and Aakash Kumar v Mala Bathini
[2014] VSCA 77
•16 April 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2012 0226 | |
| AAKASH KUMAR & ORS | Appellants |
| v | |
| MALA BATHINI & ORS | Respondents |
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| JUDGES | NETTLE, TATE JJA and McMILLAN AJA | |
| WHERE HELD | MELBOURNE | |
| DATE OF HEARING | 31 March 2014 | |
| DATE OF JUDGMENT | 16 April 2014 | |
| MEDIUM NEUTRAL CITATION | [2014] VSCA 77 | |
| JUDGMENT APPEALED FROM | [2012] VCC 1604 (Judge Shelton) | |
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MISLEADING OR DECEPTIVE CONDUCT – Whether representations made – Whether representations relied upon in making payment.
PRACTICE AND PROCEDURE – Standing – Recovery of payment made – Whether natural person plaintiff having standing to recover payment where payment made from company account.
EVIDENCE – Whether judge failed to adopt cautious approach and act with sufficient caution – Whether judge made findings which were glaringly improbable or contrary to incontrovertible facts, uncontested testimony and compelling inferences – Whether judge erred in drawing adverse inference from failure to call witness – Jones v Dunkel (1959) 101 CLR 298, applied.
CONTRACT – Effect of signature – Whether plaintiff bound by signature in contract referring to information in further document – Where signature affected by misrepresentation.
PRACTICE AND PROCEDURE – Reasons – Whether judge failed to provide adequate reasons – Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, referred to.
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APPEARANCES: | Counsel | Solicitors |
For the Appellants | Mr J M Selimi | White Ellis Lawyers |
For the Respondents | Mr J F Richardson | MLJ Law |
NETTLE JA:
I agree with McMillan AJA.
TATE JA:
I agree with McMillan AJA, for the reasons her Honour gives, that the appeal should be dismissed.
McMILLAN AJA:
Introduction
In March 2009 Mala Bathini and Anil Bathini (‘the respondents’) issued a proceeding in the County Court alleging misleading and deceptive conduct against Aakash Kumar and Aloke Kumar (‘the appellants’). The trial commenced on 3 October 2012 and was heard by Judge Shelton over ten days.
The issues at the trial were:
(a)whether the appellants represented to the second respondent, on 24 September 2008, that they had paid $440,000 for the purchase of a registered training organisation carrying on a business in the catering and cookery area known as the Australian Institute of Tourism and Commerce (‘AITC’); and
(b)whether, at about this time, the second respondent lent the sum of $20,000 to the appellants.[1]
[1]Bathini v Kumar [2012] VCC 1604, [8]–[9].
The appellants denied the claims made against them.
The first respondent, the second respondent, the first appellant and the second appellant were the only witnesses at the trial. The first respondent gave only limited evidence.
On 26 October 2012, his Honour delivered judgment. His Honour found that on 24 September 2008 the appellants did represent to the second respondent that the purchase price for AITC was $440,000, of which the respondents had then paid $220,000. His Honour also found that the sum of $20,000 was lent by the second respondent to the appellants at about that time. Judgment was given against the appellants in the sum of $240,000.
The appellants now appeal his Honour’s judgment and seek orders that the judgment be set aside and the respondents’ claim be dismissed, save for orders for the taking of accounts. Alternatively, the appellants seek orders that the matter be remitted for re-trial.
Background
Both the appellants and the respondents were involved in operating registered training organisations (‘RTOs’) in the cooking and catering area. An RTO is a body primarily involved in the education of overseas students. Completion of the cookery and catering courses by a student facilitated the obtaining of Australian citizenship.
The respondents are husband and wife. In April 2007, Chelsea International College Pty Ltd (‘CIC’) was incorporated. In mid-2008, the first respondent was the sole director and shareholder of CIC. At the end of May 2008, CIC was registered as an RTO. The second respondent was the general manager of CIC. As he had been convicted of assault in 2002 and sentenced by way of a community based order, he could not be a shareholder or director of an RTO such as CIC. The trial judge accepted the evidence of the first respondent to the effect that she left the running of CIC to the second respondent and that he acted at all times as her agent.
The appellants are brothers. They operated Intercontinental Education and Settlement Pty Ltd (‘IES’). IES held a one-third share in the Australian Institute of Education Pty Ltd (‘AIE’), another RTO in the cooking and catering area.
AusAsia Management Pty Ltd (‘AusAsia’), the third defendant in the proceeding, was also an RTO in the cookery and catering area. AusAsia had a third share of AIE. Its directors were Li Lu Khoo (‘Khoo’) and Jason Wong (‘Wong’).
The remaining share of AIE was held by Geoff Wallace (‘Wallace’). The proceeding against AusAsia was adjourned because, at the time of trial, AusAsia had been deregistered and steps were still being taken to place it back on the register.
The facts
In August 2008, there were discussions between the second respondent, Wallace, Wong and the appellants about pooling their resources in their various RTOs. However, this venture did not proceed.
