Berry v CCL Secure Pty Ltd
[2017] FCA 1546
•19 December 2017
FEDERAL COURT OF AUSTRALIA
Berry v CCL Secure Pty Ltd
[2017] FCA 1546
File number: NSD 2597 of 2013 Judge: RARES J Date of judgment: 19 December 2017 Catchwords: TRADE PRACTICES – deceit – misleading or deceptive conduct – agency agreement between applicants and respondent for supply of polymer product for printing banknotes to Government of Nigeria – where agency agreement gave applicants right to commission for invoice sales of polymer – whether applicants signed letter terminating agency on basis of representations by respondent that, first, a new agency agreement would be executed between the parties on existing terms and or secondly, if applicants signed a second document to develop in partnership a production facility in Nigeria it would be executed by respondent immediately – whether representations made by respondent – whether representations constituted misleading or deceptive conduct and or unconscionable conduct – whether, if applicants did not sign termination letter, respondent would have exercised powers under agreement to unilaterally terminate agency agreement without cause Legislation: Australian Consumer Law ss 5, 18, 20
Competition and Consumer Act 2010 (Cth) s 5, Sch 2
Evidence Act 1995 (Cth) ss 128, 136
Trade Practices Act 1974 (Cth) ss 5, 51AB, 52, 82
Prevention of Corruption Act 1906 (UK) s 1
Cases cited: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345
Berry v Innovia Security Pty Ltd (No 3) [2017] FCA 244
Berry v Innovia Security Pty Ltd (No 4) [2017] FCA 811
Commercial Union Assurance Company of Australian Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Farley (Aust.) Pty Ltd v JR Alexander & Sons (Queensland) Pty Ltd (1946) 75 CLR 487
Gluckstein v Barnes [1900] AC 240
Gnych v Polish Club Ltd (2015) 255 CLR 414
Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186
Gould v Vaggelas (1985) 157 CLR 215
Jones v Dunkel (1959) 101 CLR 298
Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151
Kuhl v ZurichFinancial Services Australia Ltd (2011) 243 CLR 361
Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70
Lazarus Estates Ltd v Beasley [1956] 1 QB 702
Master v Miller (1791) 4 TR 320 [100 ER 1042]
Master v Miller (1793) 2 (H) Bl 141 [126 ER 474]
R v Ellery [2012] VSC 349
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Simic v New South Wales Land and Housing Corp (2016) 339 ALR 200
Smith v Chadwick (1884) 9 App Cas 187
Stohl Aviation v Electrum Finance Pty Ltd (1984) 5 FCR 187
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189
Sir Thomas Bingham, “The Judge as Juror: The Judicial Determination of Factual Issues” (1985) Current Legal Problems 1
Date of hearing: 28-31 August 2017, 4-7 September 2017 Date of last submissions: 22 September 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 335 Counsel for the Applicants: Mr CS Ward SC with Mr PF Santucci Solicitor for the Applicants: Marque Lawyers Counsel for the Respondent: Mr NJ O’Bryan SC with Mr CG Juebner Solicitor for the Respondent: Aitken Partners Pty Ltd ORDERS
NSD 2597 of 2013 BETWEEN: BENOY BERRY
First Applicant
GLOBAL SECURE CURRENCY LTD
Second Applicant
AND: CCL SECURE PTY LTD (FORMERLY KNOWN AS SECURENCY PTY LTD)
Respondent
JUDGE:
RARES J
DATE OF ORDER:
19 DECEMBER 2017
THE COURT ORDERS THAT:
1.On or before 29 January 2018 the parties file and serve agreed draft orders to give effect to these reasons, or failing agreement, the orders each party proposes with written submissions in support limited to five pages.
2.The proceeding be listed for case management on 5 February 2018 at 9.30am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
RARES J:
Dr Benoy Berry, who is Indian by birth, but a citizen of the Republic of Ireland, has been a successful entrepreneur. Since 1978 he has had several companies, that he controlled, that have performed contracts and public-private partnerships to provide substantial services to, among others, the Republic of Nigeria.
In mid-2006 in Mumbai, India, Dr Berry met with Hugh Brown, the director of sales and marketing of Securency Pty Ltd (being the then corporate name of the respondent, which subsequently changed to Innovia Security Pty Ltd and is currently CCL Secure Pty Ltd). The two men negotiated the final terms of an agency agreement under which Dr Berry and Global Secure Currency Ltd (GSC), a United Kingdom company that Dr Berry controlled, would act as the sole agent of Securency in Nigeria. They agreed that the agency agreement would provide an entitlement for Dr Berry and GSC to receive a commission of 15% on the net invoiced sale value of opacified polymer sold to the governmental authorities of Nigeria.
When executed, the agency agreement provided that it would commence operation earlier, on 2 February 2006. That was to accommodate the fact that, by about early June 2006, through his efforts, Dr Berry had brought about a sale of 20,000 reams of opacified polymer to the Nigerian Security Printing and Minting Plc, being the Nigerian Government Mint, for use in the printing of polymer banknotes. The terms of the agency agreement would last to 30 June 2008 but the agency agreement also provided that, unless terminated, it would be renewed automatically every two years.
Prior to 2013, Securency was a 50-50 joint venture between the Reserve Bank of Australia (RBA), the central bank of the Government of the Commonwealth of Australia, and Innovia Films Ltd, another United Kingdom company. Innovia Films was a subsidiary of Union Chimique Belge (UCB). Innovia Films, the RBA and Securency had succeeded in commercialising the production and printing of polymer banknotes using production facilities at Securency’s premises in Craigieburn, a suburb of Melbourne. In 1992 polymer banknotes began to replace traditional paper banknotes in Australia. By 2004, 17 countries had one or more denominations of their banknotes printed on polymer.
It is necessary to briefly describe the features of the technology. There are three principal processes involved. The first step involved Innovia Films using its facilities to produce a large bubble or film of polymer that was then cut into many sheets. During the period between 2004 and 2008 Innovia Films had only two production facilities to make the polymer bubble, one of which was at Craigieburn. The second process used an opacification plant (one of which was also at Craigieburn), by which the polymer film sheets (which were not, at that stage, capable of being printed on) were converted into opacified polymer or polymer substrate, being a product on which printing can occur. The third process consists of printing the banknote or other specialised document on the opacified polymer that a mint (with suitable equipment) or a commercial banknote printer can undertake.
The principal advantage of polymer, over paper, banknotes is that the polymer ones, while more expensive to produce, last in circulation at least four or five times longer than their paper equivalents, resulting in a cost saving for the issuing government’s central bank or mint. During the 1990s, Securency set about marketing polymer banknotes and the opacified polymer on which they could be printed by the local mint to national central banks, governments and their mints.
Nigeria presented Securency with an attractive opportunity to sell its products that, prior to the involvement of Dr Berry, had eluded its grasp. From the outset, Dr Berry aimed eventually to be commercially involved in constructing and operating an opacification plant in Nigeria. He negotiated, with Securency’s encouragement, Nigeria’s possible adoption of polymer notes with its Government’s officials on the basis that, in the long term, an opacification plant would be built in Nigeria in which Dr Berry, Securency (if it wished) and the Central Bank of Nigeria (CBN) or the Mint would have interests.
Before 2004, the then Prime Minister of Australia, the Hon John Howard MP, had introduced Nigeria’s President Olusegun Obasanjo to the idea of using Securency’s polymer notes for Nigeria’s currency on two occasions. The first occasion was when the President visited Australia and the second was at the Commonwealth Heads of Government Meeting in Abuja, the capital of Nigeria. In the event, in early 2006 Dr Berry and GSC succeeded in persuading President Obasanjo and the then Governor of the CBN, Professor Charles Soludo, to agree to place an order for 20,000 reams of opacified polymer on which the Mint in Abuja would print 20 naira (N20) notes, representing one of the most common denominations in that country.
During the latter part of 2006 and in 2007, a company that Dr Berry controlled, Continental Transfert Technique Limited (Contec), became involved in a commercial dispute with agencies of the Nigerian Government. On 20 November 2007, Contec commenced international arbitration proceedings in London, England for damages against the Federal Government of Nigeria, its Attorney-General and Minister for the Interior.
In the latter part of November 2007, Dr Berry met at the Nigerian High Commission in London with Governor Soludo, the Nigerian Minister for Finance and the High Commissioner. Shortly afterwards, on around 20 or 21 November 2007, Dr Berry met with Governor Soludo and Mr Brown at the Metropole Hotel in London. During the course of this meeting, the Governor made clear that he required a letter from Securency with a commitment by it to move towards establishing an opacification plant in Nigeria as integral to the conversion of all its denominations of notes to polymer. Mr Brown allowed the Governor to believe that Securency would be willing to establish such a plant if Nigeria converted all its denominations to polymer and were able to meet numerous conditions, including the use of sufficient polymer notes (in an amount greater than what was needed for the then current circulating currency of Nigeria alone), to satisfy Securency. Mr Brown sought, in the meeting, to persuade the Governor to proceed with a new order for 5 and 10 naira (N5 and N10) notes to be printed on polymer, with his assurance that Securency would send him a letter dealing with its proposals relating to the construction in Nigeria of an opacification plant in the succeeding few weeks.
In fact, as Mr Brown knew, Securency had no wish to build an opacification plant in Nigeria, but he realised that he had to let the Governor and the other Nigerian authorities, as well as Dr Berry, continue to believe the contrary if Securency were to gain further contracts to supply either printed polymer banknotes or opacified polymer to the Mint. Mr Brown’s conduct in this meeting reflected Securency’s disingenuous approach to ethical dealing in its relationships with Dr Berry and the Nigerian Government.
Soon afterwards, on 23 January 2008, the Mint placed an order with Securency for 10,000 reams of opacified polymer. And, before 28 January 2008, the managing director of the Mint had informed Securency that it would be placing further orders for a total of 20,000 more reams. These were very valuable orders that would result in invoiced sales worth tens of millions of euros. However, Securency did not tell Dr Berry or GSC of the placing of any of these orders, although he and GSC would be entitled to their 15% commission under the agency agreement when Securency ultimately rendered invoices for the several sales. That is because Securency had hatched a surreptitious plan to replace Dr Berry and GSC.
The central issue
The substantial issue in this proceeding arises in that context. On 24 February 2008, Dr Berry had a meeting and lunch at his home in London with Securency’s director of business development for Africa and the Middle East, Peter Chapman. On that occasion, Dr Berry signed a letter (the termination letter) on behalf of himself and GSC that Mr Chapman had brought with him. The termination letter was in the following form:
Securency Agency Agreement – Nigeria
I refer to our recent discussions and confirm that the Agency Agreement with Securency dated 2nd February 2006 was terminated in accordance with the terms of the Agreement as from 31 December 2007.
Kindly acknowledge the formal termination of the Agency Agreement by signing and returning the duplicate copy of the letter attached.
