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Hilchrist Pty Ltd v Visual Integrity Pty Ltd[2018] QDC 97

Hilchrist Pty Ltd v Visual Integrity Pty Ltd[2018] QDC 97

DISTRICT COURT OF QUEENSLAND

CITATION:

Hilchrist Pty Ltd v Visual Integrity Pty Ltd and ors [2018] QDC 97

PARTIES:

HILCHRIST PTY LTD

(Plaintiff)

v

VISUAL INTEGRITY PTY LTD

(First Defendant)

and

ANDREW DARRELL BUTCHER

(Second Defendant)

and

ZOE CLARE BUTCHER

(Third Defendant)

and

EXCELLEX PTY LTD

(Fourth Defendant)

And

ALLAN HILTON JONES

(Second Defendant by Counterclaim)

FILE NO/S:

D2887/2016

DIVISION:

 

PROCEEDING:

Civil trial

ORIGINATING COURT:

District Court Brisbane

DELIVERED ON:

1 June 2018

DELIVERED AT:

Brisbane

HEARING DATE:

28-30 August, 1 September, 15 November 2017

JUDGE:

McGill SC DCJ

ORDER:

Judgment that the first defendant pay the plaintiff $584,433.41, including $49,434.41 by way of interest. Declare that the transfer by the first defendant to the fourth defendant of the shares in Sign Site Pty Ltd and the units in the Sign Saint Hybrid Unit Trust is void as against the creditors of the first defendant. The claims against the second and third defendants dismissed. The counterclaim dismissed.

CATCHWORDS:

CONTRACT – Agreement contemplating formal document – whether formal agreement superseded informal agreement – effect of change of parties.

CONTRACT – Conditions and warranties – interpretation of terms – whether breaches of warranties proved – whether substantial damages proved

EQUITY – Equitable estates and interests – vendor’s lien – whether available over personalty – whether arising.

FRAUD, MISREPRESENTATION AND UNDUE INFLUENCE – Alienation of property with intent to defraud – nature of intent – whether proved.

TRADE PRACTICES – Misleading and deceptive conduct – whether representation made – whether relied on

Property Law Act 1974 s 228

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355 – cited.

Adderley v Dixon (1824) 1 Sim & St 607, 57 ER 239 – cited.

Re: Albert Life Assurance Co. ex parte Western Life Assurance Society (1870) L.R. 11 Eq 164 – followed.

Ashala Model Agency Pty Ltd v Featherstone [2017] 2 Qd R 1 – considered.

Australian Securities Ltd v Western Australian Insurance Co Ltd (1929) 29 SR (NSW) 571 – distinguished.

Australian Workers Union v Bowen (1946) 72 CLR 575 – distinguished.

Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 – cited.

Bond v Rees Corporate Advisory Pty Ltd [2013] VSCA 13 – cited.

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 – applied.

Carrick v Armstrong [1969] Qd R 185 – cited.

Coghlan v Pyoanee Pty Ltd [2003] 2 Qd R 636 – considered.

Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 – considered.

Concut Pty Ltd v Worrell (2000) 75 ALJR 312 – considered.

Davies v Thomas [1900] 2 Ch 462 – cited.

Deputy Commissioner of Taxation v Peter Sleiman Investments Pty Ltd [2016] NSWSC 1657 – cited.

Equus Financial Services Ltd v Glengallen Investments Pty Ltd [1994] QCA 157 – applied.

General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 – followed.

George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387 – considered.

Harrison v Southcote (1751) 3 Ves Sen 389, 28 ER 249 – cited.

Hewett v Court (1983) 149 CLR 639 – considered.

Holdway v Arcuri Lawyers [2009] 2 Qd R 18 – applied.

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 – cited.

Jenkins v Burke [2015] QDC 249 – cited.

Johnson v Leader Computers Pty Ltd (2014) 118 SASR 408 – cited.

Langen and Wind Ltd v Bell [1972] Ch 685 – cited.

Mackreth v Symmons (1808) 15 Ves 329, 33 ER 778 – considered.

Marcolongo v Chen (2011) 242 CLR 546 – considered.

Masters v Cameron (1954) 91 CLR 353 – applied.

Re: McCallum, Beard v McCallum (1907) 7 SR (NSW) 523 – considered.

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 – distinguished.

Midland Brick Co Pty Ltd v Welsh [2006] WASC 122 – cited.

Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1947] AC 196 – cited.

Moore v Devanjul Pty Ltd [2010] QSC 250 – followed.

Noakes v J Harvy Holmes and Son (1979) 37 FLR 5 – cited.

Oceanbulk Shipping & Trading SA v TMT Asia Ltd [2010] 1 WLR 1803 – cited.

Olsson v Dyson (1969) 120 CLR 365 – cited.

Park & McIntosh v Lanray Industries Pty Ltd [2010] QCA 257 – applied.

Patel v Lal [2011] NSWSC 603 – cited.

Puglia v Basol [2005] NSWSC 1271 – cited.

Rudder v George Hudson Holdings Ltd [1972] 1 NSWLR 529 – considered.

Re Stucley, Stucley v Kekewich [1906] 1 Ch 67 – cited.

Stuntz v The Australian Joint Stock Bank (1891) 12 LR (NSW) Eq 325 – considered.

Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 – applied.

William Brandt’s Sons & Co v Dunlop Rubber Company Ltd [1905] AC 454 – applied.

Walker v Wilsher (1889) 23 QBD 335 – cited.

Wossidlo v Catt (1934) 52 CLR 301 – applied.

COUNSEL:

D de Jersey for the plaintiff

JD Byrnes for the defendant

SOLICITORS:

HWL Ebsworth Lawyers for the plaintiff

Thomson Geer for the defendants

  1. [1]
    In early 2015 a company Sign Site Pty Ltd (“Sign Site”) carried on the business of supplying signs as trustee of a unit trust, the Sign Saint Hybrid unit trust. The plaintiff, a company associated with Mr Jones, who was one of the directors of Sign Site, held one third of the shares in Sign Site, and one third of the units in the unit trust. In April 2015 the plaintiff’s shares and units were transferred to the first defendant, a company associated with the third defendant, the wife of Mr Butcher the second defendant, who was the managing director of Sign Site. This was pursuant to a contract under which the first defendant was to pay, over a period of time, $600,000, but only $65,000 of that has been paid. The plaintiff claims from the first, second and third defendants the balance of $535,000. That claim in contested, on various grounds including a set-off for damages for breach of that contract.
  1. [2]
    In February 2016 the shares and units were in turn transferred by the first defendant to the fourth defendant, a company associated with Mr Butcher, which the plaintiff says was in breach of a contractual constraint on transfer until the whole amount had been paid. The plaintiff seeks relief against the fourth defendant, in equity or under the Property Law Act1974, in respect of the transfer of those interests from the first defendant. There is also a counterclaim against the plaintiff for damages for breach of contract and for misleading and deceptive conduct, and against Mr Jones for damages for misleading and deceptive conduct. That claim is also contested.

Background

  1. [3]
    Around the year 2000 Mr Willems developed in the United States of America a concept of designing and selling signs over the internet, which he exploited through a business Speedy Signs: p 2-94. That became a technology company as well as a sign company, and in due course provided its technology to another American sign business, Signarama,[1]which used it to sell signs over the internet. That business operated through franchises, including in Australia. There was prior to 2012 a Signarama franchise operated in North Sydney by a company Duskheat Pty Ltd, which was associated with Mr Jones: p 45. There were also two Signarama franchises in Brisbane, operated by the fourth defendant.[2]Subsequently Mr Willems established a business Sign Site in America, selling signs over the internet, and a business with the same name was established in Australia.[3]
  1. [4]
    A company Sign Saint Pty Ltd was incorporated on 9 March 2012; it later changed its name to Sign Site Pty Ltd.[4]In March 2012 the Sign Saint unit trust was established.[5]After the Sign Site business was established, Mr Jones wound up the Signarama business and transferred assets and staff to Sign Site, including the office manager, Ms Campbell: p 28.[6]Mr Butcher also wound up his Signarama franchise business, and concentrated on the Sign Site business. The franchisor was not happy about this, and proceedings were commenced in the Supreme Court against Mr Jones and Mr Butcher in relation to their Signarama franchises.[7]In response to earlier correspondence (tab 5), Mr Jones and Mr Butcher resigned as directors of Sign Site and transfers of the first defendant’s shares in Sign Site to the other shareholders were signed, but after the Supreme Court proceedings were resolved between the parties they became directors again, and the transfers of the shares and units were formally rejected by the trustee company.[8]
  1. [5]
    The Sign Site business sold signs, which would be ordered by a customer, manufactured by the company and ordinarily installed by the company: p 58. Mr Butcher was the managing director,[9]with particular responsibility for sales and marketing, while Mr Jones was the operations director, with responsibility for production.[10]In that capacity he would keep track of the level of orders, but he maintained that he had no particular involvement in the preparation of accounts, or in providing material for those accounts: p 49. He said that the business activity statements which the company lodged were prepared by Ms Campbell: p 50.
  1. [6]
    Initially the company accounts for Sign Site were prepared in the United States by people associated with Mr Willems,[11]but difficulty arose because of their lack of familiarity with the requirements of Australian tax law.[12]Subsequently local accountants, Prudent Partners, were engaged who were responsible for preparing the accounts of Sign Site in Australia, and other accounting functions.[13]No-one from that practice concerned with the company’s accounts was called as a witness, though that firm remains the accountants for the company. Initially the company used the Quickbooks accounting system. In July 2014 however the company changed to the Xero account system, at the suggestion of the accountants.[14]
  1. [7]
    One aspect of the company accounts was that at times, when an order for a sign was placed, an internal invoice was raised for the work involved, which was however not sent to the customer; the customer was only invoiced after the sign or signs had been manufactured and installed, which could well be some time later.[15]This was referred to during the trial as “pre-invoicing”, and it had the effect that work in progress was treated for the purposes in the company accounts as income at its full value as soon as the order was placed. Mr Butcher said this was done to meet sales objectives, p 4–61. In fact it was done to make the company’s financial position look better at a time when it was seeking an increased overdraft.[16]It had the effect of inflating the income of Sign Site artificially: p 4–65.
  1. [8]
    Work in progress has value, particularly when the work extends over a considerable period of time, though the issue of valuing work in progress can be complex.[17]Attributing no value to work in progress tends to understate the financial position of a company, but is seems to me that valuing work in progress at the full invoice price from the time the order is placed will overstate the financial position of the company.[18]Whether this overstates the asset or the income position (or both) depends on how the pre-invoices have been brought to account as income and on the balance sheet of the company. Mr Jones said this was done from an early stage, and that it occurred at the direction of Mr Butcher: p 56, 58. Mr Butcher agreed that it occurred. I shall deal with this further later.
  1. [9]
    The company initially had grand ambitions: Exhibit 1 tab 3. It did not live up to them, and appears to have struggled even as a business within a part of the Australian market.[19]It is unnecessary for me to trace the breakdown of the relationship between Mr Jones and Mr Butcher. By early 2015 it had reached the point where, at a meeting of the board of directors of Sign Site on 6 February 2015, Mr Jones was removed as a director.[20]Whether this was effective in terms of his position as director does not matter;[21]for practical purposes he was excluded from the management of the company, and he ceased to be employed as chief operating officer.[22]The plaintiff still held units in the unit trust however and Mr Jones remained its representative at meetings of unit holders.[23]The plaintiff also remained a shareholder in Sign Site.
  1. [10]
    With a view to bringing this to an end, on 7 February 2015 Mr Butcher sent Mr Jones an offer to purchase the plaintiff’s shares in the company.[24]Mr Jones brought proceedings for wrongful dismissal in the Fair Work Commission,[25]and also complained that the company had not regularised the termination of his employment, as he was owed money for unpaid wages, and on a director’s loan account,[26]and that the plaintiff was owed money for unpaid dividends.[27]For present purposes the rights and wrongs of these claims do not matter, though it does seem clear that when Mr Jones was dismissed no systematic attempt was made to finalise issues such as entitlements as an outgoing employee and director, or loan accounts. On 2 March Mr Butcher made an offer to Mr Jones on condition that he withdraw his unfair dismissal claim, which was rejected.[28]
  1. [11]
    On 25 March 2015, there was a conciliation meeting in the Fair Work Commission.[29]I have evidence of this from Mr Jones and Mr Butcher, and their evidence differed as to what happened. Mr Jones’ explanation of what happened on that day was that the Commission said it would examine the information presented: p 2-4. Mr Butcher asserted in effect that the representative of the Commission present said that Mr Jones’ application could not succeed.[30]That seems unlikely since after the meeting Mr Butcher initiated talks with Mr Jones with the view to settling matters between them. Mr Jones said that Mr Butcher rang him and suggested a meeting to resolve the matter, and that at Mr Butcher’s request he withdrew the application to the Fair Work Commission.[31]
  1. [12]
    On 26 March there was a meeting between them at the apartment hotel where Mr Butcher was staying: p 2–4. Mr Jones said that Mr Butcher did not want lawyers involved in this negotiation, and there were no lawyers involved: p 2–5.[32]Mr Jones said that Mr Butcher made an offer which at his request Mr Butcher put in writing in the form of an email.[33]After the meeting Mr Jones thought about the offer, but decided that the amount was insufficient, and telephoned Mr Butcher and told him as much: p 2-79. A further meeting was arranged for early on the following day. On this occasion Mr Jones asked for $600,000, and after some discussion Mr Butcher agreed to pay that. There was also some discussion about timing of the payments. Mr Butcher then made some amendments to an existing document he had on his tablet, to put it into a form acceptable to Mr Jones, whereupon each of them signed the document electronically on the tablet, and a copy of the signed agreement was emailed to Mr Jones.[34]
  1. [13]
    I shall deal with the terms of the agreement later, but on its face it contemplated that there would be a more formal agreement made between them, and ultimately a further agreement was entered into. This was the document in Exhibit 1 tab 42 (“the tab 42 agreement”). Prior to its execution there were negotiations by email between the parties as to who were to be the parties to, and the terms of, this agreement.[35]It is unnecessary for me to refer to the detail of these negotiations. For present purposes it is sufficient to say that Mr Jones pressed to have Mr Butcher and his wife made parties to this agreement,[36]but Mr Butcher refused, and Mr Jones signed the agreement as it was, on its face an agreement between just the plaintiff, the first defendant and Sign Site.
  1. [14]
    If the tab 42 agreement did supersede the tab 38 agreement, it follows that the earlier agreement cannot give rise to any continuing rights now enforceable against any parties. This is of significance because the plaintiff’s case in contract against the second and third defendants depends on their being parties to the tab 38 agreement, and to their obligations under that agreement surviving, at least as against those parties, notwithstanding the execution of the tab 42 agreement. Although issues as to the effect of the tab 38 agreement arise first in time, if the tab 42 agreement superseded and discharged it, it is strictly unnecessary to decide those issues, though I should do so on a precautionary basis. I should however first say something about the credibility of the witnesses.

Credibility

  1. [15]
    There were some aspects of Mr Jones’ evidence which I was wary about, particularly the conflict between his evidence and the evidence given by Ms Crawford as to the extent to which Mr Jones had adjusted draft BAS returns which she had prepared.[37]However Ms Crawford was called as a witness for the plaintiff, so counsel for the plaintiff could not cross-examine her, and she is still employed by Sign Site, in effect by Mr Butcher. I found her explanation for having recorded lease payments as assets in the accounts of Sign Site unconvincing,[38]and suspect that this was done because she was aware that similar payments had been treated in that way in the previous financial year, one of the matters Mr Butcher was discussing when speaking about “adjusting” the accounts of the company to produce a profit when the raw accounts showed a significant loss.[39]There was no evidence that the final result of the ATO audit was that the BAS returns signed by Mr Jones regularly understated amounts, in a way which would be consistent with Ms Campbell’s evidence, and a number of the BAS statements Mr Jones signed were prepared by the accountants, and not changed by him.[40]I am not prepared to reject Mr Jones’ evidence just because of this conflict; indeed, it causes me to doubt Ms Campbell’s credibility.
  1. [16]
    Apart from this, Ms Campbell said she took over preparation of BAS in mid 2013 from the people in America, and Ms Jackson was not involved in Sign Site: p 34. She said she prepared draft returns which were amended, and she filed copies of the draft and final returns: p 35. Ms Jackson said she prepared the BAS until December 2013 (p 2-64) and there are documents in Exhibit 2 in December 2012 and February 2013 consistent with her preparing the BAS for September and December 2012: tabs 12, 14, 19.[41]It appears she later adjusted all BAS from 2012 to the end of 2013: Exhibit 2 tab 131.[42]She spoke of having to “fix up” the returns, to adjust expenses to allow for supplies purchased through the fourth defendant: p 2-59, 71. On 21 May 2014 she emailed the accountants seeking copies of all previous BAS for Sign Site, since Ms Campbell “didn’t keep any copies of any paperwork of the ones that she has lodged”: Exhibit 2 tab 126.[43]This also makes me doubt Ms Campbell’s evidence. Overall, where there is a conflict, I prefer Mr Jones’ evidence.
  1. [17]
    Ms Jackson spoke of her involvement with Sign Site as essentially confined to sorting account payments made by, or purchases by, the fourth defendant on behalf of Sign Site,[44]but there are a number of early documents which show her involvement with Sign Site was wider. Her email in Exhibit 2 tab 14 shows her involvement with the whole BAS, tab 17 shows her involved in other matters, tab 19 has her commenting on the payroll system, and by tab 31 in June 2013 she was involved with invoices, and reminding Mr Butcher that the PAYG was not paid. In August 2013 she reported to Mr Butcher about arrangements to limit her Sign Site work in favour of Ms Campbell, although in May 2014 she was revising BAS: tab 131.
  1. [18]
    It was submitted that Mr Jones had falsely denied or minimised his involvement in the accounts of Sign Site, but my impression is that his involvement was largely formal and superficial.[45]It seems to me that it was Mr Butcher who was mainly involved in dealing with the accountants,[46]and they operated on instructions from Mr Butcher and on the computerised accounts which were the product of Ms Campbell. It was submitted that the various returns and declarations which had been signed by Mr Jones showed that he was familiar with the details of the accounts of Sign Site. Mr Jones said that he believed that what was presented to him for signing was correct: p 2-45, 46. It was argued he could not have had this belief if he did not have regard to the accounts of Sign Site, but the obvious explanation for such a belief is that he trusted Ms Campbell and the accountants to have prepared proper returns.
  1. [19]
    The defendants went to some trouble to try to show that Mr Jones was in a practical sense familiar with and responsible for the accounts of Sign Site. There are some formal company documents which allocated responsibility for the accounts to Mr Jones rather than to Mr Butcher or anyone else in particular, but in circumstances where there were only two directors such an allocation is largely nominal. Mr Jones had no accounting training, and he had the very difficult and time consuming task of being in charge of operations, that is to say, the actual production and installation of the various signs which Mr Butcher had sold to customers. That would have been a very demanding task, as shown by the fact that the minutes recorded at times that there were various difficulties in satisfying the requirements of all the customers.
  1. [20]
    With all this on his plate, I think it most unlikely Mr Jones would have had any time to take much of an interest in the accounts of the company. His responsibility would have been in practice essentially formal and nominal, particularly where it seems that he was only given the responsibility because he worked in Sydney, as did Ms Campbell who was keeping the books on a day to day basis. In those circumstances he would have signed tax return declarations simply because he was the director who was more readily available to do so. It was said that Mr Jones presented reports to the board meetings, but the evidence suggests that in fact it was Mr Butcher who was the liaison between the accountants and the other members of the board in relation to the financial accounts of the company. For example, the BAS statements for the September and December quarter in 2012 and the March and June quarter in 2013 were all signed by Mr Jones but the returns had been prepared by Prudent Partners and sent by them to Mr Butcher and Mr Jones on 8 August 2013: Exhibit 2, tab 35, where Mr Butcher then told Mr Jones to arrange with the accountants for these to be submitted. Mr Jones signed the declarations the following day.
  1. [21]
    I was referred to an email, Exhibit 2 tab 34 on 6 August 2013, which on its face was instructions by Mr Jones to Ms Campbell to concentrate on getting accounts payable and receivable up-to-date rather than helping other people with their work. The email refers to things that “we have to start looking at” next week. That however was essentially just an exercise in Mr Jones giving instructions about what Ms Campbell was to do herself, and does not demonstrate any particular knowledge of or familiarity with the accounts.[47]When cross-examined about this document, Mr Jones conceded that he was involved with accounts receivable and accounts payable: p 2-28.
  1. [22]
    It was submitted that his evidence of a personal assurance by Mr Butcher that he would be paid was fanciful,[48]but Mr Butcher struck me as someone who would engage in that sort of theatricality,[49]and I find his evidence decidedly less credible. I would not criticise Mr Jones for the plaintiff’s attempts to build a case against the second and third defendants. Mr Jones also seemed to be quite upset, understandably, at what had been done to him, and at times somewhat nervous in the witness box. On the whole however it did not seem to me that anything particularly damaging to his credibility was exposed during cross-examination.
  1. [23]
    On the other hand, I formed a decidedly unfavourable view of Mr Butcher, and would not place any reliance on any of his oral evidence unless it was supported by other credible evidence, generally contemporaneous documents, or inherently plausible. He manipulated the company accounts to make them look better than they were by the pre-invoicing and the resulting inflation of trade creditors, and therefore the value of assets, in order to keep the bank happy, which I regard as dishonest. Mr Butcher’s statements in the board meeting on 23 October 2014, Exhibit 1 tab 11 on p 3, make it clear that he was the one responsible for this, as a means of hiding losses in the first trading year. On p 4 he spoke of showing a loss in the second year (2014) because “we stole a million dollars from it.” That loss was also covered up by pre-invoicing.
  1. [24]
    That pre-invoicing was continuing is shown by the transcript of the conversation on 11 March 2015 Exhibit 1 tab 34 at p 11, where Mr Butcher said among other things “the business has pre-invoiced to the tune of about currently $800,000.00 worth of work which is showing on the balance sheet…”. Clearly this was something Mr Butcher was well aware of. Indeed he was responsible for it. It was a matter of manipulating the accounts to conceal from the bank the fact that the company had actually made a big loss during its first year: tab 11 p 3.[50]
  1. [25]
    In the meeting of 23 October 2014, Exhibit 1 tab 11, Mr Butcher said on p 4:

“But the good news is that we’ve got understated stock and there are other expenses and costs in the business which have been put through to cost of goods when they can be put down as assets and stuff like that[51] so what that means is that we’ve got to wait to spin the numbers a little bit more and just stick it out to putting us into a profit state for that last financial year which I will be doing that over the coming days with the accountant.”