Soon after these discussions, the second respondent had a discussion with the appellants about going into partnership in an RTO in the catering and cookery area.
His Honour set out what then occurred between the parties:
The second [respondent] stated that he was particularly keen to have an interest in a further RTO and then involve his brother, Amaranth, which would assist him in obtaining permanent residency in Australia. He stated that he searched the website of the Commonwealth Register of Institutions and Courses for Overseas Students (‘CRICOS’) and located AITC. It was common ground that it had a maximum capacity allowed of fifty students and that it had not been active for a few years. The chief executive officer of AITC was one, David Lawson.
The second [respondent] stated that he discussed the possibility of purchasing AITC with the Kumars in mid-September 2008. It was common ground that the Kumars were always together for all relevant meetings.[2]
[2]Ibid [14]–[15].
In respect of the alleged misrepresentation, his Honour said:
The second [respondent] stated that on 24 September 2008, the Kumars told him that they had a discussion with Lawson and had already purchased AITC for the sum of $440,000. He said that it was agreed that there would be a partnership between the [respondents] and the Kumars in which the [respondents] would bring CIC into the partnership and the Kumars would contribute their one-third share of AIE and their shares in AITC. The Kumars stated that they had paid the sum of $220,000 towards the purchase of AITC and that the [respondents] would have to pay $220,000 also. The second [respondent] stated that at this meeting, the Kumars stated that they did not have a copy of the purchase agreement for AITC but that it was with their lawyers. It is the representation with respect to the sum of $440,000 made at this meeting which is the major issue in this proceeding. The second [respondent] stated that he did not see the agreement for the purchase of AITC until requested by his solicitors in April 2009.
…
The Kumars’ version of events is substantially different. They stated that it was the second [appellant] who located AITC and ascertained that David Lawson was its chief executive officer and approached him. They stated that on 24 November 2008, the evening of the purchase of AITC and the signing of the Sale of Shares Agreement, they met with the second [respondent] and offered him a half-share in AITC. They stated that they showed him clause 1.37 in the Sale of Shares Agreement at the office of AIE. On the next day they went to the premises of CIC in Nicholson Street, North Fitzroy where the second [respondent] took a copy of the Sale of Shares Agreement. Thus, on the Kumars’ version of events, the second [respondent] was well aware from the outset that the purchase price of AITC was $220,000.[3]
[3]Ibid [16], [20].
His Honour set out the relevant clauses of the Sale of Shares Agreement dated 24 September 2008 between Kaicheng International Pty Ltd (‘Kaicheng’)[4] and the appellants as follows:
[4]Kaicheng owns two fully paid shares in South Pacific Group Pty Ltd (‘South Pacific’), which operated AITC.
1.15‘Completion’ means completion of the sale and purchase of the Shares under this Agreement;
1.16‘Completion Date’ means 18 December 2008, or such other date mutually agreed in writing;
…
1.22 ‘Deposit’ means $22 000;
…
1.37 ‘Purchase Price’ means the sum of $220,000;
…
4.1Completion of the purchase of the Sale Shares is conditional on fulfilment of the following conditions which are for the benefit of the Purchaser and may be waived only by the Purchaser:-
4.1.1.the Company warrants to do at its own cost all necessary audits, including audits by Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) and Victorian Registration & Qualifications Authority (VROA) and obtains Licences required for the Company and/or the Purchaser to conduct the Business and use the Assets after Completion.
4.2.If any of the conditions contained in clauses 4.1 are not fulfilled or waived by the Purchaser (or in the case of clause 4.1.1 the Vendor) on or before the Completion Date then this agreement may be terminated by written notice by the Purchaser (or in the case of clause 4.1.10 [sic] the Vendor).
…
7.1.3.Income
(a)The parties acknowledged and agree that all rights, title and interest in all income, profits and benefits of the Business (‘Income and Receivables’)
(i) up to the date of this Agreement are the assets of the Vendor; and
(ii)after the date of this Agreement, are held by the Company pending Completion takes place. In the event Completion does not take place, all Income and Receivables are to be refunded to the students.
(iii)After Completion, the Income and Receivables shall belong to the Company.[5]
[5]Bathini v Kumar [2012] VCC 1604, [18].
In respect of the alleged loan, his Honour explained:
The second [respondent] stated that at [in or about early September 2008], the Kumars asked him for a loan of $20,000. It was, he said, a personal loan. The request was made at his office at CIC in Nicholson Street. He stated that he gave them $20,000 cash. He stated that the terms of the loan were not discussed and that the loan was not documented between them. The Kumars deny that any such loan was made.[6]
[6]Ibid [30].
The $20,000 was alleged by the respondents to have been paid in cash in early September 2008. On 29 September 2008, a cheque in the sum of $100,000 was provided by the second respondent to the appellants. On 19 December 2008, a cheque in the sum of $120,000 was provided by the second respondent to the appellants. Both cheques were payable and paid from CIC’s accounts. The initial $100,000 was said by the appellants to have been spent on expenses relating to the set up and operation of AITC. It is unnecessary for the purposes of this appeal to repeat the detail of those expenses.
