IN THE COUNTY COURT OF VICTORIA
AT Melbourne
COMMERCIAL DIVISION	Revised
Not Restricted
Suitable for Publication	
General List
Case No. CI-18-04868

MAYART PTY LTD (ACN 007 001 176) AS TRUSTEE FOR THE MAYART PROPERTY TRUST
and
OTHERS	Plaintiffs	
		
v		
		
PHILIPPA CHRISTINE KNIGHT
and
OTHERS	Defendants	

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JUDGE:	HIS HONOUR JUDGE MACNAMARA 	
WHERE HELD:	Melbourne	
DATE OF HEARING:	17 – 24 November 2020	
DATE OF JUDGMENT:	8 December 2020	
CASE MAY BE CITED AS:	Mayart Pty Ltd & Ors v Knight & Ors	
MEDIUM NEUTRAL CITATION:	[2020] VCC 1929		

REASONS FOR JUDGMENT
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Subject:	Claim under guarantee for repayment of moneys lent
Catchwords:	Loan agreement and guarantee; loan moneys repayable either by repayment of principal or appropriation of loan moneys to payment of price under apartment sale agreements on completion of building and registration of residential unit subdivision; borrower mortgagee of freehold development site; freehold mortgagee taking possession of development site and refusing to allow completion of apartment sales; whether borrower and guarantor remain liable under loan agreements; whether guarantor’s liability conditional on lender’s providing building agreement and builder’s executing it.
Legislation Cited:	Transfer of Land Act 1958; Sale of Land Act 1962 s32; Property Law Act s134
Cases Cited:	Mayart Pty Ltd & Ors v Knight & Ors [2019] VCC 1369; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Ankar Pty Ltd v National Westminster Finance (Australia) Limited (1987) 162 CLR 549; Fitzgerald v Masters (1956) 95 CLR 420; Cedar Meats (Aust) Pty Ltd v 5 Star Lamb Pty Ltd (2014) 45 VR 79; David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 93 ALR 271
Judgment:	1.  Within 14 days of the date of these reasons the parties to bring in short minutes to give effect to them.  2. Costs reserved.

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiffs	Dr M Wolff	Noble Lawyers	
			
For the Defendants	Mr M Knight (in person)		

HIS HONOUR:

Background
1	Mr Knight, the first defendant, is at present undertaking postgraduate studies in Construction Law at the University of Melbourne. (Transcript (“T”) 456, Line (“L”) 23–30)  In 1990, he married his recently divorced wife, Mrs Philippa Knight, the third defendant. (T293, L18‑20)  In the 19 years from 1990 to 2009, she and Mr Knight resided in and bought and sold a succession of houses in the more sought-after suburbs in Metropolitan Melbourne and its environs, including Richmond, Hawthorn, Hampton, Brighton, Sorrento and Mt Eliza.  She agreed that her name was “on the title to [each] of those properties”. (T290, L30–T291, L24; T292, L8‑10)
2	On 16 April 2009, Mrs Knight became the sole registered proprietor of a property at 39 Parkers Road, Parkdale.  This represented a departure for the Knights because all previous houses had been bought by them as residences.  Parkers Road was acquired from the start as a development site.  They would live there for 12 to 18 months maximum, during which time necessary planning approvals and other preparatory work would be undertaken. (T294, L4–10)
3	Mr Knight said that he held the degree of Bachelor of Business in Property and was qualified as a property valuer.  He arranged for the preparation of plans for a 12‑apartment development on the Parkers Road property and a planning permit issued “around 2012”.  He adopted:
“…a structured-type financing. We have multilevel – what we call the capital structure, meaning all the money needed to take it from a house that needs to be knocked down to a beautiful finished 12 apartments … It’s not unusual to have multilayers of a first mortgagee or a second mortgagee, et cetera.” (T55, L27–T56, L13) 
4	The builder appointed to carry out the works was J G King Projects Pty Ltd and Mrs Knight entered into a contract with that company accordingly. (T56, L22–26)  A registered search statement under the Transfer of Land Act, printed as at 15 September 2014, showed some three registered mortgages – the first to a company known as Direct One Management Pty Ltd, the second to a company Residential Villages (Aust) Pty Ltd, and the third to Apiang Woong.  Caveat No AK390873X was lodged by Mathieson Nominees Pty Ltd relative to an unregistered mortgage, and South East Water Corporation lodged a caveat on 14 July 2014 based on a statutory charge arising under the Water Act 1989. (Court Book (“CB”) 396)
5	For reasons not fully explained in evidence, the Knights and J G King fell into dispute.  Mr Knight said that whilst the builder had been paid on some four of its invoices, it claimed a right to payment of some $491,000, which remained unpaid.  The builder sued Mrs Knight, who consented to a judgment for that amount to be paid in 30 days. (T58, L26–T59, L2)  The judgment remained unsatisfied, and by August 2014 Mrs Knight had been served with a bankruptcy notice.  J G King presented a bankruptcy creditor’s petition, the hearing of which had been adjourned a number of times.  It became essential to raise money to settle the bankruptcy proceeding in the Federal Circuit Court, failing which the Knights would lose control of 39 Parkers Road and the development.  (T59A)  To meet this emergency, Mr Knight made contact with Mr Robert Cleary, whom Mr Knight described as a “broker”.  According to Mr Cleary, Mr Knight asked him:
“whether [he] had clients/contacts who would be interested in buying one or two apartments in a project in Parkers Road, Parkdale at a discounted price.  Knight advised that his wife was in severe financial difficulty with the builder of the project owing some 500K plus and the builder had commenced court proceedings against his wife which would likely result in her being declared bankrupt.” (T408, L11–18) 
6	Mr Lincoln Daley, one of the plaintiffs, said that he was acquainted with Mr Cleary as being “a person who arranges finance for developers”.  He said he had known Mr Cleary for some time before August 2014. (Exhibit C, paragraph 5)  Mr Cleary introduced Mr Daley to Mr Knight, having told Daley that “he had an opportunity for two off-market apartments at a discount, but [it] has to be paid now so that the old builder can be made to p… off.” (ibid, paragraph 6)   According to Mr Daley, Mr Knight said that he was speaking on behalf of Mrs Knight, who was unavailable.  Mr Daley described their discussions as follows:
“In a nutshell, Michael [Knight] approached me with a proposal to buy two apartments in the Parkers Road project because the owners and financiers needed someone to pay out the original builder.” (ibid, paragraph 8) 
He said the apartments in question were Nos 10 and 11.  According to Mr Daley, Mr Knight told him:
“The sale is to prop up the funding already in place to pay out the original builder.  The lenders have told me that I needed to source it through sales as they didn’t want to put any more money in.” (ibid, paragraph 12) 
He said Mr Knight told him that the sale was intended to get Mrs Knight:
“…out of trouble with the original builder while not further exposing the lenders on the project, hence the discount, and the money for these apartments was going to the original builder to pay them out.” (ibid, paragraph 13) 