Yours faithfully
John Ellery
Chief Financial Officer
Securency International Pty Ltd
(emphasis added)There had been no recent discussions on this topic. The decisive factual issue in this proceeding is whether, as Securency asserted based on Mr Chapman’s evidence, Dr Berry simply signed that letter in response to Mr Chapman’s telling him, “This is the letter of release from the agency agreement”, before the two men proceeded to have a pleasant interchange about other matters for about two hours, over a good lunch prepared by Dr Berry’s Indian chef or whether, as Dr Berry and GSC asserted, Securency, through Mr Chapman, made one or both of the following false representations which induced Dr Berry to act as he did, namely:
(1)if Dr Berry and GSC agreed to terminate the agency agreement, the existing terms would continue and the parties would make a new agreement on those terms (the renewal representation);
(2)if Dr Berry signed a second document (that Mr Chapman presented to him), being a memorandum of understanding or a partnership agreement for the goal of establishing an opacification plant in Nigeria, Mr Chapman would take that document back to Australia and have Securency execute it straight away (the opacification plant representation).
If Mr Chapman made one or both representations, then there is a further issue as to the damages or compensation to which Dr Berry and GSC are entitled for the tort of deceit or under s 82(1) of the Trade Practices Act 1974 (Cth). Dr Berry and GSC relied on the provision in the agency agreement for its automatic renewal every two years to contend, principally, that damages or compensation would be payable on Securency’s invoiced sales in perpetuity, or at least until June 2010, when Securency terminated all of its agency agreements, and for a loss of opportunity to earn commission thereafter.
Securency argued that, had Dr Berry not signed the termination letter, it would have terminated the agency agreement on 60 days’ notice under cl 2.6, or within 30 days before its expiry on 30 June 2008 and automatic renewal under cl 3.2, or alternatively, when its board resolved to terminate all of its agency agreements in about mid-2010.
The reason for that board resolution was Securency’s involvement in a scandal that became public in about May 2009. At that time, the Australian Federal Police, the United Kingdom’s Serious Fraud Office (SFO) and other international regulators investigated and subsequently brought proceedings against officers of Securency, including Mr Chapman, and some of its country agents, including persons associated with those who had replaced Dr Berry and GSC in Nigeria, in respect of allegations that those officers and agents had paid bribes, or been party to corrupt payments, on behalf of Securency, to government officials so as to procure contracts or orders of opacified polymer or polymer banknotes for Securency: see R v Ellery [2012] VSC 349 at [32], [41].
On 17 August 2017, the Minister for Small Business gave consent under s 5(3) of the Trade Practices Act and s 5(3) of the Competition and Consumer Act 2010 (Cth) for Dr Berry and GSC to rely on Securency’s conduct that they alleged it had engaged in outside Australia, namely in the United Kingdom, in contravention of ss 51AB and 52 of the Trade Practices Act and ss 18 and 20 of the Australian Consumer Law (ACL) in Sch 2 of the Competition and Consumer Act. The conduct to which the Minister’s consent referred was Securency’s alleged making of the renewal and opacification plant representations in February 2008 and its subsequent related conduct, which Dr Berry and GSC alleged was first, conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act and, secondly, unconscionable within the meaning of s 51AB. I will use the sections in the Trade Practices Act, as that Act was in force at the relevant time and governed the parties’ relationship. The provisions of the ACL are relevantly the same and require no consideration in the resolution of this proceeding.
Witnesses’ credibility and the absence of evidence from others
Having had the opportunity of observing Dr Berry giving evidence over the course of three days, I formed the impression that, on occasion, he was inaccurate, but that in general he was an honest witness doing his best to tell the truth about events that had occurred between 9 and 13 years earlier.
However, I was concerned about his admission on the third day of the hearing that he had lied in his evidence on the day before about visiting Nigeria in the period between mid-2006 and mid-2010. That lie related to an important issue, namely Dr Berry’s capacity to conduct the obligations of an agent when he could not, and did not, visit the country with the officials of which he had to deal for Securency. Clearly enough, the reason that he said, initially, that he had visited Nigeria several times in the four year period from about mid-2006 was to create the false impression that his and Contec’s evolving commercial and legal dispute with the Nigerian Government had not created any problem for him in visiting that country and dealing there with both its officials and his own business or in performing his role as Securency’s agent.
In assessing Dr Berry’s evidence and his credibility overall, I have been concerned that his preparedness to lie in the witness box on that issue could have reflected a more general tendency on Dr Berry’s part to tailor his other evidence to suit his perception of what would support his case. That concern was especially so because of the absence of contemporaneous written records that he had authored, other than a relatively few text messages.
I have considered carefully all of his and the other evidence having particular regard to my concern about his lie over his travel to Nigeria. Overall, however, I found him to be credible and that the objective and other relevant evidence positively corroborated or supported his account. In particular, my generally unfavourable view of the credibility of Mr Chapman and Mr Brown has not led me unthinkingly to accept Dr Berry’s evidence where their accounts conflicted. Rather, I found myself in the position where I have been satisfied affirmatively that Dr Berry’s account was more probably than not true.
At the end of the day, Dr Berry did continue his business dealings in Nigeria throughout the four year period in which he did not travel there while he was involved in the dispute and ensuing arbitration. He was able subsequently, in early 2010, to travel to Nigeria and continue his and Contec’s business there while unsuccessfully seeking to enforce the USD252 million arbitration award. He had meetings, such as the crucial one in late November 2007 with Governor Soludo and Mr Brown at the Metropole Hotel in London at which Dr Berry was an important participant. He was reluctant or, more probably, not able safely to travel to Nigeria during the four year period about which he lied. There is no evidence that the nature of Dr Berry’s (and Contec’s) commercial and legal dispute with the Nigerian Government had any substantive inhibitory or negative effect on his ability to perform his (or Contec’s) existing contractual obligations in Nigeria or to deal or interact with Nigerian Government officials, including the President.
Of course, the recollection of honest witnesses concerning conversations that occurred over 9.5 years earlier (in the case of the 24 February 2008 meeting) will be affected by the very significant lapse of time between the actual events, and the natural tendency of persons to view past events more favourably to their own position or interest than a completely objective or detached observer may at the time of giving oral (or written) evidence. In cases involving, as this does, a claim based on one or more alleged representations made in conversation years before, it is appropriate to apply (as I have) the following principles identified by Dowsett, Rares and Logan JJ in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151 at [73]-[74]:
The assessment of the evidence of witnesses in such a case, ordinarily, will be approached in the manner discussed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 as follows:
“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) [sic] within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) … in the absence of some reliable contemporaneous record or other satisfactory corroboration.” (non-italic bold emphasis added)
That caution is also reflected in s 140 of the Evidence Act 1995 (Cth) and in what Dixon J said in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-363 about the standard of proof. Dixon J emphasised that, when the law requires proof of any fact, the Court must feel an actual persuasion of its occurrence or existence before it can be found. He said that a mere mechanical comparison of probabilities, independent of any belief in its reality, cannot justify a finding of fact: see too Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 479-482 [29]-[38] per Weinberg, Bennett and Rares JJ. As Dixon J said (60 CLR at 362): “In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences”. But, the nature of the fact to be proved necessarily affects the sufficiency of the evidence by which it can be established. (emphasis added)
On 11 May 2016, in London, a jury convicted Mr Chapman on four counts of corruption contrary to s 1 of the Prevention of Corruption Act 1906 (UK) involving the payment of bribes to Mr Ehi Okoyomon, the then managing director of the Nigerian Mint. Judge Grieve QC sentenced Mr Chapman on 12 May 2016 to 30 months imprisonment, and he served the term from the time of his sentencing on licence until about May 2017: Berry v Innovia Security Pty Ltd (No 3) [2017] FCA 244 at [12]-[15].
Because Mr Chapman was not willing to give evidence, Securency applied for, and I granted, a letter of request to the judicial authorities of the United Kingdom for me to take his evidence in London as an examiner. As it transpired, I could take Mr Chapman’s evidence in London in the week after I heard the other witnesses give evidence at the trial in Sydney. Senior Master Fontaine of the Queen’s Bench Division arranged for a witness summons to issue requiring Mr Chapman to appear to give evidence before me, as examiner, at the Royal Courts of Justice in London and for me to hear final submissions there. Subsequently, Mr Brown said that he was not willing to give evidence in Australia, which led to Securency seeking a further letter of request for him to be examined in London while I was there. I granted that request and the Senior Master issued a witness summons for Mr Brown: Berry (No 3) [2017] FCA 224; Berry v Innovia Security Pty Ltd (No 4) [2017] FCA 811.
Mr Ellery did not give evidence, nor did Myles Curtis who was Securency’s managing director at all times relevant to this proceeding. David Hope, Securency’s solicitor, explained in his affidavit of 25 August 2017 that his client had suspended both Mr Ellery and Mr Curtis in about November 2009 and, in March 2010, terminated their employment. Mr Hope said that in August 2012, Mr Ellery pleaded guilty to one charge of false accounting as an officer of Securency. Hollingworth J sentenced him to six months imprisonment which her Honour wholly suspended. The charge related to Mr Ellery’s recording of a payment made to Securency’s Malaysian agent in 2006 and had nothing to do with its dealings with Dr Berry: R v Ellery [2012] VSC 349. Her Honour found that Mr Ellery did not make the accounting entry for his own gain and, since mid-2011, he had co-operated fully with the Australian Federal Police. Mr Hope said that Mr Ellery had appeared as a prosecution witness at Mr Chapman’s trial in London.
Mr Hope sought to explain why Securency had not called Mr Ellery and Mr Curtis. Mr Hope attached to his affidavit a letter dated 17 March 2014 from Mr Ellery’s solicitors that stated that their client had indicated that he was unable to assist Securency and that he had been “only peripherally involved at the time” of the events concerning Dr Berry and GSC in respect of the agency agreement and its termination. On 7 April 2014, Mr Ellery’s lawyer told Mr Hope that Mr Ellery was “simply not willing to assist” Securency. Mr Hope had had no further contact with Mr Ellery or his lawyers.
Mr Hope said that he had searched recently on the internet and found references to Mr Ellery providing consultancy services in Papua New Guinea. However, Mr Hope had made no attempt to contact Mr Ellery or his lawyers since 7 April 2014 and Securency did not seek the issue of a letter of request to have Mr Ellery’s evidence taken in Papua New Guinea, in contrast to its conduct in seeking and obtaining orders that I hear in London, as examiner, as in fact occurred, the evidence of both Mr Chapman and Mr Brown: Berry (No 3) [2017] FCA 244; Berry (No 4) [2017] FCA 811.
Mr Hope also said in his affidavit that in 2013 Mr Curtis had been committed to stand trial that is expected to commence in late January 2018 in respect of allegations relating to bribery of officials in countries other than Nigeria. On 24 August 2017, Mr Curtis’ solicitor wrote to Mr Hope saying that his client was unwilling voluntarily to assist Securency or to become involved in this proceeding and that, if he were subpoenaed to give evidence, Mr Curtis would seek to exercise his legal right to decline to answer all questions put to him on the ground in s 128(1) of the Evidence Act 1995 (Cth) that any answer may be evidence that may tend to prove that he had committed an offence against Australian law or the law of another country. In my opinion, Mr Hope’s evidence demonstrated a sound reason why Securency did not call Mr Curtis and why it should not have drawn (and I have not drawn) any inference against it because it did not call him.
