Callander v Ladang Jalong (Australia) Pty Ltd
[2005] WASC 159
CALLANDER -v- LADANG JALONG (AUSTRALIA) PTY LTD & ORS [2005] WASC 159
| Link to Appeal : |
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| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 159 | |
| Case No: | CIV:1037/2000 | 2 - 6 AUGUST 2004 & 10 - 16 FEBRUARY 2005 | |
| Coram: | MCKECHNIE J | 20/07/05 | |
| 42 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's claim allowed against first and second defendants Claim dismissed against third fourth and fifth defendants | ||
| B | |||
| PDF Version |
| Parties: | WILLIAM JOHN CALLANDER LADANG JALONG (AUSTRALIA) PTY LTD ZAINAL ABIDIN BIN MOHAMED ISA AHMED TERMIZI KASSIM BODIN ISMAIL SHAH CHEW TEN TOH |
Catchwords: | Trade practices Misleading representations of future conduct Onus whether relied upon Whether caused loss and damage Assessment of damages Trade Practices Act 1974 (Cth) s 82 Turns on own facts |
Legislation: | Trade Practices Act 1974 (Cth), s 51A, s 52, s 82 |
Case References: | Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874 Jones v Dunkel (1959) 101 CLR 298 Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 196 ALR 257 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
LADANG JALONG (AUSTRALIA) PTY LTD
First Defendant
ZAINAL ABIDIN BIN MOHAMED ISA
Second Defendant
AHMED TERMIZI KASSIM
Third Defendant
BODIN ISMAIL SHAH
Fourth Defendant
CHEW TEN TOH
Fifth Defendant
(Page 2)
Catchwords:
Trade practices - Misleading representations of future conduct - Onus whether relied upon - Whether caused loss and damage - Assessment of damages - Trade Practices Act 1974 (Cth) s 82 - Turns on own facts
Legislation:
Trade Practices Act 1974 (Cth), s 51A, s 52, s 82
Result:
Plaintiff's claim allowed against first and second defendants
Claim dismissed against third, fourth and fifth defendants
Category: B
Representation:
Counsel:
Plaintiff : Ms P M V Edward
First Defendant : Mr K E Yin
Second Defendant : Mr K E Yin
Third Defendant : Mr K E Yin
Fourth Defendant : Mr K E Yin
Fifth Defendant : Mr K E Yin
Solicitors:
Plaintiff : Verschuer Edward
First Defendant : David Taylor
Second Defendant : David Taylor
Third Defendant : David Taylor
Fourth Defendant : David Taylor
Fifth Defendant : David Taylor
(Page 3)
Case(s) referred to in judgment(s):
Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874
Jones v Dunkel (1959) 101 CLR 298
Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 196 ALR 257
Case(s) also cited:
Nil
(Page 4)
- MCKECHNIE J:
Introduction
1 This is a case about a goat-breeding venture that went wrong causing pain to many people. With the benefit of hindsight, it is not hard to see that the venture had difficulties abounding at every stage and was probably foredoomed to failure. In part, that was because a central figure in the venture, as I shall describe, Mr Paul Gregory Harrison (aka Amir Harrison), deceived all of those whom he drew into his grandiose plans to establish a viable goat-breeding business in Australia utilising the expertise of Mr Callander (the plaintiff) and the finance of Ladang Jalong (Australia) Pty Ltd ("LJA") (the first defendant). In part, the project failed because LJA did not put in the capital sum it had promised.
2 Mr Callander spent some years working for the venture and has ended up with nothing. He has brought an action against LJA and the directors of LJA who are respectively the second, third, fourth and fifth defendants.
3 During the trial it was customary to refer to the defendants by single names and I shall do likewise, referring to the second defendant as "Zainal", the third defendant as "Termizi", the fourth defendant as "Ismail" and the fifth defendant as "Annie" or "Annie Toh". This also corresponds to the way in which the defendants are referred to within the various documents that comprise the exhibits. I shall generally refer to the plaintiff as Mr Callander.
Background to the venture
4 The first defendant, LJA, was incorporated on the 25 March 1994. LJA at all material times was wholly owned by Ladang Jalong Sendirian Berhad ("LJSB") a Malaysian Pty Ltd company which in turn wholly owned by Perak State Agricultural Development Corporation, a statutory body owned by the Perak State Government of Malaysia. LJA was, in effect, a trading entity for the Perak State Government and the directors of LJA, Zainal, Termizi and Ismail, were all public servants. Over the years, LJA purchased three properties in Western Australia. The first, known as Minston Park, was located at Lot 50 Spillman Road, Bindoon, and was purchased on 8 July 1994.
5 The second, known as the Jalong Goat Dairy, was located at Bailup Road, Gidgegannup, and was purchased on 29 January 1998.
(Page 5)
6 The third, known as Kambing Park, was located at Lot 13 Gray Road, Bindoon, and was purchased on 5 August 1998.
7 In April 1997, Zainal visited Perth and had general discussions about possible ventures with Paul Amir Harrison. Mr Harrison, who has connections in Malaysia, is Australian-born and a convert to Islam. He was the director of Malaysia Australia Business & Trade Development Pty Ltd ("MABDT").
8 On his return to Malaysia, Zainal wrote to Mr Harrison (Exhibit 84) as follows:
"Thank you for entertaining Termizi and myself on our recent visit to Perth. We have studied your various proposals but has decided initially to concerntrate [sic] on acquiring a goat farm/business (dairy & livestock).
Did we discuss or even mention about goat farm enterprise? If your organisation do have such a proposal, we would like to know the acrage [sic], the asking price and the location. These informations [sic] will help us to make a firm decision to work with your group."
- Mr Harrison replied positively.
9 Mr Harrison had a partner, Dr Deen Kuthuthubeen ("Dr Deen"). Dr Deen failed to meet with Zainal on his visit to Kuala Lumpur in November 1997 but by a fax dated 25 November 1997 (Exhibit 88) sent to Zainal:
"I am sending you details of William John Callander, an expert in goat breeding and goat farm management who will be ideal to make the project work and work very profitably. You can meet him when you are in Perth."
10 Mr Callander had been referred to MABT in October 1997 and over the next few months negotiations proceeded between Mr Callander and Mr Harrison, and Mr Harrison and LJSB, to go into a joint venture breeding Boer goats.
11 In January 1998 (Exhibit 117), Zainal approached Annie to be the cheque signatory "and basically keep an eye on overall the expenses of both farms". She was duly appointed in February 1998.
(Page 6)
12 Mr Callander says he commenced employment with LJA on 26 January 1998 and was instructed to locate further suitable land and purchase stock for LJA. Whether this was so is an issue in case but is not pleaded as a cause of action.
13 On 27 January 1998, two days before the goat dairy was purchased, LJA registered a business name "Jalong Goat Dairy".
14 In February or March 1998, Mr Harrison gave instructions to a solicitor, John Rouphael, to draw up a shareholders' deed to reflect the proposed tripartite venture. Mr Rouphael's evidence was that Mr Callander was present at the first meeting at Mr Harrison's office when Mr Harrison gave him firm instructions in relation to the sums of money involved, shareholdings, directorships and the role of Mr Callander as CEO. Mr Callander denies this. Mr Rouphael prepared a draft shareholders' deed according to the instructions. It contained both standard and specific clauses.
15 On 16 March 1998, Mr Callander, Dr Deen and Mr Rouphael travelled to Malaysia and met with Zainal and others in Ipoh on 17 March 1998. It is at this meeting that representations are said to have been made which form the heart of the plaintiff's claim.
Mr Harrison
16 In addition to being the director of MABTD, Mr Harrison was also a director of LJA from 10 August 1999 until 18 February 2000 and one of two directors of Jalong Australia Goats Pty Ltd ("JAG") from 5 August 1997. JAG had been incorporated on that date under the name Malaysia Australia Food Technologies Pty Ltd ("MAFT") but changed its name to JAG on 22 May 1998.
