Constantino v Constantino
[2016] VCC 495
•29 April 2016
IN THE COUNTY COURT OF VICTORIA
AT MILDURA
COMMERCIAL DIVISION
Revised
Not Restricted
Suitable for PublicationGENERAL LIST
Case No. CI-14-06525
BRUNO CONSTANTINO Plaintiff v SALVATORE CONSTANTINO Defendant ---
JUDGE:
HIS HONOUR JUDGE SACCARDO
WHERE HELD:
Mildura
DATE OF HEARING:
4, 5, 6 and 7 April 2016
DATE OF JUDGMENT:
29 April 2016
CASE MAY BE CITED AS:
Constantino v Constantino
MEDIUM NEUTRAL CITATION:
[2016] VCC 495
REASONS FOR JUDGMENT
---Subject:CONTRACT LAW
Catchwords: Whether plaintiff and defendant entered into a binding contract requiring defendant to fund the purchase price paid by plaintiff for a farm
Judgment: Court satisfied plaintiff entitled to call upon defendant to honour his undertaking to finance the totality of the purchase price of the property.
---
APPEARANCES:
Counsel Solicitors For the Plaintiff Mr T R Messer Maloney Anderson For the Defendant Mr T M Dowling Martin Irwin & Richards HIS HONOUR:
1 The issue which arises for my determination in this proceeding is whether in 2006 the plaintiff and the defendant entered into a binding contract which required the defendant to fund in its entirety the purchase price paid by the plaintiff for a farm in Robinvale, property which the parties have described in their evidence as the “Campagna property”.
2 In deciding this issue, it is appropriate that I set out a brief chronology which will give context to the position put by each of the parties as to the above issue and my findings in the matter:
(i) The plaintiff and the defendant are brothers. Their father was a farmer in Robinvale. In the course of his life he acquired a number of blocks of land upon which he grew fruit and vegetables. During their school lives the plaintiff and the defendant (“the brothers”) assisted their father in the physical work required to manage the farming process. Upon leaving school each of the brothers undertook farm work on a full-time basis in conjunction with their father. In the mid-1980s, their father largely removed himself from the day-to-day operation of the farming process and from that time the process was managed jointly by the brothers;
(ii) The brothers operated a partnership trading under the name Grapeland Trading Company (“GTC”);
(iii) In 1987 the brothers, through GTC, incorporated a company named Grapeland Investments Pty Ltd for the purpose of buying a block of flats in Mildura. The brothers were directors of the company and each of them held 50 per cent of the shares in the company;
(iv) In 1989, the brothers agreed to diversify their joint business interests by purchasing an interest in a wholesale fruit and vegetable business in Melbourne. It was agreed that the plaintiff and his family would move to Melbourne and manage that business and that the defendant would stay in Robinvale and manage the farming business;
(v) In 1991, the brothers agreed to the purchase of a retail business in Melbourne which was also to be operated on their behalf by the plaintiff;
(vi) In 1993, the business relationship between the brothers was restructured (“the 1993 restructure”). As a result of the restructure the plaintiff transferred his interest in Grapeland Investments Pty Ltd to the defendant’s wife and the company name was changed to Grapeland Pty Ltd;
(vii) It is the plaintiff’s position that the restructure was undertaken purely to protect the assets of the brothers’ farming enterprise from his liability with respect to a loan from the ANZ Bank which had been executed to allow the purchase of the wholesale business in Melbourne in respect of which the plaintiff was a guarantor, and that in reality there was no alteration in the brothers’ business relationship;
(viii) It is the defendant’s position that the restructure involved a termination of the brothers’ business relationship, with the result that they had each agreed to go their own way, the defendant giving up any interest which he had in the retail and wholesale businesses in Melbourne and the plaintiff giving up any interest which he had in the farming enterprise;
(ix) Between May 1993 and 1999, the plaintiff lived in Melbourne and managed the operation of the wholesale and retail businesses;
(x) In 1999, the plaintiff sold the retail business and paid the proceeds of that sale, approximately $70,000, to the defendant;
(xi) Later in 1999, the plaintiff and his family moved back to Robinvale where he resumed a position in the operation of the farming business and his family took up residence in a house provided for them by the defendant located on a farm known as “Tol” which was owned by the defendant;
(xii) In 2005, the defendant approached the plaintiff with a proposal (“the 2005 proposal”) which involved a distribution of cash and land by him to the plaintiff on the basis that any business relationship/dealings between them which then existed would be curtailed and they would thereafter operate their respective farming enterprises completely independently of one another;
(xiii) Following the 2005 proposal the defendant transferred various amounts of cash and land to the plaintiff (“the 2006 transfers”);
(xiv) On 3 June 2006, the plaintiff entered into an agreement with respect to the purchase of a farming property owned by Salvatore and Malgorzata Campagna. The purchase price of the property was $720,885.00. The defendant initially contributed a total of $300,000 to the purchase price of the property. The balance of the purchase price was funded through a bank loan obtained by the plaintiff. It is the plaintiff’s position that the purchase of the property by him was subject to an agreement which he entered with the defendant that the defendant would contribute an initial payment of $300,000 to assist in the financing of the purchase of the property and thereafter the defendant would meet the full cost of the purchase of the property by providing the plaintiff with yearly instalments of $100,000 until the plaintiff’s debt of $720,885.00 was expunged. It is the defendant’s position that he undertook to fund the plaintiff’s purchase of the property by contributing $300,000 and no more;
(xv) In June 2007, the defendant paid to the plaintiff $100,000. The 2007 payment is put by the plaintiff as constituting the first instalment payment relevant to the defendant’s undertaking to finance the totality of the purchase price of the Campagna property. The defendant’s position is that the payment of $100,000 involved a gratuitous payment on his behalf, motivated by his mistaken belief that in arriving at the division of property associated with the 2005 proposal he had failed to give effect to his intention to achieve a division of assets between himself and the plaintiff on the basis of a 50:50 split, and to achieve that purpose he should pay the plaintiff an additional cash payment of $100,000.
The evidence
The evidence of the Plaintiff
3 The plaintiff gave evidence that he was fifty-six years old and had, whilst he was a school student, assisted his father in the management of the family farm at Robinvale. At the age of approximately eighteen, he left school and thereafter worked on the family farm with his father and his brother on a full‑time basis. Over the years, his father purchased a number of blocks to augment the family holdings. The plaintiff married in April 1982. At that time, his father provided him with a house on one of the family blocks and carried out renovations to the house. He also provided the plaintiff with income which was distributed on a needs basis during the year by his father. He said that his father and mother went on a trip to Italy in the mid-1980s and, from that time, the plaintiff and the defendant took over the management of the farm, which was involved primarily in the production of table grapes. In September 1987, the brothers incorporated a company, Grapeland Investments Pty Ltd, for the purpose of buying a block of flats in Mildura, which were eventually sold. The plaintiff and the defendant were the directors of that company and each of them held 50 per cent of the shares in the company.
4 In 1989, the brothers agreed to buy a wholesale fruit and vegetable business in Melbourne. It was agreed that the plaintiff would go to Melbourne to manage that business. The purchase of the business was effected through the formation of a company, Leeton Towns. Shares in Leeton Towns were held by Grapeland Investments Pty Ltd, Lou Gallo (“Gallo”) and Antonio Butera (“Butera”) in equal proportions. A deposit for the business was raised by Grapeland Investments Pty Ltd, Butera and Gallo, each contributing approximately $70,000. The balance of the finance was arranged through the ANZ Bank. The plaintiff provided a Director’s Guarantee with respect to that loan. The defendant did not. The plaintiff moved to Melbourne to run the business. He initially lived in rental accommodation, but thereafter moved to a house in Milleara Road, Avondale Heights, which was purchased by Grapeland Investments Pty Ltd. The joint proprietors of the Milleara Road property were the plaintiff and the defendant.
5 In 1991, the brothers agreed that a retail business should be purchased in Melbourne, which was to be operated by the plaintiff in his representative capacity for Grapeland Investments Pty Ltd, together with Gallo. The retail business was purchased through a company, Delmont Trial, for the sum of $145,138. It was effectively a 50:50 partnership between Grapeland Investments Pty Ltd and a company controlled by Gallo. The money was sourced by Gallo and Grapeland Investments Pty Ltd making equal contributions to the purchase price.