I am not satisfied that Securency has provided a sufficient reason for its failure to lead evidence from Mr Ellery. As will appear below, he played a real and important role in the decision making process by which the agency agreement came to be terminated. Both Mr Chapman and Mr Brown reported, or were subordinate, to Mr Ellery. I infer that Mr Ellery’s evidence as to his role and actions would not have assisted Securency’s case on the issue of how and why the agency agreement came to be terminated: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 at 412-414 [167], [169] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J, at 312 per Menzies J and at 320-321 per Windeyer J; Kuhl v ZurichFinancial Services Australia Ltd (2011) 243 CLR 361 at 384-385 [63]-[64] per Heydon, Crennan and Bell JJ.
The inference I have drawn about the absence of oral evidence from Mr Ellery is that his evidence would not have led me to arrive at a different conclusion on the ultimate issues in this proceeding more favourable to Securency.
In Kuhl 243 CLR at 384-385 [62]-[64] Heydon, Crennan and Bell JJ referred to what Handley JA had said in Commercial Union Assurance Company of Australian Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 as being authority “at least” for the proposition that where a party calls a witness but does not question him or her on a particular topic, the Court “will be less likely to draw inferences favourable to that party from other evidence in relation to that issue”. However, their Honours pointed out that a failure to ask a question in chief of a party, when he or she is called as a witness, can be qualitatively different to a failure to ask a question in chief of a non-party. They said that a litigant who entered the witness box “is under a positive duty to tell the whole truth in answer to questions asked” so that a failure to elicit evidence from him or her “may support an inference that the party suppressed evidence which would have been damaging to the party-witness”.
In contrast, their Honours said that a witness who was not a party was only under a duty to answer questions put to him or her truthfully and that a failure to ask a question in chief of such a witness only permitted the Court to infer that the answer would not have assisted (as opposed to would have damaged) the case of the party who called that witness.
Neither Mr Chapman nor Mr Brown was a party, or even a current employee of Securency, and Mr Chapman was a convicted criminal. In all of the circumstances, I consider that any failure of Securency to ask either of them questions in chief on any matters of substance, only supports an inference that his answer to such a question would not have assisted its case on the topic. Of course, I have considered the evidence of each witness as a whole in my assessment of the overall reliability of his testimony. Mr Chapman’s sense of business ethics as revealed in his paying bribes, obtaining secret commissions, creating a paper or audit trail (as I have described below) and dealings with Dr Berry, led me to the conclusion that wherever his evidence conflicts with that of Dr Berry, and unless I have made a specific contrary finding, I accept and prefer Dr Berry’s evidence as reliable and truthful: see e.g. [88], [117]-[120], [168], [218]-[219] below. I have also found Mr Brown not to be a witness on whose uncorroborated evidence I can rely, as for example I explain at [123], [156]-[160], [168], [294] below.
Background
Dr Berry began conducting business in Nigeria in 1978. He acquired a textile mill and was able to interest the then military president, General Obasanjo, to use his mill to produce uniforms for Nigeria’s armed forces as well as for numerous other government agencies. Dr Berry formed, and subsequently maintained, a friendship with President Obasanjo. Over the years Dr Berry, through companies that he owned or controlled, engaged in a number of commercial dealings with Nigerian Government authorities under different presidents, including in public-private partnership arrangements. His companies were the first in Africa to manufacture telephones, handsets and computers. He established his company, Contec, in 1984.
In 2000, the Nigerian Government engaged Contec to operate and maintain a database scheme called Cerpac. Cerpac collected and provided the Government with immigration and other information about approximately 1.5 million foreigners who worked in Nigeria, including in oil and infrastructure projects. The data included details as to their entry into and departure from the country and their tax liabilities and other financial data.
After the terrorist events in the United States on 11 September 2001, the Nigerian Government also engaged Contec to advise on and develop systems for responding to such incidents. Contec provided, on behalf of the Nigerian Ministry of Interior, secure identity (ID) cards that it issued to foreigners. Contec has continued since 2001 to operate the identity card system as part of Nigeria’s immigration controls at airports and other points of entry. Contec installed and has operated automatic gate readers for its identity cards. However, at some point, the Ministry of Interior refused or failed to pay Contec what it claimed was an entitlement to a surcharge for installing and operating the gate system. This led to the arbitration that began in November 2007 and resulted in a substantial but, as yet, unpaid award.
Dr Berry worked closely with, and gained the confidence of, most of Nigeria’s Presidents since 1984, some of whom, like President Obasanjo, also sought his advice. Indeed, in 2003, President Obasanjo nominated Dr Berry to the President of Burundi as a person with whom that President should deal.
In 2000, Dr Berry first met Mr Chapman, who was then working for a security company that supplied equipment that Contec needed to run the Cerpac system in Nigeria, which Mr Chapman described as the “green card” or aliens’ registration scheme. In 2000, Mr Chapman began employment with Innovia Films. In November 2003, he took up employment with Innovia Films again, which seconded him, from then to 2009, to work for Securency, principally as the latter’s director of business development for Africa and the Middle East.
As at 2003, the Nigerian Government was considering the complete privatisation of the Mint. It had sought a round of tenders but had not accepted any and was considering in late 2003 and early 2004 whether to call for fresh tenders. One commercial banknote printer, De La Rue plc, had a small interest in, or in connection with, the Mint. Securency had not put in a tender in the failed round, but wished to tender if the Government called for a fresh round. Mr Chapman enlisted Dr Berry’s assistance for this purpose. Mr Chapman discussed with Dr Berry in London the concept of introducing polymer banknotes into Nigeria. Mr Chapman introduced Dr Berry to Mr Brown as a person who had influence with the President and other senior Nigerian Government officials. Mr Brown asked Dr Berry if he could represent Securency in dealings with the Nigerian Government with the object of securing a contract to print polymer banknotes.
Dr Berry then discussed the introduction of polymer with President Obasanjo, his chiefs of staff, the Minister for Policy and the then Governor of the CBN. These discussions included what Securency could do to implement the conversion of Nigeria’s paper banknotes to polymer. Dr Berry said that in late 2003 he met with the new Governor of the CBN, however at that time Dr Sanusi was still Governor.
Dr Berry said that the Governor was concerned that polymer might not be a suitable material on which to print banknotes. He wanted to ensure that, if Nigeria were to use polymer, the material on which the notes would be printed would also be produced there. Dr Berry said that he and Securency were discussing with the Mint the establishment of a polymer production (i.e. opacification) plant in Nigeria and printing of polymer notes. I infer that the 2003 meeting that Dr Berry described as being with the “new” Governor, was in fact with Governor Sanusi, albeit that Dr Berry and Securency personnel had many similar discussions later when Governor Soludo was in office.
On 10 February 2004, Mr Chapman wrote an email to Mr Ellery, who was then Securency’s chief financial officer, and Mr Brown. Mr Chapman sought Mr Ellery’s guidance about “setting up our relationship with ‘Secure Currency Ltd’”, which he described as “a confection” of Dr Berry “who we have drafted in at the political level just as he was under pressure from the [Presidential] Villa to find a supplier of polymer notes”. On 14 February 2004, Mr Chapman told Mr Curtis, Mr Brown and Securency’s then marketing manager, Bruno Garoffolo, that Dr Berry would operate “from top down to Governor and for Joe Raad to operate from bottom up”.
Mr Raad was a person with experience in supplying the Mint with consumables for its printing operations. He and one of his companies, Whitvale (International) Ltd, were Securency’s then agents in Nigeria.
Mr Chapman wrote to Mr Ellery that the President wanted Dr Berry to form a Nigerian company to take over the running of the Mint. He wrote that Dr Berry would name the new company “Secure Currency”:
… as a deliberate elipse and to create a degree of fog. He will contract in the professional services required to run the operation, run the risks and take the reward. … and understands that it’s his problem if no business results for whatever reason.
However, what he wants and needs from us is a document which ties Securency to Secure Currency, for 2 purposes:
1)To guarantee him exclusive access to polymer technology and the technology transfer services should he win the bid to manage the Mint.
2)To stand up to the due diligence which will be conducted into Secure Currency, that it’s not just a shell operation (although it is) but has sharp-end clout behind it.
Both purposes could be served by a Memorandum of Understanding (or two). (emphasis added)
As will become evident in these reasons, Mr Chapman’s summary accurately reflected Dr Berry’s continuing desire and vision for his ultimate commercial objective throughout his relationship with Securency.
Mr Chapman and Dr Berry had agreed that Dr Berry would incorporate a special purpose vehicle that would include the words “Secure Currency”. Mr Chapman said that one reason for the use of those words, in what became the name of GSC, was to confuse their competitors into believing that the special purpose vehicle was a subsidiary of Securency, hence his reference to “deliberate elipse” and “fog”. Mr Chapman wished that competitors, such as De La Rue, would not become aware, at least in the short term, that a person with the influence of Dr Berry was acting on its behalf in negotiating with the Nigerian authorities.
Moreover, Mr Chapman’s email to Mr Ellery of 10 February 2004 exemplified Securency’s manner of dealing with persons in Dr Berry’s position through whom Securency would seek to secure business. Those persons would have to pursue the business opportunity at their own expense and risk based on expectations as to their reward that Securency created, but it would only offer them a contract and pay commission once Securency, through those persons’ efforts, had won the business.
On 4 March 2004, the new Australian High Commissioner to Nigeria, Iain Dickie, emailed Mr Garoffolo, referring to their meeting in Melbourne in February 2004 prior to Mr Dickie’s departure to take up his new office. Mr Dickie reported that he had yet to present his credentials to President Obasanjo but had paid a courtesy call on a senior official in the Nigerian Ministry of Foreign Affairs in the preceding week. The High Commissioner reported that the official had foreshadowed that, when he presented his credentials, the President was likely to raise with him the state of play concerning Securency’s interest in the possible introduction of polymer banknotes and that “the Nigerians were looking to Securency to take a 40% equity in the privatisation of the Mint”.
Mr Dickie asked Securency for an update so that he would be well prepared when he presented his credentials. Mr Brown responded to the High Commissioner on 5 March 2004, informing him that Mr Chapman was likely to visit Abuja the next week, as was Dr Berry, whom he described in the email as “our Nigerian partner in this matter”.
GSC was incorporated only on 13 May 2004, but by letter dated 4 April 2004, Mr Chapman wrote to it on Securency’s letterhead as follows:
Re: Partnership for the Technology Transfer of Guardian Polymer banknote substrate to the Federal Republic of Nigeria.
Further to the series of discussions that we have conducted on this subject, we are pleased to advise you that we wish to appoint Global Secure Currency Limited as our technical partner for the transfer of Guardian Polymer banknote substrate to the Federal Republic of Nigeria.
