Cloud Top Pty Limited v Toma Services Pty Limited - [2008] NSWSC 568

No judgment structure available for this case.

CITATION: Cloud Top Pty Limited & Anor v Toma Services Pty Limited & Anor [2008] NSWSC 568

HEARING DATE(S): 2/06/08, 3/06/08, 4/06/08, 5/06/08

JUDGMENT DATE :
18 June 2008

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Plaintiff's claims seeking payment of deposits upheld - Cross-claims brought by the first defendant summarily dismissed - Cross-claims brought by second defendant to be dismissed - Parties to bring in short minutes of order accordingly

CATCHWORDS: Contracts - Contract for sale of hotel real property and business - Contract not made subject to any due diligence and verification of accounting position of hotel - No warranty of accuracy of figures - Express provisions excluding reliance by purchaser on financial information - Guarantees - Misleading and deceptive conduct - Alleged contractual, common law and fiduciary duties of hotel brokers - Deposits - In New South Wales deposit of 10% of the purchase money an exception from the law relating to penalties - Whether hotel broker an agent for vendors - Solicitors - Allegation that Solicitor for purchaser owed and breached obligations to use reasonable skill, care and diligence or to act in accordance with instructions and to provide full and accurate advice

LEGISLATION CITED: Conveyancing Act 1919 (NSW)
Gaming Machines Act 2001 (NSW)
Liquor Act 1982 (NSW)
Trade Practices Act 1974 (Cth.)

CATEGORY: Principal judgment

CASES CITED: Ashdown v Kirk [1999] 2 Qd R 1
Brien v Dwyer (1978) 141 CLR 378
Freedom v AHR Constructions Pty Limited [1987] 1 Qd R 59
I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109
Iannello & Anor v Sharpe (2007) NSW ConvR 56-179
Luong Dinh Luu v Sovereign Developments Pty Limited & Ors [2006] NSWCA 40
McDonald & Anor v Dennys Lascelles Limited (1933) 48 CLR 457
Mehmet v Benson (1963) 81 WN (Pt 1) (NSW) 188
Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131

TEXTS CITED: G.E Dal Pont, Law of Agency, (2001) Butterworths

PARTIES: Cloud Top Pty Limited (First Plaintiff)
Dawcam Pty Limited (Second Plaintiff)
Toma Services Pty Limited (First Defendant)
Alister Toma (Second Defendant)
G Cooper Pty Limited as trustee for Cooper Trust trading as G Cooper Hotel Brokers (Third Defendant)
Mr Joseph Patrick Ryan (Third Cross Defendant to the First Cross Claim)

FILE NUMBER(S): SC 50068/07

COUNSEL: Mr E Hyde (Plaintiffs)
Mr Toma (litigant in person)
Mr J Gooley (for Mr Cooper and G Cooper Pty Ltd Cooper Trust t/as G Cooper Hotel Brokers)
Mr C Moore (for Mr JP Ryan)

SOLICITORS: Don McDougall Lawyer (Plaintiffs)
Lander & Rogers (for Mr Cooper and G Cooper Pty Ltd Cooper Trust t/as G Cooper Hotel Brokers)
HWL Ebsworth (for Mr JP Ryan)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 18 June 2008

50068/07 Cloud Top Pty Limited & Anor v Toma Services Pty Limited & Ors

JUDGMENT

The proceedings

1 These proceedings concern contracts for the sale of the Old Fitzroy Hotel in Darlinghurst [comprising a Real Property Sale of Land Contract and a Sale of Business Contract].

2 The contracts were terminated following the failure of the purchaser to make payments of the last deposit instalments required under the contracts.

3 The plaintiffs, Cloud Top Pty Ltd (“Cloudtop”) and Dawcam Pty Ltd (“Dawcam”), owned and operated the hotel: Cloud Top being the owner of the real property; Dawcam holding the liquor licence and gaming entitlements.

4 The Sale of Land Contract was between Cloud Top and Toma Services, while the Sale of Business Contract was between Dawcam and Toma Services. Mr Toma was the guarantor of both contracts.

5 The agreement was brokered by the third defendant, G. Cooper Pty Ltd.

Identifying the parties

6 The parties to the proceedings are:

Cloud Top Pty Ltd (Cloud Top):

first plaintiff/first cross-defendant to the first cross-claim/first cross-claimant to the second cross-claim - the owner of the property located at 129 Dowling Street, Woolloomooloo in the State of New South Wales (the property);

Dawcam Pty Ltd (Dawcam):

second plaintiff/second cross-defendant to the first cross-claim/second cross-claimant to the second cross-claim - the operator of a hotel and gaming business from the property known as ‘The Old Fitzroy Hotel’;

Toma Services Pty Ltd (Toma Services):

first defendant/first cross-claimant to the first cross-claim - the owner of the property located at 17 Bayswater Road, Kings Cross in the State of New South Wales from which a hotel and gaming business known as ‘The Barclay Hotel’ was to operate (receivers and managers were appointed to Toma Services on 19 May 2008);

[Toma Services was not represented during the hearing. The receivers and managers had determined not to assume the conduct of Toma Services’ defence of the proceedings and cross-claim and the court was so advised. In the result Toma Services’ cross-claims are summarily dismissed pursuant to UCPR Part 29 Rule 7.]

Mr

Alister Toma:

second defendant/second cross-claimant to the first cross - the director of Toma Services;

G.Cooper Pty Ltd as trustee for Cooper Trust t/as G Cooper Hotel Brokers (Cooper Hotel Brokers):

third defendant/cross-defendant to the second cross claim - a hotel broking business who acted in relation to the acquisition of the property and the business of The Old Fitzroy Hotel;

Mr Joe Ryan:

third cross-defendant to the first cross-claim - the former solicitor for Toma Services and Mr Toma in relation to the provision of liquor and gaming advice, the acquisition of the property and the business of The Old Fitzroy Hotel and the removal of the hotel licence from Woolloomooloo to Kings Cross; and

Mr Glen Cooper:

fourth cross-defendant to the first cross-claim - the principal of Cooper Hotel Brokers.

The sundry claims which require to be dealt with

7 The proceedings involve:

(a) claims by Cloud Top and Dawcam:

(i) to the sum of $50,000.00 paid into Court by Cooper Hotel Brokers (being the first instalment of the deposits under the Sale of Land Contract and the Sale of Business Contract - as those terms are defined below); and
(ii) against Toma Services and Mr Toma for the sum of $560,000.00 (being the balance of the deposits due under the Sale of Land Contract and the Sale of Business Contract);

(b) cross-claims by Toma Services and Mr Toma against:

(i) Cloud Top and Dawcam in relation to alleged misleading representations made by Mr Cooper, on behalf of Cloud Top and Dawcam, to Mr Toma concerning the nature or extent of the 2005/2006 financial year operating profit for The Old Fitzroy Hotel and the expected profitability of The Old Fitzroy Hotel in the future. Toma Services and Mr Toma seek common law damages, equitable damages/compensation, damages under section 82 of the Trade Practices Act 1974 (Cth.) (TPA) and orders under section 87 of the TPA;

(ii) Mr Ryan in relation to alleged negligence concerning the negotiation, finalisation and execution of the Sale of Land Contract and the Sale of Business Contract. Toma Services and Mr Toma seek damages in the event that Toma Services and Mr Toma are found to be liable to Cloud Top and Dawcam; and
(iii) Mr Cooper in relation to alleged breaches of contractual, tortious and/or fiduciary obligations concerning the negotiation, finalisation and execution of the Sale of Land Contract and the Sale of Business Contract. Toma Services and Mr Toma seek common law damages, equitable damages /compensation in the event that Toma Services and Mr Toma are found to be liable to Cloud Top and Dawcam;

(c) a ‘back stop’ cross-claim by Cloud Top and Dawcam against Cooper Hotel Brokers in the event that:

(i) Cooper Hotel Brokers is found to be the agent of Cloud Top and Dawcam at the time the alleged representations were made; and
(ii) Cloud Top and Dawcam are found to be liable to Toma Services and Mr Toma under the first cross-claim.

