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- National Australia Bank Ltd v Melrose[2008] QDC 67
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National Australia Bank Ltd v Melrose[2008] QDC 67
National Australia Bank Ltd v Melrose[2008] QDC 67
DISTRICT COURT OF QUEENSLAND
CITATION: | National Australia Bank Ltd v Melrose [2008] QDC 67 |
PARTIES: | NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937 (Plaintiff/applicant) v PETER VIDAKOVIC (First defendant) DOMINICK VALWYN MELROSE (Second defendant) VALWYN KERRY MELROSE (Third defendant/respondent) HERMINA THEODORA MELROSE (Fourth defendant/respondent) |
FILE NO/S: | BD 263 of 2003 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 27 March 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 4, 6 & 10 March 2008 |
JUDGE: | Rafter SC DCJ |
ORDER: |
|
DIRECTIONS: |
|
CATCHWORDS: | PROCEDURE – DISTRICT COURT PROCEDURE – PROCEDURE UNDER RULES OF COURT – SUMMARY JUDGMENT – where application brought by plaintiff for summary judgment – where earlier application for summary judgment against third and fourth defendants dismissed – where plaintiff makes subsequent application pursuant to Uniform Civil Procedure Rule 294(2) for summary judgment with leave of court EQUITY – TRUSTS AND TRUSTEES – CONSTITUTION AND CLASSIFICATION OF TRUSTS GENERALLY – where plaintiff bank brought proceedings against the defendants to enforce personal guarantee – where third and fourth defendants contend they did not sign guarantee in their personal capacity but as trustees PROCEDURE – DISTRICT COURT PROCEDURE – PAYMENTS INTO COURT – whether appropriate – whether hardship established Uniform Civil Procedure Rules r 292, r 294, r 298 Brypat Pty Ltd v Endless View Holdings Pty Ltd [2005] QSC 171 Commonwealth v Verwayen (1990) 170 CLR 394 Fieldrank Ltd v Stein [1961] 1 WLR 1287 Legione v Hateley (1983) 152 CLR 406 National Australia Bank Ltd v Vidakovic [2007] QDC 121 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 MPM Civil Pty Ltd v Ammbar Pty Ltd [2004] QSC 079 |
COUNSEL: | J.W. Peden for the plaintiff N.H. Ferrett for the third and fourth defendants (on 4 March 2008) P.G. Lynch, solicitor for the third and fourth defendants (on 6 & 10 March 2008) |
SOLICITORS: | Flower & Hart Lawyers for the plaintiff Lynch & Company for the third and fourth defendants |
Introduction
- [1]The applicant sought summary judgment against the third and fourth defendants in an action for debt due pursuant to two guarantees of overdraft facility. At the conclusion of argument on 4 March 2008 I indicated that the application would be dismissed.
- [2]The parties agreed that it was appropriate for directions to be made for the further conduct of the action. Accordingly the matter was adjourned to 6 March 2008. On that date, by consent I made an order referring the matter for mediation to be held not later than 4 April 2008. The action was stayed until six business days after the mediator’s certificate was filed or earlier order.
- [3]The main issue in relation to the directions concerned whether the third and fourth defendants’ conduct of their defence should be conditional upon them paying into Court the sum of $100,000 within seven business days of the filing of the mediator’s certificate. At the further hearing on 6 March 2008 Mr Lynch, the solicitor for the third and fourth defendants, indicated that he wished to raise hardship as a ground for opposing the order. Accordingly the matter was adjourned to 10 March 2008.
- [4]On 7 March 2008 the third and fourth defendants each filed affidavits setting out their financial circumstances. At the further hearing on 10 March 2008 they were each cross-examined by Mr Peden for the plaintiff.
Background facts
- [5]On 14 April 2003 the deputy registrar entered default judgment against the first defendant.
- [6]On 25 May 2007 the plaintiff applied for summary judgment against the second, third and fourth defendants. On 8 June 2007 Tutt DCJ gave judgment for the plaintiff against the second defendant. However, the application for summary judgment against the third and fourth defendants was dismissed.[1] By UCPR 294(2) a subsequent application for summary judgment may be made with the Court’s leave.