17 Because of Mr Harrison's central role in many of the transactions which are often recorded in the exhibits, and either letters that he wrote and letters that were sent to him, his presence looms large in the trial. Neither side called him to give evidence. The plaintiff's counsel argues that his absence at the trial means that I am more readily able to draw inferences adverse to the defendants: see Jones v Dunkel (1959) 101 CLR 298. That might be so if his absence was unexplained. However, Mr Harman, whose evidence I accept, gave pertinent evidence of the attempts that had been made to secure Mr Harrison's co-operation and attendance at the trial to give evidence. I consider that Mr Harrison's absence has been satisfactorily explained by the defendants and it would
(Page 7)
- not be proper to draw any adverse inference against the defendants solely from his absence.
18 On the central and major claim by Mr Callander, in any event, it probably matters little for reasons I will shortly set out.
The plaintiff's claims
19 Mr Callander's claim against the defendants is in three parts. The most substantial claim is for damages arising under the Trade Practices Act 1974 (Cth) for representations which are said to be misleading and deceptive and which were made to him orally by the second, third and fourth defendants on behalf of the first defendant at a meeting in Ipoh, Malaysia, in March 1998. Associated with this claim is a claim for damages for breach of an implied term in a contract.
20 There is a claim for hire of certain equipment which Mr Callander provided to the first defendant either by way of agreement or by way of quantum meruit. It is claimed the equipment was used generally for the benefit of the first defendant.
21 There is also a claim for property which the first defendant, through its agents, refused to allow Mr Callander to remove from the property.
22 The meeting in Ipoh is central to the plaintiff's case although, remarkably, there was little evidence led by the plaintiff in relation to the oral representations which formed the basis of his action. There are conflicts of evidence between the plaintiff and other persons who were present which I need to resolve.
The plaintiff
23 It is appropriate to make some comments about Mr Callander. Mr Callander has a Certificate in Agriculture and has been a farm consultant all his life. He became involved in goat farming in about 1990 when he "did a lot of research on the effects of goats" and in particular the Boer goat. He became interested in the cross-breeding of Boer goats and feral goats when he found that the most widely eaten meat in the world was goat meat which is apparently acceptable to all religions. After he had worked in Indonesia he was introduced to Mr Harrison. Mr Callander gave Mr Harrison information about goats which Mr Harrison incorporated into a number of documents. It was Mr Harrison's initial role to find a joint venture partner where Mr Callander would add his expertise in goat breeding.
(Page 8)
24 Mr Callander is a man of advancing years. In general, I thought he was honestly recounting events to the best of his recollection. However, his recollections necessarily were of events which occurred sometime in the past and were on occasions about matters to which he probably did not pay much attention at the time. As he said at TS180:
"…I've got a basic understanding of a lot of these things but I'm more a farmer and not an accountant or lawyer or anything like that. As I say, I've got a basic idea of what is contained in them."
25 I observed that Mr Callander is dyslexic, to a degree, and has difficulty in reading, a difficulty demonstrated in Court. This no doubt affected his understanding of certain documents from time to time. He reads in a halting, hesitant manner.
26 My evaluation of Mr Callander as a witness is not helped by the fact that on controversial matters he was often asked leading questions in examination-in-chief which substantially lessened the weight that I could attach to the answers he gave. At times, I felt that his evidence suffered to a degree from reconstruction and this feeling was reinforced by the mode of questioning and response. While I do not think he was dissembling, for all these reasons, I approach his evidence with some caution.
The shareholders' deed (Exhibit 27)
27 I will deal now with the shareholders' deed because it is central to these proceedings and particularly to many matters raised in the defence. It was executed by Mr Callander, LJA and MABDT.
28 As I have previously set out, Mr Rouphael drew the deed and attended the meeting in Ipoh. His evidence was that the shareholders' deed contained standard provisions as well as provisions that reflected specific instructions from Mr Harrison. The instructions he received from Mr Harrison were in Mr Callander's presence. Prior to travelling to Ipoh, Mr Rouphael provided a copy of the draft shareholders' deed to Mr Harrison. He did not receive any instructions from Mr Callander. In his draft deed he referred by name to JAG (not MAFT) and inserted an ACN number which was that of MAFT, subsequently JAG.
29 Mr Rouphael did not do a company search. In fact, MAFT, whose directors were Mr Harrison and Dr Deen, changed its name to JAG on 22 May 1998.
(Page 9)
30 As to the meeting at Ipoh and amendments Mr Rouphael said at TS874:
"I don't remember it being signed in Malaysia. I remember it being finalised. There was some discussion in a meeting and some amendments were made by me and they were typed by the receptionist up there in Ipoh, but my recollection is that it wasn't signed in Ipoh. My recollection is that it was signed here in Perth and it was in my office. I think Mr Callander came to my office.
MS EDWARD: Why would he do that?---To sign the document.
The document wasn't in any way different in Ipoh to what it was in your office, was it?---Exactly, yes."
31 This evidence is in contrast with that of Mr Callander (at TS316):
"The first time I saw the shareholders' agreement was at Ipoh at the meeting and I never received a copy of that until September 99 when I approached John Rouphael and requested a copy. I was never given a copy; I was never given a signed copy to this day.
MR YIN: Your evidence is that you first met John Rouphael at the airport?---That's right.
I suggest to you that you had in fact at least three meetings with him beforehand?---I'm telling you I never had any meeting with him. The first time I met Mr Rouphael was at the airport.
I suggest to you that these meetings were attended by Mr Harrison as well. You don't recall any such meeting between Mr Rouphael and Mr Harrison?---I never had any meeting with Rouphael other than when I met him at the airport to leave.
And in the course of these meetings Mr Harrison told Mr Rouphael in your presence what was going to - what was to go into the shareholders' deed. Would you agree with that?---No, I would not, because I never had any meeting prior to going to Malaysia with Mr Rouphael. So you're - you know, how can I answer something that I've never done?"
(Page 10)
32 Mr Callander also gave evidence that the shareholders' deed was signed on 17 March 1998 at Ipoh. Mr Callander was unsure whether the seals of the other companies who were parties to the deed were placed on the deed at Ipoh.
33 I am unable to decide between Mr Rouphael and Mr Callander as to whose recollection is better. I have already made comment concerning Mr Callander. I have no reason to disbelieve Mr Rouphael but he has no particular notes from which to refresh his memory and is relying solely on memory. Moreover, it is clear that he knew Mr Harrison and that Mr Harrison had given him particulars that contained details about Mr Callander.
34 In the end, I think nothing much turns on the conflict. It is acknowledged on all sides that the shareholders' deed was executed by all parties. Even if Mr Callander had met Mr Rouphael earlier nothing in particular turns on that. While a resolution of the issue might affect the reliability of Mr Callander's evidence about the meeting in Ipoh, I have already indicated that I approach his evidence with caution.
35 I turn now to the terms of the shareholders' deed itself. The Deed recites:
"A. The shareholders have agreed that the company conduct the business which business shall be for the mutual benefit of each of the parties to this deed.
B. The shareholders have entered into this agreement to record their aims and objects in relation to the company and to provide for the operation and administration of the company."
36 Under the definition "Business":
"… means the Business of Jalong Australia Goats Pty Ltd (CAN 079 606 447) of Level 3, 201 Adelaide Terrace, Perth which essentially entails goat stud farming and goat breeding for the purpose of engaging in large volume breeding and overseas export."
37 By clause 2 there are "Conditions Precedent":
"2.1 This agreement is subject to and will have no force or effect until all of the shares have been fully subscribed.
(Page 11)
- 2.2 Subject to clause 2.4 each of the shareholders must make all appropriate applications, diligently pursue those applications and generally use all reasonable endeavours to ensure that the conditions are fulfilled as soon as is reasonably practicable after the date of this agreement.
2.3 If the conditions are not satisfied on a date agreed by the shareholders in writing then, subject to that shareholder having complied with clause 2.2 a shareholder may at any time after that date terminate this agreement by giving notice in writing to the other shareholders.