[as the reasons make clear, the Court did not require to treat with this cross-claim]

The need to disregard the cases not pursued by Toma Services

8 In travelling through the claims made in the pleadings and in examining the evidence I have, as a matter of convenience, adopted the approach of continuing to include references to Toma Services’ pleaded cases, although for present purposes, those cases are not being pursued.

Inevitable overlap in treating with the separate cross-claims

9 Unfortunately there is an inevitable overlap from time to time where the disparate cross-claims are treated with: similar findings as to credit and reliability of particular witnesses tend to require to be repeated and on some occasions, the very same issues as will have been dealt with in an earlier cross-claim require to be dealt with in determining a subsequent cross claim against another cross-defendant.

10 The scheme of these reasons is to treat together with the cross-claims against the plaintiffs and the Cooper interests [which includes many common/overlapping issues] and to then treat with the cross-claim against Mr Ryan.

The material findings of fact

11 Underpinning the findings which follow in this section of the judgment [and which are generally interspersed throughout the reasons] is:

i. an acceptance of the reliability of the evidence given by Messrs Pasfield, Cooper, Ryan, Scotting, and Kibbey wherever conflicting with the evidence given by Mr Toma;

12 The reasons will in due course treat with the lack of reliability of the evidence given by Mr Toma.

13 While the following passages commence by sketching out the material background, it should be noted that these passages also contain findings of fact, some but not all of which are revisited later in the reasons with further detail.

14 At all material times:

(a) Mr Pasfield has been a director of both Dawcam and Cloud Top (affidavit of Mr Pasfield 21/9/07 at [2]);

(b) Cloud Top has been the owner of the property (affidavit of Mr Pasfield 21/9/07 at [4]);

(i) been the lessee of the property;

(ii) operated the hotel business known as The Old Fitzroy Hotel;

(iii) held a hotelier’s licence under the Liquor Act 1982 (NSW) (Licence No. 102291) (the hotelier’s licence); and

Gaming Machines Act

(affidavit of Mr Pasfield 21/9/07 at [4] to [7]).

June/July 2006

15 In June or July 2006, Mr Ryan contacted Mr Cooper of G Cooper Pty Ltd t/as Cooper Hotel Brokers and advised that his client, Mr Toma was looking for a hotelier’s licence with poker machine entitlements (affidavit of Mr Cooper dated 5 May 2008 at [2]).

October 2006

16 During October 2006, Mr Cooper, on behalf of Toma Services, approached Mr Pasfield to ascertain whether The Old Fitzroy Hotel (including the property) was available to be purchased by Toma Services (affidavit of Mr Toma at [12] to [14]). Mr Cooper was advised by Mr Pasfield that:

(a) although the hotel was not ‘on the market’, Mr Pasfield would entertain offers for the property and the hotel business (including the hotelier’s licence and the poker machine entitlements) in excess of $6 million;

(b) his opinion was that the hotel was only worth $5 to $5.5 million, if sold as a going concern based upon the hotel’s trading figures; and

(affidavit of Mr Pasfield 3/4/08 at [8] to [10] and affidavit of Mr Cooper at [7] to [10]).

17 On or about 20 October 2006, Mr Cooper met with Mr Pasfield at the Hotel, at which time Mr Pasfield provided Mr Cooper with:

· the Hotel’s building plans; and

· the Profit and Loss Statement for the Hotel for the year ending 30 June 2006.

18 These two documents were sent by Mr Cooper to Mr Toma by fax on or about the same day (exhibit GC-1 at 21-30).

19 At the above-described meeting, Mr Pasfield informed Mr Cooper that the figures were the profit and loss figures for the management accounts and that he had taken out personal outgoings, depreciation, one-off expenses, interest and management wages. During the same meeting Mr Pasfield also gave to Mr Cooper a document titled, “Item Movement by Product Class with Costs” which expressed the sales for a one-week period from 12 October 2006 to 19 October 2006.

20 Mr Cooper’s evidence, which is accepted as reliable, was that on or around 20 October 2006, he spoke to Mr Toma by telephone and advised him that the Profit and Loss Statement did not contain “all of the numbers” and was an estimated Profit and Loss based on management accounts. Mr Cooper’s evidence was that he told Mr Toma that if he wanted to verify the trading figures and get the full set of accountant’s figures he should have his accountant contact Mr Pasfield’s accountant. Mr Cooper's evidence was that he advised Mr Toma that the Hotel was worth $5-$5.5 million based on those figures and that Mr Pasfield wanted $6 million and was not flexible (affidavit of Mr Cooper dated 5 May 2008, para 19).

October – December 2006

21 During October to December 2006, there were discussions between Messrs Pasfield, Cooper and Toma in relation to the purchase of The Old Fitzroy Hotel during which various offers lower than $6 million were made by Mr Toma. In response to each of these offers, Mr Pasfield, whose evidence is accepted as reliable, informed Messrs Toma and Cooper that:

(a) he didn’t need to sell; and

(b) The Old Fitzroy Hotel was worth less than $6 million as a going concern but that was the price below which he was not prepared to sell.

November/December 2006

22 In late November or early December 2006, Mr Toma advised Mr Cooper that he would pay $6 million for the hotel but wanted a delayed settlement and a reduced deposit. This offer was conveyed to Mr Pasfield, but rejected on the basis that Mr Pasfield wanted a full 10% deposit.

Late February 2007

23 On 27 February 2007, Mr Cooper, at the instruction of Mr Toma, telephoned Mr Pasfield to enquire whether he was still open to offers in relation to The Old Fitzroy Hotel and the property and, if so, what the price was. Mr Pasfield informed Mr Cooper that he was prepared to sell for “$6 million in the hand, plus adjustments, and any commission to Mr Cooper had to be placed on top” (affidavit of Mr Pasfield 3/4/08 at [23], affidavit of Mr Cooper at [35] and [36] and affidavit of Mr Toma at [30] to [32]). Mr Cooper advised that he would reduce his commission by $100,000 and would go back to Mr Toma at $6.1 million.

24 Mr Toma advised Mr Cooper that he would pay $6.1 million but with a 5% deposit and settlement at the end of May. Mr Cooper then advised Mr Pasfield of this offer. Mr Pasfield then said he did not want an extended settlement but would take a 5% deposit on a normal settlement period. Mr Cooper then advised Mr Toma of this who said, “great”.

