Boylan v Farthing & Anor No. Scgrg-96-2204 Judgment No. S6505

[1997] SASC 6505

BOYLAN v  FARTHING and ANOR

Full Court
Coram: Perry, Debelle and Bleby JJ

Perry J

This appeal arises out of proceedings in the District Court in which the appellant was plaintiff and the respondents were defendants.  The trial Judge awarded the appellant damages amounting to $2,000, but found in favour of the respondents’ counterclaim, as to which he awarded the respondents $92,005.37.  Offsetting one against the other, he entered a judgment in favour of the respondents against the appellant in the net sum of $90,005.37.  It is against that judgment that the appeal is brought to this Court.

The case arises out of dealings between the parties with respect to a used car business conducted by the respondents at Reynella and Christies Beach.  The appellant became associated with the respondents in the running of the business.  Essentially, the case involves the resolution of claims and counterclaims arising out of the period over which the appellant was involved in the business.

The hearing in the District Court leading to the judgment under appeal was the second trial of the action.  The first trial took place in April 1994 before another Judge.  That Judge made an order in the form of a declaration that the appellant had wrongfully repudiated an agreement between the parties, to which I will in due course refer.  He further ordered the payment of certain money amounts, on the one hand by the appellant to the respondent Alegna Pty Ltd (“Alegna”), and on the other hand by the respondents to the appellant.  Additionally, he further ordered an account and inquiry to be taken before a Master as to various matters of account between the parties.[1]

[1]    See the judgment dated 26 July 1994 of Greaves J, judgment No D3118.

There was an appeal and cross appeal to this Court against that judgment.  The Full Court dismissed the cross appeal but allowed the appeal.  It set aside the judgments on the claim and counterclaim and remitted the action for re-trial.[2]

[2]    Judgment of the Full Court (Cox, Olsson and Mullighan JJ), 27 April 1995, unreported, judgment No S5057.

The re-trial involved a somewhat drawn out hearing, extending over 14 sitting days between March and October 1996.

The learned trial Judge delivered what he described as interim findings on 21 August 1996.  On that occasion, effectively, he pronounced final judgment in the terms which I have indicated.  He took that course as he was not in a position at that stage to publish reasons.  He subsequently published reasons dated 1 November 1996.[3]

[3]    Judgment No D3496.

It does not appear that the judgment was drawn up and sealed in the ordinary way.  But there was placed before this Court a document headed “Certificate of Judgment”.  This gives the date of the judgment as the date upon which the reasons were delivered, and further certifies that on 8 November 1996, an additional sum of interest was fixed at $15,000.

Although he was represented by counsel throughout the District Court proceedings, the appellant appeared in person on the hearing of the appeal to this Court.

To understand the issues agitated on the appeal, it is necessary to set out some of the background to the dealings between the parties.

The dealings between the parties - matters of background

The respondent Stephen Farthing, aged about 45 at the time of the hearing, migrated to Australia from the United Kingdom in 1959.  After some experience as a car salesman in Melbourne, he took up a position as manager of a used car yard in Coburg.  Eventually, he became self-employed in the car industry and operated his own business in Melbourne.

In 1988, he came to Adelaide where he established another car yard called Bob’s Cheaper Cars, which he conducted from an address at Main South Road, Morphett Vale.  The business expanded.  In about 1990, on accounting advice, he incorporated the respondent Alegna.  Thereafter, the company became the vehicle for the operation of the business.  After some changes of name, the business eventually was conducted under the name of Farthing Motor Company.

In the meantime, the company shifted its operations to premises at Reynella.  Some time later, in about August 1991, it opened another yard at Christies Beach.  By 1992 the respondent Stephen Farthing was successfully operating both car yards through the agency of Alegna, under the business name Farthing Motor Company.

The appellant, Fred Boylan, is Stephen Farthing’s uncle.  He migrated to Australia from the United Kingdom in 1962.  He is about ten years Stephen Farthing’s senior.  He trained as an electrician and subsequently conducted various businesses as an electrical contractor in the United Kingdom, Australia, the Middle East and other places.  He retired in about 1988, eventually settling at Victor Harbour.

The appellant became restless in his retirement and began spending time at his nephew’s business premises.  He became interested in used car trading.  The learned trial Judge found that Mr Boylan was a quick learner and was experienced in matters of commerce. He was given access to the books and studied the business operation.  He began to help out in the business.

What started as informal arrangements became more regular.  This applied more particularly to the first three months of 1992.  The appellant said in evidence:

“I went there (the Reynella yard) in January (1992) initially for three months, just to see if I liked it and to see if it was suitable for me, or if I was suitable for it.”

In April 1992, the appellant suggested that he acquire a share in the business.  Discussion followed.  Eventually, it was agreed that the appellant would contribute $50,000 cash, and Alegna would put in stock to the value of a further $100,000.  Effectively, there would be a partnership which would operate from the Reynella yard only, from which the cars would be sold.  Profit on sales stood to be distributed as to 70% to Mr Farthing and as to 30% to the appellant.

The precise status of Alegna with respect to the partnership does not appear clearly to have been established by the evidence.  Indeed, it may well be that the appellant and Mr Farthing never applied their minds to the status of Alegna vis a vis the partnership.  The evidence points to it being simply the vehicle through which the trading operation of the partnership was conducted.  Whatever the status of Alegna with respect to the partnership arrangements, I do not think that it matters for present purposes.  This is for reasons which will become clear later in this judgment.

At all events, the “partnership” was effective from 1 May 1992.  The early months of its operation were punctuated by two events of significance.  The appellant was absent abroad in the months of July and August, and difficulties arose with the landlord as to the continuation of the lease of the Reynella premises.  Those difficulties resulted in litigation and eventually a very costly settlement from the point of view of Alegna.  The learned trial Judge accepted evidence indicating that an amount of the order of $70,000 was eventually paid out by way of legal costs and damages in order to settle with the landlord and secure an ongoing lease of the premises.  This represented a very substantial inroad indeed into the cash resources of the company which was a relatively small business operation financed by modest capital resources.