We envisage that our work with you will take place in a number of stages in approximately the following chronology:
ŸFormal adoption of Guardian Polymer substrate by the Central Bank of Nigeria for use on Naira Banknotes.
ŸAn order for polymer banknotes, to be produced either by an external security printer or internally in Nigeria by [the Mint].
ŸA decision by the Central Bank and the [Mint] to commit to the further production of polymer substrate banknotes in Nigeria.
ŸAcquisition by the [Mint] of the necessary equipment (overcoaters) to successfully produce high quality Guardian polymer banknotes.
ŸThe formal Technology Transfer of Guardian polymer by Securency, PolyTeq and the experts of Global Secure Currency Limited to the [Mint].
ŸFormal accreditation by Securency and PolyTeq of [the Mint] as an official Preferred Polymer Printer (PPP) according to the well-established programme already implemented in Mexico, Vietnam, Brazil, Switzerland and elsewhere.
ŸWhen volumes permit, consideration of the establishment in Nigeria of a Guardian Polymer opacification facility, most likely in a joint venture arrangement with the Central Bank of Nigeria and [the Mint].
Naturally, in due course there will be a number of contractual and other documentary requirements to formalise the commercial arrangements as and when they arise, and we propose to deal with these on a case by case basis according to the situation prevailing at the time.
With this programme of stages in mind, we anticipate that the teams from Global Secure Currency Limited and Securency will need to begin immediate work in a number of areas in order to provide a strong platform for our future work together. As you are aware, we have very high levels of confidence and respect for the personnel you have at your disposal for these tasks, and we are very much looking forward to working with them.
We trust that the arrangements outlined in this letter are acceptable to you, and remain at your disposal to discuss the details with you in depth. (emphasis added)
PolyTeQ Services was jointly owned by the RBA and Securency. It provided technical consulting services to entities like the Mint in relation to printing on polymer.
Mr Chapman explained in his evidence in chief that he had included the last bullet point, emphasised in [52] above, because:
From quite early on, Mr. Berry was very interested in being part of the future permanent infrastructure that he envisaged for Nigeria for polymer. So, I put that point in to cover that, because at this stage we did not know what was going where in Nigeria. So, it was something that covered generally that possibility should it ever come about, that it is in here; and it probably was the first time it was expressed in quite this way. But that was my intention. (emphasis added)
Mr Chapman disingenuously characterised Securency’s letter to GSC dated 4 April 2004 as a “letter of comfort”. He gave this evidence in cross-examination about the last bullet point in that letter (emphasised in [52] above):
Yesterday I think you tried to downplay that bullet point as being something that would never happen, nor could ever happen. You stand by that evidence?
A.Absolutely. It could never happen. It could not happen even now or in the next million years.
Q.Would you describe it as a ludicrous proposition, Mr. Chapman? Nonsense, maybe?
A. Not nonsense, just unobtainable.
Q.I see. Yet you knew, did you not, that the very purpose of this letter was to be shown to the government of Nigeria?
A. Yes.
Q. Thank you.
JUSTICE RARES: Did it also not tell Mr. Berry what he and Global Secure Currency were being retained to do?
THE WITNESS: It does, but if you look at the first four bullet points, in fact, those are all to do with getting polymer banknotes adopted by the Central Bank and printed by the Mint in Nigeria. So four of five of those bullet points were what the real objective, core objective was, without which the fifth one was an impossibility anyway, even if all the other conditions could be met. So the emphasis on this, I use the word emphasis, is 80% about getting polymer banknotes going into Nigeria and printable by the Mint, without which bullet point 5 falls anyway. (emphasis added)
The last answer demonstrated what actually happened subsequently, namely, Securency induced both the Nigerian authorities and Dr Berry to believe that if Nigeria decided to use polymer on which to print its currency, then Securency would consider, genuinely, the practical way in which to establish an opacification plant in Nigeria. As Mr Chapman said in evidence, the Mint had had a goal, since it had opened in 1960, to move Nigeria from being a net importer to a net exporter of banknotes and other secure printed products.
Dr Berry said that he had discussed the conditions for establishing an opacification plant with each of Mr Curtis, Mr Brown and Mr Chapman. Each had told Dr Berry that Securency required a minimum order for about 5 billion polymer banknotes to justify setting up an opacification plant at a cost of about $25 million, as occurred in Mexico during 2007 and 2008. Dr Berry believed in 2004 that, at the time, Nigeria required about 7 billion notes to be on issue and, thus, was confident that he could satisfy Securency’s requirements for the construction of such a plant in Nigeria within about 1.5 years.
However, all of the witnesses who gave evidence for Securency, that I accept, namely Mr Chapman, Mr Brown, David Beeby, a former director (and chief executive officer of Innovia Films), and Joe Mamo, the chief director of marketing and strategic planning (2005 to 2008) and, from 2008, chief financial officer, were emphatic that Securency (despite what its officers said to Dr Berry and the Nigerian authorities) never intended that an opacification plant be built in Nigeria. Nonetheless, Securency was fully aware that Dr Berry and the Nigerian authorities believed throughout Dr Berry’s involvement that, if Nigeria did convert all its banknotes to polymer, they would be able to build an opacification plant in Nigeria. Yet Securency never disabused them of their belief. This practiced deception was central to Securency’s success in obtaining orders from the Nigerian authorities and, of course, was vital in Dr Berry’s dealings with them on Securency’s behalf.
Moreover, Dr Berry had an obvious commercial interest in the goal of constructing and operating an opacification plant in Nigeria. Dr Berry engaged, on Mr Chapman’s recommendation, Richard Ashwell as technical director to lead the project to bid for the shares in the Mint.
In about June 2004, Prof Soludo became Governor of the CBN. It may be that Dr Berry had the conversation I have described in [42]-[43] above, which he attributed to the new Governor, at about this time.
On 22 September 2004, Mr Chapman and Gary Wilmshurst, who was on secondment to Securency from the Reserve Bank of New Zealand, made a short power point slide presentation to the board of the CBN.
The slides had Securency’s name on each of them. The first had the title “Opportunities for Nigeria with the introduction of polymer substrates for banknote printing” followed by the names of Messrs Chapman and Wilmshurst and the date. The agenda set out on slide 2 listed seven bullet points, the last two of which were:
ŸCBN and the progression to polymer
ŸTechnology Transfer services, banknote printing and polymer production (emphasis added)
And the final bullet point on slide 9, immediately before the tenth and last slide that read “Time for Questions”, was:
ŸSecurency ready to provide technology transfer of polymer printing and polymer production to Nigeria (emphasis added)
Mr Chapman sought to explain the seventh bullet point in slide 2 in his evidence in chief. He said initially that “polymer production” was not the process of creation of the polymer bubble, but the printing of the polymer banknotes, in other words, the printing process that occurred after opacification. Then, he said that the last bullet point’s reference to “polymer production” (on the ninth slide) was there because:
we were still envisaging the possibility at some point that they might raise “Could you produce the full polymer substrate in Nigeria?” So, at this point --- which is still really very early --- that was still an option which we wanted to keep open. We did not want to close the door. So, it got a 10-second mention.
Q. So, polymer production is or is not the bubble?
A. No, absolutely not the bubble. (emphasis added)
I then asked him to clarify the last bullet point on slide 9, and he gave the following evidence:
JUSTICE RARES: Am I correct in understanding that you to be saying that the polymer production was talking about an opacification plant?
A.Yes, a possible future opacification plant. Opacification is really a posh word for printing, really. It is printing coatings on the film that comes from the bubble, to make it opaque --- simply that.
Q.Is that not the same thing, then, as what you are talking about on [slide 2], in the last few words of [slide 2], the last dot point?
A.No. That technology transfer thing was all about what would happen --- in my mind, we are talking really about the Mint at that point and what could be done fairly imminently to sort out their Mint. When it came up later, I know the same words are used, but what was in my mind at that point was talking about a future possibility of opacification. (emphasis added)
I do not believe Mr Chapman that the words “polymer production” in the last bullet point on each of slides 2 and 9 dealt with different concepts. In my opinion, he used those words consistently in the presentation to emphasise that an ultimate objective of the relationship, that Securency was offering if Nigeria agreed to use its polymer technology for its banknotes, was the building in Nigeria of an opacification plant. Indeed, in November 2004, he wrote a report on behalf of both Securency and GSC in which he confirmed this. The 70-page report was headed “Assessment of the [Mint] and Recommendations to enable [the Mint] to achieve self-sufficiency in banknote and security documents requirements for Nigeria and the West African Monetary Zone within 2-3 years”. Under the heading “Inward Investment in a Polymer Manufacturing Plant in Nigeria”, the report noted that once the CBN and Mint had adopted polymer for naira notes, GSC proposed immediately to commence planning for the erection and operation of a polymer manufacturing plant in Nigeria. The report continued, stating, as had been said in Securency’s and GSC’s presentations to the CBN board “in October [scil: September] 2004”:
it is the policy of Securency to actively promote the establishment of plants to manufacture the polymer substrate material, where the volumes and economic viability permit. Securency are in advanced discussion with a number of countries at the moment to build plants, usually as a Joint Venture with the Central Bank and their Banknote Printing companies.
These joint ventures have the following characteristics which also apply to CBN and NSPMC:
ŸThe Central Bank is the owner of the banknote printing plant and is in a position to specify polymer for the printing of its banknotes.
ŸThe Central Bank wishes the banknote printing plant to operate more efficiently and to be able in due course to export polymer banknotes within its immediate region.
ŸThe banknote plant is of a good technical level, and there is room on its premises for construction of new manufacturing units for the production of polymer material. It is essential that polymer is produced under the same security conditions as for the printing of banknotes. Having surveyed the Abuja plant, we have noted that there is sufficient space to erect a polymer manufacturing plant and that this would be the ideal location to service the demand from the factory itself.
ŸThere is a ready source of petrochemicals, which are the raw materials for the polymer substrate.
Global Secure Currency is prepared to partner with the Central Bank of Nigeria and NSPMC to generate the investment required to establish this plant in Nigeria. (emphasis added)
Mr Chapman said that the third bullet point in that passage in the report referred to the land needed to build an opacification plant. Dr Berry gave this evidence in chief about the location of the land on which the opacification plant was to be built:
Peter Chapman mostly had identified that we would use Abuja as the location next to the Mint to set up this. We had located a piece of land, which I then bought, which was not an easy task to do, because they only wanted at least a four to five acre plot in the centre of town where the Mint was. And to get it right next to the Mint, almost adjoining the Mint, we purchased it. And we got … ready for the opacification plant. We had done all the groundwork studies relating to this, in terms of what I had been told would be the civil engineering part of it. Our civil engineer had prepared the prints of what will be required. They tested … the ground for whether it could take the weight or – of the equipment that was going to be installed. (emphasis added)
During his cross-examination he described the location of that land and it emerged that first, the land was more than a kilometre from the Mint and, secondly, was held in the name of a company, Safi International Company Ltd, that owned that land. Nominees of Dr Berry owned the two issued shares in Safi. Securency submitted that this reflected adversely on Dr Berry’s credit since the land was not “right next door to the Mint”. I do not consider that Dr Berry gave, or intended to give, misleading evidence on this issue. First, Securency did not suggest that Dr Berry had acquired the land, or the company that owned it, for any purpose other than for the construction and use of the opacification plant and, secondly, Dr Berry said that “It’s next door when you consider distances in Abuja” in the context where the Mint and the site were both in relatively close proximity in Abuja’s central business district. Indeed, the two sites were about 1.4 kilometres or four minutes away from each other by car.