25 On or about 27 February it was agreed between Mr Pasfield and Mr Cooper that the purchase price for the property and the hotel business would be $6,100,000.00 (which included a “selling fee”, payable to Mr Cooper Hotel Brokers, of $100,000.00), plus stock and adjustments (affidavit of Mr Pasfield 3/4/08 at [23] and [24] and affidavit of Mr Cooper at [37] to [39]): cf the sales advice by Mr Cooper to Mr Ryan and then to Mr McDougall, advising of the agreement [Exhibit A1 at 140-141], the second last paragraph of which refers to a deposit of $305,000.

12 March 2007

26 On 12 March, Mr McDougall advised Mr Cooper that he had delivered a copy of the contract to Mr Ryan (affidavit of Mr Cooper dated 5 May 2008, para 43 and page 60 of Exhibit GC-1).

13 March 2007

27 On 13 March 2007, Mr Ryan, whose evidence is accepted as reliable, met with Mr Toma and took him through the important clauses of the contract, including the time for settlement and payment of the deposits (affidavit of Mr Ryan para 21).

14 March 2007

28 On 14 March 2007, Mr McDougall, the solicitor for Cloud Top and Dawcam, sent to Mr Ryan, a “final form” of the contracts (tender bundle 198).

15 March 2007

29 On 15 March 2007, Mr Ryan took Mr Toma in detail through the final form of contracts and explained the terms, including in relation to the guarantee and indemnity (affidavit of Mr Ryan, para 22). There was no provision for an upfront deposit of $50,000 at this stage.

20 March 2007

30 On 20 March, Mr Toma advised Mr Cooper that he only had $50,000 but would have the rest of the deposit “in a week or so”. Mr Cooper then advised Mr Pasfield of this. Mr McDougall advised Mr Cooper that Mr Pasfield would exchange on the $50,000 initial instalment with the further payment of $255,000 within 14 days (affidavit of Mr Cooper dated 5 May 2008, paras 46-47 and 49; Exhibit GC-1 at 70; affidavit of Mr Pasfield dated 3 April 2008, annexure “D”).

21 March 2007

31 On 21 March 2007:

(a) the contract for the property (the Sale of Land Contract); and

(b) the contract for the sale of, inter alia , the hotel business conducted under the business name ‘The Old Fitzroy Hotel’ (and the assets of the hotel business including the hotelier’s licence and the poker machine entitlements) (the Sale of Business Contract),

Material terms of the Contracts

32 The Sale of Land Contract (Exhibit GJP-1 to the affidavit of Pasfield 21/9/07) provided:

(a) the deposit was to be 10% of the purchase price (namely, $200,000.00) (front page);

(i) an amount of $25,000.00 to be paid on 21 March 2007;

(ii) an amount of $75,000.00 to be paid within 14 days of 21 March 2007; and

(clause 34.2); and

33 The Sale of Business Contract (Exhibit GJP-2 to the affidavit of Mr Pasfield 21/9/07) provided:

(a) the deposit was to be 10% of the purchase price (namely, $410,000.00) (clause 2.3.1);

(i) an amount of $25,000.00 to be paid on 21 March 2007;

(ii) an amount of $180,000.00 to be paid within 14 days of 21 March 2007; and

(clause 2.4.3).

34 Both the Sale of Land Contract and the Sale of Business Contract contained the following provisions:

(a) the deposits were to be paid to Cooper Hotel Brokers as stakeholder (clauses 2.1 and 2.3.1, respectively);

(b) if the deposit was not paid on time or a cheque for any of the deposit was not honoured on presentation, the vendor could terminate the contract but only before the deposit was paid in full (clauses 2.5 and 2.4.2);

(c) if Toma Services did not comply with the contract in an essential respect, the vendor could terminate the contract by serving a notice on Toma Services (clauses 9 and 9.1);

(i) keep or recover the deposit to a maximum of 10% of the purchase price; and

(clauses 9.1 and 9.3 of the Sale of Land and 9.1 of the Sale of Business Contract); and

21 March 2007 – first deposit instalments

35 On or about 21 March 2007, Toma Services paid to Cooper Hotel Brokers, as stakeholder, the sum of $50,000.00 being the total of the first instalments of the deposits due under the Sale of Land Contract and the Sale of Business Contract (affidavit of Mr Pasfield 21/9/07 at [14] and affidavit of Mr Cooper at [53] to [55]).

23 March 2007

36 On or around 23 March 2007, Mr Cooper provided, on the request of Mr Toma and/or his business associate Mr Wan, various documents relating to the hotel including business plans, a title search and an estimated profit and loss statement. Mr Cooper gave evidence that each of these documents had already been provided.

27 March 2007

37 On 27 March 2007, Mr Toma requested that Mr Cooper provide him with the trading figures for the hotel (affidavit of Mr Cooper dated 5 May 2008, para 58 and 61 and pages 85-99 and 101 of Exhibit GC-1).

38 On 27 March 2007 and again on 3 April 2007, Mr McDougall advised that the next payment of $255,000.00 was due on 4 April 2007.

30 March 2007

39 On 30 March 2007, Mr Ryan reminded Mr Toma that he had to pay the deposit monies to ensure that the contract stayed on foot, and that if he did not he could be sued by Mr Pasfield and would be liable for the 10% deposit and possibly for damages (affidavit of Mr Ryan para 36).

31 March 2007

40 By 31 March 2007, Mr Toma was under considerable financial pressure. He was attempting to obtain finance from various financial institutions for both his redevelopment of the Barclay Hotel and the purchase of the Old Fitzroy Hotel (T120.50 – T121.34). He also sought money from his managers of the Barclay Hotel, Leisure Inn, saying that he needed $250,000 to “pay some money for the Fitzroy” (tender bundle 379-381). He was under financial pressure from the builder at the Barclay Hotel which communicated, on 2 May 2007, that it would stop work until outstanding moneys were paid, and this was a source of considerable concern for him at the time (T122.40-.50).

2 and 3 April 2007

41 Mr Ryan reminded Mr Toma on 2 and 3 April 2007 that the deposit was due on 4 April 2007 (affidavit of Mr Ryan paras 38-39).

4 April 2007 – new proposal

42 On 4 April 2007, Mr Ryan attended on Mr Toma to obtain the cheque for the second tranche of the deposit. The amount due was $255,000, but Mr Toma provided a cheque for only $150,000. Mr Ryan said that this ‘was not going to cut it’. Mr Toma said that it would ‘do for a start’, and that the vendor would accept it because Mr Pasfield was getting a premium price. Mr Ryan said:

4 April 2007 – second deposit instalment

43 On 4 April 2007, Mr Ryan provided to Mr McDougall a cheque in the sum of $150,000.00 (the second instalment cheque), being part payment of the second instalments of the deposits due under the Sale of Land Contract and the Sale of Business Contract (affidavit of Mr McDougall at [3] and affidavit of Mr Ryan at [44]).

44 On 4 April 2007, Mr Cooper was advised by Mr McDougall that Mr Toma had proposed a four week deferral in settlement and a release of the deposit to Mr Pasfield.

45 Shortly before 5 April 2007, Mr Cooper provided Mr McDougall with details of the Trust Account in which the deposit was held because he was going on holidays and would not be in a position to deposit the second instalment of the deposit (affidavit of Mr Cooper dated 5 May 2008, para 66).

5 April 2007- second deposit instalment banked

46 On 5 April 2007, the second instalment cheque was deposited into the bank account of Cooper Hotel Brokers, as stakeholder (affidavit of Mr McDougall at [4]).