7	Mr Daley described himself as “an experienced builder” who had “spent [his] entire adult life around real estate developments”. (ibid, paragraph 14)   Therefore, said Mr Daley, he was aware that it was necessary for all interested parties, including in particular the two lenders, Direct One and RVA, to agree to the discounted sales.  He said Mr Knight assured him that this was the case because the only alternative was allowing Mrs Knight to go bankrupt, “which would have resulted in a firesale of the property and the destruction of their security.” (ibid, paragraphs 14‑17)   Mr Daley said that, as regards the principal of RVA, Mr Knight told him:
“Mate, he runs that show.  He even has power of attorney over us.  We can’t do anything without his say-so.  And I asked him point blank and he said, yes, if that’s the only way to fix this, then yes, he can have the apartments.” (ibid, paragraph 20) 
8	Mr Daley said that he agreed to have his company’s family trust purchase Apartment 11 as part of the money-raising process.  He had discussions with his father-in-law, Mr Cox, whose family trustee company, Mayart Pty Ltd, the first plaintiff, would purchase Apartment 10. (ibid, paragraphs 23 and 24)
9	In pursuance of these arrangements, a number of documents were executed.  Mr Knight said that preparation of sale contracts for the apartments was delayed because in 2014 it was not possible to obtain rate and planning certificates with immediate turnaround “online”.  A firm known as Fernandez & Johnson of Box Hill was commissioned to draw the relevant contracts.  At that time, according to Mr Knight, “it was not uncommon for a period of 10 days to 14 days to elapse whilst these certificates [were obtained].” (T442, L17−18)   Mr Knight said that he “was constantly phoning them to ascertain the likely timing of the delivery of the contract[s] of sale and they continued to advise me that they were awaiting delivery or provision of the relevant certificates to satisfy s32 [of the Sale of Land Act 1962].” (T442, L13−29)   As a result of this delay, according to Mr Knight:
“In the absence of a contract of sale – of all the necessary documents to complete the purchase of the apartments and to consummate the deal as it had been agreed, ... I asked Mrs Knight whether she would like me to speak to [Macpherson & Kelley Lawyers] and have a loan agreement prepared to ensure that the funds were available for satisfaction of the judgment debt prior to the return date of … the creditor’s petition in the Federal [Circuit] Court.” (T443, L18‑27) 
Mr Knight continued:
“I don’t recall a conversation with Mr Daley, but it would be obvious to me that Mr Cox and Mr Daley and their respective co‑directors and partners agreed that the way forward was for a loan agreement to be executed.” (T443, L28–T444, L1) 
10	Two agreements were executed dated 18 August 2014, both of which were prepared by the firm Macpherson & Kelley, also referred to as M+K Lawyers.  The front sheet of both designated them as “Loan Agreement”, with the identity of the “lender” blank in one case and in the other case shown as “Mayart Pty Ltd ACN 007 001 176”. (CB 147 and 161)  On the first operative page in the first of the agreements, the lenders are shown as “Lincoln and Leanne Daley/​Dalle Projects”.  The execution clause (CB 159) has the document purportedly executed by Mrs Knight as borrower, Mr and Mrs Daley as lender, and Mr Knight as guarantor.  Determining the operative terms of the agreement is complex.  It requires reference to definitions at a number of levels and also to the Schedule (CB 160).  According to the Schedule, the loan in the first case was $225,000.  The interest rate was shown as “0.0 % per annum on the basis that the Borrower shall not be in default” .  The security was shown as “Nil”, and the loan term was stated:
“From the Commencement Date ending on the earlier of:
 (a)	date on which settlement of the Contract of Sale is effected;
 (b)	fourteen (14) days after any valid rescission of the Contract of Sale; and
 (c)	twenty four (24) months after the Commencement Date”. 
11	The purpose of the loan was stated to be “To assist in the discharge of existing debts in relation to the Property and develop the Property”.   The word “Property” was defined to mean the land at 39 Parkers Road, Parkdale. (CB 150)  Clause 2 under the heading “Loan” provided inter alia:
“2.1	The Loan is made by the Lender to the Borrower on the following terms:–
(a)	the Borrower must give the Lender any documents the Lender requires which may be relevant to the Loan or the Security;
(b)	the Lender must provide the Building Contract to Dalle Projects Pty Ltd (ACN 147 573 948) (“the Builder”) within fourteen (14) days of this Agreement, noting that the Builder has agreed to execute and return within twenty-one (21) days of this Agreement the Building Contract; and
(c)	the Borrower must enter into a Contract of Sale for the Apartment concurrently with this Loan.” 
12	Clause 5 of the agreement was headed “Repayment of the Loan”, and provided:
“5.1	The Borrower must repay all of the Loan and Interest outstanding to the Lender in clear funds on or before the Due Date.
 5.2	The Borrower must make any repayment of the Loan by bank cheque, direct deposit or in such other manner reasonably requested by the Lender (for example repayment anticipated pursuant to Settlement in accordance with clause 5.3 below), from time to time.
 5.3	For the purposes of repayment of the Loan as specified in clause 5.1 above, and upon the Borrower as vendor and the Lender as Purchaser entering into a legally binding Contract of Sale for the consideration as defined therein, the Loan is deemed to have been repaid upon Settlement.  The Lender acknowledges that any amounts in addition to the Purchase Price that are owing from the Lender (as purchaser) to the Borrower (as vendor) pursuant to the Contract of Sale must be paid by the Lender (as purchaser) to the Borrower (as vendor) at Settlement”. (CB 152) 
13	The expression “Contract of Sale” was defined to mean “the contract of sale for the Apartment between the Borrower as vendor and Lender as purchaser”.   “Apartment” was defined to mean “Lot 11”. (CB 149) 
14	Clause 7 was a fairly standard loan agreement default clause providing that all moneys would become due and securities would be enforceable at the option of the lender:
“… upon the happening of any one of the following events without the necessity for any notice or demand by the Lender and notwithstanding any delay or previous waiver by the Lender of the right to exercise such option.” 
15	There then followed a number of paragraphs (a) to (e), the most material one being:
“(a)	if the Borrower defaults in the due and punctual payment of the Loan or Interest and such default is not remedied within seven (7) days of receipt of a written notice of default;” 
16	The agreement contained no less than two “entire agreement” clauses to the effect that it represented the entire agreement between the parties and there was no other agreement, understanding et cetera.  Further, clause 14.2 provided that the Lender’s rights under the agreement were in addition to and were not affected by “any mortgage or other security now or subsequently held by the Lender for repayment of the amount of the Loan”. 
17	According to the schedule to the second loan agreement under which Mayart, the first plaintiff, was shown as lender, the amount of the loan was $400,000.  The provisions were otherwise to the same effect, save that the reference to the Building Contract was to be found at clause 2.5 in the following terms:
“2.5	The parties acknowledge that the Lender will provide the Building Contract to Dalle Projects Pty Ltd (ACN 147 573 948) (“the Builder”) for execution by the Builder”. 