- [7]By a written guarantee and indemnity dated 17 August 2000 the first, second, third and fourth defendants requested the plaintiff to provide overdraft facilities to Ribford Pty Ltd. The defendants guaranteed the payment of all amounts owed by Ribford Pty Ltd to the plaintiff up to a basic liability of $50,000. By a further written guarantee and indemnity signed by the first and second defendants on 1 November 2000 and by the third and fourth defendants on 31 October 2000 the defendants guaranteed the payment of all amounts owed by Ribford Pty Ltd to the plaintiff up to a basic liability of $89,000.
- [8]The third and fourth defendants filed a defence on 5 June 2003 and an amended defence on 17 August 2006. They contended that they did not sign the guarantee in their personal capacity but rather as trustees for the Van Der Ham Family Trust. The third and fourth defendants pleaded that their liability was limited to the assets of the Van Der Ham Family Trust.
- [9]In an affidavit filed 22 May 2007 the third defendant said that prior to executing the first guarantee on 17 August 2000 there was a discussion with Mr Damian Hill, the business banking manager employed by the plaintiff. The third defendant said that it was made clear to Mr Hill that only trust assets were being provided as security for the loan. According to the third defendant Mr Hill indicated that the bank agreed that the guarantee was to be confined to assets of the trust only.[2] The third defendant stated that he sought legal advice prior to signing the guarantee and indemnity. He did not recall being given any advice to the effect that the legal consequence of the guarantee and indemnity was that he and his wife would be personally liable to the plaintiff for the debts of Ribford Pty Ltd.[3] The third defendant said that there was a similar discussion prior to signing the second guarantee and indemnity.[4]
- [10]In his affidavit sworn 21 May 2007 and filed 22 May 2007 the third defendant stated:
“31. The Third and Fourth defendants intend to amend their defence to incorporate particulars of the oral agreement made between the Plaintiff and the Third and Fourth defendants in the event that this application for summary judgment is dismissed.”
- [11]Tutt DCJ mentioned that evidence of the third defendant in his judgment delivered 8 June 2007.[5] It is not clear whether the stated intentions of the third and fourth defendants to amend their defence was influential in his Honour’s decision to reject the application for summary judgment but the fact that it was mentioned indicates that it had some significance. It is therefore surprising that the further amended defence of the third and fourth defendants was not filed until 3 March 2008. This application for summary judgment was filed on 8 February 2008. Moreover, by letters dated 27 August 2007, 14 September 2007 and 19 October 2007 the solicitors for the plaintiff requested the solicitors for the third and fourth defendants to file an amended pleading.[6] In the letter dated 19 October 2007 the solicitors for the plaintiff wrote:
“We refer to our facsimiles dated 9 September 2007 and 14 September 2007 and to our telephone messages left for you on 27 September 2007, 4 October 2007, 5 October 2007 and 15 October 2007.
You have not given us the curtesy (sic) of responding to any of the correspondence listed above nor have you returned any of our telephone calls. You remain the solicitor on record for the last remaining defendants in this matter and it is our reasonable expectation that you have obtained your client’s instructions in the four months that have past since Judge Tutt handed down his order. Accordingly, we expect your immediate response to our facsimiles of 9 September 2007 and 14 September 2007.”[7]
- [12]The further amended defence filed 3 March 2008 has hallmarks of having been hastily prepared in view of the looming summary judgment application to be heard the following day. By the further amended defence filed 3 March 2008 the third and fourth defendants say that prior to executing the guarantee and indemnity documents the plaintiff represented that it was agreed that “the Third and Fourth defendants were doing so in their capacity as Trustees of the Van Der Ham Family Trust and not in their personal capacity and by implication that the execution by the Third and Fourth defendants of the Guarantee and Indemnity would not expose the Third and Fourth defendants to personal liability under the Guarantee and Indemnity but rather that the liability of the Third and Fourth defendants as guarantors would be limited to the assets of the Van Der Ham Family Trust”.[8] In respect of the guarantee and indemnity dated 17 August 2000 the second and third defendants assert that the representation by the plaintiff was partly oral and partly in writing. They contend that the written representation was made by Mr Hill, an employee of the plaintiff, writing the words “for and on behalf of the Van Der Ham Family Trust” on the guarantor acknowledgement.[9] Those words do not appear on the guarantee and indemnity dated 17 August 2000. However, they do appear on the guarantee and indemnity dated 10 October 2000 which is not the subject of this application.