10 April 2007 – second instalment cheque dishonoured

47 On 10 April 2007, the second instalment cheque was not honoured on presentation and Mr McDougall served on Mr Ryan a notice terminating the Sale of Land Contract and the Sale of Business Contract (affidavit of Mr McDougall at [5] to [7], affidavit of Mr Cooper at [68] and [69] and affidavit of Mr Ryan at [47]). Mr McDougall concluded by stating that his clients reserved their rights to the balance of the 10% deposits, and to damages. Mr Toma read this letter (T125.7 - .33).

48 Also on 10 April 2007, Mr Toma rang Mr Pasfield to apologise for ‘mucking him around’ (affidavit of Mr Pasfield, 15 May 2008, para 7).

Subsequent negotiations

49 Thereafter, there were negotiations between the parties to endeavour to replace the 21 March 2007 contracts with some other agreement (tender bundle 431, 434, 435, 437, 440, 449). These negotiations centred around the purchase price, the payment of the deposit, the date for settlement, and the payment of legal costs.

50 The parties never in fact reached agreement on any variation to the contract, leaving the original terms on foot and Toma Services in breach of contract.

16 April 2007 - meeting

51 On 16 April 2007, a meeting took place between Messrs Pasfield, Toma and Cooper at the Barclay Hotel. During that meeting Mr Toma advised that once his funds had been approved the sale could go ahead. Mr Cooper requested an agency agreement from Mr Pasfield which was duly signed on 17 April 2007.

12 June 2007 –payment into Court

52 On 12 June 2007, Mr Cooper withdrew the sum of $50,000 from the Trust Account, which was then paid into Court.

Dealing with Mr Toma's credit

53 Mr Toma represented himself during the hearing. He has no legal training. He was opposed by three counsel. Obviously one may expect that he would have had difficulty in presenting his case.

54 His evidence was clearly unreliable unless corroborated by the contemporaneous documents. There were very many occasions when under cross-examination he gave inconsistent answers. He contradicted himself on matters of particular importance. Accepting that the courtroom context would have been difficult for him, nonetheless his performance as a witness can only be described as extraordinarily weak in terms of any cogent or ordered rendition of the events which had happened.

55 The transcript at pages 73 and following records a reasonably detailed cross-examination of Mr Toma in relation to a resume which he had prepared. Mr Toma had obviously had considerable experience in and about property development, property investments, purchases through family trusts and companies which he controlled. He had purchased, through a trust, houses and apartments in Brisbane or had been involved in the purchase. He had purchased in his own name a residential unit in Sydney for approximately $350,000 and through a company he had purchased a beachfront bungalow hotel in the northern beaches of Cairns. The purchase was for approximately $1.6 million. He had also worked on a proposal to develop the combined site into a significant property holding with many units and 3500 square metres of retail development, but the development application had been rejected. Later, the development application had been approved but the development had not gone ahead. He had also, through a family trust, purchased an 18 hectare beachside cane farm in Port Douglas [or been involved in the purchase of that property] and had handled it. He had also purchased the Barclay Hotel through companies associated with him. All of this had occurred at various stages, as I understood it, prior to January 2006 or March 2006. Mr Toma also gave evidence that Toma Services had purchased a 90 square metre corner unit, being an office suite, in approximately 2005 or 2006. His evidence in relation to four lots in Queensland was as follows:

Q. Two lines above that you refer to equity coming, sale of four lots in Queensland netting just over 600K. Did you see that?…

Q. What were the four lots in Queensland that were sold?
A. We had - we sold the land at Port Douglas. We gave - the trust gave substantial vendor finance to the purchaser and the purchaser defaulted and he had vendor finance and we had security over a subdivision, so it was already done and subdivided and there was a few blocks and that security was handed back to the trust and they were all 100,000, $150,000 type blocks and they were on-sold. Again, they were just straightforward residential sites and I had the lawyer in Queensland, solicitor, do a straightforward conveyance on it.

Q. …Mr Toma, is it fair to say that as a result of the purchase and sale of the properties that we have just been discussing that you are familiar with the usual provision for a deposit in a purchase of land?
A. Well, in Queensland it is different from New South Wales. A lot of expense I had (was) in Queensland. Normally in all the transactions that I have been involved with a solicitor would actually walk me through. If it was serious, if it was anything to do with contractual obligations--

56 Plainly Mr Toma was no 'babe in the woods' in relation to property dealings.

57 The further amended cross-summons [in paragraphs 14 and 15] reads as follows:

14.1 the deposit for the contract would be 5% rather than the usual 10%;

14.2 there was to be an extended period of time for payment of the 5% deposit in order to accommodate the need for the First and Second Cross-Claimants to make arrangements for the availability of funds to meet the amount of any such deposit;

14.3 there would be an initial payment of $50,000, but that amount would be refundable if the remainder of the 5% deposit was not provided; and

58 Under cross-examination Mr Toma gave the following evidence in relation to this section of the pleading:

Q. And it is your case, isn't it, that you thought you had an agreement in those terms with the vendor?
A. Yes.
…

Q. Mr Toma, if this was the agreement that you had--
A. Yep.

Q. --the consequence of that would be that you would not be bound to purchase the hotel unless and until you paid the balance of the initial five percent deposit?
A. Yes.

Q. The vendor would be bound, if you paid the balance of the five percent deposit, to sell the hotel to you?
A. Well, I don't know about that, but that's - I don't know.

Q. Well, your position was, wasn't it, that if you paid the balance of the five percent deposit you were entitled to purchase the hotel-
A. Yes.

Q. --you were obliged to purchase the hotel and the vendor was obliged to sell the hotel to you?
A. Yes, it's possible.

Q. But until you paid the five percent deposit you would not be bound to purchase the hotel, that's your position?
A. Yes.

Q. And you understood that this therefore conferred on you in practical terms an option over this hotel?
A. Yes. Well, that I could hold it for 14 days, yes.

Q. An option for 14 days?
A. Yes, and it was not going to be sold within 14 days.

Q. The vendor could not sell the hotel within those 14 days because you had the ability within those 14 days to come up with the five percent deposit and bind the vendor?
A. Yes.

Q. That is an excellent deal for you, Mr Toma, isn't it? The vendor is bound but you are not
A. Well, of course, the vendor wants a ridiculous price and wants ridiculous settlement terms. I have to make sure that I could meet with that and I was being pressured into I'm going to lose out again by both Cooper and Ryan, so the only option was - I said, "Look, well, get him to prepare a contract", and when they did that I said, "All I've got is 50 grand", so they said take another contract to--

HIS HONOUR: The question was do you agree that this was an excellent deal for you and you haven't answered the question yet.

59 The evidence of Mr Toma was to the following effect:

the estimated profit and loss statement

“Garry says he is not willing to give you any more information. Those are the numbers. Garry said that, after you sign the contract, your accountant can speak to his account for more detailed numbers.”
and

The plaintiffs’ claims on the summons

60 The convenient course is to firstly deal with the plaintiffs’ claims to the deposits.

61 In the Amended Reply (sic), Toma Services did not dispute the termination by Cloud Top and Dawcam of the Sale of Land Contract and the Sale of Business Contract, respectively. There was also no claim by Toma Services for relief against forfeiture of the deposits under the common law or the Conveyancing Act 1919 (NSW).

62 The only issue raised by Mr Toma is whether that part of the ‘deposit’ specified in the contracts which exceeds 5% of the purchase price constitutes a penalty and, as such, is unenforceable.