2.4 On service of a notice under clause 2.3 this agreement has no further effect and each shareholder is released from:
(a) its obligations to further perform this agreement except those imposing on its obligations of confidentiality; and
(b) any liability under this agreement except in respect of a breach of clause 2.2"
39 By clause 4 "Structure of the Company":
"4.1 The initial capital of the company shall be $475,000.00. The shareholders must procure that on the effective date the issued capital of the company is held legally and beneficially as follows:
Shareholder% Shareholding in the Company
Ladang 75 (Ladang shareholding)
MABTD 20 (MABTD shareholding)
John 5 (John shareholding)
100%
and for this purpose each shareholder must subscribe at par of $1.00 per share for the number of shares held by
(Page 12)
- the shareholder. Any further issue of shares shall be issued to the shareholders in the same proportion as above.
- 4.2 Ladang agrees to pay the company a premium of FOUR HUNDRED AND SEVENTY FOUR THOUSAND DOLLARS ($474,000.00) in respect of the total shareholding.
…"
40 Clause 5 "Board of directors":
"5.1 The number of directors (excluding alternate directors) must be five (5) unless the shareholders otherwise unanimously determine three (3) to be appointed by Ladang, one by MABTD and one shall be John who shall be the Chief Executive Officer;
5.2 The chairman of the board of directors will:
5.2.1 be a director appointed by Ladang
5.2.2 have a casting vote as chairman in addition to any vote he may otherwise have as a director.
..."
41 Clause 7 "Management":
"7.1 The company will be managed on a day to day basis by the chief executive officer who will report and be responsible to the board of directors for the company's activities and operations.
7.2 The chief executive officer will:
(a) be a director; and
(b) be appointed and removed by the board."
42 Curiously, in the particulars to par 23 of the substituted statement of claim (alleging that the defendants made reckless misrepresentations) the particulars provide:
(Page 13)
- "That the first defendant by its directors, the second, third and fourth defendants, breached the terms of the shareholders' deed in all material respects and in particular failed to pay JAG a premium of $474,000.00 in respect of its total shareholding."
43 I say curiously because the plaintiff's case is that the shareholders' deed is of no effect.
44 The wholly amended defence reads by par 5.c:
"That the respective rights and obligations of the parties to the said joint venture were entirely comprised in the shareholders' deed as pleaded below …".
45 And by par 7.d:
"The various powers and obligations of the second, third fourth and fifth defendants qua directors of the first defendant were governed by the provisions of the shareholders' deed …".
46 At par 11. it is pleaded:
"As to paragraph 14 of the statement of claim, the defendants plead as follows:
a. As to sub-paragraph (a) admit the allegations therein and plead further that the shares were in fact fully subscribed. Accordingly the term of the Shareholders Deed pleaded therein was satisfied.
b. As to sub paragraph (d) admit the allegations therein and plead further that the premium was paid.
c. Otherwise admit the remaining allegations."
47 By par 12, which is a direct response to the plea as to representations made in par 15 of the statement of claim it is pleaded:
"…
b. The Joint Venture was comprised in a written agreement, viz the Shareholders Deed (as defined and pleaded in paragraph 3 of the statement of claim)."
(Page 14)
48 And that the defendants will rely upon the shareholders' deed including clause 25 which recites that the shareholders' deed constitutes the entire agreement.
Conclusion of the effect of the shareholders' deed
49 It became abundantly clear in the trial that LJA never paid the premium of $474,000 for shares. In consequence, I conclude and so find that the shareholders' agreement never came into effect. It is true that at a later time LJA paid money to JAG. However, this money was paid by way of a loan much later and at a time when LJA was requiring payment of certain expenses, including lease expenses, back from JAG. Evidence was given by Zainal, Termizi and Annie that it was intended in due course that there would be a share issue and the loan would be converted into capital. I consider this evidence to be a reconstruction on their part and do not accept it. The contemporaneous documents do not give support for a conversion of the loan into equity. The documents make clear that moneys advanced by or on behalf of LJA to JAG were always regarded as loans.
50 As an example, when JAG went into liquidation, LJA lodged a proof of debt claiming moneys as a loan.
51 There is a world of difference between purchasing shares at a premium so as to constitute the capital of a company and lending a company money with the requirement (partly met in this case) that the money be repaid. In the end, it seems to be accepted by the defendants that the money was not a premium but a loan (defendant's closing submissions par 35). I find that the shareholders' deed never came into operation for the reason that LJA failed to comply with its obligation to pay $474,000 by way of premium for the shares. To the extent that the defendants rely upon the shareholders deed, those parts of the defence fails.
52 This finding has significance when the representations which the plaintiff alleges were made are considered.
The allegedly misleading representations as pleaded
53 The representations are pleaded in statement of claim as follows:
"15. The plaintiff signed the Shareholders Deed and entered into the Joint Venture in reliance upon the oral representations of the second, third and fourth defendants on behalf of the first defendant to the effect that:
(Page 15)
- (a) They would ensure that all necessary steps were taken to effect the transfer to the plaintiff of 5% of the shares in JAG;
(b) they would ensure that all necessary steps were taken to appoint the plaintiff to the board of directors of JAG;
(c) they would do all things necessary to ensure JAG acted for the Joint Venture for the mutual benefit of the plaintiff, the first defendant and MABTD;
(e) the first defendant would lease its property at Minston Park referred to in paragraph 2 above as were required for the purposes of the Joint Venture to JAG for a period of not less than five years;
(f) the first defendant would pay to JAG for the purposes of the Joint Venture an initial sum of $474,000.00 for the purpose of meeting all expenses of the Joint Venture including provision by hire or purchase of all necessary plant and equipment until such time as the Joint Venture generated its own income adequate for these purposes;
(g) the plaintiff would be appointed chief executive officer of JAG commencing March 1998; and
(h) the plaintiff would be appointed by the first defendant to manage JAG on a day to day basis commencing March 1998 and would receive from the first defendant from funds paid by it to JAG for that purpose a salary of $75,400.00 per annum.
The Representations were made to the plaintiff during the course of a meeting held in Malaysia in or about March 1998 attended by the plaintiff, the first defendant's directors, the first defendant's
(Page 16)
- solicitor John Rouphael and Dean Kuthubutheen. The meeting was held for the purpose of reaching agreement as to the terms and conditions of the Joint Venture which were then to be recorded in the Shareholders Deed by John Rouphael. The directors reached, or appeared to the plaintiff to reach, consensus between themselves in their own language as to the terms and conditions in respect of which representations were made to the plaintiff that the first defendant would comply with such terms and conditions. Such representations were contemporaneously conveyed to the plaintiff through Dean Kuthubutheen and the second defendant who appeared to the plaintiff to be able to speak and understand English as well as the language of the directors, and who represented that he could do so, as being a true interpretation of the matters agreed. The plaintiff does not speak the native language of the second, third, and fourth defendants and accordingly cannot set out what was said by each of these defendants other than is provided herein."
The evidence as to the representations
Mr Callander
54 The representations pleaded in par 15 are the essence of the plaintiff's case. However, very little evidence about them was led from Mr Callander. I am able to make findings upon the representations principally from the pleaded defence and the evidence of Zainal. I set out the relevant evidence of Mr Callander first.
55 At TS188:
"MS EDWARD: What was your knowledge of what was in the shareholders' deed?---At the meeting we went through this document page by page and I had a reasonable understanding of what was said. I know there were changes made and that's basically what I can tell you."
(Page 17)
56 At TS190:
"MS EDWARD: Before you signed the agreement what representations were made to you …"
57 The Malaysians mainly wanted control of the whole project. In relation to the 5 per cent of the shares [TS191]:
"…Harrison was to give them to me when I returned to Australia.
…
Can you recollect who it was who told you that Harrison would give you the shares?---Ladang Jalong.
