Easton v Gibson

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST

S ECI 2019 03651

Between:
STEPHEN EASTON	Appellant
-and-
SUSAN GAYE GIBSON	Respondent

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JUDGE:	Croucher J
WHERE HELD:	Melbourne
DATE OF HEARING:	19 February 2021
DATE OF JUDGMENT:	19 July 2021
CASE MAY BE CITED AS:	Easton v Gibson
MEDIUM NEUTRAL CITATION:	[2021] VSC 424

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APPEAL — Evidence — Relevance — Credibility — Appeal, on questions of law, from final orders of Magistrates’ Court — Parties, without legal assistance, drafted rudimentary agreement reflecting aspects of agreed transfer of ownership of two companies from respondent to appellant — Respondent claimed appellant failed inter alia to make various payments, contrary to agreement — Appellant, by defence and counterclaim, alleged respondent understated tax and superannuation liabilities of companies and thereby engaged in misleading or deceptive conduct on which appellant relied to enter agreement — Respondent’s claim allowed — Appellant’s counterclaim dismissed — Magistrate preferred evidence of respondent over appellant — Whether magistrate erred in ruling as irrelevant appellant’s evidence of transfer to respondent of his half-interest in jointly owned home unit as partial consideration for transfer of companies — Whether, in light of respondent’s assertion that she alone paid mortgage on home unit, magistrate erred in disallowing evidence from appellant that he contributed to mortgage repayments — Whether magistrate erred in disallowing further cross-examination of respondent on bank records said to show appellant contributed to mortgage repayments — Whether, if made, errors material — Appeal dismissed — Australian Consumer Law, s 18; Evidence Act 2008 (Vic), ss 55, 56, 102 & 106(2)(e); Magistrates’ Court Act 1989 (Vic), s 109.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr M Latham	LN Christie & Co
For the Respondent	Mr M Dean	JAG Lawyers

HIS HONOUR:

PART 1: OVERVIEW

This appeal[1] concerns whether certain evidence given, and related proposed evidence disallowed, was (or would have been) relevant, and materially so, to a magistrate’s determination of a dispute over an agreement to transfer interests in two companies. Those questions arise in this way.
[1]Pursuant to s 109(1) of the Magistrates’ Court Act 1989 (Vic).

Stephen Easton and Susan Gibson were once de facto partners and in a business relationship. Together, they lived in their jointly owned unit in Ringwood and ran three companies involved in the garden supply industry. Ms Gibson owned two of those companies — namely, Spivson Pty Ltd (“Spivson”) and Dalton Ironbark Pty Ltd (“Dalton”) — and Mr Easton owned another. Sadly, the couple’s personal relationship broke down, and they separated. This caused them to sever commercial ties as well. As a result, on 5 May 2015, each signed a rudimentary self-drawn agreement reflecting obligations under an agreed transfer of Ms Gibson’s two companies to Mr Easton.

Subsequently, Ms Gibson brought a claim in the Magistrates’ Court alleging that Mr Easton, among other things, had failed to make certain payments of money to her under the agreement. In his defence, counterclaim and evidence at a contested hearing, Mr Easton alleged that Ms Gibson engaged in misleading or deceptive conduct in the lead-up to the agreement by substantially understating the companies’ tax and superannuation liabilities. Ms Gibson denied that allegation and called other evidence tending to show that Mr Easton knew the true state of the companies’ tax and superannuation liabilities. The magistrate accepted Ms Gibson’s claim and rejected Mr Easton’s. His Honour ordered that the outstanding debt be paid, plus interest and costs.

Mr Easton appeals against those final orders on grounds that, in substance, reduce to two questions of law of an evidentiary nature. First, Mr Easton argues that the magistrate erred in regarding as irrelevant his evidence that, as part of the consideration for the purchase of the companies, he transferred to Ms Gibson his half-share in their jointly owned unit. His argument was that the evidence was relevant because it was commercially implausible that he would give up so much additional consideration for companies that were in a parlous financial state, unless he had been misled or deceived in the ways he alleged. Ms Gibson, for her part, said that the transfer of the interest in the home unit was a separate matter from the agreement to transfer the companies.