63 Therefore:

i. Cloud Top and Dawcam are entitled to be paid the $50,000.00 paid into Court by Cooper Hotel Brokers; and

64 In relation to the claim that monies specified in the contracts as the deposits in excess of 5% of the purchase prices are penalties, the onus of establishing that those amounts are properly construed as a penalty rests on Mr Toma [in the absence of Toma Services’ participation in the proceedings].

65 For the following reasons, there is no proper basis for construing the amounts in excess of 5% of the purchase prices as a penalty:

i. a deposit is considered an ‘earnest’ of the bargain or its performance and is ordinarily beyond the reach of equitable relief against penalty or forfeiture if it is not excessive or unconscionable in amount ( Brien v Dwyer (1978) 141 CLR 378 and Freedom v AHR Constructions Pty Limited [1987] 1 Qd R 59);

Luong Dinh Luu v Sovereign Developments Pty Limited & Ors

[24]

[25]

Mehmet v Benson

In my view a provision for forfeiture of instalments under a contract for the sale of land, even when possession has been given under the contract, is in the nature of a penalty and the person penalized will be entitled to relief in equity unless there are contrary circumstances which would make it inequitable to grant such relief even upon terms.

In my view a normal deposit is ten per cent. I realize that upon one view I should have expert evidence of what usually is the course of business in regard to the amount of deposits, but it seems to me that to require such evidence, when so many contracts are observed in these courts and generally in the community, with a deposit of ten per cent, is to substitute rigidity for reality in one’s approach to the matter.

iii. a deposit is able to be paid by instalments and a vendor is entitled, upon termination of a contract, to recover any unpaid deposit instalments ( McDonald & Anor v Dennys Lascelles Limited (1933) 48 CLR 457, Ashdown v Kirk [1999] 2 Qd R 1 and Iannello & Anor v Sharpe (2007) NSW ConvR 56-179);

iv. The amounts specified as being the deposits under the Sale of Land Contract and the Sale of Business Contract:

· are not extravagant, excessive or unconscionable in amount;

· equate to 10% of the respective purchase prices; and

· do not possess any of the characteristics of a penalty.

completion date

Date of Completion

b. the obligation to pay the remaining 5% of the deposits specified in the contracts did not arise by reason of the termination of the contracts.

66 Hence, Toma Services and Mr Toma (as guarantor) are liable to Cloud Top and Dawcam for the final instalment of the outstanding deposits (that is, $100,000.00 to Cloud Top, being the balance of the deposit under the Sale of Land Contract, and $205,000.00 to Dawcam, being the balance of the deposit under the Sale of Business Contract).

The cross-claims pursued by Mr Toma

67 Having dealt with the plaintiffs’ claim against Mr Toma and Toma Services, it is now useful to set out the essence of Mr Toma's several cross-claims.

Mr Toma’s cross-claim against the plaintiffs

68 Mr Toma makes the following assertions as part of his cross-claim against the plaintiffs:

i. Mr Cooper was an agent of the plaintiffs for a period commencing approximately February 2007. Alternatively, Mr Cooper was the authorised representative of G Cooper Pty Ltd, which was an agent of the plaintiffs.

a) were misleading and deceptive; and

a) made representations, including by way of silence, that the information included in the summary was complete and accurate;

b) further represented that it was a reasonable expectation that the business would continue to generate equivalent profits in the future;

c) was, in fact, not a complete and accurate summary, but instead overstated the true profitability of the business;

d) was in breach of s 51A and s 52 of the Trade Practices Act regarding misleading representation with respect to current and future matters;

e) was relied upon by Mr Toma in deciding to execute the Contracts;

Locus standi

69 With respect to each of the various cross-claims, it is important not to forget that it was Toma Services which entered into the subject contracts. Mr Toma's only involvement comprised his execution of the guarantees in each contract. As Toma Services has failed to pursue its cross-claims, it follows that there is no question of any declaration that the whole of the material contracts be declared void ab initio at the suit of Toma Services. The only order which Mr Toma is entitled to seek concerning the contracts is the order that the guarantee provisions in each contract be held unenforceable and that he be compensated for any material loss he personally suffered by reason of that guarantee.

70 In passing, it is appropriate to observe that Mr Toma unreservedly accepted that he had signed these guarantee provisions, his claim being that he had thought that what he was signing were only guarantees of his own name!

Mr Toma’s cross-claim against Mr Cooper

71 Mr Toma’s claim against Mr Cooper relies on several of the factual assertions set out above.

72 In addition, Mr Toma claims that Mr Cooper was, from late 2006, an agent of Mr Toma and Toma Services “for the purposes of making enquiries as to the availability for sale of the hotel business”. As such, he is said to have had contractual and fiduciary obligations towards the first and second defendants, and owed a common law duty of care.

73 These duties are put as follows:

a) to convey to Toma Services and Mr Toma completely and accurately all information obtained in relation to any potential asset for the acquisition by Toma Services and Mr Toma;

b) to deal in good faith with Toma Services and Mr Toma;

c) to maintain confidentiality;

d) to undertake his tasks or obligations with reasonable skill, care and diligence;

a) to convey to Toma Services and Alister Toma completely and accurately all information obtained in relation to any potential asset for the acquisition by Toma Services and Mr Toma; and

a) not to place himself in a position of conflict between his duty to Toma Services and Mr Toma and his own interest; and

74 The sundry allegations then put are as follows:

i. that in about February or March 2007 and without the knowledge of Toma Services and Mr Toma, Mr Cooper became the agent or representative of Cloud Top and Dawcam for the purpose of facilitating and securing the sale of the land and business owned/operated by Cloud Top and Dawcam and, in doing so, took upon himself contractual and/or fiduciary obligations to Cloud Top and Dawcam, which obligations were inconsistent in whole or part with his “pre-existing obligations” to Toma Services and Mr Toma;

ii. that from the time of taking upon himself such obligations to Cloud Top and Dawcam, Mr Cooper breached his fiduciary obligations to Toma Services and Mr Toma by putting himself in a position of conflict;

a) Mr Cooper was made aware of the likely willingness of Cloud Top and Dawcam to sell and the likely price at which they would be willing to sell;

b) Mr Cooper was provided with financial information relating to the trading profitability of Dawcam’s business for the 2005/2006 financial year; and

a) provided to Toma Services and Mr Toma 2005/2006 financial information about the business without providing them “the full and accurate explanation as to the extent of the accuracy or reliability of the information contained in that summary”;

b) informed Toma Services and Mr Toma of the need of urgency in the completion of the purchase of the land and business because of the existence of other strong interest in their purchase, despite their not being such urgency;

75 The case which was pleaded was that, in consequence, Toma Services and Mr Toma had sustained loss and damage, in that they would not have entered into the Sale of Land Contract and the Sale of Business Contract and would not have sought and relied upon the advice and agency of Mr Cooper if he had fully disclosed to them his conflicted position.

76 Here again one has the continued circumstance that Toma Services is not pursuing its cross-claims.

Mr Toma’s cross-claim against Mr Ryan

77 Mr Toma alleges that Mr Ryan was engaged as a solicitor by Mr Toma and Toma Services, for the purpose of negotiating the terms of the contracts. On this basis, he is said to have owed certain obligations to use reasonable skill, care and diligence, act in accordance with instructions and provide full and accurate advice.

