Aneve Pty Ltd v Bank of Western Australia Ltd - [2004] NSWSC 640

No judgment structure available for this case.

CITATION: Aneve Pty Ltd & Ors v. Bank of Western Australia Ltd [2004] NSWSC 640

HEARING DATE(S): 27 to 29 April and 4 May, 2004

JUDGMENT DATE:
20 July 2004

JURISDICTION:
Equity Division

JUDGMENT OF: Palmer J

DECISION: Judgment for Defendant on Plaintiff's Statement of Claim; judgment for Defendant/ Cross Claimant on Cross Claim.

CATCHWORDS: TRADE PRACTICES - MISLEADING AND DECEPTIVE CONDUCT - Whether alleged misrepresentations made by Defendant to Plaintiffs - whether Plaintiffs relied upon anything said - issues solely of credit.

LEGISLATION CITED: Trade Practices Act 1974 (Cth) - s.51AA, s.52, s.87

CASES CITED: - Briginshaw v Briginshaw (1930) 60 CLR 336
- Moukhayber v Camden Timber & Hardware Co Pty Ltd [2002] NSWCA 58
- Rhesa Shipping Co SA v Edmunds [1985] 2 All ER 712
- Timms v Commonwealth Bank of Australia [2004] NSWSC 76

PARTIES :
Aneve Pty Limited - First Plaintiff
Aniello Iannuzzi - Second Plaintiff
Paraskevi Iannuzzi - Third Plaintiff
Bank of Western Australia Limited - Defendant

FILE NUMBER(S): SC 1063/03

COUNSEL: B.M.J. Toomey QC, A.G. Diethelm - Plaintiffs
B. McClintock SC, R. Brender - Defendant

SOLICITORS: R.F. Bergagnin & Co - Plaintiffs
Blake Dawson Waldron - Defendant

Introduction and issues
1 The Second Plaintiff, Dr Aniello Iannuzzi and the Third Plaintiff, his wife, Dr Paraskevi Iannuzzi, are the sole directors of the First Plaintiff (“Aneve”), which is a family trust company. To avoid confusion, I will adopt the course taken by Counsel for the parties and will refer hereafter to the Second Plaintiff as “Dr Iannuzzi” and to the Third Plaintiff as “Dr Tsironis”, which is her maiden name. 2 By instrument dated 21 January 2002, Aneve guaranteed to the Defendant (“BankWest”) repayment by Barrington Estates Ltd (“Barrington”) of an advance of $1M (“the Guarantee and Indemnity”). The Guarantee and Indemnity was supported by a Performance Bond, originally dated 4 March 2002 but now replaced by another bond dated 28 January 2003, issued by St George Bank Limited (“St George”) whereunder St George undertook to pay to BankWest upon demand a sum of up to $1M (“the Performance Bond”). The Performance Bond in turn was supported by an instrument dated 28 February 2002 whereby Drs Iannuzzi and Tsironis guaranteed to St George the repayment of all monies payable to it by Aneve (“the St George Guarantee”). The St George Guarantee was supported by securities over four pieces of real estate owned by Dr Iannuzzi, a company controlled by him and Dr Tsironis’ parents (“the Securities”). I will refer to the Guarantee and Indemnity, the Performance Bond, the St George Guarantee and the Securities collectively as the “Transaction Documents”. 3 The Plaintiffs allege that execution of the Transaction Documents was procured by conduct on the part of BankWest which was misleading or deceptive or unconscionable, in contravention of s.52 and s.51AA Trade Practices Act 1974 (Cth) (“ TPA ”). They seek declarations to that effect. Aneve seeks an order under s.87 TPA declaring the Guarantee and Indemnity to be void and to have been void ab initio. The Plaintiffs further seek an order that BankWest be permanently restrained from making any demand on St George under the Performance Bond. BankWest, by its Cross Claim, seeks a declaration that it is entitled to make demand under the Performance Bond and it seeks damages in accordance with the usual undertaking as to damages given to the Court by the Plaintiffs on 10 January 2003. 4    The case turns upon issues of credit. Drs Iannuzzi and Tsironis say that certain oral representations were made to them by Mr David Lennon, a director of BankWest, on two occasions in December 2001. The first occasion was a telephone conversation between Dr Iannuzzi and Mr Lennon on 22 December 2001, in which Mr Gary Blom, Managing Director of Barrington, also participated. The second occasion was a meeting between Mr Lennon and his wife and Drs Iannuzzi and Tsironis at the latters’ holiday house at Blue Bay on 29 December 2001. 5    Drs Iannuzzi and Tsironis say that they relied upon the representations made by Mr Lennon in those meetings in deciding that Aneve would enter into the Guarantee and Indemnity. The Plaintiffs say that the representations were false, or misleading or deceptive, and in respect of those representations which are as to future matters, they say that there was no reasonable ground upon which the representations could have been made. In addition, they say that the making of the representations was unconscionable. 6    BankWest denies that:

– any of the representations were made by Mr Lennon as alleged;

– any representations which were made by Mr Lennon were misleading or deceptive or were made without reasonable grounds;

– any representations made by Mr Lennon were relied upon by Aneve;
– any representations made were causative of loss to Aneve.

7    BankWest says further that if any misrepresentations were made by Mr Lennon, Aneve is disentitled to relief because it failed to take care of its own interests. 8    The only persons present at the first discussion on 22 December 2001 were Mr Blom, Dr Iannuzzi and, by telephone, Mr Lennon. The only persons present at the second discussion on 29 December at Blue Bay were Mr and Mrs Lennon and Drs Iannuzzi and Tsironis. No contemporaneous note of either discussion was taken. No record or other note of either discussion was made within a reasonable time thereafter. 9    Mr Blom has not been called to give evidence; neither has Mrs Lennon. Mr Lennon suffered a severe stroke in May 2002 and he is incapable of giving evidence. The only evidence of the discussion on 22 December 2001 is that given by Dr Iannuzzi. The only evidence of the second discussion on 29 December 2001 is that given by Drs Iannuzzi and Tsironis. 10    The first critical issue of credit is whether the doctors’ evidence as to what was said by Mr Lennon can be accepted in the light of other evidence, mainly documentary, which has been adduced. The second critical issue of credit is whether they relied on whatever was said by Mr Lennon in the light of what transpired thereafter. 11    The Plaintiffs engaged solicitors, Messrs Tress Cocks & Maddox, to advise them before entering into the transaction. Mr Cheung of that firm was the solicitor principally concerned. Dr Iannuzzi also consulted his accountant, Mr Belos, and sought finance for the transaction from the National Australia Bank (“NAB”). Drs Iannuzzi and Tsironis say that, notwithstanding the advices of their solicitor, Mr Cheung, their accountant, Mr Belos and, in particular, the advice of two officers of the NAB, Mr Coupe and Mr Leeson, they continued to rely upon the alleged oral representations made by Mr Lennon on 22 and 29 December 2001 in deciding that Aneve would enter into the transaction. 12    As the state of mind of the Plaintiffs is an issue in the proceedings, they have not been entitled to claim privilege in respect of communications passing between them and their solicitors. Consequently, a large number of documents from their solicitors’ files has been admitted into evidence. Nevertheless, the Plaintiffs have not called as witnesses Messrs Cheung, Belos, Coupe and Leeson. The evidence as to the Plaintiffs’ continuing reliance upon the alleged representations of Mr Lennon is, therefore, solely that of Drs Iannuzzi and Tsironis. 13    It is clear, therefore, that on the issues of what, if any, representations were made by Mr Lennon and what, if any, reliance was placed on them by Aneve, the credit of Drs Iannuzzi and Tsironis is critical. Their credit is directly and vigorously attacked by BankWest. Mr McClintock SC, who appears with Mr Brender for BankWest, says that it is not necessary to find that Drs Iannuzzi and Tsironis are deliberately lying; he says that it is sufficient to find that their evidence is entirely unreliable either because of mistaken recollection or mistaken reconstruction. On the other hand, Mr Toomey QC, who appears with Mr Diethelm for Aneve, says that if one accepts the evidence of Drs Iannuzzi and Tsironis as to the statements made to them by Mr Lennon about the solvency and trading of Barrington, and about the absence of any risk in the transaction, then it follows from what Mr Lennon obviously knew about the company’s affairs that he was deliberately lying to them. If one does not accept that Mr Lennon was deliberately lying, Mr Toomey says, then it will be because of a finding that Drs Iannuzzi and Tsironis are lying. 14    I do not think that it is necessary or desirable to begin the task of assessing credit with the view that such dichotomy is inevitable. However, it is appropriate to bear in mind that the discussions between Mr Lennon and Drs Iannuzzi and Tsironis are fairly recent, having occurred some two years and four months ago; that the proceedings were commenced on 10 January 2003, just over a year after the discussions occurred, so that Drs Iannuzzi and Tsironis must have prepared statements of evidence for their solicitors before that time; and that Drs Iannuzzi and Tsironis say in their evidence in the witness box that they have a clear recollection of the critical statements made by Mr Lennon. In view of those circumstances, there is not much likelihood that the passage of time in itself is the explanation for any evidence given by them which is shown to be seriously incorrect.
The pleaded representations
15    The Plaintiffs allege that the following misleading, deceptive or unconscionable representations were made to them by Mr Lennon on behalf of BankWest at the meeting on 29 December 2001. They say that the representations continued uncorrected until, in reliance thereon, they executed the Transaction Documents.