18	The provisions seemed otherwise to be identical.
19	Also executed were Contracts of Sale prepared by Fernandez & Johnson for Unit 11, showing Mr and Mrs Daley as purchasers, and for Unit 10, showing Mayart as trustee for the Mayart Property Trust as the purchaser. (CB 189 and 294)  When these transactions were being undertaken and documented, the Cox family, according to Mrs Cox, “were on holidays in Queensland, we were in Mt Isa with a Rotary group raising money for the Flying Doctors Service”. (T401, L22–24)   The agreements were executed on behalf of Mayart by its solicitor, Mr Arnheim, as agent.  According to Mr Cox, the contract of sale was executed on behalf of his company on 20 August 2014. (Exhibit “D”, paragraph 11)
20	The contract of sale for Lot 11 is shown as having been signed on behalf of Mrs Knight and the Daleys on 18 August 2014.
21	The contract of sale for Unit 11 showing a price for the unit of $225,000, disclosed a deposit of nil and described the $225,000 as “paid in full”. (CB 192)  The $400,000 price for Unit 10 was similarly described. (CB 297)
22	As to the Building Agreement referred to in both loan agreements and referred to in clause 2.1(b) of the agreement between Mr and Mrs Daley and Mrs Knight, Mr Knight said no such agreement was ever provided. (T527, L22‑24)  As will appear, Mr Knight as the third defendant, relied upon this alleged contravention of the terms of the loan agreements as a vital part of his defence to the plaintiffs’ claims against him – perhaps as the centrepiece.  It will be necessary to make a finding as to whether, as Mr Knight alleged, no such building agreement was provided or, as the plaintiffs contended, it was provided but its implementation was frustrated (not necessarily in the legal sense) by actions taken by registered mortgagee RVA.  The plaintiffs produced a construction contract for 39 Parkers Road, Parkdale naming Mrs Knight as principal and Dalle Projects Pty Ltd as the contractor. (Exhibit M)  The title and preliminary pages and the execution clause were put into evidence as Exhibit M and the “bulk” of the contract was displayed by Dr Wolff but not tendered.  Exhibit M shows the agreement execution page with execution dated 18 September 2014 on behalf of Dalle Projects by Mr Daley as director.  Exhibit L was what purported to be a copy of an email from Mr Daley to Mr Knight on 18 September 2014 where Mr Daley said, “Please see attached the contract docs for Parkers Road project signed by myself in preparation of Phillipa [Mrs Knight] also signing the docs.”  Also relied on by the plaintiffs in this regard was an email exchange between Mr Daley and Mr Alex McKellar of M+K Lawyers dated 2 September, where Mr McKellar inquired as to the whereabouts of the contract.  Mr Knight said that these documents were a fraud and forgery. (T542, L31 to T543, L7)  It will be necessary later to make findings as to the genuineness or otherwise of these documents.
23	The Macpherson Kelley trust account ledger discloses receipt into trust on File 24101 entitled “Philippa Knight re Bankruptcy Proceeding” of the amounts referred to as loan moneys in two loan agreements and payment out of some $491,929.17 described as “Payment of satisfaction of bankruptcy notice”.  There is also a record of the payment of some $21,000 to “Buxton Real Estate Trust Account” described as “Release of loan funds to M Knight.”  This amount was the payment of arrears of rent on the Knights’ then family home. (T469-70)
24	Fifty thousand dollars was paid to Mr Cleary as his brokerage fee described in the trust ledger as “Release of funds for purposes of development” and “Costs and disbursements Michael Knight”.  (CB 573)
25	As previously noted, the original mortgage structure for the Parkers Road development was that the first mortgage was held by a company known as Direct One Management Pty Ltd with Residential Villages (Aust) Pty Ltd (RVA) holding the second mortgage.  A transfer of the first mortgage to RVA was lodged for registration on 22 July 2015 as dealing AM049906Y (CB 399) with the effect that on that date RVA held the overriding freehold mortgage rights over the development site.  Prior to that, in October 2015, RVA had attempted to sell the partially completed development by auction.  (T655-6)  In addition, despite whatever rights RVA might have had or be asserting the second half of 2014 (perhaps as a mortgagee in possession, though its entitlement in that regard was, as will be seen, repeatedly challenged by Mr Knight) an attempt to have another builder step in and pick up the running from J G King was fraught with difficulty because, whilst the planning permit “ran with the land” other vital items such as architectural and engineering drawings belonged to Mrs Knight. (T657)  Dr Wolff said that a sale was apparently entered into at or following the RVA auction but the purchaser failed to complete the contract.  These events had the effect that “nobody could continue building because on what basis would they do that?”  (T709, L22-28)  Mr Sheppard, the principal of RVA, said he had placed notices that his company was mortgagee in possession, but Mr Daley said that as at 30 September 2014 he had seen no such notices.  (CB 832, paragraph 29)  Mr Daley said, “Early in the new year of 2015 I found out that the sale to Maxtra [the purchaser at the October 2014 auction] had fallen through and RVA had subsequently kept their deposit and were back in the market to find someone to either sell the project to or complete it themselves.” (CB 834 paragraph 39)  Mr Daley said that he then spoke to Mr Knight by telephone who told him that, “He was working with Rex Sheppard again to finalise an agreement whereby Rex Sheppard would fund the rest of the build allowing everyone to see their investments back and move on.”  Again, according to Mr Daley, in approximately May he was contacted by Mr Knight inquiring if he [presumably Dalle Projects] “Would still be interested in doing the build on the same conditions as prior and reminding me that this was the best outcome to ensure the quality of the build for my own purchase.” (CB 834, paragraph 41)  Mr Daley says he “signed a new contract with the land owner [presumably Mrs Knight] and also signed a joint agreement between my company, the land owner and RVA as the lender.”  Shortly afterwards, Mr Daley said, Mr Sheppard told him it was necessary for his company to sign a new contract with RVA “as the land owner.” (CB 835, paragraphs 43 and 44)  Mr Sheppard told him that unless Dalle signed the new contract, “the project will never start and you’ll never see your apartments”.  Mr Daley said he spoke to Mr Knight who said, “Do whatever he wants, let’s just get this thing built.” (ibid paragraph 44, 46 and 47).
