Access Training Group Ltd v Jane

Case •

[2024] NSWCA 204

•

15 August 2024

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: Access Training Group Ltd v Jane [2024] NSWCA 204
Hearing dates: 28 June 2024
Date of orders: 15 August 2024
Decision date: 15 August 2024
Before: Ward P at [1]; Payne JA at [201]; Basten AJA at [202]
Decision:

1.   Dismiss the appeal with costs.

2.   Grant leave to the cross-appellants to cross-appeal against the costs orders made in the respective proceedings.

3.   Allow the cross-appeal and set aside order (3) made in 2019/374869 and order (5) in 2020/219022 and in lieu thereof order:

(a)   in proceeding 2019/374869, leaving aside any previous interlocutory costs orders, that the plaintiff pay 75% of the costs of the defendants of the proceedings; and

(b)   in proceeding 2020/219022, leaving aside any previous interlocutory costs orders, that the defendant pay 75% of the costs of the plaintiff of the proceedings.

4.   Order the cross-respondents to pay the cross-appellants’ costs of the cross-appeal.

5.   Dismiss the cross-respondents’ motion as to incompetency of the cross-appeal with no order as to costs.

Catchwords:

CONTRACTS – Interpretation – Whether payments totalling $1.3 million were made by respondent to appellant as a loan – Whether evidence established common assumption between parties as to nature of sum – Whether private uncommunicated views inconsistent with asserted characterisation – Appeal dismissed

COSTS – Appeal from costs order of primary judge – Where primary judge ordered each party to bear own costs on the basis that the result was “mixed” – Where final result in proceedings was judgment in favour of AGT – Identification of relevant “event” for purposes of r 42.1 of Uniform Civil Procedure Rules 2005 (NSW) where result mixed – Apportionment of costs on an impressionistic basis – Proportionate reduction appropriate – Cross-appeal allowed

APPEALS – Where cross-appeal initially brought with respect to grounds other than strictly costs – Where substantive grounds subsequently fall away – Whether leave to appeal necessary

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Supreme Court Act 1970 (NSW), s 101

Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited:

Access Training Group Limited v James Michael Jane; Access Group Training Limited v Venture Capital Fund Australia Limited [2023] NSWSC 1416

Access Training Group Limited v James Michael Jane; Access Group Training Limited v Venture Capital Fund Australia Limited (No 2) [2023] NSWSC 1632

Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166, 169; [1988] FCA 225

Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304

Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107

Browne v Dunn (1893) 6 R 67 (HL)

Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423

Cretazzo v Lombardi (1975) 13 SASR 4

Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd (No 3) [2023] NSWCA 316

Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20

Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270; [2015] HCA 53

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Galati v Deans (No 2) [2023] NSWCA 252

Ghosh v NineMSN Pty Ltd [2014] NSWCA 180

Golding v Vella (No 2) [2001] NSWSC 731

Hooker v Grilling (No 2) [2007] NSWCA 214

House v The King (1936) 55 CLR 499; [1936] HCA 40

Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106

Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; [1907] HCA 38

Hughes v Western Australian Cricket Assn (1986) ATPR 40-748

In the matter of Fewin Pty Ltd [2017] NSWSC 1093

James v Surf Road Nominees (No 2) [2005] NSWCA 296

Jaycar v Lombardo [2011] NSWCA 284

Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775

Leallee v Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518

Lenning v Alexander Proudfoot Co World Headquarters [1991] NSWCA 172

Oertel v Crocker (1947) 75 CLR 261; [1947] HCA 40.

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 568

Petrotimor Companhia de Petroleos SARL v Commonwealth of Australia (2003) 128 FCR 507; [2003] FCAFC 83

Post Office Agents Association Ltd v Australian Postal Commission (1988) 84 ALR 563, 565

Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403

Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206

Short v Crawley (No 40) [2008] NSWSC 1302

Uniline Australia Ltd (ACN 010 752 057) v S Briggs Pty Ltd (ACN 007 415 518) (No 2) (2009) 232 FCR 136; [2009] FCA 920

Waters v P C Henderson (Aust) Pty Limited (Court of Appeal (NSW), Kirby P, Mahoney and Priestly JJA, 6 July 1994, unreported)

Windsurfing International Incorporated v Petit (1987) AIPC 90-441

Category:Principal judgment
Parties: Access Training Group Ltd (First Appellant)
Venture Capital Fund Australia Ltd (Second Appellant)
James Michael Jane (First Respondent)
Judith Anne Jane (Second Respondent)
John Charles Goard (Third Respondent)
Suellen Fay Goard (Fourth Respondent)
Access Group Training Pty Ltd (Fifth Respondent)
Representation:

Counsel:
D Pritchard SC with P Doyle Gray (Appellants)
MS White SC with T Crispin (Respondents)

Solicitors:
Benjafield & Associates Lawyers
(Appellants)
Lloyd & Lloyd Solicitors (Respondents)
File Number(s): 2023/00463696
Publication restriction: Nil
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity Division
Citation:

[2023] NSWSC 1416; [2023] NSWSC 1632

Date of Decision:
22 November 2023; 20 December 2023
Before:
Nixon J
File Number(s):
2019/374869; 2020/219022

HEADNOTE

[This headnote is not to be read as part of the judgment]

From early 1997 to late 2019, Access Group Training (AGT) provided nationally accredited vocational training services in various Australian States and the Australian Capital Territory. At all relevant times, all the shares in AGT were held by two married couples: James and Judith Jane, and John and Suellen Goard (AGT Shareholders).

On 13 January 2015, Venture Capital Fund Australia Limited (VCFA) was incorporated, and specialised in identifying venture capital opportunities for wealthy individuals. Mr Lambert was a founder of VCFA and its managing director.

From around mid-2014, Mr Lambert and Mr Jane discussed the possibility of expanding AGT’s operations. At the time, Mr Lambert and various of his associates were looking to develop the aged care sector in China, and thought that AGT could assist with the training and accreditation of Chinese aged care workers. Mr Lambert suggested that, in order to assist AGT’s registration in China as a vocational training provider, Mr Jane should consider listing AGT on the Australian Stock Exchange (ASX). Because of a concern that such a listing would affect profitable contracts which AGT held with the Commonwealth Government, it was proposed that a parent company (Holdings) be incorporated to hold all the shares in AGT, and Holdings would be listed on the ASX instead. On 20 October 2015, Holdings was incorporated for this purpose; all its shares were then held by the AGT Shareholders.

At this stage, it was proposed that: (a) VCFA would subscribe for 17,000,000 shares in Holdings (74% of Holdings) for a price of $1,700,000 (Share Subscription Agreement); (b) Holdings would use this $1,700,000 for the sole purpose of paying a deposit to the AGT Shareholders for the purpose of purchasing their shares in AGT, with Holdings then becoming the sole shareholder of AGT (Share Sale Agreement); (c) Mr Jane would become Holdings’ managing director, and be issued 6,000,000 shares (representing a 26% stake in Holdings); (d) Holdings would then undertake an initial public offering (IPO) at a price of $0.20 per share, with a view to listing on the ASX by 31 December 2016.

In late August 2016, pursuant to the Share Subscription Agreement, VCFA acquired 74% of the shares in Holdings for $1,700,000. At this stage, although Holdings then paid $1,700,000 to the AGT Shareholders for the purchase of their shares in AGT, the Share Sale Agreement had not yet been executed, and the shares in AGT were not transferred by the AGT Shareholders to Holdings.

During this time, AGT (or its management company, AGT Management) advanced to VCFA the sum of $1,300,000 purportedly for the purpose of VCFA developing educational businesses in China in support of the IPO. Accordingly, VCFA contended that this sum was advanced as payment for services, whereas AGT contended that it had advanced the sum as a loan to be repaid.