While it is true that the Mint is not literally “next door” to the site that Safi owned, I accept Dr Berry’s evidence that the purpose for which he arranged for acquisition of the shares in Safi and that acquisition’s relationship to the assessment of the suitability of that site for an opacification plant was as described in the passage from the November 2004 document set out in [66] above. Ultimately, the proposed sale of the Mint did not proceed.
During 2004, and subsequently, the governments of Nigeria and its neighbouring States were considering the introduction of a common currency for use in the Economic Community of West African States (ECOWAS). Each of Securency, Dr Berry, the CBN and Mint were hopeful that, if this occurred, Nigeria would be in a position to print the new currency’s banknotes. If that occurred, Securency and Dr Berry wanted the printing to be on polymer.
The N1,000 note proposal
In about August 2004, the CBN decided to print a new denomination of a N1,000 note, which was a very high face value in Africa, especially where the largest denomination in Nigeria was then the N100 note. Large denomination banknotes are used primarily as stores of value rather than as a day-to-day unit of exchange in transactions. The Nigerian Government wanted to print 100 million of the N1,000 notes, 50 million of which would be on paper and the other half of the order on polymer, using GSC and Securency for that purpose. This required the new notes (both paper and polymer) to be designed from scratch, including the selection of security features.
By 17 February 2005, Mr Chapman reported to Securency that Governor Soludo had said that when the design of the N1,000 note was completed, Securency and GSC would be authorised to proceed with designing N5 and N10 notes for polymer. He also reported that none of Securency’s competitors had questioned GSC’s credentials or “its exact relationship with Securency, which we have left fairly vague”. He wrote that, however, GSC and Securency had appeared together repeatedly at the CBN and they had the strongest team to evaluate the requirements of the Mint. Mr Chapman also wrote that GSC had “excellent relationships at all levels”, but that those needed to be used sparingly and not exhausted on matters of detail. He concluded his report saying that there were strong indications that Governor Soludo would “like to go with our proposals for the Mint’s self-sufficiency, which would involve giving GSC a contract to project manage the sorting out of various areas including polymerisation” that had been covered in detail in the November 2004 report.
I do not accept Mr Chapman’s evidence in cross-examination that his use of “self‑sufficiency” and “polymerisation” in his report of 17 February 2005 referred only to the Mint being enabled to print on polymer. That evidence was inconsistent with his earlier evidence that the November 2004 report referred to the construction of an opacification plant, as was clearly the case.
On 12 April 2005, the CBN placed an order with GSC for 50 million N1,000 polymer banknotes at a price of €4,884,000. Securency had to use GSC, as its agent, to receive this order because Securency itself could not accept orders for printed banknotes, as Mr Chapman acknowledged, with Mr Brown’s endorsement, in his email report to Messrs Curtis and Mamo of 13 May 2005. Mr Chapman noted that once the order resulted, a letter of credit would have to be opened in favour of the banknote printer, Orell Fussli Security Printing Ltd, to which GSC would subcontract, and Securency would have to have in place a commission arrangement with GSC.
By early July 2005, both De La Rue, with which the CBN had placed its order for the paper N1,000 note, as well as Securency, were having difficulties in producing proofs of their new notes for approval by the CBN that the Governor and other officials liked, within the very short production deadline that the CBN had specified to the President.
In the event, by late July 2005, Mr Chapman had explained to Governor Soludo that Securency, GSC and Orell Fussli could not produce the required quantity of N1,000 polymer notes by the October 2005 deadline. The Governor then accepted that position and soon after he told Dr Berry that he was happy that Securency had, in Mr Chapman’s words, “come clean with him”. Importantly, the Governor still remained open to switching the printing of paper notes to polymer ones for a lower denomination.
Securency’s quest to print a lower denomination on polymer
Soon after the issue of the N1,000 paper banknotes in October 2005, Mr Brown and Mr Chapman corresponded in emails about the need to obtain orders of lower denomination polymer notes from Nigeria. Mr Chapman reported to Mr Brown that Dr Berry suggested that they all visit Governor Soludo in Abuja in mid-November 2005 for a seminar to discuss using polymer in what Mr Brown recognised was the “prize for us”, namely the two lowest denominations, being the N5 and N10 notes. Mr Brown asked Mr Chapman what was being done by the Australian High Commission with the Nigerian Government and said of Mr Raad’s continuing role “[w]hether we like it or not, Joe is still part of the ‘Mafia’ and Africa being what it is remains an issue”.
In about November 2005, Governor Soludo met separately with Mr Chapman and Dr Berry and told each of them that he wanted to switch to a polymer N20 note that had to be ordered from Securency (as opposed to GSC with which the N1,000 order had been placed). The number of N20 notes in circulation was the largest of all denominations. The Governor told Mr Chapman, in a meeting in London on 25 November 2005, that his priority was to prepare a project budget with two elements, namely the purchase of “interim” polymer notes from overseas and the technology transfer for subsequent production in Nigeria. He said that the Mint had been following a lot of the recommendations in Securency’s and GSC’s assessment report of November 2004. He also agreed to meet Dr Berry, of whom Mr Chapman said he “spoke very warmly”, and Mr Chapman in Abuja soon afterwards. The Governor also asked Mr Chapman to explain the relationship between Securency and GSC to check (in Mr Chapman’s assessment) if they had an agreement.
In early December 2005, Securency prepared draft pricing for printing N20 notes on polymer. Mr Mamo emailed Mr Chapman on 6 December 2005 noting that he had included a commission of 20% in the price for the substrate (i.e. the opacified polymer suitable for printing). Mr Mamo noted that Securency had “two agents on our books for Nigeria (J Raad and Whitvale)” and asked if that were correct. He also told Mr Chapman that both agreements had expired and would need to be renewed if both those agents “are required to secure this contract”. Mr Brown received a copy of that email and responded later on 6 December 2005 saying that both agents’ agreements were in Mr Raad’s control and had expired, although Mr Raad had made repeated requests for their renewal that Securency had resisted. He said that there was “no way that Joe will get what we had originally contracted with him”, and said that it would be more like 3%. He added that Dr Berry:
has a loose agreement for his commissions though again this needs to be quantified clearly.
Mr Brown said that Mr Chapman would be sorting out Dr Berry’s commission “as part of the overall contract when he gets to that point” but agreed to Securency pricing in a 20% commission “to cover all eventualities”. He said that it would be necessary to await the dimensions of the final order and then evaluate the input of each of Dr Berry and Mr Raad, but he did not want to give either man a rate of commission at that stage, lest he or they became alienated, saying:
Given Beno[y]’s place in the hierarchy and Joe’s influence in the market place too, it would be wrong to precipitate anything at this stage – though the time for that is not far off.
In late December 2005, the CBN invited Securency and some paper banknote printers to prepare designs and indicative pricing for the N5, N10, N20 and N50 notes. All those invitees made presentations in Abuja on 17 January 2006. Mr Chapman reported to Mr Curtis and Mr Brown on 13 February 2006 that Governor Soludo had been speaking daily with Dr Berry. On 26 February 2006, Mr Chapman reported to them that Dr Berry and Mr Raad “are doing their stuff as required. Working well at last”.
On 22 March 2006, Mr Ellery reported to Mr Curtis and Mr Brown that Securency had no current agency agreement for Nigeria, but that there were two that lapsed on 14 November 2003 and 1 April 2003 respectively, the first for Mr Raad with a commission of 7.5% and the second for Whitvale with a commission of 10%. Mr Brown responded that he would attend to cutting Mr Raad back to one agreement for less than 5%. He said that Dr Berry would have one agreement for 10% and in any event the combined commission would not exceed 15%. Mr Ellery replied expressing concern that the agreements had to be in place before Securency received any order from Nigeria, and Mr Curtis agreed.
Mr Beeby was chief executive officer of Innovia Films. He lived in England and visited Australia from time to time on its and Securency’s business. Officers of Securency made a slide presentation to him on 6 April 2006. The slides included a detailed report on Nigeria that noted it was the largest user of banknotes in Africa, wanted to become self-sufficient in relation to the printing of banknotes and was “Securency’s gateway into Africa”. The slides noted that Securency had lodged a tender to print N20 polymer notes before tenders closed on 24 March 2006.
The slides also reported that Securency’s Craigieburn printing facility would need to run at full capacity, working 24 hours per day seven days per week, to meet any order from Nigeria and its other existing commitments. Another section of the slides reported on Securency being in a major growth phase. Those slides recorded that the board and Banco de Mexico (the central bank of Mexico) had commissioned a feasibility study to assess the commercial and operational viability of establishing an opacification plant in Mexico with a view to establishing a manufacturing presence to support the Latin American market for polymer bank note substrate. The slides included a timeline from the anticipated completion of the feasibility study, in June 2006, to the time in the first or second quarter of 2008 when the Mexican opacification plant would be operational (if approved).
The polymer N20 order
On 12 April 2006, Mr Chapman emailed Mr Curtis, Mr Brown and others with the news that Governor Soludo had told Dr Berry and Mr Okoyomon again that he would proceed with an order for printing the N20 notes on polymer at the revised prices that Securency and the Mint had submitted on 6 April 2006.
On 20 April 2006 Mr Curtis instructed Mr Brown to get the issue of agency agreements for Nigeria resolved before that order was placed. Mr Brown responded on 25 April 2006 that he had “half finished” and hoped to meet Dr Berry in India in the following week “to complete the process”. I infer that Mr Brown’s reference to “half finished” was that he had finalised an agreement with Mr Raad at 5% commission, however he had done nothing yet with Dr Berry.
Mr Harding becomes a 40% shareholder in GSC
On 9 May 2006, Dr Berry signed, as a director, a share certificate that certified that Mike Harding of Berkshire, England, held 40,000 fully paid shares of 1 pence each (i.e. £400 worth) in GSC, being 40% of the issued shares in GSC. Dr Berry said, and I find, that Mr Chapman had introduced him to Mr Harding at Dr Berry’s London house. Mr Chapman told Dr Berry that Securency’s board wanted Mr Harding to help with marketing in the ECOWAS region and to hold 40% of GSC’s issued shares until such time as the RBA, through Securency, decided whether it would participate in the ownership of the Nigerian opacification plant or that GSC would be the sole owner. Dr Berry met Mr Harding only on two occasions, the second being about six months later, when Mr Harding came alone to his house. He had no other dealings with Mr Harding or his daughter, Amanda Whatley, with whom Dr Berry had never met or dealt.