The appellant continued to make drawings while he was overseas.  During the same period, the operation the company was below expectations, partly as a result of the distraction of the litigation with the landlord.

When the appellant returned from abroad in August 1992, Mr Farthing suggested that in view of the poor financial position of the company overall, the appellant should stop making drawings until the situation improved.  Despite that suggestion, the appellant continued to draw wages.

Other differences arose between the parties.  Mr Farthing continually maintained that the appellant had failed to make the contribution of $50,000 capital which had been promised.

At one stage, a new arrangement was struck.  It was agreed that as of September 1992, Mr Boylan would take up a one-third interest in Alegna; effectively, both the Reynella and Christies Beach businesses would be amalgamated; and in lieu of the arrangement involving sale of the partnership stock from the Reynella yard, it was agreed that the appellant would take up a one-third share in the whole of the business operation conducted at both yards.

A further dispute arose with respect to the issue of a share certificate representing a third interest in the company.  Notwithstanding the agreement that the appellant would take up a one-third holding in the company, Mr Farthing persistently refused to issue a share certificate, partly by reason of his consistent assertion that the appellant had failed to make the agreed contribution of capital.

Events went from bad to worse.  The relationship between the parties continued to deteriorate during 1993.  In December 1993, the appellant obtained the advice of a solicitor, Darryl Goodmund, as to the financial position of the company.  He was given to take to Goodmund, what the learned trial Judge described as the “primary books” of the company.  In the words of the learned trial Judge:

“He (the appellant) believed his solicitor photocopied the same or relevant portions thereof.  He said that he did that as he was then concerned about his recognition in the company as he was being asked to provide $50,000 and he wanted his solicitor to fully investigate the books of the company before he invested his money.”

The evidence of Mr Farthing was to a somewhat different effect.  While agreeing that the appellant had access to all of the books in December, he said that early in December 1993 the appellant intimated that he wished to go his own way and take over the Christies Beach yard.  But later in December the appellant advised Mr Farthing that he wanted other adjustments to be made, and that the matter was not so simple as taking over the Christies Beach operation.

At all events, matters came to a head in January of 1994.

Mr Farthing returned from a trip to Melbourne on about 7 January 1994.  On his return, he ascertained that the appellant had not paid the rent on either premises but had continued to take what he described in his evidence as substantial personal drawings.  At that stage, Mr Farthing rang the appellant and advised him that he had “had enough” and effectively that he wanted nothing further to do with him.  Mr Farthing stated that he was going to withdraw the stock from  Christies Beach and dispose of the business conducted on those premises.

Further discussions took place at Mr Farthing’s father’s house.  The stand taken by the appellant was that as he was a minority shareholder, he wanted his rights recognised.  Mr Farthing stated that Christies Beach could be disposed of.  They could have the books audited, and that if, on an audit of the books, anything was shown fairly to be due to the appellant “he would be reimbursed”.

In an endeavour to formalise a dissolution of the arrangements between them, at the meeting between them at Mr Farthing’s father’s house, a document, part of which had already been prepared by the appellant, was produced and discussed.  There was a dispute between the parties in their evidence at the trial as to precisely how the document came into existence, and whether or not the whole of it was written out by the appellant.

Mr Farthing’s initial reaction to what the appellant had prepared was to call off discussions, as he did not think that the proposal expressed in the document represented a basis upon which they could agree.  Effectively, however, his father acted as some sort of intermediary, and the discussion was pursued further.  As a result, eventually both parties signed a two-page document.  That document was tendered in evidence (P10).  I will refer to it hereafter as the agreement.  Its terms were as follows:

“PAGE 1

14 JAN 1994  (signed) T Farthing

IN MAY 1992 IT WAS AGREED BETWEEN STEPHEN FARTHING AND FRED BOYLAN THAT THEY WOULD BECOME BUSINESS PARTNERS IN THE REYNELLA CAR BUSINESS OF FARTHING MOTOR COMPANY.

STEVE WAS TO PROVIDE $100,000 OF CAPITAL FOR A TWO THIRDS SHARE, AND FRED WAS TO PROVIDE $50,000 FOR A ONE THIRD SHARE.  THIS ARRANGEMENT WAS TO BE EFFECTIVE FROM 1ST MAY 1992.

IT WAS LATER AGREED TO AMALGAMATE THE REYNELLA BUSINESS WITH THE CHRISTIES BEACH BUSINESS.  FRED WAS NOT REQUIRED TO PROVIDE FURTHER CAPITAL BUT ASSUMED ONE THIRD OF WHOLE BUSINESS AND ONE THIRD OF THE LIABILITIES.  THIS NEW [(initialled) FB] AGREEMENT COMMENCED ON 1ST SEPTEMBER 1992.

FRED AND STEVE HAVE NOW DECIDED TO TERMINATE THE ABOVE AGREEMENT BY NEGOTIATION ON A ONE THIRD TWO THIRDS DIVISION OF EVERYTHING.

(signed) F. Boylan   17.1.94      (initialled)   SF        (initialled) FB 17.1.94

PAGE 2

14.1.94

P1     YES
P2       “
P3       “
P4       “

FRED TO HAVE C/B
     “    “   PAY  CHRISTIES  B  O/GOINGS  FROM  9.1.94

“    “ TAKE     “             “ RESPONSIBILITIES “ 24.1.94 
  (initialled) FB, (initialled) SF
STEVE TO PAY REYNELLA O/GOINGS FROM 9.1.94
    “       “ TAKE    “         RESPONSIBILITY FROM 24.1.94
  (initialled) FB, (initialled) SF
WHOLESALE STOCK VALUE TO GO INTO FMC ACC No 7790 112872 UPON SALE.
SELLING YARD TO RETAIN PROFITS FROM 9.1.94.
STOCK TO BE DIVIDED BY 24.1.94 ON 1/3 - 2/3 RD BASIS.
STEVE TO HAVE ACCESS TO BANK LOAN MONIES AS THEY BECOME AVAILABLE.
ACC No 7790-12899 TO BE STEVE’S ACCOUNT FROM 9.1.94
No 9.
No 10
FRED TO ARRANGE INSURANCE ON C/B BY 24.1.94
F & S AGREE TO HONOUR ANY LIABILITIES THEY MIGHT HAVE TO FMC.
          ACCOUNT  (initialled) FB, (initialled SF)  
FINAL                   TO BE BY ARBITRATION (initialled) FB

(signed) F. Boylan
17 JAN 1994

(signed) S. Farthing               (signed) S. Farthing
17.1.94”

It will be seen that the first two paragraphs of the agreement relate to what I have described as the “partnership” arrangement effective from 1 May 1992.