In 2019, Holdings commenced proceedings against the AGT Shareholders to recover the sum of $1,700,000 (either pursuant to the Share Sale Agreement, or as moneys had and received) (2019 Proceedings). In 2020, AGT commenced proceedings against VCFA in relation to the alleged unpaid loan in the sum of $1,300,000 plus interest (2020 Proceedings).

The primary judge heard both proceedings concurrently. It was concluded by his Honour that (a) the Share Sale Agreement had been properly executed, such that the AGT Shareholders were liable to Holdings for the sum of $1,700,000; and (b) the sum of $1,300,000 was advanced by AGT to VCFA as a loan, and was therefore payable to AGT (together with interest). However, pursuant to a set-off clause in cl 5.9 of the Share Sale Agreement, the AGT Shareholders were entitled to set-off their successful claim of $1,300,000 (plus interest) as against their $1,700,000 liability to Holdings. After the application of this set-off, judgment was entered in favour of AGT in the sum of $176,971.63. On the basis of this result, the primary judge ordered that each party was to bear its own costs.

VCFA appealed in relation to various aspects of the finding that the $1,300,000 advanced to it by AGT was a loan. AGT cross-appealed in relation to the primary judge’s determination as to costs.

The Court held (Ward P, Payne JA agreeing, Basten AJA writing separately in relation to the cross-appeal), dismissing the appeal with costs, and allowing the cross-appeal:

  1. As to Ground 1, to the extent the primary judge referred to private uncommunicated views as to the proper characterisation of the payments in AGT Management’s internal accounts, that is to be understood as being in the context of exploring whether there was conduct by AGT that was inconsistent with its assertion that the payments were a loan. This material was not referred to in the context of locating whether there was a common assumption between the parties as to the existence of any agreement: [91] (Ward P); [201] (Payne JA); [202] (Basten AJA).

    Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 considered.

  2. As to Grounds 2-6, the evidence of an intercompany loan as between AGT and AGT Management in respect of the payments does not detract from the characterisation of the payments to VCFA as being way of a loan. The fact that no input credit was claimed for GST in the internal accounts of AGT Management supports this conclusion. In this regard, the primary judge again did not refer to this evidence as evidence establishing a common assumption between the parties; such reference was strictly in the context of determining whether there was inconsistent conduct on the part of AGT and/or AGT Management. Although the primary judge took into account the fact that GST was paid on the invoices rendered by VCFA to AGT, the support this gave to VCFA’s case was contradicted by the unreliability of these invoices: [106]-[112] (Ward P); [201] (Payne JA); [202] (Basten AJA).

  3. As to Grounds 7-8, the primary judge did not err in concluding that the email dated 20 November 2015, in which AGT represented that the payments made to VCFA to date were properly considered a loan, together with the absence of any contemporaneous dispute by VCFA, did reveal a common assumption that the substance of the transaction was a loan: [122] (Ward P); [201] (Payne JA); [202] (Basten AJA).

  4. As to Grounds 9-10, the primary relevance of the 15 February 2016 letter was that it revealed an assumption that there was an amount owing as at 31 December 2015 of $440,000, and did not make any reference to an amount payable by way of fee for service. The incorrect assertion that loan repayments had been made to date does not alter the letter’s relevance in this regard. Relevant also was the fact that the $440,000 sum referenced in the letter corresponded exactly to the amount that had been paid directly by AGT to VCFA in September 2015. The entire sum advanced ($1,300,000) was indisputably paid in tranches: [138]-[141] (Ward P); [201] (Payne JA); [202] (Basten AJA).

  5. As to Grounds 11-12, the 14 September 2016 email did not in terms deny the existence of a loan, but simply that there was never an agreement for repayment, and that the general understanding was that these funds would be recouped as a result of the listing. There was no suggestion that the term “advance” denoted payment for services: [151]-[155] (Ward P); [201] (Payne JA); [202] (Basten AJA).

  6. As to the cross-appeal, where there are multiple “events” for the purposes of the r 42.1 of the Uniform Civil Procedure Rule 2005 (NSW), the apportionment of costs across multiple issues can properly be done on an impressionistic basis. The $1,700,000 claim and the set-off claim were sufficiently interlinked so as to not warrant a deduction from the costs payable to the successful cross-appellants. However, given that some of the set-off claims failed, it is appropriate, on a broad-brush approach, to order that the cross-respondents are to pay 75% of the cross-appellant’s costs of the primary proceedings: [182]-[199] (Ward P); [201] (Payne JA).

    Cretazzo v Lombardi (1975) 13 SASR 4; Hughes v Western Australian Cricket Assn (1986) ATPR 40-748; Windsurfing International Incorporated v Petit (1987) AIPC 90-441; Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59; Lenning v Alexander Proudfoot Co World Headquarters [1991] NSWCA 172; Waters v P C Henderson (Aust) Pty Limited per Mahoney JA (Court of Appeal (NSW), Kirby P, Mahoney and Priestley JJA, 6 July 1994, unreported); Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20; Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775; Golding v Vella (No 2) [2001] NSWSC 731; James v Surf Road Nominees (No 2) [2005] NSWCA 296; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373; Hooker v Grilling (No 2) [2007] NSWCA 214; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107; Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423; Short v Crawley (No 40) [2008] NSWSC 1302; Uniline Australia Ltd (ACN 010 752 057) v S Briggs Pty Ltd (ACN 007 415 518) (No 2) (2009) 232 FCR 136; [2009] FCA 920; Leallee v Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518; Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 568; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403; Jaycar v Lombardo [2011] NSWCA 284; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 20 considered.

  7. Once a right of appeal is invoked by the filing of a cross-appeal with respect to grounds in addition to costs, if those substantive grounds subsequently fall away, the appeal will be competent, without leave: [204]-[216] (Basten AJA in obiter)

    Oertel v Crocker (1947) 75 CLR 261; [1947] HCA 40; Post Office Agents Association Ltd v Australian Postal Commission (1988) 84 ALR 563; Petrotimor Companhia de Petroleos SARL v Commonwealth of Australia (2003) 128 FCR 507; [2003] FCAFC 83; Ghosh v NineMSN Pty Ltd [2014] NSWCA 180; Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106 considered.

  8. Although AGT was not successful in all its claims in the 2020 Proceedings, it was a defensive proceeding in response to the 2019 Proceedings. The issues which AGT failed to establish in the 2020 Proceedings were minor, not dominant, issues and did not warrant some proportionate reduction: [223], [226], [228]. The Jane parties were successful in their defence of the 2019 proceeding: [227] (Basten AJA).

    Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166; Galati v Deans (No 2) [2023] NSWCA 252 applied.

JUDGMENT

  1. WARD P: This appeal is a consolidation of appeals from decisions in two sets of independent but related proceedings in the Equity Division: the 2019 proceedings (2019/374869) and the 2020 proceedings (2020/219022). The respondents were providers of vocational training in Australia. In 2016 they agreed with the appellants to establish a business in China to provide training for workers in the aged care sector. The plans included listing a company on the Australian Stock Exchange (ASX). The plans came to naught, but only after steps had been taken to establish the business and significant payments made between the respective parties. The proceedings in the Equity Division involved disputes which arose in unwinding the venture.

