walter was unwilling or unable. She only wanted Walter to be the executor.

When it was pointed out that she had signed the Will and that it had been witnessed by two people, she said that she still could not recall having signed it.

We read the Will together. Ms Toppi had earlier stated that she did not want Paola or Caterina to have any of her estate, however when going through the 2017 Will she had said that she did not mind if Paola received the shares in G&P Toppi Pty Ltd. Ms Toppi told me that the company Sciue Sciue closed down two months ago because Paola could not manage two restaurants. She stated that she did not mind if Paola received the share in Tridevco Limited. Tridevco Limited was Paola’s company. She said she did not know she owned a share in it, stating “she must have given me a share”. Ms Toppi said that Paola and her husband “used to put me as a director” for a number of their companies and “she can have that share”.

…

5. Assessment of Financial Capacity

Ms Toppi informed me she was renting a three bedroom apartment at X New South Head Road, Double Bay and had been renting for approximately five years …

Ms Toppi planned to sell the building she owned at X Macleay Street, Potts Point, and buy a nice apartment for herself. She estimated the building was worth about 14 or 15 million dollars. From the proceeds of the sale she would buy a three bedroom apartment that she estimated would cost approximately two million dollars. She would give some money to Walter, approximately five million dollars. When asked what she would do with the rest of the proceeds of the sale of the Macleay Street building she said it was time for her to enjoy herself.

If there was money left over when she died it would be left to Walter. …

Financial judgement

Toppi was asked about the steps she would take if she were to sell her property. She told me she would call a real estate agent to ask for an estimate of the building’s worth and “I’d call more than one agent to find out how much its worth”. She would ask the real estate agency to sell the property.

CURRENT SYMPTOMS

…

Ms Toppi described having gambled all her life. She said that her husband was a bookmaker. She had between $500 and $2000 each week on gambling. She said that she had never been in debt and she did not borrow money. She stated that she usually went to the casino on a weekly basis and was transported there by her son. However some weeks she would not go, for instance if she had to go to a wedding. Ms Toppi stated that she had made friends at the casino but said that she never gave or loaned them money.

She stated that she had never spent more than she could afford and had never been in debt. She said that she used to got to gambling houses with her husband and now went to the VIP room at the casino and stated that there would good people there who would never ask her for money.

CURRENT FUNCTIONING

Ms Toppi said she lived in a rental apartment with her son Walter. She woke at about 7am and might do some light cleaning. The cleaner came about twice a week to vacuum, mop and clean the kitchen and bathrooms. She had known her for fifty years. Ms Toppi showered in the morning and groomed herself independently. She stated she did not require any prompting or assistance.

She told me that util about one year ago she had gone into work at Bar Machiavelli every day and would supervise, cook or greet long standing customers. She said it was very different now she had retired. She was at a bit of a loose end. She went to Bar Machiavelli about three or four times a week where she would mingle with customers and talk to the staff. She was no longer cooking. Ms Toppi said that she maintained a good relationship with Paola.

She attended renal dialysis at St Vincent’s hospital three days a week. Her son sometimes took her out for coffee or lunch in Double Bay. Friends came to see her. She went to the casino once a week to play poker. She said she played cards and had never played poker machines.

Ms Toppi said if she was at home she would watch TV or she might read an Italian novel. In the evening she might go out with Walter. She occasionally went to church. She did not undertake and formal exercise.

Ms Toppi said she had not driven her car for three months and her licence had expired.

…

PERSONAL HISTORY

…

Her elder daughter, Paola, was born in 1964, her second child Caterina was born in 1969 and Walter was born in 1971.

Ms Toppi stated that Caterina took over the running of Machiavelli Restaurant. She said that owing to the unhappiness about the transfer of the restaurant into Caterina’s name she and Caterina were not speaking. About two or three years ago Paola and Ms Toppi opened Bar Machiavelli in Rushcutters Bay. They rented the premises and it was run by Paola. Ms Toppi stated that Paola and her husband had gone bankrupt in another business and she wanted to help Paola so Ms Toppi set her up in the business.

Ms Toppi said that she retired last year when she had to commence renal dialysis. Until then she was cooking twelve hours a day and teaching apprentices. She was also front of house.

…

MENTAL STATE EXAMINATION

Ms Toppi presented early for the appointment and said Walter had driven her. She was a neatly groomed woman with neatly cut hair who spoke in accented English. Ms Toppi told me that her first language was Italian and Italian was the language she spoke at home. Questions sometimes had to be repeated because she did not appear to understand them.

Speech was rushed at times, reflecting her distress, for instance when she was discussing the issues surrounding the Power of Attorney and the writing of her Will. Her affect was generally reactive within the normal range and she smiled spontaneously. She denied depressed mood. There was no evidence of psychotic phenomena. Ms Toppi did not describe thoughts of harm to herself or others.

COGNITIVE TESTING

Ms Toppi’s cognition was screened using the Roland University Dementia Assessment Scale, which is specifically for use in people of culturally and linguistically diverse backgrounds (CALD). She scored twenty-two out of thirty where a score of twenty-two or less is suggestive of cognitive impairment.

On the Clock Drawing Test she was able to draw a circle adequately. She did not place all the numbers on the clock face and was unable to show the time.

The cognitive screening is suggestive of executive impairment. There were errors of judgment, planning, of set shifting. Memory impairment was identified memory. Ms Toppi could recall only two of a list of four items. It is noted that English is not Ms Toppi’s first language, and neuropsychological testing in [sic] using an Italian interpreter may be required.

COLLATERAL HISTORY FROM SON WALTER

…

Mr Toppi stated that Ms Toppi had a limit of $10,000 a month at the casino but he estimated she had spent hundreds of thousands of dollars over the years. He said that he [sic] borrowed money from people in the casino and said that she was also vulnerable to other people “who frequent casinos” asking her for money.

He stated that she owed people money.

Mr Toppi said that Ms Toppi received $40,000 a month in rent from the Potts Point building, but she owed people money.

With respect to her current relationships with the family, Mr Toppi said that he believed his mother was currently upset because there was an issue with the partnership at Bar Machiavelli …

Mr Toppi said he was concerned about his mother’s financial capacity. He said “she just signs things put in front of her”.

PSYCHIATRIC DIAGNOSES

• Mild Neurocognitive Disorder (provisional)

• Possible Gambling Disorder

OPINION ON DIAGNOSES

Ms Toppi demonstrated cognitive impairments on screening in memory and executive function. Executive functions include planning, judgement, attention and problem solving. Executive functions are required for making decisions and planning. Ms Toppi also demonstrated memory impairment on screening.

She was unable to recall making the 2017 Will, but could recall making the Enduring Power of Attorney and Enduring Guardianship at that time.

Ms Toppi’s functioning did not appear to be significantly changed as a result of her cognitive impairments. She had always had a cleaner. Her bills were usually paid by her son or the accountant. She was still able to cook, and my impression was that if not for her physical impairments she would be able to dress herself independently …

The cognitive impairment, and particularly the executive dysfunction, raise concerns about Ms Toppi’s ability to manage her finances and her capacity to make an Enduring Power of Attorney, Enduring Power of Guardianship and her Testamentary Capacity.

There was a history of gambling that, based on Mr [Walter] Toppi’s history, would fulfil DSM-5 criteria for a Gambling Disorder. Ms Toppi was described as relying on others to provide money to gamble, gambled more since she retired and had to commence dialysis, and had lost a significant amount of money. It is noted that Ms Toppi gave a different history of her pattern of gambling, and given the discrepancy, objective evidence would be required to substantiate the diagnosis. If the diagnosis is substantiated, it is possible that the cognitive impairment is contributing to the disorder.

OPINION ON FINANCIAL CAPACITY

Ms Toppi was able to adequately name currency, demonstrate the relationship between currency and to understand terms related to financial management. She was able to describe how she wrote a cheque and how she would sell a house. Her ability to manage transactions such as shopping and bill paying appear to be intact.

The executive impairments are concerning, and if she has a Gambling Disorder the combination of the Gambling Disorder and cognitive impairment in the executive domain suggests that she requires assistance to manage her finances, particularly in the realm of financial decision making.

…

OPINION ON CAPACITY TO APPOINT AN ENDURING GUARDIAN

Ms Toppi initially conflated the powers of an enduring guardian with that of an enduring power of attorney. She was able to recall my explanation after a delay. She was able to understand the enduring nature of the appointment after she lost capacity. She was able to understand that the appointment would not start until it was deemed that she had lost capacity to make decisions regarding her healthcare, accommodation or decisions about her person.

Based on this assessment, I am of the opinion that Ms Toppi has capacity to independently appoint an enduring guardian.

OPINION ON TESTAMENTARY CAPACITY.

Ms Toppi was able to name the extent of her estate. She was unaware of a share in Tridevco but was aware that her main asset was the building in Potts Point and was able to identify the shares in the other companies.

Ms Toppi was able to list potential beneficiaries. She provided a rationale for the distribution of the estate between the three children. She provided a rationale for not bequeathing any of her estate to the grandchildren.

Ms Toppi did not appear to be hampered by a mood disorder or delusional beliefs about any of her potential beneficiaries.