6 The plaintiff said that by 1992-1993, the wholesale business was performing badly. At that time, the bank required the partners to inject more capital into the business and it was agreed that Grapeland Investments Pty Ltd, Gallo and Butera would each contribute $18,000. Whilst Grapeland Investments Pty Ltd and Butera made good their contribution, Gallo did not.
7 The plaintiff said that at a subsequent meeting with the bank, which was attended by him, the defendant and the other directors of Leeton Towns, there was “a bit of aggression between the directors of Leeton Towns”. He said that, after the meeting, there was a discussion between he and his brother which arose by reason of the signed Guarantee which the plaintiff had provided with respect to the liabilities of Leeton Towns, which centred around protecting the assets of the Grapeland business “so that if something went wrong with the wholesale business, it didn’t affect the farming business”.[1] He said that an arrangement was then made that the defendant would take “anything that’s worth anything and I keep the wholesale business and the retail business”.[2] As to the effect of the proposed arrangement upon the partnership, the plaintiff was asked:
[1]Transcript (“T”) 84-85
[2]T85
Q:“Was there an arrangement reached with Sam about you coming back to Grapeland?---
A:Yes.
Q:What was that arrangement?‑‑‑
A:That was always, you know, when things got cleaned up, tidied up, just as normal. It was always a partnership together working.”[3]
[3]T85
8 There is no issue:
· that in 1993, Transfers were executed between the plaintiff and the defendant in which all of the plaintiff’s interests in real property in Robinvale or the house in Milleara Road were transferred to the defendant and the defendant’s interests through Grapeland Investments in the operation of the retail business or the wholesale business were transferred to the plaintiff;
· that the plaintiff transferred to the defendant’s wife his shares in Grapeland Investments and agreed to the dissolution of the partnership between himself and the defendant;
· that all the Transfers were executed without any money passing between the plaintiff and the defendant;
· that the Transfer in the plaintiff’s interest in:
(i) Milleara Road was effected on the basis consideration of $55,000;
(ii) the Robinvale properties was effected for a total consideration of $31,000;
(iii) various items of plant and equipment was effected for a consideration of $11,669.20;
(iv) the Grapeland trading company partners’ capital account was reduced by reason of a cash withdrawal of $158,481.00;
and that each of these transactions involved no payment to the plaintiff, who in addition received no monies in respect of a withdrawal from the Capital account in the sum of $13,257.01.
9 Between May 1993 and his eventual return to Robinvale in 1999, the plaintiff, with his family, continued to live at the Avondale Heights property but paid no rent with respect to that tenancy. The plaintiff said that the retail business in Melbourne was struggling by 1993 and at that time he established a new business, Fairbank Tower, through which he took over the operation of the retail business, with Gallo effectively walking away from the business. He said that he subsequently sold the business for a figure in the vicinity of $70,000, which he subsequently provided to Grapeland Investments Pty Ltd:
Q: “Why did it go to Grapeland?‑‑‑
A: Because it was the money to keep the businesses going.”[4]
[4]T97
10 The plaintiff said that over the years he had provided cash to his parents when they would come down to Melbourne, which was applied to the family business “because I had excess to what I needed”.[5] He said that his cash contributions were substantial.
[5]T98
11 The plaintiff, together with his family, returned to Robinvale in 1999. At that time he described the defendant as looking at purchasing another 700 acres and needing a hand, the plaintiff’s position being that he was content to move back to Robinvale because he did not like the environment in which his children were growing up in Melbourne. He said the wholesale business continued to be managed by Butera upon his departure from Melbourne.
12 On returning to Robinvale, the plaintiff lived in a house on Tol Road, being part of a farm owned by Grapeland Investments Pty Ltd. The farm involved 700 acres which was dry farming but had a lot of potential.
13 The plaintiff said that he worked on various farms held by Grapeland Investments Pty Ltd but that he subsequently was mainly involved in the operation of the Tol Tol property. He described his company, Firbank Tower, becoming involved in the management of that property “to minimise payroll tax”.
Q: “How did that work?‑‑‑
A:I would put a fair portion of my wages through the chequebook, through my chequebook, which was Firbank, yeah.
Q:Where did the money come to pay the wages from?‑‑‑
A:I would just ring Sam up and tell him how much I needed, he'd give me a cheque and I’d go and bank it.
Q:So where did the money come from?‑‑‑
A:Grapeland.
Q:So Grapeland paid money to Firbank Towers so that Firbank Towers could pay its bills. Is that right?‑‑‑
A:Yes.”
HIS HONOUR:
Q:“When you say wages, your wages?‑‑‑
A:Yes. Wages, fuel, chemicals, some of the development.”
MR MESSER:
Q: Were you the only employee?‑‑‑
A: There was numerous employees.
Q:How many employees would you have at harvest time?‑‑‑
A:At harvest, anywhere up to 100 of them.
Q: Were they being employed by Firbank Towers?‑‑‑
A: Yes.
Q: And was Firbank Towers receiving money from Grapeland?‑‑‑
A: Yes.
Q: Which it used to pay the ‑ ‑ ‑?‑‑‑
A: To pay the bills.
Q:To pay the bills, including the wages bill?‑‑‑
A:Including the wages bill, yes.”[6]
[6]T102-103
14 The plaintiff said that after returning to Robinvale in late 2005, he paid $122,000 to Grapeland Investments Pty Ltd following a conversation with his brother in which he was told that the company needed some funds through to the harvest.
15 That payment was made on 21 September 2005.
16 The plaintiff said that in late 2005 he was approached by his brother. He was told –
“… that Grapeland wasn’t doing too well and that he didn't want me to go down with Grapeland.
… And we should split it up.”[7]
[7]T108
17 The plaintiff said that at that time, the defendant presented him with two handwritten proposal documents[8] which set out the defendant’s proposal for the distribution of the assets held by Grapeland Investments Pty Ltd by listing:
[8]PCB 77-79 (the Bruno list) and PCB 82-84 (the Sam list)
· The property and cash to be transferred to the plaintiff (“the Bruno list”)
· The property and cash to be retained by the defendant (“the Sam list”)
on the basis that their business relationship was to be terminated.
18 The plaintiff said that having considered the proposal, he formed the opinion that it was not fair, that the overall properties, including everything which had been spent in the previous years, were undervalued and that he eventually told his brother that “there should be at least one more block in it”.
Q:“What did Sam say to you in response; sorry. You’re telling His Honour that you told Sam there should be one more block, is that right?‑‑‑
A:Yes.
Q:What did Sam say in response to that?‑‑‑
A:It went backwards and forwards but pretty much he said no, the block that I wanted was known as Thoolen’s which I think is 47B and he said ‘You can’t have that’.
…
And he said I couldn’t because he’d renovated the house and his son was living in there or was going to live in there.
Q:Did you ask about any other blocks?‑‑‑
A:No, then we kept arguing over it, and then some time further down the track we had almost agreed, but I still wasn't happy, so then the suggestion of Sam Campagna’s block.”[9]
[9]T111-112
19 The plaintiff said that it was eventually agreed that the defendant would go and see Mr Campagna to negotiate the purchase of the block and that following that negotiation, there was a further discussion between he and the defendant:
“The discussion was that he would give me – that he would purchase the – give me the deposit to purchase the block and make annual payments until it was paid for.”[10]
[10]T112
20 That offer having been made, the plaintiff gave the following evidence:
Q:“Did Sam say anything else in relation to what was being offered?‑‑‑
A:He said, ‘That’s it, that’s final’.
Q:What did you say?‑‑‑
A:“If I got no choice we’ll take it’, that’s where - that was our final agreement. I still wasn’t happy because the values weren’t – I didn't feel that the values were correct.”[11]
[11]T113-114
21 The plaintiff gave evidence that the Campagna property was purchased for $720,885.00 and that a large cool store was located on the property, that the defendant contributed a total of $300,000 by way of deposit and finance for the purchase of the property and that the balance of the funds required to purchase the property were financed via a bank loan. There is no issue that thereafter various land transfers were executed by the defendant in favour of the plaintiff in accordance with the Sam agreement, and the business relationship between the plaintiff and the defendant ceased.
