Babscott Pty Ltd (In Liquidation) v Sharron Ruth Rosenberg
[2013] NSWSC 889
•04 July 2013
Supreme Court
New South Wales
Medium Neutral Citation: Babscott Pty Ltd (In Liquidation) v Sharron Ruth Rosenberg [2013] NSWSC 889 Hearing dates: 17 - 18, 21 June 2013 Decision date: 04 July 2013 Jurisdiction: Common Law Before: Barr AJ Decision:
- Verdict for the defendant
- Order the plaintiff to pay the defendant’s costs.
Catchwords: CONTRACT - undisclosed principal Legislation Cited: Evidence Act 1995 Cases Cited: Siu v Eastern Insurance Co. Ltd. [1994] 2 A.C. 199 Category: Principal judgment Parties: Babscott Pty Ltd (In Liquidation) (Plaintiff)
Sharron Ruth Rosenberg (Defendant)Representation: Counsel: A W Smith (Plaintiff)
S Lipp (Defendant)
Solicitors: Jones King Lawyers (Plaintiff)
Robinson Legal (Defendant)
File Number(s): 2012/241810
Judgment
By its statement of claim filed on 3 August 2012 the plaintiff, Babscott Pty Ltd (In Liquidation), sues the defendant, Sharron Ruth Rosenberg, for $1,000,000.00 as repayment of a loan, together with interest and costs. It pleads that it lent the money to the defendant on 27 February 2007.
The defendant denies that there was any loan from the plaintiff to herself. She says that she had a loan agreement with a director of the defendant, Scott Higginbotham, and pleads that any money paid to her was by Mr Higginbotham and not by the plaintiff. She denies that the plaintiff advanced $1,000,000.00 to her on 27 February 2007.
In its reply the plaintiff adopts the defendant's admission that she entered a loan agreement with Mr Higginbotham and pleads that when Mr Higginbotham entered into the loan agreement he did so as the agent of his undisclosed principal the plaintiff.
Mr Scott Higginbotham was the sole shareholder and director of Babscott Pty Ltd. He died on 23 November 2010. On 25 May 2011 Stephen Wesley Hathway was appointed joint and several liquidator of the company. He is now the sole liquidator. He is a director of SV Partners (NSW) Pty Ltd (SV) which conducts a specialist insolvency and accountancy practice. It keeps records of the administration of the plaintiff. Mr Hathway produced documents from those records. So did Ms Mali Thaggard, a senior manager of SV. The plaintiff's case depends on documents so produced.
On 12 April 2005 Mr Higginbotham made a written application on behalf of the plaintiff to the Commonwealth Bank of Australia (CBA) to borrow $500,000.00. A copy is exhibited at pp 30-42 to Mr Hathway's affidavit of 25 March 2013. Mr Higginbotham signed the application as director of the plaintiff. Particulars were handwritten on at least seven pages of the application form. Almost every such entry was made in capital letters. The word BABSCOTT, as part of the plaintiff's name, was written no fewer than eight times. The handwriting, distributed over almost all the 23 pages of the document, appears to have been made by the one hand. The signature of Mr Higginbotham appears five times on the document, always in conjunction with the handwriting I have described.
On 15 April 2005 CBA wrote to the plaintiff acknowledging the receipt of the application and attaching a 4-page document for completion and signature so that CBA could register the anticipated charge. Four such pages were received into evidence, being pp 056-059 of an exhibit to the affidavit of Ms Thaggard. All the pages contained handwriting in capital letters, similar to the handwriting on the loan application form, in conjunction with four further signatures of Mr Higginbotham.
I have considered the subject-matter of the forms, the fact that the plaintiff was the applicant and that Mr Higginbotham was its sole director. I am satisfied that all the handwriting I have described was written by the one person. I am of the opinion that that person was Mr Higginbotham. A peculiar feature of the handwriting is that whenever the word BABSCOTT appears the last two letters are joined by the use of a single cross-stroke, thus: π.