Mr Chapman denied that he knew anything about Mr Harding acquiring 40% of the issued shares in GSC and asserted that he did not meet Mr Harding until 2007. I do not accept Mr Chapman’s evidence about his lack of involvement in Mr Harding’s acquisition of the 40% interest in GSC. That is because, first, having considered Mr Chapman’s evidence as a whole and observing both him and Dr Berry in the witness box, I prefer Dr Berry’s evidence where it conflicts with Mr Chapman’s and, secondly, Mr Chapman’s selection of Mr Harding as an agent in 2007 to replace Dr Berry and GSC and the circumstances in which that occurred (as I will describe below) suggest that Mr Chapman had a much longer and deeper involvement with Mr Harding than one which commenced only in 2007. Moreover, Dr Berry’s evidence of the rationale which Mr Chapman put for issuing 40% of the shares in GSC to Mr Harding is consistent with the expectation of the Nigerian Government to which the Australian High Commissioner had referred in his email of 4 March 2004 (see [50] above).
Dr Berry agrees on the terms of the agency agreement
On 3 June 2006, Mr Brown sent a long email to Messrs Curtis, Ellery and Chapman reporting on his detailed discussion with Dr Berry in Mumbai. Dr Berry had met there with Mr Brown and Mr Wilmshurst. Mr Brown told Dr Berry that his commission was being downgraded from the 20% that he had been told was to have applied had the N1,000 proposal proceeded and that the most Securency could offer was 15%. Mr Brown had started with an offer of 11% that Dr Berry said was unacceptable. The discussion was “robust”, to use Mr Brown’s description, and in the end Dr Berry agreed to a rate of 15%.
Dr Berry explained to Mr Brown that he had incurred considerable expense in performing the work in securing the N20 order. Among other activities, beyond his own commitment of time and expense in discussions to persuade Nigerian officials to work with Securency, Dr Berry provided cars and security personnel to meet, protect and transport Securency’s personnel when they travelled in Nigeria. As Dr Berry, Mr Brown and Mr Chapman explained, there was a real need for such transport and security for persons visiting Nigeria. Over the course of the preceding 2.5 years, there had been numerous such visits. Moreover, Mr Brown acknowledged in his evidence that by the time of their Mumbai meeting, Dr Berry had “well and truly proved his worth”.
Significantly, at no point prior to his executing the agency agreement did anyone from Securency (including Mr Brown and Mr Chapman) say to Dr Berry, or did he know, that Mr Raad (or one of his companies) was also to be appointed as an agent and to receive a commission in relation to the N20 order.
The terms of the agency agreement
Recital B of the agency agreement recorded falsely that Securency was appointing Dr Berry and GSC as its sole agent in Nigeria. Mr Brown’s only explanation of Securency’s use of the false description “sole agent”, when he knew of Mr Raad’s concurrent agency, was that, “This was a standard agency agreement” and that it had been prepared by Securency’s lawyers. Mr Brown’s detailed account of his meeting in Mumbai did not suggest that any part of his discussions with Dr Berry about commission or the agency in general involved Mr Raad (or his company) having any role as a co-agent. Mr Chapman gave similar evidence that there was a number of territories in which Securency had more than one agent but, nonetheless, its agency agreements provided that each agent was its sole agent in that territory. This conduct itself is revealing of a corporate culture within Securency that was disinterested in honest behaviour.
The agency agreement was about 32 pages long and covered a wide range of topics. Although it was executed later, the agency agreement provided that it had a commencement date of 2 February 2006. It was common ground that at some stage after it was executed, Dr Berry agreed with Mr Chapman that the territory would be “Nigeria and other ECOWAS territories” and Mr Chapman added the latter extension in writing, which he initialled. Only a few provisions are relevant for present purposes, namely:
·Dr Berry and GSC were named as the agent;
·the agent agreed to act as Securency’s agent and during the term of the agreement would use its best endeavours to advertise, market, promote and obtain orders in the territory for Securency’s product of opacified polymer (referred to in the agreement by its trade name of Guardian®Polymer) (cl 2.2);
·the scope of the agency was restricted to advertising, marketing and promoting the product in the territory, obtaining orders for it from customers located in the territory, submitting them to Securency and any matter incidental to those tasks (cl 2.3);
·the agent had to devote sufficient time and attention to the performance of its obligations under cl 2.3 so as satisfactorily to perform its obligations and do so in accordance with any timing or other requirements of Securency (cl 2.4(d));
·the termination date was defined (in cl 1.1) as meaning either the date on which the agency agreement was terminated or the expiry date in item 2 of schedule 1, namely:
This agreement remains valid until 30th June, 2008 and will be automatically renewed for further terms every two years unless terminated as per the Termination clauses contained in the contract.
·the agent acknowledged and agreed that its appointment would terminate immediately upon the earlier of Securency giving it 60 days’ written notice terminating it or “the termination of this Agreement” (cl 2.6);
·the term of the agency agreement commenced on 2 February 2006 and continued until the expiry date “unless terminated earlier in accordance with this Agreement” (cl 3.1) and cl 3.2 provided:
This Agreement will continue until terminated by 30 days’ written notice given by either party to the other party, which notice may be given at any time on or after the date which is 30 days before the Expiry Date.
·the agent had to forward all orders it received to Securency no later than five business days after receipt (cl 5.1(b));
·if Securency received an order for the product from a customer located in the territory, “it must forward a copy of the order to the Agent as soon as practicable” (cl 5.1(c));
·commission was payable on invoice sales (defined in cl 1.1 to mean, relevantly, the amount of all invoices rendered by Securency and paid by customers relating to sales in the territory) in accordance with a formula set out in cl 8;
·a party also could terminate if an event of default or insolvency occurred under cl 16 (but that circumstance is not relevant here);
·on the expiry or termination of the agency agreement, the agent was not entitled to payment of any commission in respect of invoice sales from the date of expiry or termination (cl 17.1(a));
·other than for the purposes of enforcement, and the continued operation of its provisions relating to intellectual property rights, confidentiality, restrictive covenants and the general provisions of cl 20, the agency agreement would be at an end from the date of its expiry or termination (cll 17.1(b) and 17.2);
·the agency agreement contained the entire understanding between the parties and neither had relied on any representation, warranty or undertaking not forming part of its terms (cl 20.3);
·the agency agreement could not be varied except in writing signed by the parties (cl 20.11);
·the governing law was that in force in the State of Victoria and the parties submitted to, relevantly, this Court’s jurisdiction (cl 20.14);
·where there was a conflict between the main body of the agency agreement and any schedule, the former prevailed (cl 20.17);
·the rate of commission was 15% (sch 1). (emphasis added)
Both Dr Berry (whose signature was witnessed by Mr Wilmshurst) and Mr Brown (on behalf of Securency) signed the first version of the agency agreement that is in evidence. It is not clear in the evidence when that document came into existence, when Dr Berry signed it or how or why a later version, in identical terms (except for the small handwritten addition of the extended territory), came to be signed in late March 2007, as I describe immediately below. Dr Berry said that he “signed off on the first [version of the] agreement” and it “was taken back to Australia”. Mr Brown said that he signed the agency agreement and gave it to Dr Berry, I infer in India, “and he then, because he was pretty unhappy with it he decided to take it off to see his lawyers”. However, I do not accept that Mr Brown’s version was an accurate recollection. There is no record of Dr Berry doing that, or how any version signed by Dr Berry was returned, had he retained it. I find that both men signed the agency agreement, and Mr Wilmshurst witnessed Dr Berry’s signature, in India.
On 31 January 2007, Securency prepared, and Mr Ellery sent to Mr Brown in the United Kingdom, two (identical) copies of the agency agreement for execution by Dr Berry and GSC. Mr Ellery asked him to have them signed by Dr Berry and GSC and returned to Securency as soon as possible. Mr Chapman emailed Mr Brown and Mr Ellery on 13 March 2007 informing them that he had given Dr Berry and his lawyer the two copies at Heathrow on 11 March 2007 and said that Dr Berry would consider the changes and, if all were well, would return the signed copies to Australia in a couple of weeks.
Although Securency challenged Dr Berry’s denial that he wanted his lawyers to look at the draft, I accept his evidence. There were no changes from the earlier version that Mr Brown and Dr Berry had signed except for Mr Chapman’s handwritten addition of “AND OTHER ECOWAS TERRITORIES” in item 5 of schedule 1 which extended the territory beyond the typed “Nigeria”. There was no evidence as to when Mr Chapman added this, but it is likely that he did so after Mr Curtis and Mr Ellery had executed the document (see [97] below). I think it likely that Dr Berry told Mr Chapman that he wanted a couple of weeks to consider the draft (with a view to him or an employee doing so) before he signed it. Given that the second signed version was identical to the first, except for Mr Chapman’s handwritten amendment, it is likely that he told Dr Berry that there were no changes but that Dr Berry wanted to check that for himself. Mr Chapman’s contemporaneous written and oral communications were not always accurate or straightforward, nor was he a witness in whose honesty I have any confidence. Moreover, the confused nature of the termination provisions in cll 2.6, 3.2 and schedule 1 in the agency agreement has all the appearance of the absence of any commercial lawyer’s review of the document (by either party) and the use by lay persons of cut and paste options from other documents.
Mr Curtis and Mr Ellery executed the second version of the agency agreement for Securency after Dr Berry had done so for himself and GSC. Dr Berry, who was in India, told Mr Chapman on or shortly before 27 March 2007 that he would send the signed agency agreements to Mr Ellery in Australia.
The launch of the N20 polymer notes
Securency advanced other more substantial defences, namely that:
·it could have brought the agency agreement to an end had Dr Berry not signed the termination letter by use of its powers to terminate without cause on 60 days’ notice, under cl 2.6, or on 30 days’ notice before the agency agreement would have expired on 30 June 2008, under cl 3.2;
·its board had made a policy decision to terminate all agencies, in about July or August 2010, well after the bribery scandal had become notorious, and as a result Securency would have terminated any agency agreement that may then have existed with Dr Berry and GSC.
Securency’s argument that it would have terminated the agency agreement, had Dr Berry not signed the termination letter, relied, in support, on the following assertions by Mr Brown in his oral evidence. First, (as I find) Mr Brown was party with Mr Chapman to the decision to seek Dr Berry’s signature on the termination letter, because they had recommended this to “the senior management” being Messrs Curtis, Ellery and Mamo. Secondly, Mr Brown asserted in the witness box that this was because Dr Berry was:
not travelling into Nigeria, as far as we were concerned, and therefore he was not carrying out his functions as agent …. He was uncontactable and also we believed that he was ill and was hospitalised in India … and most compelling of all, was that he had started proceedings against the Nigerian government … we felt that would have denigrated his ability to perform for Securency.
The representations issues – consideration
Based on what I have found above in considering what occurred at the 24 February 2008 meeting between Dr Berry and Mr Chapman, I am comfortably satisfied that Mr Chapman made:
·first, the renewal representation, as pleaded, namely that if Dr Berry and GSC agreed to terminate the agency agreement, the existing terms would continue and the parties would make a new agreement on those terms (see [185]-[188]);
·secondly, a representation to materially the same effect as the opacification plant representation, namely that if Dr Berry signed the second document (being a memorandum of understanding or partnership agreement for the goal of establishing an opacification plant in Nigeria), that Securency had prepared, Mr Chapman would cause it to be sent to Securency in Australia and it would execute that document (see [185]-[189]).