It is concerning that she was unable to recall making the December 2017 Will. Ms Toppi has changed her mind about the appointment of Marco as executor in the event that Walter was unable or unwilling to be executor. She no longer wanted the grandchildren to benefit from the estate in the event that Walter died.

Ms Toppi has a moderately complex decision to make with respect to her Will. There is family conflict and money has previously been distributed to Paola and Caterina. In these circumstances, the cognitive demand is greater than in a more straightforward Will. Ms Toppi has to recall past financial decisions that have benefited her children, compare the financial gifts and assess the relative needs and merits of her potential beneficiaries.

This inability to make a consistent decision and the inability to recall the December 2017 Will in the context of a moderately complex Will, cognitive impairment and executive dysfunction indicates on the balance of probabilities, that Ms Toppi does not have Testamentary Capacity at the present time.

RECOMMENDATIONS

1. The Mild Neurocognitive Disorder requires further investigation with MRI and neuropsychological investigation utilising an Italian speaking interpreter.

2. Ms Toppi usually speaks Italian. It is recommended that she attend legal appointments with an Italian speaking interpreter in order to minimise any effects of language.”

19. On 13 August 2018, the Bicher entities commenced proceedings in this Court against WFM, the administrator of Bar Machiavelli and Paola for orders that WFM consent to the assignment of the 2015 Lease from Bar Machiavelli (in administration) to the Bicher entities (the WFM lease proceedings). WFM actively opposed the relief sought and was represented in the proceedings by HWL Ebsworth (HWLE). Paola was represented by Mr Beazley.

20. Orders were made by Brereton J on 10 September 2018 in the WFM lease proceedings requiring WFM to consent to an assignment of the 2015 Lease and requiring WFM to pay the costs of the Bicher entities.

21. By reason of the Court’s acceptance of the evidence of Mr Colacicco (see [92] below) and the finding that Giovanna had a fundamental disposition to assist Paola (especially in relation to Bar M) (see [139] below), the Court finds the following occurred during September 2018 in accordance with his affidavit evidence:

“22. I took the phone call from Giovanna. I recall that Giovanna was upset and distressed throughout the telephone conversation. She was upset due to legal proceedings involving business partners. I do not recall the entirety of that discussed during our telephone conversation. However, I do recall that she words to me to the following effect:

“Please Mr Frank, please help us. Speak to Mr Nick [Politis, owner of WFM] if he can help us with a loan…

Please help us with money. Ask Mr Nick to help…

I have got my property. I can give him security, but we need to do a deal with the partners…

My property is worth a lot of money…

Please speak to Mr Nick. We’re going to be left on the street if we do not find this money they want.”

23. I understood the reference to “my property” to mean the property located at XX Macleay Street, Potts Point NSW (Potts Point Property). I understood that because Mia and I had attempted to lease the Potts Point Property for Giovanna. The Potts Point Property was raised in our telephone conversation because I said to Giovanna words to the effect “Okay Mumma, don’t get upset. I’ll speak to Nick. As long as there’s equity in the property and there’s security, it should be fine. He’s a good person. He’ll help. Let me ask.”

22. Furthermore, the Court finds that the conversation referred to in the preceding paragraph must have occurred after 10 September 2018 (because Mr Beazley’s offer of that date set out in [23] below makes no express reference to a mortgage) and before the email of 27 September 2018 set out in [28] below.

23. On 10 September 2018, Mr Beazley wrote to WFM:

“We act for Paola Toppi and Scuie Scuie Pty Ltd.

Our clients wish to make an application for an assignment of the lease from Bar Machiavelli Pty Ltd (In Liquidation) to our client, Sciue Sciue Pty Ltd [sic].

The lease will be guaranteed by our client Paola Toppi, Scuie Scuie Pty Ltd and Giovanna Toppi. We are instructed Giovanna Toppi is the Registered Proprietor of XX MacLeay Street, Potts Point which has an equity of over $3million.

We draw your attention to the affidavit of Paola Toppi sworn 19 August 2018 as to the abilities of Paola and Giovanna Toppi.”

24. On 14 September 2018 this item appeared on the restaurant website under the heading “Lazarus Rising: 82 Years Young, Giovanna is Back”:

“After surviving a health scare last year, Giovanna, Sydney’s Italian restaurant matriarch from the past six decades, and mother of our head chef & co-owner, Paola, has returned to Bar M.

The 82-year-old Naples-born Giovanna, whose Sydney restaurants over the years included O Sole Mio, iconic La Strada and Machiavelli, says she feels younger than ever and is brimming with enthusiasm and new ideas.

“As people may know, I left Machiavelli restaurant in the city a few years ago after starting it in 1988,” she says. “Back then we had all the best customers… the politicians and businessmen, like Gough Whitlam and Kerry Packer. They have all gone. Now I’m at Bar M with my daughter, Paola, and feel at home again. Being here has given me a new lease on life. I’ve been reinvigorated by the young people, the crowd, the music… it’s like a cinema, it’s like La Dolce Vita all over again.”

Giovanna will consult on the spring and summer menu of Bar Machiavelli restaurant, amongst other things. “Giovanna’s comeback is like Lazarus… she’s back with a vengeance,” says Paola. “The doctors brought her back to life last year, and she now seems more like 60 than 80 with her enthusiasm. I’m looking forward to working with Mum. Everything I know about cooking I learnt from her. Many of the dishes here at Bar M are just my reinterpretations of what mum was cooking decades ago. She gives me inspiration to make the dishes, and she is still as innovative today, as she was 30 years ago.”

Both Paola and Giovanna pledge that Bar M will continue to innovate. “We are continually evolving here at Bar M,” says Paola. “Looking to the past, yes, but moving towards the future always, giving a new generation of diners a fresh perspective on Southern Italian food.”

“We as a family reinvented ourselves time and time again,” says Giovanna. “We have never stayed old fashioned. Now is no different. As long as I live I will be here to support my daughter.”

25. On 27 September 2018, Bar M was incorporated with Paola as sole director and shareholder.

26. On 27 September 2018, Giovanna purportedly signed a letter addressed to Mr Beazley which stated:

“I confirm I no longer employ Ms Vivian Evans or Uther Webster and Evans as my solicitors.

I confirm I am instructing you to act on my behalf in relation to the Bar Machiavelli Pty Ltd matter and the settlement with Me [sic] Bicher and Mr Pellorini.”

27. Mr Beazley admitted that he had typed this letter. Giovanna’s evidence was that she had no recollection of ever seeing or signing that letter, had never instructed Mr Beazley to act for her and that she had been in hospital undergoing dialysis on 27 September 2018. A hospital record in evidence records, and the Court finds, that Giovanna underwent dialysis from 7am to 1pm that day.

28. At 7.51pm on 27 September 2018, WFM’s solicitor, Ms Maria Townsend of HWLE sent an email to Mr Beazley which included:

“We are instructed that our client has agreed to provide a loan of $1.1M to Paola Toppi which is to be for the purpose of her buying out the two other unit holders in Bar Machiavelli and securing the business. Such loan is to be secured by a guarantee from Giovanna Toppi and a second ranking mortgage over Mrs Toppi’s property in Potts Point. CT attached.

Our client has also discussed with your client that our client expects its costs expended to date in the court proceedings and in relation to the lease as well as those which it is now liable to pay to the Plaintiff’s [sic] in those proceedings to be repaid by your client and it is prepared to deal with those costs by increasing the rent in the new lease so your client has the opportunity to pay these over the first term of the lease. We should be able to advise tomorrow what our client’s costs are to date but we do not know what the Plaintiff’s costs will be. In your negotiations with the Plaintiff’s [sic] therefore we request that you seek from the Plaintiffs their agreement to an amount for costs which they will accept with respect to the costs ordered against WFM in the Supreme Court Proceedings. We will then confirm that amount with the Plaintiffs and ensure we have an agreement in place with them in this regard.

Therefore we need the following by way of confirmation from you:

1. That your client is prepared to enter into a loan agreement for the above sum which will be on terms to be finalised but at interests [sic] rates which are commercial bank rates and to provide the security referred to above;

2. That your client is prepared to enter into a new lease for 5x5x5 on similar terms to the current lease, but with an increased rent to allow for the payment of the costs incurred by our client over the initial 5 year term and with Giovanna Toppi as guarantor on the lease …

… In addition we will require confirmation that all proceedings between Ms and Mrs Toppi and Bicher and Pellarini will be dealt with under your proposed settlement with them as our client needs some comfort that all disputes between them are at an end so there is no risk to your client continuing to operate the business for the term of the new lease …”

29. Mr Beazley replied by email at 9.27pm:

“The settlement provides that provided they are paid their 1.1m they will not enforce the orders including costs order.

Paola is the tenant and Giovanna is the guarantor but I want paola [sic] to sub licence to any compnay [sic] of which she is a shareholder and director.”

30. On 28 September 2018, the Settlement Deed was executed to resolve the proceedings instituted by the Bicher entities (the Settlement Deed).

31. Giovanna was a party to the Settlement Deed, as was G & P Toppi. Among the payments provided for by the Settlement Deed (the Settlement Amount) was a payment by Giovanna to Bicher & Son Pty Ltd of $100,000 as repayment for a loan described as the “Giovanna Loan”, defined as “the loan made by Bicher & Son to Giovanna in the amount of $100,000”.