On p 15 of the loan application form the CBA stated: When you withdraw funds from your loan account we will pay you by Direct Credit to your Bank Account. Provision followed for the insertion of particulars. In the same hand there were these entries -
Bank Name Commonwealth
Branch Tamworth
Bank State Branch (BSB) No 062-602
Account Number 10XXXXX 7
Account Name BABSCOTT PTY LTD
The plaintiff did not take up the facility until February 2007. In a document called Margin Loan Statement, issued by the Bank in February 2007, this entry appears -
23 Feb 2007 Loan Advance 1,000,000.00
An Investment Loan Statement issued by the Bank contained an interest summary for the period 4 May 2005 to 13 May 2013. Like the last mentioned document it recorded a loan of $1,000,000.00 on 23 February 2007.
A document produced by the defendant shows that she maintained an account at the National Australia Bank. It is exhibit MT6 to Ms Thaggard's affidavit. It shows that the sum of $1,000,000.00 was credited to that account on 27 February 2007. The entry bears these details -
Internet Banking
Transaction History
Rtgs(CBA 000936)
Mr Scott Higginbothan (sic)
Tamworth 2340
The defendant acknowledges that that sum was the proceeds of the loan from the CBA to the plaintiff. However, she denies that the plaintiff lent her the money. She asserts, among other things, that any money made over to her was supplied not by the plaintiff but by Mr Higginbotham. While he procured a loan of that sum for the plaintiff, he obtained the money from the plaintiff and transferred it to her on his own account.
There is an original document that deals with the transfer of money to the defendant, exhibit A. I received it over the objection of Mr Lipp, counsel for the defendant, and subject to that objection. The document is a CBA printed form entitled International Money Transfer Application (the IMTA). It contains a number of printed instructions and panels for the insertion of information. It must have formed part of a carbonised set of original documents. It contains machine-written and handwritten entries. The lowest panel of the form, entitled Customer's Receipt, repeats certain essential details of the transfer recorded elsewhere on the form and bears what appears to be an original ink stamp of the CBA with the particulars 062-284, West Tamworth, NSW, certain other codes and the date 27 Feb 2007. That part of the set must, I think, have been handed to Mr Higginbotham by an officer of the CBA.
The information machine-printed in the panels is as follows -
From
West Tamworth, NSW
Branch Number
2684
Date
27.02.07
Currency Symbol
AUD
Foreign Amount
1,000,000.00
Exchange Rate
1.0000
AUD Amount
1,000,000.00
Sender
SCott HIGGINBOTHAN (sic) RMBXXX
Full Address
Tamworth
Post Code
2340
Account Number
Telephone Number
XXXXX XXX76
Beneficiary's Overseas Bank Account Number
/08XXXXX XXXXX X29
Beneficiary's Name
Sharron Rosenberg
Beneficiary's Overseas Address
X XXXXX XX street Dover heights sydney
Details of Payment
Credit customers Acct
Payment Instructions
Credit Account
Bank & Branch at which funds are to be made available
National Bank, Sydney Australia,
I shall omit certain entries of coded information, which are insignificant for present purposes.
As may be observed, the panel provided for the entry of the sender's account number was left blank when the details were machine-printed. In that panel appear in writing the figures 2XXX XXXX XXX7. That was the plaintiff's account number with the CBA at West Tamworth.
A second handwritten panel entry is what I am satisfied is the signature of Mr Higginbotham. The panel is entitled Customer's Signature.
The machine entries and Mr Higginbotham's signature lack the sharp outline one would expect to see on the top copy of such a set of sheets. They are carbon impressions. The account number of the plaintiff, however, is written in black ballpoint pen directly onto the paper.
There is a further entry apparently written by the same pen directly onto the paper. It appears in a space between panels towards the top of the form. It says -
Babscott Pty Ltd
Loan to Rosenberg
The last two letters of the word BABSCOTT have been combined, as in other documents written by Mr Higginbotham, by the use of a single cross-stroke. I am satisfied that the entry was made by Mr Higginbotham.