22 The plaintiff said that in 2007, Grapeland Investments Pty Ltd paid him the sum of $100,000.
Q:“… what was the $100,000?‑‑‑
A:That was $100,000 that he was going to pay annually until the farm was paid for.
Q:Right. So he came to pay you in 2007. Yes?‑‑‑
A:And with that cheque he gave me invoice statement for whatever you want to call it, saying, ‘Put it in as a grape purchase, so that I can claim it off my tax. Enter it as a grape purchase, tell your accountant it's a grape purchase.’
Q:Was it a grape purchase?‑‑‑
A:No.”[12]
[12]T126
23 The plaintiff said that in 2008, the defendant did not pay the next $100,000 instalment. He said that the defendant approached him, saying that he was having a poor year and that he would be unable to pay the money at that time, to which the plaintiff responded that they would work something out. The plaintiff said that at that time he contacted a solicitor from Watson Legal, gave the solicitor instructions to write a letter to his brother confirming the arrangement and that the letter was forwarded on his instructions to the defendant some six months later.[13] He said that he subsequently received a response to that letter from his brother’s solicitors, which appended a personal response authored by his brother which relevantly contained the following statement:
“Again, I gave you the market stall in Melbourne, Block 9B and Block 16B fully replanted and re-trellised with sprinkler irrigation, $194,000 cash, $400,000 to levy Block 25B, plus $25,000 to buy 25 megs of water, the house and sheds at Tol Tol plus 2.2 megs of water.”[14]
[13]PCB 121
[14]PCB 122
24 Whilst the plaintiff was cross-examined at length, much of the cross-examination involved the puttage of the defendant’s case which I will summarise in the course of dealing with the defendant’s evidence about which the plaintiff made no concession. It is appropriate to record however that the defendant’s position which was put to the plaintiff was that the 1993 restructure involved the plaintiff’s acquiescence to a position put to him by the defendant that:
“… if you wanted to remain in Melbourne and carry on with these other individuals, then he wished to continue with farming as he was, and that there would need to be a complete split of all your affairs.”[15]
[15]T138
25 The plaintiff disagreed with that proposition, commenting it was all about asset protection.
26 As to the continuation of the business relationship between the plaintiff and the defendant after the 1993 restructure, the plaintiff was asked in cross-examination:
Q:Do you say that as part of the agreement in 1993 that you held the shares that you were transferred in Delmont Trial and Leeton Towns on trust for your brother, Sam?‑‑‑
A:It was a family business. Whether you call it on trust, whether it was holding it for your brother, you can put whatever - it was a unit running the businesses, a family unit.”[16]
[16]T144
27 The plaintiff said in the course of cross-examination that:
· he took the shares in Leeton Town and Delmont Trial to “… protect what we had in Robinvale”.[17] He described the businesses as being worth nothing on paper, but commented –
[17]T144
“… it’s still an ongoing business. … I had my guarantee there. If I didn't have a guarantee there, I would have come home too.”[18]
· he had continued to derive income from the operation of one or other of either the retail or wholesale businesses from which he drew wages.
[18]T144
28 The plaintiff was taken to the valuation of his interest in the Robinvale properties and it was put to him that the division of the assets between himself and his brother in 1993 was an equal division. The plaintiff strongly disagreed with that proposition. The plaintiff agreed that Lot 14B was registered in the name of his brother when it was purchased but said that it was his belief that it was purchased by his father. He agreed that after 1993 he played no part in the financial operation of Grapeland Investments Pty Ltd, he was not a director of that company and gave no financial security or guarantee with respect to the operation of the company. However, he maintained his position that the Melbourne and Robinvale enterprises were run as a unit until 2006 and that he and his brother were “one big happy family”.[19]
[19]T164
29 The plaintiff said that whilst by May 2006 his relationship with his brother had deteriorated, they could still have kept working together but that his brother did not want to do so.
30 It was put to the plaintiff that he wanted to buy the Campagna property in 2006, to which he responded:
“No. That was what we agreed with, with Sam, because he didn’t want to give me another block.”[20]
[20]T173
31 In re-examination, the plaintiff was questioned as to the valuation relevant to Lot 14B in 1993 of $3,000 in respect of which he gave evidence that that figure was a gross distortion, having regard to the fact that the block contained upon it a cool room and packing shed which would have cost more than $500,000 to build.
The evidence of Lisa Constantino
32 The plaintiff’s wife, Lisa Constantino, gave evidence as to a discussion she had with the defendant in June 2006 as to the proposed division of property between the brothers and where her family were going to live following the division. She said that this meeting took place at the defendant’s house and that she took contemporaneous notes, at which time the defendant advised her as to the properties which he intended to keep and those which he intended to pass to the plaintiff. She was told that the defendant intended to keep all of the Tol Tol property upon which they were living at the time and offered her a house on another property. She said she told the defendant that she wanted paperwork to understand what everything was worth. She said that in the course of the discussion, the defendant “changed the subject to buy Campagna’s to get a cool room and a block”:[21]
Q:“Do you remember a discussion around that at this meeting?‑‑‑
A:It was very short, just – because the other farms that he wanted to give us had nothing on them, with grapes you need a cool room, you need a shed, and it was just another – another option that was being thrown around.”[22]
[21]T195
[22]T195
33 Mrs Constantino said that the discussion concluded with her making the statement to the defendant that “none of this is fair”.[23]
[23]T200
34 Mrs Constantino said that she was present at another meeting with the defendant at which both her son and her husband were present. She said she took contemporaneous notes of that meeting, in the course of which the defendant said that he would pay the first $300,000 for a deposit on the Campagna property and then he would pay $450,000 in payments over three years so that the block would be purchased but that the plaintiff would need to get a bank loan until the money could be paid.
The evidence of the Defendant
35 The defendant gave evidence that between 1982 and 1987 his brother, himself and his father operated three separate partnerships with each of their wives through which they managed the various horticultural properties owned by them. He said that in 1977, he bought Block 16B but other than that the properties were purchased by his father. He said that in 1987, he purchased Block 9B from his father and that he purchased another property from his father in 1995. The defendant said that when the plaintiff moved to Melbourne the defendant had no involvement in running the Melbourne businesses but he used to go to Melbourne to have a look at what was happening because of Grapeland Investments Pty Ltd’s involvement in the business.
36 The defendant said in 1992, he was not happy with the way the wholesale business was being run. He said that he spoke to the plaintiff at the time and told him that they needed to sell the business, and that the plaintiff had said he was quite happy being there, to which he responded:
A:“‘No, you got to sell the business.’ We absolutely all disagreed. Bruno disagreed and the other partners.
Q:What happened after that disagreement?‑‑‑
A:I said to Bruno quite firmly, ‘Sell the business and get out or I want out’.
Q:Did he say anything to that?‑‑‑
A:He said, ‘I don’t want out, I want to stay here’.
Q:What did you say to Bruno after he’d expressed that view?‑‑‑
A:I said, ‘If that’s that case we separate everything now’.
Q:How did you propose you were going to do that?‑‑‑
A:He’d keep the Grapeland Investment share in the Melbourne businesses and I took his share in the farming businesses.
…
Q:What did Bruno say to that suggestion?‑‑‑
A:He wasn’[t] real happy with that suggestion at first but he had no choice, because I put – that was the ultimatum, sell the business or we separate it.
…
Q:As part of this arrangement, what were the assets that you were proposing to take from Bruno?‑‑‑
A:Half the share in the house in Melbourne, a third share in 16B, third share in Lot 1 or 2 whichever it was, 14B and – let me think what else was there, hang on.
Q:Was there anything else to do with the farm that you ‑ ‑ ‑?‑‑‑
A:A bit of equipment I’d assume.”[24]
[24]T213-214
37 The defendant said that because a ‘no money’ transfer was being undertaken, he sought valuations of the properties on the basis of municipal valuations which he said sometimes reflected the commercial value of properties and at other times did not.