The following paragraphs on the first page relate to the revised arrangement between the parties effective from 1 September 1992.

The remainder of the document was intended to express the basis upon which the parties had agreed finally to resolve their differences and to go their separate ways, the appellant taking the Christies Beach yard and Mr Farthing retaining the Reynella yard.

The reason why there is a reference to certain adjustments to be made as from 9 January 1994, is that it was from that day that, following Mr Farthing’s return from the trip to Melbourne and the discussion which then took place between them, the Christies Beach and Reynella businesses had been conducted independently of each other, the former by the appellant, the latter by Mr Farthing.

It was on 9 January 1994 that in the course of a telephone call, Mr Farthing said that he would dispose of Christies Beach and the appellant would no longer be a signatory on the cheque account.

In the agreement the cryptic words “Fred to have C/B” record the fact that it was agreed between the parties that the appellant would take over and run the Christies Beach yard as his own.

The expression in the agreement “wholesale stock value to go into FMC account No 7790 12872 on sale” reflected the fact that the parties had intended, inter alia, that upon the sale of any vehicles from the Christies Beach yard, the amount of the “stock value” of the vehicle was to be paid into that account.  When the agreement then goes on to refer to “selling yard to retain profits from 9.1.94”, this indicated that anything obtained over and above the stock value (and perhaps other expenses associated with the sale) would be retained by the yard from which the sale was effected.

I refer to those aspects of the operation of the agreement because of their importance in the course of events which transpired after 17 January 1994.

Events after 17 January 1994

Mrs Cornish gave evidence at the first trial that she had purchased a vehicle from the appellant at the Christies Beach yard on 16 February 1994.  She said in evidence that she started to write out the cheque to “Farthings” in the belief that this represented the entity with whom she was dealing, but that the appellant interrupted that process and asked her to make the cheque payable to “Christies Beach Motors”.  He said that he was having the business name changed to that name.  Accordingly, she crossed out “Farthings” and wrote “Christies Beach Motors”.

Her further evidence was that on the next day she obtained a bank cheque for $7,000 in favour of Christies Beach Motors, and delivered the cheque to the appellant the same day.

The appellant admitted at the first trial that he had paid the bank cheque into his own bank account.  The learned trial Judge made findings based on that evidence, and other evidence given during the course of the hearing before him.  The relevant findings are in the following passage from his reasons for judgment.

“During the trial before me, Mr Boylan admitted that a Mrs Cornish attended at Christies Beach and he sold her a car that was owned by the company.  When asked about where the moneys from that sale went, he said “into the nominated account that we were both supposed to pay into”.  It was put to him about telling her to change her cheque and he said “I don’t recall that I did that, but I’m not saying that I didn’t.  If I did, then there’ll be a cheque with an alteration on it, it’s as simple as that”.  He was then asked specifically about the bank cheque made payable to Christies Beach Motors and his answer was “possibly”.  When put to him specifically where those moneys were paid and that they went into his account, he said “it may have because if it was made to Christies Beach Motors it would have gone into my account and then I would have paid whatever was due to Farthing Motors”.  It was put to him that no money had been paid to Farthing Motors, and he answered that by the fact that if it was a cheque it would normally take four, five or six days to clear and while waiting for the cheque to clear he found his business was illegally closed.

There is no doubt that money did go into Christies Beach, and, there is no doubt that he directed Mrs Cornish to make the cheque out to Christies Beach Motors rather than Farthing Motor Company.  It should have been paid to Farthing Motor Company, as it owned the vehicle, but Mr Boylan placed that money into his account.  However, it was a bank cheque and there was no need to wait until it was cleared.”

Mr Farthing was unaware of the transaction with Mrs Cornish at the time it took place, as by then each of the parties were trading out of their separate yards.

The evidence of Mr Farthing, which the learned trial Judge accepted, was that during the course of his operation of the yard at Reynella he received accounts for what he regarded as Christies Beach trading, which he took to the appellant at Christies Beach to attend to.  His evidence was also that the rent the Christies Beach yard fell into arrears, and that the appellant did not honour his obligation which Mr Farthing regarded as arising from the agreement, to attend to payment of it.

Indeed, Mr Farthing formed the view that the appellant was generally not meeting his obligations under the agreement.

On 21 or 22 February 1994 he confronted the appellant with what he described as a “handful of accounts” which he asserted were the appellant’s responsibility to pay.

On Wednesday 23 February the appellant visited Mr Farthing’s parents.  In effect, he accused his mother of keeping, with respect to Alegna, “dodgy books”.  Mr Farthing’s mother, upset at the suggestion, rang him.  Eventually that evening the appellant attended Mr Farthing at his house.  Mr Farthing’s evidence was.

“I advised Fred that I would be down in the morning either to receive payment or evict him.”

On the same night, that is, 23 February, the appellant apparently had a heart attack and was admitted to hospital, from which he was discharged two days later on 25 February 1994.