The statement issued by the CBA to the plaintiff for the period 10 February to 9 March 2007, p 026 of Ms Thaggard's affidavit, shows that CBA credited the sum of $1,000,000.00 to the account of Babscott Pty Ltd, no 2XXX XXXXX X7, on 23 February 2007 and that the same sum was withdrawn from the account on 27 February 2007. That account was the one the plaintiff and CBA arranged in 2005 to use for the credit of loan moneys.
Notwithstanding that the sender was stated in exhibit A to be Scott Higginbothan (sic), nothing machine-printed on the form identified the account from which the money being transferred was to be taken. The statement I have mentioned shows that it was to come from the plaintiff's account. Mr Higginbotham knew that.
The first of Mr Lipp's objections to the use of the IMTA, exhibit A, was that the authenticity of the document had not been proved. In particular, the identity of the person who wrote on the document was unknown.
The document was tendered as a business record. Relevantly, s 69 of the Evidence Act 1995 provides -
69 Exception: business records
(1) This section applies to a document that:
(a) either:
(i) is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business, or
(ii) at any time was or formed part of such a record, and
(b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business.
(2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made:
(a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or
(b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact.
...
(5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (other than a previous representation made by a person about the fact).
The evidence establishes that Mr Daniel Hamilton Moore, the nephew of Mr Higginbotham, was appointed the executor of Mr Higginbotham's estate. With the help of Mr Higginbotham's brother, Warwick Higginbotham, Mr Moore engaged Mr Ken Truman, a chartered accountant, to assist in winding up the estate and to undertake certain other accounting work, including work for the plaintiff. Mr Truman asked for records and documents were delivered to him. They included bank statements, deposit slips, IMTAs, cheque butts and copies of computer email files. The documents did not comprise a complete set of records, however. Some bank statements were missing, so Mr Truman asked the bank to supply copies and it did. The documents delivered to Mr Truman were apparently loose and not well arranged. They were contained in a milk crate and several plastic bags. Mr Truman accepted in cross-examination that they were incomplete and in a mess. The IMTA, exhibit A, was part of those documents.
It seems to me that exhibit A must have come from the records Mr Higginbotham kept, either on his account or as director of the plaintiff. I am satisfied that Mr Higginbotham made the handwritten entries on the document. I think that the authenticity of the document has been established.
Mr Lipp's next submission was that in any event the document and the handwritten notations were not relevant to construe the loan agreement because the meaning of the words was uncertain. As I shall explain, the meaning of the words may be understood by reference not only to the words themselves but to the circumstances in which they were written.
Finally, Mr Lipp submitted that the document was unreliable because it came from records that were incomplete and badly kept. I do not think that those circumstances bear on the reliability of the document as such. I propose to construe and act on the document in deciding the facts.
The plaintiff submitted that when Mr Higginbotham made the loan agreement with the defendant he did so as the plaintiff's agent, undisclosed to the defendant. The principles of undisclosed principals were succinctly put in these words by Lord Lloyd of Berwick, delivering the judgment of the Privy Council in Siu v Eastern Insurance Co. Ltd. [1994] 2 A.C. 199 at 207 -
For present purposes the law can be summarised shortly. An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. In entering into the contract, the agent must intend to act on the principal's behalf. The agent of an undisclosed principal may also sue and be sued on the contract. Any defence which the third party may have against the agent is available against his principal. The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surround the contract, may show that the agent is the true and only principal. (Footnotes omitted)
Consideration
When Mr Higginbotham applied to CBA for the facility in 2005 he did so on behalf of the plaintiff and the arrangement was that any moneys advanced by CBA would be credited to the plaintiff's bank account at the CBA West Tamworth. Accordingly, the $1,000,000.00 was credited to the nominated account on 23 February 2007.