The Balance Sheet Representation
Mr Lennon represented that the financial position of the Barrington Estates group of companies was:

“Total current assets
25,268,362

Total non-current assets
34,194,594

Total assets
$59,462,956

Total current liabilities
12,722,637

Total non-current liabilities
24,484,351

Total liabilities
$37,206,988

Net assets/shareholders’ equity
$22,255,968
”

Contrary to the representation, the financial position of the Barrington Group was:

“Total current assets
18,064,093

Total non-current assets
37,079,889

Total assets
$55,143,982

Total current liabilities
10,201,367

Total non-current liabilities
35,793,756

Total liabilities
$45,995,123

Net assets/shareholders’ equity
$9,148,859
”

The Solvency Representation
Mr Lennon represented that the Barrington group of companies was not at that time in financial difficulties and was not expected to experience such difficulties throughout the 2002 calendar year.
Contrary to the representation, in December 2001 the Barrington Group was experiencing significant cash flow difficulties and was expected to continue to have such difficulties throughout 2002.
The Bridging Tranche Representation
Mr Lennon represented that the amount of $2.5M would be sufficient to allow the Barrington Group to trade until 30 June 2002. In fact, BankWest expected in December 2001 that the Barrington Group was likely to require a further $4.4M in working capital in addition to the amount of $2.5M.
The Asset Sales Representation
Mr Lennon represented that the sale of assets of the Barrington Group would commence in January 2002 and would be complete by 30 June 2002. In fact, the sale of assets did not commence until late April or early May 2002 and no assets had been sold by 30 June 2002.
The Receivership Representation
Mr Lennon represented that BankWest would not at any time appoint receivers to Barrington or to the other members of the Barrington Group. In fact, BankWest appointed receivers to the Barrington Group on 22 May 2002.
I will refer collectively to these alleged representations as “the Representations”. It is important to note that all of the Representations are said to be express and complete in themselves; there is no allegation of a duty to make disclosure so that silence, or failure to qualify or explain, is in itself a misrepresentation or misleading, deceptive or unconscionable conduct.

Oral evidence of critical conversations
16    Before the affidavits of Drs Iannuzzi and Tsironis were read, Mr McClintock sought that the affidavit evidence of the doctors as to the critical conversations on 22 and 29 December 2001 not be read and that they be required to give that evidence orally, as credit was the central issue in the case and the other participants in the conversations were not to be called. Mr Toomey had no objection to this course. 17    I considered that, in the special circumstances of this case, that course should be adopted: where, as here, evidence of representations is to be given and there is available to the Court neither the evidence of the alleged representor nor any contemporaneous record of the occasion, it is usually better for the Court to hear the witness’s evidence in his or her own words rather than in the words of an affidavit prepared by a lawyer. 18    Accordingly, I rejected paragraphs 33 and 41 to 50 of Dr Iannuzzi’s affidavit of 10 January 2003, and paragraphs 25 to 31 of Dr Tsironis’ affidavit of the same date. 19    At the conclusion of the evidence, Mr Toomey sought to tender the rejected portions of the doctors’ affidavits. I declined to admit them because the doctors had given their evidence fully in examination in chief and had been cross examined at length on that evidence. In my opinion, that, and no other, was the evidence upon which the issues in the case had to be decided.

The uncontested facts up to 22 December 2001
20    Drs Iannuzzi and Tsironis have been carrying on practice as general practitioners in Coonabarabran for eight years. As will emerge from evidence discussed later, in addition to his medical practice Dr Iannuzzi has been extensively engaged in investment activities for some time. I think it fair to describe him as at December 2001 as an astute and experienced investor. 21    Aneve and Dr Tsironis’ parents are the shareholders of a company called Darcy Byron Pty Ltd (“Darcy Byron”). In December 1999, on the initiative of Dr Iannuzzi, Darcy Byron purchased an established vineyard known as the Mount Eyre Vineyards near Broke in the Hunter Valley. Dr Iannuzzi sought to run the vineyard as a profitable grape growing and wine production business, although he had no previous experience in the wine industry. 22    Barrington was an established wine producer which owned a vineyard and wine production facilities, called the Yarraman Road Estate, in the Hunter Valley not far from the Mount Eyre Vineyard. Shortly after Darcy Byron acquired the Mount Eyre Vineyard, Dr Iannuzzi met the managing director of Barrington, Mr Gary Blom. Mr Blom was also a major shareholder of Barrington. Dr Iannuzzi was anxious to find outlets for the grapes produced at the Mount Eyre Vineyard and as a result of his discussions with Mr Blom he soon obtained two contracts with Barrington. One was a “grape supply contract” under which the Mount Eyre Vineyard would sell grapes to Barrington; the other was a “wine making contract” under which Barrington would manufacture wine for Mount Eyre using its grapes. Each of these contracts was for a term of three years, commencing in January 2000. Dr Iannuzzi was also concerned to obtain means of marketing and distributing the Mount Eyre wine production and he had discussions with Mr Blom with a view to procuring a distribution agreement. However, nothing eventuated from these discussions. 23    In October 2000 and July 2001 Barrington, through subsidiary or associated companies, acquired vineyards in the Margaret River region in Western Australia, in the Pyrenees region in Victoria, and in the McLaren Vale region in South Australia. The acquisition of these vineyards was financed, for the most part, by BankWest, which ultimately advanced to the Barrington group of companies approximately $22M, pursuant to a facility agreement dated 27 July 2001. 24    By agreements and mortgages dated 28 July 2001, BankWest held security over the real estate and other assets of the Barrington Group in first priority to a number of other lenders, namely, a Dr Morrison, a United States investor called Mr Earl Slick, and Perpetual Trustee Company Limited as trustee for the Quadrant Capital Fund. The amount for which BankWest had priority under its Deed of Priority was $22M together with “any interest, fees, costs and expenses (whether or not capitalised) payable” in connection with its loan facility to the Barrington Group. 25    By December 2001, the Barrington Group was in difficulties. Mr Slick, who had lent about $4.5M to Barrington and was a 25% shareholder, had lost confidence in Mr Blom and wanted him removed as managing director. On 4 December 2001, Mr Slick’s solicitors served notices of demand on the Barrington Group calling up Mr Slick’s loans. It was clear that the Barrington Group did not have the funds to make repayment of the loans. Mr Blom succumbed to pressure and resigned as a director of Barrington on 10 December 2001. 26    On 19 December 2001, an urgent meeting was held at BankWest’s offices to discuss Barrington’s current position and the injection of further funds to permit the group to continue trading. Present at the meeting were Messrs David Lennon, (BankWest’s Director, Structured Finance), Greg Wynne (Chief Manager, Credit, NSW and Queensland), Paul McGarry (Manager, Structured Finance), Shane Ross (Manager, Structured Finance), Leo Seward (Managing Director, Barrington), Charles Gibb (Chief Operating Officer, Barrington), Chris Hadley (Managing Director, Quadrant Capital Fund) and lawyers representing Mr Slick. Notes of the discussion at the meeting taken by Mr Lennon’s subordinate officer, Mr McGarry, were later incorporated in a memorandum dated 3 January 2002 prepared by Mr McGarry. 27    The memorandum prepared by Mr McGarry records that Mr Seward and Mr Tom Slick (the son of Mr Earl Slick) were the only two remaining directors of Barrington after the “forced resignation” of Mr Blom. Mr Seward was concerned about the potential liability of the directors for insolvent trading and had considered the appointment of administrators to Barrington. 28    The memorandum proceeds:

“To assist with current cash needs and provide Barrington with ‘breathing space’ it was proposed that $2.5M in new funding be provided to Barrington by the following parties in the proportions set out below:–
Slicks – $1.0M
Quadrant - $0.5M
Gary Blom $1.0M (Credit support to be provided by a third party investor).

Leo Seaward agreed that the directors would not appoint Voluntary Administrators pending the negotiation of the injection of $2.5M of additional funding.

The Slicks sought instructions from Earl Slick overnight in relation to the proposal (he resides in the USA). Mr Slick advised that he would not support any proposal that involved Gary Blom. It appeared at that stage that the injection of the new funding would not occur. We were concerned that a Voluntary Administrator would be appointed to Barrington.
As a way forward it was then suggested that the Bank provide the $1M of funding in lieu of Gary Blom. Without the involvement of Gary Blom the Slicks advised that they would be supportive of the proposal. The Bank agreed to act as the ‘conduit’ for $1M of the funding provided its loan and interest was supported by a Letter of Credit from an Australian Bank.”

29    According to Dr Iannuzzi, in early December 2001 Mr Blom had telephoned him asking if he had access to $1M. No further detail of the discussion is given by Dr Iannuzzi. In late December, according to Dr Iannuzzi, Mr Blom telephoned again, asking if Dr Iannuzzi had access to $1M. Dr Iannuzzi says that he replied: “That all depends on what it is for. I might be able to borrow it if it was for the right reason” . Mr Blom then said: “I want to come and meet you to talk about it.” They then arranged to meet on Saturday, 22 December 2001, at Dr Iannuzzi’s home in Coonabarabran. 30    According to Dr Iannuzzi, this is the full extent of his conversations with Mr Blom prior to 22 December 2001. However, on 20 December Mr Blom’s solicitor, Mr Michael Eyers, sent a facsimile to Mr Lennon and the other parties’ representatives, advising inter alia:

“In a fax yesterday I set out some terms on which our client, Gary Blom, is prepared to arrange the provision of $1 million as 40% of a $2.5 million secured debt facility to Barrington Estates Limited (to rank behind BankWest and Dr. Morrison but ahead of all other existing shareholder debt). Following discussions yesterday afternoon I advise that:

the $1 million will be provided through Viticulture Professional Co. Pty Limited by interests associated with Dr. Aniello Ianuzzi of Mount Eyre Vineyards;

confirmation from Dr. Ianuzzi that the funds will be placed with this firm by close of business on Thursday, 27 December 2001 is to be provided by 10:00 am on Monday, 24 December 2001;
interest at 10% per annum will be payable on repayment of principal which is to be from proceeds of sale of Barrington Estate Limited or its businesses, or 31 December 2002, whichever is the earlier.”

In a covering facsimile to Mr Lennon, Mr Eyers said:

“Gary has asked me to remind all parties that the name of Dr. Ianuzzi is provided in confidence and he is not to be contacted until his letter of confirmation is provided on Monday, assuming we get to that point.”