78 Mr Toma claims that he gave instructions to Mr Ryan prior to 21 March 2007 that the contracts were to include provisions that:

i. the deposit would be 5% rather than the usual 10%;

ii. there was to be an extended period of time for payment of the 5% deposit in order to accommodate the need for [Toma Services and Mr Toma] to make arrangements for the availability of funds to meet the amount of any such deposit;

iii. there would be an initial payment of $50,000, but that amount would be refundable if the remainder of the 5% deposit was not provided; and

79 Mr Ryan denies that these instructions were given.

80 Mr Toma claims that, on the occasion of executing the contracts, Mr Ryan orally confirmed to him that the contracts had been prepared in accordance with the instructions above. He also alleges that Mr Ryan:

i. failed to provide him with a copy of the final version of the Contracts prior to the date of execution;

ii. did not explain the contents and terms of the Contracts; and

81 Mr Toma alleges that he signed the contracts without being aware of the terms which they contained. Specifically, he claims to have been unaware that Toma Services would be liable to pay the 10% deposit if he failed to pay the deposit instalments by the due date, and to have been unaware that he had personally guaranteed the obligations owed by Toma Services. His claimed understanding of the agreement was that:

i. it was a conditional agreement; i.e. from the date the Contracts were signed, the plaintiffs were bound to complete if Toma Services elected to pay the deposit amounts on time, but Toma Services could elect to withdraw at any time prior to the payment of the full 5% deposit without penalty; and

82 It appears that the cross-claims against Mr Ryan and the remaining cross-defendants are close to mutually exclusive. Significantly, if Mr Toma claims that he entered into the agreement believing that it was an optional agreement which he could exit at any time without penalty, then this weakens his claim to have relied upon the allegedly misleading financial documents provided by Mr Cooper.

83 Of course, once again Mr Toma’s interest in terms of a claim for relief relates to the guarantees which he gave and losses which he may claim to have suffered by reason of entering into those guarantees.

Dealing with the issues raised by the cross-claims against the plaintiffs and the Cooper interests

84 As earlier observed, Mr Cooper is accepted as a witness who gave reliable evidence.

85 Mr Cooper’s evidence is accepted as reliable where inconsistent with Mr Toma’s evidence. In particular, the evidence given by Mr Cooper as to what was said to Mr Toma when the estimated profit and loss statement was provided to him was consistent with the contemporaneous documents:

(a) the e-mail sent by Mr Toma to Mr Cooper on 23 October 2006 (page 41A of the Exhibit GC1 to affidavit of Mr Cooper) - within days of the financial information being provided and Mr Toma’s conversation with Mr Cooper - which notes that the offer of $5.5 million was “ subject to 4 week due diligence (sic) and verification of numbers by the accountant ”;

(b) the e-mail sent by Mr Toma to Mr Ryan on 19 June 2007 (at page 45 of the Exhibit SDK-1 to the affidavit of Mr Kibbey);

(c) the file note of the conversation between Messrs Kibbey, Scotting and Toma on 29 June 2007 (at page 52 to 61 of the Exhibit SDK-1 to the affidavit of Mr Kibbey);

(d) the conversation between Messrs Kibbey, Scotting and Toma on 29 June 2007 (affidavit of Mr Scotting at [5]); and

The allegation that Mr Cooper was acting as the agent, or authorised representative, of Cloud Top and Dawcam in or about October 2006

86 The evidence establishes that Mr Cooper provided the allegedly misleading financial information to Mr Toma in October 2006. In order to succeed against the plaintiffs, Mr Toma therefore bears the onus of establishing that Mr Cooper was an agent of the plaintiffs in or about October 2006. This onus has not been discharged.

87 The clear evidence, including the evidence of Mr Toma, is that, at the relevant time, Mr Cooper and/or Cooper Hotel Brokers was acting for Toma Services and Mr Toma:

(a) paragraph 10 of the affidavit of Mr Toma - “ I authorised Ryan to engage [Cooper] to undertake inquiries on behalf of Toma Services … ”;

(b) paragraphs 16 to 21 of the affidavit of Mr Toma - which is to the effect that Mr Toma requested Mr Cooper to obtain financial information on his behalf of Toma Services; and

(c) paragraphs 3 to 9 of the affidavit of Mr Cooper and paragraphs 10 to 12 of the affidavit of Mr Pasfield - which confirms that Mr Cooper was acting as the agent of Toma Services/Mr Toma rather than of Cloud Top and Dawcam.

“Q. Do you recall during that conversation with Mr Cooper you asking Mr Cooper to get him the numbers and as much information as you could, as he could, rather?

(T49:34-44).

88 There is no evidence on which it could be found that the necessary elements of agency (firstly, the consent of both the principal and the agent; secondly, authority given to the agent by the principal to act on the principal’s behalf; and thirdly, the principal’s control of the agent’s actions - see Law of Agency by G E Dal Pont, Butterworths (2001) at [4.3]) existed between:

(a) Mr Pasfield/Cloud Top/Dawcam (as principal); and

89 The only evidence of Mr Toma as to Mr Cooper/Cooper Hotel Brokers being the agent of Mr Pasfield, Cloud Top and/or Dawcam was that he was told by Mr Cooper in late February 2007 that he (and, in effect, Cooper Hotel Brokers) had “got the listing” (affidavit of Mr Toma at [35]). Thus the agency arrangement alleged by Mr Toma appears to have commenced some four months after Mr Cooper made the alleged misrepresentations.

90 The evidence of Mr Pasfield is that the only time that he, Cloud Top and/or Dawcam appointed Mr Cooper/Cooper Hotel Brokers as an agent, was on 17 April 2007 (affidavit of Pasfield 3/4/07 at [40] and [41], T 162.36-38 and T 169.26-39). The circumstances of the discussions between Messrs Pasfield and Cooper as to liability for any commission that was payable on any sale of the hotel business were explained by Mr Pasfield in cross-examination (T162.40-51).

91 Even had the finding been that Mr Cooper was acting as the agent, or authorised representative, of Cloud Top and Dawcam in or about October 2006, the claims made against Cloud Top and Dawcam by Toma Services and Mr Toma in the further amended cross-summons would require to be dismissed as:

(a) the evidence given by Mr Toma is not capable of supporting the pleaded contravening conduct; and

92 Further:

i. In the First Cross-Claim Mr Toma pleads that Mr Cooper was engaged to make enquiries as to the availability of the Hotel for sale. There is no suggestion that this was not done. However paragraph 22 of the Further Amended Cross-Summons then seeks to expand the alleged engagement to an obligation for Mr Cooper to find “a” suitable property and business for Mr Toma.

ii. The evidence is that it was Mr Toma who contacted Mr Cooper in October 2006 enquiring whether the Hotel was for sale. In other words Mr Toma directed Mr Cooper to the Hotel.

iii. In mid October Mr Cooper obtained a licence search in relation to the Hotel and at a meeting gave this search to Mr Toma. He also advised Mr Toma that the hotel had 15 poker machine entitlements and was within a 1 km radius. There has been no suggestion that any part of this information was incorrect or was anything other than what could be expected of Mr Cooper.