32. There was in evidence a copy of the Settlement Deed signed by Giovanna and Paola as directors of G & P Toppi and by Giovanna in her personal capacity, this latter signature being witnessed by Mr Beazley. Giovanna’s evidence was that she had no knowledge of the “Giovanna Loan” and that as far as she was aware she did not sign the Settlement Deed.

33. The total of the Settlement Amount was $1,100,000 secured by a mortgage over the Property. In return for the Settlement Amount, the Bicher entities agreed to discontinue the Bicher trust proceedings against Paola and not enforce the judgment against WFM obtained in the WFM lease proceedings.

34. On 8 October 2018, Ms Townsend emailed Mr Beazley including:

“… We will also need as requested some terms of settlement to be entered into by the Plaintiff’s [sic] in the Lease proceedings, with our client to finalise this whole transaction and as a condition of the loan to be granted by our client.

The quicker we can get these issues resolved the quicker we can finalise the documentation and proceed to completion.

In the meantime subject to all of the above, we attach a draft Lease in mark-up showing the amendments to the terms from the current lease (apart from the names of the parties) so that you can confirm Paola and Giovanna are happy with the changes and the new rent. You will note that former annexures are now exhibits due to LPI not accepting photographs and most plans as annexures on leases to be registered. You will also note that the lease commencement date is to be 1 October 2018, so the Surrender Deed and your sale of business contract should have the same effective date for completion, notwithstanding that completion cannot occur until the settlement deed with the other unit holders also completes.

Please confirm the lease is in acceptable form and provide the documents requested. We will provide the loan and security documents and new subleases as soon as possible over the next couple of days …”

35. On 10 October 2018, Ms Townsend emailed Mr Beazley:

“Please the link below [sic] which you can click on to download the new lease, sublease and loan security documents which have now been reviewed by our clients and are in final form. The only difference between the new lease in the below and the one previously sent is that we had omitted earlier to include the yearly fixed increase during the initial term of the lease. That has now been corrected in the schedule.

Please note these documents are not being submitted as an offer, or acceptance of an offer, and are subject to all the conditions precedent under the loan agreement and the information we have sought under previous emails. The provision of these documents will not be effective or intended as any agreement to enter into those documents until the documents have been signed by both parties.”

36. Mr Beazley’s affidavit evidence is that he met Giovanna on or about 12 October 2018:

“12. On or about 12 October 2018, I met with Giovanna at Bar M for her to sign the facility documents for the Bar M Loan (Meeting).

13. I recall the facility documents for the Bar M Loan which needed to be signed by Giovanna included a loan agreement, mortgage, guarantee and declarations (Loan Documents). During the meeting, I took Giovanna through each of the Loan Documents and for each Loan Document, explained she was guaranteeing the repayment of the loan and it was being secured over her Potts Point Property. I explained $100,000.00 of the loan was for her personal liability and the $1m was to pay out Bicher and Pellorini under the settlement agreement. I witnessed Giovanna sign each of the Loan Documents.

14. During the Meeting, Giovanna and I spoke to each other in English. After I had explained each of the Loan Documents to Giovanna, we had a conversation to the following effect:

Me: “Do you understand what I have explained to you about the documents and do you have any questions? If not, are you happy to sign them?

Giovanna: “Yes Darling, I understand, I have no questions. Happy to sign.”

…

18. Giovanna did not raise any issues or questions during the Meeting.

19. I recall Paola was present at the restaurant during the meeting but she did not sit at the table with us when I discussed the Loan Documents with Giovanna.

20. Paola did not hand Giovanna any documents during the Meeting. Paola did not ask Giovanna to sign the Loan Documents during the Meeting.”

37. Mr Beazley acknowledged, and the Court finds, that he did not keep any file note or other written record of the advice he says he gave Giovanna on that occasion. Giovanna denies any such meeting took place.

38. On 15 October 2018, Mr Beazley sent a letter to HWLE saying “We enclose the executed loan and lease documents”. In doing so, it appears he was premature, because it drew this email from Ms Townsend at 3.48pm that day:

“We received a bundle of documents from you today which have been executed by your client.

As previously advised the documents have been forwarded to you for review and were not and are not an offer from our client to lease to your client. In particular we note that we have not yet provided a disclosure document for the retail lease and we have not yet received the preliminary information requested in relation to evidencing Paola’s authority to execute the documents changing the trustee, the sale of the Bar Machiavelli Business and the agreement of the other unit holders to such actions as well as confirmation they will enter into terms of settlement or a deed of settlement with our client with respect to the Lease Proceedings.

We can do nothing with the documents we have sent without the above information and the draft Deed of Surrender of Lease we have requested.

We also note that the Declaration signed by Paola as director of Bar M is a scanned copy and not an original. An original will be required.

Can you please advise when you will be providing the information sought above and previously requested.”

39. Giovanna underwent dialysis from 7.30am to 1.30pm on Thursday, 25 October 2018.

40. By emails sent at 4.33pm and 5.11pm on 25 October 2018, Ms Townsend sent Mr Beazley the final versions of the transaction documents. The first of these included:

“… Please see below a link to clean copies of all the final versions of the documents which need to be executed and delivered to us by tomorrow as originals and in duplicate where required below:

1. Loan Facility Agreement – in duplicate

2. General Security Agreement – in duplicate

3. Guarantee and Indemnity of Giovanna Toppi – in duplicate

4. Guarantee and Indemnity of Paola Toppi – in duplicate

5. Mortgage by Giovanna Toppi (including Annexure A and registered Memorandum) – in duplicate and please ensure that the witness also witnesses the Mortgagor’s signature in each page of the annexure.

6. Lease for [x] Neild Avenue, Rushcutters Bay – in duplicate (please note we have previously served the disclosure statement for this lease and we now accept the signed Lessee disclosure statement executed by your client as acknowledgment of that receipt. Some variations have been made to the lease including change of commencement and termination dates due to commencement date now being 27 October 2018 and consequential changes to the option term dates, in addition you will note we have provided that the GSA is to be security for the obligations under the lease and a further event of default being the occurrence of an Insolvency Event which has led to consequential amendments to include a definition of Insolvency Event, Controller and General Security Agreement. Additionally the bank guarantee security description in the schedule has been amended to state only 3 months rent plus GST given we are unlikely to be able to obtain the benefit of the current security held by the rental bond board, although we confirm our client will not require the lessee to provide this security as a condition precedent)

7. Sublease – in duplicate (only amendment to this has been the date of commencement and termination consequent on the change of those dates in the Lease)

8. Authority and Undertaking – the Lease and sublease have been added as one of the transaction documents,

9. Declaration of third party Mortgagor and Guarantor from Paola Toppi

10. Declaration of third party Mortgagor and Guarantor from Giovanna Toppi

11 Declaration by company director

12. Property declaration.

We look forward to receiving all these documents duly executed tomorrow and to your advice as to the details for settlement on Monday such as location and time as well as cheque details so we can attend to hand over cheques and collect all releases and discharges and the Deed Poll from the other parties regarding the Lease Proceedings.”

41. At 4.58pm on 25 October 2018, Mr Beazley received a text message from Paola which stated: “Can you call mum to come in to sign the papers tomorrow. X [Giovanna’s mobile phone number is set out]” (Paola’s text message).

42. Mr Beazley’s electronic diary records him as being in Parramatta Children’s Court from 9.30am to 10.00 am on Friday, 26 October 2018.

43. On 26 October 2018 at 10.31am, Ms Townsend’s personal assistant emailed Mr Beazley referring to the previous day’s emails of 4.33pm and 5.11pm and saying: “We look forward to receiving the signed document [sic] today and details of settlement which is due to take place on Monday”.

44. At 11.03am on 26 October 2018, Mr Beazley downloaded for execution the final form of the transaction documents that had been emailed to him by Ms Townsend the previous afternoon.

45. By letter dated 26 October 2018, Mr Beazley sent the signed transaction documents to Ms Townsend. These included (Giovanna’s signed transaction documents or the Transaction):

1. A third party mortgage by Giovanna over the Property in favour of WFM in respect of Bar M apparently executed by Giovanna in the presence of Mr Beazley and dated 25 October 2018.

2. A third party guarantee by Giovanna in favour of WFM in respect of Bar M apparently dated 25 October 2018, signed by Giovanna in the presence of, and witnessed by, Mr Beazley.

3. A property declaration in relation to the Property apparently executed by Giovanna in the presence of Mr Beazley and dated 25 October 2018.

4. A statutory declaration as third party mortgagor and guarantor apparently signed by Giovanna in the presence of and witnessed by Mr Beazley on 25 October 2018.

46. The statutory declaration referred to in the preceding sub-paragraph recorded:

“1. I am the Guarantor and Indemnifier named in certain loan and security documents between Borrower and the Lender.