26	This contract appears at CB 400 to 498.  It is not dated.  However, the date 4 November 2015 appears next to some of the initials and presumably that represents its date.  As time went on, according to Mr Daley, he “was consistently reassured by Mr Knight that everything was fine and he would have everything sorted out, that the project would proceed and that our investment was sound, everything was fine.” (T325, L25-28)  Mr Daley said he passed on those assurances to the Coxes. (T326, L24-26)  Mr Knight did not deny having given such assurances.  Mr Daley accepted those assurances until 2018 (T327, L3-4), “… but in 2018 it became obvious that there was a problem at that point. That’s when we decided to take action. But prior to that our understanding was that, you know – well what we believed through advice from Mr Knight was that the lender was acting illegally and that he [Mr Knight] had control of the project behind the scenes and that everything would be fine in the end.” (ibid L5-12)   I asked Mr Daley how he could accept assurances that Mr Knight was in control and at the same time sign a contract with RVA, presumably on the footing that RVA was in possession and in control of the project.  Mr Daley replied:
“When Residential Villages Australia contacted me and instructed me that they wanted me to do the build, but I would need to sign a building contract with them, I advised RVA that they weren’t the land owners, my understanding was that, in my words, at the time that Mr Knight was the land owner and that I needed to sign a building contract with him.  I then contacted Mr Knight and asked him what really he thought the best move forward should be, what I should do, and he said go ahead and sign a contract with RVA if that’s what they want, if it will get the job moving.” (T427, L24 – T328, L3)   
27	Mr Daley continued:
“In discussions with Rex Shepherd [scil Sheppard] from RVA, during the course of the project I had raised on multiple occasions that we had loaned Michael Knight a sum of money and that two of the apartments were the settlement of that loan and during the course of the project he had maintained that pending the outcome of the final sales, that that should be fine.  As the project progressed the scope was changed and increased by the (indistinct), additional works had to be done, remedial works had to be done that were done incorrectly by the previous builder, the price went up, and at that point is when he said, mate, you’re not going to see your apartments, you’re going to need to go after Michael Knight.”  (T328, L12-25)  
28	This occurred in the period February to April 2018. (ibid L26-27).  On 20 September 2018, Mr and Mrs Daley received a document styled Termination/Rescission Notice which purported to cancel their contract to purchase Unit 11 based on the “sunset” clause in the contract which entitled either party, in the event of completion of the building and registration of the plan of strata subdivision not being registered within a stipulated time, to cancel the contract.  This notice was given in the name of Mrs Knight but by Mr Sheppard as her attorney and as a director of RVA as mortgagee in possession. (CB 521)  Presumably, a similar notice was given to Mayart relative to Unit 10.
29	The plaintiffs then commenced this proceeding.
This proceeding
30	This proceeding has a complex procedural history.  Many of the procedural “in and outs” are of no current significance.  It is necessary, however, to say something of the complex history to understand how the evolving dispute which has now come on for trial reached the present point.
31	This proceeding was commenced by writ filed in court on 31 October 2018.  The plaintiffs were Mayart as Trustee for the Mayart Property Trust and Mr and Mrs Daley.  The defendants were Mrs Knight, RVA and Mr Knight.  The prayer for relief extended over no fewer than three pages seeking a series of declarations, orders for the recovery of money had and received, damages, injunctions, declarations of constructive trusts, declarations of equitable liens and orders for accounts of profits.  By order made 30 August 2019, Judge Woodward gave the plaintiffs leave to add as a fourth plaintiff Dalle Australia Pty Ltd as Trustee of the Daley Family Trust.
32	In broad terms, the writ sought relief against Mrs Knight for having failed to make title under the relevant apartment sale agreements.  As against RVA, the plaintiffs sought orders requiring RVA to give clear title to the apartment together with relief by way of lien and constructive trust.  Relief was sought restraining RVA from selling the apartments to any other party.
33	Judge Woodward granted an application by RVA for a summary dismissal of the claim against it pursuant to ss62 and 63 of the Civil Procedure Act 2010. ([2019] VCC 1369)
34	On 23 October 2020 – that is, the week before the date fixed for the trial of the proceeding – a debtor’s petition in bankruptcy was accepted by the Official Receiver, with the result that Mrs Knight became bankrupt.  A report by the trustee, Mr Miskiewicz, disclosed only one unsecured debt liability: the $625,000 sought by the plaintiffs in this proceeding.  Mrs Knight told me that she filed her debtor’s petition in bankruptcy as a defence to this proceeding. (T278, L29–T279, L1)  She continued:
“Your Honour, I felt completely with no other alternative and I felt like I had tried to communicate my position as best as I could very clearly to the plaintiffs ...” (T279, L17–19) 
35	As a result, this proceeding now goes on against Mr Michael Knight, the third defendant, alone.  The claim is for the payment of moneys alleged to be due by him as guarantor of his former wife’s obligations under the two loan agreements.  All the more arcane causes of action, prayers for relief, including injunctions, declarations, accounts of profits, declarations of liens, and constructive trusts, etc, have fallen away; but at least one complication remains.  Dr Wolff, on behalf of the plaintiffs, opened a case based entirely on the two loan agreements, which, as Dr Wolff interpreted them, evidenced obligations owed in the one case to Mr and Mrs Daley, and in the other case to Mayart.  The role of the fourth plaintiff which, it will be recalled, was added by order of the court at a relatively late stage, remained unexplained.  The mystery deepens when one considers that at the outset of the trial, and as part of the same opening statement in which Dr Wolff narrowed the scope of his clients’ claim, he sought an amendment to one of the paragraphs of the prayer for relief so as to add a reference to the “fourth plaintiff”.
The Statement of Claim
36	The version of the plaintiffs’ Statement of Claim on which the trial proceeded is designated “Further Further Amended Statement of Claim (amended by consent on 17 November 2020)”.  References to the Statement of Claim, in the absence of any statement to the contrary, are to this document.
37	Despite the date which it bears, the elaborate pleadings formulating the now dismissed claim against RBA remain, as do the elaborate pleadings as against Mrs Knight, including claims for mistake etc.
38	Aside from allegations as to incorporation, identification of references to properties, and the Parkers Road development, the first material allegation appears at paragraph 40, under the heading “The First Plaintiff’s Loan Agreement”.  That paragraph refers to the loan agreement dated 18 August  2014, between Mayart and Mrs Knight as borrower, and Mr Knight as guarantor, as having been entered into by Mayart “as nominee or transferee of the Fourth Plaintiff”.  This loan agreement is said to be in writing.
39	Paragraph 41 says that “On or about 18 August 2014, the Fourth Plaintiff nominated [Mayart] as lender in its place” under the first loan agreement “which nomination was accepted, alternatively hereby nominates [Mayart] as the lender ... which nomination [Mayart] hereby acknowledges and accepts.” 
40	Paragraph 42 includes an allegation in the alternative that the fourth plaintiff, viz Dalle Australia Pty Ltd as trustee for the Daley Family Trust, transferred or “hereby transfers” the benefit of the loan agreement to Mayart.  Despite seeking and obtaining leave to amend the prayer for relief in the course of his opening statement, Dr Wolff presented the plaintiffs’ case entirely according to the two loan agreements as they appear on their face, without reference to the fourth plaintiff or any transfer at all.
41	This seemed to me to be an appropriate mode of proceeding, so far as I could apprehend the evidence which was to be given and which was ultimately given.  A transfer assignment or nomination would, as I understand the law, presuppose the existence, before the alleged nomination, transfer, or assignment, of some bundle of rights which could be, in the case of an assignment or transfer, made over from one natural or legal person to another, or an existing bundle of rights which could be made over in favour of some party other than their initial holder by the exercise of a power of nomination by an identified party, presumably such power being of the same character as a power of appointment under a trustee.
42	The evidence which was placed before the court indicated to me that the documents sued upon were the source of all relevant rights and obligations, whatever they might be.  They did not purport to act upon, dispose of, or otherwise modify any pre-existing contractual rights.  This was the basis upon which the trial was conducted.  Accordingly, I propose disregarding the references in the Statement of Claim to nomination and assignment.