The parties entered into a Partnership Agreement on 24 October 2008 that was backdated to 1 October 2008. They did so at a meeting at the offices of a solicitor, Mr Ben Meir, who took them through the terms of the agreement. It provided for the parties to be equally liable for expenses and equally entitled to profits.
The issues on this appeal
In their notice of appeal, the appellants identified twenty-five grounds of appeal. Before this Court, only sixteen grounds were pressed.[7] The grounds seek to attack the judge’s two principal conclusions with varying degrees of specificity:
[7]Grounds 6, 11, and 18 to 24 were not addressed.
(a)the respondents did not have standing to bring a claim for misleading and deceptive conduct against the appellants or for repayment of a loan against the second appellant;[8]
(b)it was not open on the evidence for his Honour to find that the second respondent advanced a personal loan of $20,000 to the second appellant;[9]
(c)his Honour failed to apply a ‘cautious approach’ in determining the questions of fact in dispute and in assessing the credibility of the three witnesses;[10]
(d)his Honour erred by making ‘glaringly improbable’ findings and erroneous assessments of the credibility of the three witnesses;[11]
(e)his Honour erred in law in failing to hold it was not open to the respondents to maintain they did not have notice of the contents of a sale of shares agreement dated 24 September 2008 when the existence of the document was disclosed in the Partnership Agreement signed by them dated 1 October 2008;[12]
(f)his Honour had no warrant for drawing a Jones v Dunkel inference against the appellants for failing to call their solicitor;[13]
(g)his Honour erred in allowing the claims because there was no evidence of any reliance on the part of the respondents;[14] and
(h)his Honour failed to give adequate reasons for concluding the appellants had made the representation despite his ‘reservation’ concerning the evidence of the second respondent.[15]
[8]Grounds 9, 10 and 16.
[9]Ground 16.
[10]Grounds 1, 2, 3, 12–15, and 25.
[11]Grounds 4 and 5.
[12]Ground 3.
[13]Ground 17.
[14]Grounds 7 and 8.
[15]Ground 25.
The judge’s reasons
The trial judge commenced his reasons by stating that his findings on the issues of misrepresentation and the personal loan depended upon the credibility of the second respondent on the one hand and the appellants on the other.
In respect of the misrepresentation alleged to have been made by the appellants, and the loan of $20,000, his Honour then set out what he described as the relevant considerations on the questions to be determined by him. His Honour arranged these into thirteen distinct points.
The credibility of the competing parties’ accounts, and of their evidence as witnesses in the trial, was central to the resolution of this case. The versions of events propounded by each party were diametrically opposed. The case could not be resolved without determining on the balance of probabilities which story was more credible. Counsel for the appellants put the question more starkly, submitting that the substance of the appeal boiled down to one question: was it reasonably open to the trial judge to find that the alleged representation had been made?[16]
[16]Albeit of course that, in point of form, this is an appeal by way of rehearing: Freeman v Rabinov [1981] VR 539; Fox v Percy (2003) 214 CLR 118, 125.
Although he had some reservations in relation to the evidence of the second respondent, his Honour was satisfied on the balance of probabilities that the misrepresentation that the purchase price for AITC was $440,000 was made on 24 September 2008 and the sum of $20,000 was lent by the second respondent to the appellants.
Grounds 9, 10 and 16: The respondents did not have standing to bring the proceeding
The ninth and tenth grounds of appeal were that the trial judge erred in failing to find that the respondents did not have standing to bring the claim for misleading and deceptive conduct because the two sums claimed were paid by CIC, not by the respondents, and only CIC could bring a claim to recover either the payment of $220,000 or the separate sum of $20,000.
In response to this submission, his Honour found:
… if any representation was made, it was made to the second [respondent] and, through him, to the first [respondent], and the fact that the second [respondent] chose to draw the cheques on CIC and not on his own personal account is irrelevant. As Mr Richardson submitted, had one or both payments been made by bank cheque, it would not follow that the relevant bank had the cause of action and not the [respondents].[17]
[17]Bathini v Kumar [2012] VCC 1604, [58].
The sixteenth ground of appeal was that the trial judge erred in law and in fact by finding that the respondents had lent the appellants the sum of $20,000 in circumstances where his Honour had earlier found that the second respondent’s recollection of events surrounding the loan might be faulty. At trial, the appellants submitted that no loan of $20,000 had been made to them. While they maintained this on appeal, they also submitted that his Honour’s reliance on the business records of CIC was in error, as those records were evidence of a loan made by CIC, not by the appellants.
In considering this point at trial, his Honour found:
The [second respondent] stated that the loan for $20,000 which he alleges was made towards the end of September 2008 and of which he sought repayment in the March emails was for a personal loan. However, a copy remittance advice of CIC records, on 28 September 2008 against an entry for $20,000: ‘Loan to Aloke Kumar — Buss Startup’, which it was agreed meant ‘Business Start Up’. A similar entry appeared in the Account Transactions [Accrual Journal] and CIC’s Cash Disbursements Journal of the same date.