2. I have received independent legal advice regarding the loan and security documents referred to in paragraph 1.

3. After receiving that advice I have freely and voluntarily signed the following documents:

(a) The Facility as accepted by the Borrower;

(b) Guarantee and Indemnity dated on or about the date of this declaration (limited as to amount) in favour of the Lender on account of the Borrower;

(c) First registered Real Property Act Mortgage from me in favour of the Lender over the Mortgaged Property;

(d) Authority and Undertaking between the parties in (a) above; and

(e) the lease between the Lender and the Borrower for the premises being part 91/SP82837 as to the Ground Floor and Mezzanine, [X] Neild Avenue, Rushcutters Bay, NSW to be entered on or about the date of this agreement …”

47. Mr Beazley’s evidence (set out at [102] below) is the effect, and the Court accepts by reason of Mr Beazley’s electronic records, that Giovanna’s signed documents could only have been signed between 11.00am and 2.26pm on 26 October 2018. The Court also accepts Mr Beazley’s evidence that he has no independent recollection of meeting with Giovanna at that time and that (as he accepted at T174.05) the documents were being executed “in a big rush”. Furthermore, Mr Beazley has no file note or other record of what advice he gave Giovanna at any such meeting.

48. Giovanna’s evidence sworn in response to this evidence of Mr Beazley’s was:

“5. Throughout September and October 2018 my daughter Paola Toppi would ask me to sign my signature on many documents. I would only ever be shown the execution page. Paola would say to me words to the effect of:

“Mum, please sign here. It’s for the restaurant.”

I would sign the documents, as I trusted my daughter Paola not to ask me to sign documents that exposed me to financial risk and harm. Those are the circumstances in which I wrote my signature on the pages.

6. Had I, at any stage, been advised about the content of the documents I signed relating to the WFM Motors transaction, which appeared to have been sent by Mr Beazley to the solicitors for WFM Motors on 15 October 2018 and 26 October 2018, I would not have signed them.

7. Insofar as the mortgage is concerned, which appears from pages 219 to 220 of PB-1, if I had been told by my daughter Paola or by Mr Beazley, or by anyone else, that I was signing a mortgage, I would have refused to sign it.

8. Neither Paola nor Mr Beazley nor anyone else, explained, or read to me, or advised me, in relation to the documents appearing from pages 1-226 of Exhibit PB-1. Had I received an explanation or advice that under those documents I was guaranteeing repayment by Paola’s company of a $1.1 million loan within 12 months, and guaranteeing obligations of Paola’s company of a $1.1 million loan within 12 months, and guaranteeing obligations of Paola’s company of a lease of the Rushcutters Bay premises with a term of up to 15 years and which included increased rent to repay legal costs to WFM, and that I was granting a mortgage of my Potts Point property as security for those guarantees, I would not have affixed my signature to these documents.

9. I refer to paragraph 13 of Beazley’s Second Affidavit. Mr Beazley asserts that I must have attended his office on 26 October 2018 to execute the documents between 11:03AM and 2:30PM. I have no recollection at all of attending Mr Beazley’s office on 26 October 2018. The documents are dated 25 October 2017 (not 26 October 2018). I signed them in the presence of my daughter, Paola, as I have deposed to previously in this affidavit and in my First Affidavit.

10. I refer to paragraphs 14 and 15 of Beazley’s Second Affidavit, I signed the documents when Paola put the pages in front of me and asked me to sign them, as I have described above and in my First Affidavit. At not stage did Mr Beazley ever give me advice relating to those documents.”

49. As part of the same suite of documents, Bar M entered into a new lease of the Premises with WFM (the 2018 Lease). Giovanna guaranteed Bar M’s obligations under the 2018 Lease. That obligation was also secured by the mortgage she gave over the Property. The 2018 Lease included a higher rent intended to provide a means for the payment to WFM over time of the costs it had incurred in the WFM Lease Proceedings. The mortgage also secured Giovanna’s guarantee obligation in respect of Bar M’s performance of the 2018 Lease. In other words, Giovanna’s obligations to WFM were not limited to securing Bar M’s obligation to repay the funds that had been advanced and were repayable with interest within 12 months of the date of draw down.

50. On or about 28 October 2018, Bar M drew down just less than $1,100,000 under the facility provided by WFM.

51. By reason of the Court’s acceptance of the evidence of Mr Colacicco (see [92] below), the Court finds the following occurred on the evening of 28 October 2018 in accordance with his affidavit evidence:

“34. On the date of the Loan Advance, being on or about 28 October 2018, I attended the restaurant for dinner in the company of Nick, amongst others. As we walked towards our usual table at the restaurant, I observed Giovanna get up from her seat to approach Nick and I. She kissed both Nick and I hello. Giovanna then said to Nick in English in my presence words to the effect “Thank you Mr Nick. You saved us. Don’t worry, we’ll pay the money back in 1 year. I will sell the property.” Giovanna also said words largely to the same effect to me. I replied to Giovanna in words to the effect “don’t worry. It has all been sorted out. Good luck with everything. Be happy.” These discussions did not occur in the presence of Paola.”

52. Giovanna’s evidence was that in January 2019 Paola said to her (Giovanna) that Giovanna would soon have to sell the Property to pay WFM’s mortgage. Giovanna said she denied knowledge of the mortgage and asked Ms Evans to obtain Giovanna’s signed transaction documents from Mr Beazley.

53. Mr Beazley sent at least some of Giovanna’s signed transaction documents to Ms Evans on 1 November 2019. So much appears from a letter from Ms Evans to Mr Beazley dated 1 November 2019 which included:

“I refer to your email of 4 February 2019 received at 5:31pm in which you enclosed a number of documents.

Can you please advise who you acted for in the transaction, as I note that there are a number of parties, and you have witnessed the signature of a number of the parties on the security documentation.

Please confirm that you acted on behalf of:

1. Giovanna Toppi

2. Bar M Pty Ltd

3. Paola Toppi

There is a reference in the Loan Facility Agreement to a Settlement Deed dated 28 September 2018 between a number of parties, including the Guarantors, G & P Toppi Pty Ltd, Neil Cunningham, Sciue Sciue Pty Ltd, Bicher & Son Pty Ltd, Bicher Truco Pty Ltd, Pelltruco Pty Ltd, Paul Pellarini and Nicolae Bicher. In those circumstances, can you please provide us with a copy.

In the Declaration by a Third Party Mortgagee executed by Giovanna Toppi in your presence, it states that she received independent legal advice regarding the loan and security documents referred to in paragraph 1 of the Statutory Declaration. Can you please identify the lawyer who provided the independent legal advice?

We note that the Statutory Declaration states that Giovanna has also freely and voluntarily signed amongst other documents, the Lease between the Lender and the Borrower for the premises at [X] Neild Avenue, Rushcutters Bay. The copy of the Lease that I have is between WFM Motors Pty Ltd and Bar Mr Pty Ltd. The Guarantors to the Lease are said to Giovanna Toppi and Paola Toppi. Did you act for Giovanna Toppi in respect of the Lease transaction?

In relation to the loan, we understand that the principal advance was $1.1 million, and interest is payable at 4.5% per annum. Can you please confirm that the Borrower has met all obligations in respect of interest payments, and what steps have been taken, if any, to discharge the facility of $1.1 million which we understand is repayable within 12 months from the drawdown date.

Can you please confirm the exact date of the drawdown of the First Advance?

We note that Giovanna Toppi is neither a director not shareholder of Bar Mr Pty Ltd. On what basis was she asked to provide the Guarantee for the Lease and guarantee the loan and provide the security to her property?

We note that your previous advice that $100,000 of that money that was borrowed by Bar M Pty Ltd was utilised to repay “Giovanna’s indebtedness to Bicher and Pellarini”.

Was there a separate document with Bicher and Pellarini in relation to the payment of that $100,000 including any Deed of Release? As I do not have the Settlement Deed, and it may be contained within that document, if it isn’t, can you please provide us with all communication documents in respect of that payment of Giovanna’s indebtedness.

Was an independent solicitor’s certificate provided to the Lender? I do not wish at this stage to request these documents from the Lender’s solicitors and would appreciate you providing us with the same and the information requested.

In relation to Bar M Pty Ltd, does Bar M Pty Ltd trade in its own capacity or is it a Trustee for a Trust? If so, please provide full particulars and the most recent financial statements for Bar M Pty Ltd and the Trust. Can you also confirm that Bar M is meeting is [sic] leasing obligations pursuant to the Lease?

Could you please provide this information urgently and by no later than close of business on Monday, 4 November 2019? …”

54. There was no evidence of any reply from Mr Beazley to Ms Evans’ inquiries.

55. WFM and Bar M agreed to extend the repayment date of the $1,100,000 loan first to 24 January 2020 and then to 24 February 2020.

56. Bar M defaulted in its obligations to WFM by failing to repay the amount due by the extended repayment date.

57. On 5 March 2020, Bar M failed to comply with a demand from WFM to repay the loan.

58. Giovanna failed to comply with a demand from WFM to repay the loan on or before 13 March 2020.

59. WFM commenced these proceedings by statement of claim filed on 15 September 2020.

60. Giovanna sold the Property by a contract made on 7 April 2021 for $8,500,000. WFM agreed to discharge a caveat it had lodged over the Property upon payment of funds into Court sufficient to meet WFM’s claim against Giovanna.

The disputed facts

61. Before turning to the essential facts in dispute between the parties, I will set out the relevant legal principles in relation to fact finding, and then consider the evidence of the various witnesses, together with submissions made in relation to potential witnesses who were not called.