I know but you need to nominate a director, if you can recall. Can you recollect which director told you that?---The only director that I recall in the meeting was Zainal."
58 At TS192 - 196:
"Who do you recognise in this court as having been at the meeting in Ipoh?---Zainal is the only one that I recognise in this court as being at the meeting in Ipoh.
What concerns did you tell Zainal you had?---There were a couple of concerns. I wanted to know where my shares were going to be given, who was going to organise that I be made a director, and also whether, you know, I was to be paid a wage. Zainal had mentioned all this. There was Dr Deen, who was talking with Zainal. A lot of the time they spoke English, but there were times when the spoke in Malay, but apart from that Zainal was the main person, who seemed to be in control of everything.
…
What concerns did you have about JAG?---I was not quite sure what JAG was going to be. I was under the impression it was going to be a service company.
Who told you that?---Zainal.
(Page 18)
- What purpose was it to serve?---It was mainly to have all the funds put through it to run the joint venture.
What concerns did you have about the land for the venture?---Prior to going up there, I was told to look for different properties around WA, which I did. When we were up there, it was discussed that a portion of Minston park would be used, approximately 100 acres. When we came back, all these things had changed.
Yes, but before you signed the agreement what were you told about the land that would be used for the project?---I was told that we were going to use Minston Park.
Who told you that?---Zainal.
…
We were to use a section of Minston Park which would be leased by JAG for a period of not less than five years for the running of the goat venture.
Who told you this?---Zainal.
…
What were you told about the finances of this project?---That Ladang Jalong would put 474,000 into this project.
For what purpose?---The running of the goat venture on Minston Park.
Were you told that these moneys had to be borrowed?---No.
…
At the meeting in Ipoh I explained to Zainal that I had a wife, family, a mortgage that I had to service. …
…
…Zainal and the other directors of Ladang Jalong who were present at the time and I was to be paid a wage of 4000 net per month to run this joint venture."
(Page 19)
59 In cross-examination Mr Callander said at TS319:
"MR YIN: …I think you have given evidence that English was spoken but at times they spoke in Malay?---That's right, and it was spoken among themselves and Dr Deen, and Dr Deen translated it back to us and told us what they had been speaking about. It was with regards - making changes to some sections of the agreement. As I recall, it was where they wanted full control of the venture.
But your evidence was not of anything that Dr Deen told you. Your evidence was that Zainal told you certain things?---Yes. Zainal also spoke, but I am saying that at times through that meeting they spoke in Malay. I cannot understand that. They spoke with Dr Deen, who was a Malaysian, and he repeated that but most times it was in English and Zainal was one of the persons at the meeting that I recall. I know he left the room a couple of times to confer with someone else - I don't know who - and they came back and they made alterations.
So most of the things that were told to you were told to you in English, were they, by Zainal? That's what you said yesterday?
---Yes, most of the stuff; yes.
By Zainal?---By Zainal and, you know, there were two other directors there of Ladang Jalong. I don't know who they were. I can't identify them."
60 Mr Callander conceded that in his witness statement (which was not tendered as an exhibit at the trial because he gave evidence orally) he did not mention that Dr Deen had made translation into English from Malay. He said at TS322:
"…My memory isn't as good as it was six years ago. I can remember quite a lot of things but there are things when I've put it into this witness statement that I have probably overlooked and which has now come back to me in recollection."
61 I think this reflects the position of Mr Callander's memory accurately which is why I conclude that some of his evidence of the meeting is based on reconstruction rather than memory.
62 Mr Callander gave evidence at TS322 that the $474,000 was to be paid immediately and that he would be paid $4000 per month as he
(Page 20)
- understood from Zainal. Approximately one thousand acres of Minston Park would be used for the joint venture.
63 Although he did not recall which other directors were there Mr Callander maintained that Zainal and two other directors of LJA were there at the meeting.
64 Mr Callander could not recall whether there was discussion about a service company although was pretty sure reference was made to a service company.
65 He was cross-examined as to who would pay his wage and said at TS325:
"…He said that I would be paid $4000 a month. He didn't say what company was paying."
66 At TS326:
"MR YIN: Zainal said that finance was to be arranged, didn't he?---I don't recall saying that.
I suggest to you that during this entire conversation only English was spoken. Would you disagree with that?---Yes."
67 At TS329:
"Do you recall that Dr Deen or Rouphael referred to the shareholders' deal and said, "John is to be the CEO"?---I think I was but I think if I was the CEO I should have received a lot of information that was tendered between Zainal and Harrison too, should I not?"
68 After giving evidence about the purchase of embryo stud goats in advance of joint venture Mr Callander said at TS330:
"I was aware that there was a venture and it was to go ahead and the only thing that was required was the signing of the documents and the meetings up in Malaysia. I had no documents or anything else other than what I was told by Harrison.
…
(Page 21)
- MR YIN: I suggest that you thought it would go ahead because you saw a copy of the shareholders' deed?---No, I didn't. I've told you, I have not seen that document until I got to Ipoh…"
69 At TS344:
"MR YIN: … Do you agree that Zainal did not say that you would be paid a salary for the loss of your 5 per cent?---No, that was the agreement, that I was to lose my 5 per cent for a salary.
Would you agree there was no discussion about a service company?---I'm sure there was."
70 This reflects the totality of the evidence led on behalf of the plaintiff as to the Ipoh meetings. Other references in the transcript are to similar effect.
The wholly amended defence ("the defence") as pleaded
71 The defence as to par 15 is as follows:
"12. As to paragraph 15 of the statement of claim the defendants plead as follows:
a. Subject to the matters pleaded below, the defendants deny the making of the said oral representations or any of them:
(1) Sub paragraph (e) is admitted.
(2) The defendants admit the making of a representation to the effect that the said sum of $474,000.00 would be paid to JAG for the purposes of a Joint Venture.
(3) As to subparagraph (g) the Shareholders Deed recited the plaintiff was to be the CEO.
(4) As to sub paragraph (h) the defendants admit that a representation was made that Callander would be manager to manage JAG but denies that any representation was made that he would be so appointed by the first defendant. The defendants
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- plea further that they represented that payment therefor would be by the employer viz JAG and that his salary in this respect was $48,000.00. Subject thereto, sub paragraph (h) is otherwise denied.
A salary of $4,000.00 per month was agreed as noted in the plaintiff's letter to MABTD dated 14th August 1998.
b. The Joint Venture was comprised in a written agreement, viz the Shareholders Deed (as defined and pleaded in paragraph 3 of the statement of claim).
c. The defendants deny that if they or any of them made the said oral Representations (the making of which is subject to sub paragraph (a) denied) then the plaintiff made the Shareholders Deed in reliance thereon.
d. If the defendants or any of them made the oral representations or any of them attributed to them in paragraph 15 of the statement of claim (which subject to the matters pleaded in sub paragraph (a) thereof is specifically denied) then in any event by the Shareholders Deed the parties thereto (including the plaintiff) specifically covenanted that the Shareholders Deed comprised the entire agreement between the said parties in relation to its subject matter and no earlier agreement understanding or representation whether oral or in writing in relation to any matter dealt with therein would have any effect from the date of the making of the Shareholders Deed – see clause 25.1 thereof.
e. The defendants will rely on clause 25.1 of the Shareholders Deed.
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- f. The obligations of all the parties thereto (including MABTD both as joint venturer as well as financial manager of the said Joint Venture) were expressly provided for, and were entirely comprised in the Shareholders Deed.
g. If the said representations or any of them were made by the second, third or fourth defendants or any of them (all of which is, subject to the above admissions, expressly denied) then the defendants plead in any event that the plaintiff did not rely on them but relied on his own judgment, in particular as an agricultural consultant (as pleaded in paragraph 1 of the statement of claim) in signing the Shareholders Deed as thereby entering the Joint Venture."