31    Mr Eyers’ letter suggests that the essential terms of the agreement between Dr Iannuzzi and Mr Blom had been discussed between them on or prior to 20 December and that Dr Iannuzzi was to confirm his agreement by 24 December 2001.

Meeting on 22 December 2001
32    On Saturday, 22 December, Mr Blom came to see Dr Iannuzzi at his home in Coonabarabran. Dr Tsironis and their children were at their holiday home at Blue Bay and no one else was present at the meeting. Following is the account of the meeting given by Dr Iannuzzi in his evidence in chief. 33    Mr Blom described the structure and shareholding of Barrington Estates and its operations. He said that it had a distribution company and said that Mount Eyre’s wine could be sold through that distribution company. 34    Mr Blom said that there were difficulties at board level, that the board members just could not get along, and that he had decided that the best thing was to sell the company as a going concern. He said that because of the discord amongst the board members, he had stood down as Managing Director because he could not work with or trust the other directors. 35    Mr Blom gave Dr Iannuzzi a balance sheet of Barrington Estates as at 30 June 2001, which was then the subject of some discussion. He said that the shareholders had come to an agreement whereby $2.5M was required to ensure that the sale of the company was carried out in an orderly manner. He said that the company would be placed on the market just after the New Year and that of the $2.5M required he would be responsible for $1M. He said that he did not have that money available, which was the reason that he had approached Dr Iannuzzi. 36    Mr Blom said that BankWest was the major financier for the company. He said that there were “international parties” interested in buying the company, one of which being a large wine and spirits company which he named. 37    Mr Blom offered the following terms to Dr Iannuzzi: Dr Iannuzzi would have an option over 900,000 of Mr Blom’s shares in Barrington Estates, the exercise price of the option being $1 and Dr Iannuzzi would receive interest on the $1M loan at the rate of 10% per annum. 38    At the end of the discussion, Mr Blom suggested that he ring Mr Lennon so that Dr Iannuzzi could speak to him. Mr Blom then rang Mr Lennon and a conversation between the three men took place over a speaker-phone. 39    Mr Blom gave Mr Lennon a very brief résumé of his discussions with Dr Iannuzzi. Dr Iannuzzi then gave this evidence:

“Q: Did Lennon say anything about the nature of the transaction as to whether it carried any risk or not?
A: Lennon said the transaction was safe.”

40    Mr Lennon and Dr Iannuzzi then made arrangements for a further meeting between them, to take place at Dr Iannuzzi’s holiday home at Blue Bay, on 28 December. Mr Lennon said that he would use the meeting as an opportunity to take his wife for a few days to a resort called Kim’s Camp, which is very close to the Iannuzzis’ holiday home at Blue Bay. 41    Telephone records show that the telephone call between Mr Lennon, Mr Blom and Dr Iannuzzi lasted a little more than eighteen minutes.

The uncontested facts up to 29 December 2001
42    At 9.25am on 24 December 2001, Dr Iannuzzi sent an e-mail to a Mr Martin Kennedy at NAB. The e-mail refers to an e-mail from “Darrell” (Mr Darrell Leeson of NAB) and asks Mr Kennedy to give Mr Leeson information regarding “the deal he will discuss with Gary Blom today” at a meeting scheduled for 10:00am. The information to be conveyed was:

“– equity component of the deal: Mr Blom is offering 900,000 shares in the Barrington Estates group. Darrell should make sure that assurances are made that between the execution of the deal, and the sale of the group to another party that the following conditions apply, and should be included in the agreement:

* The letter of credit deal is to be in the name of Dr Aniello Iannuzzi, so it can act as a tax deduction. The 900,000 shares are to be by way of a $1 option (in total, for all 900,000 shares), able to be executed at any time after the letter of credit is approved by the NAB, and I have paid to execute such a letter of credit.

* Mr Blom does not sell or transfer or forfeit any of his shares to any other party in this time, with the exception of the 900,000 shares being transferred to Aneve.

* Aneve’s total shareholding does not fall below 6.9% of the company if Slick does not convert his note, and below 6% of the company if Slick converts his note. The meaning of all of this will be apparent after Mr Blom makes his presentation.

– Aneve will re-invest the profits from the convertible note interest rate deal into its debt with the NAB. Any cash (post-tax) earned from the sale of the 900,000 shares will also be for Aneve debt reduction, of the Blue Bay property.
I hope this helps.”

43    This e-mail strongly suggests that by 24 December Dr Iannuzzi had already obtained some fairly detailed information relevant to the proposed transaction and had given it close consideration. 44    At 12:34pm on 24 December an e-mail was sent by Barrington’s solicitor, Mr Sutherland, to representatives of Barrington’s shareholders and to Barrington’s chief operating officer in the following terms:

“I’ve spoken to BankWest this afternoon. They have had discussions with NAB and they are comfortable that Ianuzzi’s security will be provided without any problems. Accordingly would you both please confirm that Slick and Quadrant will be involved in the further financing. I’ll distribute a draft terms sheet if not this afternoon then on Thursday morning.”

45    Dr Iannuzzi went to Blue Bay for Christmas and at that time he discussed with Dr Tsironis the pro forma balance sheet for Barrington which Mr Blom had given him at their meeting on 22 December. 46    On 26 December, Dr Iannuzzi wrote the following letter to Mr Lennon:

“Thank you for your recent communication via telephone. Eve and I are looking forward to meeting with you on Friday.

What follows this covering letter includes:
Directions to our house at Toowoon Bay
Assets and liabilities summary
Summary of my account balances of my major accounts (does not include $1.305M bills for Mount Eyre Vineyards)
Executive summary of our investments
Thumbnail cashflow analysis of wine business
Our CVs
Recent valuation on property at Toowoon Bay, and letter of complaint to the valuer.
My accountant, Menio Belos, will fax you some up-to-date financials on Thursday.”

47    Attached to the letter was a statement of assets and liabilities. It is significant to note that Dr Iannuzzi gives comparative values of the assets according to their “worth (bank)” and to “my valuation” . Dr Iannuzzi’s valuations exceeded the bank’s estimate of worth by a total of $815,000. The attached “Executive Investment Summary” prepared by Dr Iannuzzi showed a sophisticated analysis of the property and other assets owned by Dr Iannuzzi and Dr Tsironis and their family trust. 48    There is also attached to the letter to Mr Lennon a valuation of the Blue Bay property as at 2 December 2001, which was apparently required by NAB in support of its loan facilities to the doctors. It is highly instructive that Dr Iannuzzi included in this attachment a letter which he had written to the valuers on 18 December 2001. The letter criticises the valuation methodology of the valuers in terms which are aggressive to the point of rudeness. What is significant is that Dr Iannuzzi sought to demonstrate in that letter that his own understanding of valuation method was at least equal to the valuers’ and, even more importantly as he repeats on three occasions, his own enquiries had disclosed information about the value of his property which was apparently unknown to the valuers. It seems to me that this letter is very revealing of Dr Iannuzzi’s attitude to information provided to him by others and as to whether he is the sort of person to accept what he is told by others without making his own enquiries. 49    On 27 December, Mr Lennon forwarded by e-mail to Mr McGarry an e-mail from Mr Gibb, the Chief Operating Officer of Barrington, which reported that unless there was a capital injection into Barrington’s business by 9 January 2002 there would be “significant implications in terms of our ability to generate business to keep ourselves ‘above water’ early in the new year” . The e-mail detailed certain critical payments which had to be made and notices of demand which had been received. The e-mail left no doubt that Barrington was experiencing a severe liquidity crisis.

29 December meeting – Dr Tsironis’ evidence
50    As it transpired, the meeting at Blue Bay which Dr Iannuzzi had arranged with Mr Lennon for 28 December had to be postponed to the morning of Saturday, 29 December 2001. The following is the account of the 29 December meeting given by Dr Tsironis in her examination in chief. 51    Dr Tsironis gave birth to her fourth child, Christopher, on 7 December 2001. After the birth she and her four children remained at their holiday house in Blue Bay while Dr Iannuzzi returned to Coonabarabran. They spoke by telephone every day and during one of these conversations Dr Iannuzzi told Dr Tsironis that Mr Blom was coming to see him at Coonabarabran on 22 December. Shortly after that meeting, Dr Iannuzzi told her that Mr Lennon would be coming to Blue Bay to discuss the proposal with both of them. 52    Mr Lennon and his wife arrived at the Blue Bay house at some time between 9am and 10am on 29 December, a Saturday. Dr Iannuzzi and Dr Tsironis were there with only Christopher, the other children having been taken out by their grandparents. Christopher had been diagnosed only days before with a serious liver condition and this was very much on Dr Tsironis’ mind. She kept Christopher with her for most of the meeting which lasted between one and a half hours and two hours. 53    At the beginning of the meeting, after the exchange of pleasantries, Dr Iannuzzi said to Mr Lennon:

“… that we were relying solely on this meeting to decide whether to actually give the letter of credit for the $1M that they had requested.
Q: What did David Lennon say in answer to that?
A: I can’t remember his exact words.”