The second question arises in this way. In cross-examination, Ms Gibson said that she alone paid the mortgage on the home unit. She denied that company bank records showing monthly payments of $2,000 to her account reflected Mr Easton’s contribution to the mortgage. She believed that the payments were likely reimbursements of payments she had made for business supplies. Mr Easton argued that the magistrate erred in ruling that he was not permitted to adduce additional evidence — both via further cross-examination of Ms Gibson on the bank records and from his own mouth — in an attempt to prove that her denials in this respect were false. This branch of the case included an argument that the magistrate erred in rejecting a submission that s 106(2)(e) of the Evidence Act 2008 (Vic) allowed admission of that proposed evidence.

While, at first glance, both of Mr Easton’s arguments may seem attractive, on closer analysis, they are merely theoretical and do not amount to material errors of law. This is because, for reasons I shall detail later, there was an insufficient factual substratum to make meaningful assessments as to whether Mr Easton’s claims about partial consideration and commercial implausibility, and his claims of contributions to the mortgage, if accepted, “could rationally affect (directly or indirectly) the assessment of the probability of the existence of the fact in issue”[2] — namely, whether there was operative misleading or deceptive conduct by Ms Gibson.
[2]See s 55(1) of the Evidence Act 2008 (Vic).

Further, I am satisfied that, even if the magistrate had regarded the commercial implausibility evidence as having relevance, and even if he had allowed Mr Easton to pursue the mortgage contributions issue further and considered that evidence relevant too, I think it is certain that his Honour would not have come to a different conclusion on the merits. There are two main reasons. First, as we shall see shortly, there were aspects of Mr Easton’s evidence that made his case on misleading or deceptive conduct very weak. A second and related point is that the magistrate, who had the singular benefit of seeing and hearing the witnesses in the flesh, made firm findings that he preferred the evidence of Ms Gibson (and her supporting witness, book-keeper Gary Bates) over that of Mr Easton (and his supporting witness, manager Thomas Tofts). On my reading of the whole of the evidence, there is no surprise in these findings. Indeed, I think they were all but inevitable.

In those circumstances, I am persuaded that both of the alleged errors, if errors they were, were immaterial. This is because, even if they were not made, there is no reasonable possibility that the result might have been any different. Indeed, I am satisfied that, were I to allow the appeal and remit the matter to the same magistrate for reconsideration according to law (which was the course Mr Easton accepted would be necessary if the appeal succeeded), his Honour would be driven to precisely the same result. In those circumstances, such orders would be futile and therefore would not be “appropriate”.[3]
[3]See s 109(6) of the Magistrates’ Court Act 1989 (Vic).

Accordingly, I would dismiss the appeal, with costs. My more detailed reasons for those proposed orders follow.

PART 2: PROCEEDINGS IN THE MAGISTRATES’ COURT

Background

Introduction

Before turning to the detail of the arguments in this Court, and their resolution, it is necessary that I set out a summary of the hearing in the Magistrates’ Court. This will include outlining the written agreement, parts of the pleadings, some of the procedural steps, the key features of the evidence given, and the main points taken in that court, as well as the findings and reasons of the magistrate.

The written agreement

The written agreement upon which Ms Gibson sued took the form of a two-page document, drafted in uppercase. It was signed by both Mr Easton and Ms Gibson on 5 May 2015. I shall set out the document in full (in uppercase), except for some (irrelevant) private details:

5/5/15

AGREEMENT BETWEEN SUSAN GIBSON AND STEPHEN EASTON

STEPHEN IS TO REPAY SUSAN’S CREDIT CARDS WITHIN 6 MONTHS FROM DATE OF THIS AGREEMENT —

—HSBC ACCOUNT NO. … WITH A BALANCE OF APPROX $5,000.00.

—VIRGIN CARD ACCOUNT NO. … WITH A BALANCE OF APPROX $25,000.00

STEPHEN IS TO PAY SUSAN $2,000.00 ON THE 28^TH OF EVERY MONTH INTO EXISTING ACCOUNT FOR 12 MONTHS FROM DATE OF THIS AGREEMENT.

STEPHEN IS TO PAY REMAINING LOAN INSTALMENTS OF 627.30 PER MONTH FOR TOYOTA RAV 4, … UNTIL AUGUST 2016, WITH A BALLOON OF $10,500.00 DUE SEPTEMBER 2016, AT WHICH TIME OWNERSHIP OF THE CAR IS TO BE TRANSFERRED INTO SUSAN’S NAME.

AS PER ORIGINAL ARRANGEMENT ON COMMENCEMENT OF BUSINESS BOTH STEPHEN AND SUSAN ARE TO HAVE SELF FUNDED THEIR SUPERANNUATION FROM THE OUTSET. THEREFORE ANY OUTSTANDINGS ARE THE SOLE RESPONSIBILITY OF EACH INDIVIDUAL.