In a letter of demand of 12 June 2009 to Slater & Gordon, Wisewoulds, in addition to referring to the sums of $100,000 and $120,000 paid by CIC in relation to the purchase of AITC, refer to:
… the sum of $240,000 being their contribution to the purchase of the AITC business which is comprised of:
a$20,000 cash which was paid directly to the Aakash and Aloke Kumar in late September 2008 being the deposit for the purchase of the AITC business:
b$100,000 …
c$120,000 … .
I infer that the reference to $20,000 being the purchase of the AITC business was written by Wisewoulds on instructions from the second [respondent]. It accords with the internal financial records of CIC. The financial records in this letter suggest that the second [respondent’s] recollection of events surrounding the loan of $20,000, and recollection regarding other matters, may be faulty.[18]
[18]Ibid [61](iii).
The respondents submitted that, as the trial judge found, the cause of action does not transfer to CIC simply by virtue of the fact that the money was paid from a CIC account. The trial judge was entitled to find on the balance of probabilities that the money paid from the CIC account was the purchase price and loan as alleged by the respondents. The respondents further submitted that the defence filed by the appellants admitted that any representations that were made had been made to the respondents and not to CIC, and that the case at trial was never argued on the basis that the representations had been made to the respondents as agents of CIC rather than in their own capacity. It was always the individuals that were to enter into the Partnership Agreement, and the corporate entities were always to be instruments of that partnership.
The explanation given for the source of the funds, a CIC account, was that it was in the nature of a loan from CIC to the respondents, a loan on which they paid income tax. As the appellants pointed out, this explanation was not referred to by the trial judge in his Honour’s reasons for judgment. However, in my view, the source of the funds is not sufficient to defeat the claim. Whether the money came from CIC as an instrument of the respondents, as a gift, or as a loan, and whether or not the respondents might owe obligations to pay that money back to CIC, it would not defeat the claim made by the respondents. The comparison by the trial judge to a cheque account was apt in that respect.
Ultimately, in the case of the funds advanced for both the purchase of AITC and the personal loan, it was open to the trial judge to determine whether the payments had in fact been made, and whether they were payments made on behalf of the respondents or on behalf of CIC.
In my view, the trial judge was not in error in accepting the submissions of the respondents on these issues, and the ninth, tenth and sixteenth grounds of appeal should be rejected.
Grounds 1–5, 12–15 and 25: The trial judge failed to act with sufficient caution in respect of the oral evidence, and made glaringly improbable findings and an erroneous assessment of the credibility of the witnesses
The first, second, third, twelfth, thirteen, fourteenth, fifteenth and twenty-fifth grounds of appeal were characterised by the appellants in their submissions as supporting an error by the trial judge in failing to apply a ‘cautious approach’ in determining the principal questions of fact in dispute and assessing the credibility of the witnesses. The respondents’ submissions in response to these grounds, and in response to the fourth and fifth grounds, relied largely on the same findings, so I shall deal with the submissions together.
Failure to act with sufficient caution
The submission that the trial judge failed to apply a cautious approach was supported by a number of specific grounds, which counsel for the appellants said were in many respects akin to particulars of the broader ground. These included an error in finding that the second respondent’s poor recollection was honest, an error in failing to find that the second respondent was not credible, an error in accepting the second respondent’s uncorroborated evidence, an error in finding that the sum of $220,000 had been paid without seeing the agreement, and a substantial miscarriage of justice by failing to set out the evidence of each witness in his Honour’s reasons.
His Honour acknowledged that the proper approach was to be cautious in finding a representation had been established on the basis of oral evidence, but also noted that, where the representation depended upon a bare fact, rather than subtle nuances, less caution was required:
Courts, in recent cases, have expressed the need for caution when relying upon oral statements as the basis for a misleading and deceptive conduct claim. In Soia v Bennett (No 5), Commissioner Sleight stated:
A cautious approach should be taken when oral statements made some time ago are the basis of a misleading and deceptive conduct claim.
To like effect is the comment of McClelland CJ in Eq in Watson v Foxman, which was adopted by Judd J in Bovino Pty Ltd v The Casey Group Holdings Pty Ltd:
Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as ‘misleading’) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court ‘must feel an actual persuasion of its occurrence or existence’. Such satisfaction is ‘not … attained or established independently of the nature and consequence of the fact or facts to be proved’ including the ‘seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding’.
Here, however, I am not concerned with ‘subtle nuances’. The simple allegation, which is denied, is that the defendants orally represented that the purchase price for AITC under the Sale of Shares Agreement was $440,000.[19]
[19]Ibid [55]–[57] (citations omitted, emphasis as in the trial judge’s decision).