72 To the extent that the defence just quoted relies on the shareholders' deed, in view of my earlier ruling on the shareholders' deed those paragraphs cannot be sustained. Of significance, however, is 12.a.(2) which is an admission of the oral representation as to payment of $474,000. The admission does not specify whether the money is by way of premium or loan.
Zainal
73 Zainal deposed in-chief that Dr Deen, Mr Rouphael and Mr Callander attended the meeting:
"32. I took them to meet Dato Ismail in his office. This meeting merely exchanged pleasantries. It was brief. I recall no discussion of the Shareholder's Deed or the goat-breeding project at that introduction. I took them to a meeting room.
33. In attendance initially were myself, Callander, Dr Deen and John Rouphael. There may have been other LJSB 'people' there. As I recall Termizi (the third defendant) and Dato Ismail the fourth defendant were not in attendance for the whole time. To the best of my recollection Termizi came to the meeting after it started. I do not recall how much later this was. I do not recall that Dato Ismail was at that meeting.
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- 34. The meeting took approximately 1-2 hours. No 'minutes' were kept.
35. I had a copy of the Shareholder's Deed with me. Either Deen or Rouphael provided me with another copy of a document described as a 'Shareholder's Deed'. Rouphael said that he had a diskette with him containing the draft.
36. I began examination of the Shareholder's Deed by saying words to the effect:
'Okay, let's start at the beginning.'
37. I recall saying words to the effect:
'I see this is the Shareholder's Deed.'
38. I then looked at the Shareholder's Deed, page by page. I recall I examined the first page of it which set out the parties. I noted that it had the three parties on it that I expected. I do not recall any discussion of this.
…
42. I recall asking in words to the effect:
'What is our total contribution?' Dr Deen or Rouphael replied in words to the effect:
'As you can see at paragraphs 4.1 and 4.2 you must pay your proportion of the $1,000 in shares.' That person also said:
'And for you that is $750.' That person also said:
'And of course the additional $474,000'; to which I said:
'Yes', and also said: 'Finance needs to be arranged.'
That person also said:
'You will have 75 per cent of the shares.'
…
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- 53. At some point I excused myself from the room and went to see Ismail. I was out of the room for about 5 minutes. I cannot recall whether Termizi was with me or not.
54. I do not recall Termizi asking any questions about the Shareholder's Deed. As I recall he asked a number of questions about the project management in words to the effect:
'What property will be used for the project?'
As I recall Callander responded by explaining that a new property was needed. He also said words to the effect:
'I have purchased goats already.'
…
57. I do not recall speaking in a language other than English and I do not recall any person in the room speaking in a language other than English during our meeting.
58. To the best of my recollection the matters outlined above were the entirety of the discussions at the meeting. In particular there were no discussions of Callander's consulting fees or wages and there was no discussion of the payment of any other money to JAG or anyone else. There was no discussion of the hire of any equipment to Callander.
59. After the meeting in our meeting room we adjourned for lunch to a local hotel or club (I do not recall which). At this meeting were a number of LJSB staff members but I do not recall who was present. After lunch Dr Deen, Callander and Rouphael left. I do not recall any discussion with the visitors about the Shareholder's Deed or what LJA would do."
74 Zainal agreed that he took a leading role on behalf of LJA (TS465). Mr Callander did not sign the shareholders' agreement in the meeting at Ipoh.
75 At TS477 Zainal indicated that he knew of the condition for the full subscription of shares. His response was that he asked Mr Harrison and kept pushing Mr Harrison to arrange the issue of shares.
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76 At TS478 he gave an explanation as to why LJA did not pay the money:
"MS EDWARD: Yes. When you hadn't paid the moneys, why were you asking for shares?---Can I explain this one, your Honour? Ladang Jalong has been hard pressed by MABTD and John Callander to start the project. Okay. So we understand that Jack [sic] JAG has been registered. We didn't check whether it has already been officially registered.
…
You had agreed to pay $474,000 and he wanted to start?---So we told them that we don't have the money yet."
77 At TS486 Zainal conceded that Mr Callander could not have said that a new property was needed because the problem with running cattle and goats on Minston Park had not yet surfaced. At TS493:
"MS EDWARD: What did you tell Callander about Ladang Jalong's financial ability to fund this venture?---In terms of funding I have not told anything because the discussion about funding is with MABTD all the time.
So you didn't tell him that Ladang Jalong was already very much overcommitted?---No.
And that it was involved in litigation with Export Link. You didn't tell him that it was involved in litigation with - - - ?---He knows about that one. He knows about that one.
Did you tell him that you didn't have the financial backing of the state of Perak?---No, I didn't say that."
78 At TS495 – 496 Zainal said that when they tried to use Minston Park to raise money, the banks would not give them money. There were quite a number of banks being negotiated with and the money did not come through for nine months, until December 1998. There was a condition imposed by the banks about guarantors. The loan was taken out for LJA and one of the guarantors was Mr Callander. Another was Dr Deen.
79 At TS497 Zainal admitted that Mr Callander would be appointed by LJA to manage JAG. At TS498 Zainal said that the salary was gross – that is, the $4000. It was not discussed whether it was net or gross. He was working off the cashflow which Mr Harrison had prepared. The
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- defendants' closing submissions, however, concede that $4000 was a net figure.
80 At TS506 Zainal denied that Malaysian was ever spoken at the meeting in Ipoh. At 509 Zainal concedes that he knew there was urgency to get money to Australia otherwise the breeding season would be missed and there would be no goats to sell. At TS514 Zainal conceded LJA was taking a management fee of $1000 a month. He was unable to explain why. At TS522 Zainal attempted to explain why LJA agreed to pay an invoice from MABDT to Jalong Australia Goats for $15,000 for management and consultant fees up until, and including, March 1998; that is, before the shareholders' deed had been signed or before JAG, under that name, existed. I do not accept his explanation.
81 At TS529 Zainal made the following concession:
"MS EDWARD: When you were representing to Callander that Ladang Jalong would pay $474,000, did you tell him that it didn't have the money?---Not directly to Callander…"
82 At TS543 Zainal conceded that the project was meant to start immediately after the deed was signed. At TS594 Zainal conceded that the money was paid by way of loan and not premium.
83 By the time Zainal came to give evidence he had retired. Up until April 2003 he was employed with LJSB as general manager and he is now a pensioner. In the course of his evidence he had given evidence at par 15:
"15. Between 5 and 8 December 1997 I visited Perth and met Harrison. At a meeting held, as I recall at Harrison's office in Adelaide Terrace I met Dr Deen and Callander. Harrison introduced me to the both of them. Dato Ismail (the fourth defendant) came with me to that meeting."
84 Mr Callander denies that this meeting took place. It is not necessary for me to resolve this issue. It goes only to credibility and the evidence of Zainal in cross-examination largely confirms that of Mr Callander, at least in so far as the $474,000 is concerned. Likewise, I do not need to resolve whether there was a meeting in late February with Mr Callander although if it were necessary to resolve it the probabilities are that there was no such meeting. Zainal is unable to remember any contribution from Mr Callander and his description at par 21 of his proof of evidence is clearly slanted towards the defence. At the time of the meeting,
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- Mr Callander seems to have been absent from the city scouting for properties in the Eneabba area and Moora.
Ismail
85 Until his retirement, Ismail was Chairman of LJSB and a director of LJA. He became a director of JAG on 22 May 1998. His evidence-in-chief was:
"9. On 17 March 1998 I welcomed John Rouphael, Callander and Dr Deen to Ipoh in my office. As I recall the meeting was a formality and to exchange pleasantries.
10. Immediately after introducing the visitors Zainal took them elsewhere into the building. As I recall I did not go with them or attend any meeting with them. I made no comment about what LJA would do or provide in relation to the project and I did not hear Zainal or anyone else say anything about what LJA would do or provide in relation to the project."
Termizi
86 Termizi is an employee of the Perak State Agricultural Development Corporation. He was appointed a director of LJA on 11 May 1998. He was never a director of JAG. He attended the Ipoh meeting after the meeting had commenced. His recollection of the details of the meeting is that he recalls no discussion about the shareholders' deed. There was discussion of management of the goat project. He asked a number of questions dealing with the daily management of the project.