38 He said that the plaintiff was going to take the Melbourne businesses but that the plaintiff’s share in the Milleara Road property was to be transferred to him, because he thought that the plaintiff’s share in the Melbourne businesses “was going to be too much so I thought that half value of the house would be better coming to me”.[25]
[25]T216-217
39 He said that the plaintiff’s shares in Grapeland Investments were to be transferred to his wife, Mary, and that all Grapeland Investments’ shares in Leeton Towns and Delmont Trial would be transferred to the plaintiff.
40 The defendant said that in 1993, he created a trust in which the beneficiaries were he, his wife, his children, the plaintiff, his wife and their children.
41 He explained his reason for including his brother and family in the trust being “Might as well distribute to a family as to strangers if you have to”.[26]
[26]T220-221
42 The defendant said that between 1993 and 1999, the plaintiff had no input into the operation of Grapeland Pty Ltd. He agreed that when the plaintiff sold the retail business, he had sent the proceeds of the sale to the defendant. He described this occurring in the context of a conversation with the plaintiff in which he told the plaintiff that he would apply those funds for the purchase of machinery for the plaintiff. He denied that the plaintiff had ever sent cash to him via his parents. He said that the loan from Grapeland Investments to Leeton Towns or Delmont Trial had been written off as bad debts after the company restructure in 1993. He said he could not exactly remember what he did with that money but it was applied to the purchase of equipment. He said that he subsequently repaid the money to his brother. He described having been pressured by his mother to convince the plaintiff and his family to come back to Robinvale. He said that when the plaintiff did return to Robinvale the defendant told him that the plaintiff and his family could live in one of the houses located on the various blocks and that the plaintiff could work “with us for a couple of years, we’ll try and set you up on your own”.[27]
[27]T224
43 When the plaintiff first returned to Robinvale, he was paid a wage as an employee:
Q:What happened after that?‑‑‑
A:After that I thought to get him to move on he’s going to need some kind of trading history, so then I said to him, ‘I will pay Firbank Tower instead of paying you, and you can manage a small portion of the property so you’ve got a track record, so in the next couple of years you can move on’.”[28]
[28]T224-225
44 Between that time and 2006, the defendant described other discussions occurring with his brother which involved him telling his brother it was time to move on and work on his own, with his brother’s position being that they should leave things the way they were. He said that he had approached his brother in 2006 and told him that he had put together a few properties which he was prepared to give to his brother so that he could go out on his own. The plaintiff’s response was that he did not want to do that but wanted to maintain the status quo, the defendant explaining: “He was quite happy with that arrangement, but that wasn’t a good arrangement.”[29]
[29]T227
45 The defendant described the process by which the Bruno list and the Sam list were prepared as involving the process in which:
“Bruno kept whinging and whining and everything, so I said, okay, I drew up a rough list to say, ‘Here, this is going to be about half. Get out of my hair’, … .”[30]
[30]T228
46 He described the Sam list as recording what he was keeping and the Bruno list as recording “what I was giving him”.[31]
[31]T230
47 He described the house valued at $300,000 in the Bruno list in the following terms:
A:“…Originally it was only going to be the house, then Bruno whinged and whined so he wanted the sheds, the pound (sic) and five or six acres down the bottom which were never part of the original deal anyway.
Q:When you showed this to Bruno, did you explain the document to him?‑‑‑
A:Yep.
Q:What did he say?‑‑‑
A:Not happy.
Q:Did he say anything else?‑‑‑
A:No, that’s all, ‘I’m not happy’.
Q:What did you say?‑‑‑
A:I said, ‘Bruno, that’s more than happy’.
Q:Was there an outcome to that meeting at all?‑‑‑
A:Yeah, we left it at that, yeah, but still not happy.”[32]
[32]T231
48 The defendant said that a few meetings followed in which:
“Bruno kept whinging, ‘It’s not enough. It’s not enough’. I said, ‘That’s it’. After that I gave him some money for some water which was never part of it anyway. That’s another thing that he got extra.”[33]
[33]T232
49 Of specific relevance as to the Campagna property, the defendant said that the plaintiff preferred to have a property with a cool room rather than just the funds to build a cool room, commenting upon the plaintiff’s statement to that effect and his own response:
“… No, it’d be better to have Campagnas’, I said, ‘Okay, I’ll give you the 300,000, then you go and buy Campagnas’. That’s why the 300,000 was given at once instead of instalments.”[34]
[34]T234
50 The defendant said that he negotiated the purchase of Campagna:
Q:“Why did you do that?‑‑‑
A:Because I reckon Sam and Goshka wouldn’t have – wouldn’t have let anybody else ‑ ‑ ‑
Q:…
A:Sam and - we used to call her Goshka, which were my neighbours.
Q:…
A:Because Sam’s block had been for sale for a while. A[nd] people had gone in to negotiate and he chased them all out. And I believe strongly, if Bruno had of negotiated that block, he wouldn't have it today.”[35]
[35]T234-235
51 The defendant said that he then paid $30,000, being the deposit for the Campagna block and $270,000, being the balance of the $300,000.
52 As to the discussions between the defendant and his sister-in-law, the defendant said that his sister-in-law was initially upset when he explained the house that they were getting, commenting:
“‘Not the old broken down house”, she says. And she was quite - kind of said, ‘Oh’, right. And then she got upset and left, because I said to her, ‘There’s nothing wrong if you and Bruno and the children go to work for a living’, and she got upset and left.”[36]
[36]T273
53 The defendant explained his reason for making a $100,000 payment to the benefit of the plaintiff in 2007 in the following terms:
“Because Bruno kept whinging ‘It’s not enough, it’s not enough’ so I quickly looked at them documents and said ‘Shit’ – sorry – ‘I’ve made a mistake’. I’d added mine up to be 2.1 instead of 1.9 so I said ‘Here’s the extra $100,000 and we’ll call it quits’.”[37]
[37]T238
54 The defendant continued:
Q:Did you have occasion to reconsider the payment of that amount?‑‑‑
A:Yeah.
Q:When was that?‑‑‑
A:When Bruno didn’t stop. ‘It’s not fair, it’s not enough’, I said, ‘Well’ ‑ ‑ ‑
Q:I’ll put the question again. When you made the payment in 2007 you said you made a calculation?‑‑‑
A:Yes.
Q:What was the calculation you made?‑‑‑
A:The calculation mistake I realised that when Bruno started proceedings. Before then I hadn’t realised that I’d made that mistake. … .”[38]
[38]T238
55 In cross-examination, the defendant said that he had no recollection of attending a meeting with the ANZ Bank to discuss the funding of the wholesale business in Melbourne. He agreed that the plaintiff had given a guarantee with respect to that debt, but the defendant had not. He accepted that he was concerned in 1993 that the wholesale business was getting out of hand and that this concern arose because he was still in a partnership with the plaintiff and the plaintiff had given a personal guarantee. He agreed that in the course of the transfer of the assets between him and the plaintiff in 2013 he had written off as bad debts the money owed to Grapeland Investments Pty Ltd from Leeton Towns and Delmont Trial. He agreed that he had instructed his accountant, Mr Charles, that those debts were worthless.
56 The defendant denied that his motivation for restructuring the business was associated with the fact that he thought that the wholesale business was going bad. He said that had the plaintiff agreed to sell the wholesale business, the partnership would not have separated back then.
57 When it was put that the plaintiff could not sell the business because he was a minority shareholder, the defendant responded:
“The Butera family were happy to sell the business and made us a minority share to sell the business. The business could have been sold.”[39]
[39]T254
58 This evidence by the defendant contradicts that given by him in evidence-in-chief – namely that the plaintiff and all the other partners disagreed with his position that the plaintiff should sell the business.[40]
[40]T213
59 The defendant agreed that the plaintiff was paid nothing when the partnership was wound up. He described the working relationship which had existed between he and the plaintiff, the two brothers, before the 1993 restructure as follows:
“… I had my property, Dad had his properties. We just traded them together. It wasn’t that it was Bruno’s property or my dad’s property. One property was mine, a share was Bruno’s. All that was is that we pooled the working of the property. At the end of the year it was all distributed. …
… when Bruno came to work at home, instead of paying him a wage we pooled all the properties and we shared - we just traded them together and distributed that income. When Grapeland Trading Company stopped … , all it was that we stopped working the properties together. It’s not that it was a company that Bruno needed to get paid for that. It’s not a company like you’re buying a company.”[41]
[41]T257
60 The defendant was taken to the 1993 valuation of Lot 14B at $1,000. He agreed that the property contained a cool room and shed worth approximately $155,000 and that the value of $1,000 ascribed in 2003 to his brother’s one-third share of that property “on the face of it” in no way represented the value of his interest in the land.