  1. [26]
    He had earlier said “our zero books is showing a loss of $100.000.00 in that second year.” What he described in that paragraph was adjusting the figures generated by the electronic accounting system so as to get rid of an operating loss of $100,000.00 which appeared on the face of the books of the company for the 2014 year. That this was successfully completed by him and the accountant was shown by net income of $143,143.00 in the profit and loss account for 2014 as submitted to the bank, Exhibit 2 tab 223.[52]This was done in order to deceive the bank as to the true financial position of the company. That in my opinion was dishonest, and is significant for the credibility of Mr Butcher’s evidence.
  1. [27]
    Apart from that, there were parts of his evidence of the negotiations with Mr Jones which were contrived, and not consistent with the documents. He said for example that at the meeting on 26 March 2015 he put forward two goodwill payments “to ensure that the status of the business as he was presenting it was to be correct and that the good will payments were incentive for him to work with me with regard to the transition from him out of the business”: p 3–64. He also said that the agreement on 27 March came to involve an additional $200,000 by way of an increase in the goodwill payments after he said to Mr Jones: “that’s definitely subject to the business succeeding as far as continuing to trade, that there’s nothing untoward that I don’t know about, that everything is in order and I can rely upon you to transfer all the information that you have back to me so I can properly get on with running this business.”[53]
  1. [28]
    The difficulty with that evidence is that it is inconsistent with the terms of the document which Mr Butcher himself composed on 26 March, and then modified on 27 March before it was signed: in neither case was the goodwill payment expressly made conditional upon the business having the financial position “presented” by Mr Jones, or that there was nothing untoward about the business that Mr Butcher did not know about. The warranties about the position of the business were only introduced later, by the lawyers. In those circumstances the ideas that this was said expressly to Mr Jones on 26 and 27 March, and that Mr Butcher was in fact concerned about this at the time, are unconvincing and contrived. Mr Butcher did not want Mr Jones to work with him in any transition, he had already been excluded from the business, and Mr Butcher just wanted him gone.
  1. [29]
    Also contrived was what was said by Mr Butcher at p 3–65, as to why the names of Mr and Mrs Jones and Mr and Mrs Butcher were added after the names of the plaintiff and first defendant in the tab 38 agreement:

“I just suggested it for the sake of not creating confusion that Zoe and I were attached to Visual Integrity and he and Robin were attached to Hilchrist”.

The notion that there might have been some confusion as to which company was the family company of which family is laughable.[54]I strongly suspect that the names were inserted so as to give the widest possible operation to the various releases and discharges included in the document: that would be a logical reason for taking that step, particularly if Mr Butcher had not thought through the implications of adding the individuals as parties to the agreement in this way. Of course once he took the document to lawyers he would have been advised of this, so by the trial he was keen to defuse any suggestion that these people had been deliberately added as parties.

  1. [30]
    His attempts to create an impression that he had very little to do with the accounts, and that the state of the company’s accounts up to the time when Mr Jones was removed from his position were the product of Mr Jones’ efforts alone, were obviously quite contrived, since it was clear that he was the one who had the established relationship, and who ordinarily dealt, with the accountants Prudent Partners, and very clear from the transcript Exhibit 1 tab 11 that he was the one who was responsible for manipulating the accounts in order to present a favourable impression to the bank. He was managing the detail of cash flow problems.[55]He spoke at one point in evidence in chief about “inserting myself as managing director with the external accountants” (p 3–40) but when he was cross-examined about that expression he persistently attempted to distance himself from involvement with the accounts or the accountants.
  1. [31]
    It was also obvious from some answers, particularly at p 3–27 lines 14, 15, that he was personally very bitter towards Mr Jones.[56]Some of his answers were long-winded and rambling, as if he was attempting to deal with difficult questions just by talking a lot.[57]He was also inconsistent in his answers to me at pp 3–41, 42 about how long expenses for Sign Site were being charged to the fourth defendant, evidence which still did not justify the proposition that there was some continuing ongoing difficulty in “reconciling” accounts between the fourth defendant and Sign Site. At p 3-73 he said he found the notice from the ATO on 7 September 2015 about understated PAYG returns for the 2015 financial year “unbelievable”, and that he had complained to Mr Jones about this (and other things) on 11 September 2015 because Mr Jones was the one who had completed the returns. But the deficiencies in the 2015 financial year in PAYG remissions arose from incorrect returns put in (very late) by Mr Bishop, and he was aware in March 2015 of accounts which showed a debt for unremitted PAYG as at 30 January 2015 of over $300,000: Exhibit 1 tab 19.
  1. [32]
    He disclaimed any involvement in BAS until after Mr Jones had been removed from his position (p 3–34), noting that he did not have access to the accounts when they were on QuickBooks: p 4-60. That was contradicted by an email in Exhibit 2 tab 17, which he affected not to recall: p 4–60. That Mr Butcher did not have personal access to the QuickBooks files (if that were the case) is of no great significance, in circumstances where the accountants had such access from about June 2013: p 33.[58]He had access to Xero from July 2014. By March 2015 he was sufficiently familiar with the Xero accounts to assemble Exhibit 12: p 4-106. Mr Butcher was also not forthcoming about the fact that he had partly undertaken a commerce degree at university, no doubt attempting to distance himself from anything to do with accounts.[59]
  1. [33]
    On 16 October 2015 Mr Butcher affirmed an affidavit filed in the Supreme Court in support of an application to set aside a statutory demand served on the first defendant by the plaintiff on 1 October 2015: Exhibit 1 tab 16. In paragraph 16 he said that a list of taxation liabilities of Sign Site became known to him after the tab 42 agreement was signed. The list included the opening balance figure of $40,055.46, but Mr Butcher was told that a sum of a little more than that was owing in an email from the accountants on 17 Match 2015 (Exhibit 2 tab 250), which was apparently sent again on 2 April 2015: tab 256. Mr Butcher admitted that he did know that this payment was outstanding before the agreement was signed: p 4-88. As well, in paragraph 14 he said that “Mt Jones … had not submitted a large number of lodgements … .” In context this related to BAS and PAYG returns, and the discovery was said to have been made after 21 May 2015. The email of 17 March 2015 tab 250 also advised that the result of the negotiations between the accountants and the ATO about the lodgement of BAS and other lodgements undertaken “as per your request” and listed the returns listed in the defence paragraph 47. The email of 2 April 2015 Tab 256 reminded him that these returns were still outstanding, and that it was “vital that these outstanding items get lodged” by 7 April. Mr Butcher therefore affirmed an affidavit which was false in these two respects.
  1. [34]
    His evidence that he relied on the accounts of the company for his belief as at 27 March 2015 that the shares and units were worth $7-800,000 (p 4-105) was also false, as shown by the transcript of the unitholders meeting on 11 March 2015 (Exhibit 1 tab 34 p 11) where he spoke of the need to strip pre-invoiced work out of the balance sheet: “the balance sheet position will shift from showing us in a position of 900 odd thousand on the balance sheet to being virtually zero.” This shows that he knew in March 2015 that the accounts of the company had been artificially inflated by the pre-invoicing, and that without this feature the book value of the company was essentially nothing, as his solicitors said in their letter of 11 March 2015: Exhibit 1 tab 35.[60]    
  1. [35]
    There also seemed to have been some surprising holes in the defendant’s disclosure, particularly documentation held by the accountants, or associated with the tax office audit of the accounts of Sign Site. Although by the last day of the trial the tax audit was said to have been completed (p 5-5) no documentary evidence about the outcome of the audit was produced, or to support Mr Butcher’s evidence that he and the accountants had been absolved from fault, although I said its absence would be a matter for comment: p 5-5. Mr Butcher’s account of the difficulty he had in dealing with the company accountants about documentation which they had been asked to produce (multiple times according to Mr Butcher: p 4–50) was really quite theatrical and unbelievable: p 4–50. He said that he did not know what documents solicitors need or don’t need to prove a case; that is not the point, and in any event the solicitors had advised what documents he needed to disclose. I know that, not just because that is what any solicitor would do in the circumstances, but because on 28 August 2017 a certificate by the solicitor about disclosure was handed up in accordance with the practice direction, certifying that the solicitor had “fully explained to my clients the duty of disclosure under chapter 7 of the Uniform Civil Procedure Rules”. Overall I regard Mr Butcher as a thoroughly unreliable witness.

Was the tab 38 agreement superseded?

  1. [36]
    In my opinion the tab 42 agreement did supersede the tab 38 agreement. The proposition that a relatively informal agreement can be subsequently superseded by a more formal agreement is one which has long been recognised by the law, and one which usually gives rise to difficulty only if the more formal agreement is not ultimately made between the parties. Where it is made however it is well established that its effect is to supersede the earlier agreement.
  1. [37]
    The essential functions of the tab 38 agreement was to provide for the sale by the plaintiff to the first defendant of the shares in Sign Site Pty Ltd and the units in the unit trust, and for the releases by the plaintiff and Mr Jones of all claims he otherwise had on the company or Mr Butcher or his interests. That was also the functions of the tab 42 agreement. That latter agreement was prepared by solicitors, and was a more formal agreement. It dealt with matters with greater precision of language,[61]and it contained some additional terms of a kind one might expect to find in a more formal agreement. There is the further consideration that there was nothing stated in the formal agreement which expressly or impliedly indicated that any aspect of the earlier agreement was to survive. It expressly recited that the terms of the sale and purchase were to be those “set out hereunder”. Further, special condition six contained a mutual release from all obligations between the plaintiff, the first defendant, the unit trust and the company to each other, other than the obligations contained within that agreement. That would have the effect of discharging any obligations between the plaintiff, the first defendant and the company created by the tab 38 agreement. In those circumstances in my opinion the tab 42 agreement is binding between the plaintiff and the first defendant, subject to any relief granted pursuant to the counterclaim, and superseded the tab 38 agreement.
  1. [38]
    Counsel for the plaintiff referred to the decisions in the High Court in Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 and Concut Pty Ltd v Worrell (2000) 75 ALJR 312. In the former the court confirmed the statement in Tallerman & Co. Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 144:

“The parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement.”[62]

In Sara Lee there was a contract for the sale of land, and a later agreement which varied that contract in important respects, changing both the purchase price and the identity of the purchaser. Nevertheless, the later agreement expressly provided that it functioned as “an amendment” of the earlier agreement, and that “except as provided in this agreement … the [earlier] agreement remains in full force and effect.”  In these circumstances the court had little difficulty in concluding that the later agreement took effect as a variation of the earlier agreement, and did not replace it.

  1. [39]
    In Concut (supra) an employee of a company who initially was engaged on an oral agreement entered into a written contract of service “to record the terms and conditions of the employee’s employment with [Concut]”. In subsequent proceedings by the employee for wrongful dismissal, an issue was whether that agreement was a new and discrete contract of employment replacing the earlier oral agreement between the parties. The High Court held that the written contract did not have the effect of releasing any entitlement to terminate which had arisen prior to it because of breach by the employee. Whether it had that effect was decided by reference to the terms of the written agreement, and the surrounding circumstances: [20]. The majority noted that the written agreement recited that the employee was an employee of the company, and manifested no intention to displace accrued rights and liabilities. It specified a term for the employment, but not a starting date. Indeed one clause expressly provided that nothing in the agreement “shall in any way, limit or restrict the accrued rights of the employee with respect to prior service … .”  In these circumstances, it was not difficult for the High Court to reach the conclusion that the written agreement modified the existing contract of employment between the parties, but did not substitute a wholly new contract, and did not have the effect that any undisclosed serious misconduct committed prior to that date became irrelevant: [22].
  1. [40]
    Given the terms of the later agreements considered by the High Court in those two cases, the conclusions reached by that court are unsurprising. There are no equivalent indications in the present case. On the face of it, the tab 42 agreement is a complete agreement between the parties to it, and it contains no express recognition of any relevant earlier contractual relationship such as the tab 38 agreement. This is not an agreement governing a continuing relationship which could be seen to have been modified in some way, but to be otherwise continuing: it was an agreement essentially for the disposition of certain property and for associated releases, and on its face a complete statement of how that process was to be undertaken, and therefore naturally to be read as something which has superseded the earlier agreement. The context provides some support for this, in that the earlier agreement expressly provided that there would be a more formal agreement entered into.
  1. [41]
    Sara Lee and Concut were referred to and applied by the Court of Appeal in Coghlan v Pyoanee Pty Ltd [2003] 2 Qd R 636 at [5], [6]. In that judgment McPherson JA expressed the proposition that what was involved was “a comparison of the earlier and later contracts and an assessment of the significance, if any, of the differences between them in the light of the circumstances surrounding the contracts. To establish rescission, the latter contract must … be entirely inconsistent with the earlier contract; or, if not entirely inconsistent with it, be inconsistent with it to the extent that goes to the very root of it.”  In that case there had been a written contract for the sale of land under which the balance purchase price was payable at completion. The parties subsequently entered into an agreement which purported to vary the contract to provide for vendor finance, in a way which it was accepted at trial was void for uncertainty. The issue was whether that agreement had nevertheless effected a release of the earlier contract. It is not a test which would naturally apply in circumstances where an informal contract has been followed by a formal contract which essentially covered the same ground, but which had a significant difference. In such a situation, it would not be surprising if the later contract was substantially consistent with the earlier one. The essential issue is whether there was a change in the parties, and the effect on the existing contract of the deliberate omission from the later contract of some of the parties to the earlier contract.
  1. [42]
    It was submitted by the plaintiff that the tab 42 agreement did not supersede the tab 38 agreement because there were matters covered by the tab 38 agreement that were not covered by the tab 42 agreement. This was related to the submission that the later agreement did not discharge the earlier one because the parties were different. The tab 38 document is drafted without distinguishing between the companies and the people behind them, and it is in other respects drafted without precision. For example the second paragraph speaks of “my offer to purchase your entire unit holding” whereas the reference to the stages talks about “shares” in the Sign Saint Trust. There were in fact shares in Sign Site Pty Ltd, and units in the Sign Saint Unit Trust. There was also a reference to “Site Group Investments” which is obscure.
  1. [43]
    The agreement stated expressly:

“Seller: HILCHRIST, Alan Jones, Robin Jones

Buyer: VISUAL INTEGRITY, Andrew Butcher, Zoe Butcher.”

That this extended deliberately to two individuals apart from each company was shown by the fact that part of what was promised was that the buyer would arrange “the release of seller from company guarantors [sic] with banks and leases and transfer obligations and guarantees to the buyer.”  I expect that bank and other guarantees would have been given by individuals, not by the plaintiff, and if they were to be transferred it would be to Mr Butcher and his wife rather than to the first defendant, if as usual guarantees by natural persons were sought.[63]