54    Mr Lennon said on more than one occasion during the course of the meeting that Barrington Estates was worth between $55M and $60M and that BankWest had independent valuations which confirmed those figures. Dr Iannuzzi had the balance sheet which Mr Blom had given him and Dr Tsironis asked Mr Lennon whether it was correct. Mr Lennon said that it was. 55    Mr Lennon said that because of disagreement within the board as to the direction in which Barrington was going, BankWest had taken over the day-to-day running of the company. BankWest required $2.5M from the shareholders as a sign that they were supporting the sale of the company. $1M would come from Mr Blom, $1M from Mr Slick and $500,000 from Quadrant. The bank required the money as a sign of commitment that none of the major shareholders would interrupt the sale process and “to keep the company going to fund the sale’s process” . He also said that the commitment of funds from the shareholders was to ensure that they would not put the company into receivership and that he knew of no other creditor who could put the company into receivership. 56    Mr Lennon said that the company was trading well, that it had a strong future ahead of it and that “they were confident that they’d had interest from overseas as well as locally” to buy the company. He said that the company would be on the market in mid-January and would be sold by 30 June. 57    Mr Lennon said that he was in the process of obtaining an agreement between the major shareholders that none of them was to jeopardise the sale process or destabilise the company in any way. 58    As to Mr Blom’s offer of an option over 900,000 shares in the company:

“A: [Mr Lennon] said words to the effect that he understood that Gary Blom had offered us 900,000 shares if we would put in the $1m for him that he could not come up with, and he said, ‘I also realise that we, as the bank, are offering you 10 per cent of the $1m, but if the shares are worth nothing, you know, that wouldn’t be enough to get you into the deal’ : the 900,000 shares, if they were worth nothing, that the 10 per cent wouldn’t really be enough to get us into the deal.
Q: Did he say whether he thought the share options were worth anything?
A: He said that he believed that the company would be sold for around the $55m mark, if not more, but he wasn’t sure of what value the actual shares would have.”

59    Dr Iannuzzi and Dr Tsironis asked about whether BankWest would be able to procure Barrington Estates to enter into grape selling contracts and wine making contracts with their company to replace those contracts which were about to expire two months later. Mr Lennon said that the bank had full control of the company and was able to procure those contracts. 60    Dr Tsironis gave this evidence:

“Q: Did Mr Lennon say anything about whether or not there was any risk in the proposition of you people giving the letter of credit?
A: He did a few times.

Q: What did he say?
A: He said that if he though that our million was at all at risk that he would not let us get into the deal.

Q: Did he say anything else? You said he mentioned it on a few occasions.
A: Yes, he did. He mentioned it in relation to where the $1m would sit in terms of priority, that he was confident that the bank would achieve around the $55m mark for the sale of the company and that our $1m would rank with the bank’s $22m as first priority. He also mentioned that in relation to – he and his wife apparently were involved in a …

Q: Don’t say ‘apparently’; did he tell you?
A: Yes, he did tell me.
Q: What did he tell you?
A: Well, it was himself and Merryn who were involved in a business in the Blue Mountains. I can’t remember the exact nature of the business, but I know that the business went bad and they did lose money and he said to us, ‘I know what it feels like to lose money and I wouldn’t let you get into the deal if I thought that your $1m was at risk’ .”

61    According to Dr Tsirionis, Mr Lennon said nothing about Barrington being short of money or being unable to pay its trading debts. If he had mentioned those matters, she would definitely not have been interested in the proposed transaction. 62    In concluding her evidence in chief, Dr Tsironis said that neither she nor Dr Iannuzzi said anything to Mr Lennon during the course of the meeting to indicate that they were favourably disposed to the proposition, but that after Mr and Mrs Lennon had left she and Dr Iannuzzi agreed that they would give the proposed letter of credit. Dr Tsironis took no further part in the transaction after the 29 December meeting.

The 29 December meeting – Dr Iannuzzi’s evidence
63    The following is the account of the 29 December meeting given by Dr Iannuzzi in his examination in chief. 64    At the start of the meeting, Dr Iannuzzi said to Mr Lennon that he and his wife would not be together for any substantial period of time over the Christmas holidays for reasons related to Christopher’s illness. He said that they “would be relying heavily” on what Mr Lennon was saying about the transaction. 65    Mr Lennon said that there was a disagreement at board level between the directors and shareholders of Barrington, that Mr Slick in particular was “being difficult in respect to the ongoing running of the business” , that as a result Mr Blom had stepped down and that BankWest had taken over the affairs of the company. He said that the company would be sold as a going concern as soon as possible and he had identified 30 June 2002 as the time by which the sale process would be completed. The shareholders were required to lend $2.5M to the company as a commitment to the orderly sale of the company as a going concern. 66    There was discussion concerning the balance sheet of Barrington given to Dr Iannuzzi by Mr Blom. Mr Lennon’s estimate was that the company would be sold as a going concern for between $50M and $60M. He said that the assets and liabilities were reflected in the balance sheet. 67    They discussed a range of prices which the assets might realise in a “fire sale scenario” and in a “good scenario”. Dr Iannuzzi went through the assets on the balance sheet and made his own calculations of what he thought they would realise on a “fire sale basis” and Mr Lennon “agreed that my conclusions were reasonable conclusions” . Dr Iannuzzi was asked:

“Q. How were those figures arrived at; were they your figures or jointly yours, or Mr Lennon’s?
A. Mainly I just talked through those figures and explained to him how I was thinking about them and he seemed to agree with what I was saying.

Q. How did he indicate that he seemed to agree?
A. Well, he didn't object to what I was saying for a start. I can't remember any specific words that he used but certainly we were in agreement as to those figures.
Q. Did you write those figures down in his presence?
A. Yes.”

68    Dr Iannuzzi was asked whether Mr Lennon said anything about his position if there was a fire sale. He responded:

“A. He said we were in a safe position, that the $1m was not at risk.”

69    Dr Iannuzzi asked why BankWest would not put the $2.5M into the company. Mr Lennon “gave me a complex sort of response that there were credit committees and procedures and basically it would be difficult to arrange” . 70    Mr Lennon said that it was in nobody’s interest for the company to go into receivership. It would not be put into receivership because the only one who could do that was the bank and the bank was not going to do it. He was satisfied that there was no other creditor who was in a position to put the company into receivership; the shareholders had agreed that the company would not go into receivership and this agreement would be formalised in writing. 71    Mr Lennon said that he felt Barrington was a good company, that it had a lot of potential, that it was trading well, and he had an optimistic view of the company “with the exception obviously of the Slicks, who were undermining the process” . 72    Dr Iannuzzi referred to the option over Mr Blom’s shares in Barrington. Mr Lennon said:

“… that we shouldn’t be basing our judgment on the up side or the benefit of this deal based on the equity and the provision of the option.”

73    Dr Iannuzzi and Mr Lennon discussed the question of new contracts between Barrington and Mount Eyre Vineyard. Dr Iannuzzi said:

“A. The discussion was that we would benefit by having a continuation of the existing grape sale contracts and wine making contracts, as well as I also discussed with him the distribution sale which had been discussed in the past and never materialised and I said to him that I would like to see some contracts like that put in place, because that would then give us a clear benefit and ensure the short term progress of our company, Mount Eyre.

Q. Would you have considered this deal had it not been for the advantages for Mount Eyre?
A. No. It wouldn't have been - no.
Q. Was that your motivation?
A. The motivation was to help Mount Eyre.”

74    Mr Lennon said nothing about any financial difficulties of Barrington. Dr Iannuzzi said that if he had known that the directors of Barrington were concerned about insolvent trading, he would not have proceeded with the transaction. 75    Dr Iannuzzi said that immediately after the meeting with Mr Lennon concluded he had a discussion with Dr Tsironis. He said that he “was happy that the transaction was safe” . 76    He was shown the e-mail from Mr Gibb to Mr Lennon on 21 December 2001 to which I have referred in paragraph 49 and he said that if he had been aware that Barrington was in the position revealed by the document he would not have gone into the transaction.

Events after 29 December 2002
77    In paragraph 54 of his affidavit of 10 January 2003, Dr Iannuzzi said that shortly after his meeting with Mr Lennon on 29 December 2001 he called the manager of the Marrickville Business Branch of NAB to enquire about obtaining the letter of credit “but after discussions the NAB declined to provide the letter of credit” . Dr Iannuzzi did not disclose in either of his affidavits the following circumstances. 78    On 2 January 2002, Mr Coupe of NAB sent Dr Iannuzzi an e-mail in the following terms:

“I need your help to get this proposal through to a stage that would be acceptable to the Bank. The main issue that the Bank has is overall group serviceability plus amortisation of commercial facilities (Darcy Byron P/L) over a commercial term not exceeding 10 years.
Based upon personal taxation returns supplied by your accountant and other information supplied by you relating to rental income/ expenditure, I have constructed the following table. Please advise where you believe the information does not stack up.”

Then followed a detailed table showing income available to Dr Iannuzzi and Dr Tsironis and their associated entities and the liabilities which that income would have to meet. The analysis shows surplus funds to meet living expenses of $13,883 per year.
Later in the e-mail, Mr Coupe said:

“Nello, we understand that you wish to get this proposal approved and due to the value we place on your relationship we’re endeavouring to piece the proposal together to meet both the Bank’s and your satisfaction. Clearly, there is risk evident against this lending, or BankWest themselves would be providing the $2.5M that Barrington Estates needs against their existing security held . Notwithstanding that point, the potential for upside is also strong with flow on effects to Darcy Byron in terms of product sale and to yourself in investment and shareholding return. [Emphasis added.]
If the $1M Letter of Credit required was to be called upon (note – contractual terms needed to be vetted), there would be an additional $1M of debt crystallised which your Group would need to service. If this were to happen, are you prepared to sell assets to reduce gearing to a more manageable level? If so what are you prepared to sell? Additionally, are you prepared to sell your shares – advised by you to have an estimated worth of $110K – to meet interest costs? Due to only nominal surplus funds available in the above table, these issues are important with your feedback required for inclusion in a submission if it is to proceed.”

79    Dr Iannuzzi replied to this e-mail on the same day. He identified those assets to be sold “if we got into trouble” . He said:

“I do not have the same gloomy picture about our servicing the debt as you do … obviously if we default on the loan, then the securities can be called upon by the NAB. Isn’t that the whole point of having security?”

80    On 3 January 2002, Mr Coupe responded to Dr Iannuzzi by e-mail, in the course of which he said:

“In this high risk proposal, we want you to be clearly aware of the position and take care of the ‘what ifs’.”

81    On 8 January 2002, Mr Coupe sent Dr Iannuzzi an e-mail advising of NAB’s reasons for declining his funding request for the $1M letter of credit. In the course of the e-mail, Mr Coupe gave as one reason for refusal the insufficiency of income to meet repayment of principal and that asset sales were considered a last resort. The other reasons for refusal were:

“The level of risk attributable to new borrowing -- 3rd party security risk - i.e. the need to further involve your parents in law & their financial position to secure the new facility.