On Thursday 24 February, Mr Farthing called at the Christies Beach premises to inspect the business records, but was unable to gain access to them.  On the following day, that is, Friday 25 February, he again attended at the Christies Beach premises and inspected the records, to use his expression, “to see if Fred had met his requirements as per the agreement”.  He formed the view that a number of vehicles belonging to Alegna had been sold and were unaccounted for by any payment into the account designated in the agreement.  One of the transactions in which he thought that had occurred was with respect to Mrs Cornish, whom he rang to see if she had taken delivery of her car, which she confirmed had occurred.

Upon being given that information, he inspected the stock of vehicles in the yard, which was about thirty cars.  There is a schedule attached by law to vehicles displayed in used car allotments.  He took the view that the schedules on the cars indicated that they were Alegna vehicles.  Mr Farthing thereupon arranged for the vehicles to be removed.  He also took away a number of business records which he regarded as the property of Alegna.  Effectively, he closed down the Christies Beach operation.

The appellant then instructed solicitors who made an application to the District Court for an urgent injunction.  That was granted on 15 March 1994 as a result of which fifteen vehicles were returned.

The remaining issues between the parties were left for the court to determine.

The issues at the trial

A question arises as to just what the issues were before the trial Judge, in particular whether it was right of him to treat the case as an accounting exercise, and more particularly, an exercise to be performed on the basis of the agreement of 17 January 1994.  That was the basis adopted by Mr Farthing’s accountant, Mr Murdock, whose evidence was eventually accepted by the learned trial Judge.

The statement of claim centred on the removal by Mr Farthing of vehicles on 25 February 1994 from the Christies Beach yard which the appellant alleged was in breach of the agreement and an act of conversion.  The appellant sought an interlocutory injunction requiring the respondents to re-deliver the vehicles into the possession of the appellant and damages for breach of contract and conversion.

As I have indicated, fifteen of the vehicles were returned before the hearing, pursuant to the injunctive relief granted by Judge Lee.

The issues which ultimately went to trial were more particularly defined in the defence and counterclaim filed by the respondents, and the reply to the amended defence and counterclaim filed by the appellant.

While the amended defence and counterclaim sought damages against the appellant for breach of contract and for conversion of the vehicles retained by him, as well it sought a declaration that the appellant had repudiated the agreement, and further, an accounting between the parties of the appellant’s “entitlement for the period from May 1992 to 9 January 1994”.  It also advanced a claim for approximately $82,000 “being moneys owed” to Alegna.

In his reply, the appellant sought, as well as the relief in the statement of claim, a declaration that the respondents or one of them had breached the agreement, damages for breach of contract, and in the alternative, “an inquiry as to the damages sustained” by the appellant by virtue of the respondents’ alleged breach of contract.

Importantly, in the defence and counterclaim the respondents assert and refer to the agreement of 17 January 1994, and they dispute the appellant’s interpretation of it.  [See paragraphs 7.1 at 1.23 and 8.1 at 1.25.]  Although in the body of the defence and counterclaim, the respondents assert a breach or repudiation of the agreement, in the prayer for relief they seek only a declaration that the respondents had breached it.

At various stages during the trial there was discussion as to just what issues would be addressed by the trial Judge.

During the course of his opening, Mr Forrest of counsel for Mr Boylan indicated that the appellant did not accept the accuracy of the accounting which had been performed by Mr Murdock.  He said:

“   the plaintiff has said that on a proper accounting various things have to be taken into account as being either a share of profits taken by one or other or not being a share of the profits taken by one or the other.  The plaintiff says that a proper accounting would have to be properly audited with the source documents available.”

He went on to indicate that that would be a very lengthy and time-consuming exercise to be performed during the course of the hearing.  He went on to say:

“What the parties in effect propose is that Your Honour should hear whatever evidence is necessary to be heard to determine the factual disputes that have arisen between the parties, leaving aside the accounting exercise.  That would have to, we say, follow those factual findings.  What we would be urging from Your Honour at the end of the case is an order for an accounting of the affairs of the company under the auspices of the Master and preferably and proper audit accountant, with the parties having the right to make submissions to the accountant.”

Mr Moffa of counsel for the respondents indicated that he was in basic agreement with that approach.

But the parties did not adhere to that position during the course of the trial.  Eventually, the parties accepted that the learned trial Judge, rather than a Master, should perform the accounting exercise and arrive at whatever final adjustment should be made between the parties.  The learned trial Judge said, before the completion of the examination of chief of the first witness, Mr Boylan:

“My whole concern with the plaintiff’s case, just reading the copy documents .... was that this was very much an accounting exercise”,

to which Mr Forrest for Mr Boylan replied that that was so:

“But it is the principles of the accounting that are in dispute.”

Mr Murdock’s first report was tendered at an early stage of the trial, and after four or five days of hearing, on 15 March 1996 the learned trial Judge adjourned the trial over to 22 July 1996 when it resumed again.

This was for two reasons.  In the first place, ostensibly it was to give to Mr Boylan’s advisers the opportunity to make a perusal of what were described as the primary books of account.  The respondents denied the genuineness of the suggestion that they had not previously had an opportunity to do so, having regard to the access given by Mr Murdock to the books in December 1993.  Be that as it may, the second reason for the adjournment was to enable closer perusal of Mr Murdock’s report and to enable a report to be obtained from an accountant on behalf of the appellant.

Such a report was in fact prepared by Mr R.M. Kennedy, an accountant engaged on his behalf.  In his report, Mr Kennedy challenged the accuracy of some of the matters set out in Mr Murdock’s report, for example, the value of the vehicles introduced by Mr Farthing, and made some other criticisms of the report.

On the resumption of the hearing, Mr Kennedy was called to give evidence,  But his evidence and his report were of limited value in that his report did not offer an accounting other than for the months of May and June 1993.  He did not attempt an accounting down to 9 January 1994, which was the critical exercise for the purpose of finally adjusting the position between the parties.