- [13]It was an event of default under both overdrafts if:
- (a)Ribford Pty Ltd had an administrator appointed or went into liquidation; or
- (b)the expiry dates under the overdraft expired and Ribford Pty Ltd owed the plaintiff money.
- [14]Ribford Pty Ltd failed to pay the amount outstanding under the overdraft by the expiry date which in each case was 31 July 2001.
- [15]On 28 May 2001 an administrator was appointed to Ribford Pty Ltd and it was subsequently placed into liquidation on or about 25 June 2001.[10]
Application for summary judgment
- [16]It is not in issue that the third and fourth defendants entered into the guarantees acting in a trustee capacity. That appears from the details of guarantee and indemnity section in each document.[11] The third and fourth defendants are named as trustees of the Van Der Ham Family Trust.
- [17]Quite apart from the principle that a trustee entering into a business transaction is personally liable for any debts that are incurred in the course of that transaction,[12] the plaintiff relies on clause 20.1(a) of the guarantees which provides:
“20.1 If you enter this guarantee and indemnity as trustee of the trust named in the Details, you:
- (a)are liable both personally and in your capacity as trustee;
…”
- [18]The third and fourth defendants received legal advice before executing the guarantee and indemnity dated 17 August 2000. The solicitor certified that she “explained the effect of this guarantee and indemnity to the guarantor who appeared to be aware of and to understand the nature and effect of the obligations of the guarantor under this guarantee and indemnity, and executed it in my presence”.[13]
- [19]The further amended defence filed 3 March 2008 pleads that the plaintiff agreed that the third and fourth defendants executed the guarantee in their capacity as Trustees of the Van Der Ham Family Trust and “by implication” they would not be exposed to personal liability.
- [20]
- [21]While it is correct as Mr Peden for the plaintiff submitted, that the third and fourth defendants have not pleaded any express representation or statement by the bank officer, they have nevertheless placed evidence before the court of conversations held with him. For instance the third defendant states:
“The First Guarantee
- The Second and Fourth Defendants and myself attended at the Plaintiff’s premises in August 2000 for a meeting with Ribford’s Business Banking Manager, Mr Damian Hill.
- Discussion took place between myself primarily and Mr Hill concerning the provision of lending facilities to Ribford and in particular this discussion concerned the security to be given to the Bank to support the borrowings of Ribford.
- During this meeting my wife and I agreed to put up the land as security for the Ribford facility.
- Furthermore my wife and I also agreed that the trust would guarantee the Ribford loan.
- During this conversation I made it clear to Mr Hill that my wife and I were only agreeing to put up the trust assets as security for the Ribford loan.
- I told Mr Hill that we did not want to go any further than that.
- Whilst I cannot recall his exact words, I have a specific recollection that Mr Hill indicated to me that the bank agreed that the guarantee was to be confined to the assets of the trust only.”[17]
- [22]The second and fourth defendants support the assertions made by the third defendant.[18] However, in my view the weight of the evidence of the second and fourth defendants is diminished somewhat by the fact that they each simply state that they have read the affidavit of the third defendant and that the facts stated in it are true and correct. The overall effect of the affidavits of the second, third and fourth defendants is that none of them has a recollection of the “exact words” of the bank officer. In the circumstances it is a little surprising that not one of the deponents was able to offer any details of the conversation.
- [23]The third defendant said that the issue of personal liability was particularly important because he and his wife had previously lost a home as a result of having given a personal guarantee.[19]
- [24]Having regard to the importance of the issue it might be expected that the matter would have been canvassed with the solicitor prior to signing the guarantee on 17 August 2000.
- [25]However, the third defendant merely states:
“I sought legal advice about the loan documents from a solicitor prior to signing them. I cannot recall any advice being provided to me by that solicitor to the effect that the legal consequences of the documents including the guarantee were that my wife and I were personally liable to the Plaintiff for the debts of Ribford.”[20]
- [26]Moreover the essential element of any promissory estoppel argument is the existence of unconscionability.[21] Mr Peden submitted that the third and fourth defendants pleaded no facts that would support a finding that the plaintiff had acted unconscionably.