– the speculative nature of the investment -- i.e. dependent upon Barrington meeting cashflow projections when balance sheets provided reveal prior loss trading accumulation . Noted - past financials are not included in information memorandum.

– failure of Barrington’s Banker BankWest to provide funding direct - after all they have 1st Registered Mortgages over property & business assets.

Whilst we certainly do value your business & can understand your desire to be involved in this dealing due to the benefits available to you (i.e. potential interest return, shareholding, vineyard sales, etc), the proposal does carry a strong degree of risk with Barrington clearly needing funding going forward to meet substantial growth plans and against a financial track record that does not yet show a continued record of trading profitability. Saleability of a controlling interest in Barrington is yet to be determined .
Nello, your comments to the effect that the bank’s failure to provide funding would result in you transferring your funding arrangements are disappointing & ultimately we would not want to see that happen. Our decision to decline the new funding was based upon commercial considerations and risk.” [Emphasis added.]

From this e-mail it appears clear that by 8 January 2002 NAB had been provided with balance sheets for Barrington which revealed that Barrington was trading with accumulated losses and that the “investment” was dependent upon Barrington meeting its cash flow projections. Mr Coupe pointed out that it was significant that Barrington’s own bank, BankWest was not itself prepared to lend further even though it had first registered securities. He further pointed out that the proposal carried “a strong degree of risk” and the reasons he gave for that conclusion were essentially founded upon the picture of unprofitable trading which had emerged from the balance sheets of Barrington provided to him.

82    An internal note dated 8 January 2002 prepared by Mr Coupe for the purpose of considering Dr Iannuzzi’s application to NAB gives an analysis of the proposal in the following terms:

“RISK
: $1M is part of $2.5M syndication to principals of Barrington for working capital purposes pending sale of that business – Rabobank to broker sale with potential purchasers. If sale does not eventuate then letter of credit issued on behalf of Iannuzzi via Gary Blom – is likely to be called upon – debt to be raised.
…
FACTORS/INFORMATION
: Dr Iannuzzi is well aware of risk however is prepared to undertake same in view of upside.
: Servicing is already tight – see table attached. Notwithstanding this point Nello has advised:
(1) that he has $110K worth of shares that he is prepared to sell if necessary to service debt if L/C called upon …”

83    On 9 January 2002, BankWest’s solicitors sent to Dr Iannuzzi’s solicitors, Tress Cocks & Maddox, for approval a draft Guarantee and Indemnity and a draft letter of credit. In his first affidavit, Dr Iannuzzi said that within a week of meeting Mr Lennon he had instructed Tress Cocks & Maddox to act for Aneve and that Mr Cheung of that firm acted “in finalising the documentation” . Dr Iannuzzi said nothing about any discussions which he had with Mr Cheung or about any advice which might have been given to him by Mr Cheung. Neither of Dr Iannuzzi’s affidavits gave any evidence about the circumstances leading up to execution by the Plaintiffs of the Transaction Documents on 28 February 2002 or about what happened between execution of the Transaction Documents and the appointment of receivers to Barrington. 84    In his first affidavit Dr Iannuzzi said that Mr McGarry of BankWest called him on either 21 or 22 May 2002 to tell him that Barrington was being put into receivership because Mr Slick was obstructing the sale of assets. Dr Iannuzzi accepted the statement by Mr McGarry that this was a positive step and he himself did nothing further until 1 August 2002 when Mr McGarry informed him that the sale of assets was not making progress and that Aneve’s Guarantee and Indemnity was likely to be called upon by BankWest. Dr Iannuzzi then decided to seek legal advice, which resulted in these proceedings being commenced.

Dr Iannuzzi’s second affidavit
85    In his affidavit sworn 20 May 2003, Dr Iannuzzi said that between his first contact with Mr Lennon on 22 December 2001 and Aneve’s execution of the Guarantee and Indemnity on or about 21 January 2002 his principal contact at BankWest was with Mr Lennon. After the meeting of 29 December, several e-mails were exchanged and some telephone conversations took place but:

“At no time during these communications did David Lennon say (nor did anyone else from the Bank say) anything to the effect of any of the following propositions:

a. that there was any pressure from BankWest or any other creditor to sell Barrington Estates (“Barrington”) (or its assets) in part or in whole;

b. that we should make our own enquiries about the financial status of Barrington;

c. that we should not rely upon anything he said;

d. that Earl Slick (or anyone else) had already taken steps towards legal action and calling in his loans;

e. that the balance sheet we were looking at (referred to in paragraph 44 of my previous affidavit) was out of date or wrong in any way;

f. that he had updated valuations that valued the assets of the company at less than $46 million in one report and less than $40 million in another;

g. that Barrington was in default under any facility or loan or security document;

h. that Bankwest was proposing an ‘informal workout’ as compared to a formal receivership;

i. that Earl Slick had imposed unacceptable ultimatum conditions which might require Bankwest to enforce its security;

j. that the company had suffered a significant downturn in sales, and that it had lost important sales and distribution agreements;

k. that Bankwest had employed independent accountants with expertise in insolvency and receiverships to assess the state of the company;

l. that Bankwest had entered into an Option Agreement with Barrington in July 2001 under which it had taken options over shares in the company in consideration for providing facilities;

m. the Bank’s interest, fees and other costs would rank ahead of our letter of credit;

n. that Bankwest was dissatisfied with Barrington’s accounts and record keeping, and there were gaps in significant historical and financial information which it had about the company;

o. that previous financing from Bankwest had imposed a condition that Barrington raise $15 million in equity, which condition had not been fulfilled;

p. that a Bank report indicated that Barrington would require a further $8 million in equity during the calendar year of 2002;

q. that senior management at Barrington had warned Lennon of a serious lack of funds in the company, and that $2.5 million would not be enough to keep the company afloat.
If David Lennon (or anyone else on behalf of Bankwest) had told me that any of the propositions in the preceding paragraph was true, that would have influenced my decision to enter into the Guarantee and to arrange for St George to issue the Letter of Credit. If I had known that several of these propositions were true (let alone all of them) then I would most certainly not have caused Aneve Pty Limited to enter into the Guarantee and arrange for the Letter of Credit.”

The Deal Summary
86    Dr Iannuzzi did not refer in either of his affidavits to a document which he had prepared for his solicitors and a mortgage broker and had sent to them on 9 January 2002, the day after his finance application to NAB was rejected. The Deal Summary is an extremely detailed document of eight pages. Unfortunately, it contains so many statements of significance that it must be set out in its entirety. I have, for convenience, emphasised those passages which are of particular importance.
“ Barrington Estates Deal Summary
CONFIDENTIAL

Dr Aniello Iannuzzi, for the benefit of prospective financiers and those providing him with legal advice, has prepared this summary. The contents of this summary are confidential, and represent the views of Dr Aniello Iannuzzi only.

Background on Barrington Estates
Founded by Gary Blom about 6 years ago, with the purchase of Barrington Estate from Rosemount. Apparently was a messy affair. Barrington Estate is now called Yarraman Road, as it is on Yarraman Road, Wybong, in the Upper Hunter.

Gary Blom has invested a lot of money and energy into the estate, with new plantings and a new winery. The winery is modern and worth about $5M in replacement value.

The Barrington Estate property is worth about $10M in my eyes .

Gary Blom has a business, and not a wine, background. This has resulted in his approach to the business being focussed on business primarily, with wine as a secondary, albeit important, consideration. This has led to a credibility problem in the industry. However it has also resulted in perceptive assessments of the market in broad, international terms. Gary Blom is very aware of market trends, corporate plays and facts and figures.

Gary Blom then came to the realisation that medium sized wine interests like his have little future, unless they have superlative brand recognition and quality-for-price ratios. Barrington Estate failed on both accounts . This meant that Barrington Estate had the following options available, with the following likely outcomes :
Try to trade its way to better market profile and size. This would fail .
Sell out to recover funds and make a profit. This would fail in the Upper Hunter and with poor brand recognition and sales .
Go bankrupt .
Downsize. This was not an option, as Gary Blom had invested too much money to not realise an income or profit.
Upsize. This would allow market penetration, acquisition of brands and better sales. It would also mean it becomes a significant buy-out target for larger domestic firms or overseas firms.

Gary Blom decided to take the last option. He needed more money, and did a deal with Quadrant, the investment arm of Westpac. They bought a share of the company, which allowed development of the Yarraman Rd site, and paved the way for acquisitions.

It then became apparent that money was again drying up . Quadrant referred Blom to Mr Slick, a USQ investor, in his eighties. Allegedly a billionaire, Mr Slick was thought by Blom and Quadrant to be a good ‘silent partner’ and source of funds. Slick therefore becomes the third major shareholder.

In 2000 and 2001, the following acquisitions were made:
Hayshed Hill – a medium Margaret River company, with a good reputation at the lower to medium end of the market.
Mount Avoca – a small, successful producer in the Victorian Pyrenees.
Haselgrove – a medium producer in McLaren Vale, with an excellent portfolio of reds.

The new mother company is called Barrington Estates. The original Barrington Estate is now known as Yarraman Road. Together, the four companies have a capacity to produce almost 500,000 cases per year. The company is in the top 30 in terms of size in Australia. It has spread its risk and wines all around Australia; this is good in terms of variety of wine styles, but awkward in terms of co-ordinating administrative tasks.

The three new acquisitions are all more accepted, credible and better quality than Yarraman Road in terms of sales, distribution and wine.

Barrington Estates is putting together a smart group of personnel, with good industry experience, to handle the marketing and distribution of their wines.

Sales are slow . Export has suddenly become tougher since September 11, 2001 .

The expansion from one site to four sites was rapid . More money was needed .

Gary Blom also wanted to remain the major shareholder.