61 The defendant:
· agreed that the Leeton Towns’ shares which were transferred to the plaintiff in 1993 were valued at $4.00 and that the Delmont Trial shares transferred to the plaintiff at the same time were valued at $6.00;
· accepted that at the time of the transfer, the plaintiff received only those shares, whilst the defendant received the plaintiff’s interests in the real estate, plant and equipment of the business in Robinvale and the house in Milleara Road and that no money changed hands.
62 The defendant did not accept, however, that this situation was grossly unfair to the plaintiff.
63 The defendant was cross-examined as to the way the $100,000 which he considered he was responsible to pay the plaintiff in 2006 had been calculated. Whilst the defendant said that this sum included the $70,000 which the plaintiff had provided to him upon the sale of the retail business, he could not recall how the remaining $30,000 came to be calculated. It was put to the defendant that that figure involved the repayment of the cash sums which the plaintiff had provided to the defendant, which the defendant denied. The defendant was, however, unable to give an alternative explanation as to the way that sum was calculated.
64 The defendant’s position that he had sought to provide the plaintiff with half of his assets was challenged on the basis that he had done so relying on property valuations which were three years old at the time that he had made the calculation and having excluded an asset valued at $281,250.00, being water rights held by his trust company, Constantino Trust. He said that in 1999 when the plaintiff returned to Robinvale, the plaintiff was not the manager of the Tol Tol property but that he merely worked on the property, commenting “I don’t need a manager for my properties”.[42] He said that the plaintiff’s company, Firbank Tower Pty Ltd, “ended up being paid as if it was managing the property”.[43]
[42]T269
[43]T269
65 It was put to the defendant that the process of making payments to Firbank Towers Pty Ltd was not motivated by the defendant’s wish to provide the plaintiff with a trading history. To the contrary, he defendant maintained that this had been his intention. It was put to the defendant:
Q:“You put this arrangement in place, didn’t you, for payroll tax purposes?‑‑‑
A:If that’s what it was for, I can’t remember, I put it in place ‑ ‑ ‑
Q:You can’t remember?‑‑‑
A:I put it in place to give Bruno experience at running the property.
Q:Did it have a payroll tax benefit for Grapeland?‑‑‑
A:Anything you take away from your company has got a payroll tax benefit.
Q:You told Bruno it was for payroll tax purposes, didn’t you?‑‑‑
A:I cannot remember but I doubt it.”[44]
[44]T272
66 The defendant agreed that in 2003 when he had obtained a valuation for the Tol Tol property, which he had relied upon in calculating which properties should be retained by him and which should be made available to the plaintiff as set out in the Bruno list and the Sam list, the Tol Tol property had not been irrigated, but that at the time at which the calculation was undertaken, some 12 or 15 hectares (approximately 30 acres) had been irrigated:
Q:“That meant that those 12 or 15 hectares were worth considerably more than $2,000 a hectare, weren’t they?‑‑‑
A:I would say so, yeah.
Q:How much more?‑‑‑
A:Irrigated overheads in clay soil, it would probably only add not much more to it.
…
It costs 5000 an acre to put overheads in. It’s valued at two, add another $3,000 an acre … .”[45]
[45]T275
67 Whilst the defendant agreed that the plaintiff had paid $122,000 to him in September 2005, he denied that he asked the plaintiff for the money and could not explain why the payment was made.
68 As to the reason for the payment made by the defendant to the plaintiff in 2007, which it is asserted was part of the defendant’s undertaking to pay off the full purchase price of the Campagna property, it was put to the defendant:
Q:“You couldn’t work together, and you say that you were so keen to make sure he got half that you paid an extra $100,000 in 2007 because you thought you’d dudded him. That is your evidence, isn’t it?‑‑‑
A:That’s exactly right.
Q:To give him half?‑‑‑
A:Not to give him half. To get him out because he wasn’t moving. You’ve got to understand, he’s not moving.
Q:Your evidence as I understand is that you topped him up in 2007 because you thought he hadn’t got half?‑‑‑
A:Yeah, because he kept whinging every day. All right, cut all that, … .”[46]
[46]T279
69 The defendant agreed that the plaintiff had told him that he wanted another block but said that he denied that request.
70 The defendant agreed that his sister-in-law was unhappy with the split of assets. He said that he could not recall having a second meeting with the plaintiff and his sister-in-law but he denied ever making an offer to pay the balance of the purchase price of Campagna other than his agreed contribution of $300,000. He agreed that eventually a deal had been done with his brother and that –
Q:“… Bruno got to the point where he said, ‘I’ll take it’, didn’t he?‑‑‑
A:Yes.”[47]
[47]T282
71 The defendant maintained however that the final deal between himself and the plaintiff had been done prior to the Campagna property coming into the equation and said that when he went to talk to the Campagnas the deal was already done.[48]
[48]T283
72 The defendant said that when he made the 2007 payment of $100,000 to the plaintiff, he recorded the payment in his BAS of June 2007 as involving a grape purchase. He was asked:
Q:“Did Grapeco sell you grapes in June 2007?‑‑‑
A:No.
Q:It didn’t did it?‑‑‑
A:No.
Q:You put this through your books as a grape purchase for your own reasons?‑‑‑
A:Yes.
Q:I suggest to you that you asked Bruno to raise a tax invoice?‑‑‑
A:No.
Q:Are you saying there’s no tax invoice supporting this transaction?‑‑‑
A:The tax invoice is the one I gave him.
Q:So you created the tax invoice?‑‑‑
A:I created the tax invoice.
Q:Which would have to be a tax invoice for Grapeco to you, is that right?‑‑‑
A:It will be in here somewhere.
Q:But you created a tax invoice for this transaction?‑‑‑
A:Yep. From Grapeland to Grapeco.
Q:Because you wanted to show this transaction as a grape purchase for your own reasons?‑‑‑
A:Yes.”[49]
[49]T285
73 The defendant was taken to his letter written to the plaintiff on 29 January 2009 which contained the words “I gave you $400,000 to levy Campagna’s?”.[50]
[50]T287
74 It was put to the defendant that these words involved an admission by him that he had provided the plaintiff with $400,000 towards the purchase of the Campagna property. The defendant denied this, explaining:
Q: “The 300,000 was in lieu of the cool room, right?---
A:I’m not a solicitor, that’s the way I wrote it. I wrote it that ‘I gave you the 300’, the 100,000 from me was just my money that I gave him, that’s just a figure of speech. I did not and I will stay here for 100 years, I did not and I will never give him the money for Campagna’s, it's not the way it is.
Q:On 29 January 2009 so far as you were concerned, the $400,000, that was the 300,000 paid in 2006 and the 100,000 paid in June 2007, was referable to the purchase of Campagna’s, wasn’t it; that’s what you wrote?‑‑‑
A:That’s the way it’s written, yes.
Q:That’s what you wrote when your memory was a whole lot better than it is now, I put to you, Mr Costantino, when you weren’t being sued and when you had no reason to change the story. That’s what you wrote?‑‑‑
A:That’s the way I wrote it, yes.
Q:Because that’s what your agreement was, wasn’t it,
Mr Costantino?‑‑‑
A:Wrong.”[51]
[51]T287
75 In re-examination, the defendant was taken to a payment of $25,000 recorded as being a purchase of grapes in his BAS ledger of June 2008, and was asked:
Q:That is described as grape purchase?‑‑‑
A:Yeah.
Q:Did you know what that amount was for?‑‑‑
A:That was for the water.