  1. [44]
    The use of the broader definitions of seller and buyer also fitted in better with the special conditions about the assets “provided by the seller”, including assets “in the name of the seller or their associated entities such as Duskheat Pty Ltd … .” The second paragraph under the heading Special Conditions was also obviously intended to extend to individuals rather than just the plaintiff and the first defendant, particularly because of the reference to claimed wages and loans in general. The document was signed by Mr Butcher as “MD Sign Site Pty Ltd, Visual Integrity Pty Ltd.”[64]Overall therefore it seems to me that there are a number of indications to show that the parties to the agreement included Mr and Mrs Jones personally as well as the plaintiff, and Mr and Mrs Butcher personally as well as the first defendant.
  1. [45]
    On the other hand, the tab 42 agreement clearly identifies the three parties to it, although there are provisions in the document which refer to the position of “associated entities” or “related parties” to the parties to the agreement: special conditions 2, 3, 4, 5. This document is not well drafted. Although the terms “vendor” and “purchaser” were defined and used generally in the agreement, the special conditions in clause 3 use the expressions “seller” and “buyer”, while clause 7(b) uses the term “vendors” in the plural, and clause 9 manages to use that term in both singular and plural. Nevertheless, there is nothing of substance in the wording of the tab 42 agreement to suggest that there are any parties to it other than the three nominated by the document itself.
  1. [46]
    That does not in my opinion cause any difficulties in the operation of the later document. To the extent that there are obligations to non-parties, such as the obligation in clause 3 for the purchaser to arrange the required company guarantor releases, they could have been enforced if necessary pursuant to the Property Law Act 1974, s 55. In so far as special condition 2 required assets to be transferred to Sign Site or the trust by persons other than the vendor, the condition amounted to a promise by the vendor that that would occur, in effect a promise to procure such transfers. In the same way, an obligation to release a loan from a related party of the vendor to a related party of the purchaser within special condition 3 could be covered by treating that as an obligation on the relevant party to the agreement to procure such a release from the related party. On the whole I do not think that there is any difficulty caused by interpreting the tab 42 agreement as one just between the vendor, the purchaser and the company. That does mean that to some extent there were obligations contained in the tab 38 agreement which were not carried over into the tab 42 agreement, in particular as to who was liable to make the payments to the seller under the agreement. That is not in my opinion inconsistent with the proposition that the new document superseded the old document.
  1. [47]
    It is of course possible for a situation to arise where parties will restate in more precise terms part of an earlier agreement, while leaving the balance of the earlier agreement in place.[65]In the present case however the major difference between the two agreements lies in the omission of the natural persons from the identification of the “buyer” and “seller”. In effect, it is a situation where there was a change in the parties to the agreement. It has been said that a situation where there is a change in parties is one which ordinarily involves a new contract coming into existence which replaces the former contract.[66]Commonly this occurs in a situation where a contract between A and B is replaced by a contract between A and C, in which situation the agreement of all three parties is required.[67]In the present case the natural persons who signed the tab 42 agreement were the same as the natural persons who signed the tab 38 agreement, and the difference is that the natural persons who were parties to the earlier contract were omitted from the later. That seems to me to be a good example of a situation where there has been a new contract which replaces entirely the earlier contract, specifically with the intention of omitting those additional parties.
  1. [48]
    The alternative interpretation would be somewhat cumbersome. The plaintiff’s argument is really that the later contract may have amended or restated the terms of the agreement between the plaintiff and the first defendant, and the company, but left untouched the contractual obligations owed by and to the natural persons, on the basis that they were not parties to the later contract. That would produce a commercially inconvenient situation, which is in itself a reason not to interpret the later contract in that way. It would mean for example that as between the plaintiff and the first defendant, the entitlement to receive the last two payments was dependent on the plaintiff not having breached the conditions of the tab 42 agreement, whereas the entitlement of Mr and Mrs Jones under the tab 38 agreement was dependent upon them not having breached the conditions of the tab 38 agreement.
  1. [49]
    There is also a difficulty created by the identification of the nature of the right held by the multiple sellers and multiple buyers. At common law in the absence of anything to sever the obligations, the presumption would be that the promises were joint rather than joint and several, or several.[68]In Queensland that would be subject to the operation of the Property Law Act 1964 s 54, which would make the relevant promises, promises made jointly and severally by each of the persons. The tab 38 agreement however was made in New South Wales, where there is no equivalent to s 54. In those circumstances, the common law rule applies, and the obligations were joint. But the release of one joint promisor discharges of all of them.[69]In the tab 42 agreement, there was an express release of the first defendant from all obligations other than those within that agreement, which would include a release from the obligation to pay money to the plaintiff under the tab 38 agreement. That also released the obligation on Mr and Mrs Butcher under the tab 38 agreement to pay the money. Indeed, even if s 54 had applied, the release of the first defendant would still have operated as a release of all three, because the release of one joint and several covenantor discharges the others in the same way as with a joint covenant.[70]
  1. [50]
    The position therefore is that the involvement of the natural persons in the tab 38 agreement, and their obligation to pay the various amounts payable under it, was necessarily discharged when the plaintiff and the first defendant entered into the tab 42 agreement. In those circumstances, it cannot assist the plaintiff to show that the tab 38 agreement survived in some way as an obligation to pay money on the part of the second and third defendants, because it necessarily did not.
  1. [51]
    There is also the consideration that some of the provisions of the tab 38 agreement, to which I have already referred, amounted to an immediate release of various obligations including loans to or from the seller in the broader sense, and any entitlements of the seller in the broader sense to wages, dividends or loans in general. To the extent that these releases took effect immediately, they had already taken effect prior to the tab 42 agreement being entered into, and the rights released would not be revived by the release of the tab 38 agreement. In those circumstances, the fact that in this respect the operation of the tab 38 agreement was wider than that of the tab 42 agreement does not assist in showing that the latter did not supersede the former. Overall therefore I conclude that that was the effect of the tab 42 agreement, and that the tab 38 agreement was replaced by it, so that no rights under the tab 38 agreement can now be enforced by the plaintiff.
  1. [52]
    An argument was advanced by the plaintiff that the second and third defendants were by implication parties to the later contract, the tab 42 agreement. There is nothing in the document itself to support such an interpretation, and in particular to support the proposition that they were impliedly taking on the obligation, jointly or jointly and severally, with the first defendant to pay the amounts payable under that agreement. There is nothing in the surrounding circumstances to justify implying such an obligation. Apart from the fact that at one point Mr Jones had asked that they be parties and they had refused to be parties, which would make it I think very difficult to imply such a provision into the agreement subsequently executed, I am not at all sure that a party can be included in a contract by implication.
  1. [53]
    The concept of an implied term of a contract has been discussed in the context of implying into a contract terms additional to the express terms thereof. In the case of a term which is implied specific to a particular contract, one of the requirements in the classic statement of the conditions for a term to be implied is that the implied term “must not contradict any express term of the contract.”[71]The tab 42 contract is introduced with the statement “this agreement dated … between Hilchrist Pty Ltd … and Visual Integrity Pty Ltd … and Sign Site Pty Ltd … .”  Further, the term “party” is defined as meaning those persons or entities named in this agreement, which in the context must mean named as parties in the agreement, and which are to sign the agreement, because the definition of “agreement date” is “the date the last party executes this agreement”. So to imply additional parties into the agreement would be inconsistent with the express terms of the agreement. Accordingly the second and third defendants are not implied parties to the tab 42 agreement.

Precautionary findings

  1. [54]
    In these circumstances it is not strictly necessary for me to make any findings about the effect of the tab 38 agreement. Nevertheless, in case a different view of the matter is taken elsewhere, and in deference to the detailed submissions made on these issues, I should express my conclusions on these matters on a precautionary basis.
  1. [55]
    It will be apparent from what I have said that in my opinion the second and third defendants, and Mr and Mrs Jones, were parties to the tab 38 agreement. I reject the submission of the defendants to the contrary. The identification of the parties to a contract is a matter of interpretation of the contract, to which the ordinary rules apply. In the present case, the actual words of the document have as their obvious prima facie meaning the proposition of the term “seller” was defined as the company and the two individuals Mr and Mrs Jones, and that the term “buyer” was defined as the first, second and third defendants. There is nothing in the document inconsistent with that interpretation, and there is nothing inherently implausible in that situation, for the reasons referred to earlier. The fact that this was a preliminary agreement and drawn up without the benefit of legal advice is not inconsistent with the inclusion of the individuals behind the companies as parties.[72]
  1. [56]
    The fact that Mr Butcher and Mr Jones actually signed the contract is not itself of any great significance, particularly when Mr Butcher obviously did so on behalf of both the first defendant and Sign Site Pty Ltd. The fact that the document made provision for signing only by the two individuals in my opinion supports an inference that each was signing both personally and as agent for the other relevant entities, the plaintiff and Mrs Jones in the case of Mr Jones, and the first defendant and the third defendant and Sign Site Pty Ltd in the case of the second defendant.[73]The defendants’ arguments in relation to the interpretation of this document really involved disregarding completely the two lines which commence with the words “seller” and “buyer”. Although there are some textual inconsistencies, such as the subsequent use of the terms “seller” and “buyer” as singular, the document is not so precisely drafted as to make grammatical infelicities of such a nature significant.
  1. [57]
    The assertion that the second and third defendants had no obligations owed by or to them was really circular; that depended on whether they were included in the obligation on the “buyer” to make various payments under the agreement. There is no difficulty in principle in three persons promising to transfer to a buyer something owned by one of them, since the other two are simply promising that that will happen.[74]There is also no difficulty in three persons contracting to purchase something, at least as long as they all agree on the identity of the person to whom the property is to be transferred. Although the document did not refer to any particular disputes, it did refer to “claimed wagers, dividends and loans in general” which implies some dispute. The fact that it was entered into to resolve all issues between the Jones interests and the Butcher interests is apparent from the context in which it was made.[75]The other arguments set out at length in the defendants’ written submissions are either inconsequential or unpersuasive.
  1. [58]
    Overall I have no difficulty in concluding that the second and third defendants were parties to the tab 38 agreement. The plaintiff argued that if the second and third defendants were not parties to the earlier contract, they were parties by implication. Given my finding that they were expressly parties to the earlier contract, it is unnecessary to consider that argument. Indeed, on the view I take of the tab 38 agreement it would be quite artificial for me to consider it.
  1. [59]
    There is a further issue on the pleadings about whether the tab 38 agreement was entered into for the purpose of settling disputes between Mr Jones and the first to third defendants regarding the circumstances of Mr Jones’ removal as a director of Sign Site, Mr Jones’ claim for outstanding wages, and the plaintiff’s claim for repayment of loans and unpaid dividends. This was denied, but I think it is clear from the terms of that document that it was intended to resolve all disputes between anybody, so that thereafter no party (or related person) was to have any claim on any other party other than under the agreement. That involved resolving all the disputes, including all claims which had been or possibly could be made by Mr Jones personally and by the plaintiff against other entities. For practical purposes, the disputes were between Mr Jones and Mr Butcher. In those circumstances paragraph 4H of the statement of claim was proved, though paragraph 4I was not, for the reasons stated above.

Proceedings properly constituted

  1. [60]
    A related point was an issue raised by the defendants about whether the proceeding was properly constituted without the presence as plaintiffs of Mr and Mrs Jones, advanced only if the finding were made that Mr and Mrs Butcher were parties to the tab 38 agreement. It was submitted that the entitlement to enforce payment of the money rested with all three persons identified as “seller” as a joint entitlement, and accordingly all of them had to join in the proceeding for it to be properly constituted.[76]This was in substance a plea in abatement, something which was abolished by the Judicature Act system of pleading introduced in Queensland in 1876.[77]Since then the absence of one or more joint contracting parties is not fatal to a claim by another.[78]
  1. [61]
    The effect of this reform was summed up by Lord Macnaghten, with whom the other members of the House agreed, in William Brandt’s Sons & Co v Dunlop Rubber Company Ltd[1905] AC 454 at 462: “No action is now dismissed for want of parties… .”  That proposition was applied by Fitzgerald P and by McPherson JA in the Court of Appeal in Equus Financial Services Ltd v Glengallen Investments Pty Ltd [1994] QCA 157. That decision was in turn applied in Moore v Devanjul Pty Ltd [2010] QSC 250 at [7] by McMurdo J (as his Honour then was) to reject an argument that a particular person who was not a party was a necessary party to the proceeding. His Honour also relied on UCPR r 67, which expressly permits the court to deal with the proceeding despite rr 62 and 63. There is no substance to this point.[79]

Capacity of the plaintiff

  1. [62]
    The defendants also submitted that the proceeding was misconceived because the plaintiff was seeking relief in its own right whereas any entitlement it had must be in its capacity as trustee of the AR Jones Family Trust. They pointed to the requirement in UCPR r 18 that any representative capacity be stated on the originating process. Assuming r 18 applies in a situation where a person is suing as trustee,[80]that is an irregularity which does not render a proceeding a nullity: r 371. Apart from the fact that that is obvious under the rules, in Park & McIntosh v Lanray Industries Pty Ltd [2010] QCA 257 the Court of Appeal held that, although the applicants had breached r 18 by failing to endorse on the originating process that they were bringing the proceeding in their capacity as the liquidators of a company, that did not affect their entitlement to bring an application for relief under s 588FF(1) of the Corporations Act 2001 (Cth): [16].
  1. [63]
    In some circumstances it may be relevant to determine whether a company is contracting in the capacity of trustee of a trust, for example, in order to ascertain whether any liability of the company in relation to the proceeding would be one where there would be, or be likely to be, a right of indemnity against the assets of the trust.[81]Conversely, if a party contracts expressly as trustee of a trust, it may be impliedly excluding personal liability on the contract, and in effect offering only the value of any right of indemnity from the assets of the trust to stand behind its promises in the contract, although clear words are necessary to exclude the personal liability of a trustee.[82]But it is well established that a trustee acting as such does not have any separate legal personality. In a situation where, as here, the plaintiff is seeking to enforce a contractual obligation to pay money, whether the plaintiff holds the cause of action as an asset of a trust, and would hold any proceeds received from it in the same way, is irrelevant to the liability of the defendants. The plaintiff is seeking to enforce a legal right of which it is the legal owner.
  1. [64]
    Similarly, where a trustee has entered into a contract and there is nothing to exclude personal liability, the trustee is personally liable on the contract. There is no impediment to the entitlement of the plaintiff to enforce any right given to it by the contract. The first defendant is personally liable on the contract, regardless of whether it contracted as trustee. Whether the first defendant has a right of indemnity from the trust’s assets is strictly speaking a matter not before me. As General Credits Ltd v Tawilla Pty Ltd (supra) also decided, I give any judgment simply against the first defendant personally, not against the first defendant “as trustee”.

Uncertainty

  1. [65]
    It was also submitted for the defendants that the tab 38 agreement was not a binding contract, on the ground that it contemplated that there would be a more formal agreement drawn up between the parties and that only that more formal agreement would be binding. In effect, the submission was that the contract falls into the third category in Masters v Cameron(1954) 91 CLR 353. Reference was also made to a decision in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628, where it was suggested that there was a fourth category of case, though I have difficulty in distinguishing it from the first category referred to in Masters v Cameron . That is the category into which in my opinion the tab 38 agreement falls. This is not a case where the particular nature of the agreement causes any difficulty about fitting it into one of those three established categories. There is nothing in the words of the document, or in the circumstances under which it was made, to suggest that it was not intended to be immediately binding.
  1. [66]
    The use of the term “without prejudice” does not change that. The parties were not lawyers and there is no reason to think they had any proper understanding of the legal significance of that term. The document was in form an offer which was then accepted. Making an offer “without prejudice” can be significant if it is not accepted, in excluding it from evidence. If it is accepted however it ceases to be subject to the “without prejudice” privilege.[83]That the agreement was intended to be immediately operative is shown by the provisions that “a sale notice will be issued within three working days”[84]and that the shares were to be transferred “as soon as possible but no later than 14 April 2015” whereas the “formal sale agreement” was to be executed by 14 April 2015. The obligation to transfer was not expressed to be subject to the prior execution of the formal sale agreement, and could easily happen first. The formal sale agreement was not to contain any changes of substance or additions other than those “required by law to allow the sale to take place”, a proposition more consistent with this being a concluded agreement which the parties at this point did not intend to change in the future. Overall from the tab 38 agreement I have no difficulty in concluding that it was intended to be immediately binding between the parties, and that the matter falls into the first class in Masters v Cameron.[85]

Subsequent events

  1. [67]
    The documents for transferring the shares in Sign Site were not finalised and sent to Mr Jones for execution until 30 April 2015: Exhibit 1 tab 43. These in fact transferred both the units in the Sign Saint Hybrid unit trust and the shares in Sign Site Pty Ltd from the plaintiff to the first defendant. The first two payments were due on 30 April and 30 June 2015, and these were paid.[86]On 21 May 2015 Mr Butcher sent an email to Mr Jones referring to some earlier correspondence about particular paperwork for a job, and continuing “All files you have for Sign Site, soft copy and hard copy must be provided to Sign Site as per our sale agreement. Essentially you should not have any Sign Site files in any format, these are Sign Site property”: Exhibit 1 tab 44. The proposition that Sign Site files are Sign Site property was clearly correct; the proposition that there was something in the tab 42 agreement about returning Sign Site property was not. What that agreement dealt with was property owned by others which was being used by Sign Site, presumably as at the date of the agreement.
  1. [68]
    In his reply on 31 May 2015 Mr Jones said that he did not have paperwork at home relating to Sign Site: tab 44. There had been some documents for Sign Site among documents relating to Duskheat Pty Ltd (which in fact he had removed when he was excluded from the business) but he said that he had returned the Sign Site documents to the premises of Sign Site some time ago.[87]Mr Butcher said that there had been a filing cabinet in the office at the company premises in Sydney which had files relating to Sign Site in it. Mr Jones agreed with that, though he said there were also some Duskheat Pty Ltd files in the bottom draw.[88]He said that the filing cabinet was kept locked, and the key was kept in the drawer of his desk, which was not locked. Ms Campbell would also access the filing cabinet, for the purposes of doing filing.
  1. [69]
    Ms Campbell agreed that there was such a filing cabinet, and that it had a quantity of Sign Site files in it: p 36. She said that after Mr Jones had left the Sign Site Office there was nothing in the filing cabinet but she could not say how much later she first looked.[89]Mr Jones maintained at the time, and in evidence (p 2–10), that he did not take any of the Sign Site files. Mr Butcher’s emails impliedly asserted that he did not take them. There is really no clear evidence that Mr Jones did take these files. The only real circumstances supporting an inference that he took them are that he had the opportunity to do so, and that he had taken his personal documents, that is documents not related to Sign Site, when he left. But others had access: the replacement operations managers used the same office from January 2015.[90]The records could have been sent to the accountants. The taxpayer’s copies of a number of them are in evidence, so someonefor the company had them.[91]Bearing in mind the seriousness of this allegation, I am not prepared to find that Mr Jones took records of Sign Site when he left the Sign Site office, other than to the minor extent that he accepted, which records once discovered were promptly returned.
  1. [70]
    There was also an issue which arose in an email on 31 May 2015 from Mr Butcher about the rental bond for the lease of the Sign Site premises in Sydney: Exhibit 1 tab 44. Mr Jones’ response was that he and his wife had paid the bond in cash themselves, since Sign Site had insufficient funds at the time. Presumably this was included in the amount of the director’s loan which was released under the agreement.
  1. [71]
    The third payment was due on 31 August 2015, but was not made. Mr Jones rang Mr Butcher on 3 September, and was told that they would pay in a few days.[92]Reference was made to a cash flow difficulty at the start of the month. The payment was not forthcoming, and on 10 September there was another conversation, when Mr Butcher claimed to have just become aware of the pre-invoicing, and said he was seeing the accountants about it, and Mr Jones was not going to get paid.[93]On 11 September 2015 the plaintiff sent a notice under clause 9 of the agreement in respect of the failure to make that payment: Exhibit 1 tab 45. Clause 9 provided:

“If the purchaser defaults in payment in accordance with the payment schedule and if after seven days’ notice in writing specifying the default has been given by the vendor to the purchaser to remedy the default it still continues, then the whole of the said payment in accordance with the schedule, notwithstanding anything herein and without prejudice to any others rights of the vendors at their option, become immediately payable and recoverable.” 

  1. [72]
    The third payment was not made within seven days after the notice in writing was given, and a request for an extension was refused.[94]The effect of clause 9 is that the whole of the “payment in accordance with the payment schedule” then outstanding became immediately payable and recoverable. There is an issue whether this accelerated all of the payments outstanding under the agreement, or only the remaining three payments in the list immediately following the expression ‘the following schedule’ in clause 3. The payments due on 30 June 2016 and 2017 could be seen as within the payment schedule if the expression was used in the broader sense, but an alternative interpretation is that the payment schedule referred only to the payments in paragraphs (a)-(e), totalling $200,000.
  1. [73]
    The goodwill payments were made subject to the “business” trading at the time when the further payments were to be made, and “the vendor not breaching the conditions of this sale agreement.” On the whole I consider that the correct interpretation of the contract is that these payments were not accelerated. Given that these payments were conditional upon certain situations obtaining on dates in the future, in my opinion the more natural reading of the words, the more commercially practicable interpretation and the need to interpret the contract as a whole all favour the proposition that the reference in clause 9 to the “payment schedule” was to the schedule consisting of the five payments in the list (a)-(e) in clause 3. Accordingly the balance of $135,000.00 became payable on 14 September 2015.
  1. [74]
    The defendant denied that there was any liability under the agreement in respect of the balance of the purchase price, on the ground of the plaintiff’s breaches and the first defendant’s entitlement to a set-off as alleged. Any breach of the agreement on the part of the plaintiff does not disentitle it to recover the balance of the purchase price unless the defendant is entitled to rescind the agreement on the ground of that breach. Any breach by the plaintiff would not excuse the defendant from paying the total purchase price under the contract, in circumstances where the shares and units, sold under the contract, had been transferred to it, but it may have a set-off for damages for breach of contract.