In order to remain the largest shareholder, Gary led the company to borrowing money, rather than raising capital through selling more shares in the company, hence diluting his holding.

This was done in the following ways:
Quadrant and Slick both lent money to the company, despite being shareholders. These loans amount to about $15M.
Slick has taken out a convertible note, valued at about $5M. If he exercises this note, it will be at about $2.08 per share. If he exercises, the company debt falls by $5M, however shareholdings dilute for all but Slick.
Partial payment of Hayshed Hill, so that Dr Morrison, the original owner, is still owed $1.5M.
BankWest has lent them $22M .

In addition, one new shareholder was taken in, Leo Seward. This man was involved in the Hayshed Hill business. He purchased 900,000 shares for $1.5M.

As I understand it, Barrington Estates has about 13,000,000 shares, not including Slick’s convertible note.

The approximate distribution (subject to confirmation):
Seward 900,000 shares
Blom 6,000,000 shares
Slick 3,500,000 shares
Quadrant 3,000,000 shares

Before any deal goes ahead, the number of shares in Barrington, and all options etc need to be determined, so that we suddenly do not end up owning nothing . [Emphasis in original.]

Background on Gary Blom
I do not know as much as I should. What I do know is that he is seen as shady by many, and a businessman and dealmaker .

He brought IMAX to Australia, and was the chairman on Darling Harbour Harbourside development. I believe he got many off side in that time. He also got Rosemount off side when he bought the first vineyard.

Why is he not liked? I have no proof. It could even be that people are jealous of him.

May need more research .

State of the wine industry
… (not relevant)

Mount Eyre & Barrington Estates
The Iannuzzi and Tsironis families bought Mount Eyre Vineyards, Broke, in mid-1999. We signed a grape sale and winemaking contract with Barrington Estate (then, still the one estate) for 3 years. The last year will be the upcoming 2002 vintage.

We helped Barrington Estates sign an important export agency agreement for Canada, which will be potentially worth millions to them over the years.

As our relationship has built over the years, and Barrington Estates has grown. It has become apparent that distribution would be very difficult to achieve for Mount Eyre, given its production is 5000-9000 cases per year.

Now that Barrington Estates has set up a nationwide distribution, we have agreed that they will also distribute our wines. This has clear benefits to us in terms of sales, but also helps Barrington, as it gives them a broader product range, and ensures we have common goals in producing good fruit and wine. It also means that if Mount Eyre cannot keep up with its own demands, then Barrington can supply us with bulk wine, sales of which is a small, but important source of business for them at Haselgrove.

The Need for the current deal

Barrington has again hit a cash crisis ! Sales have basically not hit projections, and everyone is getting edgy .

It was decided that to raise capital, the company would merge with a public ASX company, Hotham Wines . This would effectively be a takeover of Hotham by Barrington, but importantly giving them access to the stock market . This would solve the issue of cash and capital .

The deal was set up for November-December 2001. Slick vetoed the merger. This annoyed the other shareholders, not least Blom, who was MD of the company.

Slick then made a call on his loan, and the motivation then became clear: send the company into liquidation, and then take over Barrington for a pittance .

Blom resigned, and the board of directors became unworkable. Seward took over as interim MD. BankWest got edgy, too . BankWest, while secure, need this deal to not fall over, as it would be a blemish on their lending . David Lennon, in the corporate lending in Sydney, overseeing this deal.

A deal amongst the shareholders has been brokered along these lines, in order to settle the impasse:

1. State of play defined
Deloittes audited the company and concluded that $2.5M is needed to keep the company afloat until 30 June 2002 .
Company assets valued by BankWest as $59M .
Company debt $42M . Not including convertible note .
Net assets, therefore about $17M .

2. Company to be sold
Shareholders to sign agreement that if a ‘bailout’ to occur, then company to be put up for sale immediately .
Major international banks to tender for the rights to the sale.
Current state of wine industry, with globalisation and consolidation, plus weak Australian dollar, means buyers should be forthcoming.
BankWest insists company be sold by 30 June 2002 .

3. Company to be kept trading
Q uadrant and Slick agree to freeze their $15M in loans, effectively removing a major cash flow problem from the company .
All agree that to sell a trading company is far preferable to selling a company in liquidation .
My advice is that the company worth $50-$70M if still trading .
Company worth only $40M if insolvent, according to BankWest .

4. ‘Bailout’
The $2.5M needed to keep company trading to be put in by 3 major shareholders .
Quadrant to put in $500K.
BankWest $1M
Blom $1M
The $2.5M is to be a loan to the company for 12 months, at 10% p.a.
This $2.5M will be secured against second mortgages, and only be underneath the $22M owed to BankWest and the $1.5M owed to Dr Morrison.

The problem is that Blom cannot access $1M, and has approached us for help. [Emphasis in original.]

If Blom cannot raise the $1M in time, the deal falls over, and the company is doomed . Blom’s $6M invested over the years will effectively be worthless .

What Blom has offered us
Blom has negotiated privately with BankWest to accept a back-to-back letter of credit for $1M.
In other words, we do not need to draw the $1M, unless Barrington fails to repay the loan after 12 months (this needs to be spelt out very clearly in the documentation). [Emphasis in original.]
Regardless of whether the $1M is drawn, we get the 10% interest anyway.
For providing the line of credit, Blom will give us an option over 900,000 shares, exercisable for $1 in total. The value of these shares will depend on the sale price of the company. If the company is sold for net assets, then the price per share is about $0.75.

Gary Blom informs me that to break even, the shareholders must recover the following per share:
Blom $1.70
Slick $2.08
Quadrant $2.00
Seward $1.70

Assuming the company stays liquid, the 900,000 shares will be worth anywhere from $600K to $1.5M .

If the company goes bust, the shares are worth nothing .

Our reply
Given the problems faced by Barrington, it is likely that the $1M will indeed be drawn upon . Given interest rates for such loans will be about 8%, this leaves a margin of 2%, or $20K. In this scenario, the shares are also worth zero. Therefore to expose us to this deal for only $20K is pointless .

Therefore we insisted on certain other conditions, which were agreed to by Blom .

The deal is not to go ahead unless documentation for what appears below is completed to our satisfaction before the $1M is made available. [Emphasis in original.]

We receive $50K of the first $1M Blom makes from his entire share sale when Barrington is sold, exclusive of our 900,000 shares. Once Blom has made $1M, then our shares should be worth a significant amount.
We can exercise our $1 at any time, without conditions.
Full shareholder entitlements pass to us for the 900,000 shares.
We will not be directors of the company, and therefore not liable for losses of the company.
Full disclosure of all relevant, completed shareholders’ agreements regarding security of the $2.5M and sale of the company.
Signing of a 3-year grape sale agreement with Barrington Estates for the sale of a minimum of 40t Semillon grapes @ $1200/t, applicable to vintages 2003-2005.
Signing of a 3-year winemaking agreement with Barrington for winemaking @ $800/t, with other associated charges at reasonable market rates.
Signing of a 3-year national wine distribution agreement, with Barrington agreeing to sell a minimum of 2000 cases per year of our wine (using the current allocations of product range as a guide). If the 2000 cases are not achieved, then the 2000 will be purchased from us by Barrington regardless. Mount Eyre to guarantee a minimum stock of 4000 cases available for sale on the local market at any one time (no vintage to be specified). We do not require legal advice on these contracts at this point in time, and will satisfy ourselves that they are correct before going ahead.
The above three agreements between Barrington and Mount Eyre must be such that it is specified that any sale of Barrington must carry conditions that the 3-year contracts with Mount Eyre are to be honoured by the new owner.
[Emphasis in original.]

The benefits to our company are self-explanatory.

If the shares become worth nothing, and the company remains solvent and sells , the contracts must be honoured by the new owners, guaranteeing us income. In this respect the deal is still of great benefit to us .

If Barrington goes bankrupt, then the contracts are worth nil .

Possible outcomes
Assuming Blom gets his paperwork right, this is what can happen :
Barrington goes bankrupt . This is the worst case . This would mean a ‘fire sale’ takes place and assets are sold off one by one . I have calculated that even in fie sale conditions, that $30M will be realised . Given BankWest and Dr Morrison are only owed $23.5M, we still recover our $1M, and go home a lot wiser and sober ! If the $1M is not recovered, we take some good land, wine or equipment very cheaply .
Barrington sells for less than net assets . The 900,000 shares are worth only a small sum, but we still make the 10% and whatever the shares are worth. We also have ongoing contracts and sales distribution.
Barrington sells for net assets or better . The shares are worth a lot of money. Blom is hopeful that the company will sell for 1-2 times net assets, but that there have been industry precedents of 3 times net assets (this was for Petaluma, and they are not Petaluma!)

Whoever buys Barrington will have to keep dealing with Mount Eyre. This will either help us grow, or lead to them wanting to buy out of the contracts or buy out our business.
I hope this helps you!
Aniello Inanuzzi”

[Underline emphasis added.]

Dr Tsironis’ cross examination

“I have received independent advice regarding the loan and security documents. After receiving that advice I have freely and voluntarily signed … the Deed of Guarantee and Indemnity and the Deed of Cross Collateralisation.”

Dr Iannuzzi’s explanation of the NAB advice

“A. Because I had the assurances of Lennon from our meeting on 29 December. Lennon was a much more senior banker than John Coupe, and therefore I felt that Lennon knew much more about this deal than John Coupe. Furthermore, this was a period of time with the National Bank there was a lot of upheaval in the managers and I didn't feel John Coupe had a good grasp of our affairs. Indeed, he had his own personal distractions as well at the time. He had a wife with a brain tumour and he had his mind elsewhere.”

“there was no way I was going to get finance”

“Q. And what did he say to you?
A. He said the reason why I wouldn't get this finance was Gary Blom.

Q. Is that all he said? Did he expand on that?

A. Well, basically he said that Gary Blom's reputation, in his mind, was not a good reputation and that anything to do with Blom he didn't want to be part of.”