Q:Why was it described as grape purchase?‑‑‑
A:That’s probably an accounting thing so I could claim it on my tax rather than just give the money away. It’s the only reason I wrote it as a grape purchase so I could claim it on my tax.”[52]
[52]T293
76 At the conclusion of the defendant’s cross-examination I raised with Counsel for the defendant the evidence given by the defendant that he falsified the financial records for the purpose of obtaining taxation deductions to which he was not entitled and enquired of counsel for the defendant whether he wished to obtain further instructions from the defendant for the purpose of clarifying that evidence. The defendant did not take the opportunity to do so.
The evidence of Maria Constantino
77 Maria Constantino, the defendant’s wife, gave evidence that in 1992, the defendant had concerns about the Melbourne business because it was not going well. She said that her husband had told her that he was going to separate the business with his brother. She said that after the separation she and her children all worked on the farm, that various loans were raised by Grapeland Pty Ltd in respect of which she and the defendant were guarantors and that the plaintiff played no part in the day-to-day management of the farming enterprise and gave no financial guarantees to support that enterprise. She said that in 2006, the defendant had come home and told her that he was going to give his brother “a couple of properties”.[53]
[53]T300
The evidence of Michael Charles
78 Mr Michael Charles gave evidence that he had acted as the defendant’s accountant from approximately October 1992 onwards and the plaintiff’s accountant between 1992 and 1995 or 1996. He said that he had been approached by the defendant with respect to a restructure of the family business in 1992 which essentially involved a transfer of the plaintiff’s interest out of the structure to the defendant’s wife. He agreed that at that time he had been instructed by the defendant’s solicitors to achieve an exchange of assets in the form of a direct swap with no monies owing and that he had written a memorandum to the solicitors in which he had commented:
“The only problem is that Bruno’s share in the farms is worth, say, [$]147,416 as attached, and Sam’s equity in Grapeland Investments Proprietary Limited is worth nothing by his own admission that the loans to Leeton Towns Proprietary Limited and Delmont Trial Proprietary Limited of [$]190,750 are worthless. … Therefore the company has no value.”[54]
[54]T308
79 Mr Charles agreed that in June 2003, Grapeland Investments wrote off the loans that had been recorded on the balance sheet from Leeton Towns and Delmont Trial on the basis of the defendant’s advice “that they were bad, not collectable”.[55]
[55]T312
80 In cross-examination, Mr Charles agreed that the loans to Leeton Towns and Delmont Trial Pty Ltd were worthless. He was asked as to the 1993 transfer:
Q:“There was a concern here, wasn’t there, to protect the assets in Robinvale?‑‑‑
A:Well, definitely the farm assets, I believe, was Sam’s major concern.
…
Q:Underlying all this is a concern that if Bruno got sued in Melbourne, that the farm assets would be exposed. Is that right?‑‑‑
A:Agreed … .
Q:And that you were concerned in that event that if Bruno got sued in Melbourne and he had effectively given away the assets in Robinvale, that they might be exposed to a claim by the trustee in bankruptcy?‑‑‑
A:Correct.”[56]
[56]T316
81 Mr Charles agreed that on his calculations, the plaintiff’s interest in the assets transferred to the defendant in 1993 was valued at $147,416.00, and was asked:
Q:“So the effect of Bruno transferring his assets … was that he was transferring assets worth just under $150,000 and receiving an asset that was worthless in return. Is that the effect?‑‑‑
A:That’s the effect.”[57]
[57]T316
82 Mr Charles was taken to the partnership taxation return for the July 1993 to June 1994 financial year which described the sum of $158,481.00 as being a cash withdrawal. It was put to Mr Charles that that money was not paid to the plaintiff. I understand the evidence of Mr Charles in response to be that whilst he accepted that $137,591.00 of this amount was probably represented by introduced capital, the balance between that sum and the $158,481.00 may have been a cash withdrawal.[58]
[58]T320
The Defendant’s reliability as a witness
83 For the following reasons I have grave reservations as to the defendant’s reliability as a witness on issues the outcome of which may have an adverse effect upon him financially:
(i) The defendant admitted on two separate occasions to preparing documents which falsely described payments made by him to the plaintiff pursuant to the 2006 transfers as payments associated with the purchase of grapes:
§ The defendant volunteered that his misdescription of the 2007 payment made by him to the plaintiff of $100,000 as being a payment with respect to the purchase of grapes was supported by the creation by him of a false invoice to support the bogus purchase;
§ Further, the defendant had no hesitation in explaining his false recording of a payment made by him to the plaintiff in 2008 in compensation for a water entitlement which the plaintiff was to receive pursuant to the 2006 transfers as involving a purchase of grapes which would allow him to obtain a taxation deduction with respect to that purchase.
I am satisfied that on both of these occasions the defendant made false claims for the purpose of obtaining taxation concessions to which he was not entitled.
My strong impression as to the manner in which this evidence was given by the defendant was that he saw no problem with the process which he had adopted on each of these occasions.
(ii) In the course of his evidence, the plaintiff described the motivation for the defendant’s introduction of payments to be made for labour and other expenses incurred in the operation of the Tol Tol property through the operation of the plaintiff’s company, Firbank Tower, as being solely for the purpose of reducing the liability of Grapeland Investments Pty Ltd for the payment of payroll tax.
Whilst the defendant maintained that he did so in order to provide the plaintiff with a trading history which would assist him in securing a bank loan in due course, given the defendant’s responses in cross-examination as to this issue at Transcript page 269, line 3, to page 272, line 10, I find the defendant’s assertion in this regard to be totally implausible.
It follows that I accept the plaintiff’s evidence on this issue and that I am satisfied that the defendant created an artificial expense in the operation of the Tol Tol farm solely for the purpose of minimising his exposure to payroll tax.
(iii) Further, I found the defendant’s evidence in which he maintained the position that the division of assets between himself and the plaintiff in the 1993 restructure required him to take over the brothers’ joint interest in the Milleara road property to be unreliable when considered in the context of:
§ The defendant’s extreme under valuation of the plaintiff’s interest in Lot 14B:
§ The evidence of Mr Charles as to the extreme inequality of value of the assets transferred between the brothers to the benefit of the defendant.
Given the evidence of Mr Charles as to the respective value of the property divided between the brothers which he had documented in his 1993 memorandum I am satisfied that:
§ the defendant must have been aware of the disparity in the distribution of the assets between he and his brother at that time; and
§ the defendant’s evidence in which he sought to defend the equality of that division was indicative of the presence of tendency by the defendant to approach his evidence with an attitude of presenting himself in the best light even if doing so involved him ignoring a financial reality.
84 The defendant’s dishonesty with respect of the transactions to which I have referred above, together with his unreliability, causes me to apply great scrutiny before accepting evidence given by him on financial issues potentially to his detriment.
Findings as to the nature of the 1993 restructure between the Plaintiff and the Defendant
85 An issue which arises for my consideration is whether or not the 1993 restructure involved:
· a process which was designed to safeguard the joint assets of the partnership between the plaintiff and the defendant in Robinvale and the house in Milleara Road on the basis that the plaintiff would take up an appropriate position within the farming enterprise upon his return to Robinvale; or
· the termination of the business relationship between the plaintiff and the defendant such that they agreed to a final distribution of their mutual interests in their assets on the basis that they would then go their separate ways.
86 In deciding this issue, my analysis is influenced by the strong impression I formed of the parties as they gave evidence, namely that the defendant’s assertive personality was such that in any partnership between the plaintiff and the defendant, the defendant would have sought to have assumed a dominant role in any decision-making process and would have been reluctant to adopt a position which favoured the plaintiff to the defendant’s own financial detriment.
87 My impression in this respect is reinforced by:
(i) the fact that the 1993 restructure was first mooted by the defendant and thereafter effected via the input of lawyers and accountants retained by the defendant with very little input by the plaintiff and the distribution of the assets;
(ii) The inequality of the division of the assets the subject of the restructure in to the benefit of the defendant.