- [27]Mr Ferrett for the third and fourth defendants submitted that UCPR 292 does not require a consideration of whether the defendants’ case has been properly pleaded. He submitted that the relevant issue is whether “the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim”.
- [28]Although the defences of the third and fourth defendants appeared to be very weak I concluded that the application for summary judgment should be dismissed because:-
- (a)The second application for summary judgment required the court’s leave pursuant to UCPR 294(2); and
- (b)The defences were not so untenable that summary judgment should be entered.
Security
- [29]As I have mentioned the parties agreed that the matter should be referred for mediation. On 6 March 2008 I made an order referring the matter for mediation to be held not later than 4 April 2008. The parties also agreed that there should be directions for the future conduct of the action. Mr Peden for the plaintiff submitted that the third and fourth defendants’ conduct of their defence should be conditional upon them paying into court the sum of $100,000 within seven business days of the filing of the mediator’s certificate. He relied on the statement of Devlin L.J. in Fieldrank Ltd v Stein[22]:
“I think that any judge who has sat in chambers to hear summonses under Order 14 has had the experience of a case in which, although he cannot say for certain that there is not a triable issue, he is nevertheless left with a real doubt about the defendant’s good faith, and would like to protect the plaintiff, especially if there is no grave hardship on the defendant being made to pay money into court. For my part, I should be prepared to accept that there has been a tendency in the last few years to use this condition more often that it has been used in the past, and I think that that is a good tendency.”[23]
- [30]During argument on 6 March 2008 I asked Mr Lynch who was then appearing for the third and fourth defendants whether he relied on grounds of hardship in opposing the order. Mr Lynch indicated that he did. The matter was adjourned to 10 March 2008 to afford the third and fourth defendants the opportunity to file affidavits in relation to their financial circumstances.
- [31]The third and fourth defendants each filed affidavits in which they claimed that they did not have the financial capacity to pay $100,000 into court.[24]
- [32]At the hearing on 6 March 2008 Mr Lynch indicated that the third and fourth defendants were prepared to provide $25,000 by way of security. At the hearing on 10 March 2008 Mr Lynch said that this amount remained available, although it emerged that it was to be borrowed from the third and fourth defendants’ son.[25]
- [33]The amount sought by the plaintiff by way of security is somewhat arbitrary. In respect of the guarantee dated 17 August 2000 the principal liability is $50,000 and interest as at 4 March 2008 was $17,022.96. The principal liability pursuant to the guarantee dated 31 October 2000 is $89,000 and interest as at 4 March 2008 amounted to $74,040.44.[26]
- [34]The third defendant owns no real property. He is employed by Marcelford Wholesale Meats as a salesman earning an annual gross salary of $65,000. In addition he receives a $5,000 annual honorarium from the Australian Meat Industry Association. He owns 1,000 shares in Talent 2 International Ltd which he estimates to be worth $1,000. He also owns shares in Calvert Butchery Pty Ltd and Tinpit Pty Ltd jointly with the fourth defendant. He also owns one share in Tydak Pty Ltd. The fourth defendant is a discretionary beneficiary in the Tydak Family Trust. The fourth defendant has a 2006 Toyota Prado motor vehicle that is leased through his employer.
- [35]The fourth defendant is the registered proprietor of a residential home at 1 St Ives Court, Karana Downs. She purchased the property in 2002 for $280,000. The property is subject to a mortgage in favour of Suncorp Metway Ltd. The mortgage secures a loan that has a current balance of $272,000.[27] The property has been listed for sale for approximately nine months. The listed sale price is $560,000. The fourth defendant said that she received an unconditional offer of $540,000 which she rejected. She now regrets not having accepted that offer.[28]
- [36]The Suncorp Metway Ltd mortgage also secures a loan made to Tydak Pty Ltd as Trustee of the Tydak Family Trust. That loan has a current balance of $320,000.
- [37]Tydak Pty Ltd purchased an 80 acre property at Greenmount near Toowoomba for $300,000 in May 2007. Suncorp Metway Ltd has a registered mortgage over that property.
- [38]The third and fourth defendants are building a home on the Greenmount property and they are intending to live there.