Legal principles as to fact finding and credit

62. I summarised the legal principles as to fact finding and credit in Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964. The relevant sections are extracted below:

“[462]   The Court was given helpful summaries of the legal principles in relation to fact finding and credit by each of the parties. Those submissions were one of the few areas of the case where there was no disagreement as to the way in which the Court should go about fact finding in a case such as the present where most of the critical evidence depended upon uncorroborated oral testimony and where, to quote Maria and George’s written submissions, “There are vast factual differences between the parties”.

[463]    In approaching the task of fact finding, particularly where credit is a significant issue, the Court has applied ten principles.

[464]    First, at the forefront of the Court’s approach has been the oft cited statement of McClelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 (Watson) at 318-319:

Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction (1995) 49 NSWLR 315 at 319 rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

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

[465]   Second, the concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (In liquidation) (No 2) [2011] FCA 1123; (2011) 297 ALR 56:

48. Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account:

●   the nature of the cause of action or defence;

●   the nature of the subject matter of the proceeding; and

●   the gravity of the matters alleged.

When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2).

[466]    Third, there is the statutory successor of the rule in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 in s 140 of the EA:

140 Civil proceedings: standard of proof

(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:

(a) the nature of the cause of action or defence, and

(b) the nature of the subject-matter of the proceeding, and

(c) the gravity of the matters alleged.

[467]    Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest.

[468]    Fifth, evidence of independent witnesses, i.e. persons who have no reason to be partisan, may be decisive in resolving the conflicting evidence of interested parties.

[469]    Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness’ evidence in its entirety. This approach was expressed by O’Loughlin J in Cubillo v Commonwealth of Australia (No 2) [2000] FCA 1084; (2000) 103 FCR 1:

118 Before commencing a detailed analysis of the evidence in this case, I desire, in the first instance, to make clear the approach that I have taken to the evidence of a witness where I have found some, but not all, aspects of the evidence of that witness to be unreliable. Simply because I find against a party or a witness on one issue and reject some part of the evidence of that person, it does not mean that what remains is tainted, or otherwise lacks probative force, with the consequence that I should dismiss all the evidence of that person. The principles enunciated in the cases indicate that the trial judge is entitled to believe part of the evidence given by a witness and to reject the rest. After making an assessment of the evidence, after utilising the advantage of having seen and heard all the witnesses, and after forming an impression of each, the confidence that the judge reposes in a particular witness is assessed accordingly. Where evidence has a logical probative value, a judge will rely on it; where it contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force, the judge will, in all probability reject it or, at least, not rely on it. I mention some authorities that support those propositions.

…

121 A trial judge is not restricted in his or her assessment of a witness. By this I mean that if, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected.

[470]    Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings:

155    There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

156    Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44].

[471]    Eighth, disbelieving a witness that “X” was the case does not mean that “not X” has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 (citations omitted):

The fact that a witness is disbelieved does not prove the opposite of what he asserted: Scott Fell v. Lloyd [1911] HCA 34, (1911) 13 CLR 230, at p 241 ; Hobbs v. Tinling (C.T.) & Co. Ltd. (1929) 2 KB 1, at p 21 . It has sometimes been said that where the story of a witness is disbelieved, the result is simply that there is no evidence on the subject (Jack v. Smail [1905] HCA 25, (1906) 2 CLR 684, at p 698 ; Malzy v. Eichholz (1916) 2 KB 308, at p 321 ; Ex parte Bear; Re Jones [1945] NSWStRp 50, (1945) 46 SR (NSW) 126, at p 128 ), but although this is no doubt true in many cases it is not correct as a universal proposition. There may be circumstances in which an inference can be drawn from the fact that the witness has told a false story, for example, that the truth would be harmful to him; and it is no doubt for this reason that false statements by an accused person may sometimes be regarded as corroboration of other evidence given in a criminal case: Eade v. The King [1924] HCA 9, (1924) 34 CLR 153, at p 158; Tripodi v. The Queen [1961] CHA 22, (1961) 104 CLR 1. Moreover, if the truth must lie between two alternative states of fact, disbelief in evidence that one of the state of facts exists may support the existence of the alternative state of facts: Lee v. Russell (1961) WAR 103, at p 109 .

[472]    Ninth, for reasons set out in Saravinovski (No 5) at [76] and following, the Court gave leave for certain of Chris’ affidavits to be relied upon, notwithstanding that his loss of mental capacity meant that he could not be cross-examined. The way such evidence should be treated was considered by Hallen J in Fulton v Fulton [2014] NSWSC 619 [Fulton]:

111.   However, affidavit evidence, however good, which, for whatever reason, is not subject to cross-examination when cross-examination is required, will always be discounted, as appropriate, if the affidavit is used with leave without cross-examination. The degree to which it will be discounted may depend on various factors, including the circumstances that lead to cross-examination being dispensed with, the nature of the evidence and its centrality and degree of significance to the case. The degree of discount appropriate will be judged according to all the circumstances of the case: Re O'Neil, Deceased [1972] VicRp 35, [1972] VR 327, per Anderson J, at 333 - 334; Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 86, per Hamilton J, at [5].

[473]    Tenth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. This case has many similarities to the family dispute considered by Robb J in Aytul Ak-Tankiz v Ferat Ak & Ramazan Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said:

187.   The principal evidence relating to these issues consisted of the uncorroborated evidence of the witnesses, or alternatively the only corroboration available was the testimony of other witnesses. The evidence distilled into the word of one witness against the word of one or more other witnesses. Most of the events relevant to the issues occurred many years ago. The evidence relevant to the issues generally consisted of a series of assertions, and counter-assertions by various witnesses. Evidence of the objective context was generally not available, so it has not been feasible to test the versions of events that were in contest by reference to the objective probabilities, based upon uncontroversial contemporary circumstances. Though the issues are not entirely irrelevant, their significance is limited, and their resolution has not been necessary for the purpose of determining the real issues in the case. Any attempt to resolve the issues by making judgments about the relative credibility of the individual witnesses on an issue-by-issue basis was likely to be based on illusory foundations.”

Legal principles as to the evidence of a witness who has died

63. Beazley, Giles and Santow JJA set out the principles relevant to the weight to be given to a witness’ evidence when they have died before they were cross- examined in Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419 (Amalgamated):

“[188] There is, however, some authority as to how to deal with evidence upon which there has been no opportunity to cross-examine, because, for example, a witness had died. It has been held that such evidence is admissible but that the “‘court [would] not attach so much weight to it as it would have been done if there had been an opportunity of cross-examination’, Daniell’s Chancery Practice, 6th Ed, p 786”: Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd (1967) 116 CLR 254 at 263. In that case, a witness who had died by the time the trial came on for hearing swore two contradictory affidavits. Windeyer J said at 263:

“The latter I think makes the former of no weight; and it can itself be of little or no weight in the circumstances, except to the extent that it is supported by documents which accord with other evidence to which I shall come later.””

64. Levine J set out a rationale for affording any weight to evidence untested by cross-examination in Marsden v Amalgamated Television Services Pty Limited [2001] NSWSC 510 (citations omitted):

“[1021]   A reason advanced for affording the evidence any weight in those cases where death or incapacity intervenes, is that the witness did not know when examined in chief, that death would prevent him being cross-examined. Fear of cross-examination therefore operated as “some guarantee of a willingness to tell the truth””

Jones v Dunkel inferences

65. Ward CJ in Eq (as her Honour then was) set out what a Jones v Dunkel inference is in Galati v Deans [2021] NSWSC 1094:

[496]   “In circumstances where the evidence adduced calls for an explanation by a party and that party fails to call a witness or tender evidence, a Jones v Dunkel inference may be drawn that the uncalled witness or missing evidence would not have assisted that party’s case. The rule allows for the more ready acceptance of evidence which might have been contradicted, but which was not (see as explained in Greenaway v Auzhair 1 Pty Ltd (2010) 80 ACSR 538; [2010] NSWSC 1339 (Auzhair Supplies) at [114]). However, the rule does not permit the court to choose between guesses simply because one guess seems more likely than the other or to fill the gaps in evidence (Jones v Dunkel at 305 per Dixon CJ). Thus, a Jones v Dunkel inference is only available where there is, on the evidence, a reasonable basis on which the inference may be drawn (Auzhair Supplies at [115]-[117]). Moreover, in Payne v Parker, Glass JA made clear that the rule only applies when three conditions are met, namely: (i) the missing witness would expect to be called by one party rather than the other; (ii) their evidence would clarify a particular issue; and (iii) their absence is unexplained.”

The witnesses

Giovanna Toppi

66. As I have already noted, Giovanna’s affidavit evidence was that without explanation from anyone, and not understanding what she was signing, Giovanni acquiesced in Paola’s request “Mum, I need you to sign here” or “Sign here, Mum”. However, an important preliminary question is what approach the Court should apply to her evidence when most of it was not able to be tested by cross-examination.

67. As was required to be the case at the time, the entire hearing was conducted remotely. Giovanna was sworn through an interpreter at 10.33 am (T85:1) on the third day of the hearing (Monday, 20 September 2021), which had commenced at 9.30am. With that commencement time my practice is to take a morning tea adjournment at about 11am.