Conclusions on the oral representations as pleaded
87 The plaintiff's evidence as to the oral representations was scant to say the least. However, the whole of the evidence, especially the evidence of Zainal, establishes that at the meeting in Ipoh the shareholders' deed was discussed line by line and in particular, representations were made that LJA would advance $474,000 by way of premium and that Mr Callander would be the CEO of JAG. I am inclined to think that the other representations pleaded in par 15 of the statement of claim were also made. However, except in a general or cumulative sense, I do not think that Mr Callander particularly relied on them to join into the venture. The two significant representations were in relation to the premium and to his position as CEO. So while I find, for example, that a representation was
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- made that Mr Callander would be given a 5 per cent shareholding, the representation by itself led to no damage.
88 The representations were made by Zainal on behalf of LJA. I am unable to conclude affirmatively that at the time the representations were made Ismail was actually present and heard them. Although Termizi may have been present, I am unable to conclude that he heard Zainal make the representations that I have just outlined. Mr Callander is not a sufficiently reliable witness for me to positively conclude that there were two directors of LJA, other than Zainal, present at the meeting and who heard the representations. As a consequence, I am unable to be satisfied on the evidence that Termizi or Ismail contravened the Trade Practices Act s 52.
89 As it is common ground that Annie was not at the Ipoh meeting, and there is no evidence that she had prior knowledge that representations would be made, she too has not contravened the Trade Practices Act.
90 The plaintiff's claim for damages for misleading and deceptive conduct against Termizi, Ismail and Annie fails.
Were the representations misleading and deceptive?
91 The representations were made by Zainal on behalf of LJA. The representations were clearly as to future conduct. By the representations LJA, through Zainal, was representing to Mr Callander that the $474,000 would be paid as a premium and that Mr Callander would be appointed CEO of JAG. It is for LJA to show that it had reasonable grounds for making the representations: Trade Practices Act s 51A.
92 I conclude that LJA and Zainal had no reasonable grounds for making the representations and that the representations were misleading and deceptive. It is clear that as of March 1998 LJA was trading at a loss. It had no reserves of capital it could advance. It may be that the LJA Board expected that the State of Perak might underwrite the project although there is no evidence that the State was ever approached to do so. I have no way of judging whether such an expectation would be reasonable. What is known is that it took some nine months for moneys to be raised and even then it required the intervention of Dr Deen and Mr Callander as guarantors for LJA to raise money to loan to JAG. The reasonable grounds for representations have to be judged when they are made. When the representation is to a future matter then it is necessary to examine what occurred later. Nothing in the later conduct of LJA, or Zainal, gives any support to a reasonableness of belief on 17 March 1998. There were no unexpected events.
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93 The evidence clearly establishes, and Zainal conceded, that the premium of $474,000 was required immediately; that is, in or close to March 1998, in order to capitalise on the goat breeding season. Yet it was not forthcoming.
94 It seems to me that nobody really took much account of the shareholders' deed. Mr Callander, as I have previously indicated, I regard as a man generally unused to matters of commerce and business. From all of the actions of the directors of LJA, they paid no regard to an agreement to appoint Mr Callander as CEO. They continued to treat Mr Harrison as effectively the General Manager or CEO. Zainal and Ismail as directors of LJA took office as directors of JAG on 22 May 1998. The undoubted fact is they acted as directors for and on behalf of LJA. At no time, however, while they were acting as directors, was the shareholders' deed actually in operation. LJA, through Zainal and Ismail, acted as if part of the shareholders' deed was operative. They proceeded to make decisions on finances and property at directors' meetings. Zainal directed Mr Harrison or gave his approval to Mr Harrison's actions. Annie took an active role in finances on behalf of LJA and as part of her responsibilities for that company yet other parts of the shareholders' deed was ignored. Not only did LJA, through Zainal and Ismail, fail to appoint Mr Callander as CEO, for all intents and purposes they relegated him to a position in the venture beneath that of Mr Harrison and answerable to him.
95 They made demands on JAG for payment of expenses from time to time but were niggardly in supplying JAG with the capital which it needed to be viable. The subsequent behaviour of LJA, through its directors, and by Zainal, speaks eloquently of the lack of reasonable grounds for making the representations on 17 March 1998.
Reliance
96 I can briefly deal with the defence par 12.g which puts into issue reliance, that is, the question whether Mr Callander relied upon the representations and acted to his detriment.
97 The clear tenor of Mr Callander's evidence was that he entered into the deed because LJA, which was backed by the Malaysian Government, had money and that they were going to supply the money for the joint venture. He would supply to the venture his agricultural background, especially his expertise with goats. Mr Harrison would supply contracts and administration. There is no evidence that Mr Callander was able to finance the venture himself. Indeed, all the evidence is to the contrary. I find that he relied upon the representation that the defendants would pay a
(Page 31)
- premium of $474,000, and also that he would be appointed the CEO of the venture. These, I find, were the predominant reasons why he joined the venture and thereafter worked on its behalf in the expectation he would be paid a salary equivalent to a net monthly payment of $4000.
Conclusion on the Trade Practices claim for damages for misleading and deceptive conduct
98 I am satisfied that the two representations I have outlined were made, that they were material and Mr Callander acted in reliance on them. I am satisfied that they were made about future events. I have not been persuaded that LJA had reasonable grounds for making them. The representations are, as a consequence, taken to be misleading. I consider that Zainal was knowingly concerned in the making of those statements on behalf of LJA and that he did so without any reasonable belief in their accuracy. On the contrary, I consider that all times he knew that the money was going to be advanced by way of loan not by way of premium.
99 I am unable to be satisfied that at the time the representations were made, either Ismail, Termizi or, necessarily, Annie Toh, were aware of them. I am therefore unable to be satisfied that they aided and abetted or were knowingly concerned in the making of those statements.
100 The plaintiff is entitled to damages against LJA and Zainal.
Statement of claim: par 28 – The implied term
The implication of a term into the contract
101 The plaintiff also pleads an implied term of a contract by par 28:
"28. It was an implied term of the agreement evidenced by the Shareholders Deed that the first defendant's directors from time to time on behalf of the first defendant would use their best endeavours to ensure that the matters being the subject of the Representations were effected.
The said term is to be implied because it is:
(a) Reasonable and equitable;
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- (b) necessary to give business efficacy to the Shareholders Deed as it is not effective without it;
(c) so obvious that it goes without saying;
(d) capable of clear expression; and
(e) does not contradict any express term of the deed,
- and because the first defendant by reason of its majority shareholding and directorships in JAG, sole ownership of the properties upon which the Joint Venture was to be conducted as well as the plant, equipment and stock of the Businesses and its control of the finance required by the Joint Venture, was the only participant in the Joint Venture with the authority, power and effective control to ensure that the Representations were put into effect."
102 Much of the plaintiff's case was directed to establishing what the actions of a prudent director would be in certain circumstances and attempting to establish that all the directors failed to take any reasonable steps to ensure that the plaintiff received that to which he was entitled.
103 I cannot imply a term set out in the statement of claim into any contract. Firstly, as I have said, I do not regard there was any agreement evidenced by the shareholders' deed. The parties did not enter into another agreement. They purported to enter into the shareholders' deed. That failed. If the plaintiff seeks to rely upon an agreement evidenced by the shareholders' deed, it was a term that the shareholders' deed constituted the entire agreement between the parties. Further, I do not find that the term is necessary to give business efficacy to the shareholders' deed or is so obvious that it goes without saying or that it does not contradict any express term of the deed. The plaintiff's claim for damages for breach of an implied term of the contract fails.
104 In this event, it is unnecessary to deal further with the position of the directors. I observe that the plaintiff would, however, still have significant difficulties in affixing liability to individual directors for breach of duty to the plaintiff as pleaded in the statement of claim par 34: see, for example, Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874.