  2. The 2019 proceedings involved a claim by Access Training Group Ltd (the first appellant, and cross-respondent, in the consolidated appeal, to which I will refer, as “Holdings”, because its initials readily lead to confusion with the fifth respondent) against four individuals, Mr James Jane and Mrs Judith Jane, and Mr John Goard and Mrs Suellen Goard (the first to fourth respondents, and cross-appellant) in the consolidated appeal, to whom I will refer as the Jane Defendants, who were shareholders of Access Group Training Pty Ltd (AGT), the fifth respondent. In those proceedings, Holdings sought to recover a sum of $1.7 million as moneys had and received (following the failure to proceed with a proposed initial public offering (IPO) in relation to the shares of Holdings) or alternatively pursuant to the terms of a Share Sale Agreement dated 28 February 2017 between the Jane Defendants and Holdings, in relation to the shares held in Access Group Training Pty Ltd (the fifth respondent in the consolidated appeal, to which I will refer as AGT) (the execution of which was in issue).

  3. The Jane Defendants denied any obligation to repay the claimed amount but also asserted set-offs against any amount that might be payable: those being an amount claimed to be owing to AGT as a debt by a company related to Holdings, Venture Capital Fund Australia Ltd (the second appellant in the consolidated appeal, to which I will refer as VCFA) (in the order of $1.45 million); and an amount of $985,000 in respect of alleged float expenses in relation to the proposed IPO (AT 1.35-50).

  4. The 2020 proceedings were brought by AGT against VCFA seeking to recover an alleged unpaid loan of $1.3 million plus interest (which could then be set-off against the claimed sum in the 2019 proceedings pursuant to cl 5.9(d) of the Share Sale Agreement, assuming of course that that was enforceable). VCFA admitted that the sum of $1.3 million had been paid to it but disputed its characterisation as a loan, contending that the money was paid for services provided by VCFA. AGT also claimed an amount of $150,000 said to be unpaid rent (AT 1.46-50).

  5. The two proceedings were heard together on various dates in October and November 2023, with evidence in one being treated as evidence in the other. The primary judge handed down his reasons for judgment on 22 November 2023 (Access Training Group Limited v James Michael Jane; Access Group Training Limited v Venture Capital Fund Australia Limited [2023] NSWSC 1416; the primary judgment).

  6. The primary judge held that the sum of $1.3 million paid by AGT to VCFA was a loan; that interest accrued on that loan at the rate of 10% from the date of each advance; and that no amount had been repaid by VCFA in respect of the principal or interest on the loan (see [102] of the primary judgment), such that, as at 17 July 2019, VCFA was indebted to AGT in respect of the sum of $1,300,035 and interest thereon at 10% per annum ([266]). However, his Honour also found that, pursuant to cl 5.9(d) of the Share Sale Agreement dated 28 February 2017, the Jane Defendants were entitled to set-off their individual liabilities to Holdings under that agreement (in aggregate amounting to $1.7 million) against the liability of VCFA to AGT in relation to the loan ($1.3 million plus interest), such that, after the application of the contractual set-off, no amount was payable by the Jane Defendants to Holdings in respect of the sum of $1.7 million ([268]). His Honour rejected the claimed set-off for float expenses in the 2019 proceedings and for unpaid rent in the 2020 proceedings, respectively. The upshot of this was a net judgment in favour of AGT against VCFA for $176,971.63.

  1. In a subsequent judgment on the papers following written submissions as to costs (Access Training Group Limited v James Michael Jane; Access Group Training Limited v Venture Capital Fund Australia Limited (No 2) [2023] NSWSC 1632) (the costs judgment), his Honour concluded, relevantly as to costs, that the appropriate outcome (having regard to the broad discretion as to costs and the mixed success of each set of parties in the proceedings), was that each party bear its own costs of each set of proceedings ([9]). His Honour considered that this appropriately reflected the fact that the outcome of the proceedings was, in essence, that each set of parties owed debts of similar size to the other, this being a position for which no party had contended.

  2. By notices of appeal each filed on 20 March 2024 in separate appeal proceedings, Holdings appealed from the primary judge’s rejection of, or failure to deal with, its claim in the 2019 proceedings that reliance by the Jane Defendants on cl 5.9(d)(ii) of the Share Sale Agreement was unconscionable and VCFA appealed from the upholding of the loan claimed by AGT in the 2020 proceedings.

  3. By notices of cross-appeal filed on 9 April 2019 in the respective appeal proceedings, the Jane Defendants and AGT each cross-appealed as to the finding by the primary judge that there was no binding agreement for reimbursement of its costs of the IPO and as to the costs order made by the primary judge. In their notice of cross-appeal filed in relation to the 2019 proceedings, the Jane Defendants included contentions that the primary judge’s decision ought be upheld on grounds other than those relied on by his Honour. They contended that Holdings had not advanced at trial its alternative claim (pleaded at [36]-[46] of the Amended Statement of Claim) and that the primary judge could not have been satisfied that reliance on cl 5.9(d)(ii) of the Share Sale Agreement was unconscionable (because of the matters set out in ground 4(a)-(e) of the cross-appeal grounds).

  4. On about 7 June 2024, Holdings abandoned its appeal challenging the upholding of the Share Sale Agreement (in the 2019 proceedings). What remained pressed by the Holdings/VCFA parties was only the appeal by VCFA against the upholding of the claimed $1.3 million loan by AGT to VCFA.

  5. Following the abandonment by Holdings of its challenge to the Share Sale Agreement, AGT and the Jane Defendants did not press their cross-appeal as to the claimed agreement for reimbursement of their costs of the IPO (or, in the case of the Jane Defendants, their contention as to the unconscionable reliance claim), maintaining only their cross-appeals as to costs.

  6. The significance of the reduced scope of the appeal proceedings in this Court is that if VCFA succeeds in challenging the finding in relation to the upholding of the loan (i.e., if its contention that the amount in question was paid by AGT for services rendered by VCFA) and the cross-appeal is dismissed, then there will be nothing for the Jane Defendants to set-off as against their liabilities to Holdings. In those circumstances, the appellants say that VCFA’s liability to AGT is nil and that the Jane Defendants remain liable to Holdings in aggregate for $1.7 million (plus interest).

  7. One consequence of the fact that the cross-appeals were thus reduced to appeals in relation to costs alone was that the cross-appellants proceeded on the basis that they required leave to prosecute both cross-appeals pursuant to s 101(2)(c) of the Supreme Court Act 1970 (NSW) (AT 37).

  8. The premise of that concession as to the requirement for leave may be moot, given that, when commenced, the cross-appeals could not be said to have been incompetent because they were not then restricted to costs. The requirement for leave where there is a cross-appeal on costs alone was considered by Leeming JA in Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106 (Housman v Camuglia) at [43]-[84] but in that case the cross-appeal had been limited to costs at the outset. In any event, in circumstances where the cross-appellants have proceeded on the basis that leave is necessary, it is appropriate to address that aspect of the matter on that basis (as I do in due course).

Background

  1. It is necessary, given the nub of the complaint here made as to the insufficiency of weight given to the appellants’ internal records, and the paucity of documentation in relation to the alleged agreement or the services provided in respect of which invoices were purportedly rendered, to set out in some detail the chronology of events. References to paragraph numbers in what follows below are taken, unless otherwise indicated, from the primary judgment. There is no challenge to his Honour’s factual findings (rather, the appellants simply contend that additional findings should have been made, as I explain in due course).

  2. From early 1997 to late 2019, AGT provided nationally accredited vocational training services in various Australian States and the Australian Capital Territory ([2]). Each of the Jane Defendants held one quarter of the shares in AGT and each was a director of the company ([3]).

  3. In the mid-1990s, Mr Jane (an AGT shareholder and director) met Mr Ross Lambert (later the founder and managing director of VCFA), and they and their respective spouses became close friends ([5]). From around mid-2014, Mr Jane and Mr Lambert had discussions as to a potential expansion of AGT into China. At that time, Mr Lambert had business associates in China who were looking to develop the aged care sector in China and thought that AGT could assist with the training and accreditation of Chinese aged-care workers ([6]).