iv. As previously noted, on 20 October 2006 Mr Cooper sent to Mr Toma the hotel's building plans and the profit and loss statement that he had been given by Mr Pasfield. Mr Cooper gave evidence that he made no other representation concerning the financial returns of the Hotel other than to say that the figures were the profit and loss figures for the management accounts and that Mr Pasfield had taken out personal outgoings, depreciation, one-off expenses, interest and management wages. Mr Cooper through his company was simply the conduit for the information that he obtained.

v. Although Mr Toma disputes being told of the omissions from the accounts, there is no reason why Mr Cooper would not have told him about those matters.

vi. Mr Cooper was candid in admitting that Mr Pasfield advised him of the omissions from the profit and loss account and Mr Pasfield was “100% certain” that he so advised Mr Cooper (T170, L39-54).

vii. Mr Cooper did not provide to Mr Toma a copy of the document titled, “ Item Movement by Product Class with Cost” because it only represented seven days trading in a particular period and, in his experience, a particular week’s sales are not representative of annual sales.

viii. Mr Cooper gave evidence that shortly thereafter he told Mr Toma that if he wanted to verify the trading figures for the Hotel and to obtain the full set of accounting figures he should have his accountant contact Mr Pasfield’s accountant. Mr Toma agreed that this was suggested by Mr Cooper. Mr Cooper also told Mr Toma that, in his opinion, on the figures provided the Hotel was worth $5 to $5.5 million as a going concern.

subject to four weeks due diligence and verification of numbers by the accountant”

a) the conversation between Mr Pasfield and Mr Toma on 27 March 2008 (see para 32 of the affidavit of Mr Pasfield dated 3 April 2008);

b) an e-mail sent by Mr Toma to Mr Ryan on 19 June 2007 (see page 45 of Exhibit SDK-1 to the affidavit of Mr Kibbey – Exhibit B1 page 564);

x. Importantly, it is not suggested that Mr Cooper or his company was involved in any due diligence or verification of the accounts on behalf of Mr Toma. There is also no evidence that any other due diligence or verification of the financial position of the Hotel was undertaken by Mr Toma prior to exchange of contracts.

a) Mr Toma knew from Mr Cooper that Mr Pasfield would not sell the Hotel for less than $6 million. He was consistently told this. Mr Cooper had advised Mr Toma that Mr Pasfield wanted $6 million clear and a six week settlement; that there was another agent looking at the Hotel with clients at $6.2 million; that Mr Cooper would charge $100,000 commission; that therefore the purchase price would be $6.1 million; that there would be a need to pay a 5% deposit (T58 – T60);

b) That Mr Cooper had identified a suitable hotel for Mr Toma’s company and had made enquiries on his behalf re. ascertaining whether it was for sale and whether it had poker machine entitlements;

c) Mr Cooper had obtained registered plans for the Hotel (Exhibit A1 at 126-128), title property searches (Exhibit B1 at 362), licence searches (Exhibit A1 at 1) and a Profit and Loss prepared by the owner of the Hotel (Exhibit A1 at 118) and had given these to Mr Toma or his legal representative;

d) Mr Cooper had prepared an inventory list for the Hotel (Exhibit A1 at 305);

e) Mr Toma, on 23 October 2006, had offered to pay $5.5 million “subject to four weeks due diligence, verification of numbers by Mr Toma’s accountant and settlement on 15 February 2007 (Exhibit A1 at 126). These provisos were not replicated in the exchanged contracts of sale or in any other subsequent offer that he made;

93 Mr Gouley, counsel for the Cooper interests drew the courts attention to the following matters each of which is of substance:

i. Neither contract was made subject to any due diligence and verification of the accounting position of the Hotel.

ii. No warranty was provided in relation to the accuracy of the figures contained in the Profit and Loss Statement that had been given to Mr Toma in October 2006.

iii. If the financial position as stated in the Profit and Loss Statement for year ending 30 June 2006 were crucial to Mr Toma’s decision whether to enter into the contracts on 21 March 2007, then it was within the hands of Mr Toma to make the contracts subject to such requirements or to contain such a warranty. This was not done.

iv. The Sale of Business Contract contained express provisions excluding reliance by Mr Toma on any financial data that he was given (clauses 8.2, 8.3 and 8.4 of the Sale of Business Contract located at Exhibit A1, page 293).

Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd

94 The allegation that there was a contractual obligation between Mr Cooper and Toma Services and/or Mr Toma is without foundation.

95 Ultimately “Coopers Hotel Brokers” [not Mr Cooper personally], was described by the parties to the Sale of Land Contract and the Sale of Business Contract as the “Vendor’s agent”. Further, clause 32.1 and 32.2 of the Sale of Land Contract reinforces this role. Any suggestion that Toma Services or Mr Toma did not know that Mr Cooper's company had become the agent or representative of Cloud Top or Dawcam is contrary to the evidence contained in those contracts.

96 Prior to exchange of contracts Mr Cooper was simply a facilitator between Mr Toma and Mr Pasfield. He communicated the offers that were made and the responses to those offers. He handed over documents that he obtained to Mr Toma and/or his legal representative.

97 There is no evidence that Mr Cooper or his company failed to act in good faith; failed to maintain confidentiality; failed to act with reasonable skill, care and diligence; or failed to act in the interests of Mr Toma or Toma Services. Mr Toma utilised the services of Mr Ryan in relation to the conveyance of the property and the business and it was Mr Ryan’s evidence, accepted as reliable and dealt with below, that he explained the terms and conditions of the relevant contracts to Mr Toma.

98 Mr Cooper gave to Mr Toma all relevant information that he had been given concerning the financial performance of the Hotel. Mr Toma was informed by Mr Cooper that Mr Pasfield wanted $6 million for the Hotel. He was also correctly advised that there were other parties dealing with Mr Pasfield. Mr Toma negotiated knowing the price and the conditions that were set down by Mr Pasfield. Further, Mr Toma conducted negotiations over several months in relation to the Hotel and in those circumstances his case that he or Toma Services were compelled to enter the contracts is rejected.

No reliance

99 Reliance upon the alleged representation was not established as:

(i) the chain of e-mails at tabs 5 and 6 of Exhibit AT-1 to the affidavit of Mr Toma;

(ii) the e-mail from Mr Toma to Mr Cooper on 23 March 2007; and

it is clear that Mr Wan:

(iv) was unable to open or read the attachment to the e-mail sent to him (which is alleged to have contained the financial information) in October 2006;

(v) no analysis or projections concerning the financial information had been undertaken as at 13 March 2007 when Mr Wan asked for the trading figures; and

Likewise, the other evidence of Toma Services’ purported reliance on the financial information all occurred after the exchange of the contracts (affidavit of Mr Toma at [46] to [53]);

(b) there is no evidence by Mr Toma, in his personal capacity , that he relied upon the estimated profit and loss statement or his alleged conversation with Mr Cooper when he determined to execute the guarantees contained in the Sale of Land Contract and the Sale of Business Contract. Mr Toma only gave evidence on this issue in his capacity as the sole director of Toma Services (affidavit of Mr Toma at [43] to [57]);

(i) The Old Fitzroy Hotel was worth less than $6 million as a going concern; and

(see, for example, affidavit of Mr Cooper at [9], [10], [16], [17] and [19] and affidavit of Mr Pasfield 3/4/08 at [17]);