43	From there, the Statement of Claim alleged a failure on the part of Mrs Knight as borrower and Mr Knight as guarantor to repay the loans made under the two loan agreements, followed by a claim as against Mr Knight as guarantor for default interest at the rate specified in the loan agreements.  Ultimately, these were the only operative provisions of the 81‑paragraph document which call for consideration in the court’s determination.
Defence
44	The situation as to Mr Knight’s Defence was somewhat perplexing.  The operative document seemed to be a document styled “Administratively Amended Defence of Michael Scott Knight to the Plaintiffs (sic) Further Amended Statement of Claim”.  The date on this document was 26 October 2020, but the document ultimately placed before me had been further amended but not re‑dated.  I added a manuscript date of “18 November” 2020 to it.
45	The background to this document was somewhat fraught.  It was provided pursuant to a self-executing order made by a judicial registrar.  On the Friday before the Monday on which the trial was scheduled to commence, the plaintiffs brought on a summons seeking a determination that, in the events which had occurred, the self-executing order had executed.  They said that the document provided in purported compliance with the judicial registrar’s order was late, and as a matter of substance not in compliance with the order.  It was contended that the amendments which might be made to the pre-existing Defence by Mr Knight were confined to the secretarial exercise of renumbering the paragraphs.  I accepted that the document was late, and that as a result the self-executing order had indeed executed.  Nevertheless, I extended the time for compliance to enable the document which Mr Knight ultimately placed before me, and which I have described above, to serve as his Defence.
46	Dr Wolff desired to commence his presentation at trial with a raft of attacks on this document, contending that matters raised therein should be struck out or dismissed because in some cases they were said to be misconceived; in other cases they were said to have been the subject of amendment applications already which had been rejected by Judge Cosgrave in the course of interlocutory proceedings.  Other objections again were raised.  Ultimately, I persuaded Dr Wolff to defer pressing this multitude of matters to enable the trial to go into evidence.  The commencement of the trial was put back one day, so that the first day was the Tuesday of the following week rather than the scheduled Monday.
47	Mr Knight’s position seemed to evolve in the course of trial.  He raised a number of matters in his opening statement which were not entirely reflective of the “Administratively Amended Defence”.  In the evidence which he ultimately gave, and the closing statement which he delivered at the end of the trial, another somewhat different set of defences was raised.
48	In the circumstances, I propose to seek to deal first with the defences which he enunciated in the course of trial regarding his closing statement as representing the final and definitive evolution of his case, deferring consideration of the matters in the Administratively Amended Defence to a later point in my reasons.
49	I felt it appropriate to extend this degree of latitude to Mr Knight as a self-represented litigant, despite the fact that he said he holds the degree of Bachelor of Laws with First Class Honours, together with a Bachelor degree of Business and Property, and is at present studying for a Master’s Degree in Construction Law at the University of Melbourne.
Plaintiffs’ basic case
50	Dr Wolff contended in his closing submissions that each element of the plaintiffs’ primary case has been made out.  Mr Knight admitted signing the two loan agreements as borrower. (T13)  Mrs Knight did not distinctly admit signing.  Asked about documents relative to the development at 39 Parkers Road, she said:
“I had nothing to do, Mr Wolff, with the financing of the property, so Michael Knight arranged and coordinated all the financing to do with all our properties (indistinct), so for me I had nothing to do with it and I was unaware who specifically it was that the finance was arranged with or the terms under which the finance was arranged.” (T252, L26–T253, L1) 
51	She said she made no official appointment of Mr Knight as her agent in transactions such as this:
“[H]e was my husband at the time so I wouldn’t have assumed I would have to do that when you’re in a marriage and your husband is a property developer.” (T272, L18–20) 
52	She did not remember signing one of the loan agreements (T274, L10), but said:
“I remember there would often be a stack of documents with tabs where to sign things.” (ibid, L15–16) 
53	The upshot is that, at least before their estrangement, Mrs Knight said that she was prepared to sign whatever documents Mr Knight, in his role as property developer, asked her to sign.  No doubt this has changed since their estrangement and divorce, but as at August 2014, with Mrs Knight ready to sign whatever documents were put before her by Mr Knight, and, as it turned out, having a separate and pressing personal reason to enter into these transactions, namely to stave off personal bankruptcy, it is appropriate to infer that she signed the loan agreements as borrower.
54	Mr Daley and Mr Cox said that they signed as lenders.  Mr Knight said on a number of occasions that the Mayart loan agreement was not executed on behalf of Mayart at all.  It will be recalled that the signature on behalf of Mayart was made by its solicitor, Mr Arnheim, as agent.  Section 126 of the Corporations Act recognises the power of corporations to enter into contracts and execute documents via their agent.  The directors of Mayart gave evidence, the tenor of which was that these agreements were entered into with their authority and on behalf of Mayart.  I therefore regard the execution of the Mayart loan agreement by the lender as having been established.
55	Mr Knight contended that the plaintiff in this proceeding is Mayart in its trustee capacity.  He observed that, according to company searches and the concession by director Mr Cox, Mayart was incorporated in 1988.  Its trust deed showed that the relevant trust commenced in 1990.  He said it should be inferred, therefore, that Mayart had a non-trustee capacity, and this was the capacity in which it entered into the relevant loan agreement.  In this proceeding it sued as trustee.
56	This contention seems to treat a trustee acting in its capacity as such on the one hand, and acting in its personal capacity on the other hand, as being separate persons.  This is not correct.  Trustees, when acting as such, become liable on the contracts which they make in their personal capacities, save where some special clause exempts or limits their liability, and by necessary extension are entitled to enforce contracts, subject to an obligation to observe the terms of the trust.
57	Again, whether a contract is made by a trustee in its trustee capacity is a matter of fact which may be established by evidence other than a clause in the relevant contract stating that the contract is made in the trustee capacity.  To take a homely example, a proprietary company which carries on a retail business is not to be taken as contracting in its personal capacity to the exclusion of any trustee capacity where it deals with a retail customer and issues a tax invoice which fails to note the fact that it acts as trustee of a unit trust in conducting the business.  That the contract is a contract made in the trustee capacity may be established by proof, (a) that it was entered into in the course of the retail business, and (b) that the retail business was undertaken in performance of trustee obligations and that the business was a trust asset.
58	The contract of sale for Lot 10 was executed on the express basis that Mayart contracted as trustee of the Mayart Property Trust. (CB 295)  The Mayart loan agreement referred to Lot 10 and to the contract of sale for Lot 10.  Repayment of the loan moneys might be made by virtue of clause 5.2 (CB 166) by settlement of that contract of sale.  The inference that Mayart entered into the two contracts in the same capacity, viz its trustee capacity, is strong.  The omission of a reference to the trustee capacity in the loan agreement, as I have explained, does not displace this inference.
59	It was common ground that the moneys described in the loan agreements had not been repaid, either by Mrs Knight as borrower or Mr Knight as guarantor.  Mr Knight contends that this is because, in his case, he is under no legal obligation to do so, and that, before her bankruptcy, neither was Mrs Knight.  I should observe that the manner in which Mrs Knight has gone bankrupt and the disclosure of liabilities referred to in the trustee’s report represents an admission of liability on her part.