88 I am satisfied that the position contended for by the plaintiff as to the effect of the 1993 arrangement should be accepted for the following reasons, each of which in my opinion support the plaintiff’s position as to that issue:
(i) Firstly, the timing of the restructure was closely associated with the meetings between the parties requested by the ANZ Bank for additional capital to be injected into the wholesale business, which in turn is consistent with the plaintiff’s evidence that the business was in financial difficulty;
(ii) Secondly, the evidence of the plaintiff that the primary purpose of the agreement was to secure the partnership farming assets was supported by the evidence given by Mr Charles to like effect;
(iii) Thirdly, the value of the division of assets was so heavily weighted in favour of the defendant as to make it unlikely, in my opinion, that the plaintiff would have accepted such a division if a total split between the partners was to be effected by the agreement;
(iv) Fourthly, I accept the plaintiff’s evidence that whilst he was in Melbourne he sent cash sums to support the operation of Grapeland Pty Ltd. In addition, there is no issue that the plaintiff provided Grapeland Pty Ltd with the proceeds of the sale of the Melbourne retail business and subsequently, in September 2005, with cash funds of $122,000. I find it extremely unlikely that the funds to which I have referred would have been provided by the plaintiff to the benefit of the defendant if their business relationship had been terminated in 1993;
(v) Fifthly, the fact that Grapeland Pty Ltd allowed the plaintiff to live in the Milleara property rent free after the transfer of the title of that property to Grapeland Pty Ltd is consistent with the existence of an ongoing business relationship between the plaintiff and the defendant;
(vi) Sixthly, upon the return by the plaintiff and his family to Robinvale in 1999, the plaintiff was seamlessly accommodated in a house on the defendant’s property and incorporated into the operation of the Grapeland business, eventually in a quasi-managerial role;
(vii) Seventhly, the defendant included in the Bruno list, which was described by the defendant as containing the list of property which he would distribute to the plaintiff, the defendant’s then current valuation of the Melbourne wholesale business, this action in my opinion being consistent with the defendant holding a belief that he had an interest in that asset which he was divesting himself of to the plaintiff’s benefit;
(viii) Finally, I consider the approach taken by the defendant viz-a-viz the distribution of his assets which was to apportion them equally between himself and the plaintiff to be an approach consistent with, and likely to have been motivated by, the defendant’s acceptance that the plaintiff had a right to make a claim upon those assets, which right had not been extinguished by the 1993 restructure.
89 It is put on behalf of the defendant that although the 1993 restructure may have involved an unequal distribution of assets between the plaintiff and the defendant, the agreement involved a process in which each brother received what they wished to receive.
90 Whilst in cross-examination, the plaintiff accepted that whilst the assets of the Melbourne companies were on paper worth nothing, the businesses were ongoing and in that sense had a real value, I accept the plaintiff’s evidence at Transcript 144:
Q:Let me put it this way, it was worth something to you, wasn’t it?‑‑‑
A:I had my guarantee there. If I didn’t have a guarantee there, I would have come home too.”
91 There is no issue that between 1993 and 1999 the farming enterprise was controlled by the defendant as the managing director of the enterprise and undertaken in conjunction with the joint physical input of the defendant and his family. Neither is it in issue that the defendant and his wife assumed the financial risk associated with the operation of the farming enterprise.
92 It was put on behalf of the defendant that the plaintiff’s lack of input in the decision-making process or any financial risk in the management of the farming process is cogent evidence in support of the defendant’s position that the partnership between he and his brother had been terminated in 1993.
93 In my opinion there is little merit in this point when the business relationship of the brothers after the 1993 restructure is considered in the context of the history of that relationship during the period in which the partnership between them persisted after the plaintiff’s move to Melbourne and prior to the 1993 restructure.
94 During that period the brothers had agreed that the partnership should operate on the basis that:
· The plaintiff should bear the risk associated with the operation of the Melbourne businesses owned by Grapeland Investments Pty Ltd through the guarantee which he had provided and make the management decisions involved in the operation of those businesses; and
· Whilst the brothers maintained their partnership and respective interests in the Robinvale properties, the defendant should make the management decisions involved in the operation of the farming enterprise.
95 When one considers the respective positions of the partners between the 1993 restructure and the plaintiff’s return to Robinvale in 1999, the alteration in the positions which pertained prior to 1993 is not easily identified.
96 For the reasons set out above I accept the plaintiff’s evidence that:
· the 1993 restructure had been presented to him by the defendant as being undertaken to secure the assets of the Grapeland Trading Company and the farming business and that it was in fact all about asset protection; and
· whilst the plaintiff was, at that time willing to stay in Melbourne and persevere with the businesses, he would have returned to Robinvale in 1993 but for the existence of his guarantee.
97 It follows that in making that finding I reject the defendant’s evidence to the contrary. In doing so, whilst I give appropriate weight to my findings as to the defendant’s reliability as a witness, I do not accord that issue such weight as to make it in any way determinative.
Did the 2006 transfers occur by reason of —
(i) a gift made by the Defendant to the Plaintiff?; or
(ii) a contract entered into between the Defendant and the Plaintiff?
98 I am satisfied that the plaintiff has established that the 2006 transfers occurred by reason of a contract entered into between the plaintiff and the defendant which involved the classic principles of offer, acceptance, consideration and intention to make the contract binding.
99 Whilst the defendant presented himself in the course of his evidence as a generous man who was prepared to provide the plaintiff with a substantial gift, I find the defendant’s evidence on this issue to be unlikely for the following reasons:
(a) Firstly, if the defendant’s evidence as to the 1993 restructure was to be accepted, the weighting of the distribution of the assets by the restructure demonstrated no aspect of generosity on the defendant’s behalf but rather the opposite, particularly so given the defendant’s insistence that the plaintiff relinquish his interest in the Milleara Road property in which he and his family lived;
(b) Secondly, I formed a strong impression of the defendant as he gave his evidence given:
(i) the terminology employed by defendant in which:
§ he repeatedly described a process in which he issued ultimatums to the plaintiff not only in 1993 but in 2006;
§ he repeatedly described the plaintiff as a whinger and a whiner;
(ii) the fact that the defendant at no time acknowledged the value of any contribution made by the plaintiff to the farming process;
when considered in the context of the defendant’s practice of falsifying the business records of Grapeland Pty Ltd to secure taxation deductions to which it was not entitled, which the defendant readily admitted and appeared to consider as being justified;
that the defendant was a hard, if not ruthless and, when it suited him, dishonest businessman not given to acts of spontaneous generosity which involved no benefit to himself.
100 In my opinion the whole structure of the 2006 transfers was:
(i) Inconsistent with a gift by the defendant which imposed no enforceable obligation upon the plaintiff; and
(ii) Consistent with the intention of the parties to enter into a contractual agreement which bound the parties given:
§ The plaintiff’s initial rejection of the defendant’s offer;
§ The process of negotiation which followed the defendant’s so called “take it or leave it offer” which involved demands made by the plaintiff upon the defendant to increase the offer and the admitted capitulation by the defendant to at least some of those demands;
§ The position accepted by the brothers that the acceptance by the plaintiff of the defendant’s offer would bind the plaintiff to the position proposed by the defendant, namely that the brothers would operate their respective farming interests completely independently of one another.
101 I am satisfied that the evidence establishes that the defendant’s primary motivation for making the offer to the plaintiff involved the defendant’s wish to bind the plaintiff to a position which the plaintiff did not wish to accept in which all business relationships between the brothers would be severed.
102 The defendant was clear in his evidence that he felt the continuation of the status quo in the business relationship between himself and the plaintiff to be untenable and that his offer to the plaintiff was made to secure a binding agreement which terminated that arrangement.
103 Equally, there is no issue that at the time at which the 2005 proposal by the defendant was made to the plaintiff, the plaintiff was involved in the day-to-day operation of the farming business conducted by the defendant through Grapeland Pty Ltd and that the plaintiff wished the status quo to continue.
104 Notwithstanding the above, I am satisfied for the reasons which follow, that the plaintiff accepted the fact that the defendant’s wish to achieve a change in the status quo gave him little choice but to accept the best offer he could negotiate with the defendant and it was that realisation which motivated the plaintiff to:
(a)reject the defendant’s initial offer;
(b)continue to voice complaints as to the adequacy of the defendant’s proposal, the effect of which was to increase the plaintiff’s entitlement should the offer be accepted;
(c)eventually accept the best distribution of assets which he could negotiate.
105 In the course of his evidence, the defendant described this process as involving the defendant making concessions to the plaintiff as to the split of assets between them through a process of the plaintiff “whinging and whining” which eventually resulted in the defendant capitulating as to various of the plaintiff’s demands.