It seems to me that there can be no doubt that the actions of Mr Boylan, having regard to the findings of fact made by the learned trial Judge, and in particular as to Mr Boylan’s conduct in failing to adhere to the agreement, amounted to a repudiation of it.  Equally, I do not think that it could seriously be suggested that the actions of Mr Farthing on 25 February 1994 could be characterised as other than an acceptance of the repudiation which he perceived (rightly, as the trial Judge found) had been committed at that stage by Mr Boylan.

But if the agreement was to be regarded as repudiated by Mr Boylan and the repudiation was accepted by the appellant, the basis upon which any final accounting between the parties should proceed, and the associated question of damages between them for damage of contract, would become problematic.

But the trial did not go forward on that basis.  Instead, it was accepted by both sides that there should be an accounting drawn up on the footing of the application of the agreement of 17 January 1997.

There was some dispute as to the construction of the agreement.  But at the end of the day, it was common ground that the agreement was to govern the final accounting between the parties.

That position is illustrated by the written submissions made by counsel for Mr Boylan before the learned trial Judge.

Paragraph 4.6 of those submissions states, inter alia:

“The fact of the matter is that it was agreed that the plaintiff would have a one-third share in the ownership (not profit) with the second defendant.  That this is the case is beyond doubt by reference to P10.”

[P10 was the agreement of 17 January 1994.]

Paragraph 8.1 states in part:

“As to the discussion between the plaintiff and the first defendant on or about 21.2.94, the plaintiff submits that this was a sham by the first defendant to try and give himself an excuse for avoiding the agreement evidenced by P10.”

The argument on appeal confirms what I have indicated.  It was at no time suggested by the appellant on the appeal that the case involved other than an ascertainment of what he suggested to be a true construction of the agreement of 17 January 1994 and its application to the state of affairs between the parties, as an instrument to determine what balance was due by way of a final adjustment between them.  His concession that the agreement was still on foot (which is contrary to any suggestion that it was repudiated and that the repudiation was accepted) appears, for example, in the written submissions put forward by the appellant at paragraph 4.9 when he says, inter alia:

“Murdock’s accounts are contrary to the admitted agreement of the parties as recorded in the judgment of Judge Greaves.”

The same position is assumed in the submissions put to this Court on the hearing of the appeal by the respondents.  Mr Rice of counsel put his submissions on the basis that the agreement governed the termination of the relationship between the parties, and that on a proper evaluation of the accounting evidence, and in particular that of Mr Murdock, the conclusion by the learned trial Judge as to the amount due by the appellant to the respondents was properly reached.

So the issue for this Court is whether or not the learned trial Judge erred in accepting the evidence of Mr Murdock as to the manner in which the agreement was to be applied to the state of accounts between the parties, and in accepting the figures advanced by Mr Murdock by way of a final accounting between the parties, allowing for the small adjustments which the learned trial Judge made to those figures before reaching the amount for which he pronounced judgment.

The case on appeal

As I have indicated, the appellant presented his case on appeal in person.  Necessarily, the time allowed for him and for counsel for the respondents for the presentation of oral argument was limited.  Both were permitted to put in further written submissions on the conclusion on the hearing of the appeal.

The appellant is clearly an intelligent and articulate man, and experienced in matters of commerce.  While he put forward a lucid case in support of the appeal, he raised several issues which had not been raised before, or put emphasis on arguments which did not loom large before the learned trial Judge.

The notice of appeal itself raises no less than 33 grounds, although many of them overlap.

This Court must be astute to ensure that in these circumstances, the appellant does not attempt to mount a new case, different from that presented at first instance.

One issue raised on the appeal may be disposed of shortly.

Fresh evidence on the appeal

By application dated 21 May 1997, the appellant sought an order which is described in the application in the following terms:

“1..... Seek leave to submit NEW EVIDENCE on the APPEAL.

(a).... The affidavit of Stephen Farthing dated 28.10.96.

(b)... The affidavit of Stephen Farthing dated 19.12.96.

(c)... Key financial data supplied by the Australian Securities Commission dated 14 May 1997.

2...... All other evidence made in support of this application.”

By order made on 23 May 1997, I referred the application to the Full Court to be dealt with on the hearing of the appeal.  As to the proposed new evidence, the affidavit of Stephen Farthing dated 28 October 1996 was filed in the District Court in support of an application by the respondents seeking an injunction to preserve assets said to be owned by the appellant, pending execution of the judgment which the respondents were entitled to on the basis of the interim findings delivered by the learned trial Judge in that court on 21 August 1996.

The affidavit sworn by Mr Farthing on 19 December 1996 was sworn in support of an application made to this Court, the notice of appeal by then having been lodged, that the appellant provide security for costs of the appeal.

Both affidavits are in substantially similar terms and deal with certain dispositions of assets made in recent years by the appellant, including details of payments by him into various bank accounts, and information obtained from the Australian Securities Commission (“ASC”) as to the extent of shareholders’ equity in a company, Christies Beach Motors Pty Ltd, of which the plaintiff was a director.  The details are given of other financial transactions associated with the conduct of the business of Christies Beach Motors Pty Ltd, in part based upon information given by Terry Allen, a former employee of that company.

The so-called “key financial data” is in fact the 1994 annual return of Alegna lodged in the ASC on 27 February 1995.

In his affidavit in support of the application to adduce fresh evidence on the appeal, the appellant complains that the process of discovery between the parties which preceded the District Court trial was deficient in that the respondents, so he asserts, failed to make full and complete discovery of what he describes as “all financial records of the company” (Alegna), by inference relying on some of the information contained in the two affidavits of Stephen Farthing and the 1994 annual return of the company.

In my opinion, there is no merit in this part of the application to adduce fresh evidence on the appeal.  The process of discovery is essentially a pre-trial process.  There was every opportunity for the appellant, during the course of the interlocutory stages of the District Court action, to ensure that full and adequate discovery had been made by the respondents.

As I have indicated, the financial records of the company were handed over to his solicitors as early as December 1993, and the constantly reiterated assertion by the appellant that he has not had full access to those documents has no foundation in fact.