In written submissions, the appellants point to his Honour’s findings that:
(a)the second respondent gave many non-responsive answers both in evidence in chief and in cross-examination (for example, the non-responsive reply dealing with the critical issue of the alleged representation);
(b)the second respondent was fairly vague in his recollection of events and appeared to have a poor memory;
(c)it was ‘somewhat surprising’ that the second respondent would pay the sum of $100,000 on 30 September 2008 without having seen the Sale of Shares Agreement;
(d)the purchase price was not discussed at the four meetings with Ben Meir;
(e)the second respondent did not insist upon seeing a copy of the Sale of Shares Agreement at these meetings, particularly as it was referred to in the Partnership Agreement and the Supplementary Partnership Agreement, each of which were signed by the respondents;
(f)it was further ‘surprising to believe’ that the second respondent paid the further sum of $120,000 when the audit of AITC had not been completed before the original date for completion of 18 December 2008; and
(g)the second respondent was prepared to make this payment without insisting upon seeing a copy of the Sale of Shares Agreement that disclosed the real purchase price.
They submitted that, in light of his Honour’s ‘incredulous observations’, the trial judge ought to have found that the second respondent had in fact seen the Sale of Shares Agreement and knew the real purchase price.
The respondents pointed out that the submissions of the appellants focus selectively on findings of the trial judge that weigh in favour of the appellants, and ignore the ‘large swathes of those issues’ that the judge considered weighed against the appellants. They submitted that, on the issue central to the resolution of this case, the credibility of the parties’ accounts, the trial judge ultimately found that the respondents’ version of events was the more consistent version.
Glaringly improbable findings as to credit
The fourth and fifth grounds of appeal were in essence that the finding of the trial judge that the alleged representation had been made was glaringly improbable or contrary to incontrovertible facts, uncontested testimony and compelling inferences. While conceding that the onus was squarely on the appellants to show error in circumstances where the principal findings of fact depended upon an assessment of credit, they submitted that there was a substantial body of unchallenged evidence that ought to have been critical in determining the veracity of the respondents’ claims relating to the alleged representation.
The appellants relied in particular on the case of Davis v Veigel, where McFarlan JA said:
… as Mr Davis recognised, he had a substantial hurdle to overcome in order to successfully challenge the primary judge’s acceptance of Ms Grey’s evidence because that acceptance was credit-based. In the case of such a finding it is necessary for an appellant to demonstrate that the finding is ‘contrary to incontrovertible facts or uncontested testimony’, ‘glaringly improbable’ or ‘contrary to compelling inferences’. As Giles JA noted in Shimokawa v Lewis, credit-based findings may be set aside, consistently with Fox v Percy, if the findings are made ‘for reasons which in whole or in part do not truly go to the reliability or veracity of the relevant evidence, or without taking account of an important consideration or considerations material to evaluation of the credibility or veracity’. I would add that, in relation to the first, as well as the second, alternative postulated by Giles JA, for the finding to be vitiated the error that the primary judge made must be an important one which was material to evaluation of the reliability or veracity of the relevant evidence.[20]
[20][2011] NSWCA 170, [42] (citations omitted, emphasis as in the appellants’ written submissions).
They also relied on McCartney v Orica Investments Pty Ltd, where Giles JA said:
This court has an appellate court’s advantage, which can be a counter to a trial judge’s advantage of the unfolding of the evidence over time, of careful assistance in examination of the evidence free of distraction by other trial issues.
…
For the finding to be vitiated the error that the primary judge made must be an important one which was material to evaluation of the reliability or veracity of the relevant evidence.[21]
[21][2011] NSWCA 337, [87]–[88] (citations omitted).
The respondents submitted that the trial judge was in this case uniquely placed to determine the credibility of the witnesses, and made specific reference to his Honour’s findings on the credit of the appellants. Counsel for the respondents conceded, quite properly, that the manner in which the parties did business was in many respects quite surprising, and certainly not in line with best business practices. But, it was said, the more surprising analysis of the facts was that put by the appellants.
Significantly, it was said, his Honour found in relation to the appellants’ credit that:
The attitude of the Kumars to swearing as to the truth of affidavits was somewhat cavalier. The first plaintiff stated that he signed his affidavit on 1 December 2010 on the basis that his brother told him that it was all right for him to sign. The second defendant stated that he signed his affidavit of 1 December 2010 on the basis that his lawyer asked him to sign it. It appears that the Kumars were prepared to swear to anything put before them by their solicitors and had little regard for the solemnity of an oath.
All these matters reflect adversely on the credibility of the Kumars.[22]
[22]Bathini v Kumar [2012] VCC 1604, [61](xi).
Conclusions as to these grounds
There were no ‘subtle nuances’ in the findings to be made in this case. The representation was made, or it was not.
A great deal was made, in oral submissions, of the appellants’ explanation of the money transferred. It was said that, of the $220,000, some $120,000 was advanced either in payment of the respondents’ share of the purchase price or else partly as that payment and partly as repayment of the deposit that had been paid by the appellants. The other $100,000 was advanced from CIC for the payment of set-up costs for AITC. On the appellants’ case, CIC was at that time considered by the appellants to be jointly owned under the partnership and hence the sum of $220,000 was jointly advanced rather than paid by the respondents. This was justified by reference to two claims:
(a)The appellants, acting as agents of the respondents, had substantially grown the business of CIC from one student to over 300 students. They did so without claiming any form of commission. In lieu of that commission, which would have totalled somewhere between $150,000 and $300,000, the respondents were to pay the purchase price entirely and were also to transfer CIC as an asset of the partnership. They were also to meet all the expenses of AITC from the date of the agreement (24 September 2008) to the date of settlement (18 December 2008).