68. Giovanna was cross-examined by Mr Jammy for about half an hour. It was done through an Italian interpreter, although Giovanna appeared to understand some questions before they were interpreted and answered in English. The cross-examination, such as it was, takes up ten pages of transcript. After some questions about Giovanna’s history as a restaurateur, the topic had turned to preliminary questions about the Settlement Deed and the alleged debt of $100,000 owed to the Bicher entities when morning tea was taken.

69. Before the Court rose, I said this to the parties (T96:1-8):

“I have some reservations about how well this is working, but it’s really a matter for counsel. It is theoretically possible if people take the view that this will be better done in person that I may be able to get us a court separate from this building, but I’m in the parties’ hands if that application is to be made. At the moment I’m just signalling that I’m slightly concerned that we’re getting a proper understanding and a proper impression of the witness through this process, but I’m in counsel’s hands.”

70. I indicated to the parties that over morning tea I could make inquiries if a court room could be made available outside the main Queen’s Square complex for the hearing to continue in person. I then had this exchange with Mr Kidd SC (T96:45-97:13):

“KIDD: For what it’s worth, as I understand it, my side proposed an application for an in person hearing. My learned friend’s side didn’t agree and the application wasn’t made. For what it’s worth, if your Honour is willing to make that enquiry over morning tea that would be relevant to know whether it’s possible, obviously.

HIS HONOUR: Yes.

KIDD: I suppose a question there is at what point in time that could be convened, particularly where, as I understand it there’s a dialysis procedure tomorrow. I don’t know how feasible it is to hastily convene an in person hearing for this afternoon, for instance –

HIS HONOUR: I’ll make that enquiry, Mr Kidd, otherwise it will have to be on another day, which I know is very unsatisfactory, if people think that it’s serious. But I have to say, having now been doing this for more than a year this is the first time I’m genuinely having some reservation about the fairness and effectiveness of what’s going on. But it’s not at the point where I feel the Court should intrude. I think at this moment I really just need to rely on the parties to tell me if anyone feels they’re being disadvantaged and make the offer. Perhaps on that basis, Mr Kidd, in light of what you’ve said I should at least go and make an enquiry over morning tea?

KIDD: For our part, we’d be grateful if your Honour is willing to do that and take some instructions about it in the meantime.

HIS HONOUR: Yes, all right.”

71. The solution I had in mind was not achievable. After the short adjournment I informed the parties that the only possibilities were to press on with taking Giovanna’s evidence remotely or adjourn her evidence. I also said (T97:50 – T98:1-8):

“HIS HONOUR: To be perfectly frank, the problem I’m having, quite apart from the problems that you may be having, are that it is very difficult for me to tell how much is what is the flat effect of being on a screen, an older witness through an interpreter, giving her answers off into space, to what extent is her lack of understanding, simply the completely strange circumstances in which she finds herself, as opposed to something more to do with her mental condition, her capacity to understand and the like, so I do have a concern about that, but you may say to me, “Look, that’s fine, we’ll just press on.”

72. The exchange continued in the (electronic) absence of Giovanna and Mr Jammy said (T99:36-100:4):

“JAMMY: Your Honour my instructions accord with my recommendation, which is that we will be seeking an adjournment until such time as Ms Toppi is able to give evidence in person. The reasons for that really are because the nature of the dispute is a matter is one where both her under understanding and ability to understand and communicate are central to the issues in dispute, as are questions of her credibility. A credit finding is going to need to be made in respect of her evidence given the conflict between her and the evidence of the other witnesses. We believe, in those circumstances, it’s important that your Honour is able to properly assess her demeanour and understand her answers and form a view. That would be the first reason.

The second reason is the one that we discussed before we adjourned, which is that I simply cannot hear her answers, which makes it very difficult for me to let the cross-examination flow if I don’t know what her answer to a previous question is. I don’t want to stop her answering spontaneously, I think that’s very important that she be allowed to do that. I wouldn’t ask your Honour to direct her to answer through the interpreter. If she feels comfortable answering a question she must do so, but there is that difficulty that I’m struggling with the audio.”

130. To this must be added the Court’s acceptance of Mr Colacicco’s evidence set out in [21] and [51] above. Mr Colacicco’s evidence contradicts Giovanna’s evidence. As WFM submitted, it demonstrates that she requested Mr Politis to advance funds, she offered up the Property as security for the loan, she understood it was repayable in 12 months and that its repayment might require the sale of the Property, which she was prepared to do.

131. I have also taken into consideration that Giovanna, as a self-made success in the restaurant business, must have developed some business acumen. In addition, there was evidence, not explored in any detail because Giovanna was not able to be cross-examined, about previous transactions that:

1. she had given a guarantee and mortgage in 2005 over the Property in respect of a nearly $1,000,000 facility to National Australia Bank concerning Ristorante Macchiavelli;

2. she had guaranteed loans for her daughter Catarina and Catarina’s husband, and provided a personal guarantee for an indebtedness of Catarina’s company of $1,300,000 (these were referred to in Giovanna’s will made on 26 October 2018 that was in evidence, apparently drawn for her by Mr Beazley); and

3. in 2013 she had given a personal guarantee and a mortgage over the Property to secure a personal loan to her of $150,000 from Neolite Neon Co Pty Ltd.

153. Taking all of the matters commencing at [134] above into account, I am not actually persuaded on the balance of probabilities that she did not understand or that she would not have entered into the Transaction if she had understood.

154. It does not automatically follow from the previous paragraph that the Court should find that she did understand or that she would have entered the Transaction if she did have the benefit of proper and independent legal advice. However, in this case the evidence warrants that conclusion. First, whatever she may or may not have understood, the Court finds based on Mr Colacicco’s evidence that, having requested Mr Politis to advance funds and offered up the Property as security for the loan, she understood the most critical aspects: it was repayable in 12 months and that its repayment might require the sale of the Property, which she was prepared to do. When to these findings is added the Court’s conclusion (see [139] above) that Giovanna was disposed to help Paola and would not have wanted her previous assistance to Paola in opening the restaurant to come to nothing, the Court finds that Giovanna would have proceeded with the Transaction even if she had received proper and independent advice about its nature and effect, including that it extended to securing Bar M’s performance under the 2018 Lease (noting that is not an obligation upon which WFM sues in these proceedings).

Benefit to Giovanna

155. WFM submitted Giovanna personally owed Bicher & Son Pty Ltd $100,000 (the Giovanna Loan), and this amount was used from the Transaction to repay the debt. In this way, Giovanna derived a benefit from the Transaction.

156. On the other hand, Giovanna’s affidavit evidence was that this debt did not exist. It was submitted for her that, without repayment of the Giovanna Loan, Giovanna did not derive a benefit from the Transaction. Furthermore, even if she did owe the debt, any relief under the CR Act could be fashioned so as not to deprive WFM of its right to repayment of so much as went to payment of the debt.

157. There are three reasons why the Court finds the Giovanna Loan did exist, even when Giovanna’s untested denial of the existence of the debt is taken into account.

158. First, the Settlement Deed was the product of an arms-length negotiation in the context of contested litigation. It would make no sense for the Bicher entities to acquiesce in the inclusion of a fictitious item as part of the Settlement Deed. However, it does make sense that the Bicher entities would use the commercially advantageous position in which they found themselves as a result of the litigation, especially the WFM Lease Proceedings, to extract repayment of a debt owed by Giovanna.

159. Second, Mr Ryan gave evidence in cross-examination that he had been made aware in the time leading up to WFM’s advance of funds that $100,000 was “going to Giovanna” (T53.6), although he accepted that he did not know what it was for.

160. Third, the Report makes clear that Giovanna gambled and that she owed people money. As it records: “Mr Toppi said that Ms Toppi received $40,000 a month in rent from the Potts Point building, but she owed people money”. This makes more probable that she owed the Bicher entities money, even an amount as large as $100,000 given the reported size of her gambling habit.

161. These three matters are more persuasive of the existence of the Giovanna Loan than Giovanna’s untested denial. However, while not dispositive, in considering her denial I have also taken into account that her denial may be the product of poor memory or a reaction to an inconvenient or embarrassing truth. Either possibility finds some support in Giovanna’s reaction recorded in the Report to being presented with her 2017 Will, which it appears from the Report she had undoubtedly executed.

162. Finally, while absence of financial benefit may not make a contract unjust, non-financial benefit is also relevant in this case. There were two related non-financial benefits for Giovanna to enter into the Transaction and thereby ensure Paola did not lose the restaurant, both apparent from the Report and other uncontroversial evidence:

1. She avoided all of her previous assistance to Paola in relation to the restaurant coming to nothing; and

2. She clearly enjoyed coming to the restaurant and being in “front of house” with customers as a diversion in her retirement.

Independent and competent legal advice

163. I have dealt with Mr Beazley’s evidence at some length (see [100] to [113] above), so can state my factual conclusions concisely. These conclusions are all made taking into account Giovanna’s untested evidence.

164. Despite the difficulties which I have identified with his evidence, having seen him give his evidence and taking into account his communications with HWLE, I am satisfied that he acted for Giovanna in relation to the Transaction. I regard Paola’s text message (see [41] above) as the essential piece of contemporaneous corroboration. I have also taken into account to a limited extent the letter at [26] above, which I accept was signed by Giovanna: limited because in its terms it only relates to the matters giving rise to the Settlement Deed.