There is no record of CBA crediting any money to the account of Mr Higginbotham himself. There is no evidence that he had a bank account of his own.
The IMTA exhibit A reveals a remarkable occurrence. The information inserted by CBA using a machine nowhere mentions the plaintiff's name, yet the funds for the transfer were held only in the plaintiff's account. Instead the sender is stated to be Mr Higginbotham. CBA made no entry in the panel reserved for the number of the account and that tends to confirm that Mr Higginbotham did not have an account. The misspelling of his name by CBA might possibly show CBA's unfamiliarity with his personal affairs.
There appears no reason why the plaintiff's name and account were not mentioned. If the principal lender were really the plaintiff, all Mr Higginbotham had to do was to have CBA prepare a transfer document naming the plaintiff as transferor and recording the number of its bank account as the source of the funds to be transferred.
Although the plaintiff asserts that the plaintiff was the undisclosed principal there seems much more in this transaction than mere non-disclosure. If the plaintiff was the principal, that fact was deliberately concealed.
The defendant is married to Anton Rosenberg. He and the defendant knew Mr Higginbotham well. Mr Rosenberg met him in 2000 and from then on they spoke many times and joined in financial ventures. Mr Higginbotham maybe taken to have known and intended that the money transferred to the defendant's account would be used by Mr Rosenberg.
Mr Rosenberg is a director of Claymore Capital, a firm that advises on and manages investment and the raising of capital. He swore an affidavit on 27 May 2013. During the hearing the credibility of Mr Rosenberg came under attack from counsel for the plaintiff and counsel ultimately submitted that the Court should find his evidence unreliable. Because of the view I have formed about the principal issue in this case I find it unnecessary to determine that issue. Because of that, however, I shall confine my consideration of Mr Rosenberg's evidence to matters on which he was not challenged and which I think are uncontroversial.
In his affidavit Mr Rosenberg said this -
3. The former sole director of the Plaintiff was Scott Higginbotham (Scott). Scott was a businessman from Tamworth, NSW.
4. Scott worked in commercial and residential property development of over 20 years.
5. Carillon Developments Ltd (Carillon), formerly known as Television New England Ltd, was a company listed on the Australian Stock Exchange founded by Scott's family in 1960. The company initially owned and ran television and radio stations in country areas.
6. Carillon, Scott, Scott's brother Warwick Higginbotham and their family are credited with bringing two world famous events to the Tamworth area - the Country Music Festival and Agquip. These are events which have become synonymous with Tamworth and were introduced to increase advertising opportunities for the media business. Scott was heavily involved in the development of these marketing opportunities.
7. Over the years the company diversified into property development in regional areas. When media cross-ownership laws changed in 1989, Carillon sold its media businesses. The proceeds were invested in real estate. In particular, the company built up a number of self-storage facilities in Queensland and South Australia. Scott served as the commercial property manager of Carillon for over 10 years and was the driving force of the business.
8. In addition to his role with Carillon, Scott was involved in developing a variety of residential and commercial developments. These included property developments of $35 million and other property transactions of up to $60million including residential land subdivisions and development. Scott was involved in property development throughout Queensland from the Gold Coast to as far north as Mackay.
9. During the time that I knew Scott, he was a director of 24 different companies. A copy of the ASIC personal extract for Scott is annexed hereto and marked AR-1. Many of these companies, like Turbo Amusements Pty Ltd and Bread Crumb Pty Ltd were investment vehicles he used.
...
13. Scott and I first met in 2000.
14. I met Scott when Claymore was contracted by Babcock & Brown (Babcock) to help their takeover of Carillon. The CEO of Babcock was Phil Green (Green). Scott was an executive of Carillon, who oversaw most of Carillon's investments. These included property development; investment in regional areas and self-storage facilities in Queensland and South Australia.
...
15. Scott was retained by Carillon for a year after the takeover. He left Carillon and began to work full time on his own projects including an investment property in Airlie Beach, Hogs Breath Toowoomba and car dealerships.