- [39]The fourth defendant is employed by Tydak Pty Ltd as an office administrator. She earns an annual gross salary of $29,640. The fourth defendant estimates that after meeting all household expenses she and her husband have a combined residue of $314.35 per week.[29] The fourth defendant says that she and her husband maintain three joint bank accounts with a total approximate balance of $500. She is a joint shareholder in Calvert Butchery Ltd and Tinpit Pty Ltd. She has one share in Tydak Pty Ltd.
- [40]In MPM Civil Pty Ltd v Ammbar Pty Ltd[30] Mackenzie J refused an application for summary judgment by the plaintiff but granted leave to defend conditional upon the respondent defendant making payment of the sum of $300,000 into court or alternatively giving security in that sum in a form acceptable to the registrar. It is correct as Mr Lynch for the third and fourth defendants pointed out that the sum of $300,000 could not reasonably be disputed. The plaintiff’s claim for engineering works at a subdivision at Yeppoon exceeded $1 million.
- [41]In Brypat Pty Ltd v Endless View Holdings Pty Ltd[31] Philippides J dismissed an application for summary judgment by the plaintiff. However Her Honour was concerned that the defences raised were “shadowy” and ordered that the sum of $200,000 be paid into court within 30 days, failing which the plaintiff would be at liberty to enter judgment.
- [42]Mr Peden also pointed out that a similar order was made by Homes J (as Her Honour then was) in Beynon v Aikman Stoddart Accountants Pty Ltd and Others[32] on 28 September 2004. Mr Peden provided a copy of the order made in that case.
- [43]I have concluded that it is appropriate in this case to order that the third and fourth defendants’ conduct of their defence be conditional upon them paying into court the sum of $100,000 or alternatively giving security in that sum in a form acceptable to the registrar within seven days of the filing of the mediator’s certificate consequent upon the mediation in the referring order dated 6 March 2008. The reasons I have concluded that the order is appropriate in this case are:
- (a)I have formed the view that the defences raised by the third and fourth defendants appear to be weak.
- (b)On 21 May 2007 the third defendant swore an affidavit stating that the third and fourth defendants intended to amend their defence to incorporate particulars of the alleged oral agreement.[33] Notwithstanding requests by the solicitors for the plaintiff the further amended defence was not filed until 3 March 2008.[34]
- (c)It is an inevitable consequence of the property transactions of the fourth defendant and Tydak Pty Ltd that there will be no assets available to satisfy any judgment in favour of the plaintiff. In cross-examination at the hearing on 10 March 2008 the third defendant conceded that this was an outcome of the transactions. The third defendant’s evidence was:
“But you’d agree with me that the effect of these transactions is to soak up the head room and get any assets out of your wife’s name, isn’t it? – No, I don’t believe that’s the main reason, no.
No, it’s one of the reasons, isn’t it? - Well, it’s – it was an event of what we were doing, yeah.
Right. Now, would it be right to say then that once you follow through this transaction you’ll end up with the 80 acres at Toowoomba with the new house on it? - That’s correct.
And no assets in your name? - That’s right.
And no assets in your wife’s name? - That’ll be the event of it, yeah.”[35]
- (d)The fourth defendant did not accept that the property transactions were motivated by the present action, but of course the consequence is that having regard to both loans, there is limited or perhaps no equity in the Karana Downs property. The fourth defendant’s evidence was:
“And can I suggest to you that what you wished to put into effect by buying the land at Toowoomba in the name of Tydak and mortgaging both your Karana Downs Property and the Toowoomba property with the same – over the same loan, was that you were, in effect, trying to get the assets out of your own name and put them in the name of Tydak?-- Because of this Court case?
No, I’m just suggesting that that’s what you wanted to do. You wanted to get the assets out of your own name, did you not? -- Well, I suppose that’s a reason but it wasn’t because of the Court case.”[36]
- (e)The third and fourth defendants have the sum of $25,000 available to them.
- (f)The third and fourth defendants have not shown that they do not have the financial capacity to obtain a further sum of $75,000 by way of security. As Mr Peden pointed out a bank guarantee would suffice.[37]
Orders
- [44]The orders will be as follows:
- The plaintiff’s application for summary judgment is dismissed.