  4. VCFA was incorporated on 13 January 2015, specialising in identifying venture capital opportunities for high net-worth investors (connecting investors in China with operations in Australia that were in need of venture capital) ([4]).

  5. Mr Lambert suggested that Mr Jane consider listing AGT on the ASX, explaining that this would assist AGT to become registered in China as a vocational training provider, and would mean that the Jane Defendants could get a return by selling shares in the business to Chinese investors ([7]). The proposed listing of AGT would also have been for VCFA’s benefit in that, in order to provide training for aged care workers in China, VCFA needed either to be included in the Chinese Government’s education curriculum or to offer its training services through a listed education company on a respected international stock exchange ([8]).

  6. Because of a concern that the listing of AGT might affect profitable contracts which AGT held with the Commonwealth government, the proposal changed to one where a parent company (Holdings) would be incorporated to hold all of the shares in AGT, and that parent company would be listed on the ASX ([9]). On 20 October 2015, Holdings was incorporated for this purpose ([9]). On incorporation, all the shares in Holdings were held by the Jane Defendants.

  7. At [10], the primary judge described what was proposed as follows:

It was proposed, in broad terms, that the following steps would be taken in respect of the proposed listing: VCFA would subscribe for 17m shares in Holdings for a price of $1.7m (or $0.10 per share), and would thereby acquire a 74% stake in the company; Holdings would use this $1.7m for the sole purpose of paying a deposit to the AGT Shareholders [i.e., the Jane Defendants] for the purchase of their shares in AGT; Holdings would become the sole shareholder of AGT; Mr Jane would enter an employment agreement with Holdings and become its managing director; Holdings would issue 6 million shares to Mr Jane (representing a 26% shareholding); and Holdings would then undertake an initial public offering at a price of $0.20 per share, with a view to listing on the ASX by 31 December 2016.

  1. In late August 2016, pursuant to the terms of a Share Subscription Agreement, VCFA acquired 74% of the shares in Holdings for $1.7 million and this sum was immediately paid to the Jane Defendants (in equal shares) ([11]). The Jane Defendants held the remaining 26% of shares in Holdings. At the time of payment, the terms of an agreement between Holdings and the Jane Defendants relating to the sale of the shares in AGT (the Share Sale Agreement) had been negotiated but not executed ([11]).

  2. Pausing here, I note that the parties had opposing contentions in the 2019 proceedings as to the status of the Share Sale Agreement, which were as follows. Holdings contended that the Share Sale Agreement was never executed (and hence its principal claim was for repayment of the claimed $1.7 million as money had and received), whereas the Jane Defendants contended that the Share Sale Agreement was in fact entered into in around late February 2017 ([13]-[14]). There were different versions of the Share Sale Agreement in evidence; the final version that his Honour accepted to have been duly executed by the respective parties was signed by the Jane Defendants but only by one of the directors of Holdings, Dr Paula Robinson, and bore the date of 28 February 2017. The primary judge dealt with the status of the Share Sale Agreement at [181]-[189], finding it likely that the Share Sale Agreement dated 28 February 2017 was signed on around 2 March 2017 ([189]) and (at [214]) that it was duly executed by Holdings (and hence binding on it).

  3. The proposed listing of Holdings on the ASX by way of an IPO did not eventuate and at some stage there was a falling out between the parties.

  4. In 2019, Holdings commenced proceedings against the Jane Defendants seeking to recover the sum of $1.7 million that VCFA had paid in August 2016 (the 2019 proceedings); and in 2020, AGT commenced proceedings against VCFA for the alleged unpaid loan in the sum of $1.3 million plus interest (the 2020 proceedings). Of relevance to the dispute as to the characterisation of the sum of $1.3 million (that VCFA admitted had been paid to it) are the following further matters.

  5. VCFA was developing certain educational businesses in China which it proposed would be offered as part of the IPO ([22], [24]).

  6. AGT Management Pty Limited (AGT Management) was a company, registered in 2009, which was related to AGT and formed part of the group owned and controlled by Mr Jane and Mr Goard (two of the Jane Defendants). The directors of AGT Management were Mr Jane and Mr Goard.

  7. Between August and September 2015, VCFA issued three invoices (variously to AGT or AGT Management) for amounts totalling $1.3 million. The original invoices were not in evidence (and indeed there was evidence that copies of the invoices had not been able to be obtained until 2021 due to the lapse of subscription to a FreshBooks invoicing programme).

  8. The first invoice was issued by VCFA to AGT Management on 3 August 2015 in the amount of $600,000 plus GST bearing invoice number ending in 001. The due date was specified on the invoice to be the same date as the date of issue. The narrative on the invoice was “AGT float costs as discussed”. The primary judge noted that there was no detail provided on the invoice of the matters to which these costs related or the basis on which the figure had been calculated ([34]) and inferred (from the fact that Mr Lambert had claimed there was a more detailed breakdown of the amounts on the invoices but, despite deferral of his re-examination to enable this to be produced, no such document was produced) that there was no document available providing a more detailed breakdown of the amount claimed ([35]).

  9. AGT Management paid the amount of $660,000 to VCFA on 4 August 2015, the day after the invoice was issued. (Although the copy invoice in the Court Book indicates that the amount was paid at the date of the invoice, I understand this is because the copy invoice in evidence was printed as at the time of the proceedings.)

  10. The second invoice was issued by VCFA to AGT on 24 September 2015 in the sum of $400,000 plus GST. The due date for payment specified on the invoice was again the date of the invoice. The invoice bore a tax invoice number ending in 002. The narrative stated “IPO costs – Preparation of prospectus including copy writing, graphic design, research, creation of charts, and excel spreadsheets”. There was again no breakdown of how this amount was calculated by reference to the work said to be done (see [41]).

  11. On 29 September 2015, AGT paid $440,000 to VCFA.

  12. The third invoice was also dated 24 September 2015. It was issued by VCFA to AGT Management. It was in the amount of $200,000 plus GST. It specified the due date as 24 October 2015. The invoice contained the following narrative:

Legal work including various documents

Share Sale agreement

Call option agreement

Training contract with Guangzhou college China

Consulting fees as discussed.

  1. The amount the subject of the third invoice was paid in tranches by AGT Management (seven payments totalling $200,000) over a period of some six months, but leaving outstanding the sum of $20,000 which corresponded to the amount of the GST specified on the invoice ([49]).

  2. As noted, the three invoices bore sequential tax invoice numbers (ending in 001-003 respectively). Other than those three invoices, there was no document predating the payments which recorded, or referred to, either an agreement for services or an agreement for loan. The manner in which the payments were recorded in the internal accounts of AGT/AGT Management is explained in due course.

  3. In November 2015 (shortly after the third invoice had been issued), there was an email exchange to which his Honour attached some significance. The exchange commenced with an email sent on 20 November 2015 by Mr Jane to Mr Lambert, Mr Elias Poulos (who was also a director of VCFA), and two other persons, with the subject header “transfer of $100k to VCFA”, stating that:

I have just authorised a transfer of $100k to VCFA –

AGT and AGT Management have now advanced as loan funds $1.2 million to VCFA.

  1. Mr Lambert replied by email on 26 November 2015, simply with the words “[t]hanks Jim”. There was no evidence of any communication from Mr Poulos or either of the other two recipients responding to this email. The significance his Honour attached to this email ([55]) was that none of the officers of VCFA to whom the email was addressed disputed that all of the payments which had been made to date represented advances to VCFA; and none referred to any agreement for services or claimed that the amounts were in fact paid in respect of services.

  2. By this time (late November 2015), payment in respect of the first two invoices (totalling $1.1 million) had been made to VCFA and on 20 November 2015 a further payment of $100,000 was made to VCFA.