(b)The expenses, for which the extra $100,000 was advanced, were detailed in four distinct places: the amended defence, the affidavit of Aloke Kumar sworn December 2010, the examination in chief of the appellants, document referred to as an ‘aide memoire’ with documentary evidence of the expenditures attached that was produced by the appellants for the first time at trial after the respondents’ case had closed.
The first point had initially been argued by way of defence by the appellants, but was ultimately abandoned. Counsel for the appellants was refused leave to cross-examine on the issue, and two applications to amend the pleading during the trial were refused. It was also the subject of conflicting evidence as to the amount claimed. Although counsel for the appellants conceded before this Court that the appellants were not legally entitled to a claim for commission, it was argued that the purported existence of such a claim could be relied upon as a better explanation for how the parties had organised their affairs, and hence go to the credibility of the respondents’ claims in respect of the alleged representation.
The second point seemed initially to have substance. If the money paid was being spent on AITC’s expenses, rather than on meeting the purchase price, how was the purchase price to be met at settlement? However, this after-the-fact justification did not stand up to closer scrutiny. The second respondent denied under cross-examination that he knew that the money advanced was being spent running AITC.[23] The appellants managed AITC, and were responsible for meeting the expenses of AITC. As far as the respondents were concerned, they had advanced the money as their share of the purchase price, and they were not to know that the money was being spent operating the company.
[23]Although the documents supporting the expenses were produced after the second respondent had given evidence, his knowledge of the expenses was tested in cross-examination, and in re-examination, by reference to the expenses detailed in the defence, which were different from those in the aide memoire.
Both the case advanced by the respondents and the case advanced by the appellants appeared to have significant weaknesses.
On the part of the respondents, it was difficult to understand why they would have advanced the entirety of their share of the purchase price prior to the settlement date. They were also unable to explain how it was that the appellants could be so brazen in asserting that the purchase price was double the actual amount. Anyone making such a claim would surely have known that the Sale of Shares Agreement would eventually be sighted, and the lie exposed.
On the part of the appellants, they could not explain why the respondents would not only have contributed more than half the purchase price (being the $120,000 that they conceded was advanced for that purpose), but would also have contributed CIC as a partnership asset, including all of the cash available to CIC and being used for AITC’s expenses.
While the respondents’ case appeared somewhat unlikely, it could at least be explained by naivety on their part in paying their share of the purchase price prior to seeing the Sale of Shares Agreement. It could also be explained by a lack of foresight on the part of the appellants, who believed either that their deception would not be uncovered, or if it were, that it could somehow be resolved. In contrast, the appellants were unable to explain the apparent generosity of the respondents in contributing nearly all of the assets to an equal partnership, except by reference to an alleged commission payment to which they had abandoned any claim to legal entitlement and about which there was conflicting evidence.
Far from being glaringly improbable, his Honour’s findings as to credit carefully and cautiously acknowledge the weaknesses in the evidence on either side. His Honour determined the case by reference to the most probable of two competing accounts that each strained plausibility. The respondents’ account was consistent throughout, in contrast to the case of the appellants, which his Honour, adopting the expression used by counsel for the respondents, described as a ‘moving feast’.[24]
[24]Bathini v Kumar [2012] VCC 1604, [61](xi).
The explanation said by the respondents to have been given by the appellants for the discrepancy between the represented purchase price and the Sale of Shares Agreement was that a further $220,000 had been paid ‘under the table’ in the presence of an accountant and lawyer. The appellants denied having given this explanation. However, in a series of e-mails exchanged between the parties in March 2009, the various allegations now sued upon by the respondents were put to the appellants. In responding, the appellants did not deny the allegations but rather avoided the issue by not addressing them at all. As his Honour found, ‘a response to these serious allegations might have been expected’ from the appellants.[25] Although the fact of the allegations being made does not support the respondents’ case, the failure of the appellants to respond left open the inference that the allegations were not a surprise to them.
[25]Ibid [61](vi).
It follows that I see no error in the trial judge’s conclusions in respect of these grounds.
Grounds 3: By executing the Partnership Agreement, the respondents ought to be deemed to have notice of the Sales of Shares Agreement
The third ground of appeal was that the trial judge erred in law in failing to hold that it was not open to the respondents to maintain that they did not have notice of the contents of the Sale of Shares Agreement, because the existence of that agreement was disclosed in the Partnership Agreement that the respondents executed on 1 October 2008. In support of this submission, the appellants relied on Toll (FGCT) Pty Ltd v Alphapharm Ltd, where the High Court held:
The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document.[26]
[26](2004) 219 CLR 165, 185. See also 183.