“assurances”

“Barrington has again hit a cash crisis”

“A. Well, the source of that knowledge was just previous information I've already outlined in this document as well as the discussions I had with Blom and Lennon.”

“again hit a cash crisis”

“no risk”

“safe”

“A. The subject of the Slicks came up, and there was also broader discussion than what I had just previously said that has been deleted, but Lennon was mentioning that the Slicks had been difficult. He mentioned this tactic of Chapter 11 I think it is called that they used to – he said they more or less sabotage a company and then they can buy it back cheaply. As part of that discussion Lennon also said that the Slicks were meant to be providing money and they were now talking of providing money and that is why they had to come to this agreement …”

“Q. The next sentence

: who told you that?

A. Blom didn't tell me that. Lennon did mention that sales weren't hitting projection, but that is also something that I viewed as a problem throughout the wine industry as well, so that has got my view in there as well as what I had been told by Lennon.”

“Q. Just take the first sentence: Given the problems faced by Barrington, it is likely that the $1m will indeed be drawn upon.
Was that your belief when you wrote that?
A. Yes, it was. I wouldn't have written it otherwise.

Q. And what did you think would be the result if the $1m was drawn upon?
A. Well, I understood that the $1m would also be used as part of the sale process and in order to sell the company, so it was likely that it was going to be used and it had been calculated as being what was necessary to keep the company going.

Q. Did you understand that if the $1m was drawn upon, you may not recover?

A. That was certainly not something that I was factoring into my thinking because Lennon had told me it was safe and the $1m and the money spent on this would be recovered as part of the sale process as well.”

“not something that I was factoring into my thinking”

“If the $1M is not recovered, we take some good land, wine or equipment very cheaply”

.

“we were in a safe position, that the $1M was not at risk”

“I was happy that the transaction was safe”

“safe”

“HIS HONOUR: Q. Just so that I understand your position, Dr Iannuzzi, are you saying that if you had believed that there was any real risk that the guarantee for $1m would actually be called upon, you would not have entered into the transaction?
A. Called upon and lost, your Honour, rather than just called upon and then repaid. There's a distinction there and, as things progressed, the difference between being called upon, in my view, had changed. The implications of being called upon for the $1m had changed substantially between earlier on and then later, once it was all in concrete, the ‘called upon’ had quite a different significance to what it did earlier on.

Q. Just so that I can understand what you mean by that because you were talking about your belief changing over a certain period of time, as I understand it – is that right?
A. Well, there's a little bit of confusion, your Honour, because initially when the $1m and guarantee was being discussed, it was as part of this – well, it was always part of the $2.5m, and this $2.5m would be used for the company and to oversee the orderly sale of the process, but by the time we actually progressed and signed the guarantee, the letter of credit and the agreement was such that it would only be called upon at the conclusion of the sale process if the sale process didn't realise the assets and that basically ‘calling upon’ in the final agreement, basically meant that we were out, the $1m was lost; whereas initially the $1m could have been drawn upon to be used as part of this orderly process in an orderly company which could then have been repaid when the company is sold.

Q. What I want to understand is this: at the conclusion of your discussion with Mr Lennon on 29 December 2001, was it your belief that there was no real risk that the $1m guarantee would ever be called upon?
A. As I understand it, the $1m would not be lost.

Q. Was it your belief at the end of that discussion that the $1m guarantee would be called upon but that you would not lose money in the end?
A. That was, yes, certainly a possibility. That was an understanding that I had as a possibility at the end of that conversation, but then, as the actual nitty gritty happened and evolved with the guarantee, the status of this $1m changed a little bit so that it then became a situation where, if BankWest called upon it, it basically would have meant that the money was lost because it became such that the bank was then putting in the money and that – because the agreement was that the LC would be then called upon at its expiry or if the sale process was exhausted and the bank didn't recover enough money to pay out its own principal.

Q. I'm not sure I quite follow that progression of thought. Did you have any discussions with Mr Lennon after 29 December 2001 which led you to change your beliefs or views about the risk involved in this transaction? When I say ‘discussions with Mr Lennon, after 29 December’ , I mean between 29 December and the time that you actually delivered the guarantee and the letter of credit?

A. There was no discussion, your Honour, in terms of the risk changing, of the status of the safety changing. It was actually the – I'm not a banker. I'm not a financier. I don't quite understand, you know, how LCs work but I do understand that the safety wasn't changed. That side of the thinking had never altered. The $1m was safe. No matter what happened with the sale process, our money should have been well and truly covered because there was plenty of fat in the equation. But, as the final letter of credit stood, it had taken on a status such that it was there sort of as I've explained: if it was drawn upon, the final circumstances drawing upon the letter of credit would have meant that the money, in effect, was lost; whereas initial discussions of the $1m were such that it could have been drawn, even in part, just to help this process to oversee the orderly sale of the company.

Q. Am I understanding you rightly? You say that as the transaction took shape in its final form with a letter of credit – did you appreciate then that there was a risk that the $1m could be actually lost?
A. Well, the safety aspect was always very clear in my mind, that it was a very safe transaction, because Lennon had given me these assurances. He had verified the balance sheet. He commented on two occasions that, ‘Your money would be safe’. He had made these allusions to the business in the Blue Mountains to give us some more comfort. He gave me a lot of confidence in the process and that he knew what he was doing, that he had full control of this process. My opinion of the safety of the transaction didn't waver between the time I met him and the time it was actually signed off, no, it didn't change whatsoever; but the mechanics of the nitty gritty of actually of the letter of credit and all that sort of thing was not something that I must confess I was fully in charge of because I'm not a banker and I don't understand how these instruments work in totality.

Q. I assume that you discussed with your lawyers how this transaction would work before you gave your final assent to it, did you?

A. Well, final assent, I understood that the $1m would be called on only in the event that they didn't recover their funds or if the letter of credit expired, the sale process not being exhausted; but again because of those assurances that it would be sold by 30 June, et cetera, that was a scenario that I just didn't have any imagination could really in reality occur because of all these assurances I'd had and all these representations I'd had.”

Dr Iannuzzi’s cross examination

“The need for current deal”

“cash crisis”

“Slick then made a call on his loans”

“Q. Do you see it says, ‘Slick then made a call on his loan’ ? Do you see that?
A. Yes.

Q. That tells you that prior to 9 January 2002, Mr Slick had made a call on his loan; that's correct, isn't it?
A. Yes.

Q. You said in your evidence that Mr Lennon and Mr Blom had told you that; correct?
A. Yes.

Q. You say in your affidavit, in effect, that Mr Lennon didn't tell that you Mr Slick was calling in his loans?
A. Yes.

Q. The two statements are inconsistent, aren't they, Dr Iannuzzi?
A. You could say that.

Q. One of them is true –

HIS HONOUR: Q. Well, I want your answer, not what you attribute to Mr McClintock. What do you say? Are the two statements inconsistent?
A. Well, not – I don't believe so in entirety, your Honour, because I think there is context that needs to be taken into account here.

MR McCLINTOCK: Q. What context do you say needs to be taken into account to reconcile those two statements – being 4(d) and the second last paragraph on page 7 – so that they are consistent?
A. Because Lennon had told us that Slick was being mischievous; Lennon had told us that he was using this tactic of wanting to use the Chapter 11 tactic, and this document that I've prepared here is somewhat interpretive on my part. It's not an exhaustive document. It's not a complete document. It was never meant to be a document that I – you know, I never thought it would come to this.

Q. You never thought we'd find out about it, did you?
A. I'm not sure about that. It's not something that I'd ever contemplated.

Q. I'm sorry for interrupting you. I shouldn't have done that. Would you continue your answer?

A. And therefore it appeared to me that there could have been some threats there without necessarily formally being taken into an approach of legal action, so there are degrees of this calling. You see, I'm not a financier. I mean

and

, there are implications here which I'm not sure of.”

“You could say that”

“This has been written after our telephone conversation late this afternoon.

1. BankWest has been instructed by me as to what is required with respect to:
– veracity of assets & liabilities
– waivers of default
– $1.0M vs $1.1M
– drawing on the $1.0M (conditional)

BankWest will resolve all these issues Wed morning, so there is no need to do anything there.”

“Q. You see that, that you have said ‘BankWest has been instructed by me as to what is required with respect to’ , second point, ‘waivers of default’ ?
A. Yes.

Q. What had you told BankWest about waivers of default?
A. I'm not sure.

Q. You knew, didn't you, that Barrington Estates was in default under the loan agreement?
A. I'm not sure what I believed with respect to that.

Q. Dr Iannuzzi, you have written there that you instructed BankWest as to what was required with waivers of default, haven't you?
A. Yes.

Q. Is it your evidence that you don't remember now what you were referring to there?
A. I don't remember what I was referring to.

Q. You are aware, aren't you, that Barrington Estates was in default as at 15 January 2002 with the loan agreements with BankWest?
A. Can't remember.

Q. You are also aware, aren't you, that your lawyers had insisted that the defaults be waived prior to you going ahead with the transaction because if they weren't waived BankWest could immediately call up the loan?
A. I recall that there were waivers of default discussed, the exact details of which I am unclear on, but I also do know that Lennon was overseeing this proceeding and that he was in charge of it and I had trusted he knew what he was doing through all of this.

HIS HONOUR: Q. I just want to understand that last answer Dr Iannuzzi, you say that you were aware prior to final execution and delivery of the guarantee and the letter of credit that Barrington was in default of its facility agreement with the bank?
A. I'm aware that there was – through my discussions with Lennon and through all this goings on I was aware that there were negotiations between the bank and the parties of the board, et cetera, that they were patching up some problems of some sort. I'm not exactly sure of the exact details, the nature of which, and all that sort of thing.

Q. What I want to understand from you is although you may not have been aware of the precise content of the negotiations, were you aware that there were negotiations in progress to try and cure the problem of the fact that Barrington was in default with BankWest?
A. I was aware that there were problems – sorry, could you repeat your question, your Honour?