60	In his Administratively Amended Defence (final version), Mr Knight sought to withdraw his admission that there had been a receipt of funds pursuant to the loan agreements by leaving the admission standing, but adding a statement that the receipt of funds was not to be regarded as pursuant to the loan agreements.  This was the subject of lengthy debate during the opening statements of Dr Wolff and Mr Knight on the first day of the trial.  Ultimately, Mr Knight withdrew the attempted proviso, such that it was admitted that funds had been advanced and that the advance was pursuant to the loan agreements.  The proviso, beginning with the words “Insofar”, in the relevant paragraphs numbered 18 and 79 were withdrawn. (T97-98)
61	In the circumstances, I regard the plaintiffs’ primary case as having been made out, subject to a consideration of the matters urged by Mr Knight to which I will turn presently.
Other Defences
Loan agreement temporary only
62	Mr Knight’s narrative as to the relationship between the loan agreements and the apartment sale agreements was that the loan agreements were “a temporary measure until the contract[s] of sale came in”.  That is, that the contracts of sale, when entered into, superseded, subsumed or, perhaps, released the obligations under the loan agreements.  Mr Knight pressed this argument in the context of his explanation that the loan agreements were resorted to only as a temporary expedient because of the delay in obtaining contracts of sale, and because of the need to wait for rate and planning certificates to form part of the statement required to be given by the vendor prior to or contemporaneously with the contract by virtue of s32 of the Sale of Land Act.
63	The first thing to be said about this is that the documentary evidence does not bear it out.  As noted above, according to the signature page for Apartment 11, the Daleys signed on 18 August, as did Mrs Knight. (CB 190)  This is inconsistent with the narrative given by Mr Knight.  The contract of sale of Apartment 10 to Mayart is expressed to be signed on behalf of Mayart by its agent, Mr Arnheim, on 20 August.  Mrs Knight is shown to have signed on 26 August. (CB 295)
64	These documentary considerations would be sufficient to reject Mr Knight’s contention simply on the ground that they do not conform to the written record of events as they occurred.  It must be conceded that there may be legitimate reasons for parties to “backdate” documents on the basis that a matter or matters was agreed by a meeting of the minds on a particular date, but only reduced to writing later.  Assuming, without deciding, that Mr Knight’s narrative of events as they unfolded was accurate, and the sale contracts have, for some good reasons, been backdated, Mr Knight’s contention that the loan agreements have been somehow discharged or subsumed must still be rejected.  
65	The loan agreements were obviously drawn with some care and tailored to meet the particular features of the transactions.   Had they been intended to operate as an interim measure, as contended by Mr Knight, they would have made explicit provision for the process of discharge or supersession by the sale contracts.  No such provisions are to be found in the loan agreements.  I reject Mr Knight’s argument on this point.
Loan agreements conditional on building contract
66	As to the provisions relative to the “building contract” in the loan agreement, Mr Knight said (Closing Submissions paragraph 7):
“It was an obligation of the parties and essential terms of the Loan Agreement that the parties would satisfy conjunctive [scil coordinate] obligations to:
 (a)	Provide and enter into a building contract; and
 (b)	Enter into a Contract of Sale for the relevant apartment.”
67	He said that the plaintiffs “failed to either provide or execute the required building contract within the requisite time provided in the Loan Agreement, or at all”.  He referred to paragraph 19 of an affidavit sworn by Mr Daley.
68	Mr Knight said that, in the circumstances, the plaintiffs were in breach of essential terms of the loan agreements and, accordingly, his liability as surety/guarantor became unenforceable.  He referred to the decision of the High Court in Ankar Pty Ltd v National Westminster Finance (Australia) Limited (1987) 162 CLR 549.
69	Dr Wolff, on behalf of the plaintiffs, challenged both the factual and legal basis for these contentions.  First, he said that the building contract in the form of Exhibit M had been provided, as required by the Daleys’ Loan Agreement.  He said that Exhibits K and L made good that contention.  Moreover, he said that according to affidavit material filed in the proceeding, that agreement had been executed – at least by Dalle Projects Pty Ltd.  He referred to paragraph 9 of an affidavit by Mr Daley sworn 10 July 2019. (CB 846)
70	He referred also to an affidavit by Mr Knight himself sworn 20 June 2019 (Exhibit J, paragraph 13), where Mr Knight swore:
“Mr Daley agreed to buy two apartments in the development if he was appointed as the head Contractor to build the project so he could have some control.  The first defendant agreed to the arrangement, the loan was made, contracts entered into and a building contract signed between the first defendant and Mr Daley’s building company.”
71	For his part, Mr Knight referred to an affidavit which he swore on 9 June 2020. (CB 872, paragraph 19), where he said:
“It was [an] express term of any Loan Agreement between the parties and it was an express condition precedent relied on by the Third Defendant [viz Mr Knight] in providing any purported Guarantee of the First Defendant's [Mr Knight’s] obligations that the parties would enter into and complete the building works at 39 Parkers Road, Parkdale, Victoria, under an AS 4300 Building Contract between the Third Plaintiff (or an associated company) Daley Projects Pty Ltd ACN 147 578 948 and the First Defendant.”
72	Mr Knight’s contention that Exhibits K, L and M are forgeries is implausible.  Particularly when, in 2019, when it seems that the plaintiffs and Mr Knight were to some degree aligned with one another in resisting RVA’s summary judgment application, he swore that the agreement had been entered into and, by necessary implication, “provided”.
73	With RVA removed from the scene, in June this year the Knights were the sole defendants.  At trial, Mr Knight had become the sole defendant.  He had an obvious interest then in asserting that what he swore happened in 2019 occurred, when it might have been in his strategic interest to say that these matters had not in fact occurred.  I am satisfied that, as required by the loan agreements, the building contract was “provided” by the Daleys, executed by the `Builder’ and returned to Mr Knight on behalf of Mrs Knight. 
74	Assuming without deciding, particularly in light of the form of Exhibit M, that since this copy – at least of the contract – was not signed by Mrs Knight, it could not be regarded as having been “entered into”, I reject the contention that if this were so, it represented a breach of an essential term or non-fulfilment of a condition precedent to liability such that Mr Knight would not be liable under the guarantee clauses contained in the loan agreements.
75	In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, following a period of controversy in Australian appellate courts as to the proper approach to the construction of commercial contracts, the Justices of the High Court sought to restate what they saw as the orthodox position in this matter.  French CJ, Nettle and Gordon JJ said:
“In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.  That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.” [47]
76	A reasonable business person would not think it an appropriate construction of contractual arrangements that the liability of a borrower or a guarantor for monies already outlaid should be defeasible based on a failure of the lender to “provide” an agreement with another corporation not a party to the loan arrangement, much less based on an alleged failure of that other party to execute such agreement.  