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Moneys expended by the plaintiff: statement of claim par 17(c)
105 I am satisfied that the plaintiff expended the moneys set out in par 17(c) of the statement of claim as particularised. The money was expended by him as a consequence of the misrepresentations which caused him to work in the venture and expend money on behalf of LJA. He is therefore entitled to the sum of $6188.99.
Hire agreement: statement of claim pars 18 and 19
106 Much time was spent in the trial on the issue whether there was an agreement in relation to hire of the plaintiff's equipment. That equipment and an alleged rate is set out in the particulars to the statement of claim but the plaintiff has amended the particulars to claim a sum of $30,000 which is considerably less than the original claim.
107 There is a dispute between the parties as to whether there was an agreement that Mr Callander hire his equipment to the venture. Mr Callander was in a position of authority, although not CEO, and in the way in which the joint venture unfolded he had general authority from the Board to make a management decision about the hire of equipment. Mr Callander also says that he received Mr Harrison's permission to do so. It is unnecessary for me to resolve the hire issue because the plaintiff puts an alternative claim by way of quantum meruit in par 19.
108 It is clear that equipment of the type particularised was necessary from time to time to carry out the goat breeding venture. Neither LJA nor JAG had such equipment. Mr Callander explained the rate by which he calculated the hire of such equipment. All things considered, although there is little evidence on the topic, I am of opinion that the sum of $30,000 is a reasonable sum for payment by way of quantum meruit and I allow that sum.
109 This loss is not attributable to misleading and deceptive conduct and so Zainal is not liable to make payment. The money was expended on behalf of LJA.
Equipment detained by LJA: statement of claim par 18
110 Mr Callander claims the cost of equipment provided for the benefit of the joint venture and retained by the first defendant. The equipment is particularised in par 18 and totals $36,101.68.
111 On 15 September 1999, Zainal, on behalf of LJA, (Exhibit 44), wrote to Mr Callander advising that the management agreement with MABDT
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- had been terminated effectively on 1 September 1999 and asking him "to please direct all enquiries you have pertaining to any matters previous or current direct to Mr Rocco Sacca from Universal Properties & Investments Pty Ltd" who had been appointed to manage the three farms. Mr Sacca was given full authority to take appropriate action. When Mr Callander went to get his equipment the gate was locked by Mr Sacca and Mr Callander was unable to get his equipment. He wrote to the then solicitors of LJA making a claim for the equipment. There was no challenge at trial to the amount of the claim for the equipment. I accept Mr Callander's evidence in that regard and allow the claim of $36,101.68. This head of damage is not as a result of misleading and deceptive conduct and so Zainal is not liable for payment. He was acting on behalf of LJA which is liable.
Assessment of damages under the Trade Practices Act
112 The plaintiff spent a considerable amount time at the trial arguing in substance and in evidence that he was employed in reality by LJA. There is some evidence that he did work for LJA prior to March 1998 and the Ipoh meeting. When JAG went into liquidation he lodged a proof of debt for wages against that company. There is some support for the view that when his responsibilities were expanded to include the goat dairy, which was never part of JAG, he was doing so on behalf of LJA and was entitled to be paid by that company. Documents that he signed on 16 July 1998 noting his expenses of 2 weeks consultant's fees were billed to JAG.
113 In the end, it is not necessary to make a final conclusion as to the liability to pay on the basis of employment. That is because I am satisfied that by reason of the misleading conduct by way of the representations of LJA and Zainal, the plaintiff has established an entitlement to damages. The damages may generally be calculated by reference to the extent of Mr Callander's unpaid salary and a shortfall between what was agreed and what was received. The plaintiff's counsel suggested no alternative method. I am satisfied that a predominant cause of the plaintiff's loss was the misleading representations as to the payment of the premium and to his appointment as CEO. I am satisfied that had those representations not been made, he would have declined to join the venture. He did join the venture and suffered loss.
114 I find that the plaintiff relied upon the representations to commence work, purportedly for JAG, but work and generally in the interests of LJA.
115 The plaintiff suffered loss and damage because of the misleading representations. The joint venture was chronically starved of funds as is
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- abundantly clear from the evidence. Its lack of funds was due directly to the first defendant failing to pay $474,000 by way of premium and contributed to by the first defendant's actions including the charging of certain LJA expenses to JAG and requiring JAG to pay lease payments.
Assessment of damages
116 The plaintiff's claim for damages under the Trade Practices Act s 82(1) in the pleadings is for a sum of $93,306.94.
117 It is asserted that the plaintiff was entitled to wages of $124,951.29 but received $51,095.70. The difference is therefore $73,855.59. In addition, the plaintiff claims superannuation on the wages said to be due at 7.5 per cent making a total of $9,371.35 and holiday pay of 6 weeks making a total of $10,080.
118 It is not necessary for the plaintiff to establish that his loss was caused by the ultimate failure of JAG and that LJA contributed to it. The plaintiff must simply establish, as he has done, that the representations were made, that they were misleading, and that they were a significant inducing factor into his entering into an arrangement which ultimately caused him loss and damage.
The assessment of the damage: principles under s 82 of the Trade Practices Act
119 It is wrong to approach s 82 by beginning the inquiry with an attempt to draw some analogy with a particular form of claim under the general law. Reference to loss or damage can be given no narrow meaning: Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 at [44] and [45].
120 The fact that damages may be difficult to assess is no bar to recovery. In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 196 ALR 257 Hayne J said at 38:
"It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. …"
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121 This case is one of the former. LJA took effective control of JAG and Zainal gave general instructions to Mr Harrison about its operations. The directors of JAG were required to keep the accounts in order. If Mr Callander has difficulty in identifying his precise loss that is because of the default of LJA, Zainal and Ismail.
122 Before undertaking an assessment of damage there are further findings I make.
123 I find that the plaintiff's agreement with Zainal and, for what it is worth, with Mr Harrison, was that he was to be paid at a rate of $4000 per month net. The plaintiff tendered into evidence a wages reconciliation (Exhibit 62) and agreed with the following two paragraphs:
"The company claims that the annual net salary from commencement of employment was $48,020.70 per annum, being a gross annual amount of $75,400.00. This net amount was to be paid at a fortnightly interval of $1,846.95 per fortnight or $4001.66 per month.
This amount was increased on March 1, 1999 to an annual net amount of $54,193.10 per annum, being a gross annual amount of $87,360.00. Whilst not required under the companies [sic] verbal agreement with John Callander this increase was provided to Mr Callander as part of the companies [sic] increased activities by having an additional farm to attend to."
124 In respect of holidays, I find that Mr Callander was entitled to holiday pay. There is no evidence that he took holidays during the relevant time. There was probably an agreement made with Mr Harrison for holidays. Mr Harrison had been armed by LJA with authority to deal on its behalf with the affairs of JAG. The evidence appears in Exhibit 59 where in "Wages Reconciliation" Mr Harrison has set out a calculation of holiday pay. Mr Harrison was prepared to concede that Mr Callander was entitled to $5616.95 for holiday pay with the leave loading of $1042, each a net amount. This is on the basis of 38 days annual leave.
125 Under the Minimum Conditions of Employment Act 1993 (WA), in any event, the plaintiff have been entitled to 20 days annual recreational leave. An argument by the defendants that the Supreme Court's jurisdiction to make an award in respect of conditions under the Minimum Conditions of Employment Act for holiday pay was sensibly not pressed.
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Superannuation
126 Superannuation was not discussed with Zainal. However, in Exhibit 61 prepared by Mr Harrison, there is a concession of an entitlement to superannuation of $7309.40.
127 In the case of the holiday pay and the superannuation, I regard the statements made by Mr Harrison as made within a general authority to make admissions on behalf of JAG. That authority stemmed from the actions of Zainal and Ismail in extending managerial power to Mr Harrison.