  3. Reliance was also placed by his Honour on an email letter dated 15 February 2016 from Mr Lambert, on VCFA’s letterhead, sent to Mr Jane, which, relevantly, stated:

LOAN REPAYMENT STATUS

Dear Jim,

Please be advised that we have been honouring our loan repayments as per our agreement and confirm the following loan repayment position.

Date:        Amount owed

31 December 2015   $440,000

Please let me know if there is anything further you require?

  1. His Honour noted (at [60]) that insofar as the letter suggested that loan repayments had been made prior to 15 February 2016 this was incorrect and that it was common ground that no amount was paid back to AGT in respect of the $1.3 million in issue in the proceedings.

  2. It is relevant at this point to note how the payments made by AGT/AGT Management were recorded in their internal accounts. The first payment (of $660,035 on 4 August 2015 – the additional $35 being referable to a bank fee) was initially recorded in the books of AGT Management by the external bookkeeper/accountant of AGT/AGT Management, Ms Danielle Pearce, as “Loan – Venture Capital” and noted that it was “BAS Excluded”. On 5 August 2016 (presumably in the course of preparing the company’s financial accounts for the year ending June 2016), Ms Pearce reallocated this payment to “Loan – Access Group Training Pty Ltd”. Mr Jane explained in his evidence that this change was because the entity making the loan was AGT, with AGT incurring an intercompany liability to AGT Management for the amount that AGT Management had advanced to VCFA on AGT’s behalf (see [37]-[39]).

  3. The second payment (of $440,000) was initially allocated by Ms Pearce, on 6 October 2015, to “Equity, Capital Raising & IPO Expenses”. This was later amended by Ms Pearce on 23 November 2015 when the entire amount was allocated to “Loan – Venture Capital” (again the notation “BAS Excluded”) ([44]).

  4. As to the third invoice, the payment of $100,000 to VCFA on 20 November 2015 was initially allocated to “Loan – Venture Capital”, again with the notation “BAS Excluded”. Ms Pearce again, on 5 August 2016, reallocated this payment from “Loan – Venture Capital” to “Loan – Access Group Training Pty Ltd” (reflecting an intercompany loan by AGT Management to AGT for the amount that AGT Management had advanced to VCFA on AGT’s behalf ([56])). The six further transfers (from mid-February to mid-March 2016) totalling a further $100,000 from AGT Management to VCFA (described in VCFA’s bank statements as “AGT Payment”) were initially entered in AGT Management’s accounts as “Loan – Ross Lambert” and subsequently assigned by Ms Pearce in August 2016 to “Loan – Access Group Training Pty Ltd”; and each bore the notation “BAS Excluded” ([61]).

  5. No input credit for GST was claimed by AGT Management for any of the payments (see [37], [44], [56]).

  6. It appears that in September 2016, in the context of documentation in relation to the then still proposed IPO and an “AGT audit” (presumably related to the proposed IPO), there was discussion as to a proposed deed of acknowledgement of loan in respect of the payments that had been made to VCFA.

  7. On 8 September 2016, at 9am, Mr Warwick Kerridge sent an email to Mr Lambert, apparently responding to a query raised by Mr Lambert at 8.48am as to what Mr Kerridge was referring to in an earlier communication by Mr Kerridge (at 8.44am) as to the need to “close off the doc for the audit”. Mr Kerridge identified what he had been referring to as the “deed re loan account” and attached three documents. Those were described in the attachment details as: “AGT VCFA loan account deed of acknowledgement”; “AGT VCFA schedule 1 Loan – Details AGT VCFA”; and “AGT VCFA Schedule 2 Interest Calculations”.

  8. At 5.09pm that day, Mr Kerridge forwarded to Mr Lambert an attached signed (by Mr Jane) version of “Loan Agreement between AGT and VCFA”, advising that “[i]n terms fo [sic] the audit please see the enclosed deed in the form approved by the auditors duly executed to be countersigned”. It appears that the deed included the printed date 30 August 2016.

  9. It appears from an email sent by Mr Kerridge to Mr Poulos and Mr Lambert on 4 April 2018 that, on 12 September 2016, there was a meeting between Mr Lambert, Mr Poulos, and Mr Jane (and Mr Kerridge, the adviser to both sides, who did not give evidence at trial), at which there was discussion as to the deed of acknowledgement. In the 4 April 2018 email, Mr Kerridge recorded that:

3. … The discussions between Jim on behalf of AGT and Ross and Elias on behalf of VCFA were quite heated at some points. Ross continued to state the reasons why he provided the original acknowledgment. Elias stated that there were indeed no investments contributions to be treated as loans or in fact ALL investor contributions at the time should be treated as loans. Jim did not accept this. Jim and the writer [Mr Kerridge] expressed the view that UHY [the auditors] required a form of certainty regarding the funds in the balance sheet of AGT to be provided so that UHY could be satisfied about the recoverability of the entry which was recorded as a loan (receivable). After continued debate Ross advised Jim that he would sign as he did not want to hold up the IPO for everyones sake but did not agree with the deed. When offered to Elias to sign he declined and said that he would think about it and speak to the Chinese. At that point the original document had been signed by AGT (Jim Jane) and VCFA (Ross Lambert). The original was left with the writer and supplied to UHY.

  1. The reference in this email to the “original acknowledgement” appears to be a reference to the document considered by the primary judge at [65] to have been the subject of a significant concession by Mr Lambert in cross-examination (see [51] below); and places the “Loan – Venture Capital Fund Transactions” (Loan Acknowledgement), which is itself undated, as having been signed before the 12 September 2016 meeting.

  2. Further, the response attributed to Mr Poulos (Elias) when cavilling with the proposition that the amounts advanced were loans was not an assertion that they were payments for services rendered but, rather, a complaint that if some “investments [sic] contributions” were to be treated as loans, then all investor contributions should be so treated. That said, as his Honour noted, Mr Poulos was not privy to the discussion(s) between Mr Lambert and Mr Jane in which the relevant agreement (i.e., loan or fee for services) was struck, so the weight to be attributed to this later account attributed to Mr Poulos is limited ([93]).

  3. The Loan Acknowledgement is a document apparently prepared for the purpose of finalising the financial accounts of AGT for the year ending 30 June 2016 (see [67]). Appended to a single page headed “Loan – Venture Capital Fund Transactions” are the following acknowledgments:

Acknowledgement

The Lender Acknowledges that the above amounts have been loaned to Venture Capital Fund

Signed

James Jane

Director – Access Group Training Pty Ltd

The Borrower acknowledges that the above amounts have been received by Venture Capital Fund Pty Ltd as a loan from Access Group Training Pty Ltd

Signed

Director – Venture Capital Fund Pty Ltd

  1. The Loan Acknowledgement was signed by Mr Jane and Mr Lambert, respectively (and there was a handwritten deletion of “Pty” in the description of the latter signatory’s company).

  2. In terms of the chronology this brings me to the first of two deeds which were the subject of consideration by the primary judge (First Deed). Although dated 30 August 2016, it seems from the email communications chasing its execution, that the First Deed is likely to have been signed by Mr Lambert after that date – (and, on Mr Kerridge’s account, not until the 12 September 2016 meeting). That said, I note his Honour’s finding (which the appellants do not challenge) was that the First Deed was signed in August 2016 (see [77]).

  3. His Honour concluded at [90] that the primary significance of the First Deed lay in the acknowledgements set out in the Recitals:

Recitals

A.    The Company [AGT] has advanced principal sums to VCFA of $1,300,035.00 (“The Primary Advances”) as detailed in Schedule 1 hereof.

B.    VCFA has not paid the Primary Advances and remains indebted to The Company in respect thereto.

C.    The Company is entitled to interest on commercial terms of the Primary Advances at the rate of 10.00% on the variable balance of the Primary Advances from the date of the first advance of 4th August to the date hereof and continuing.