77	In Ankar Pty Ltd v National Westminster Finance (Australia) Limited (1987) 162 CLR 549 relied on by Mr Knight, the High Court held that clauses in a guarantee requiring the credit owner under hiring arrangements to notify the guarantor of that arrangement if the hirer proposed selling the machinery and requiring the owner to inform the guarantor if the hirer was in default, constituted conditions or essential terms relative to the guarantor’s liability.  Breach of those essential terms discharged the guarantor.  
78	In a joint judgment, Mason ACJ (as he then was), Wilson, Brennan and Dawson JJ said that additional to the usual analysis required to determine whether provisions of a contract should be regarded as “essential terms”, special considerations applied to guarantee contracts.  They said:
“It is necessary to take into account as well the special character of a suretyship contract and of the relationship that it creates between the parties.” [14] 
79	They said:
“The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk, e.g., a reduction in the debtor's debt or in the interest payable by the surety. The mere possibility of detriment is enough to bring about the discharge of the surety.” [18] 
80	Mr Knight said that these provisions had the effect of discharging his liability.  He said that he had a legitimate interest in the relevant contracts being entered into and performed because it would place him in the role of superintendent, which is a powerful, almost quasi-judicial role in the administration of building contracts.  
81	There is of course an element of unreality in all this.  The narrative so far indicates that the problem in 2014 and 2015 was that RVA was asserting overriding powers as mortgagee in possession.  I was told that whilst the Knights commenced proceedings to “oust” RVA and reassert control over the development site, ultimately those proceedings were compromised on terms that RVA was neither ousted from control of the site nor restrained from exercising a mortgagee’s power of sale over the apartments in the development.  
82	According to Mr Knight, the settlement entailed his former wife walking “out of that court that day with a very, very, very large sum of money that she wouldn’t have otherwise – so I won’t call it an abject failure”. (T563, L28 – T564, L2) 
83	If the objective of the building contract referred to in the loan agreements was to place Mr Knight in the saddle as superintendent within the meaning of that contract, this could never have happened.  Mr Knight might have been appointed “superintendent” by Mrs Knight but this in itself would not have enabled him to seize control of the development from RVA.  It must be admitted, however, that the strictness of the rule stated by their Honours in Ankar’s case would appear to be supportive of Mr Knight’s contentions here.  Nevertheless, they fail based upon the evidence because the Daleys, on the facts which I have found, provided the agreement and Dalle Projects Pty Ltd entered into the contract in the sense that it executed it and made it available to the Knights.  The alleged breach of condition did not occur.
84	This defence therefore fails.
Abandonment
85	The issue of “abandonment” had a lengthy and vexed history.  When Mr Knight amended his Administratively Amended Defence in accordance with the judicial registrar’s order, aside from changing the paragraph numbers – a merely secretarial task – he introduced substantive new defences based on laches and acquiescence.  Dr Wolff opposed the introduction of these defences.  Mr Knight took me to an earlier incarnation of his defences that made some mention of laches and acquiescence.  
86	Ultimately, however, I ruled that these defences should be struck out because with the disappearance of RVA and Mrs Knight as litigants or active litigants in the proceeding, the only relief which the plaintiffs then sought was the recovery of allegedly liquidated sums owing under a loan agreement and guarantee.  Laches and acquiescence are equitable defences that applied only to applications for equitable relief.
87	I told Mr Knight, however, that he was at liberty to rely upon the same matters by way of the common law defence of abandonment.  I cautioned him, however, that this was a defence difficult to make out where, in one leading High Court decision the Court had declined to find a contract abandoned, despite a delay in enforcement of some 20 years. (Fitzgerald v Masters (1956) CLR 420)
88	Mr Knight expressed the defence of abandonment in the course of his presentation in various ways.  In broad terms, he said that the plaintiffs had, according to their case, entered into arrangements in 2014 and then taken no enforcement action at all until the present proceeding was commenced late in 2018.  In cross-examination he took Mr Daley to clause 7.3 of the loan agreement involving him and his wife, asking if he had taken any of the enforcement steps referred to therein, to which Mr Daley responded that he had not.  
89	Most notably, clause 7.3(e) empowered the lenders “at any time after the occurrence of an Event of Default” to “enter the Security Property and take possession without the need to obtain any Court Orders  (at the lender’s discretion) and sell up the Security Property by private sale or public auction and appropriate all funds in payment of monies outstanding under the terms of this Agreement”.  The “Security Property” is defined to mean “the property”, viz the entire development site at 39 Parkers Road, Parkdale.  The reference in the definition of “property” is apparently to the parent title, not to any title to issue for a sub-divided lot.
90	Item 5 of the schedule to the loan agreement describes the security as “nil”.  There is reason to think that clause 7.3(e) has been inappropriately included in this loan agreement in circumstances where it would have been appropriate only in a loan secured by a mortgage of land.
91	Mr Knight did not deny that he provided continuing assurances to Mr Daley and, by extension, to Mr Cox of Mayart that he had matters in hand and he and his wife had commenced proceedings to “oust” RVA.  Until the apartments were constructed, nothing could be done to seek to recover title to them because no separate title would issue until construction was complete and the plan and sub-division was registered.  At around that time, as previously noted, RVA purported to rescind the contracts for apartments 10 and 11.  This is one of the factors which triggered the commencement of the present proceeding.
92	As Mr Knight himself observed, financially it would be far more advantageous to Mayart and the Daleys to obtain title to the apartments.  They would then be possessed of a more valuable asset that repayment of the principal sum and interest under the loan agreements would be.  It was therefore sensible and understandable that they accepted Mr Knight’s assurances and stayed their hands.
93	In Fitzgerald v Masters (1956) 95 CLR 420, the High Court held that a contract might still be ordered specifically performed despite a delay of 20 years.  The Court was prepared to accept explanations as to why no enforcement action had been taken and therefore declined to infer that the parties had abandoned the relevant contract.
94	Similarly here, any apparent delay is, in my view, fully explained. In any event, as the learned editors of Cheshire and Fifoot’s Law of Contract, 11th Australian Edition [22.9], page 1167 state:
“As with termination of a contract generally, in the absence of a clear intention to the contrary, termination of a contract by abandonment ‘operates prospectively without prejudice to accrued entitlements’.”
95	The learned editors refer to Cedar Meats (Aust) Pty Ltd v 5 Star Lamb Pty Ltd (2014) 45 VR 79 [19].  In that case, the trial judge had found a contract allowing one company to process lamb at the other’s facility had been abandoned.  The Court, Nettle and Beach JJA and McMillan AJA, allowing the appeal, said:
“According to ordinary contractual principles, the manifestation of such an intention [viz, to abandon a contract] may be express or implied. Where, however, a contract has been partly performed, it is not lightly to be supposed that parties intend to abandon accrued rights.  Absent a clear indication to the contrary, it is to be inferred that the abandonment of a contract operates prospectively without prejudice to accrued entitlements.” [19]
96	Even assuming, contrary to what I have said already, that the loan agreements could be regarded as “abandoned”, there is no reason to think that the accrued entitlement to repayment of the loan amount – which accrued as soon as the agreement was entered into and the loan amounts were advanced – or at any rate after the lapse of two years, viz August 2016, would thereby have been taken away.