Allegations of breach of warranty

  1. [75]
    It was alleged in paragraph 47 of the defence that business activity statements (BAS) for Sign Site had not been lodged for the September or December quarters, both of which ought to have been lodged before the date of the agreement. That these documents were not lodged at that time was not admitted in the reply, but there was no evidence that such documents had been lodged, there were statements in the evidence that people had said at different times in early 2015 that these had not been lodged, and there are documents in evidence from the tax office suggesting that these statements were in fact lodged in early June 2015.[95]I find that these BAS were due to have been lodged prior to the date of the agreement but had not been lodged at that date. Paragraph 47 also referred to PAYG income withholding statements for the months of September 2014 to February 2015. The position is the same in relation to these statements,[96]and I find that these statements had not in fact been lodged at the date of the agreement.
  1. [76]
    Paragraph 48 alleged that there were certain unpaid tax amounts due, or on its true position ought to have been due, because of a list of tax liabilities most of which were in fact imposed after the date of the agreement. This allegation was not admitted in the reply. Documents of the tax office do show that as at the date of the agreement there was a balance of $40,055.46 owing, which amount was paid on 22 April 2015: Exhibit 2 tab 355. With regard to the balance of the allegations, these must refer to the proposition that various specified amounts were amounts that, on the true position of Sign Site, ought to have been due. These include GST amounts in respect of the business activity statements in paragraph 47(a) and (b) of $45,361.00 and $61,165.00.
  1. [77]
    The difficulty with this allegation is the assertion that these represent figures which ought to have been due on the true positon of Sign Site. There was evidence from the tax office document that on 1 June 2015 a BAS statement lodged by the company had a credit balance in respect of Goods and Services Tax of $45,361.00: Exhibit 2 tab 355. There was also in evidence a document downloaded from the tax office agent portal in March 2017 which reflects a BAS for goods and services tax for the quarter ending 30 September 2014 and shows a credit amount in respect of GST of $45,361.00: Exhibit 2 tab 369. This was said to have been lodged on 1 June 2015. Presumably if this BAS had been lodged at the proper time, in the same terms, it would have shown the same credit amount. Paragraph 48(c) is wrong in treating a credit amount as a debt. On the other hand, both documents tab 355 and tab 370 show a BAS liability for goods and services tax, in respect of the period ended 31 December 2014, lodged on 1 June 2015, of $61,165.00 as alleged.
  1. [78]
    All this shows however is that that amount was owing on the basis of a statement made by the company to the Australian Taxation Office. The BAS was lodged by accountants, but there was no evidence from them to verify that the statement they provided to the ATO did represent the true position of Sign Site. In circumstances where Mr Butcher said that there has since been in conjunction with the ATO a major reconstruction and examination of the correct financial position of Sign Site for the purposes of income tax, which during most of the trial was not finalised,[97]I am not willing to treat the document lodged on 1 June 2015 purporting to show a particular position of Sign Site during a particular period of 3 months as showing the true position of the company for that period. No one has said that it is the case, and the evidence such as it is suggests that the information being provided to the ATO in 2015 did not accurately and reliably set out the true potion of the company. In those circumstances, although I accept that a business activity statement for the December 2014 quarter was provided to the ATO on 1 June 2015 which showed a liability for GST of $61,165.00, I am not prepared to find that that amount was actually owing on the true position of Sign Site in respect of GST in respect of that quarter.
  1. [79]
    Part of the difficulty here may be the practice of pre-invoicing to which I referred earlier. During a meeting held on 11 March 2015 Mr Butcher referred to “eight hundred and fifty or eight hundred odd thousand dollars of pre-invoiced work that’s currently in the system” showing that at least at that stage the process of pre-invoicing was still being practiced.[98]I do not know whether that practice was affecting the sales figures in the document lodged on 1 June 2015.[99]Ms Campbell said that when she provided draft BAS returns to Mr Jones he would commonly lower the figures in the returns, which would be consistent with his adjusting the sales figures to strip out pre-invoicing, though there was no evidence from him that he would do that.[100]
  1. [80]
    Mr Butcher in evidence said the document at tab 309 was the original financial statements prepared by the accountants for the year ended 30 June 2013, which I note were signed by someone on their behalf on 23 January 2015, after a note which says among other things that “the directors of the trustee company are solely responsible for the information contained in the special purpose financial statements…” and that the statements had been prepared “on the basis of the information provided by the directors of the trustee company. …Our procedures do not include verification or validation procedures. No audit or review has been performed accordingly no assurance is expressed.” A revised set of financial statement for the company for the year ended 30 June 2013 was the document tab 310, this time signed off by the accountants on 17 March 2017 under disclaimers in similar terms.
  1. [81]
    It appears that the only adjustment made to the profit and loss account however was that the trading income was reduced from $2,550,828.61 to $1,942,374.96. As a result net profit from ordinary activities before income tax of $198,256.01 became a loss of $410,197.64. The figure for trade debtors in the balance sheet was reduced by about $670,000, but the net assets of $360.00 went down by less, because of substantial reductions in beneficiary loans to the AR Jones family trust and the Visual Integrity trust, and the elimination of a loan to the Speedy Group Inc. The change in the profit and loss account and in the asset position would be consistent with stripping out pre-invoicing. I note that no amount is included in the assets for work in progress.
  1. [82]
    There was also evidence that PAYG tax withholding statements were lodged by the company for September and December 2014 on 1 June 2015, for October and November 2014 on 29 June 2015, and for January and February 2015 on 29 June 2015, in respect of which the amounts payable were those listed in paragraph 48 of the defence: Exhibit 2 tabs 369, 370, 375 – 378. Finally the defendant relied on the fact that on 7 September 2015 the ATO issued an amended assessment for PAYG tax for the financial year ended 30 June 2014, in the sum of $42,724.00. This adjustment occurred in circumstances where Sign Site had omitted to respond to a query sent two months earlier seeking an explanation of a discrepancy. On 7 July 2015 the ATO wrote to Sign Site drawing attention to the fact that the total of the amounts withheld as PAYG tax on payment summaries issued by Sign Site was much more than the amounts shown in BAS and other returns as having been withheld, the difference being $42,724.00, and sought an explanation from Sign Site: Exhibit 2 tab 295. This was passed on by the accountants to Mr Butcher and Ms Campbell on 15 July 2015. With this was a printout from the QuickBooks data which on its face showed the amount deducted from wages and salaries paid during the year to be $228,711, the amount referred to by the ATO, presumably because the payment summaries were prepared on the basis of that data. The accountants had prepared a discrepancy schedule advising different, higher amounts for the December 2013 and March 2014 quarters.[101]The amended assessment was issued on 7 September 2015 because Sign Site did not respond to the notice: tab 299.
  1. [83]
    I accept that this reflected a claim by the ATO that there was an additional amount owing as withholding tax not remitted, but again there is no evidence that the figures in the QuickBooks data were the true position. The position is simply that there were different documents which had been produced by Sign Site at different times, but there was no evidence from anybody who was in a position to know the true situation about whether the figure adopted by the ATO in September 2015 was the correct figure. It is not clear whether this was something caught up in the recent exercise of reviewing the company’s financial position and auditing its true tax liabilities. I note that on 7 September 2015 the ATO issued an adjustment increasing the amount payable by Sign Site in respect of the PAYG tax withheld during the 2015 financial year by $95,766.00: tab 299. This was on the basis that payment summaries issued by the company for that year recorded amounts withheld which totalled much more than the amount in the activity statements. That would have included the six activity statements referred to in paragraph 47, which provides a further reason to doubt that those activity statements reflected the true position of the company.
  1. [84]
    Overall therefore I am prepared to find that the ATO records did show that as at the date of the agreement $40,055.46 was owing on the company’s account, and that the various amounts in the other paragraphs were subsequently payable on the basis of information provided by the company, or said by the ATO to be payable on the basis of information provided by the company, except for the amount in paragraph 48(c) which was a credit rather than an amount owing, on the information provided by the company. I am not however prepared to find that these amounts reflected the amount that, on the true positon of the company, ought to have been due at that time.
  1. [85]
    Paragraph 48(k) and (1) alleged two amounts payable in respect of payroll tax. Reliance on these was abandoned expressly in the written submissions on behalf of the defendants, Annexure A p 53.
  1. [86]
    Paragraph 49(a) alleged that ten transfers in particular amounts from Sign Site to Duskheat Pty Ltd, the company associated with Mr Jones, were recorded as expenses but were not expenses of Sign Site. It was not disputed that those payments were in fact made by Sign Site to Duskheat. The difficulty I have however is that the list in paragraph 49(a) of the defence is quite different from the list in Exhibit 2 tab 321, relied on as the entry in the books and accounts of Sign Site. There are transfers on 31 January, 28 February, 30 April, 30 May and 27 June on the QuickBooks document tab 321,[102]but only the amount of the 27 June payment matches the amount in paragraph 49(a). The payment of 27 June is under a list of “interest expense” so presumably this one was recorded in the books and records of Sign Site as an expense. The evidence about these payments was not clear; for example there was no original evidence of the fact that such payments were actually made by Sign Site, and to whom, or how they came to be made, and I am being asked to place a lot of reliance on a piece of paper produced by a computerised accounting system apparently operated by someone who had experience only as a bookkeeper, under the (I suspect nominal) supervision of someone who had no accounting experience, without any information about what the state of the computerised account was at the relevant date, rather than on 1 August 2017 when this document was printed.
  1. [87]
    I am being asked to draw a lot of inferences on the basis of one dubious piece of paper which has not been properly explained to me.[103]As well, there is in evidence a document Exhibit 12, apparently produced on 5 March 2015, which looks like the other accounting documents for Sign Site, and which lists “payments made for Jones, Duskheat and Hillchrist – Loans” which lists all the payments alleged in paragraph 49(a) except that of 12 May 2014. On its face this documents suggests that, prior to the date of the agreement, these payments had been characterised in the accounts as payments on behalf of Mr Jones and attributed to his loan account.[104]I am prepared to draw the inference that the payment in paragraph 49(a)(vi), and some other payments, were at some time recorded as payments in the books and accounts of Sign Site, though not in fact expenses of Sign Site, but that is all.
  1. [88]
    For the last four payments, reliance was placed on a page said to be from the Xero ledger, which continued the heading after the accounts were converted to Xero on 30 June 2014: tab 323. This records the first three entries, and a similar but different amount ($3,237.49) on 5 November 2014. Again, that shows that at some date these payments were recorded as payments by Sign Site, but that is all.[105]Again there was no proper evidence about the significance of this document. I note that Exhibit 19, a version of the General Ledger Summary for the financial year to 27 March 2015 dated 7 August 2017, by which time presumably any incorrect entries in the accounts had been corrected, still shows on p 2 a figure for “Interest Expense: Loan Interest (437.02)” which matches the total of the four entries under that heading in tab 323. But these payments are also listed in Exhibit 12, so they are in the same position as the earlier entries. Paragraph 49(a) is not made out.
  1. [89]
    It was alleged in paragraph 49(b) that three payments in the 2012 – 2013 financial year were entered as expenses as legal fees, though in fact they reflected legal costs incurred by Mr Jones or Duskheat Pty Ltd, and were not properly recorded as expenses of the company. In the reply it was admitted that there were payments in those amounts from Sign Site to ANZ Visa in respect of Mr Jones’ obligations to a firm of solicitors for legal fees in relation to a dispute which did not directly involve Sign Site. Again I have been provided with what is supposed to be a print out from the Sign Site ledger within QuickBooks, this time on an unidentified date, which records the first two payments in the dates and amounts alleged in paragraph 49(b) as “legal fees”: Exhibit 2 tab 322; p 3 – 91. These two payments add to $9,261.60. There was a further payment to the same law firm shown on 1 July 2013, but for $3,636.36, not the amount in paragraph 49(b).[106]These three figures total $12,897.96. There are six other entries on that ledger, totalling $4,185.45.
  1. [90]
    The accounts for the company which were signed off by the accountant on 23 January 2015, before the date of the agreement, list in the expenses for the year ended 30 June 2013 legal fees of $32,104.64: Exhibit 2 tab 309. That does not correspond to the amount listed in the ledger at Exhibit 2 tab 322. Without evidence as to how the figure for legal expenses in the accounts as they were prepared by the accountants in January 2015 were made up, it is impossible to know whether the figure in those accounts included the items which on the face of tab 322 were the only legal fees for that financial year. Again I am prepared to find that at some point these two payments were recorded in the books and accounts of Sign Site as payments by the company; I am not prepared to find that they were recorded as expenses of the company as at the date of the agreement.
  1. [91]
    Paragraph 49(c) alleged that a total of 37 payments which were monthly payments for leasing equipment had been incorrectly recorded in the books and accounts of the company as assets rather than as expenses. This matter was not admitted on the pleadings. Ms Campbell gave evidence that all the items listed in this paragraph were entered by her incorrectly as assets, when they should have been entered as expenses: p 26. With one exception all the entries related to the 2014-2015 financial year; there was one payment on 2 June 2014.[107]She said no one told her to enter them in that particular way, there was just confusion on her part: p 41. Relatively recently she had corrected these entries, on instructions from Mr Butcher.[108]For what it is worth, my reading of Exhibit 2 tab 223 and tab 320 appears to support the proposition that that was the state of the accounts at least as at the end of January 2015.[109]
  1. [92]
    On the other hand, the defendants’ evidence in support of this allegation has the usual deficiencies. Ten of the pleaded payments were expressly abandoned in submissions. For the balance, reliance was placed on Exhibit 2 tab 384, but some of the amounts listed there for the relevant dates do not match the amount alleged.[110]Many of the payments are recorded as made to “Excellex Trust”, presumably the fourth defendant.[111]Some seem to follow the regular pattern one would expect for a finance lease, others do not. Some entries are recorded as “INV”, others as “PAY”; there was no evidence as to the significance of this.[112]If I depended only on this document, the defendants would face serious difficulties, but I also have the evidence of Ms Campbell and the other documents. Overall therefore it does appear that the allegations in paragraph 49(c) are made out, to the extent that they were not abandoned. The plaintiff’s submission in relation to these matters was that this had nothing to do with Mr Jones, and indeed some of the entries were made after he was removed from any position of authority within the company on 6 February 2015. That is correct, but does not affect the allegation in paragraph 49(c). Who was responsible is another matter.
  1. [93]
    Paragraph 49(d) alleged that items were incorrectly recorded as receivables prematurely for invoices not yet issued or for invoices that were never issued. This appears to be a reference to the system of pre-invoicing referred to earlier. There is ample evidence that this practice was at times followed to inflate income, and hence receivables, and that it occurred at the direction of Mr Butcher.[113]
  1. [94]
    Paragraph 49(e) alleged that the true taxation liabilities of Sign Site were underdeclared and as a result later amendments were required with further tax to be paid, part of which would relate to the period prior to the date of the agreement. Two amended assessments were referred to, one on or about 7 September 2015 and one on or about 26 September 2015. These matters were not admitted in the reply. The first of these two entries is for an amended PAYG assessment made by the ATO on 7 September 2015 in respect of the 2015 financial year in the sum of $95,766.00, which was advised by the ATO on 7 September 2015, on the basis that the total amount withheld on payment summaries issued by Sign Site exceeded the amount withheld set out in activity statements by that figure: Exhibit 2 tab 299. Plainly this discrepancy was based on payment summaries issued by the company after the end of the financial year, and the activity statements for the whole of the financial year. However although that includes activity statements which had been issued prior to the date of the agreement, what is alleged here is that taxation liability was underdeclared, which has resulted in a greater taxation liability than that indicated in the books and records of the company at the time of the agreement.
  1. [95]
    As to whether they were underdeclared, most of the PAYG withholding statements for the financial year, which were due prior to the date of the agreement, had not been lodged and hence no amount had been declared, as discussed in relation to the allegations in paragraphs 47 and 48 earlier. So no amount was underdeclared. Further, the accounts of the company for the 2015 financial year as of the end of January 2015 showed PAYG withholding tax payable of $323,166.00: Exhibit 1 tab 19. Although this was less than the figure for the whole year in the tab 299 document, it was not much less than that figure, and suggests that the accounts of the company had already made proper provision for withholding tax liability, to the knowledge of Mr Butcher since he was the one who circulated this document. In the circumstances, and in the absence of evidence about how the figure in the company’s accounts is made up, I am not prepared to infer that the result of the ATO determination in September 2015 was different from what was at the relevant time recorded in the accounts of the company. For all I know the books and accounts of the company may have been correct in this respect, and the problem may have been simply that the returns to the ATO (lodged after the agreement) were incorrect.
  1. [96]
    The other matter referred to was an amendment to the general interest charge for the period 1 July 2014 to 30 June 2015 in the amount of $3,971.85. This appears in an integrated client account notification issued 26 September 2015: Exhibit 2 tab 304. That this amendment was processed to the itemised account of the company is shown by Exhibit 2 tab 356. The general interest charge is imposed on all amounts not paid by the due date and calculated on a daily compounding basis. Presumably this amended charge arose from the amended ATO determined amount for the period ended 30 June 2014, alleged in paragraph 48(b). I have however previously held that I was not prepared to find that the amount asserted by the ATO to be payable as alleged in paragraph 48(b) represented the amount that ought to have been payable by the company on its true position, because of an absence of evidence. In these circumstances, I am also not prepared to find that the amended general interest charge reflected the true taxation liabilities of the company for the 2015 financial year, assuming that that refers to the liability by way of a general interest charge.
  1. [97]
    I can find that that was an amount assessed as payable on that basis in respect of that period on 26 September 2015, but I note that in the records of the company’s running account there have been many instances where general interest charges have later been amended or remitted in whole or in part, and there is no evidence that the amount imposed on this occasion was not subsequently adjusted further, or subsequently remitted, so as to show that it did reflect the amount correctly payable on the true financial position of the company at that time. It follows that the allegation in paragraph 49(e) is not made out, because it has not been proved that they represented the true taxation liabilities at that time. In those circumstances, the further allegation in paragraph 49(f), which appears to be tautologous, is also not made out.
  1. [98]
    Paragraph 49(g) alleged that tax returns for the company for 2013 and 2014 were incorrect in that they did not correctly state the assets and liabilities of the company. There was evidence that the first tax return for the 2013 year lodged by the company was Exhibit 2 tab 311. This stated the total assets at $1,123,518.00, and the total liabilities at $1,123,158.00, figures which were consistent with the financial statements prepared by the accountants for the year ended 30 June 2013 which are at tab 310. There is also in evidence a further return for the 2013 financial year by the company, also undated but presumably put in more recently, which has total assets of $455,087.00 and total liabilities of $864,925.00. Those figures are in turn consistent with those in the financial statements for 2013 prepared by the accountants at tab 310, the one signed on behalf of the accountants on 17 March 2017.
  1. [99]
    The fact that the accountants and the company have now put in a different tax return, shows that they have abandoned any reliance on the earlier return as accurate, and in view of the evidence of the practice of pre-invoicing I think it quite likely that the earlier return was influenced by that practice, which would have distorted the figures in it, particularly by inflating the value of receivables and hence assets of the company.[114]In the circumstances I am prepared to find that the tax return for the 2013 financial year at tab 311 was incorrect. That return is undated. On 23 January 2015 the accountants had emailed to Mr Butcher what were described as draft financial statements, and when this was forwarded by him to Mr Jones and Mr Willems on 27 January 2015, both a draft of the document at tab 309 and a draft of the tax return at tab 311 were attached: Exhibit 2 tab 319. So it was finalised and lodged after that date. There is no evidence as to when it was lodged. I am not prepared to infer that it was before the date of the agreement. In the absence of evidence verifying the accuracy of the replacement tax return for 2013,[115]however, I am not prepared to find that it reflected the true situation of the company in respect of the period it covered.
  1. [100]
    The original tax return for the company for the 2014 financial year was said to be Exhibit 2 tab 314. That document records total assets of $1,444,191 and total liabilities of $1,443,831: p 5. However, the document is undated. Indeed, Mr Butcher said it was not signed by him for lodging until 30 September 2015: p 4 – 9. By this time Mr Jones was long gone, and was not responsible for the state of that 2014 return. There is also in evidence what was said to be the original balance sheet for the company as at 30 June 2014, tab 313. This document is dated 30 January 2015, but it contains figures which are different from those in paragraph 49(g)(iii) for both total assets and total liabilities.
  1. [101]
    On 30 January 2015 Mr Butcher sent to Mr Jones and Mr Willems an email attaching a balance sheet and profit and loss statement for the 2014 financial year, and the current financial year to date: Exhibit 2 tab 226. The balance sheet for the 2014 financial year with that email is similar to, but different from, the balance sheet for the 2014 year at tabs 223 and 313.[116]The differences among the assets are a small difference in trade receivables, a small difference in the value of machinery and equipment and a reduction value of warehouse equipment under fixed assets, and small differences in the value of accounts payable, the liability for GST, and the value of loans from two Exellex trusts. One other difference is that at the foot of the earlier document there is the date 30 January 2015 while the foot of the latter there is the date 24 July 2017, although it is supposed to be a document attached to an email dated 30 January 2015.[117]I have not located in the evidence any other versions of the balance sheet for the company for 2014 between those and the date of the agreement.
  1. [102]
    Because of the significant differences between the numbers in the original tax return at tab 314 and the numbers in those balance sheets, and because I have not been provided with a copy of a proper set of financial statements for the year entered 30 June 2014 prior to the set signed by the accountant on 17 March 2017, tab 316, which is said to be a revised financial statement, I am not prepared to find that as at the date of the agreement the tax return for the 2014 financial year had been prepared and lodged with the tax office.[118]Assuming therefore that the original tax return for the 2014 financial year was incorrect in stating the amounts referred to in paragraph 49(g)(iii), I am not persuaded that that was the situation as at the date of the agreement. Accordingly, that allegation is not made out.
  1. [103]
    Again, although the figures for assets and liabilities in paragraph 49(g)(iv) correspond with those given in what is said to be the revised tax return for 2014, Exhibit 2 tab 315, and the revised financial statements for that year, tab 316, in the latter case signed by the accountants on 17 March 2017, there is no evidence that these figures were correct and reflected the true position of the company. The mere fact that these are documents prepared by accountants is not something I find persuasive, particularly in view of their disclaimers, and where the figures for assets and liabilities for 2013 in the financial statements at tab 310 and at tab 316 seem to be different, even though they were both signed on behalf of the accountants on the same day.
  1. [104]
    Paragraph 50 alleged that Mr Jones held books, records or registers as at the date of the agreement and retained them after the date of the agreement. This is apparently a reference to the materials said to have been in the filing cabinet in the office when Mr Jones was using it, which at some stage after he had left were said not to have been located there. I have already dealt with that allegation and am not persuaded that it was made out.
  1. [105]
    It was then alleged in paragraph 51 that the matters in paragraphs 47-50 were not disclosed in writing or otherwise to the first defendant prior to entry into the agreement. Mr Butcher well knew prior to the agreement that the company had not lodged the September and December quarter business activity statement. On 11 March 2015 there was a recorded conversation between Mr Jones, Mr Butcher and Mr Willems, the transcript for which is Exhibit 1 tab 34. On a page numbered 11 within this document Mr Butcher said:

“Ok tax obligations. I am doing a current review at this point in time but my understanding is that we’re behind in our tax returns for business activity statements.”[119]

On the following page Mr Butcher said:

“I believe that the returns haven’t gone in for one or two returns so we’re behind on that … I am working through those at the moment…”[120]

  1. [106]
    Apart from this, he was told by the accountants on 12 March and 17 March 2015 that these and the other returns in paragraph 47 had not been lodged (Ex 2 tab 244, tab 250) and was reminded by them on 2 April 2015: tab 256. In the circumstances I find that he was well aware that those returns had not been lodged.[121]It was admitted in the defence that Mr Butcher was a shadow director of the first defendant, and on the evidence he was the controlling mind of the first defendant, so that his knowledge is imputed to the first defendant. Further, if Mr Butcher had been in March 2015 doing a current review of the company’s tax obligations, I consider it inconceivable that he was unaware that PAYG monthly reports had not been lodged. After the February 2015 meeting Mr Jones had been effectively excluded from the organisation, so on any view of the matter the person responsible at that time for lodging such statements was Mr Butcher. He would have known whether he had lodged those statements, and therefore would have known, in respect of the statements due to be lodged since Mr Jones’ departure, that such statements had not been lodged.
  1. [107]
    There is also the consideration that on 30 January 2015 Mr Butcher sent to Mr Jones and Mr Willems a balance sheet as at the end of January 2015 which showed among the liabilities an amount of PAYG withholdings payable of $323,166.00. This is a very substantial amount, and it must have been obvious to him from that figure that there had been a substantial failure to keep up to date with remitting PAYG withholding amounts, something which ought to have suggested to him that the withholding statements were not being lodged. Mr Butcher had completed a number of subjects towards a commerce degree, and during the meeting on 23 October 2014 said at one point “I think I have the most knowledge when it comes to accounting,” referring to the position among the directors: Exhibit 1 tab 11 p 6. In the circumstances I am not prepared to accept his evidence to the contrary, and infer that he was aware at the time the agreement was entered into that the income tax withholding statements in paragraph 47 of the defence had not been lodged.
  1. [108]
    With regard to the liabilities in paragraph 48, the historic liabilities owed but not paid referred to in paragraph 48(a) relate to PAYG tax withheld for a period ended 30 June 2014 and for the period ended 31 August 2014, together with amounts payable as updated general interest charge: Exhibit 2 tab 355. Mr Butcher conceded he was aware of this liability before the agreement was signed.[122]Given the very substantial liabilities in the balance sheet at the end of January[123]for PAYG withholding, in an amount greater than the total amount for PAYG and GST in paragraph 48, and bearing in mind that the same balance sheet showed separately an additional GST liability of $26,290.00, an amount actually more than the net GST liability in respect of the adjustments in paragraph 48 for GST, it is apparent that at the end of January Mr Butcher was aware that there were very substantial amounts outstanding to the tax office. As the person with his hand on the purse strings of the company between the beginning of February and the date of the agreement, he would also have been well aware that no payments had been made to the ATO during that period, as was the case: tab 355. It may be that Mr Butcher was not aware of the precise figures referred to in paragraph 48, but on the evidence he was aware of the existence of liabilities in relation to these matters of at least that order, if not greater.
  1. [109]
    There is no evidence to suggest that, prior to the time when the agreement was entered into, Mr Butcher knew that the payment referred to in paragraph 49(a)(vi) of the defence was at some time recorded as an expense in the books and accounts of Sign Site, but in circumstances where I am not prepared to find that that was the state of the books at the relevant time, the issue in regard to paragraph 49(a) goes away. The same applies to the matters alleged in paragraph 49(b). There was no evidence Mr Butcher was aware of the matters in para 49(c) at the date of the agreement. As to paragraph 49(d), this is concerned with the pre-invoicing and the inflation of trade creditors i.e. receivables. This was certainly something that Mr Butcher was well aware of, as discussed earlier. He also spoke of manipulating the 2014 accounts to avoid revealing a loss of $100.000.00 shown in the “Xero books”.[124]Mr Butcher was well aware that the books and accounts of the company for the 2014 financial year were incorrect, since he was the one who had falsified them.
  1. [110]
    It was then alleged in paragraph 52 of the defence that the plaintiff breached the warranties in the agreement in four respects. In clause 7(c) of the agreement it was warranted that “other than matters disclosed to the purchaser in writing the books and accounts of the trust truly and fairly reflect the trusts affairs”. It was alleged that the matters in paragraph 49 of the defence amounted to breaches of that warranty, and to the extent that those allegations are made out, that is in respect of the matters referred to in paragraphs 49(c) and (d), a breach of clause 7(c) of the agreement has been proved. In other respects the allegation is not made out. Clause 7(d) warranted that “the trust’s books, records and registers are in the possession of the trustee, and accurately record the details of all of the trust’s transactions, finances, assets and liabilities”. This was alleged to have been breached by the matters in paragraphs 49 and 50. The only matters in those paragraphs proved were those in paragraphs 49(c) and (d), and accordingly clause 7(d) was breached to that extent.
  1. [111]
    Clause 7(e)(i) warranted, among other things, that “the trust has lodged or filed all tax and duty returns for all taxes… and has paid all amounts found due for payment…”. It was alleged that this warranty had been breached by the matters in paragraphs 47 and 48 above. The matters alleged in paragraph 47 have been made out and did amount to a breach of this warranty, but the matters alleged in paragraph 48 have not been made out. Clause 7(g) of the agreement warranted that “the trust has met all deadlines for repayment of its debts”. This was alleged to have been breached by the matters in paragraph 48 above. Assuming that the warranty in clause(g)(iv) extends to debts arising from obligations to pay taxes, which is not consistent with the use of the term “repayment”, the fact that the allegations in paragraph 48 have not been proved means this allegation has not been made out.
  1. [112]
    It was then alleged that the effect of the breach of those warranties was that there was a breach of a condition of the agreement, with the result that the plaintiff was not entitled to the “goodwill payments” of $400,000.00, by operation of clause 3 of the agreement. Clause 3 provided relevantly:

“Subject to the Business, as defined in the Sign Saint Hybrid Unit Trust Agreement dated 13 March 2014, trading and the vendor not breaching the conditions of this sale agreement, the following good will payments will be made to the vendor…”.

Clause 3 then went on to set out a number of “special conditions” some of which can be described as elements of the settlement reflected in the agreement, such as condition 3 which provided that various loans were absolved and no longer owing upon transfer of the units and shares. There were however some provisions of ongoing operation, particularly conditions 7 and 8 which provided

“7The Seller agrees to a non-compete of 5 years with the Trust and the Company and its associated entities Australia wide.

8The Seller agrees to maintain goodwill and not to initiate, contribute to or perpetuate any bad will to the buyer, the Company and its associated entities”.

  1. [113]
    Clause 7 was headed “vendor’s warranties”. Paragraph (a), which had a heading “generally”, was as follows:

“The vendor agrees that:

  1. (i)
    it is a condition of this agreement that each warranty is true and correct in every respect and shall be construed separately;
  1. (ii)
    the warranties have been given with the intention and for the purpose of inducing the purchaser to enter into this agreement;
  1. (iii)
    the purchaser has entered into this agreement and agreed to the purchase price payable for the shares on the basis of and in full reliance upon the warranties; and
  1. (iv)
    prior to the settlement date the vendor will take all such steps and provide all such information and documents with regard to the trust as the purchaser may reasonably require, and will give the purchaser and its professional advisers full and free access to the records and accounts of the trust, whether financial or otherwise, to enable them to fully investigate the accuracy of the warranties”.
  1. [114]
    Broadly speaking, clause 7 contains the sort of warranties which one would expect to find in a contract for the sale and purchase of a business at arm’s length. Hence the inclusion of something like subparagraph (iv), which in the present case of course was totally unnecessary because Mr Butcher and his accountant already had access to all the records of the trust and the company, indeed his accountants were the accountants of the company. It does however throw light on the function of clause 7(a)(i) in this agreement, because it indicates that the clause was drafted on the assumption that between the date of the agreement and the date of settlement the purchaser would have the opportunity to investigate whether there was anything in the warranties which was incorrect. In these circumstances, the reference in subparagraph (i) to its being a condition of this agreement really means that it was a condition of the settlement of the agreement.
  1. [115]
    The purpose of that clause was to give the purchaser the right to terminate the agreement if it emerged prior to settlement that there was something incorrect about one or more of the warranties. In the present case of course the purchaser had no interest in doing so, but this is obviously a standard form clause which has been inserted by the solicitors as a piece of “boilerplate” without regard to the reality of the situation. Ordinarily, a party to a contract would not be entitled to terminate the contract for mere breach of warranty. The traditional distinction between a condition and a warranty is that a breach of a condition gives a right to terminate whereas a breach of a warranty does not.[125]The function of making the warranties conditions in a contract for sale and purchase of a business is to give the purchaser a right to terminate the contract if it emerges that there is something wrong with the books and records of the company, or that there are undisclosed debts, or in some other way there has been a breach of these various warranties.[126]Once a contract for sale of a business has been completed however, the provision making the warranties a condition is spent, and the purchaser is relegated to a remedy in damages. In effect it is a condition which ceased to be a condition upon the completion of the agreement by the transfer of the shares and units in the trust.
  1. [116]
    That is one reason why in my opinion the reference in the extract I have quoted from clause 3 to “conditions of this sale agreement” does not extend to the condition in clause 7(a)(i). The other reason is that clause 3 essentially reproduced the content of the tab 38 agreement, apart from the identification of the parties, and tidying up the language. The equivalent provision in that document was “stage three: the buyer will make two goodwill payments to the seller subject to the condition the business trading and the seller has not breached any conditions of sale”. Then the tab 38 agreement set out a number of “special conditions.” With one exception, the 10 special conditions to the tab 42 agreement closely reproduced the special conditions in the tab 38 agreement. The exception is that there is a reference in the tab 42 agreement in special condition 2 to excluding personal vehicles, banking accounts and other assets held in the name of the seller or their associated entities not being used by Sign Site or at Sign Site premises from being transferred to Sign Site. This was evidently introduced to avoid a potential change in meaning which might have been produced by splitting the first one paragraph condition in the tab 38 agreement into two paragraphs in the tab 42 agreement, so that it is not so obvious that condition 2 is dependent on condition 1.
  1. [117]
    At the stage of the tab 38 agreement there was no such provision as clause 7 of the tab 42 agreement, and the reference to “conditions of sale” in the tab 38 agreement must be a reference to the special conditions subsequently set out in it. That history, in my view, supports the interpretation of the expression “the conditions of this sale agreement” in clause 3 of the tab 42 agreement as being a reference to the special conditions also in clause 3. That is also supported by the fact that clause 3 is headed “agreement”, so the reference is to the conditions in clause 3. In my opinion, for these reasons on the true construction of the document the expression “the conditions of this sale agreement” in clause 3 refers to the conditions set out subsequently in clause 3, and does not include the condition of settlement in clause 7(a)(i). The allegation in paragraph 53 is for that reason not made out.
  1. [118]
    It was alleged that the first defendant entered into the share sale agreement in reliance on the warranties and agreed to the purchase price of $200,001.00 on the basis of and in full reliance on the warranties. This allegation was supported by reliance on the express statement to that effect in the contract. In circumstances however where, as I have found, Mr Butcher was well aware of many deficiencies in the accounts of the company, most of which he was in my view responsible for, the proposition that in some way he was relying on the accuracy of those records in entering into this contract was plainly fanciful.[127]Apart from that, this was not a situation where the purchase price was in some way calculated by reference to the accuracy of any particular accounts and records of the company. This was a situation where the Jones interests and the Butcher interests had fallen out, and where the Jones interests had claimed a large amount of money. The Butcher interests were denying that the Jones interests were entitled to any of that money, or at least to most of it, but one thing that was clear was that the plaintiff owned shares in Sign Site and units in the unit trust of which Sign Site was trustee. It was in a position to enforce the terms of the unit trust agreement against the other parties to that agreement, particularly the first defendant.
  1. [119]
    There was obviously some advantage to the Butcher interests in obtaining a transfer of the shares and units from the plaintiff, but the agreement resulted in many other benefits to the Butcher interest. The plaintiff and Mr Jones gave up any entitlement to any loans owing to them by Sign Site, any undistributed share of the profits in the trust (and on the face of the then current accounts there were profits to be distributed, though it is now said that there were actually losses being made at the relevant time) any unpaid salary (if, as I suspect, there was actually an agreement with the company to pay Mr Jones a salary[128]), any loans made to Sign Site, and generally any other claims for anything. There was also evidence of other amounts which Mr Jones had contributed from time to time to the company, such as a cash bond paid by him in respect of the lease of premises in Sydney by the company.[129]The Butcher interests might have been asserting that none of these claims were worth anything, but for that matter they were also asserting that the shares and the units in the trust were not worth anything either.[130]
  1. [120]
    The effect of the agreement was to discharge all other obligations, in circumstances where many of them had not been quantified but where all of them might well have had some value, possibly significant value. There is also the consideration that whatever its value in an immediate accounting sense as a relatively new company in a competitive industry,[131]Mr Butcher may have seen Sign Site as having significant long term value, and therefore something which was going to be worth money to him, particularly if the company survived its initial difficulties and did ultimately achieve some real profitability. It is I think not without significance that the “goodwill” payments were made conditional upon the business continuing to trade; it is quite plausible that Mr Butcher took the view that by the time those payments fell due, either the business would have failed or it would be doing well enough for him to be able to make payments of that order.
  1. [121]
    There is however an alternative explanation: Mr Butcher never had any intention of making more than minimal payments under this agreement, and its function was simply to get control of the shares and units, to defuse Mr Jones’ other claims and to keep him at bay for some time. There are two aspects of the matter which strike me as suggesting such an explanation. The first is that Mr Butcher seems to have gone up from $400,000.00 to $600,000.00 surprisingly readily in the circumstances, particularly in a context where he initially sought to justify the $400,000.00 figure by reference to something derived from the most recently circulated version of the accounts.[132]The second reason is that he flatly refused to provide personal guarantees, isolating the obligation to make the payments to a company with only nominal capital and no assets other than those held on trust. There is also the consideration that, having seen Mr Butcher in the witness box for much longer than I would have preferred, he did strike me as the sort of person who would enter into a contract of this nature without the slightest intention of performing it. I am not concerned with any question of estoppel, because there is no plea that the plaintiff is estopped from denying that the defendant entered into the contract in reliance on the warranties. The allegation in paragraph 54 is not made out.
  1. [122]
    It was then alleged in paragraph 55 that Mr Butcher and his company had made extensive loans to Sign Site since the date of the tab 42 agreement. Mr Butcher did give evidence that from time to time various amounts had been advanced by him or his companies, but I am not aware of any evidence which would prove the detail alleged in paragraph 55, or the total amount alleged. Apart from that, it is not obvious that the allegation is relevant either to the claim or the counterclaim.

Proof of loss

  1. [123]
    Paragraph 56 alleged that Sign Site has incurred costs including penalties and interest in dealing with the errors in the accounts alleged in paragraphs 47 to 50. There may have been some costs associated with delays in lodging business activity statements and income tax withholding statements, but it seems to me that they would have been quite small. Correcting the entries in paragraph 49(c) would have had the effect of increasing the expenses of the business during the relevant period, which should have had the effect of reducing the profit (or increasing the loss) and so reducing the incidence of income tax, rather than increasing it. It is not immediately obvious that reducing the value of the assets of the balance sheet would have imposed any particular cost on the company. It is also not obvious that the practice of pre-invoicing provided any long term cost to the company; in the short term it would have exposed the company to a liability for income tax, but evidently the company was ultimately able to avoid that liability by demonstrating that the accounts which were infected with pre-invoicing were incorrect. There may have been some accounting costs involved, but the defendants have not proved what they were. Overall it is not obvious that Sign Site is significantly worse off as a result of such accounting deficiencies as have been pleaded and proved.
  1. [124]
    It was alleged in paragraph 57 that the “quality” of the shares and the units, the subject of the agreement, were not as warranted in that they were of lesser value. The first difficulty here is that, although there were various warranties given in the agreement, one thing that was not warranted was the proposition that the shares and units were worth any particular amount. Indeed, on the face of the second paragraph of clause 3 of the agreement, what was paid for the shares and units was one dollar, that being the identified consideration for them. The difficulty with identifying the figure of $200,001.00 as the price for the shares and units is that this transaction was much more than a sale of the shares and units; as mentioned earlier it involved the plaintiff, Duskheat Pty Ltd and Mr Jones (and possibly Mrs Jones) giving up a lot of other rights, the true value of which was never quantified, either at the time of this agreement, or by evidence in the trial. The defendants’ case essentially ignores all of the rights released pursuant to this agreement, or treats them as being of no value.
  1. [125]
    There is no reason to adopt that approach. It is not appropriate in my view to treat this just as a sale and purchase of the shares in the company and the units in the unit trust for a “price” of $200,001.00, much less to imply some contractual warranty that they had that value. The first difficulty the plaintiff confronts is that this is a contract which does much more than simply provide for the sale and purchase of shares and units, and it is impossible to say on the face of the contract that any particular amount (other than $1) is allocated specifically as the “price” for the shares and units.
  1. [126]
    There is also a fatal evidentiary flaw in the defendant’s proof of the other element in this calculation, the market value of what was sold, namely the shares and the units. An independent accountant, Mr Green, was called to verify his opinion that the shares and units at the relevant time had no market value, because the business and the company were worthless: Exhibit 21. The difficulty with this evidence however is that it was dependent upon the accuracy of the “revised versions” of the company accounts which were produced by the company accountants in the context of an investigation by the ATO, and where there was no evidence (or at least no reliable evidence) that the versions of the accounts provided to Mr Green reflected the true position of the company and trust at the relevant time.
  1. [127]
    Given the vicissitudes of the accounts of this company,[133]good evidence would have been required to demonstrate that this particular version of the accounts was actually accurate, which would have included showing that they had not been distorted by a desire to minimise liability for income tax. Whether or not Mr Butcher can give evidence to satisfy the formal test for admissibility of company documents, as I said during the trial I do not regard his evidence that a particular version of the accounts was correct as worthy of any weight, when the defendants did not call the accountant who had been involved with the company throughout this period to give evidence verifying this version of the accounts. How am I to know that the “revised” accounts produced by Prudent Partners and Mr Butcher were not artificially distorted to minimise income tax, when this combination had earlier produced a set of accounts artificially distorted to make the company look better than it was, to keep the bank happy? 
  1. [128]
    In those circumstances, and in the light of my serious reservations anyway about Mr Butcher’s credibility, I am not prepared to treat the documents upon which Mr Green based his opinion as deserving any weight in this trial. It necessarily follows that Mr Green’s opinion is itself not deserving of any weight (if indeed it is even technically admissible), even though there is no particular reason to criticise it as an exercise in drawing a conclusion from the material he was given.[134]Hence the defendants have not proved the market value of the shares and units sold either. In that situation the first defendant has not shown that it suffered any substantial damages as a result of the breach of warranties proved, and is not entitled to more than nominal damages.
  1. [129]
    Perhaps I should point out that there are a number of emails in Exhibit 2 which suggest that on many occasions Prudent Partners was giving Mr Butcher good advice, particularly about putting returns in on time and complying with payment arrangements, which he did not take. Anything they did would have been based on information provided to them by Mr Butcher. I have seen no document from them suggesting that they were knowingly cooperating in Mr Butcher’s plans to distort the accounts, and Mr Butcher’s evidence about them is as unreliable as the rest of it. In the circumstances, the most plausible explanation for the absence of a witness from Prudent Partners is that the defendants did not think their testimony would assist the defendants’ case.
  1. [130]
    Apart from this, I have serious difficulties about the recovery of other than nominal damages in circumstances such as this where the first defendant is alleging a breach of warranties of certain matters, and where the second defendant was well aware at the time the contract was entered into that in most of these respects the matters warranted were not true. Whether this is seen as an issue of causation, because it cannot be said that any substantial loss or damage has been caused to the purchaser because of the inaccuracy of a factual proposition which the purchaser knew to be inaccurate at the time of entering into the contract, or whether this is simply a matter of policy, in that the court would not allow the purchaser to profit from its own, or perhaps more strictly Mr Butcher’s, wrong, probably does not matter. Text books speak of damages compensating for loss caused by a breach of contract.[135]
  1. [131]
    Mr Butcher was well aware of the pre-invoicing, and had deliberately instituted that policy in order to produce accounts to the bank which were more favourable than the true situation, and was well aware of the failure to lodge the relevant BAS and monthly withholding statements because he was the one within the company who had been responsible for doing this before the relevant time. The real cause of any failure of the company to live up to its accounts in these respects was Mr Butcher’s wrong, not anything for which the plaintiff or Mr Jones was responsible.[136]It is however unnecessary for me to resolve this question, because the simple answer to the plea of a set-off is that the first defendant has failed to prove any substantial damages for breach of contract. I will therefore not consider this point further. I allow nominal damages of $1 which is set-off against the plaintiff’s claim.
  1. [132]
    The defendants then pleaded a claim for an adjustment in the event that the shares and units were ordered to be re-transferred to the plaintiff. Such relief is claimed in the alternative in the statement of claim, but was not pressed in submissions, and in any event I can see no reason why the events that have happened would give the plaintiff an entitlement to terminate the contract ab initio. The plaintiff’s remedy is judgment against the first defendant for the balance of the money payable under the contract, but that is all. It is therefore unnecessary to consider any question of whether any return of the shares and units should be conditional upon the plaintiff’s making allowance for any enhanced value attributable to Mr Butcher since the units and shares were transferred.