106 Regardless of the disparaging description applied by the defendant to the ongoing negotiations which occurred between he and the plaintiff, it is not in issue that negotiations did occur and that through that process the plaintiff’s position was advanced to the detriment of the defendant when compared with the initial position presented by the defendant to the plaintiff in the Bruno list.
107 Putting aside the issue as to whether or not the agreement involved the defendant undertaking to eventually meet the full costs of the purchase of the Campagna property, it is clear that the process of negotiation to which I have referred was undertaken in the context of the plaintiff reluctantly accepting that he would abandon the status quo which existed between he and the defendant as to their business dealings if a suitable allocation of the resources of Grapeland Pty Ltd was made to him, and that he eventually did so.
108 For all these reasons I am satisfied that the plaintiff has established that the transfer of property from the defendant to the plaintiff in 2006 occurred by reason of an agreement between the plaintiff and the defendant which involved the classic prerequisites for a binding contract, in that the parties agreed to enter into that agreement on the basis that each of the parties would provide consideration in the form of:
§ the defendant giving over the property to be transferred to the plaintiff; and
§ the plaintiff abandoning any right to which he may have been entitled to be jointly involved with the defendant in the farming business or to any of the assets of that business.
109 In making the above finding I do according appropriate weight to the findings which I have made as to the effect of the 1993 restructure.
110 The issue then arises as to whether the allocation of resources pursuant to the 2006 transfer involved the defendant agreeing to fully finance the purchase of the Campagna property.
Did the contract between the Plaintiff and the Defendant involve an undertaking by the Defendant to finance the purchase of the Campagna property?
111 There is no issue that:
· the plaintiff was unwilling to accept and act upon the initial offer made to him by the defendant, as set out in the Bruno list;
· the plaintiff informed the defendant that he wanted additional land to that contained in the Bruno list The defendant’s evidence as to this issue was as follows:
Q: “Bruno wasn’t happy with your offer, was he?---
A: No.
Q: And he told you he wasn’t happy?---
A: Yes.
Q: And he told you he wanted another block, didn’t he?---
A: He said that, yes.
Q: You discussed the number of blocks?---
A: I said absolutely not.
Q: Did he ask for particular blocks that you rejected? Do you recall that?---
A: He asked for an extra block. I said ‘No’.
Q: But you agree that Bruno asked for another block?---
A: Yes.”[59]
[59]T279-280
112 These two aspects of evidence tend to support the plaintiff’s contention that in the absence of the defendant providing him with the funds for a cool store, together with an additional parcel of land, he was not willing to accept the defendant’s proposal that they should terminate their business relationship.
113 There is no issue that the purchase of the Campagna property was discussed between the plaintiff and the defendant.
114 The defendant gave evidence that he negotiated the sale of that property to the plaintiff. Other than for the fact the purchase of the Campagna property was discussed and that the defendant negotiated the sale to the plaintiff, the respective positions of the parties as to the content of the discussion with respect to the purchase by the plaintiff of the Campagna property cannot be reconciled.
115 It is the plaintiff’s position that:
(i) the defendant agreed to finance the total purchase of the property by:
§ making available a lump sum of $300,000 immediately; and
§ thereafter making annual payments of $100,000 until the loan the plaintiff was to negotiate in order to finance the property was cleared; and
(ii) the payment made by the defendant which now makes up his counterclaim was in fact the first of those instalment payments.
116 The defendant’s position is that the only relevant alteration to the structure proposed by him in the Bruno list in which he undertook to pay the plaintiff $300,000 by three annual instalments of $100,000, involved his agreement to pay $300,000 and no more in a lump sum to assist the plaintiff in the purchase of the Campagna property.
117 The evidence of the plaintiff as to the undertaking by the defendant to fund the purchase of the Campagna property is consistent with, and supported by, the viva voce evidence of the plaintiff’s wife as to the statements made by the defendant to her or in her presence (in respect of which she made contemporaneous notes) that the defendant agreed to finance the initial deposit of the purchase of the Campagna property and thereafter, through instalment payments of $100,000 per year, to meet the full purchase price of that property.
118 I am satisfied that I should accept the plaintiff’s evidence upon this issue for the following reasons:
· Firstly, it is corroborated by the evidence of the plaintiff’s wife, who impressed me as a reliable witness and who made a contemporaneous note of the defendant’s undertaking;
· Secondly, the instructions by the plaintiff to his solicitors in 2008, which resulted in the letter from Watson & McLeod to the defendant dated 9 January 2009,[60] make it clear that, as at 2008, the plaintiff was asserting a position consistent with the claim made by the plaintiff as to the defendant’s undertaking;
[60]PCB 119
· Thirdly, I find the defendant’s evidence that the payment to the plaintiff made at his direction by Grapeland Pty Ltd in June 2007 of $100,000 was an altruistic payment made by him to the plaintiff in order to ensure that the plaintiff received a fifty per cent share of the Grapeland assets to be implausible given:
(i) the imprecise mechanism originally employed by the defendant in arriving at the value to be attributed to the items which comprised the Bruno and Sam lists which at best, in my opinion, could be described as informed guesswork and which failed to take account of significant assets held by the defendant such as a water right held by the defendant’s trust company which had a value in excess of $281,000 and which was ignored by the defendant in arriving at his calculation as to the distribution of assets which represented the fair valuation of a half of the farming assets;
(ii) the additions which the defendant had already made to the Bruno list, the effect of which had been to increase the value of the Bruno list to the detriment of the Sam list, well before the defendant’s alleged further gift in 2007;
(iii) the defendant’s position that the agreement between he and the plaintiff as to the redistribution of assets had been finalised at least twelve months earlier, namely prior to the purchase of the Campagna property, which makes it unlikely in my opinion that the defendant would have been motivated to revisit the issue in 2007;
(iv) the animosity which clearly existed between the defendant and the plaintiff – which is demonstrated by the defendant’s allegation in his letter of January 2009[61] that in 2006, the plaintiff had charged the defendant with his ute, causing the defendant to have to run for his life which in my opinion makes it unlikely that the defendant would have been motivated to increase the generosity of his alleged gift to the plaintiff by a further payment in 2007.
[61]DCB 467
119 My finding as to this issue is further reinforced by the fact that in penning his response to the letter from the plaintiff’s solicitors which he received in 2009, the defendant asserted that he had financed the Campagna property at that time in the sum of $400,000, this assertion being consistent with the defendant taking the position that the sum of $300,000, which he had paid as a deposit and his contribution to the settlement of the property, together with the $100,000 paid by him in June 2007, were all payments relevant to the purchase of the Campagna property.
120 For these reasons I find it much more likely that the 2007 payment by the defendant represented the first instalment of the yearly payments which the defendant undertook to make with respect to the Campagna property.
121 Finally, I factor into my decision-making process on this issue my finding that the defendant has proven himself to be an unreliable witness as to the 1993 restructure and as a person prepared to make false assertions to achieve financial gain which causes me to adopt caution in accepting the evidence of the defendant upon an issue in respect of which a finding adverse to the defendant would have an negative effect on his finances.
122 Given the position asserted on behalf of the defendant that there was never any consideration by the plaintiff which could give rise to an enforceable contract in this instance, it is appropriate that I record my finding that I am satisfied, given the plaintiff’s evidence as to importance to him which an additional block of land played in his decision to accept the defendant’s ultimate proposal, that it is safe to infer that the defendant’s undertaking to meet the full cost of the Campagna property significantly influenced the plaintiff’s decision to commit himself to a loan to purchase the property and that for this reason, considered in isolation of the other findings which I have made, the plaintiff is entitled to call upon the defendant to honour his undertaking.
123 For the reasons set out above I am satisfied that:
(i) the plaintiff is entitled to the relief which he seeks in this proceeding; and
(ii) the defendant’s counterclaim should be dismissed.
124 I propose to allow the parties to draft the appropriate orders and will hear them as to costs.
125 As I indicated in the course of closing submissions, I propose to hear Counsel for the defendant upon the issue as to whether I should refer the transcript of the defendant’s evidence to the appropriate authorities in this instance having regard to the findings which I have made.
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