I am of opinion that the evidence of Dr Berry that I have accepted concerning the representation to materially the same effect as the pleaded opacification plant representation, entitles him and GSC to relief, notwithstanding that it is not in exactly the same words as the pleading. The reason why the representation that I have found is materially similar is that Mr Chapman proffered the second document as one prepared by Securency (and thus an offer capable of acceptance by Dr Berry and GSC) which, if Dr Berry (and GSC through him) accepted it by signing it, Securency would formalise in due course – as a matter of “routine” – by executing it. This occurred in the context in which Mr Chapman also persuaded Dr Berry to sign the termination letter, namely that the two men were engaged in a bit of “routine admin”. Dr Berry had for the preceding four years been seeking, as had the Nigerian authorities from President Obasanjo down (including Governor Soludo), that Securency agree to Dr Berry (and GSC), with or without Securency itself participating, arranging the construction and operation of an opacification plant in Nigeria. Mr Brown and Dr Berry had met Governor Soludo in late November 2007, when he had insisted, forcefully, that he wanted Securency to act on the matter of the opacification plant.
Immediately after this meeting, Securency internally sought to address both how to appear, without any actual commitment, to be satisfying the Governor’s requirement and how to terminate the agency agreement. Securency’s internal communications about the terms of the draft letter to Governor Soludo stopped around 5 December 2007 without there being any email or other evidence that revealed a decision or reason for the dropping of the internal discussion directed at formulating the letter. However, in the period immediately following the 24 February 2008 meeting, Securency produced and provided Dr Berry with the two letters dated 16 March 2008 that would give Dr Berry comfort in the “routine” meeting he and Mr Chapman had with Governor Soludo in London on 24 March 2008 (see [237], [240] above). This conduct, of using the ambiguous letters of 16 March 2008, on the part of Securency was akin to using documents to “lie like truth”, to coin Lord Blackburn’s expression: Smith 9 App Cas at 201.
Securency knew that the Nigerian Government and Governor Soludo in particular wanted, as did Dr Berry, an opacification plant to be constructed if Nigeria were to convert all its denominations to polymer notes. Securency set about creating the impression that this is what it was proposing, while using words of qualification to ensure that, when push came to shove, it could say that it had never made any definite commitment to construct, or assist in the construction of, an opacification plant in Nigeria. As Lord Macnaghten said in Gluckstein v Barnes [1900] AC 240 at 250-251:
My Lords, it is a trite observation that every document as against its author must be read in the sense which it was intended to convey. And everybody knows that sometimes half a truth is no better than a downright falsehood. (emphasis added)
Securency contended that the agency agreement was “only marginally profitable for GSC, which earned only 3% of the 15% commission payable by way of profit”. It referred to Dr Berry’s statement that he needed a 12% commission to break even and argued that this marginal return supported its case that Dr Berry was tired of the agency agreement and did not see the need to pursue it for such a small return. It submitted that this provided a good reason why Dr Berry was prepared to terminate the agency agreement on 24 February 2008 without any qualm.
I reject that argument. Dr Berry’s continued activity in support of Securency, including at the meeting with Governor Soludo on 24 March 2008, is inconsistent with any desire or intention to give up the right to commission. And, had he done so, he would have put himself in a weaker commercial position to push for an opacification plant if others were acting as Securency’s agents in Nigeria. That is because those other agents would stand to lose their commission if Dr Berry succeeded in his aim of constructing such a plant. Thus, the other agents would have a powerful motivation to seek to persuade the Nigerian authorities against agreeing to Dr Berry’s proposed opacification plant. And assuming that Dr Berry and GSC did only make a small margin, nonetheless that profit margin was 20% of the total commission paid. On the evidence, during 2008 Securency paid SPT about €1,456,000 at 12% commission, so that a 15% commission was worth about €1.73 million, 20% of which was worth over €340,000, a not inconsiderable sum in itself.
Having regard to all of the evidence, there was no rational or other reason for Dr Berry to sign the termination letter, if (as the intelligent man he is) he had understood it to have had its literal effect. In my opinion, he was tricked deliberately by Securency, through Mr Chapman, into signing the termination letter by each of the representations that I have found, whether the effect of each representation is considered separately or combined. In my opinion, Dr Berry trusted in the integrity of Securency that, when he signed each of the termination letter and the second document on 24 February 2008, Securency thereafter would continue to act as he had perceived it to have acted in the past, by honouring or working co-operatively to honour the promises it had made to him.
I have not overlooked that it could be said that Mr Chapman’s request that he sign the termination letter could have raised an alarm in Dr Berry’s mind that he (and GSC) would then be without any contract with Securency. Life can be stranger than fiction. Human beings do not always act logically. Dr Berry heard Mr Chapman’s explanation that what was occurring was “routine” and he trusted Mr Chapman and Securency to be good to their word. Brennan J said in Gould v Vaggelas (1985) 157 CLR 215 at 252: “A knave does not escape liability because he is dealing with a fool”. While Dr Berry was no fool, he was fooled into acting on the overall impression made on him by what Mr Chapman said: see too Gould 157 CLR at 236-237 per Wilson J (with whom Gibbs CJ agreed on this aspect at 219) and per Brennan J at 250-251. Had Dr Berry followed Lord Macnaghten’s advice about how to read a prospectus in Gluckstein [1900] AC at 251-252 in relation to Securency’s representations of how it would act, that Mr Chapman made at the 24 February 2008 meeting and by its subsequent conduct in 2008, he would have, to use his Lordship’s thinking analogically:
That sum, they tell us, is ‘payable in cash.’” You will observe those last words, “payable in cash.” Their introduction is almost a stroke of genius. That slight touch seems to give an air of reality and bona fides to the story. Would anybody after that suppose that the directors were only going to pay 120,000l. for the property, and pocket the difference without saying anything to the shareholders? “But then,” says Mr. Gluckstein, “there is something in the prospectus about ‘interim investments,’ and if you had only distrusted us properly and read the prospectus with the caution with which all prospectuses ought to be read, and sifted the matter to the bottom, you might have found a clue to our meaning. You might have discovered that what we call ‘interim investments’ was really the abatement in price effected by purchasing charges on the property at a discount.” My Lords, I decline altogether to take any notice of such an argument. I think the statement in the prospectus as to the price of the property was deliberately intended to mislead the shareholders and to conceal the truth from them. (emphasis added)
There was nothing routine about terminating a four year business relationship that generated large amounts of revenue for both parties and that each knew would continue to be generated in the future. Securency had made no suggestion to Dr Berry that it would or might terminate the agency agreement. Securency’s conduct, through Mr Chapman’s representations on 24 February 2008, was a shabby fraud designed to conceal from Dr Berry and GSC that it was not going to pay them commission, while leaving them under the impression that they were still acting as its agent in Nigeria and would be able to progress with persuading the Nigerian Government to allow Dr Berry to construct and operate an opacification plant there.
Governor Soludo’s express position in both the November 2007 and March 2008 meetings with Dr Berry and, respectively, Mr Brown and Mr Chapman, was to require that Dr Berry (and GSC) be involved in the construction of an opacification plant as integral to Nigeria’s future demand, and orders, for polymer banknotes. The termination by Securency of the agency of Dr Berry and GSC would have been likely to have caused Dr Berry and the Governor to react adversely to Securency. Neither knew, of course, of the nature of Mr Chapman’s relationship with Mr Okoyomon, which I infer was by early 2008 corrupt, even though the bribes for which Mr Chapman were convicted only came to be paid in early 2009. And, Mr Chapman needed to set up the agency and flow of commission to SPT, which did not occur until 22 August 2008 (see [263] above). Swingaxle, which Mr Chapman said was “an extension” of himself, set up and controlled SPT and he or Swingaxle paid some bribes to Mr Okoyomon in early 2009.
The estoppel argument only needs to be stated to appreciate its unsoundness. As I have found, Mr Chapman continued to treat Dr Berry as if nothing had happened so as to maintain the effect or spell of the two fraudulent representations that I have concluded he made on 24 February 2008. Mr Chapman arranged for Dr Berry to meet with him and Governor Soludo in London and they met there on 24 March 2008 for what, even on Mr Chapman’s evidence, was a “routine” meeting – i.e. with Dr Berry acting as he had done routinely for over four years before as Securency’s agent. Not only did Securency, through Mr Chapman, make use of Dr Berry, with knowledge of what Mr Chapman had fraudulently said on 24 February 2008 to trick Dr Berry into signing the termination letter, it pretended to him that it was still “routine” for him to be at the 24 March 2008 meeting with Governor Soludo. And Securency continued, through Mr Chapman, interacting with Dr Berry during 2008 as if all were “routine” and their agency “agreement” continued on the basis that Mr Chapman explained it would on 24 February 2008.
I do not believe Mr Brown’s assertion, on which Securency relied (that I have quoted at [302] above), that had Dr Berry not signed the termination letter, Securency would have exercised one of its powers to terminate the agency agreement. That is because, first, a unilateral termination would have converted Dr Berry from a person who was using his influence with Governor Soludo and other senior Nigerian officials to advance Securency’s interests, into a person who would be likely to impede those interests. Moreover, Governor Soludo’s determination, as demonstrated in both the November 2007 and March 2008 meetings was that Dr Berry in his own right would be involved in the construction of an opacification plant. Securency was conscious of the importance of that objective of the Governor and if it had terminated the agency of Dr Berry and GSC, it would have shown the Governor that it was not going to fulfil his vision. That is why Securency provided Dr Berry with the 16 March 2008 letters and Mr Chapman had Dr Berry meet Governor Soludo in London on 24 March 2008 – namely to show the Governor that Securency was moving in the direction he had set.
Secondly, after 15 May 2007, Securency, through Mr Chapman, had recently extended, by his handwriting on the second version of the signed agency agreement, its territory to include the ECOWAS States (see [96], [104] above). Dr Berry had been consistent in urging Securency to develop a proposal for the opacification plant, which Governor Soludo also wanted.
Thirdly, there was no evidence to support Mr Brown’s assertion that Dr Berry’s and Contec’s legal issues or the arbitration had had any effect on his other relationships with the Nigerian Government or his capacity to do business with it. Nor would Dr Berry be able to build such a plant if any of his legal issues, in fact, had compromised his relationship with that Government. Dr Berry had been open about that dispute, yet there was no document that Securency produced in evidence that referred to it as a problem. Mr Chapman’s text of 14 July 2008 was the first document in evidence in which anyone from Securency referred to the arbitration. More significantly, in their internal responses to Dr Berry’s 29 September 2009 letter, neither Mr Brown nor Mr Chapman said a word about the existence, let alone significance for Securency, of any concern about the arbitration as at February 2008 or otherwise.