16. Starting around 2003, Claymore was conducting capital raisings for various companies, including mining companies. Scott invested some monies in some of the raisings conducted by Claymore and Scott and I kept in touch on a regular basis.
17. In around 2005 Scott and I began to meet more frequently as he began to invest more money into projects run by Claymore.
Beginning in late 2005 Mr Rosenberg and Mr Higginbotham began talking about purchasing a Hunter Valley property called Glenrock. Settlement took place in May 2006. There were 7 investors. Level 1 Pty Ltd, the trustee of Mr Rosenberg's family trust, held a 5% share in the venture. Mr Higginbotham held a 5% share on his own account.
Early in 2006 Mr Rosenberg and Mr Higginbotham considered entering an enterprise to develop land at Burrum Heads, near Hervey Bay, Queensland. A company of which Mr Rosenberg, Mr Higginbotham and one, Alex Simon, were directors entered into a contract to purchase the contemplated land.
The point of this brief excursus is to establish that Mr Rosenberg and Mr Higginbotham knew each other well and had mutual interests in a number of ventures. A necessary part of the development of such ventures was the raising of capital. That seems to have been Mr Rosenberg's function.
A number of things seem to follow. First, the $1,000,000.00 transferred on 27 February 2007 was intended by Mr Higginbotham to be used by Mr Rosenberg to fund one or more ventures they were contemplating. Mr Rosenberg's evidence was generally to that effect. I did not understand the plaintiff to take a different view.
The kinds of venture Mr Rosenberg and Mr Higginbotham were interested in were substantial and took considerable time to develop. Finance had to be raised, property purchased, permissions obtained, investors attracted and works completed.
I consider it unlikely that a person like Mr Higginbotham would lend money for such a venture without informing his fellow venturers who he was. If, as here, his fellow venturer knew who he was, I think it unlikely that he would deliberately convey a false impression that he was personally interested (as Mr Higginbotham had been in the Glenrock venture) whereas he was not, but only represented an unnamed and undisclosed person.
There appears no reason why Mr Higginbotham should actively conceal the fact, if it were the fact, that the plaintiff was the lender.
A possible reason why Mr Higginbotham caused CBA to frame the IMTA as it did was not to avoid disclosure of the plaintiff as the lender but to convey that he himself was the lender.
The two lines of words are taken by the plaintiff to be readable as though written in a continuous line, denoting that Babscott Pty Ltd was the true lender.
The defendant submits that the meaning of the words is unclear.
Although the two lines of words are not far apart on the document they do not form a continuous line. They may have been intended to make two related but separate statements. The words Babscott Pty Ltd may have been inserted for Mr Higginbotham's own use, only on his copy of the form, to record that the money lent had been provided by Babscott Pty Ltd. The handwritten completion of the account number panel might support that conclusion. The second line of writing would record the purpose of the transaction, namely a loan to the defendant, though not the identity of the lender.
Bearing in mind the history of dealings between Mr Higginbotham and Mr Rosenberg, including that on at least one occasion Mr Higginbotham had acted only on his own account, it is not surprising that Mr Rosenberg, whose evidence I accept on this matter, believed that he was dealing with Mr Higginbotham personally.
As I have said, the selection of information for insertion in the IMTA was remarkable in that it effected a deliberate concealment of the name of the person providing the money. And I think that the stronger implication is that Mr Higginbotham arranged things in that manner to give effect to his intention to be the lender. The presence of the handwritten words does not change my opinion. I am of the view that it is more likely than not that Mr Higginbotham acted as he did in order to make himself the lender. The plaintiff was never the principal in the loan.
The plaintiff has failed to prove that it lent the sum advanced to the defendant. There must accordingly be a verdict for the defendant. I make the following orders -
(1) Direct the entry of a verdict and judgment for the defendant;
(2) Order the plaintiff to pay the defendant's costs.
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Decision last updated: 04 July 2013
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