Q. While you were not aware of the content of the negotiations, were you aware that there were negotiations in progress to try and get around the problem caused by the fact that the company, Barrington, was in default with BankWest, I should say?
A. Sorry?

Q. You referred to some negotiations to get around the problem between the board of the company and the bank.
A. This was a time, your Honour, when there was obviously a bit of upheaval going on, a lot of negotiation, a lot of things going on. I know that there were negotiations between the bank and the board, the nature of which I didn't know the details of. I do recall the words ‘default’ and ‘waivers of default’ were mentioned through those things, but the significance and meanings of those things I must confess I have a very poor understanding for, but I was aware that Lennon was in all of this negotiating through and that he was overseeing the process, and I was relying on him heavily through all of this to make sure this was right.
…
MR McCLINTOCK: Q. Just go to paragraph 4(g) of the affidavit which you have in front of you. You see there that you say that Mr Lennon didn't tell you that Barrington was in default under any facility or loan or security document?
A. No, I don't think he did, no.

Q. You certainly were aware of the need to obtain waivers of default prior to 21 January 2002, weren't you?
A. I think so.

Q. And the reason why it was necessary to obtain waivers was that Barrington Estates was in default, wasn't it, to your knowledge?

A. Well, it must have been, but again the significance of all these things I'm not sure of, Mr McClintock. I'm not a trained banker or financier.”

“very poor understanding”

“default”

“waiver of default”

“Bank of Western Australia Ltd, Barry Thomas Morrison, Earl Frates Slick (trustee) and Perpetual Trustee Company Ltd (trustee) have taken security over Barrington Estates Ltd and its subsidiaries above (the “Group”) and have previously agreed certain priority arrangements. They now propose regulating their priority position in accordance with the summarised priority order set out in the table below (although the final position is not yet agreed).

1. BankWest first to $22.0m (which can be increased to $25.0m)

2. Morrison second to $2.5m

3. BankWest/Slick/Perpetual third to $2.5m (pro rata in relation to the current proposed $2.5m funding – this is the funding which will be supported by the letter of credit).

…

To each of the above dollar amounts, interest, fees, costs and expenses are additional.”

“The fact that you were able to correct this priority sheet shows that you read it with some attention, doesn't it?
A. It shows that I read it.

Q. And with some attention, Dr Iannuzzi?
A. It's only a one page document.

Q. But you read it carefully, didn't you?
A. If that's the conclusion you want to draw.

Q. No, Dr Iannuzzi, I don't want to draw any conclusion.
A. Sorry.

Q. I want your evidence as to whether you read this carefully or not?
A. Well, I read it.

Q. You read it carefully, may I suggest, because you wanted to check whether the information contained in it was accurate?

A. Yes.”

“to each of the above dollar amounts, interest, fees, costs and expenses are additional”

“Q. That told you that additional to BankWest's $22m were interest, fees, costs and expenses; that's correct, isn't it?
A. That's what it says.

Q. You were aware of that when you read this document on 10 or 11 January 2002, weren't you?
A. I'm not sure if I read that bit, but I don't believe this to be the final priority deed, Mr McClintock.

Q. You were aware, weren't you, that if this priorities document stood, it was telling you that BankWest was entitled to add interest, fees, costs and expenses to the principal amount of the debt?
A. That's what it says.

Q. Yes, and the consequence is, isn't it, that if it was entitled to do that, those amounts would rank ahead of the $1m that you were, in effect, guaranteeing?
A. That's not my understanding.

Q. That's what it says there, isn't it, Dr Iannuzzi?
A. That's what it says, but that's not what Lennon told me.

Q. It's what Blake Dawson Waldron, on behalf of the bank, was telling your solicitor, who told you on 10 and 11 January, isn't it?

A. Yes, but that wasn't the only mistake that was made.”

…

“Q. … Let us look at what you said in your affidavit. You said:

…

That's what you said, isn't it?
A. Say, yes, say.

Q. It's perfectly clear that Blake Dawson Waldron, on behalf of the bank, was saying in the document which appears on page 846 that interest, fees and costs were additional to principal and that they therefore ranked ahead of the $1m?

A. But Blakes is not the bank.”

“Q. When you were swearing this affidavit in May 2003, a little over a year and four months after you read that document, you knew that Blake Dawson Waldron, on behalf of the bank, had told Tress Cocks that interest, fees and other costs would be additional - correct - to the principal?
A. Well, it was on the sheet. It was on the page.

Q. Yes. And you knew that they would therefore rank ahead of your letter of credit, didn't you?
A. Well, I didn't quite appreciate it in that way, I must say.

Q. Dr Iannuzzi, I don't want to be in any way unfair to you, but I want to suggest to you that when you swore this affidavit, you knew that paragraph 4(m) was untrue?
A. Paragraph which was untrue?

Q. Paragraph 4(m). Read the introductory words of paragraph 4 and subparagraph (m) to yourself.
A. Yes:
‘The Bank's interest, fees and other costs would rank ahead of our letter of credit.’

Q. Please, don't rush yourself. Read the introductory words of paragraph 4 and read paragraph (m) to yourself.
A. (Witness does as requested.)

Q. Have you read that?
A. I have read it.

Q. It wasn't true, was it?
A. I believe it was true because that's the way I understood it, Mr McClintock.

Q. I want to suggest to you, Dr Iannuzzi, not merely is it untrue, but you knew it was untrue when you swore that affidavit, didn't you?
A. No, I understood that our money, the $1m, would rank ahead of all those things because that is the way it was explained to me and my wife by Mr Lennon.

Q. I want to suggest to you that that is simply untrue, that Mr Lennon never said anything like that?

A. I don't agree with that.”

“In our conversation at Blue Bay this was the only cautionary remark that he made. Everything else was positive and comforting.”

“I was never under the impression that [Barrington] was in any sort of a precarious position.”

“cash crisis”

“poor choice of words”

“overstated”

“Yes”

“in any sort of precarious position”

“sales have basically not hit projections”

“in any sort of precarious position”

– Barrington’s sales being “slow” ;

– money “again drying up” ;

– Barrington having “again hit a cash crisis” ;

– “everyone is getting edgy” ;

– Mr Slick’s desire to “send the company into liquidation and then take over Barrington for a pittance” ;

– “a major cash flow” problem of the company;

– the company being worth “only $40M if insolvent, according to BankWest” ;

– $2.5M being needed “to keep the company trading” ;

– “if Blom cannot raise the $1M in time, the deal falls over and the company is doomed” ;

– “assuming the company stays liquid” ;

– “if the company goes bust, the shares are worth nothing” ;

“this is what can happen: Barrington goes bankrupt …”

“trading loss accumulation”

“strong degree of risk”

“against a financial track record that doesn’t yet show a continued record of trading profitability”

“I was never under the impression that the company was in any sort of precarious position”

Conclusions as to the Representations

“safe”

“if he thought that [their] million was at all at risk”

“guarantee in support of Blom’s funding in the package”

“The deal with Iannuzzi is between them, not us. Blom’s arranged this, let’s not get involved. Issues can arise in these sorts of situations. Be careful of what you say to Dr Iannuzzi.”

“I’m not stupid, Paul.”

“safe”

“an actual persuasion”

Briginshaw v Briginshaw

Rhesa Shipping Co SA v Edmunds

“The judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take.”

Moukhayber v Camden Timber & Hardware Co Pty Ltd

Timms v Commonwealth Bank of Australia

Reliance

“$10M in my eyes”

“My advice is that the company is worth $50-$70M if still trading”

Orders

– oOo –

Last Modified: 07/26/2004

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Citations

Aneve Pty Ltd v Bank of Western Australia Ltd [2004] NSWSC 640

Cases Citing This Decision

0

Cases Cited

3

Statutory Material Cited

1

Council of the Law Society v The Legal Practitioner [2010] ACAT 2

Moukhayber v Camden Timber & Hardware Co Pty Ltd [2002] NSWCA 58

CITATION:	Aneve Pty Ltd & Ors v. Bank of Western Australia Ltd [2004] NSWSC 640
HEARING DATE(S):	27 to 29 April and 4 May, 2004
JUDGMENT DATE:	20 July 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Judgment for Defendant on Plaintiff's Statement of Claim; judgment for Defendant/ Cross Claimant on Cross Claim.
CATCHWORDS:	TRADE PRACTICES - MISLEADING AND DECEPTIVE CONDUCT - Whether alleged misrepresentations made by Defendant to Plaintiffs - whether Plaintiffs relied upon anything said - issues solely of credit.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) - s.51AA, s.52, s.87
CASES CITED:	- Briginshaw v Briginshaw (1930) 60 CLR 336 - Moukhayber v Camden Timber & Hardware Co Pty Ltd [2002] NSWCA 58 - Rhesa Shipping Co SA v Edmunds [1985] 2 All ER 712 - Timms v Commonwealth Bank of Australia [2004] NSWSC 76
PARTIES :	Aneve Pty Limited - First Plaintiff Aniello Iannuzzi - Second Plaintiff Paraskevi Iannuzzi - Third Plaintiff Bank of Western Australia Limited - Defendant
FILE NUMBER(S):	SC 1063/03
COUNSEL:	B.M.J. Toomey QC, A.G. Diethelm - Plaintiffs B. McClintock SC, R. Brender - Defendant
SOLICITORS:	R.F. Bergagnin & Co - Plaintiffs Blake Dawson Waldron - Defendant

“Total current assets	25,268,362
Total non-current assets	34,194,594
Total assets	$59,462,956
Total current liabilities	12,722,637
Total non-current liabilities	24,484,351
Total liabilities	$37,206,988
Net assets/shareholders’ equity	$22,255,968	”

“Total current assets	18,064,093
Total non-current assets	37,079,889
Total assets	$55,143,982
Total current liabilities	10,201,367
Total non-current liabilities	35,793,756
Total liabilities	$45,995,123
Net assets/shareholders’ equity	$9,148,859	”