Fourthly, there was no evidence that Dr Berry was inhibited, or contemporaneous evidence that Securency in 2007 and 2008 perceived him to be inhibited, in performing the agency at all, or by reason of his inability, unwillingness or failure to travel to Nigeria. And, fifthly, Mr Brown’s suggestion that Dr Berry was in ill health or hospitalised had no evidentiary basis. Nor was Mr Brown’s asserted reasoning consistent with his request for, and use of, Dr Berry in the meeting in late November 2007 which was an important step in procuring the January 2008 order from the Mint. None of the documents that Mr Ellery, Mr Mamo, Mr Brown and Mr Chapman created immediately after that meeting suggested any problem with Dr Berry’s performance of his agency. Moreover, Mr Brown said that, immediately before that meeting, he and Dr Berry discussed the possibility of Dr Berry’s appointment as Securency’s agent in India (see [137] above). Likewise, Securency through Mr Chapman continued to make use of Dr Berry after 24 February 2008, including having him meet with Governor Soludo in London on 24 March 2008.
Sixthly, Securency argued that it had two modes of terminating the agency agreement, namely on 60 days’ written notice (cl 2.6(a)) or on 30 days’ written notice within 30 days of its expiry (prior to its automatic renewal for a further two years) (cl 3.2). Under cl 2.6(a) Securency had the right to issue a 60 day notice at any time, whereas, under cl 3.2 each party could issue a 30 day notice in the 30 day period leading up to the expiry date. In the event, no such notice was issued and no document in evidence contemplated that Securency would enforce its right to issue such a notice. The 15 August 2007 memorandum contemplated that, on 30 June 2008, being the expiry date (before the automatic two year renewal), Dr Berry’s supposed health problems might require a succession plan to be in place.
Securency’s action in tricking Dr Berry into signing the termination letter in February 2008 suggests that it was not prepared at the time to use its contractual right to terminate. Generally, the policy of the law is that a court will be disinclined to allow a party to a contract to take advantage of its own wrongdoing: Gnych v Polish Club Ltd (2015) 255 CLR 414 at 426-427 [45] per French CJ, Kiefel, Keane and Nettle JJ. If one party to a contract has the right to avoid it without default by the other but does not do so, the other may enforce the contract according to its terms: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441-442 per Latham CJ, Williams and Fullagar JJ.
Here, Securency’s fraud (or contravention of s 52 of the Trade Practices Act) constituted by Mr Chapman’s making of each of the false representations to induce Dr Berry to sign the termination letter on 24 February 2008, requires that letter to be treated as vitiated, i.e. as being of nor force or effect: Lazarus Estates Ltd v Beasley [1956] 1 QB 702 at 712-713 and Farley (Aust.) Pty Ltd v JR Alexander & Sons (Queensland) Pty Ltd (1946) 75 CLR 487 at 493. In SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189 at 196 [15], Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ quoted from both those cases to explain how this general policy of the law as to the effect of fraud applies in circumstances such as these, namely:
In Lazarus Estates Ltd v Beasley [[1956] 1 QB 702 at 712-713] Denning LJ declared:
“No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever: see as to deeds, Collins v Blantern [1 Smith’s Leading Cases, 13th ed, p 406; (1767) 2 Wils KB 34 [195 ER 847]]; as to judgments, Duchess of Kingston’s Case [2 Smith’s Leading Cases, 13th ed, 644, at pp 646, 651; (1776) 20 State Tr 355 at 538-539, 543-544]; and as to contracts, Master v Miller [1 Smith’s Leading Cases, 13th ed, 780, at p 799 (1791)].”
Earlier, speaking in this Court of a fraudulently obtained trade mark registration, Williams J said in Farley (Aust) Pty Ltd v JR Alexander & Sons (Qld) Pty Ltd [(1946 75 CLR 487 at 493]:
“Fraud is conduct which vitiates every transaction known to the law. It even vitiates a judgment of the Court. It is an insidious disease, and if clearly proved spreads to and infects the whole transaction (Jonesco v Beard [[1930] AC 298 at 301-302]).” (emphasis added)
In Master v Miller (1791) 4 TR 320 [100 ER 1042] at 329, Lord Kenyon CJ identified the principle (with which Ashurst J expressly agreed at 332, as did Buller J in his dissent at 337-338, and the Exchequer Chamber affirmed the King’s Bench’s decision: Master v Miller (1793) 2 (H) Bl 141 [126 ER 474]) that:
no man shall be permitted to take the chance of committing a fraud, without running any risk of losing by the event, when it is detected.
I am of opinion that Securency, having committed the fraud that I have found, by making the two false representations on 24 February 2008, cannot now be permitted to assert that it had a lawful alternative path, that it chose not to take (viz: terminating the agency agreement under cll 2.6(a) or 3.2), to achieve the very position that its fraud procured.
I note, but need not decide, what Dr Berry and GSC argued, that the retrospective operation of the termination letter involved a departure from any contractual method of prospective termination on 30 or 60 days’ written notice. They contended that it followed that the parties had treated the termination letter as a contract but it was not supported by consideration and so had no contractual or other legal efficacy. However, had I to decide that question, cl 20.11 of the agency agreement provided that the parties could amend or vary any provision in writing, and the termination letter (if it were effectual, untainted by Securency’s fraud or misleading conduct that I have found) evinced an intention to do just that.
What is the duration of the period for which the agency agreement as automatically renewed would have run?
Securency also relied on the policy decision its board made in about July or August 2010 to terminate all agencies. Securency argued that, as a result of that policy decision, it was likely that Dr Berry’s and GSC’s agency would have come to an end, had they remained as its agents until that time.
However, in my opinion, had Securency engaged in honest dealing in Nigeria and with Dr Berry and GSC, it is likely that they would have had the opportunity to construct and operate an opacification plant there. Of course, if that occurred then the agency agreement (or its promised replacement) would have no further work to do at the point when the plant began operating. Dr Berry and GSC would have had to make the capital investment to construct and then operate the opacification plant.
In my opinion, it is not readily possible on the material before me to assess any loss flowing from the loss of the opportunity to construct and operate an opacification plant in Nigeria as damages on a contractual or other basis. No contract for the construction of such a plant was ever made nor was there any contract for the supply of the polymer film to Nigeria or for the sale by the owner of such a plant of the printed notes or opacified polymer. Nor was there any evidence as to the costs of financing or operating an opacification plant in Nigeria or any basis for assessing what, if any, level of profitability operating it would have and how long it would take to recover the cost of the capital sum invested. There are many unknown financial integers in the matters that I have just raised that affect the ability to make any meaningful assessment of damages on the present evidence. Dr Berry and GSC did not lead any evidence of these matters. However, they complained that Securency had not given full discovery of the requisite financial material necessary to calculate their damages.
In those circumstances, my preliminary view is that one basis on which Dr Berry’s and GSC’s damages can be assessed is by reference to the presumed continuation of the agency agreement, as automatically renewed, based on the actual sales to Nigeria that Securency has made, less any just allowances for expenses that Dr Berry and GSC would not have had to make while they did not perform their role as agent.
It may be that Dr Berry and GSC are able to identify in the evidence, or, if entitled to obtain discovery or production of further documents by Securency, to rely on material by reference to which it is possible to ascribe a value to the commercial opportunity that they lost of potentially being able to construct and operate an opacification plant in Nigeria, on the land owned by Safi in Abuja or elsewhere. I have not concluded that that opportunity is valueless, but rather that on the material currently before me, as I understand it, in the absence of any argument to this point, there does not appear to be a means of attributing value to it: cf. Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355-356 per Mason CJ, Dawson, Toohey and Gaudron JJ. Securency is likely to have documents that relate to the costs of constructing and operating the Mexican opacification plant and its profitability. The parties can address this question, if they wish, in preparing the orders that I will make to fix or quantify damages or other compensation.
It may be appropriate to appoint a referee to take evidence and report on the assessment of such damages, including making findings as to the value of the lost opportunity to construct and operate an opacification plant, as to the invoice sales that have occurred and as to the deductions that Securency was authorised to make from the commencement of the agency agreement. That could include deductions for any bona fide expense that JH Marketing, JHM Global or SPT incurred, if any of them did anything of substance as an agent under their respective agencies that would have been an expense that Dr Berry or GSC would have had to incur had they been allowed to carry out their duties after 24 February 2008.
Rectification
Dr Berry and GSC also sought rectification of the agency agreement so that it would read that the right to commission survived termination and remained in force while ever Securency continued to make invoice sales in Nigeria. There is no credible evidence that this was the common intention of not only Dr Berry (and through him, GSC), but also Securency. Securency’s draft of the standard terms of its agency agreement, settled by its solicitors in 2005 (unlike the forms of some agency agreements in evidence that officers of Securency had adapted in other respects from that standard form), provided in some emanations for the agent’s right to commission to cease on termination, which is what the agency agreement itself provided, and in others such as the JH Marketing, JHM Global and SPT agency agreements, for the agent’s right to commission to continue for two, or a number of, years after termination. There is nothing unreasonable or inappropriate in either term. After all, if the agency were terminated, any replacement agent would have to deal in the territory with any issues, including the procurement of new orders, and ordinarily could expect to be paid a commission for its activities in the role. It is unlikely that Securency would agree that it would pay commission twice over for more than two years if Dr Berry and GSC lost their agency in circumstances untainted by fraud or misleading conduct.
Notably, in submissions, senior counsel for Dr Berry and GSC did not refer to any written or oral evidence to support their claim for rectification. In addition, there is little commercial sense in a right to commission for an unlimited, indeed perpetual, period in the absence of contemporaneous cogent and clear evidence of language and or conduct that this was the common intention of both parties: cf. Simic v New South Wales Land and Housing Corp (2016) 339 ALR 200 at 223 [103]-[104] per Gageler, Nettle and Gordon JJ, see too at 211-213 [40]-[46] per Kiefel J.
Dr Berry and GSC sought that their commission be calculated at the rate of 15% that Dr Berry negotiated with Mr Brown in Mumbai in June 2006 (see [89] above).
Because I have found that the termination letter was ineffective, the agency agreement should operate according to its terms, including in respect of the rate of commission and provision for automatic renewal.
Dr Berry’s and GSC’s other claims
Securency argued, and I agree, that Dr Berry and GSC made an “all or nothing” case in the sense that if I accepted Dr Berry’s evidence about the 24 February 2008 meeting, he and GSC were entitled to relief, and if I did not accept him, they were not so entitled. There is no utility in considering Dr Berry’s and GSC’s claims based on Securency’s unconscionability under s 51AB of the Trade Practices Act or unconscientious conduct in the eye of equity. That is because Securency’s fraud in procuring Dr Berry’s signature on the termination letter has unravelled all.
Conclusion
For these reasons, Dr Berry and GSC are entitled to relief. The parties agreed that I should publish my conclusions and afford them an opportunity to make submissions as to the orders appropriate to give effect to those conclusions. I will do so.
I certify that the preceding three hundred and thirty-five (335) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 19 December 2017
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