The respondents submitted that, as they were not signatories to the Sale of Shares Agreement, the appellants could not rely on their signature of the Partnership Agreement as evidence of their knowledge of the Sale of Shares Agreement, and that the mere reference to the Sale of Shares Agreement was insufficient.
The problem for the appellants’ argument, which arises from the very words of the statement of principle in Toll, is that this case does involve an alleged misrepresentation. If it were the case that the appellants had said nothing, it may have been arguable that the respondents should be held to know the contents of a document that they had signed. But the case here was that the appellants represented to the respondents that the purchase price was $440,000, and that was not true. Even if the respondents had signed a document containing the actual purchase price, it would be open to them to argue that there was a misrepresentation. The central issue was whether the trial judge would believe their account that the misrepresentation had been made, and his Honour did.
In my view, there is no error in the trial judge’s conclusions in respect of the third ground of appeal.
Grounds 17: The principles in Jones v Dunkel ought not to have been applied
The seventeenth ground of appeal was that the trial judge erred in law in applying the principles in Jones v Dunkel[27] in circumstances where a satisfactory explanation was given for failing to call the solicitor, Mr Ben Meir, as a witness in the case. Specifically, the appellants submitted that the evidence was unchallenged that the Sale of Shares Agreement was present at the meetings with Mr Meir in October 2008, was discussed at those meetings, and was referred to in the Partnership Agreement and Supplementary Partnership Agreement. In those circumstances, it was said to be readily explicable that Mr Meir was not called by the appellants.
[27](1959) 101 CLR 298.
The trial judge set out his reason in respect of this submission as follows:
Mr Richardson relied upon the failure of the defence to call Ben Meir as a witness. He asked me to draw an inference that Meir’s evidence would not have assisted the [appellants’] case. In doing so, he sought to rely upon Jones v Dunkel. The nature of the inference referred to there is conveniently summarised in O’Donnell v Reichard, where Newton and Norris JJ stated:
… It is sufficient to say that in our opinion for the purposes of the present case the law may be stated to be that where a party without explanation fails to call as a witness a person whom he might reasonably be expected to call, if that person’s evidence would be favourable to him, then, although the jury may not treat as evidence what they may as a matter of speculation think that that person would have said if he had been called as a witness, nevertheless it is open to the jury to infer that that person’s evidence would not have helped that party’s case; if the jury draw that inference, then they may properly take it into account against the party in question for two purposes, namely:
(a) in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and
(b) in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given, again in relation to matters with respect to which the person not called as a witness could have spoken.
In the course of the trial, I queried with Mr Selimi whether Meir was to be called. I was told that he was on standby. Mr Selimi submitted that there was no necessity for Meir to be called since it has not been specifically put to the second [respondent] that the Sale of Shares Agreement was on the table at the meetings with Meir. However, the second [respondent] stated that he only became aware of the Sale of Shares Agreement in April 2009. In my view, there was no necessity for Mr Richardson to put specifically to the Kumars, in that context, that the Sale of Shares Agreement was on the table at the meetings at Meir’s office. Had Meir given evidence that the Sale of Shares Agreement was on the table at the meetings, this would have been near fatal to the [respondent’s] case. It could well have been, of course, that Meir, having acted for the Kumars on the Sale of Shares Agreement, was familiar with its content and did not need to have the Sale of Shares Agreement on the table.
In the circumstances, I am prepared to draw an inference that Meir’s evidence would not have assisted the [appellants’] case.[28]
[28]Bathini v Kumar [2012] VCC 1604, [61](x) (citations omitted). It should be noted that his Honour’s reasons should presumably read: ‘Mr Selimi submitted that there was no necessity for Meir to be called since it has not been specifically put to the defendants [the appellants] that the Sale of Shares Agreement was not on the table at the meetings with Meir.’
The respondents submitted that it was put to the appellants in cross-examination that the respondents did not see the Sale of Share Agreement until April 2009.
A clearer example of the application of the principle in Jones v Dunkel would be difficult to find. The respondents’ case was that they did not know the actual purchase price. The appellants’ case was that they must have known because, amongst other things, the Sale of Shares Agreement was on the table in their meetings with Mr Meir in October 2008, and referred to in those meetings. The trial judge repeatedly invited counsel for the appellants to call Mr Meir, and was told that he was on standby. The issue was writ large for the parties when the respondents gave evidence that they did not see the agreement until April 2009. The appellants gave evidence that the agreement was on the table. It was put to them that the respondents said that they did not see it until April 2009. If Mr Meir had been able to give evidence that the Sale of Shares Agreement was on the table, that would have corroborated the appellants’ account. The appellants chose not to call him.
In those circumstances, it was open to his Honour to infer that Mr Meir was not able to give evidence that the Sale of Shares Agreement was on the table, whether because he could not recall or for some other reason. Accordingly, I see no error in the trial judge’s conclusions under the seventeenth ground of appeal. I agree with them.