D.    The interest due on the Primary Advances in (sic) calculated in accordance with Schedule 2 hereof.

E.    VCFA seeks to acknowledge the indebtedness to The Company and to secure its indebtedness and enter into this Deed in furtherance of its acknowledgement and covenant Operative Provisions

  1. On 14 September 2016, Mr Kerridge sent an email to Mr Lambert pressing for the deed in relation to the VCFA loan account (i.e., the First Deed) to be countersigned and returned (as the auditors had completed the audit but were refusing to release the audit sign off until the deed had been returned).

  2. Mr Poulos responded to Mr Kerridge’s request that same day. Relevantly, as the primary judge noted at [94] and as the appellants here emphasise, the terms of this email were drafted by Mr Lambert (see his email sent to Mr Poulos at 2.02pm that day). Mr Lambert’s draft was as follows:

As already discussed we are not prepared to sign the loan agremment [sic]. The $1.3M was never a loan it was an advance that Jim provided to VCFA to build up the various VCFA projects that were being developed to add diversification to AGT to ensure a successful float. There was never an agreement for repayment. AGT would benefit from the upside that they would receive from vending in these projects and would recoup these funds as a result of the listing. This is why we went doen [sic] this path in the first place.

Earlier this year Jim asked me as a favour to provide a note confirming that the $1.3M was a loan to satisfy his fellow directors and I agreed to help him out. Following this the advance has morphed in [sic] a loan and the Auditor has requested we sign off a loan agreement. Firstly, we provided additional shares in VCFA as payment for Jim’s $1.3M contribution. In addition to this, Elias and I decided to allocate shares in DWF and the allocation was generous. Now you have presented us with a loan agreement which is for the total amount, plus interest which becomes repayable whenever AGT calls in the loan agreement. The agreement takes security over the DWF shares which you have suggested are valueless, security over VCFA via a fixed and floating charge and or security over the shares that VCFA purchased in AGH.

The challenge with this is that at the time the shares were purchased in AGH [sic] for $1.7M the loan agreement was not in existence for the $1.3m[.], This was advanced and had nothing to do with the individuals who invested the funds for the AGH share purchase. So we cannot secure a loan that we didn’t disclose (as it was not in existance [sic]) against the shares which VCFA holds as a result of this investment. The same applies to the fixed and floating charge as the loan did not exist when we took in two of our chinese partners. So this leaves the DWF shares which we have allocated to AGT which you consider are valueless. We do not agree that the DWF shares have no value, quite the reverse.

  1. The text of Mr Poulos’ email to Mr Kerridge largely reproduced the above (with amendments to refer to “Ross” in place of “I” in the text and to correct typographical errors).

  2. There was a second deed of acknowledgment of loan signed by each of Mr Jane and Mr Lambert (Second Deed), this being dated 19 April 2017. VCFA pleaded in its defence in the 2020 proceedings that Mr Lambert signed the Second Deed at a meeting in around 2017 that took place in VCFA’s offices in Chatswood between Mr Lambert, Mr Jane and Mr Kerridge after Mr Lambert had denied the indebtedness recited in the Second Deed and had said that the moneys AGT claimed to be owed by VCFA constituted risk capital and not debt. Among other things, VCFA pleaded that Mr Lambert had said that he was prepared to sign the Second Deed as an expression of VCFA’s good faith in completing the float but that his signature would not constitute effective execution of the Second Deed and that it would have to be put to VCFA’s board of directors and formally approved before it would be entered by VCFA.

  3. The Recitals to the Second Deed included (Recital C) that “[t]he sums due as the Primary Advances as defined in the Deed of Acknowledgement dated 29th August 2016 [sic] and this further supplemental deed have not been paid and are due and payable”. As his Honour noted at [99], there does not exist any “Deed of Acknowledgement dated 29th August 2016”. Rather, it would appear that the parties intended to refer to the First Deed, dated 30 August 2016.

  4. In mid-2018, the directors of Holdings formally resolved, among other things, to discontinue the proposed listing of the company on the ASX and to terminate the Share Sale Agreement between Holdings and the Jane Defendants relating to the purchase of their shares in AGT (and “initiate the process under clause 5.9(d) of the AGT Agreement”).

Primary judgment

  1. For the purposes of this appeal it is not necessary to summarise the primary judge’s conclusions on all the issues then in dispute as the only challenge by the appellants is to the finding (in respect of the claims in the 2020 proceedings) that the payments totalling $1.3 million to VCFA represented loans made by AGT to VCFA (which had the result that the Jane Defendants were able to set-off the amount owing by VCFA on the loan, and interest, against the amounts owing by them to Holdings in relation to the $1.7 million deposit paid in August 2016 in relation to the sale of their shares in AGT).

  2. The primary judge noted at [20] that the main dispute in the 2020 proceedings was as to the characterisation of the payments made to VCFA; at [21] that there was no document predating the payments which recorded or referred to either an agreement for services or an agreement for loan and that each of AGT and VCFA contended that the agreement which gave rise to the payments was an oral agreement between Mr Jane of AGT and Mr Lambert of VCFA. His Honour noted at [26] that neither side suggested that the payments made by AGT to VCFA were by way of a gift; and that the argument at trial had proceeded on the basis that the moneys must have been paid either pursuant to an agreement for services or pursuant to a loan agreement; i.e., that one such agreement must have been in place, the question being which one had been formed.

  3. As to the proper characterisation of the invoices, the primary judge noted (at [29]) that the transactions in question arose out of conversations between Mr Jane and Mr Lambert some eight years ago, in circumstances where neither could recall the specifics of what was said. His Honour said that it was necessary to examine the objective contemporaneous documentary evidence, including the parties’ communications after the time of the alleged agreement, in order to determine the relative probabilities of the parties’ respective positions; and in particular, to determine whether those communications revealed a common assumption as to the existence and terms of the agreement between them.

  4. His Honour (at [27]) noted the statement of Griffith CJ (O’Connor J agreeing) in Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; [1907] HCA 38 (Howard Smith) to the effect that statements or conduct after the date of an alleged agreement that were inconsistent with the existence of a concluded contract were relevant in determining whether the parties had in fact concluded an agreement at a particular time.

  5. His Honour also noted (at [28]) Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 (Brightstars) at [124] where Basten JA (Gleeson JA agreeing) observed that post-agreement conduct of one party known to the other and communications between the parties which reveal a common assumption as to the existence and terms of an agreement may provide evidence of such agreement (but that subjective views or reservations of one party, undisclosed to the other, could not provide a basis for inferring the terms of a pre-existing agreement).

  6. The appellants do not cavil with his Honour’s statement of principle or the approach his Honour indicated he would adopt but they maintain that his Honour incorrectly applied the principle there stated (see Ground 1).

  7. At [30], his Honour set out up front his conclusion that, although there were some materials that supported VCFA’s contention (that the moneys were paid as a fee for service), the evidence overwhelmingly supported the conclusion that the moneys were loaned by AGT to VCFA. His Honour then went on to address: from [31]-[51], the three invoices in question (on which the appellants place great weight); from [52]-[61], communications contemporaneous with the payments; from [62]-[76], Mr Lambert’s evidence of the common understanding of the parties; and then, from [77]-[101], the First Deed and Second Deed.

  8. As to the invoices, his Honour accepted that the fact that GST was included in the invoice and that this was paid by AGT Management provided some evidence in support of the contention that services were rendered by VCFA to AGT ([37]). However, his Honour said that, as against that was the fact that AGT Management did not treat any part of the payment made as being for GST in its own accounts. At [38], his Honour observed that treatment of the payment(s) as “BAS Excluded” was evidence of a contemporaneous view, on the part of AGT Management, that no part of the sum paid represented GST; and said that this was consistent with the view, also expressed in the contemporaneous allocations, that the whole of the amount was paid by way of loan.