97	The defence of abandonment therefore fails.
Commercial breach of loan agreement
98	In his closing submissions, Mr Knight observed that Mr Lincoln Daley of the Dalle Group and “M Knight”; viz Mr Knight, himself, presumably as his then wife’s project manager or representative, agreed on the terms of the building contract, viz the terms of the Building Contract AS4300, under which Mr Knight “would be the superintendent”.  He continued, “By being the Principal’s representative, [Mr] Knight would have had control over important issues such as time, cost and quality.  As matters transpired, Lincoln Daley entered into a building contract with RVA, for a sum approximately AUD$1,000,000 more than the requisite building contract with Ms Knight.”  Mr Knight noted that whilst practical completion under that contract with RVA was required within 12 months after 4 November 2015, “in fact [it] was not achieved until late 2018 some 2 ½ years later.  During this period, RVA did not issue one notice as to time, nor one notice as to quality and upon completion, did not pursue Mr Daley for liquidated damages as allowed in the building contract.” (Closing submissions paragraphs 18 and 19)
99	Mr Knight then referred to correspondence between Dalle Projects Pty Ltd and Mr Armytage who was RVA’s legal representative.  Following examination of the correspondence and debate during Mr Knight’s closing address, this matter was not pursued. (Closing address paragraph 20; CB 864)  Ultimately, Mr Knight seemed to make no more of this correspondence than as an acknowledgment that even Mr Armytage, as RVA’s legal representative, was of the view that Mrs Knight should be the principal under the building contract. (T673-4)
100	Mr Knight said that “if in fact a building contract existed with Ms Knight, firstly it could have been provided for the purposes of home warranty insurance … and secondly, the normal commercial procedure would be for RVA to be a party to a tripartite agreement … It is noteworthy, given the late production of the purported building contract between P. Knight and Dalle Projects Pty Ltd that Dalle Projects is in the habit of amending and producing documents, as evidenced by the strike out of the name ‘View Bank Securities Pty Ltd (ACN 127 822 986)’ and insertion of the company name Residential Villages (Aust) Pty Ltd.  The struck-out company is in no way now, or [has] ever been associated with the First or Third Defendants.” (Closing submissions paragraph 21)
101	Mr Knight then quoted paragraphs from an affidavit of Mr Rex Sheppard of RVA sworn 23 May 2019 critical of the performance of Mr Daley’s companies under building arrangements with RVA and complaining that RVA had been required to pay “$600,000 in excess of the building contract price in order to get the job finished …” (Closing submissions paragraphs 23 to 24) Mr Knight concluded:
“I submit, Mr Daley has commercially benefited from the breach of the Loan Agreements by not entering into the requisite building contract, negotiating a building contract including an additional AUD$1,000,000 for the contract sum and enjoying the benefits of an unfettered construction period with no notices issued by RVA nor liquidated damages sought despite 2 ½ years of delays in achieving practical completion.” (Closing submissions paragraph 25)
102	There are many difficulties both factual and legal in accepting this as a defence to the plaintiffs’ present claim.  First, despite the pleadings in this proceeding having gone through successive transformations and been the subject of extensive argument and interlocutory ruling, there has never been a damages counterclaim or, for that matter, a defence by way of set-off pleaded on behalf of Mr or Mrs Knight.  Even if there had been, there would be problems in establishing mutuality (in the broad sense rather than the narrow and special sense in which that context is used in the Bankruptcy Act).  Broadly, a claim against one of Mr Daley’s companies would not be relied upon as a defence or counterclaim as against Mr Daley, himself, or Mrs Daley, much less Mayart.
103	In addition, no doubt because of the state of the pleadings and the other matters referred to in the previous paragraphs, the factual issues relative to the alleged commercial breach remained almost entirely unexplored at trial.  The delays in the contract arrangements with RVA, the absence of liquidated damages claims and so forth emerged from the intersticies of the documents in the Court Book and in cross-examination of Mr Daley.  There was no examination of what caused the delays and whether the relevant Dalle company or companies would have any legal defence to a claim for liquidated damages.  Mr Sheppard and his company, RVA, emerged from the narrative as ruthless protagonists for their own interests.  It is difficult to conceive, when one considers the role of RVA and Mr Sheppard, generally, that these persons would have endured time and cost overruns without seeking redress.  There is therefore some reason to doubt that that redress would have been available.
104	I reject the contention that Mr Daley, or Mrs Daley for that matter, was in commercial breach of the loan agreements.
Further Defences
105	At paragraph 41 of his Administratively Amended Defence revised as at 18 November 2020, Mr Knight referred to the Statement of Claim’s references to nominations and assignments, alleging that the requirements as to legal assignments of choses in action laid down by s134 of the Property Law Act 1958 had not been complied with.  He said, “If the any [sic] Defendant was indebted to any Plaintiff by assignment, it could only have been because the requirements of s134 of the Property Law Act 1958 (Vic) were satisfied.  On the pleadings, notice was not given to the Defendants and he (viz Mr Knight) says no notice was ever served or delivered as required by the express terms of the Agreement.”
106	Judge Cosgrave had earlier denied Mr Knight leave to introduce a defence along these lines by amendment to his then Defence, remarking that where an alleged assignor and assignee, in this case the Fourth Defendant and First and Second Plaintiffs, were parties to the proceeding, an assignment could be enforced according to the principles of equity without resort to s134 of the Property Law Act.  More fundamentally the case pressed at trial did not depend upon any finding of assignment at all.  Section 134 of the Property Law Act provides Mr Knight with no defence in those circumstances.
107	I have already explained in the now purely common law claim pressed by the plaintiffs that laches and acquiescence are not available as defences.
Interest
108	The provisions as to interest are common in the two loan agreements.  Taking the Daleys’ loan agreement as the example, clause 6.1 provided that no instalments of interest were payable until the due date. (CB 152)  The “due date” was defined as being “the last day of the loan term”.  The “loan term” was defined to mean “a period set out at Item 3 of the Schedule”. (CB 150)  In the events that have occurred, the loan term by reference to Item 3 of the Schedule (CB 160) was 24 months from the commencement date; viz 18 August 2016.
109	Clause 6.3 provided:
“If the Borrower defaults in payment by the due date of any amount payable to the Lender, the Lender may, without prejudice to any other remedy available to it, increase the Rate to the Default Interest Rate for the period from the due date of such amount payable to the Lender until the date of payment in full.”  (CB 153)
110	This clause, as I read it, entailed payment of interest at the default rate prospectively from the date of default and does not entail a retrospective increase of interest liability prior to default. (David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 93 ALR 271)
111	Dr Wolff conceded that until the due date, no interest was payable.  Thereafter, interest accrued at the default interest rate which is defined as “the rate that is prescribed in the Penalty Interest Rates Act 1983 (Vic)”. (CB 150)  Interest is payable on the principal sum under the two loan agreements at that rate from and after the “due date”.
Disposition 
112	I will direct the parties within 14 days of the date of these reasons to bring in short minutes to give effect to them.
Costs
113	I have heard no submissions on the question of costs and so I will reserve them.