Grounds 7 and 8: The trial judge failed to find that the respondents had relied on the alleged representation
The seventh and eighth grounds of appeal were that the trial judge erred in failing to make an express finding that the respondents had relied on the alleged representation in entering into the Partnership Agreement, or that in the alternative the trial judge erred in failing to find that the respondents would have entered into the Partnership Agreement irrespective of whether the representation had been made. It was said by counsel for the appellants that his Honour’s reasons were entirely silent on the issue of reliance.
This ground of appeal centred on the evidence of the second respondent that the purchase price in the alleged representation of $440,000 ‘was cheap’. It was said that, absent other evidence, the trial judge was bound to conclude that the respondents would have entered into the Partnership Agreement in any case, and accordingly the statutory cause of action could not have been made out.
This point had also been argued at trial, in respect of which his Honour held:
Mr Selimi submitted that even if the representation of the purchase price for AITC shares, being $440,000, was made, the second [respondent] did not rely upon this representation since he conceded under cross-examination that even at $440,000, the price of AITC was cheap. As indicated however, the [respondents] plead that they relied on the alleged representation not only to make the payment of $220,000 but also to enter into the partnership with the Kumars which they would not have done had they known the true position.[29]
[29]Ibid [59].
The respondents submitted that it was not necessary that the inducement be the sole inducement, and that it was therefore not to the point that the alleged representation was considered to be a good price. They also submitted that it was for the appellants to rebut an inference of inducement.
In support of this submission, the respondents relied on authorities to the effect that the principles of reliance in deceit, as articulated by the High Court in Gould v Vaggelas,[30] should guide the Court in analogous claims in misleading and deceptive conduct.[31] In Gould, Wilson J summarised the applicable principles as follows:
1.Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.
2.If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
3.The inference may be rebutted, for example, by showing that the representee, before he entered the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.
4.The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.[32]
[30](1985) 157 CLR 215.
[31]Jones v Acfold Investments Pty Ltd (1985) 59 ALR 613, 622–4; National Australia Bank Ltd v Nobile (1988) 100 ALR 227, 249; Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242, 245 (Kirby P), 266 (Rolfe AJA); Tenji v Henneberry & Assocs Pty Ltd (2000) 172 ALR 679, 702.
[32](1985) 157 CLR 215, 236.
In this case, the representation was made to induce the respondents to enter into the agreement and advance the money. The agreement was then entered into and the money was advanced. The inference that counsel for the respondents said should be drawn from the facts was that the value or otherwise of the purchase was irrelevant. The respondents were led to believe that they were entering into a partnership in which they would be contributing half the purchase price, and the appellants would be contributing the other half. Instead, they entered into an arrangement and contributed the whole of the purchase price. The reliance was not about whether the offer was a good deal; it was whether they would each be contributing half. Had they known that they would be putting up the whole purchase price, they would never have entered into the partnership at all.
The seventh and eighth grounds of appeal should therefore be rejected.
Grounds 25: The trial judge failed to give adequate reasons
The twenty-fifth ground of appeal was that the trial judge failed to give adequate reasons by failing to set out the evidence of each witness and make findings in respect of the whole of the evidence. This was separately relied upon as evidence of the trial judge’s failure to adopt a cautious approach.
The respondents submitted that this ground should be dismissed, for much the same reason that the submission that his Honour failed to adopt a cautious approach and that his Honour made glaringly improbable findings in relation to credit should be dismissed. The key issue, it was said, were his Honour’s findings on the credibility of the witnesses, and the explanation his Honour gave for those findings.
As was acknowledged on all sides, the major issue in this case was whether the representation had been made. It was the major contest at trial, and the major contest at appeal. Its significance was noted by the trial judge both at the outset of his Honour’s reasons and at the outset of his Honour’s conclusions. In determining that question, two accounts were given that were almost entirely conflicting. The contemporaneous evidence was in many respects unhelpful — some was consistent with the account given by the appellants, some with the account given by the respondents. The trial judge ultimately had to determine which witness or witnesses gave the more credible version of events. His Honour spent eight pages of his judgment going in detail through his conclusions on what counsel submitted were the relevant considerations in answering that question.
Although a trial judge has an obligation to give reasons, those reasons cannot cover every aspect of every issue that could conceivably be in dispute between the parties. To do so would be an impossible burden. Rather, with the assistance of the parties and the practitioners involved, a trial judge must decide what the central issues are that are determinative of the dispute between the parties, and set out the path of reasoning by which the conclusions made in the judgment have been reached.[33] In this case, his Honour did that.
[33]Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, 279–80, 282 (McHugh J); Fletcher Constructions Australia Ltd v Lines Macfarlane & Marshall Pty Ltd (2001) 4 VR 28, 35 (Chernov JA); Ta v Thompson [2013] VSCA 344, [27]–[45] (Osborn JA).
The appellants’ complaints under the twenty-fifth ground in my view must also be rejected.
Conclusion
The appeal must be dismissed, and subject to anything counsel might wish to say, with costs.
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