SUSAN TO REMAIN WORKING TWO FULL DAY[S] PER WEEK BEING SATURDAY AND ONE OTHER DAY TILL SHE FINDS A FULLTIME JOB, AND IS TO BE PAID $30 PER HOUR.

ALL PERSONAL GUARANTEES ARE THE RESPONSIBILITY OF STEPHEN.

UPON SUSAN’S RESIGNATION AS DIRECTOR OF SPIVSON PTY LTD AND DALTON IRONBARK PTY LTD THERE WILL BE AN INDEMNITY AGAINST ANY LIABILITY AGAINST HER FROM THAT TIME ON.

IF PAYMENTS ARE NOT MADE ON TIME A TRUCK IS TO BE SOLD WITHIN 2 WEEKS TO FINALISE ALL PAYMENTS STILL REMAINING TO SUSAN.

THIS AGREEMENT IS FINAL AND BINDING WITH NO FURTHER ACTIONS ALLOWABLE BY EITHER PARTY.

SIGNED SIGNED

STEPHEN WILLIAM EASTON SUSAN GAYE GIBSON

Curiously, the agreement did not refer to its principal purpose — namely, that the ownership of the companies be transferred to Mr Easton. Nor, apart from the particulars noted, was there any reference to the price to be paid for that transfer. As I mentioned earlier, the agreement also failed to record Mr Easton’s (disputed) claim that the transfer of his half-share in the unit was part of the consideration for the purchase of the companies. More of this later.

Ms Gibson’s claim

At the outset of the hearing in the Magistrates’ Court, and consistently with the pleadings, Mr Dean (who appeared for Ms Gibson below and in this Court) advised that, in reliance on the agreement, his client’s case was that Mr Easton should be ordered to pay $20,209 in relation to the unpaid credit card debts, to pay the remaining monthly instalments of $2,000, and to transfer to Ms Gibson ownership of the Toyota motor car mentioned in the agreement.

The car

While the car had remained in Ms Gibson’s possession since the agreement was executed and Mr Easton had caused the relevant loan or lease to be paid out, he had, contrary to the agreement, also caused the car to be transferred to his own company instead of into Ms Gibson’s ownership.

In the Magistrates’ Court, the parties reached an accommodation about how the ownership of the car could be addressed without troubling the magistrate. In the result, the fate of the car formed no part of the appeal to this Court.

The magistrate’s orders

Ultimately, once the magistrate made his findings, the parties agreed on the amounts that should be ordered on the claim, as well as on interest and costs. Those amounts ordered against Mr Easton were $40,482.85 on the claim; interest of $14,395.57; and costs of $31,173.38.

Mr Easton’s counterclaim

Mr Latham appeared for Mr Easton in the Magistrates’ Court and in this Court. In his brief opening before the magistrate (which was delivered immediately after Mr Dean’s opening on behalf of Ms Gibson and before any evidence was called), and consistently with the pleadings, Mr Latham explained that his client alleged that Ms Gibson orally misrepresented the superannuation and taxation liabilities of the companies and that he relied upon these misrepresentations to his detriment.[4] In particular, as pleaded, Mr Easton’s case was that, in or about May 2015, Ms Gibson represented (a) that Spivson had an ATO debt of $23,000 and (b) that the companies owed superannuation of about $40,000 when, in fact, at that time, the debt owed to the ATO was $39,367 and the superannuation liabilities were $199,466.68. Mr Latham indicated that his client sought rescission of the agreement and restitution.
[4]Mr Easton specifically pleaded reliance on s 18 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Law Act 2010 (Cth) (“the ACL”)) and/or Part 2.2 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (“the ACLV”).

Half-share in unit as part of consideration for companies

It was also during his opening that Mr Latham alleged that Mr Easton had provided partial consideration for the transfer of the companies by transferring to Ms Gibson his half-share in the jointly held unit in Ringwood. This was said to be a surrounding circumstance relevant to the formation of the agreement. In particular, Mr Latham’s argument was that Mr Easton would not have transferred his interest in the unit unless he had been misled about the extent of the companies’ tax and superannuation liabilities.

As we have seen, this point was not reflected in the written agreement. Nor was it mentioned in the pleadings. Yet, at this stage of proceedings, neither the magistrate nor Mr Dean raised any query or objection about the argument that might be made or the evidence that might have been led in support of that assertion.