- The third and fourth defendants’ conduct of their defence of the proceeding is conditional upon them paying into Court the sum of $100,000 or alternatively giving security in that sum in a form acceptable to the Registrar within 7 days of the filing of the mediator’s certificate consequent upon the mediation in the referring order dated 6 March 2008.
- The parties have liberty to apply, in the event that the sum of $100,000 is not paid into Court or security is not given by the third and fourth defendants within 7 days of the filing of the mediator’s certificate consequent upon the mediation in the referring order dated 6 March 2008.
- Costs reserved.
Directions
- [45]Pursuant to UCPR 298 the directions will be as follows:
- The third and fourth defendants file and serve any further amended defence within 10 days of the filing of the mediator’s certificate consequent upon the mediation in the referring order dated 6 March 2008.
- The plaintiff files any amended reply within 7 days after the time for any filing of the further amended defence.
- Each party deliver any further list of documents within 14 days after the time for any filing of the amended reply.
- Inspection of documents be effected by delivery of copies of all requested documents on any further list of documents within 2 business days after any further list of documents is delivered.
- Each party execute a request for trial date on or before 30 May 2008.
Footnotes
[1] National Australia Bank Ltd v Vidakovic [2007] QDC 121.
[2] Affidavit of the third defendant filed 22 May 2007 paragraph 18.
[3] Affidavit of the third defendant filed 22 May 2007 paragraph 22.
[4] Affidavit of the third defendant filed 22 May 2007 paragraph 26.
[5] National Australia Bank Ltd v Vidakovic [2007] QDC 121 at paragraph [16].
[6] Affidavit of Bruce Hollas filed 8 February 2008, Exhibit BH10, BH12 and BH13.
[7] Affidavit of Bruce Hollas filed 8 February 2008, Exhibit BH13.
[8] Further amended defence of the third and fourth defendants filed 3 March 2008, paragraph 2A and 3AA.
[9] Further amended defence of the third and fourth defendants filed 3 March 2008, paragraph 3AA.
[10] Affidavit of Bruce Hollas filed 8 February 2008 paragraph 12.
[11] Affidavit of Bruce Hollas filed 8 February 2008, Exhibit BH1 and BH2.
[12] Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367.
[13] Affidavit of Bruce Hollas filed 8 February 2008, Exhibit BH1.
[14] Legione v Hateley [1983] 152 CLR 406 at 435-436.
[15] (1998) 153 ALR 198.
[16] (1998) 153 ALR 198 at 235.
[17] Affidavit of the third defendant filed 22 May 2007, paragraphs 12-18
[18] Affidavit of Hermina Theordora Melrose filed 22 May 2007 and affidavit of Dominick Valwyn Melrose filed 22 May 2007
[19] Affidavit of the third defendant filed 22 May 2007 at paragraph 20
[20] Affidavit of the third defendant filed 22 May 2007 at paragraph 22
[21] Commonwealth v Verwayen (1990) 170 CLR 394 at 441
[22] [1961] 1 WLR 1287.
[23] [1961] 1 WLR 1287 at 1289.
[24] Affidavit of the third defendant filed 7 March 2008 at paragraph 12, affidavit of the fourth defendant filed 7 March 2008 at paragraph 20.
[25] Affidavit of the third defendant filed 7 March 2008 at paragraph 13.
[26] Plaintiff’s outline of submissions dated 6 March 2008 at paragraph 6.
[27] Affidavit of the fourth defendant filed 7 March 2008 at paragraph 5.
[28] Affidavit of the fourth defendant filed 7 March 2008 at paragraph 8.
[29] Affidavit of the fourth defendant filed 7 March 2008 at paragraph 13.
[30] [2004] QSC 079.
[31] [2005] QSC 171.
[32] Supreme Court Brisbane, File No. 6194 of 2003, 28 September 2004.
[33] Affidavit of the third defendant filed 22 May 2007 at paragraph 31
[34] See paragraph [11]
[35] District Court Brisbane 10 March 2008, transcript of proceedings page 17 lines 15-30.
[36] District Court Brisbane 10 March 2008, transcript page 9 lines 45-55
[37] District Court Brisbane 10 March 2008 transcript page 29 line 48