Misleading and deceptive conduct

  1. [133]
    This claim, which was brought only against the second defendant, alleged that the email of 27 March 2015, which is the tab 38 agreement, involved certain representations by the second defendant. It was alleged that the email represented that he would acquire the plaintiff’s shares, that the first defendant was to be involved in the transaction only as a company which he owned and controlled, and that the second defendant would remain responsible for performance of the obligations under the sale agreement in his capacity as controller of the first defendant and managing director of Sign Site. These are said to have been conveyed expressly in that document, or by implication from it and from the facts pleaded in paragraphs 4O to 4H in the statement of claim. The facts alleged in paragraphs 4A, 4B, 4C and 4G were admitted in the defence at para 5.
  1. [134]
    Paragraph 4D alleged that the plaintiff, MrJones and the defendants were in dispute regarding Mr Jones’ removal as director of Sign Site and his claims for wages and for repayment of loans, which was denied on the basis that those disputes were with Sign Site, and that in any event there was no substance in the claims of the plaintiff and Mr Jones. I find that there were disputes between Mr Jones and Mr Butcher about these matters, regardless of whether the particular interest was held directly or through a company. I have already said something about these claims. The allegation in paragraph 4E about whether certain solicitors represented that they acted for the second and third defendants and Sign Site in certain correspondence was also made out on the face of the correspondence: Exhibit 1, tab 30. Mr Jones gave evidence which proved the allegations in paragraph 4F.[137]
  1. [135]
    Paragraph 4H, which was denied, alleged that the tab 38 agreement was entered into for the purpose of settling disputes between Mr Jones and the first, second and third defendants. My assessment on the evidence is that that agreement was entered into with a view to resolving all matters in dispute between the Jones’ interests and the Butcher interests, so as to enable Mr Jones to walk away with no continuing claims either personally or in respect of his company or anyone else against any aspect of the Butcher interests arising on whatever basis. So much follows from the scope of the various rights discharged and claims barred by that document. Accordingly those paragraphs of the statement of claim were made out.
  1. [136]
    Nevertheless, I do not consider that these facts give rise to the representations pleaded as a matter of implication, either with or without the terms of the tab 38 agreement. There is an element of unreality in the argument in circumstances where I have found that the second defendant was a party to the tab 38 agreement anyway, but the document does not specifically indicate who was to receive the shares and units in the trust as between the first, second and third defendants. What matters here is the representation that the second defendant would be responsible for discharging the obligation under the contract. On my interpretation of the tab 38 agreement it was a contract entered into by inter alia the second defendant, so that he was responsible for the payment of the consideration under the contract.
  1. [137]
    I accept as well that the representation was made in trade or commerce for the purposes of the Competition and Consumer Act 2010, but I cannot accept the following proposition, that the plaintiff executed the further agreement in reliance on the representation notwithstanding that the further agreement does not expressly identify the second and third defendants as purchasers. The further agreement is a reference to the tab 42 agreement. The difficulty with that argument is that, after the draft of the tab 42 agreement was sent to Mr Jones, one of the matters he raised specifically was the fact that Mr and Mrs Butcher were not parties to that agreement. After negotiations between Mr Jones and Mr Butcher about the terms of that agreement, they were not parties to it at the time when it was executed. In those circumstances, plainly Mr Jones was not relying on the fact that they had been made parties to the tab 38 agreement. He specifically wanted them to be parties to the tab 42 agreement as well, but Mr Butcher refused, and Mr Jones signed the agreement without the second and third defendants being parties to it, knowing that that was the situation because Mr Butcher had refused personal liability on that agreement.
  1. [138]
    Whatever may have been the position under the tab 38 agreement, by the time Mr Jones executed the tab 42 agreement on behalf of the plaintiff, he knew quite well that Mr Butcher would not be a party to that agreement and was not personally responsible for payments to be made under it, and he agreed to that situation by signing the agreement in those terms. Another reason why the plaintiff is not entitled to any relief against Mr Butcher for misleading and deceptive conduct is that any such misleading or deceptive conduct was not a cause of any loss the plaintiff may suffer because of the absence of a judgment against the second defendant.
  1. [139]
    It is not necessary to go further, though it seems to me that on the evidence at the time when the tab 38 agreement was put into the form in which was signed there is no reason to doubt that it reflected Mr Butcher’s view and intention at that time, since on the evidence he was the one who inserted those names after the description “seller” and “buyer” in the document.[138]In those circumstances it was not shown that that statement was misleading or deceptive at the time it was made. If a statement as to a future event is made on reasonable grounds the fact that the future event does not materialise does not mean that the statement was misleading or deceptive. The claim for damages for misleading and deceptive conduct fails.

The fourth defendant

  1. [140]
    The fourth defendant’s involvement arises because, on or about 8 February 2016, the first defendant transferred all the shares it held in Sign Site, including those acquired from the plaintiff, to the fourth defendant for $306.[139]The plaintiff claimed that this transfer was a breach of a term of the tab 38 agreement that “the buyer agrees not to transfer the business of another entity until the seller has been paid in full.”  In the alternative, the plaintiff alleged that it had a vendor’s lien over the shares and units, and also that the transfer was with the intention to defraud creditors.
  1. [141]
    I would interpret the quoted passage as a reference to transferring the business “to” another entity. More importantly, that was the terms of the equivalent clause in the tab 42 agreement, where it became special condition 9 within clause 3:

“The buyer agrees not transfer the business to another entity until the seller has been paid in full including the goodwill payments on or before the 30th June 2017.”

  1. [142]
    It was alleged in the statement of claim that the reference to “the business” meant the shares and units sold pursuant to that contract: para 27. That was admitted in the defence: para 36. Nevertheless, it is in my view plainly not correct. Although the expression “the business” is not defined in special condition 9, it was defined earlier in clause 3 of the tab 42 agreement in the context of the agreement to make the “goodwill” payments, payment of which was said to be subject to (among other things) “the Business, as defined in the Saint Hybrid Unit Trust Agreement dated 13 March 2014 trading … .” The only difference between what was said there and what was said in special condition 9 is that the word “business” has a capital B in the earlier use and a lower case b in special condition 9. I do not regard the tab 42 agreement as drafted with enough skill and precision to justify treating a difference like that as a matter of significance. Besides, the term “the business” does not readily or naturally describe the shares and units transferred. The reference to “the buyer” does not present any difficulty as the first defendant controlled Sign Site and through it Mr Butcher was in a position to decide whether that business would be sold.
  1. [143]
    The wording of special condition 9 fits in with the provision for the goodwill payments on or before 30 June 2017, the date on which the second goodwill payment was to be payable under the earlier part of clause 3, so the special condition is naturally related to the provision for the goodwill payments. In those circumstances, it seems to me quite clear that “business” in special condition 9 means the same as “business” in the earlier part of clause 3. The reference to the Sign Saint Hybrid Unit Trust Agreement in my opinion is a reference to the document at tab 10 of Exhibit 1. In that document in clause 1.1 the term “Business” was defined as meaning “the business described in item 6 in Schedule 1 and any other business carried on by the Trust as agreed by the Unitholders to be the subject of this agreement.” The “trust” was defined as the trust described in item 5 in Schedule 1.
  1. [144]
    Schedule 1 in the agreement identified in item 5 the trust as “the Sign Saint Hybrid Unit Trust” carried on by Sign Site Pty Ltd pursuant to the trust deed executed by that company (under its former name) and dated 13 March 2012. Item 6 identified “the business” as “SignSite is a sign manufacturing, installation and service business. Operating in Australasia. SignSite sells product on the internet, through technologies available to it and offline in person.”[140]That reads like a description of the business being carried on by Sign Site (as trustee) at the time these agreements were made.
  1. [145]
    The fact that the allegation was admitted on the pleadings does not in my opinion change the situation. The correct interpretation of the document is a question of law not a question of fact, and I am not bound on questions of law by the conduct of the parties. Apart from that, there is authority that a trial judge is not bound to act on a fact alleged in one pleading and admitted by the other party if the evidence before the judge shows that the admitted allegation is nevertheless wrong.[141]There was no suggestion that the Sign Site business had been transferred. This aspect of the plaintiff’s claim against the fourth defendant fails.

Unpaid vendor’s lien

  1. [146]
    As to the second limb of the claim, a vendor’s lien is an equitable lien, which is really a form of equitable charge imposed by equity for the purpose of doing justice as an incident to an agreement for sale rather than pursuant to any express term. It arose in the context of contracts for the sale of land. The leading case is the judgment of Lord Eldon in Mackreth v Symmons (1808) 15 Ves 329, 33 ER 778, where the earlier authorities were thoroughly reviewed.[142]Lord Eldon thought that the doctrine was derived from the civil law as to goods, but it has also been explained as based on the principle that in equity an interest in the land the subject of a contract passes to the purchaser on contract, though it is subject to the obligation to pay the purchase price. In effect, the equitable interests depend on factors other than the conveyance of a legal title. The lien arises automatically but is subject to exclusion by contract, or generally by statute, as has occurred in Queensland in the case of land under the Land Title Act 1994: s 191. Because it is an equitable remedy, a vendor’s lien will not arise unless the contract is specifically enforceable.[143]It will arise even if the conveyance recites receipt of the purchase price, if that has not actually happened.[144]
  1. [147]
    There are three difficulties about the claim for an unpaid vendor’s lien. The first is whether it applies at all to a contract for the sale of shares. The second is whether it applies in this contract in respect of the obligation to make the payments of the consideration, and indeed the “goodwill” payments, some time after completion, and the third is whether it can operate anyway in circumstances where, as I have pointed out earlier, the contract did more than simply provide for the sale and purchase of the shares and units in the trust, and where the consideration was not apportioned.
  1. [148]
    As to the first point, traditionally courts of equity did not grant specific performance of a contract for the sale of personal property, not because of its nature but because it was more difficult with such a contract to show that the legal remedy of damages was not an adequate remedy.[145]The plaintiff relied on the decision of Street J in Rudder v George Hudson Holdings Ltd [1972] 1 NSWLR 529, where it was held that a contract for the sale and purchase of shares in a company of which the court would grant specific performance gave rise to an unpaid vendor’s lien, as a corollary to the fact that in those circumstances the contract for sale could properly be the subject of the equitable jurisdiction: p 535.
  1. [149]
    In the case of a contract for the sale and purchase of shares, the more modern approach depends on whether the shares can be readily bought and sold in the market; if not, then damages are unlikely to be an adequate remedy.[146]This provides some support for the reasoning in Rudder(supra), though the subsequent history of that case would otherwise give reason to doubt it. The decision went on appeal directly to the High Court of Australia, where the declaration made was varied, but the appeal was otherwise dismissed: George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387. The court dealt with the matter on different grounds, but Walsh J did point out that the purchaser did not obtain legal title to the shares and was to be restrained by injunction from obtaining that title, and the vendor had the whole beneficial interest in them as well as the legal title, so that the purchaser had no property which could be subject to an equitable lien in favour of the vendor: p 401-2. That seems, with respect, obviously correct, and must make the analysis of Street J doubtful.
  1. [150]
    Street J had noted the decision in Langen and Wind Ltd v Bell [1972] Ch 685, which also involved a contract for the sale and purchase of shares.  In that case the applicability of the unpaid vendor’s lien was not contentious: p 692. Brightman J did however refer to Re Stucley (supra) as authority for the proposition that a lien would arise in all cases where a court of equity would assume jurisdiction, that is, would grant specific performance. In Stucley the Court of Appeal treated the proposition that a vendor’s lien was not confined to real estate, but extended to the sale of any property of which a court of equity would order specific performance, as settled by an earlier decision of the Court of Appeal, Davies v Thomas [1900] 2 Ch 462. Further, in Hewett v Court (supra) both Gibbs CJ and Deane J said that a vendor’s lien applied to sales of personalty as well as realty: p 646, p 663.
  1. [151]
    I therefore accept that a vendor’s lien could arise in the case of a contract for the sale and purchase of shares and units in a unit trust if the contract was one of which equity would grant specific performance, and that that would be the case with this contract.
  1. [152]
    The next difficulty is that equity has drawn a distinction between a situation where property has been conveyed to the purchaser in return for a price which has not yet been paid, and a situation where property has been conveyed in return for a promise to make a payment or payments at some time in the future.[147]The issue is whether the property is transferred in consideration of payment, albeit at a future date, or in consideration of a promise to pay at a future date; in the latter case, the vendor by obtaining the promise has obtained the consideration bargained for, and in those circumstances there is nothing to secure by an equitable lien. Hence, in Wossidlo v Catt (1934) 52 CLR 301, it was held that the sale of land in return for a promise to pay an annuity to the vendor did not give rise to an unpaid vendor’s lien in respect of the amounts payable pursuant to the annuity: see in particular Dixon J at p 311, where it was said that the parties could hardly have been intending to give the purchaser full beneficial ownership only when and if the annuity had finally been paid out.[148]
  1. [153]
    I have already referred to the terms of the contract of the present case. In my opinion the analysis adopted in those decisions leads to a conclusion that in the present case, the parties could not have intended that the defendant would take full beneficial interest in the shares and units only if and when the last of the future payments to be made under the contract was made. The correct interpretation here is that the plaintiff transferred that property in return for the promise to pay those amounts at that future time. Accordingly on this contract in my opinion no vendor’s lien arose.
  1. [154]
    Apart from this, the authorities speak of the vendor having a lien to secure payment of the consideration, or the purchase price, for the property transferred.[149]I have already averted to the difficulty presented by this contract, that there was an undifferentiated consideration payable for a range of advantages accruing to the Butcher interests in various different ways, including by way of the transfer of the shares and units. In Wossidlo(supra)the land was transferred together with some other property, but the consideration was apportioned in the contract and the discussion was by reference to that part of the consideration which was apportioned specifically to the transfer of the land: see p 309.
  1. [155]
    In Stuntz v The Australian Joint Stock Bank (1891) 12 LR (NSW) Eq 325 the court considered that a vendor’s lien could not arise where there was undifferentiated consideration for the sale of real property and personal property where possession had passed. It was held that no lien would attach to the personalty in those circumstances, so no lien attached to the realty either. It was said in Stonham that having regard to later decisions this appears to be incorrect,[150]and reference was made to Re: McCallum, Beard v McCallum(1907) 7 SR (NSW) 523, where however it was held that a lien attached to both realty and chattels not transferrable by delivery, which is a different point. Given that in my view no vendor’s lien arose anyway, I am not prepared to investigate the point further, but it seems to me in principle that it must be right that, in a case like this where a specific “purchase price” of the shares and units under the contract cannot be identified, a vendor’s lien cannot attach to them.

Conveyance to defraud creditors

  1. [156]
    The Property Law Act 1974 s 228 provides relevantly:

“Every alienation of property, made whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person prejudiced by the alienation of property.”

  1. [157]
    The section has considerable history, being based on a statute from 1571, as explained by the High Court in Marcolongo v Chen (2011) 242 CLR 546. The court endorsed an interpretation of the equivalent section in New South Wales that the term “defraud” should be understood as if it read “delay, hinder or otherwise defraud”: [19]. As well the court said that that intention was shown if a debtor “disposes of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach…”: [32]. The issue was not whether the transaction effected by the debtor was otherwise legal. It is also not necessary to show that that was the only or the dominant motivation or intention in undertaking the transaction: [57]. The court also noted that the statutory provision has long been held to require a liberal construction: [58].
  1. [158]
    That decision was considered by Jackson J in Ashala Model Agency Pty Ltd v Featherstone [2017] 2 Qd R 1 at [150] – [156], where he also considered the decision of the full court of South Australia in Johnson v Leader Computers Pty Ltd (2014) 118 SASR 408. In that case that court rejected the proposition that an intention to prefer one creditor over other creditors was inconsistent with the intent to defraud required by the Act. The application of such a section was also summarised in Patel v Lal [2011] NSWSC 603 at [6], and in Deputy Commissioner of Taxation v Peter Sleiman Investments Pty Ltd [2016] NSWSC 1657 at [42]-[49].
  1. [159]
    There is also a proviso in sub-section (3) to protect a conveyance for valuable consideration and in good faith to any person not having at the time of the conveyance notice of the intent to defraud creditors. Plainly that would not assist the fourth defendant here, in circumstances where Mr Butcher was both a shadow director of the first defendant and the only real director of the fourth defendant. If in the former capacity he had the relevant intention, in the latter capacity he knew about it.
  1. [160]
    The plaintiff’s case was that at the relevant time the shares in Sign Site and the units were the only valuable asset of the first defendant, and by transferring them this diminished the assets available for the satisfaction of the first defendant’s contractual obligation to the plaintiff. The consideration appears to be fairly nominal, though as I have pointed out there is no good evidence about the true financial position of Sign Site and hence its value. Mr Butcher said that at the time of the transfer he did not believe that there was any claim, and certainly not any valid claim, which the plaintiff had against the first defendant,[151]so there was no question of his doing anything to harm any capacity to enforce any judgement it or another creditor might obtain.
  1. [161]
    The transaction was about 8 February 2016, before this proceeding commenced on 6 April 2016 by the filing of a claim and statement of claim in the Supreme Court. On the other hand, there had been default notices issued in September 2015 by the plaintiff to the first defendant (Exhibit 1 tabs 45, 47) and there had been other intervening litigation. A statutory demand under the Corporations Act 2001 (Cth) was served by the plaintiff on the first defendant, which prompted an application to the Supreme Court to set it aside, filed on 19 October 2015: Exhibit 1 tab 16. The first defendant filed a claim in this court against the plaintiff and Mr Jones on 21 October 2015 (Exhibit 17), before the return date of the application to the Supreme Court, which was 4 November 2015.[152]It claimed that the first defendant had terminated the agreement to purchase the shares and units, and that it had suffered loss of $65,000.00, the amount of the payments already made to the plaintiff, together with an amount of over $300,000.00 as payments made for taxation liabilities “which should have been paid prior to the agreement being entered into”.[153]
  1. [162]
    The solicitors for the first defendant wrote to the solicitors for the plaintiff on 4 February 2016, just before the transfer occurred, advising that they were instructed to withdraw that proceeding and were now attending to filing a notice of discontinuance: Exhibit 18. Given that this letter was sent to solicitors in reference to the litigation on behalf of the plaintiff and Mr Jones, I infer that the claim and statement of claim had been served prior to that time. It seems to me that the pursuit of this litigation was in substance an attempt to defeat any claim the plaintiff made against the first defendant, showing that Mr Butcher was conscious of the fact that Mr Jones was likely to pursue the enforcement of the agreement. In those circumstances I am prepared to infer that the proceeding was abandoned as a means of dealing with any claim by the plaintiff,[154]and transferring the shares was adopted in its place.
  1. [163]
    Mr Butcher when pressed said that the explanation for the transfer was that the first defendant was incapable of providing further funding to Sign Site to meet its obligations (p 5–30), that Sign Site required further shareholder funding in order to continue to trade, and “we made a decision to provide further funding through a different entity, which was” the fourth defendant: p 5–31. He said that the fourth defendant would not provide further funding without having an interest in the company (Sign Site), but he also said that it had already loaned quite a lot of money to Sign Site, and obviously if he chose it could continue to do so: p 5–31. In short, Mr Butcher’s explanation made no sense. In those circumstances, there is no reason not to draw the obvious inference, that the reason for the transfer was to ensure that if the plaintiff sued the first defendant successfully the shares it held in Sign Site and units in the trust would not fall into the hands of a receiver or liquidator, which would deprive Mr Butcher of control of Sign Site.
  1. [164]
    That in my opinion satisfies the requirement of an intent to defraud creditors as that expression has been explained by the High Court, and accordingly the transfer of the shares and units from the first defendant to the fourth defendant is voidable at the instance of the plaintiff. The plaintiff is a person prejudiced by the transfer, because it follows from what I have already said that the plaintiff is entitled to a substantial judgement against the first defendant, and the first defendant does not otherwise have assets to satisfy the judgement. Whatever the shares and units may be worth, about which I have no reliable evidence, plainly the first defendant is in a better position to satisfy the judgement with them than without them.
  1. [165]
    It was submitted for the defendants that there was no point in granting relief under s 228 where there was no entitlement on the part of the plaintiff to obtain a retransfer of the shares from the first defendant. But the function of section 228 is not to make available property for that purpose; it is to make the property amenable to execution of a judgment, that is a money judgment, against the debtor which has alienated the relevant property. In terms of execution on a judgement by the plaintiff against the first defendant, those shares, although in the hands of the fourth defendant, are to be treated as if they were the property of the first defendant, and hence amenable to that execution.[155]The court can make consequential orders upon the avoidance of a transfer of property that are necessary to give effect to the superior title of creditors claiming the benefit of the statute against the party whose title was acquired under the transfer.[156]One consequential order which can be made is a freezing order: Puglia v Basol [2005] NSWSC 1271. There is no entitlement to damages against the fourth defendant. After these reasons are delivered I shall invite further submissions as to the content of any consequential orders sought.