The 1994 annual return of Alegna was clearly available, if not by other means, by searching the records of the ASC.  It could have been obtained from the ASC well ahead of the date of commencement of the trial in the District Court, as it was in the records of the ASC before that date.

There is no other information in the affidavits of Mr Farthing to which I have referred which, as the appellant suggests, is relevantly inconsistent with evidence given at the trial by Mr Farthing, or which could support the suggestion made by the appellant that he had in any way previously misled the court.

The application to adduce fresh evidence on the appeal in no way satisfies the very stringent rules applicable to such applications.  In my opinion, it should be dismissed.

Findings as to credit

At the forefront of the appellant’s complaints was his attack on the learned trial Judge’s findings as to credit.  Indeed, he took up much of his oral presentation on the hearing of the appeal pursuing that aspect of the matter.

The learned trial Judge made specific findings as to credit.  He noted at the outset of those findings that he had observed both the appellant and the respondent Stephen Farthing “over a long period”.  He noted that Stephen Farthing in particular was cross-examined for many days about his relationship with his uncle, and in detail on every transaction.

He went on to observe:

“I believe Mr Boylan is a man who may well be obsessed with, I would think minor issues and I doubt whether in any situation he would not (sic) be one to compromise.  For instance, his explanation of the deletion of the ‘lease’ and inserting ‘responsibility’ is impossible to understand, bearing in mind the tenor of those discussions.

However, his actions thereafter reflect badly on him and particularly I will later mention the Cornish contract where I regard the actions of Mr Boylan as blatantly deceitful.”  (The reference to the substitution of the word “responsibility” for the word “lease” is a reference to one of the changes made to the agreement P10.)

The learned trial Judge stated that he believed Mr Farthing to have a more accurate memory than the appellant, and that he preferred the evidence of Mr Farthing “where there is any clash between the parties”.

In placing so much weight upon this aspect of the appeal, the appellant has failed to recognise the disadvantage in which the appeal court is placed as compared with the trial Judge in assessing the credit of witnesses.  So much depends upon the impression gained by the learned trial Judge from the demeanour of the witnesses.

It is only in the most limited of circumstances that it would be right for an appeal court to interfere with the trial Judge’s findings as to credibility, or findings of fact based upon his or her assessment of the witnesses or parties.

In De Vries and Anor v Australian National Railways Commission and Anor[4] the matter was put in this way (see the joint judgment of Brennan, Gaudron and McHugh JJ):

[4] (1993) 177 CLR 472 at 479.

“More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact.[5]  If the trial judge’s finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge ‘has failed to use or has palpably misused his advantage[6] or has acted on evidence which was ‘inconsistent with facts incontrovertibly established by the evidence’ or which was ‘glaringly improbable’.[7]”

[5]   Citing Brunskill (1985), 59 ALJR 842; 62 ALR 53; Jones v Hyde (1989) 63 ALJR 439; 85 ALR 23; Abalos v  Australian Postal Commission (1990) 171 CLR 167.

[6]    Citing SS Hontestroom v SS Sagaporack [1927] AC 37 at 47.

[7]    Citing Brunskill (1985) 59 ALJR at 844; 62 ALR at 57.

Giving proper weight to those considerations and to the inestimable advantage which the learned trial Judge had in seeing and hearing the witnesses, it would be wrong for this Court to interfere with his findings as to credit.

I do not overlook that in the course of his attack on this part of the judgment under appeal the appellant referred to the transaction involving Mrs Cornish, and what he alleged was the error of the learned trial Judge in reading and taking into account her evidence given at the first trial.  As will be seen, in my opinion, there was no error in the learned trial Judge’s treatment of the evidence given at the first trial.  Insofar as his view as to the appellant’s conduct with respect to the transaction with Mrs Cornish was a matter taken by him into account in determining issues of credit between the parties, in my opinion, he was entitled to do so.

In all the circumstances, in my view, the appellant’s attack upon the findings as to credit fails.  That failure in turn, has a substantial effect upon the outcome of a number of the other grounds of appeal.

The evidence from the first trial

In ground 18 of the appeal, the appellant complains:

“The learned trial Judge erred in relying on evidence given by Mrs Cornish at the first trial.  The learned trial Judge gave no warning to counsel that he proposed to selectively rely on evidence given during the first trial and therefore counsel were not given the opportunity of commenting on that evidence and/or objecting to the learned trial Judge’s intention to refer to and rely on evidence given in the first trial.”

That ground of appeal sits uncomfortably with ground 2 which reads:

“The learned trial Judge erred in refusing to accept as an exhibit the evidence of the first defendant, (Mr Farthing) from the first trial.”

In fact the learned trial Judge had recourse to the evidence given at the first trial with the concurrence of both counsel who were before him.

The question was discussed on several occasions.  The learned trial Judge suggested to the parties at an early stage of the proceedings that it might save time if he was to be permitted to read the evidence from the first trial.  In fact, summaries of that evidence were prepared by the parties in order to direct the learned trial Judge’s attention to aspects of the evidence given at the first trial which were thought by each of the parties to be of importance.

The hearing was adjourned from 8 to 12 March 1995 to allow the summaries to be prepared and for the learned trial Judge to read the evidence from the previous trial.  When the action resumed on 12 March, he said that he had read the evidence of the appellant and of Mr Farthing “with a bit of detail” and scanned the other evidence.

Not only, as I have indicated, was his perusal of the evidence of the first trial with the concurrence of the parties, but the critical evidence given by Mrs Cornish at the first trial was specifically put at some length to the appellant during the course of his cross-examination during the second trial.  The essential elements of the dealing with Mrs Cornish were matters which he conceded during the course of that cross-examination.  It was open for the learned trial Judge to find, as he did, that the appellant’s evidence in cross-examination on this topic was evasive, vague and non-responsive.