165. For reasons I have already given (see [110] above), Mr Beazley was not a solicitor independent of both the lender and the borrower. He had a conflict of interest in acting for both Paola and Giovanna.

166. To find that Mr Beazley did not meet with Giovanna on 26 October 2018 and that he did not witness her signatures in his presence would be very serious findings including that an officer of the Court had lied to the Court. Such findings would require satisfaction on the Briginshaw standard. I am not so satisfied, having seen him give his evidence and taking into account Paola’s text message as independent, contemporaneous corroboration. I would also be slow to make such findings in the absence of Giovanna having been tested on her evidence. In reaching this conclusion I have taken into account the dating of Giovanna’s signed transaction documents, but have accepted that this is likely to have been the product of mistake in the obvious haste of what occurred on 26 October 2018.

167. Having seen him give his evidence and taking into account Paola’s text message, which I find more persuasive than Giovanna’s untested evidence, I am satisfied that Mr Beazley met with Giovanna on 26 October 2018 and witnessed her sign Giovanna’s signed transaction documents. I also accept, not least because it was inherently likely given my finding that he acted for her and because of the declaration (see [46] above), that he gave her some advice about entering into the Transaction. However, in the absence of any written record of that advice, given the views to which I have come about both the reliability of his evidence and his apparent lack of adherence to professional standards, I am unable to make any finding about the nature of that advice or its adequacy.

168. WFM submitted that whatever had happened on 26 October 2018, the Court could take account of whatever advice Mr Beazley gave Giovanna on or about 12 October 2018. Hospital records show Giovanna had dialysis on 11 and 13 October 2018. There are two reasons why I do not accept that submission.

169. First, and again, in the absence of any written record of that advice, given the views to which I have come about both the reliability of Mr Beazley’s evidence and his apparent lack of adherence to professional standards, I am unable to make any finding about the nature of that advice or its adequacy.

170. Second, I accept Mr Kidd SC’s submission that Giovanna’s signed transaction documents differed in a significant respect from those executed on 12 October 2018, a point about which Mr Beazley seemed to be unaware until it was pointed out to him in the witness box. That was that the scope of Giovanna’s liability was expanded under the Transaction to include guaranteeing Bar M’s performance under the 2018 Lease.

WFM’s conduct and knowledge

171. Both Mr Colacicco in his affidavit and Mr Ryan in his cross-examination described their various observations and interactions with Giovanna, including seeing her regularly at the restaurant. Other than acknowledging her age, none of what they described would have put them on notice of any obvious vulnerability or impairment on the part of Giovanna. They had both conversed with her in English (Mr Colacicco also in Italian as their common native language). The Court infers from their descriptions that WFM had no notice of any obvious vulnerability or impairment on the part of Giovanna other than her age (which in and of itself is not a vulnerability or impairment).

172. Next, there was an issue between the parties directed at least in part towards the concept of asset lending. It was submitted for Giovanna that Mr Ryan’s evidence supported a finding that WFM did not care whether the Toppi interests could repay WFM without having to sell the Property. In cross-examination, Mr Ryan was asked whether WFM had undertaken any assessment of the capacity of Bar M to be able to repay the loan. Mr Ryan replied that WFM had not undertaken any such assessment. Mr Ryan was also asked whether he had seen any financial statements or cashflow forecasts of the restaurant business. Mr Ryan replied that he had not seen such documents.

173. WFM submitted that Mr Ryan’s evidence does not support such a finding. In cross-examination, Mr Ryan was asked whether he had any idea whether Bar M would be able to afford to repay the loan. Mr Ryan replied that he did have some idea of whether Bar M would be able to afford to repay the loan. WFM occupied the building next to the restaurant and Mr Ryan could see the restaurant had enough customers to make it work.

174. Consistently with the Court’s view of Mr Ryan as a reliable witness (see [99] above), the Court accepts his evidence that:

1. It was not WFM’s expectation that it was most likely the loan would be repaid by the sale of the Property;

2. While WFM took comfort in having security over the Property, it had confidence in Paola and Giovanna by reason of having observed them operate the restaurant and having regard to Giovanna’s reputation; and

3. WFM hoped it would not have to draw on the Property.

175. WFM’s view of Paola and Giovanna appears from Mr Ryan’s answer as to why WFM would not consent to an assignment of the 2015 Lease to the Bicher entities (T44:2-12):

“… The comparison was Paola Toppi and her - when, when we dealt with Paola Toppi we also, we also knew that Giovanna, her mother, brought a lot of, a lot of customers and, you know, referrals to the Bar Machiavelli business. She, she was very important as in Paola was running the business without a doubt but Giovanna was very active in the business bringing custom to the business. She knew everyone from Machiavelli's in the city and, you know, we - the - so I was comparing Paola, a seasoned operator for many years in Machiavelli, one of the best-known restaurants in Sydney, and her mother behind her and then I was comparing that to someone who had worked for, I think, 18 months to maybe 2 years in the, in the Machiavelli business and previously had run day spas, I think.”

176. Mr Ryan’s evidence, which I accept was (T58:41-T61:8):

“Q. Is this right; to your understanding WFM had not undertaken any assessment of the capacity of Bar M Pty Ltd to be able to service the loan and repay the $1.1 million principal within 12 months?

A. No, you’re right. Sorry, yes, yes.

Q. You agree with what I--

A. I agree, yeah.

Q. You were certainly aware when you entered into this document that Bar M would be liable not only to pay the interest payable under the loan agreement but also to pay the increased rent under the new lease that was entered into at the same time, correct?

A. Yes.

Q. You, as at late October 2018, had no idea whether Bar M would be able to afford to make the interest payments as well as the increased rent payments, correct?

A. Well when you say no idea, we, we occupied the building right next to there. We know the volume of traffic that they were generating through the, through the restaurant. They had changed their strategy to larger functions rather than, rather than solely night of restaurants. They were getting big numbers. Now whether big numbers mean they make a lot of money is, is never the same thing. But they certainly had increased the volume there and we thought, you know, there's every chance that they'll be successful with their, with the way they were moving the, moving the restaurant.

Q. You hadn't seen any financial statements or--

A. No.

Q. --or cashflow forecasts--

A. No.

Q. --of the business?

A. No.

Q. Correct?

A. That's correct.

Q. So far as repayment of the $1.1 million principal within 12 months, do you agree that you had no basis for believing that Bar M would be able to repay that amount, do you agree with that?

A. Not specifically, no.

Q. What did you say, you agree with what I say? Is that what you said?

A. We had no specific information. We had no budgeted cashflows or anything like that, no.

Q. You also had no basis for believing that Bar M would be able to repay $1.1 million in 12 months' time, correct?

A. Not necessarily, no.

Q. Sorry, I'm just trying to understand whether you're agreeing with me or disagreeing?

A. No, no, I'm not agreeing with you on that point entirely. We see what was a thriving restaurant business. They used to, when they went into administration there was a whole range of issues, finance and accounting issues, and cash issues between them and the previous partners. We think if they were run properly, from an administrative point of view, they certainly had the volume of people, and, and traffic to be able to make, make the restaurant work.

HIS HONOUR

Q. Is this a fair summary, you didn't have any financial information but you were relying on the performance of the restaurant as you had seen it before the problems arose?

A. That's correct, yeah, that's correct.

KIDD

Q. What I'm trying to ask you is based upon your observations of the performance of the restaurant, you surely must agree with you that you had no basis for supposing that in 12 months' time there would be $1.1 million available to repay the loan?

A. Well I just said to you I didn't see a formal, formal budgets to prove otherwise, yeah.

Q. Is this right, that your expectation as at October 2018 was that the $1.1 million loan would be repaid in the 12 months, by the 12 monthly payment date by the Potts Point property being sold?

A. Not entirely, no, no. We didn't necessarily guarantee that we would have to draw on that property. We, we were hoping we wouldn't have to.

Q. Your expectation was that the most likely source of funds to repay the $1.1 million loan in 12 months' time would be the sale of the restaurant business?

A. No, not necessarily. We felt comfort in the fact that we had the property to fall back on, though it wasn't our intention to automatically rely on selling the property …

Q. To your understanding, you and the other director of WFM were content to advance the $1.1 million loan because you were comfortable that there was ample equity in the Potts Point property owned by Giovanna to repay the loan?

A. Correct.

Q. It was your expectation that the sale of the Potts Point property would be the likely source of funds to repay the $1.1 million loan, correct?

A. We were prepared to take the risk that it was, yeah.

Q. You agree that that was your expectation, that the $1.1 million would be repaid in all likelihood by the sale of the Potts Point property?

A. No, I think what you asked me before, that I'd be comfortable that there was a sufficient equity to pay the loan if needed.

Q. You were content to advance the loan?

A. Correct.

Q. Because of being comfortable of the ample equity in the Potts Point property, correct?

A. I thought I'd answered this, but yes.”

177. The final issue is WFM’s knowledge concerning Giovanna’s legal representation. As to this the Court finds that WFM must be treated as being fixed with their solicitors’ knowledge that Mr Beazley was acting for Giovanna and Paola and that, as their solicitors ought to have known had they turned their mind to it, Giovanna did not have the benefit of independent legal representation.