Counterclaim

  1. [166]
    There are two aspects to the counterclaim. The first is a claim for damages for breach of warranty, on the basis that the amount already paid by the first defendant exceeded the value of the shares and units by $64,999. I have already found that there is no entitlement to substantial damages for breach of warranty, and allowed nominal damages of $1 set-off against the plaintiff’s claim. The first defendant already having the benefit of that set-off, the counterclaim for damages for breach of contract fails.
  1. [167]
    The second part of the claim alleged that Mr Jones on behalf of the plaintiff engaged in misleading and deceptive conduct in relation to the accounts of Sign Site. This claim is even more lacking in substance than the claim in contract, but I will go through the various allegations in the pleading and explain in detail why this is so. It was alleged that Mr Jones had supervised or been responsible for the incorrect entries entered prior to 6 February 2015 and inaccuracies as alleged in paragraph 49 of the defence. The propositions in paragraphs 49(a), (b), (e), (f) and (g) were not made out. As to paragraph 49(c), the only evidence about these incorrect entries was that the entries were made by Ms Campbell as she said without instructions from anyone. I am wary about that evidence because I think that she made the entries to be consistent with the entries for which Mr Butcher was responsible in the previous year’s accounts, but there was no evidence that those entries were in any way the responsibility of MrJones. Paragraph 49(d) referred to the inflated figures for trade receivables due to the practice of “pre-invoicing” to which I have already referred. This was a practice instituted by Mr Butcher and directed and supervised by him, not by Mr Jones, and Mr Jones was not shown to be in any way responsible for any resulting inaccuracies in the accounts for Sign Site. Hence to the extent that the accounts have been proved to be incorrect as alleged in paragraph 49 of the defence, Mr Jones was not responsible for those inaccuracies.
  1. [168]
    It was then alleged that Mr Butcher relied on Mr Jones in relation to the financial records of tax accounting of Sign Site. Such allegations were plainly nonsense. It was Mr Butcher who was manipulating the accounts of Sign Site in order to produce accounts which would look good for the bank, and to that end he was necessarily familiarising himself thoroughly with the content and effect of the accounts, something he said he did in conjunction with the accountants Prudent Partners. I am quite satisfied that Mr Butcher was aware of the relevant proved inaccuracies referred to earlier, and probably all or most of the inaccuracies in the accounts of Sign Site.
  1. [169]
    Paragraph 5 of the counterclaim was essentially correct. Paragraph 6 was not correct, because the purchase price of the shares and units was not negotiated in that way on 27 March. What happened was that on 26 March Mr Butcher made an offer in particular terms which Mr Jones did not accept. The following day Mr Jones sought a higher figure, and Mr Butcher agreed to that higher figure. Mr Butcher said that he made his offer by reference to some financial statements that he had dated 30 January 2015, statement he said on 11 March were wrong, as discussed. Even if that were the case, the price that was ultimately agreed was not shown to have been based on those figures even on his evidence, and for reasons given elsewhere, I do not regard him as a reliable witness.
  1. [170]
    I do not think that the accounts of the company were of any relevance in the determination of the figure of $600,000 on 27 March. This was a figure sought by Mr Jones and justified by him as the amount that he needed to get out of the company because of his own financial position, and it was the figure agreed to by Mr Butcher because he wanted an agreement with Mr Jones to get him out of the company on terms which would prevent him from pursuing any of the various claims that he had made. Further, Mr Butcher knew quite well that the figures for trade receivables and total assets and total equity in the accounts had been distorted by the practice of pre-invoicing with which he was also familiar; indeed the whole function of the pre-invoicing was to distort the accounts to make them look better than they really were. Accordingly the allegations in paragraph 6 and 7 of the counterclaim are not made out, indeed in my view are quite false.
  1. [171]
    It follows that Mr Jones and the plaintiff could not have known of this, since it did not happen. Indeed there was no evidence that Mr Jones knew of this as alleged in paragraph 8 of the counterclaim. Further, I am not persuaded that Mr Jones knew of the errors alleged in paragraph 49 of the defence, or at least so much of them as have been presently proved. I am satisfied that Mr Jones was not aware of the errors referred to in paragraph 49(c) or paragraph 49(d), though he was aware that there had been pre-invoicing which would have had an effect of distorting the financial position of Sign Site. It was certainly the case that Mr Jones did not inform Mr Butcher during the meeting of those errors. I am not prepared to draw the inference alleged in paragraph 11 of the counterclaim that in the circumstances the state of the accounts referred to in paragraph 6 amounted to a misrepresentation about the financial position of Sign Site by Mr Jones to Mr Richards. To the extent that they were inaccurate, Mr Richards was well aware of that, and indeed had much better knowledge of it than Mr Jones did. There was no misrepresentation by Mr Jones.
  1. [172]
    I am also not persuaded that there was any duty on his part to say anything about the accounts, in circumstances where Mr Butcher was in a much better position to be aware of the true state of the accounts than he was. Accordingly I am not persuaded that Mr Jones, or the plaintiff acting through him, engaged in conduct which was misleading or deceptive for the purposes of the Australian Consumer Law or the Fair Trading Act1989. The allegation in paragraph 13 was not made out. It follows that neither Mr Jones nor the plaintiff were involved in a contravention of s18 of the Australian Consumer Law by the other. Even if there had been some representation of the accuracy of the accounts, there was no reliance on it. The first defendant therefore cannot show that it suffered any damage as a result of any contravention of the Australian Consumer Law, or for that matter the Fair Trading Act. The counterclaim for misleading and deceptive conduct fails. In those circumstances, the counterclaim is dismissed with costs.

Conclusion

  1. [173]
    The plaintiff is therefore entitled to judgment that the first defendant pay it $534,999 together with interest under the Civil Proceedings Act 2011 s 58. I allow interest on $134,999 from 19 September 2015, on $150,000 from 1 July 2016 and on $250,000 from 1 July 2017, to the date of judgment. According to the court calculator, such interest comes to $49,434.41.[157]There is therefore judgment that the first defendant pay the plaintiff $584,433.41, including $49,434.41 by way of interest. I declare that the transfer by the first defendant to the fourth defendant of the shares in Sign Site Pty Ltd and the units in the Sign Saint Hybrid Unit Trust is void as against creditors of the first defendant. The claims against the second and third defendants are dismissed. The counterclaim is dismissed. I will hear submissions on the question of costs.

Footnotes

[1]The “-arama” word ending was popular among businesses in America in the ‘40’s and 50’s: Bryson, B “Made in America” (Black Swan 1998) p 253.

[2]Butcher p 3-24.

[3]Willems p 2-95; Exhibit 1 tab 1 sets out the basic structure: p 2-96; Jones p 45. See also Exhibit 1 tab 3; this copy is unsigned but a copy was signed: Willems p 2-96; Jones p 46.

[4]Exhibit 1 tab 2. The name change took effect on 16 April 2012.

[5]Exhibit 1 tab 10 refers at p 32 to the trust deed by which the trust was established on 13 March 2012. The agreement at tab 10 is undated, so it took effect when the last person signed: clause 1.1. Jones said this was in March 2013: p 2–18. The minutes at Exhibit 1 tab 22 suggest it occurred after 27 March 2014. See also Butcher p 3–53, 54: April 2014.

[6]He said he continued to work finalising the affairs of Signarama for some time later, although he spent one or two days at Sign Site each week: Jones p 2-18.

[7]Exhibit 1 tab 7, commenced in April 2013. There were also other defendants.

[8]Jones p 47, 48; Exhibit 1 tabs 2, 6, 8; Butcher p 3-30; Exhibit 2 tab 13. Butcher also ceased to be a director of the first defendant, but continued to run it: statement of claim para 2, defence para 2; Ms Butcher p 3–22.

[9]He was appointed to this position at some stage in early 2013, as reflected in the Trust Agreement Exhibit 1 tab 10 Schedule 1 item 8. Although there was some delay in getting this document signed, he described himself as “Managing Director” in August 2013: Exhibit 2 tab 35.

[10]Willems p 2-97; Butcher p 3–28.

[11]Jones p 2-20; Willems p 2-98; Butcher p 3–26. Data entry was done by Ms Campbell in Australia or by Ms Willems: p 2-20; p 2-98.

[12]Campbell p 32, p 43; Exhibit 3 – BAS forms were not submitted; Jackson p 2–63; Exhibit 2 tab 12.

[13]They were involved by 23 October 2012: Exhibit 2 tab 9. They had been Butcher’s accountants.

[14]Jones p 52; Exhibit 2 tab 145.

[15]Jones p 56: done at direction of Butcher; Butcher p 3–43. This was done at the end of the 2012 – 13 financial year: p 3–44. It was not done all the time: p 4–64.

[16]Exhibit 11; Exhibit 1 tab 11 p 3; Exhibit 2 tab 89 re extension of overdraft.

[17]For the purposes of a trial I once had to value the work in progress of a solicitors’ practice on two dates twelve months apart: Thompson v Royds [2003] QDC 288 – a good cure for insomnia.

[18]That is my own impression without the benefit of relevant expert evidence at the trial.

[19]See e.g. Exhibit 1 tab 11 p 1, p 2. It certainly had cash flow problems, which Mr Butcher managed: Exhibit 2 tab 42, tab 51.

[20]Exhibit 1 tab 25. Jones p 60.

[21]Ordinarily a meeting of directors of a company cannot remove a director: Corporations Act 2001 (Cth) s 203E. Mr Jones believed his removal was effective: p 2-49.

[22]The company’s solicitor denied that he was an employee, Exhibit 1 tab 35. That a director could be an employee was contemplated by the agreement Exhibit 1 tab 10, and p 4 of tab 3, the agreement of 13 June 2012, looks very like an agreement to employ him as Global Operations Director, on a fixed salary. The board meeting on 27 March 2014 adjusted his “wages”: Exhibit 1 tab 22; Exhibit 2 tab 90. Exhibit 1 tab 14 looks like a duty statement. At the meeting on 6 February 2015, the board expressly terminated his employment: tab 25. Mr Willems claimed this was a mistake on his part in the minutes, and that they were not employees: p 3–12, 13. I do not believe this evidence. If I had to make a finding, I would find on the evidence before me that he was an employee.

[23]Such as the meeting on 11 March 2015; Exhibit 1 tab 34.

[24]Exhibit 1 tab 26. The amount was not stated but did not exceed $450,000. It was not accepted.

[25]Exhibit 1 tab 31, on 27 February 2015.

[26]The origin of this account was that when Sign Site started the assets of Duskheat had been transferred to Sign Site without payment: Jones p 48. See also Exhibit 1 tab 2.

[27]Exhibit 1 tab 27, 29, which particularised a total claim of $886,065.74. The response was little more than mere bluster: Exhibit 1 tab 30. There is no reason to think there were unpaid dividends, but the trust tax returns refer to distributions from the trust: Exhibit 2 tab 311 p 7, tab 314 pp 7, 8, and some of these may have been unpaid.

[28]Jones p 62; and see Exhibit 1 tab 33.

[29]Exhibit 1 tab 32.

[30]Butcher p 3-60. Mr Jones said the Sign Site HR consultant said this: p 2-76.

[31]His oral evidence reads as if this was done before the agreement:  p 2-4. The signed notice of discontinuance was dated 30 March 2015: Exhibit 2 tab 254. It was apparently provided by the Sign Site HR consultant, and returned to her signed the same day.

[32]Butcher p 3–60: He had arranged to attend without a lawyer and so would not meet unless no lawyers were there. Jones, to the same effect: p 2-76.

[33]Jones p 2–5; Butcher p 3–62; Exhibit 1 tab 37. It offered a total of $400,000.00.

[34]Exhibit 1 tab 38: “the tab 38 agreement”; Jones p 2-6; Butcher p 3–65.

[35]Exhibit 1 tab 41. This is an email from Mr Jones, with comments in blue inserted into it by Mr Butcher, and further comments in green in reply inserted by Mr Jones. If this approach was adopted in order to assist comprehension by someone in my position, it failed. There was also a conversation: Butcher p 3–69.

[36]Jones p 2-84; claiming that this was on the basis of legal advice.

[37]Jones p 2-48: changed one draft BAS at Butcher’s direction; Campbell p 35: changed regularly.

[38]Campbell p 26, p 41.

[39]Exhibit 1 tab 11 p 4.

[40]Exhibit 3, forwarded by Butcher to Jones: Exhibit 2 tab 35. The numbers were the same in the documents signed by Jones: Exhibit 2 tabs 325-8, and see tabs 361-4. He did not adjust the numbers on these returns.

[41]The first two are duplicates of Exhibit 5 tabs 1 and 2.

[42]Also at Exhibit 5 tab 5. This shows that she revised all BAS for Sign Site before 1 January 2014.

[43]She was sent copies obtained from the ATO.

[44]Jackson p 2-59, 2-68, 69.

[45]In Exhibit 1 tab 11 p 5, when Butcher was explaining why the accountants were having to do so much work, he spoke of Ms Campbell having too much to do, but did not mention Jones.

[46]He was the one they talked to or (generally) emailed, and he circulated the documents they produced. They had access to Quickbooks, and later to Xero: Campbell p. 33

[47]I have noticed that the last sentence in that email is in a different font from the balance of the email. How this came about was not explained by evidence during the trial, but it is certainly curious.

[48]Jones p 2-6 line 10.

[49]See for example Butcher p 5-32: claimed to be shocked when the plaintiff sued, and p 5-33 “ridiculous, obscene.” 

[50]The “revised” 2013 tax return, Exhibit 2 tab 312, showed loss of $317,205, if that document has any validity.

[51]Perhaps payments on finance leases, for example. That would explain why Ms Campbell treated such payments the same way in the 2014 year.

[52]By the time the tax return for 2014 was put in, the net profit had grown to $176,124: Exhibit 2 tab 314. In an email to the accountants on 27 January 2015, Bishop told them “I have not completed my review of 2014 in Xero. This needs to be adjusted  .. .”  On 30 January he told them the accounts still contained many discrepancies, and needed a full audit by the accountants.

[53]Butcher p 3-64, 65. Emphasis added to those parts not in Exhibit 1 tab 37 or tab 38.

[54]When I questioned him about this later, he first suggested that it was to do with the “restraints” and other (unspecified) conditions, and when I pointed out that restraints did not explain the reference to him and his wife, he added that the agreement was to extend to all personal debts: p 5-37.

[55]Exhibit 2 tabs 42, 51. He also met the accountant to discuss finance (tab 44) and told Mr Jones how to reply to a query from a finance company: tab 48.

[56]Yet he was reluctant to admit that he wanted Jones out of the business: p 5-43, 44, 45.

[57]Examples of long-winded and generally irrelevant answers are at pp 3–29, 30, and p 3–60.

[58]Ms Jackson was able to log onto QuickBooks from the Brisbane office using a particular programme: p 2–73. So it is not clear why Mr Butcher could not do the same.

[59]Butcher p 3-23, 4-19; Exhibit 9. See also Exhibit 1 tab 11 p 6: “I have the most knowledge when it comes to accounting”.

[60]I was also not impressed by his attempts to distance himself from that statement in the letter: p 4-105, 6.

[61]Perhaps, rather, less imprecision. It is scarcely a model of the draftsman’s art.

[62]This reference to the later agreement shows that it cannot assist the plaintiff to refer to the provision in the tab 38 agreement that the “formal sale agreement” was to contain “no changes to the conditions and terms of sales other than that required by law to enable the sale to take place.” 

[63]As to the bank’s requirements, see Exhibit 2 tab 38. The names of the individuals were put in at the suggestion of Mr Butcher: Jones p 2-79.

[64]A person may sign an agreement in more than one capacity; Bond v Rees Corporate Advisory Pty Ltd [2013] VSCA 13 at [57], [58].

[65]Midland Brick Co Pty Ltd v Welsh [2006] WASC 122 at [244]-[249].

[66]Seddon & Ellinghaus “Cheshire and Fifoot’s Law of Contract” (9th Australian ed, 2008) p 1065.

[67]Olsson v Dyson (1969) 120 CLR 365 at 388.

[68]Glanville Williams “Joint Obligations” (1949) p 35.

[69]Glanville Williams op. cit. p 106.

[70]Glanville Williams op. cit. p 135.

[71]BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283.

[72]Indeed, in another matter I held that an agreement which on its face was an agreement between the individuals that stood behind a collection of corporate trustees through whom the individuals dealt with each other was a contract binding on them as individuals, not made by them only in the capacity as agents for the corporate trustees: Jenkins v Burke [2015] QDC 249. I am applying the approach to interpretation of contracts set out therein, without restating it.

[73]There was no issue raised by the defendants as to the authority of the second defendant as agent for the third defendant.

[74]In the event of non-completion they would be liable for damages, but not specific performance.

[75]See for example the correspondence in Exhibit 1 tabs 26, 27, 29, 30 and 35.

[76]UCPR r 62, 63; Australian Securities Ltd v Western Australian Insurance Co Ltd (1929) 29 SR (NSW) 571; Australian Workers Union v Bowen (1946) 72 CLR 575 at 583.

[77]McPherson “Supreme Court of Queensland” (1989) p 169. See also RSC 1900 O 25 r 20.

[78]Carrick v Armstrong [1969] Qd R 185 at 191.

[79]Except for the historical curiosity that the proposition advanced has not been good law in Queensland since 1876.

[80]These are decisions where that has been held or assumed: Moore v Devanju Pty Ltd [2012] QSC 66 at [3]: Schneider v Alusa Pty Ltd [2012] QSC 37 at [16].

[81]See General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 at 389.

[82]General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 at 389.

[83]Walker v Wilsher (1889) 23 QBD 335 at 337; Oceanbulk Shipping & Trading SA v TMT Asia Ltd [2010] 1 WLR 1803 at 1809; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 110.