In hindsight, I think it might have been better if the precise basis upon which the evidence from the first trial was to be read by the learned trial Judge had been made more clear.  I think it better practice for a trial Judge in that situation specifically to mark as an exhibit in the second trial the evidence from a previous hearing which he is asked to take into account, and at the same time to note in the transcript the basis upon which it is to be read, that is, whether it is to be treated as though the witnesses had given evidence before him or her, or whether it is to be treated as evidence of the truth of the assertions made by the witnesses at the first trial, or however it might be agreed that it is to be evaluated.

In this case it seems clear enough that the learned trial Judge simply took the earlier evidence into account as part of the general body of evidence before him without, on the face of it, giving it undue weight.  It seems clear from his reasons for judgment that the critical issues were resolved by the learned trial Judge by reference to the evidence called before him.

While as I have said, the use to be made of the evidence given at the earlier trial could have been made more explicit and the basis of its use recorded more clearly, I am not persuaded that in having regard to that evidence, the learned trial Judge either acted contrary to the understanding reached with counsel, or made improper use of it.

As to ground 2 of the appeal, to which I have already referred, the learned trial Judge did not “refuse to accept as an exhibit the evidence of the first defendant from the first trial”.  On the contrary, he made it clear that he had read it, together with the evidence given at the first trial by the appellant.

Access to accounting records and to Mr Murdock’s report

The learned trial Judge deals in his reasons for judgment with complaints by the appellant with respect to access to what he described as the “primary books of account”, and an alleged inability to obtain timely independent advice from another accountant as to Mr Murdock’s accounting, under the heading “Application for adjournment during Mr Boylan’s evidence”.

As to access to the books of account, I have already referred to the fact that in December 1993 Mr Boylan obtained all of the primary books of account of the company and had an opportunity to submit the same to a solicitor or accountant.

Several days into the trial, Mr Forrest of counsel for the appellant sought an adjournment “to enable the plaintiff to obtain some accounting advice”.  Before the hearing, he or those instructing him had been supplied with an undated report of the respondent’s accountant Mr Murdock.  The learned trial Judge summarised Mr Forrest’s application in this way:

“... he (Mr Forrest) felt by reason of the matters in that report (Mr Murdock’s undated report) the plaintiff’s claim was prejudiced and he required an adjournment to have that report and no doubt the primary books of account inspected by an independent accountant so his client, as he said, would not be prejudiced ...”

The learned trial Judge went on:

“Counsel for the defendant strenuously opposed this application and questioned the merit of the application.  He pointed out that the plaintiff at all times, even as early as December 1993, had full access to company accounts.  During the first trial numerous and relevant accounting records were produced.  Then the defendants had requested an accounting and what is referred to as the ‘first report of Mr Murdock’ was certainly in the hands of the plaintiffs since early in the year which is regarded, and properly so, as the major working document.  The subsequent “further Murdock report” to the solicitors for the defendants had been made available to the plaintiff and the solicitors.  This was the report with a covering letter dated 28 April 1996.”  (emphasis added)

The learned trial Judge was mistaken in referring to the report with a covering letter dated 28 April 1996 as having been made available to the appellant prior to the application to adjourn made on 15 March 1996.

However, despite opposition from the respondents to the adjournment, the learned trial Judge in fact adjourned the trial until 6 May 1996 to enable the appellant to obtain independent accountancy advice.  By then the report of 28 April 1996 was available.

Mr Kennedy’s report dated 3 May 1996 was put before the learned trial Judge and made available to counsel for the respondent before the resumption of the hearing, which in fact did not take place on 6 May, but on 23 July 1996.

As at the date when the hearing resumed, there was no reason to suppose that the appellant or his advisers had other than an adequate opportunity to obtain whatever accounting advice he wished.

On the resumption of the hearing, the learned trial Judge noted with some surprise that the report prepared by the appellant’s accountant Mr Kennedy was confined to the months of May and June 1992.

In response to an application by the appellant’s counsel, he allowed the re-opening of the examination in chief of the appellant to deal with what were suggested to be some issues raised by the accountant.  The appellant then gave some evidence challenging some of the figures relied upon by Mr Murdock.

It seems to me that there was no basis to criticise the course of the trial or the rulings made by the learned trial Judge with respect to the opportunity for the appellant to obtain and present accounting evidence.  On the contrary, the learned trial Judge leant over backwards to ensure that the appellant had a more than adequate opportunity to deal fully with the accounting issues, and to obtain appropriate accounting advice.

There is nothing in the grounds of appeal in which the appellant advances criticisms of the learned trial Judge as to this aspect of the matter.

On the contrary, there is much in the respondent’s contention that the course of the trial indicates a deliberate attempt on the part of the appellant to delay and procrastinate.

The $70,000 payment

I have already referred to the fact that the learned trial Judge found that $70,000 was paid out by Alegna by way of legal fees, and an amount necessary to procure a settlement with the landlord pursuant to which Alegna was able to secure a renewed lease of the Reynella premises.

The appellant complains that this finding “was against or is not supported by the evidence” (notice of appeal ground 17).  More specifically, on the hearing of the appeal, the appellant contended that payment of a total of $70,000 was not supported by any records in the books of the company, and the learned trial Judge erred in failing to satisfy himself that  it had been paid.

The evidence of Mr Farthing at the trial was that $70,000 was paid in total to settle a dispute with the landlord’s receiver.  In particular his evidence was:

“The net result was within a couple of grand of $70,000 ... but the final figure was very close to 70 grand.

Q...... Was that paid.

A...... It has been, yes.”

There was no challenge to that evidence during the course of the trial.  But written submissions given to the learned trial Judge[8] in part read:

[8]    Page 17, para 5.1.

“5.1.. The first defendant seeks to portray a picture of financial crisis of the business.  The first defendant falsely accuses the plaintiff as being the cause of this crisis.  The fact that the second defendant was in any sort of financial crisis at any time between June 1993 and January 1994 has not been established.  The 1994 financial accounts were not put in although the first defendant maintained that the company had continued to be in financial crisis since January 1994.  The crisis has been manufactured by the first defendant as a way of justifying his actions on 25/2/94.  The first defendant said that Alegna had paid costs of $70,000.00.  Where is the evidence of that?”