The date of termination of Mr Callander's employment
128 There is a dispute between the parties as to when Mr Callander's employment ceased. On 26 June 1999 Mr Harrison wrote to the plaintiff (Exhibit 42) purporting to terminate his services as of 2 July 1999.
129 The plaintiff did not accept this as terminating his employment. He considered he had as much right as Mr Harrison to be in the company and that LJA were the only ones who could terminate his services. He therefore continued working full-time on the properties maintaining the stock (at TS273).
130 On 15 September 1999 Zainal, on behalf of LJA, wrote to Mr Callander saying, amongst other things (Exhibit 44):
"I believe this resolves the issues & there is no requirement for any further correspondence, discussions & meetings between yourself & the board of Ladang Jalong (Australia) Pty Ltd & Jalong Australia Goats Pty Ltd.
Please be advised that any further contact may be deemed as harassment & appropriate action will be taken."
131 The defendants submit that Exhibit 42 constituted the termination and that on its true construction Exhibit 44 could be construed as a warning to stay away but not a termination of employment as such. With respect, neither proposition is tenable. There is no evidence that Mr Harrison was authorised to terminate Mr Callander's employment in the way he did. I do not regard the apparent authority by which Mr Harrison acted as extending to dismissal of Mr Callander. Mr Callander was a director of JAG. This proposition has to be seen in the light of the misrepresentation that Mr Callander was to be employed
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- as CEO of JAG. There is no evidence that the Board of JAG or LJA approved or ratified the termination at that time.
132 On the other hand the letter (Exhibit 44) is the clearest possible indication of an intention to end any contract between the plaintiff with LJA or JAG. I find that Mr Callander continued in employment, that is, continued to work for LJA's benefit until 15 September 1999.
133 The defendants argue that there is no evidence as to what Mr Callander actually did receive by way of gross wage or otherwise. Clearly, from time to time, Mr Callander was paid money by way of wages. A bundle of bank statements was tendered as Exhibit 60. They were received into evidence provisionally subject to counsel's right to address me on relevance, admissibility and the weight.
134 Mr Callander said that when he received the salary cheque he put it into the ANZ Bank. Although counsel for the plaintiff said she would take me through and show me the amounts of money that he actually received by way of cheques, she did not do so.
135 As a result, I have not been assisted by either counsel in the resolution of the question: How much money was paid to Mr Callander as salary? It seems to be unchallenged by the defendants that an amount of money is owed to Mr Callander (they would dispute by whom) by way of unpaid wages. He has sought to set off an amount which he says he received. In the circumstances, the onus is on the defendants to establish that the plaintiff has received more by way of wages (thereby reducing the damages). Given the state of the evidence, the defendants have failed to do so. I propose, in considering my assessment, to act upon Mr Callander's schedule as to payments he concedes he received insofar as it purports to mitigate his loss.
136 I have not found it necessary to resolve finally the question whether the plaintiff was employed by LJA or by JAG even though this was the subject of considerable evidence and argument at the trial. That is because I am assessing loss or damage brought about by a misrepresentation. The reference to the amount of salary which Mr Callander has not been paid is simply a convenient method of calculating his loss and damage. If Mr Callander had entered into the joint venture in consequence upon the misleading conduct, but had been paid all the entitlements by way of salary, leave and superannuation, which had been agreed, then arguably he would have suffered no
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- economic loss as a result of the misrepresentations. Other forms of loss or damage have not been pursued by the plaintiff in this action.
137 To my mind, a valid method of calculating the plaintiff's economic loss is to arrive at a figure which as nearly as possible represents the difference between what he ought to have been paid as agreed salary (by whatever entity) and what he in fact received. In making this calculation I have ignored the tax liability. PAYE income tax should have been deducted from Mr Callander's gross salary and remitted to the Australian Taxation Office.
138 Counsel for the defence, in closing submissions, raised the question of taxation and pointed out that there was no evidence that the amounts paid were net or gross amounts. It is not possible for me to determine whether tax was ever remitted.
139 I have noted the defendants' arguments concerning the salary and the question of tax. The evidence does not definitively show whether tax has been deducted and paid to the Australian Taxation Office. The amounts that have been paid to the plaintiff do not particularly suggest that they have been calculated by reason of tax although some may have been. I have done my calculation on gross amounts in the expectation that there will be a tax liability which may or may not have been reduced by payments already made. The extent to which the defendants may jointly or severally have a liability for the collection and payment of tax, as suggested by the plaintiff, is a matter beyond the scope of the pleadings in this action.
140 It is not clear if tax was always remitted to the ATO. Mr Callander may have a tax liability in respect of part of this judgment but that is not a loss incurred as a result of the defendants' conduct.
141 Accepting that termination occurred on 15 September 1999, as I do, I would regard a proper period of notice as 2 weeks and so I make the calculations to 30 September 1999. I have not used Mr Callander's particulars in their entirety to calculate damages. Instead I have used the figures from Exhibit 62 for calculation of salary. I have used Mr Callander's schedule for moneys received by him as the schedule constitutes a concession that he received such moneys.
142 I would also include a provision for holiday pay of 6 weeks at $10,080.
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143 The defendants raise the issue of superannuation submitting there is no pleaded agreement in relation to superannuation and for this reason alone the plaintiff must fail.
144 I am unable to agree. The exhibits do suggest that it was agreed there was a superannuation entitlement. In any event, superannuation is a normal incident of employment and I am calculating damages and loss owing to the plaintiff. I do not consider that the Superannuation Guarantee (Administration) Act 1992 (Cth) applies to a calculation of the plaintiff's loss and damage. The plaintiff would be the ultimate beneficiary of superannuation.
145 The plaintiff conceded that his gross annual salary, as agreed, was $75,400. This translated to a net amount of $4001.66 per month. The amount was increased on 1 March 1999 to take account of the plaintiff's increased responsibilities and represented a gross annual amount of $87,360.
146 Using those figures and working on a commencement date of 1 April 1998 the calculations of damages are as follows:
1 April 1998 to 28 February 1999 (11 months) |
| |
1 March 1999 to 30 September 1999 (7 months) |
| |
|
| |
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$ 68,980.96 |
|
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|
| |
|
| |
|
$94,255.70 | |
|
| |
|
|
$160,357.38 |
I will round the totals.
Conclusion
147 I set out again and record my findings:
• At the Ipoh meeting the first defendant, through its director Zainal, made representations to the plaintiff.
• That the first defendant would pay to JAG for the purposes of the joint venture, an initial sum of $474,000.
• That the plaintiff would be appointed Chief Executive Officer of JAG.
• The representations were as to future conduct.
• The representations were misleading or deceptive because they conveyed to the plaintiff that LJA had the means and the intention of making a payment forthwith by way of share premium to JAG so that JAG could commence operations in time for the goat breeding season. In fact, LJA had no present ability to pay the premium and its directors must have known that it would have to make arrangements to borrow money from some source in order to pay the premium and that the borrowing of money would take some time. Until the premium was paid LJA had no ability to take shares in JAG and to effect the appointment of the plaintiff as CEO.
• LJA has not discharged its onus to show that it had reasonable grounds for making the representations.
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- • Zainal was knowingly concerned in the making of the misleading representations.
• The plaintiff has not established that the other directors present in Ipoh, whether or not present at the meeting, that is Termizi and Ismail, were a party to or joined in the making of the representations.
• The plaintiff has not established that Annie knew of the representations at any material time.
• The plaintiff relied on the representations and acted to his detriment in consequence.
• The plaintiff suffered economic loss and damage due to the misleading conduct of LJA and Zainal.
Orders
148 The plaintiff's claims against the first defendant is established. Damages are assessed at a rounded up sum of $160,360.
149 The plaintiff's claims against the second defendant are established. The second defendant is jointly and severally liable with the first defendant for the rounded up sum of $94,260 of the total damages as assessed.
150 The plaintiff's claims against the third, fourth and fifth defendants are dismissed.
151 I will hear from the parties as to consequential orders and costs.
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