[84]This was a notice under the Trust Agreement Exhibit 1 tab 10 clause 14.2. This did not present a problem as the sale was to an existing unitholder and Mr Willems consented: Exhibit 2 tab 257.

[85]If it matters, the parties thought on 27 March they had a deal: they shook hands on it: Butcher p 5-44.

[86]Statement of Claim para 8, defence para 20. The issue about who paid was irrelevant.

[87]The documents related to a lease, and registration papers of vehicles owned by Duskheat Pty Ltd: Jones p 2-89.

[88]Jones p 2-10.

[89]She added that Mr Jones had a lot of personal documents in the office as well and after he had left his office was basically cleared out: p 36. Mr Jones used his personal computer, which he took: p 37.

[90]Jones p 2–9. He was stripped of responsibility for operations on 19 January 2015: Exhibit 2 tab 217; Butcher p 3-49.

[91]Exhibit 1 tab 16; Exhibit 2 tabs 325-330. These are different from the versions obtained from the ATO: Exhibit 2 tabs 334-338.

[92]Jones p 2-11. Butcher said he did not recall any such conversation: p 3-74.

[93]Jones p 2-11; a different version was denied in cross-examination: p 2-87

[94]Exhibit 1 tabs 46, 47.

[95]Exhibit 2 tabs 355, 369, 370.

[96]The September and December returns were in the BAS. Others are Exhibit 2 tabs 375–378, all lodged 29 June 2015.

[97]It had been finished before 15 November 2017, but I was not given any documents evidencing the outcome.

[98]See also Exhibit 1 tab 35, which referred to pre-invoicing affecting the accounts then.

[99]Ms Jackson said the BAS returns were completed on a cash basis, and would not have been influenced by pre-invoicing: p 2–71. The accountants advised that that they were changing to an accruals basis from 1 January 2014: Exhibit 2 tab 83. The BAS obtained from the ATO portal for periods in 2013, eg tab 335, state that the accounting method was accruals, but this may have been because that was the basis applicable when these were obtained in 2014.

[100]Campbell p 35. She said that after Mr Jones left she was not involved in the preparation of the BAS returns: p 42. Jones said he only adjusted one BAS return, at Butcher’s direction: p 2-48.

[101]All of the returns for these quarters had been lodged in June 2015.

[102]These are described in the document as “Interest ING loan”. The 2014 balance sheet tab 313 showed no such loan to the company, so there was no reason for the accountants to treat this as a company expense. See also Jones p 48.

[103]The only explanation was by Mr Butcher at p 3–90, given after the objection at p 3–39. I ruled that the documents are admissible, but in the circumstances can give them little weight.

[104]Mr Butcher said he “collated” it (p 4-106) which I assume means he was the one who put it together, from he said the accounting software for the company. He sent it to the defendants’ solicitors, who sent it under cover of their letter at Exhibit 1 tab 35.

[105]Each payment is identified as “Duskheat Pty Ltd” suggesting it was not recorded as an expense of Sign Site.

[106]It was submitted that this was because it was recorded as net of GST. There was no evidence of that.

[107]Reliance on this payment was abandoned in submissions, Appendix A p 55.

[108]See also Exhibit 2 tab 384: Butcher p 3–91.

[109]So far as I can tell without the benefit of expert evidence on the point. Because of that lack, I am wary of placing any great weight on this.

[110]This was said to be because they had been recorded as amounts exclusive of GST. There was no evidence of that, and no explanation of why some such payments would be recorded in this way, but not all.

[111]For example one on 10 September 2014 which seems to match the payment referred to in Exhibit 2 tab 185, where Mr Butcher said on 8 September 2014 “I have paid the Sydney equipment rental from Sign Site .. “. Ms Campbell than “uploaded” something for Mr Jones to “release”.

[112]In some cases there is an “Inv” number recorded for the INV entries, but none of the PAY entries.

[113]See for example Exhibit 1 tab 11 p 3-4; Butcher p 4-65, 66; Exhibit 1 tab 34 p 11. A list of invoices with “incorrect” dates or for jobs cancelled at Exhibit 2 tab 381 shows 40 of them dated 30 June 2013, with a face value of $907,441.95, and 32 in the next financial year, mostly in late May or June, with a face value of $438,321.45.

[114]See also Exhibit 1 tab 11, discussed below.

[115]Except for the mere assertion of Mr Butcher, e.g. at p 3–96, which apart from any issues of his credibility, carries no weight as they were prepared by the accountants, as I ruled at p 3–95.

[116]This is particularly odd because the emails at tabs 223 and 226 look to be the same email presented differently by different programs.

[117]It is however quite different from the revised balance sheet for the company signed by the accountants on 17 March 2017: tab 316. Curiouser and curiouser!

[118]It had not been lodged by 12 March 2015: Exhibit 2 tab 244. What was said to be the original tax return for 2014, tab 314, records distributions from the trust to the first defendant and to the Speedy Group Inc, but not to the plaintiff, suggesting it was prepared after the agreement was in place, and the units in the trust had been transferred.

[119]This was not the first time; he had made himself aware of the tax liabilities of the business in August 2013 after early BAS forms had not been lodged, Exhibit 2 tab 35; Mr Butcher p 3–33, p 4–55.

[120]He claimed in evidence that by this he meant a couple of months: p 3–58. He had just referred to BAS returns and he must have known these went in quarterly.

[121]Exhibit 2 tab 244 also advised him that there was an existing tax liability on the running account, unpaid superannuation amounts, and the 2014 tax return was overdue.

[122]Butcher p 4-88. See also Exhibit 2 tab 244, tab 250.

[123]Exhibit 1 tab 19.

[124]Exhibit 1 tab 11. He successfully changed this to a profit of $143,143.00 in the 2014 accounts as submitted to the bank: Exhibit 2 tab 223.

[125]Lindgren Carter & Harland “Contract Law in Australia” (1986) p. 202+. The distinction was modified by Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.

[126]Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355 at 388.

[127]On 30 January 2015 he told the accountants that the accounts for 2014 needed a full audit by them: Exhibit 2 tab 224. As well he said at that meeting in March 2015 he did not trust Mr Jones: p 3-64. It follows that so far as the accounts were the product of Mr Jones, he did not trust the accounts.

[128]See Exhibit 1 tab 22 heading “Working directors’ wages”.

[129]Exhibit 1 tab 44.

[130]Exhibit 1 tab 35.

[131]The industry was competitive: Butcher p 3-76.

[132]Butcher p 3-64. Particularly surprising in a context where he said there was no real benefit to the first defendant in buying the shares p 5–44.

[133]For example, compare the balance sheet as at 30 September 2013 in Exhibit 2 tab 50, showing a figure for net equity of about minus $163,000 with the balance sheet as at 31 March 2014, six months later, in Exhibit 2 tab 107, showing net assets of $468,097.32. Exhibit 2 tab 90 shows net income for the year to March 2014 at only $87,226.31.

[134]I have not looked closely at Mr Green’s analysis, but one thing I did look at was the entries in his Schedule 4.1 for interest paid, summarised from the management accounts in Exhibit 1 tab 19 and in Exhibit 2 tab 318. On the face of it the summary has interest paid lower in the latter, longer period, but while my addition also gets $30,683 for tab 19, I get $47,809 for tab 318, not $20,869. Mr Green was not cross-examined about this. Perhaps he should have been.

[135]Seddon & Ellinghaus, op cit, p 1077; McGregor on Damages (15th Ed 1988) p 137, citing Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1947] AC 196 at 225 per Lord Wright.

[136]The case is the converse of the situation in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 408-10, where the vendor was liable for damages for breach of an (implied) warranty that the subject matter of the sale existed, when the purchaser had relied on the vendor and the vendor should have known the truth.

[137]Jones p. 61 re Exhibit 1 tab 30; p. 64 re Exhibit 1 tab 35.

[138]His explanation for this was of course nonsense: Butcher p 3-65. The obvious reason for this step was to maximise the width of the discharges in the document given by Mr Jones.

[139]Statement of Claim, para 29, admitted in defence, para 5. At the same time all the units in the trust were transferred to it: Butcher p 5–28. The trial was conducted on the basis that there was no difference between the units and the shares.

[140]Another document not drafted with notable skill and precision.

[141]Holdway v Arcuri Lawyers [2009] 2 Qd R 18 at [64], [65].

[142]One of which, Harrison v Southcote (1751) 3 Ves Sen 389, 28 ER 249, was said by Lord Eldon (at 337/781) to be authority for the proposition that a lien would not be raised in favour of a Papist. This was because of certain statutes repealed in 1778.

[143]This is the traditional view, confirmed by Gibbs CJ in Hewett v Court (1983) 149 CLR 639 at 649. But Deane J in that case at pp 664-6 rejected that limitation, and the other members of the court did not consider the point. So far as I know, this difference has not been resolved by the High Court.

[144]Re Stucley, Stucley v Kekewich [1906] 1 Ch 67 at 79.

[145]Adderley v Dixon (1824) 1 Sim & St 607, 57 ER 239.

[146]See Spry “The Principles of Equitable Remedies” (6th Ed 2001) p 64.

[147]See the classic statement in Re: Albert Life Assurance Co. ex parte Western Life Assurance Society (1870) L.R. 11 Eq 164 at 178.

[148]Lord Eldon in Mackreth v Symmons (supra) also held that a covenant to pay a life annuity in return for the transfer of land did not support a vendor’s lien to secure payment of the annuity.

[149]Even the reformulation of Deane J in Hewett v Court (supra) at p 668 spoke of indebtedness arising from the consideration for the acquisition of property or an expense incurred in relation to it.

[150]Stonham “Vendor & Purchaser” (1964) p 674 para 1344.

[151]Butcher p 5–32, 33.

[152]There was no evidence of what happened then, but I assume the statutory demand was set aside.

[153]Statement of claim para 24; the claim and statement of claim were Exhibit 17.

[154]There was no evidence about this, but the first defendant was apparently only the trustee of a trust at the relevant time, and in those circumstances I assume it would have been ordered to give security for costs in this litigation had an application to the court been made, something Mr Butcher might have been unwilling to do.

[155]The submissions for the defendants did not come to grips with the proper operation of this section.

[156]Noakes v J Harvy Holmes and Son (1979) 37 FLR 5 at 12.

[157]$20,755.18 + $16,021.69 + $12,657.54

Close

Editorial Notes

  • Published Case Name:

    Hilchrist Pty Ltd v Visual Integrity Pty Ltd and ors

  • Shortened Case Name:

    Hilchrist Pty Ltd v Visual Integrity Pty Ltd

  • MNC:

    [2018] QDC 97

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    01 Jun 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355
2 citations
Jump To
Cite 1 - (1993) 114 ALR 355
Cite 2 - (1993) 114 ALR 355
Adderley v Dixon (1824) 1 Sim & St 607
2 citations
Jump To
Cite 1 - (1824) 1 Sim & St 607
Cite 2 - (1824) 1 Sim & St 607
Adderley v Dixon [1824] 57 ER 239
2 citations
Jump To
Cite 1 - [1824] 57 ER 239
Cite 2 - [1824] 57 ER 239
Ashala Model Agency Pty Ltd (in liq) v Featherstone[2017] 2 Qd R 1; [2016] QSC 121
2 citations
Jump To
Cite 1 - [2017] 2 Qd R 1
Cite 2 - [2017] 2 Qd R 1
Australian Securities Ltd v Western Australian Insurance Co Ltd (1929) 29 SR (NSW) 571
2 citations
Jump To
Cite 1 - (1929) 29 SR (NSW) 571
Cite 2 - (1929) 29 SR (NSW) 571
Australian Workers Union v Bowen (1989) P 169
1 citation
Jump To
Cite 1 - (1989) P 169
Australian Workers' Union v Bowen (1946) 72 CLR 575
2 citations
Jump To
Cite 1 - (1946) 72 CLR 575
Cite 2 - (1946) 72 CLR 575
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
2 citations
Jump To
Cite 1 - (1986) 40 NSWLR 622
Cite 2 - (1986) 40 NSWLR 622
Beard v McCallum (1907) 7 SR NSW 523
2 citations
Jump To
Cite 1 - (1907) 7 SR NSW 523
Cite 2 - (1907) 7 SR NSW 523
Bond v Rees Corporate Advisory Pty Ltd [2013] VSCA 13
2 citations
Jump To
Cite 1 - [2013] VSCA 13
Cite 2 - [2013] VSCA 13
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
2 citations
Jump To
Cite 1 - (1977) 180 CLR 266
Cite 2 - (1977) 180 CLR 266
Carrick v Armstrong [1969] Qd R 185
2 citations
Jump To
Cite 1 - [1969] Qd R 185
Cite 2 - [1969] Qd R 185
Coghlan v Pyoanee Pty Ltd[2003] 2 Qd R 636; [2003] QCA 146
2 citations
Jump To
Cite 1 - [2003] 2 Qd R 636
Cite 2 - [2003] 2 Qd R 636
Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
2 citations
Jump To
Cite 1 - (2000) 201 CLR 520
Cite 2 - (2000) 201 CLR 520
Concut Pty Ltd v Worrell (2000) 75 ALJR 312
2 citations
Jump To
Cite 1 - (2000) 75 ALJR 312
Cite 2 - (2000) 75 ALJR 312
Davies v Thomas [1900] 2 Ch 462
2 citations
Jump To
Cite 1 - [1900] 2 Ch 462
Cite 2 - [1900] 2 Ch 462
Deputy Commissioner of Taxation v Peter Sleiman Investments Pty Ltd [2016] NSWSC 1657
2 citations
Jump To
Cite 1 - [2016] NSWSC 1657
Cite 2 - [2016] NSWSC 1657
Equus Financial Services Limited v Glengallan Investments Pty Ltd [1994] QCA 157
2 citations
Jump To
Cite 1 - [1994] QCA 157
Cite 2 - [1994] QCA 157
General Credits Ltd v Tawilla Pty Ltd & Ors[1984] 1 Qd R 388; [1984] QSC 95
3 citations
Jump To
Cite 1 - [1984] 1 Qd R 388
Cite 2 - [1984] 1 Qd R 388
Cite 3 - [1984] 1 Qd R 388
George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387
2 citations
Jump To
Cite 1 - (1973) 128 CLR 387
Cite 2 - (1973) 128 CLR 387
Harrison v Southcote (1751) 3 Ves Sen 389
2 citations
Jump To
Cite 1 - (1751) 3 Ves Sen 389
Cite 2 - (1751) 3 Ves Sen 389
Harrison v Southcote [1751] 28 ER 249
2 citations
Jump To
Cite 1 - [1751] 28 ER 249
Cite 2 - [1751] 28 ER 249
Hewett v Court (1983) 149 CLR 639
4 citations
Jump To
Cite 1 - (1983) 149 CLR 639
Cite 2 - (1983) 149 CLR 639
Cite 3 - (1983) 149 CLR 639
Cite 4 - (1983) 149 CLR 639
Holdway v Arcuri Lawyers (A Firm)[2009] 2 Qd R 18; [2008] QCA 218
2 citations
Jump To
Cite 1 - [2009] 2 Qd R 18
Cite 2 - [2009] 2 Qd R 18
Hong Kong Fir Shipping Co. Ltd v Kawaski Kisen Kaisha Ltd (1962) 2 QB 26
2 citations
Jump To
Cite 1 - (1962) 2 QB 26
Cite 2 - (1962) 2 QB 26
Jenkins v Bourke [2015] QDC 249
2 citations
Jump To
Cite 1 - [2015] QDC 249
Cite 2 - [2015] QDC 249
Johnson v Leader Computers Pty Ltd (2014) 118 SASR 408
2 citations
Jump To
Cite 1 - (2014) 118 SASR 408
Cite 2 - (2014) 118 SASR 408
Langen & Wind Ltd v Bell [1972] Ch 685
2 citations
Jump To
Cite 1 - [1972] Ch 685
Cite 2 - [1972] Ch 685
Lord Eldon in Mackreth v Symmons [1808] 33 ER 778
2 citations
Jump To
Cite 1 - [1808] 33 ER 778
Cite 2 - [1808] 33 ER 778
Mackreth v Symmons (1808) 15 Ves 329
2 citations
Jump To
Cite 1 - (1808) 15 Ves 329
Cite 2 - (1808) 15 Ves 329
Marcolongo v Chen (2011) 242 CLR 546
2 citations
Jump To
Cite 1 - (2011) 242 CLR 546
Cite 2 - (2011) 242 CLR 546
Masters v Cameron (1954) 91 C.L.R 353
2 citations
Jump To
Cite 1 - (1954) 91 C.L.R 353
Cite 2 - (1954) 91 C.L.R 353
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
2 citations
Jump To
Cite 1 - (1951) 84 CLR 377
Cite 2 - (1951) 84 CLR 377
Midland Brick Co Pty Ltd v Welsh [2006] WASC 122
2 citations
Jump To
Cite 1 - [2006] WASC 122
Cite 2 - [2006] WASC 122
Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1947] AC 196
2 citations
Jump To
Cite 1 - [1947] AC 196
Cite 2 - [1947] AC 196
Moore v Devanjul Pty Ltd [2010] QSC 250
2 citations
Jump To
Cite 1 - [2010] QSC 250
Cite 2 - [2010] QSC 250
Moore v Devanjul Pty Ltd [2012] QSC 66
1 citation
Jump To
Cite 1 - [2012] QSC 66
Noakes v J Harvy Holmes & Son (1979) 37 FLR 5
2 citations
Jump To
Cite 1 - (1979) 37 FLR 5
Cite 2 - (1979) 37 FLR 5
Oceanbulk Shipping & Trading SA v TMT Asia Ltd [2010] 1 WLR 1803
2 citations
Jump To
Cite 1 - [2010] 1 WLR 1803
Cite 2 - [2010] 1 WLR 1803
Olsson v Dyson (1969) 120 C.L.R 365
2 citations
Jump To
Cite 1 - (1969) 120 C.L.R 365
Cite 2 - (1969) 120 C.L.R 365
Park & McIntosh v Lanray Industries Pty Ltd [2010] QCA 257
2 citations
Jump To
Cite 1 - [2010] QCA 257
Cite 2 - [2010] QCA 257
Patel v Lal [2011] NSWSC 603
2 citations
Jump To
Cite 1 - [2011] NSWSC 603
Cite 2 - [2011] NSWSC 603
Puglia v Basol [2005] NSWSC 1271
2 citations
Jump To
Cite 1 - [2005] NSWSC 1271
Cite 2 - [2005] NSWSC 1271
Re: Albert Life Assurance Co. ex parte Western Life Assurance Societ (1870) L.R. 11 Eq 164
2 citations
Jump To
Cite 1 - (1870) L.R. 11 Eq 164
Cite 2 - (1870) L.R. 11 Eq 164
Rudder v George Hudson Holdings Ltd [1972] 1 NSWLR 529
2 citations
Jump To
Cite 1 - [1972] 1 NSWLR 529
Cite 2 - [1972] 1 NSWLR 529
Schneider v Alusa [2012] QSC 37
1 citation
Jump To
Cite 1 - [2012] QSC 37
Stucley v Kekewich [1906] 1 Ch 67
2 citations
Jump To
Cite 1 - [1906] 1 Ch 67
Cite 2 - [1906] 1 Ch 67
Stuntz v The Australian Joint Stock Bank (1891) 12 LR NSW Eq 325
2 citations
Jump To
Cite 1 - (1891) 12 LR NSW Eq 325
Cite 2 - (1891) 12 LR NSW Eq 325
Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93
3 citations
Jump To
Cite 1 - (1957) 98 CLR 93
Cite 2 - (1957) 98 CLR 93
Cite 3 - (1957) 98 CLR 93
Thompson v Royds [2003] QDC 288
1 citation
Jump To
Cite 1 - [2003] QDC 288
Walker v Wilsher (1889) 23 QBD 335
2 citations
Jump To
Cite 1 - (1889) 23 QBD 335
Cite 2 - (1889) 23 QBD 335
William Brandt's Sons & Co v Dunlop Rubber Company (1905) AC 454
2 citations
Jump To
Cite 1 - (1905) AC 454
Cite 2 - (1905) AC 454
Wossidlo v Catt (1934) 52 CLR 301
3 citations
Jump To
Cite 1 - (1934) 52 CLR 301
Cite 2 - (1934) 52 CLR 301
Cite 3 - (1934) 52 CLR 301

Cases Citing

Case NameFull CitationFrequency
Car Mojo Pty Ltd v Lin [2021] QDC 1842 citations
1

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