  9. His Honour pointed out that the descriptions of the work done on the second and third invoices bore no (or, in the case of the third invoice, little) relation to the work that Mr Lambert deposed was the subject of those invoices (see [41]-[43] in relation to the second invoice, and [46]-[47] in relation to the third invoice). His Honour said that Mr Lambert offered no explanation for the discrepancy in the description of the work on the second invoice ([43]) and did not produce any detailed document providing a breakdown of the amounts charged on the third invoice nor did he provide any explanation as to why that invoice wrongly stated that everything except the amount of GST had already been paid ([47]), nor as to why VCFA did not appear to have chased AGT for the payment of the outstanding amount of $20,000 ([49]).

  10. At [50] his Honour considered that the fact that the invoices in question provided, on Mr Lambert’s own evidence, incorrect information about the work to which they related and, in relation to the third, the amount which was outstanding, cast significant doubt on the reliability of the invoices, particularly where the anomalies were unexplained.

  11. His Honour concluded (see [51]) that the evidence of the invoices and payments made following the invoices did not reveal a common assumption by VCFA and AGT as to the existence and terms of the agreement between them.

  12. His Honour next turned to the contemporaneous communications, which his Honour considered did reveal a common assumption that the substance of the transactions was that the moneys paid to VCFA were being advanced as loans ([52]); those being the 20 November 2015 from Mr Jane (see above at [36]), and the 15 February 2016 email letter from Mr Lambert (see above at [39]).

  13. As to the first, his Honour noted that none of the officers of VCFA to whom the email was addressed disputed the statement that all of the payments to date represented advances to VCFA; nor did they assert that the amounts were in fact paid in relation to services ([55]). As to the second, his Honour said (at [59]) that this letter revealed a common assumption that the payment of $440,000 by AGT to VCFA represented an advance repayable in full; and was inconsistent with any common assumption that the amount had been paid as a fee for service rendered by VCFA. His Honour also referred to the treatment of the various $100,000 payments in the accounts of AGT Management as referable to loans (at [56] and [61]).

  14. Turning to Mr Lambert’s evidence in his affidavit to the effect that Mr Jane had asked him to say that the money had been loaned to VCFA (when each of them knew this to be not true) in order to deceive Mr Jane’s fellow directors of AGT, the primary judge noted that it was not suggested to Mr Jane in cross-examination that he had any intention to deceive his fellow directors or that he had knowingly created a false document in order to do so ([63]) and his Honour (finding Mr Jane to be an honest witness) rejected any such allegation.

  15. His Honour also referred to a number of concessions made by Mr Lambert in cross-examination, which he said were inconsistent with Mr Lambert’s affidavit evidence, the most significant of which in his Honour’s opinion concerned the Loan Acknowledgement, including that Mr Lambert believed it to be true at the time he signed it; and that, as far as Mr Lambert could tell, Mr Jane believed that the moneys had been paid by way of a loan ([69]). His Honour said that those concessions were directly inconsistent with Mr Lambert’s evidence that he and Mr Jane in fact believed the opposite to be true and that documents acknowledging the loan were produced at Mr Jane’s request ([70]).

  16. His Honour referred to other matters which Mr Lambert accepted in cross-examination that his Honour considered were consistent with the terms of the Loan Acknowledgement (see at [71]-[73]), relating to the financial documents prepared by VCFA’s accountant.

  17. His Honour found implausible Mr Lambert’s explanation for the inconsistency between his affidavit evidence and his evidence in cross-examination (see at [74]-[75]). His Honour attached significance to the fact that the treatment of the payments in VCFA’s own accounts was consistent with the treatment of the same payments in the accounts of AGT and AGT Management (which allocated all the payments to loan accounts without any element of GST) and said that the consistency of those entries across the two sets of accounts was at odds with Mr Lambert’s evidence that the documents describing the payments as a loan were created solely for the purpose of deceiving Mr Jane’s fellow directors of AGT ([76]). His Honour said that the more likely explanation (supported by the contemporaneous communications and the treatment of the payments in both companies’ records, as well as Mr Jane’s own evidence) was that the payments were made by way of loan; and that both companies understood this to be the case ([76]).

  18. The primary judge then turned to consider the two deeds that had been signed (from [77]), concluding that the First Deed was significant primarily because it revealed a common assumption on the part of AGT and VCFA (and, in particular, the only officers of those companies involved in the relevant transaction) that there existed an agreement between them that VCFA would repay in full the amount of $1.3 million which had been advanced by AGT to VCFA, together with interest from the date of the payment ([92]); and noting, as to the Second Deed, Mr Lambert’s agreement in cross-examination that when he signed the document it was because he accepted that its contents were true ([100]).

  19. In considering the import of the First Deed, his Honour referred to the 14 September 2016 email to Mr Kerridge from Mr Poulos. At [94], his Honour said that the terms of this email (which his Honour noted had been drafted by Mr Lambert) were significant. His Honour said that the email did not dispute that the moneys were paid by way of advances from AGT to VCFA but disputed the intention that AGT be able to call for repayment of the advances prior to the float being completed. His Honour extracted the text of this email, emphasising (among other things) the references in the email to the moneys being “an advance”; that there was “never an agreement for repayment”; and that there was never any intention “to turn the advance into a loan”. His Honour at [95] said that the language of the email was confused particularly insofar as it stated that the “advances” were not “loans”.

  20. At [102], his Honour found that: the amount of $1.3 million was advanced by AGT to VCFA; interest accrued on that loan at the rate of 10% from the date of each advance; and no amount had been repaid by VCFA in respect of the principal or interest on the loan. That, however, did not lead to the conclusion that AGT was entitled to an order for repayment of the full amount of the loan and interest thereon (because of the operation of the set-off provided for by cl 5.9(d)(ii) of the Share Sale Agreement – as to the interpretation and application of which the parties were agreed, as noted at [267]).

  21. The conclusion ultimately reached, that the claim made by Holdings for repayment of the $1.7m deposit must fail ([269]), followed from the conclusion that the amount payable by VCFA to AGT in respect of the $1.3 million loan funds exceeded the amount of the deposit at the time it fell due for repayment under cl 5.9(d) of the Share Sale Agreement – i.e., 17 July 2019 ([268]); not, I emphasise, because the Jane Defendants would have had no liability to repay the deposit absent the applicable set-off. I only emphasise this because it is of some relevance when considering the cross-appeal as to costs.

“6   It is now well established that the mere fact that a federal claim which is brought within the jurisdiction of the Court is not tenable will not prevent the Court from proceeding with a non-federal element which is within the accrued jurisdiction of the Court: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212; Post Office Agents Association Ltd v Australian Postal Commission (1988) 16 ALD 428.”

To similar effect, Beaumont J stated (emphasis in original):

“33   … It may be accepted, as was held in Burgundy Royale Investments Pty Ltd … v Westpac Banking Corporation (1987) 18 FCR 212; that failure on a federal issue which is legitimately raised, will not deprive the Court of authority to adjudicate on other non-federal claims which are part of the one ‘matter’, in the sense explained in Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 585–6. But what is necessary is that the Court’s jurisdiction is legitimately invoked; and this can only occur if there is a federal, justiciable controversy (Moorgate Tobacco Co Ltd v Phillip Morris Ltd (1980) 145 CLR 457 at 477 …).”

5. (2003) 128 FCR 507; [2003] FCAFC 83.