The answer is in the evidence of Mr Farthing, which was not challenged during the course of the hearing.

Even more importantly, what has to be borne in mind is that the learned trial Judge based his judgment upon the accounting evidence which he accepted, largely that of Mr Murdock with some small adjustments which are irrelevant for present purposes.  Mr Murdock’s various accounts were put forward, and he was examined and cross-examined at great length.  During the course of the cross-examination, no question was put by counsel for the appellant as to the amount which Mr Farthing had asserted in his evidence had been paid with respect to the litigation with the landlord.

The criticism of the learned trial Judge’s findings in this respect must be rejected.

The accounting evidence

The appellant complains that the learned trial Judge wrongly understood the accounting evidence, and in particular did not-

“... properly understand or appreciate the evidence of Mr Kennedy, and in particular that the evidence of Mr Kennedy demonstrated the unreliability of the evidence of Mr Murdock”  (Ground 13).

Both accountants were, of course, called and their reports tendered.  As I have already explained, the report and evidence of Mr Kennedy was of limited value in view of the short period of time to which it related.

While there could not be any serious challenge to the qualifications of both witnesses, who were experienced chartered accountants, Mr Murdock did have the advantage of a wide experience over a long period of time in preparing the accounts for a number of car dealers.  Furthermore, he had an intimate knowledge of the books of account kept within the business in question, having attended to the accountancy affairs of Mr Farthing from about 1989.

Mr Murdock reported as to three discrete periods.  The first, which he described as “the Reynella agreement”, covered the period 1 May 1992 to 30 June 1992.  The second was what he described as “the company agreement” covering the period 1 July 1992 to 9 January 1994.  Finally he reported on what he described as the “post-9 January 1994 activity”.

It was only as to the first of those periods that Mr Kennedy attempted any accounting, although he had some more general comments to make by way of criticism of some of the approaches taken by Mr Murdock applicable to the remaining periods.

A critical point of difference between the two accountants was that Mr Kennedy accepted instructions from the appellant that the agreement between the parties was that “wages would be paid outside of the profit sharing arrangement”.  As a result, he treated drawings as “wages”.  On the other hand, Mr Murdock treated the so-called “wages” as drawings by each of the appellant and Mr Farthing.  The learned trial Judge’s preference of the evidence of Mr Farthing over that of the appellant in that respect is of some importance in understanding the differences between the two accountants.

Furthermore, Mr Kennedy relied on assertions made by the appellant as to stock and sales and various associated matters, but those assertions were not established to the satisfaction of the trial Judge.

At the end of the day, it was for the learned trial Judge to reach his own view as to the final state of accounting between the parties, having regard to the evidence given by the two accountants against the background of whatever findings the learned trial Judge was prepared to make as to disputed areas of fact.

The learned trial Judge’s analysis of the accountancy evidence is set out in detail, and there would be no point in repeating that detail in the course of this judgment.  It is sufficient to state that for the first period, although Mr Murdock suggested that the appellant owed a total of $7,255.14, this was adjusted by the learned trial Judge for the reasons set out in his judgment to $6,855.  As to the second period of accounting, the learned trial Judge said that he could find “no basis on the evidence to fault the findings of the result of this period as a liability for Mr Boylan to the company of $84,305”.  He took the same view as to the short period after January 1994 which, on the evidence of Mr Murdock, indicated a liability by the appellant to the company of $844.

Insofar as the evidence of Mr Murdock was predicated on the basis of his construction of the agreement, it is implicit from the learned trial Judge’s findings that he found no fault with that construction, or for that matter, with the other assumptions made by Mr Murdock.  Although the appellant criticises some of Mr Murdock’s expressions, such as “notional liquidation”, I am satisfied that the reality of the accounting exercise performed by him reflected the adjustments required by the agreement.

In reaching his conclusions, the learned trial Judge preferred the evidence of Mr Farthing over that of the appellant with respect to the latter’s alleged capital contributions.  Again, this was a matter open to the learned trial Judge, and I am unable to perceive any basis upon which the relevant findings in that respect can successfully be challenged on the appeal.

In the result, the learned trial Judge calculated the amount which he found due by the appellant as follows:

“First period to 30 June 1992  $6,855.14
Second period to 9 January 1994  84,305.86
Third period post 9 January 1994  844.37
  _________
  Total  $92,005.37
  ========

For the reasons which I have given, I would not interfere with that conclusion.

The finding as to damages for conversion

This aspect of the matter was but faintly argued by the appellant.  Having regard to the evidence given at the trial, there was very little basis established for this award.

The cars were removed by Mr Farthing from the Christies Beach yard on 25 February 1994, and on 15 March 1994 Judge Lee directed by way of mandatory injunction that fifteen vehicles be returned forthwith.  The appellant was without those vehicles for a period of less than three weeks.

The appellant suffered the heart attack which resulted in his admission to hospital, to which I have earlier referred, on 23 February 1994.  It is not clear on the evidence when he was in a fit state to resume trading, and just what profit might have been lost by reason of the conversion as opposed to the unrelated interference with his ability to conduct his business by reason of his state of health.

In all the circumstances, no basis has been established for interfering with the award of $2,000 on this head.

Standing back from the matter, I think it fair to say that despite the trenchant criticisms of the learned trial Judge advanced by the appellant, the essential arguments advanced by the latter were untenable.  They were either a re-statement of arguments put at the trial, which the learned trial Judge was not shown to be in error in rejecting, or an attempt to re-argue the case on bases which were neither established in the evidence nor advanced at the trial.

I have not paused to deal with every ground of appeal, although I have considered them all.  I have stated my reasons for rejecting the more substantial of the arguments put by the appellant.  In my opinion, none of the grounds advanced by him is made out.

I would dismiss the appeal.

Debelle J

I agree.

Bleby J

I agree that the appeal should be dismissed and for the reasons given by Perry J.