(d) the evidence of Messrs Pasfield, Cooper and Toma is that Toma Services wished to purchase The Old Fitzroy Hotel so that the hotelier’s licence and the poker machine entitlements could be relocated to Kings Cross (see, for example, affidavit of Cooper at [3], [9], [17] and [19], affidavit of Mr Pasfield 3/4/08 at [8], [13], [17], affidavit of Mr Toma at [9] and affidavit of Mr Ryan at [6], [7] and [11]);

(i) no warranty, statement or representation was made by Dawcam as to the takings, profits or outgoings of the business;

(ii) Toma Services did not rely upon any warranty, statement or representation made by Dawcam; and

(g) even after the Sale of Land Contract and the Sale of Business Contract had been terminated, Toma Services offered to increase the total purchase price by $25,000 and wished to proceed with the purchase of the property and the hotel business (see, for example, affidavit of Ryan at [54], affidavit of Mr Toma at [51] and pages 77, 82 and 85 of Exhibit JPR1 to the affidavit of Mr Ryan);

(a) the sale price of $6.1 million was “ ridiculous ” (T 102:30-39 and TR 103:11-23) and “ a bit high ” (T 103:40-44);

(b) the Sale of Land Contract and the Sale of Business Contract were not binding upon Toma Services/him (T 101:13-30, T 102:17-27);

(c) in executing the contracts and paying the sum of $50,000.00, all Toma Services/he was doing was purchasing a 14 day option to purchase the hotel business (T 102:17-27); and

(ii) he only agreed to enter in to the alleged ‘option to purchase’ as a result of pressure from Mr Ryan and Mr Cooper not to miss out on the sale and the fact that he believed that another party was intending to purchase the hotel business for $6.2 million (affidavit of Mr Toma at [30] to [33] and T 101:30-39).

No loss or damage as a consequence of any alleged contraventions

100 Whilst contravening conduct need not be the only source of a plaintiff’s loss or damage [it is sufficient if it being a cause of loss or damage (I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109)], the alleged contraventions did not contribute in any way to the loss or damage, had such been established, of Toma Services (and Mr Toma as guarantor). The loss and damage complained of was wholly due to the failure by Toma Services:

(a) to have sufficient funds available to honour on presentation its cheque in the sum of $150,000.00, being part payment of the second instalments of the deposit due under the Sale of Land Contract and the Sale of Business Contract respectively; and/or

101 It was these actions which lead to the crystallisation of Mr Toma’s obligations as guarantor of the liabilities of Toma Services under the Sale of Land Contract and the Sale of Business Contract respectively.

102 In the result the cross-claims made by Toma Services and Mr Toma against Cloud Top and Dawcam as well as the Cooper parties require to be dismissed with costs.

Dealing with Mr Toma's cross-claim against Mr Ryan

103 The essential detail of this cross-claim has already been set out. The issue can be dealt with quite shortly.

104 However it is first appropriate to make clear that the oral submissions advanced by Mr Toma, alleging that Mr Ryan had a conflict of interest because of his alleged relationship with Mr Cooper, were not pleaded. These allegations therefore do not need to be entertained. Had the matter been pleaded, the allegation would have been rejected.

105 Returning to the instruction which Mr Toma claims to have given Mr Ryan with respect to the provisions to be included in any agreement with the plaintiffs [set out above]; clearly enough that form of instruction:

i. is inherently unlikely; and

106 Mr Toma’s case is inconsistent with the contemporaneous documents, and with the evidence of three witnesses: Mr Ryan, Mr Cooper and Mr Pasfield.

107 The finding is that no such instruction was given.

108 As already indicated, Mr Toma’s case in relation to the deposit clauses fails at the outset. His case is that he reached an in-principle agreement with the vendor through Cooper that the deposit would be 5%, but that $50,000 only would be paid up front and the contract would only be binding if Mr Toma paid the rest of the 5% within 2 weeks.

109 By contrast, the evidence of Mr Cooper (5 May 2008, paragraphs 37-39), accepted as reliable, is that Mr Toma reached an in-principle agreement that included an unconditional 5% deposit.

110 As Mr Moore, counsel appearing for Mr Ryan, has observed, this evidence was not even challenged in cross-examination. In any event, the evidence of Mr Cooper is accepted.

Short minutes of order

111 The parties are to bring in short minutes of order on which occasion costs may be argued.

*************

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Citations

Cloud Top Pty Limited v Toma Services Pty Limited [2008] NSWSC 568

Most Recent Citation

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Cases Cited

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Statutory Material Cited

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Brien v Dwyer [1978] HCA 50

McDonald v Dennys Lascelles Ltd [1933] HCA 25

CITATION:	Cloud Top Pty Limited & Anor v Toma Services Pty Limited & Anor [2008] NSWSC 568
HEARING DATE(S):	2/06/08, 3/06/08, 4/06/08, 5/06/08
JUDGMENT DATE :	18 June 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Plaintiff's claims seeking payment of deposits upheld - Cross-claims brought by the first defendant summarily dismissed - Cross-claims brought by second defendant to be dismissed - Parties to bring in short minutes of order accordingly
CATCHWORDS:	Contracts - Contract for sale of hotel real property and business - Contract not made subject to any due diligence and verification of accounting position of hotel - No warranty of accuracy of figures - Express provisions excluding reliance by purchaser on financial information - Guarantees - Misleading and deceptive conduct - Alleged contractual, common law and fiduciary duties of hotel brokers - Deposits - In New South Wales deposit of 10% of the purchase money an exception from the law relating to penalties - Whether hotel broker an agent for vendors - Solicitors - Allegation that Solicitor for purchaser owed and breached obligations to use reasonable skill, care and diligence or to act in accordance with instructions and to provide full and accurate advice
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) Gaming Machines Act 2001 (NSW) Liquor Act 1982 (NSW) Trade Practices Act 1974 (Cth.)
CATEGORY:	Principal judgment
CASES CITED:	Ashdown v Kirk [1999] 2 Qd R 1 Brien v Dwyer (1978) 141 CLR 378 Freedom v AHR Constructions Pty Limited [1987] 1 Qd R 59 I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 Iannello & Anor v Sharpe (2007) NSW ConvR 56-179 Luong Dinh Luu v Sovereign Developments Pty Limited & Ors [2006] NSWCA 40 McDonald & Anor v Dennys Lascelles Limited (1933) 48 CLR 457 Mehmet v Benson (1963) 81 WN (Pt 1) (NSW) 188 Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131
TEXTS CITED:	G.E Dal Pont, Law of Agency, (2001) Butterworths
PARTIES:	Cloud Top Pty Limited (First Plaintiff) Dawcam Pty Limited (Second Plaintiff) Toma Services Pty Limited (First Defendant) Alister Toma (Second Defendant) G Cooper Pty Limited as trustee for Cooper Trust trading as G Cooper Hotel Brokers (Third Defendant) Mr Joseph Patrick Ryan (Third Cross Defendant to the First Cross Claim)
FILE NUMBER(S):	SC 50068/07
COUNSEL:	Mr E Hyde (Plaintiffs) Mr Toma (litigant in person) Mr J Gooley (for Mr Cooper and G Cooper Pty Ltd Cooper Trust t/as G Cooper Hotel Brokers) Mr C Moore (for Mr JP Ryan)
SOLICITORS:	Don McDougall Lawyer (Plaintiffs) Lander & Rogers (for Mr Cooper and G Cooper Pty Ltd Cooper Trust t/as G Cooper Hotel Brokers) HWL Ebsworth (for Mr JP Ryan)