  1. In Post Office Agents Association Ltd v Australian Postal Commission,[6] Davies J held:

“The jurisdiction of the court under the ADJR Act has been invoked. The application is brought thereunder as a matter of substance, not as a matter of artificiality or subterfuge. The court has jurisdiction to deal with the claim and jurisdiction to deal with all other claims not otherwise within its jurisdiction arising out of the subject matter of the dispute: see Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd and Fencott v Muller…”

6. (1988) 84 ALR 563, 565.

  1. Despite the concession by the cross-appellants as to the need for leave, in the circumstances which had arisen, in my view the cross-appeals were competently commenced and did not thereafter cease to be competent, absent a grant of leave. However, if leave were required, then it should be granted because the case raises an issue at least as to the application of principle, if not as to the scope of the relevant principle, and a substantial miscarriage.

Costs following the event

  1. The issue raised on the cross-appeals was whether the trial judge erred in failing to make appropriate costs orders with respect to the proceedings determined by him. That question may be broken down into two parts, namely whether the judge (i) failed to correctly identify the “event” for the purposes of Uniform Civil Procedure Rules 2005 (NSW), r 42.1 or, (ii) erred in making “some other order” because it appeared to him, pursuant to the power conferred by the rule, that “some other order should be made”.

  2. Broadly speaking, the “event” referred to in r 42.1 is not to be broken down by reference to individual issues or findings, but refers to the outcome of the proceeding. There is no great magic in the word “event”: many cases involve mixed success. Even where there is one issue, namely the assessment of compensation, it will be common that the successful plaintiff receives less than he or she sought.

  3. The relevant principles in dealing with cases of mixed outcomes were identified by this Court in Galati v Deans (No 2) [7] in the following passages:

    7. [2023] NSWCA 252 (White JA; Basten AJA) (footnotes in original).

“6 The broad and unfettered discretion as to costs conferred by s 98 of the Civil Procedure Act 2005 (NSW) is expressly rendered subject to rules of court. The general rule applying to a hearing determined on the merits is that ‘the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs’: … r 42.1. Rule 42.1 has been construed on the basis that ‘the event’ which costs should prima facie follow can be identified as a judgment for the plaintiff or the defendant on the claim. [8]

7   In applying this principle, it need not be assumed that each trial or appeal involves a singular ‘event’. That was not the case in relation to the present trial or the current appeal. There were entirely separate questions as to the beneficial interests in the shares held by TRHS Pty Ltd in Felan’s Fisheries Pty Ltd and a claim for disgorgement of part of a secret commission obtained by one party in relation to the acquisition of those shares.

8   Further, even in relation to a particular matter, such as the determination of the beneficial ownership of the shares, it may be appropriate to allocate costs or limit the costs recoverable by the successful party where a clearly dominant issue has been determined against it, or where there are clearly separable issues on some of which it has failed. [9] On the other hand, as stated in Bostik Australia Pty Ltd v Liddiard (No 2):[10]

‘Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.’

9   The Court has a broad discretion, to be exercised according to the purpose of compensating, at least in part, the costs reasonably incurred by a successful party in establishing its rights, subject to the need to accord fairness to each party in the particular circumstances of the case. [11] ”

8. Baker v Towle [2008] NSWCA 73 at [11]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [8] applied in Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin (No 2) [2021] NSWCA 98 at [11] (White JA, Basten and Macfarlan JJA agreeing).

9. State of New South Wales v Stanley [2007] NSWCA 330 at [18] (Hislop J, Beazley and Tobias JJA agreeing).

10. [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA).

11. Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] (Finkelstein and Gordon JJ).

  1. These principles have been restated from time to time, sometimes with more citation of authority and sometimes with a focus on the specific matters in issue. [12] In considering whether a party should be deprived of its costs because it has failed on particular issues, it may be important to have regard to whether or not it was the moving party. As Burchett J noted in Australian Conservation Foundation v Forestry Commission:[13]

“A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to rise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs.”

12. See Oikos Constructions (No 2) at [10]-[16]; citing, amongst other cases, Bostik Australia (No 2) at [38].

13. (1988) 81 ALR 166, 169; [1988] FCA 225.

  1. In this case, the proceedings were commenced in 2019 by Access Training Group Ltd (“Holdings”) against the Jane parties (being the shareholders of AGT). Although the trial judge made a declaration that the Jane parties were obliged to pay Holdings $1.7 million on 17 July 2019, that entitlement did not give rise to a judgment, because it was subject to a set-off by reference to any amount owing by Holdings’ related company, Venture Capital Fund Australia Ltd (Venture Capital) to AGT. As the latter debt was found in the 2020 proceedings to exceed the former, the substantive result in the 2019 proceedings was that the proceedings be dismissed.

  2. Because AGT was not a party to the 2019 proceedings, in order to establish the amount of the set-off, fresh proceedings were commenced by AGT against Venture Capital in 2020. In those proceedings AGT obtained a judgment for $176,971.63, being the balance owing after the setting-off exercise.

  3. Although AGT was not successful in all its claims in the 2020 proceedings, it was a defensive proceeding forced upon it and its shareholders as a result of the proceedings commenced by Holdings. Accordingly, AGT was only in a formal sense the moving party in those proceedings. Further, although the judgment in favour of AGT was in a relatively small amount (some 10% of the amount owing by its shareholders to Holdings), its true entitlement (before the set-off) was $1,834,371.27, as against Venture Capital.

  4. A further consideration in the present case is that the trial judge appears to have set-off costs against each other. In principle, that approach was not open: the parties to the proceedings did not overlap. Indeed, no party was common to both proceedings.

  5. The hearing of the two proceedings ran for five days, but two were very short and the transcript suggested there were less than three full days of hearing. The parties went to significant length to deal with the matters expeditiously. Indeed, some claims were dismissed for want of evidence.

  6. Further, the cross-appeal was also dealt with expeditiously in this Court. The cross-appellant’s written submissions ran to 20 paragraphs; the cross-respondents’ written submissions were of a similar length. Whilst the cross-appellant laid the responsibility for initiating the proceedings at the feet of Holdings, neither party alleged that any particular claim was unreasonable and without foundation, nor that the other party acted unreasonably in the conduct of the proceedings. The cross-respondents did not contend that the cross-appellant had failed on matters constituting a dominant part of the proceedings.

  7. The appropriate order in the 2019 proceedings is that Holdings pay the Jane defendants their costs of that proceeding. In the event, they were successful. The fact that aspects of their earthworks collapsed should not be held against them unless their defensive positions were unreasonable, were pursued in a manner which unreasonably extended the hearing of the matter, or were entirely severable and dominant. Absent one of those elements, none of which was established, the Jane defendants should have their costs of the trial against Holdings without diminution.

  8. With respect to the 2020 proceedings, AGT was successful in its claim against Venture Capital and should have its costs of that proceeding. It failed only on minor and entirely subsidiary issues, not warranting some proportionate reduction.

  9. Those entitlements should not be reduced by reliance on an inchoate principle of fairness, as that would be to invite reducing costs awards which are otherwise appropriate by reference to the outcomes of individual issues. The authorities referred to above warn against that.

  10. In these circumstances, the following orders should be made in the cross-appeals:

  1. Allow the cross-appeals and vary the orders entered on 18 and 25 March 2024.

  2. In the 2019 proceeding –

  1. set aside order (3) and

  2. in lieu thereof, and without disturbing interlocutory costs orders, order that the plaintiff pay the defendants’ costs in the Division.

  1. In the 2020 proceeding –

  1. set aside order (5) and

  2. in lieu thereof, and without disturbing interlocutory costs orders, order that the defendant pay the plaintiff’s costs in the Division.

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Endnotes

Decision last updated: 15 August 2024

Most Recent Citation
Cases Cited

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Statutory Material Cited

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