Giovanna’s CR Act Claim - Consideration

178. It is convenient to summarise the Court’s essential factual findings relating to the period June to October 2018:

1. Giovanna could speak and understand conversational English well.

2. Giovanna could understand and retain a clear explanation about legal documents, although her understanding would have been enhanced with the use of an Italian interpreter.

3. Giovanna understood that she could take legal advice on matters of importance from her solicitor.

4. Giovanna’s general disposition was to trust and assist Paola.

5. It was Giovanna who asked for Mr Politis’ help, volunteered the Property and later thanked him and Mr Colacicco for advancing the Settlement Sum.

6. Giovanna intended to sell the Property in any event and understood the process of selling.

7. The Property was not Giovanna’s family home and her equity exceeded what would be required to repay WFM’s loan including interest.

8. Even accepting that Dr Reutens had provisionally diagnosed Giovanna with Mild Neurocognitive Disorder, Giovanna has not discharged the onus of satisfying the Court that she did not understand the nature and effect of the Transaction or that she would not have entered into the Transaction if she had.

9. Giovanna understood that the loan from WFM was repayable in 12 months and that its repayment might require the sale of the Property, which she was prepared to do.

10. Giovanna had general business experience as a successful restaurateur and had given mortgages and guarantees.

11. Giovanna owed $100,000 to Bicher & Son Pty Ltd and the Transaction gave her the direct benefit of enabling her to discharge that debt.

12. The Transaction also gave Giovanna the indirect benefits of ensuring her previous assistance to Paola in relation to the restaurant did not come to nothing and enabling Giovanna to continue her “front of house” role which she clearly enjoyed.

13. Mr Beazley acted for Giovanna in relation to the Transaction, witnessed her signing Giovanna’s signed transaction documents and gave her some advice.

14. However, Mr Beazley was not an independent solicitor in the requisite sense.

15. The Court is unable to make a finding as to the nature or adequacy of any advice Mr Beazley gave Giovanna. Insofar as she bore the onus to show she received no, or inadequate advice, Giovanna has not discharged that onus. However, to the extent Giovanna’s untested affidavit evidence cast an evidentiary burden on WFM, it has not satisfied the Court that she was adequately advised.

1. It was not WFM’s expectation that it was most likely the loan would be repaid by the sale of the Property.

2. While WFM took comfort in having security over the Property, it had confidence in Paola and Giovanna by reason of having observed them operate the restaurant and having regard to Giovanna’s reputation.

3. WFM hoped it would not have to draw on the Property.

4. WFM, by its solicitors, ought to have known that Giovanna was not receiving independent advice in relation to the Transaction.

179. It will be clear from the foregoing that Giovanna’s case fails on the facts. Nearly all of the facts urged upon the Court on her behalf as justifying relief under the CR Act have not been made out. Most of the facts which have been established point against such relief being granted.

180. The first step under the CR Act is to consider whether the Transaction was unjust in the circumstances it was made. Taking account of all the matters referred to in [178] above, the Court does not conclude that it was in that sense. The proven feature of this case which could support such a conclusion is that Giovanna did not have independent legal advice and that WFM ought to have known that through its solicitors. I do not think that is sufficient in the context of all the other matters to conclude that the Transaction was unjust in the circumstances in which it was made.

181. However, even if that conclusion is wrong and the Transaction was unjust in the circumstances in which it was made, the Court would not, in the exercise of its discretion, grant any relief. The reasons for this are all of the matters (other than the absence of an independent solicitor and WFM’s imputed knowledge of that) identified in [178] above. To the extent that Mr Beazley failed Giovanna by not recognising his conflict and ensuring she received independent advice, it would be unjust in all the other circumstances I have identified to visit the consequences of that failure on WFM.

182. There is another matter of context which has informed the conclusion which the Court has reached. This was not a transaction involving a bank or other professional lender. The Transaction took place in the context of a pre-existing commercial relationship of landlord and tenant where both sides (WFM on the one part, and Paola and Giovanna on the other) wanted their relationship to continue. Each had their own distinct interests for that to occur. It would be artificial to view the Transaction as a third party mortgage and guarantee simpliciter and ignore that broader commercial context. In my respectful view, looking at what occurred in that way points against both injustice in the circumstances and, if that be wrong, against the Court granting any relief and depriving WFM of the commercial benefit for which it had bargained.

183. There are two other matters which I should note.

184. First, I am not satisfied that what occurred was, in all the circumstances, asset lending of the kind criticised in Khoshaba and Riz, not least because the Property was not Giovanna’s home (that is not to say that a transaction concerning an investment property can never be asset lending). There was no accounting or other evidence that at the time of the Transaction it should have been clear to WFM (and the other parties) that the loan from WFM would not be able to be serviced. The fact that 12 months later it was not repaid is not of itself sufficient to found such an inference.

185. Furthermore, Mr Ryan’s evidence demonstrates that WFM had a rational basis to make the commercial judgment to enter into the 2018 Lease. Unlike a commercial lender, WFM was not lending money in the expectation of a return through the interest charged. It would make no sense for WFM to enter into the 2018 Lease and fund the Settlement Sum if it thought there was no real prospect of Paola, with Giovanna’s matriarchal “front of house” presence, making a success of the restaurant and complying with the 2018 Lease. I do not accept that WFM was indifferent to the serviceability of its loan to Bar M or that it was engaging, or thought itself to be engaging, in a “potentially fruitless enterprise” of the kind referred to by Basten JA in Khoshaba.

186. Second, I have taken into account that by entering into the 2018 Lease and the Transaction, WFM obtained significant, additional commercial benefits compared to the 2015 Lease, including a higher rent to recover its costs of the WFM Lease Proceedings and the benefit of a secured guarantee from Giovanna for not only repayment of the Settlement Amount but also for Bar M’s performance under the 2018 Lease. The latter is not sought to be enforced by WFM in these proceedings. In any event, I do not consider any of those matters to be more than a reflection of the parties’ respective commercial bargaining positions and not, of themselves, indicia of unjust or unconscientious conduct by WFM.

187. I will next briefly consider Giovanna’s other claims.

Giovanna’s ASIC Act Claim

188. Giovanna relies on these provisions of the ASIC Act:

“12CA    Unconscionable conduct within the meaning of the unwritten law of the States and Territories

(1)   A person must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

(2)   This section does not apply to conduct that is prohibited by section 12CB.

12CB    Unconscionable conduct in connection with financial services

(1)     A person must not, in trade or commerce, in connection with:

(a)     the supply or possible supply of financial services to a person; or

(b)     the acquisition or possible acquisition of financial services from a person;

engage in conduct that is, in all the circumstances, unconscionable.

(2)     This section does not apply to conduct that is engaged in only because the person engaging in the conduct:

(a)     institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or

(b)     refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.

(3)     For the purpose of determining whether a person has contravened subsection (1):

(a)    the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and

(b)    the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

(4)  It is the intention of the Parliament that:

(a)     this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and

(b)    this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c)     in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:

(i)     the terms of the contract; and

(ii)     the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract.

…

12GM    Other Orders

…

(2)    Without limiting the generality of section 12GD or 12GNB, the Court may, on the application of:

(a)    a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division; or

(b)    ASIC in accordance with subsection (3) on behalf of such a person or persons;

make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (7)) if the Court considers that the order or orders concerned will:

(c)    compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage; or

(d)    prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person or persons.”

189. Allsop P (as his Honour then was) set out principles applicable to ASIC Act claims in Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O’Donnell [2011] NSWCA 389, (Bathurst CJ and JC Campbell JA agreeing) which I respectfully adopt:

“[291] Aspects of the content of the word "unconscionable" include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably: Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at 583 [121]; the conduct must be irreconcilable with what is right or reasonable: Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at 140 [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; 117 FCR 301 at 316-317 [44]; Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262; factors similar to those that are relevant to the CRA are relevant: Spina v Permanent Custodians Ltd [2009] NSWCA 206 at [124]; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity: National Exchange at 140 [30]; the statutory provisions focus on the conduct of the person said to have acted unconscionably: National Exchange at 143 [44]. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances.”

190. It will be apparent from the Court’s findings in [178] above that there is no basis for finding – and the Court does not find – the kind of “high level of moral obloquy” on the part of WFM of the kind his Honour identifies. This claim also fails.

Giovanna’s unconscionability claim under the general law

191. Keifel CJ, Bell, Gageler, Keane and Edelman JJ in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 set out the principles applicable to an unconscionability claim as follows:

“[38]    A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage "which seriously affects the ability of the innocent party to make a judgment as to [the innocent party's] own best interests". The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring "victimisation", "unconscientious conduct", or "exploitation". Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.”

192. Again, it will be apparent from the Court’s findings in [178] above that Giovanna has failed to demonstrate a “special disadvantage” or any “unconscientious taking advantage”. This claim also fails.

Conclusion

193. WFM is entitled to judgment on its claim against Giovanna’s estate. Giovanna’s cross-claim will be dismissed. Giovanna’s estate is to pay WFM’s costs of the proceedings.

194. The parties will be given an opportunity to bring in short minutes to give effect to these reasons, including quantifying WFM’s claim up to date. If these are agreed, the orders will be made in chambers. Otherwise, on a date to be fixed the Court will hear any special costs applications or resolve any other matter in relation to the final orders on which the parties are unable to agree.

Decision last updated: 04 November 2022