Letter of demand and email response

After Mr Easton failed to make the necessary payments under the agreement, some letters and emails were exchanged between the parties or their legal representatives.

One such letter (dated 6 April 2016) — which took the form of a letter of demand — from Ms Gibson’s solicitors to Mr Easton was put into evidence at the hearing below. In it, reference was made to the agreement, and a demand was made for payment of $40,490. This amount was comprised of the following:

a) $14,000, being the remaining seven payments of $2,000 per month;

b) $500, being “the balance of the sale of the business”;

c) $850, for monthly MYOB payments made by Ms Gibson; and

d) $25,140, being the unpaid credit cards plus interest.

In his email response (dated 21 April 2016), Mr Easton said this (among other things):[5]

The background of the agreement was that I … was to pay out [Ms Gibson] as agreed and also make the final payment to David Spivey of $142,000. A total upfront payout of $292,000. It should be noted that [Ms Gibson] and I (as a partnership) had no means by which to pay out David Spivey at this time.

[5]My emphasis.

Mr Easton went on to say that he obtained finance of $240,000 “to clear both parties” and “the rest [he] managed to pull together”, leaving the company in “a vulnerable position”.

Thus, on the strength of this email, plus the terms of the written agreement, it seems that there were at least three components to the price Mr Easton was to pay for the companies. First, it appears that $150,000 was paid to Ms Gibson. Second, $142,000 was paid to a former owner David Spivey.[6] The third part of the price appears to have been the payments and things mentioned in the written agreement — for example, payment of the credit cards, the $2,000 a month for 12 months and the loan on the car. However, as I have said, neither party gave any direct evidence of the total price paid. Nor was that issue the subject of any submissions. And, of course, on Mr Easton’s (disputed) case as disclosed at the hearing, a fourth component of the price was the transfer to Ms Gibson of his half-share in the unit.
[6]See the next footnote for further evidence about Mr Spivey’s interest in Spivson.

Later in the email, Mr Easton said the following:

Immediately subsequent to this, I was given a tax bill of $67,000.[7] [Ms Gibson] was the only one to access taxation details and had assured me the tax bill for Spivson was as low as $23,000. Hence I had to urgently find an extra $44,000 which [Ms Gibson] said she was unaware of. Attached is a garnishee notice dated 25 March 2015, in which during this time [Ms Gibson] was the only one to have access. This put us in a fairly dire position of which we are finally beginning to recover from.

[7]The discrepancy between the ATO debt pleaded ($39,367) and the amount asserted in this email ($67,000) was not explained. As will be seen below, various different estimations of the ATO debt (and of the superannuation liabilities) applicable around the time of the formation of the agreement were given in evidence by reference to the balance sheets of the two companies. As I apprehended things, no point was made of these discrepancies in the Magistrates’ Court or in this Court.

As indicated earlier, there was no mention in this email of the extent of the superannuation liabilities or of Mr Easton being misled about those liabilities.

Viva voce evidence

Introduction

I turn now to a summary of some of the more important aspects of the viva voce evidence before the magistrate.

There were four witnesses. Mr Dean called Ms Gibson and Mr Bates in his client’s case. Mr Latham called Mr Tofts and Mr Easton in the defence case.

Ms Gibson

Evidence-in-chief

Ms Gibson was the first witness. The gist of her account was as follows.

Ms Gibson and Mr Easton were in a de facto relationship from 2006 until 2013. They were in that relationship when Spivson and Dalton were incorporated. Ms Gibson was an owner and director of the companies from the outset. Mr Easton did not want to be a director initially and he had no money to put into the companies at that time.

Ms Gibson confirmed that the ASIC searches of Spivson and Dalton showed that Mr Easton became a director of those companies on 8 December 2014.[8]
[8]The search regarding Spivson was made on 1 July 2016. It showed that Spivson was registered, and that Ms Gibson and Mr Spivey each became a director thereof, on 1 October 2008. Mr Spivey was the secretary from 1 October 2008 to 5 July 2012; and Ms Gibson took over that role from 5 July 2012 to 4 May 2015. Mr Easton became a director on 8 December 2014 and secretary on 4 May 2015. Ms Gibson and Mr Spivey each previously owned six of twelve shares. The search regarding Dalton was made on 5 July 2016. It showed that Dalton was registered, and Ms Gibson became a director and secretary thereof, on 19 July 2010. She resigned those positions on 4 May 2015. Mr Easton became a director on 8 December 2014 and secretary on 4 May 2015. Ms Gibson formerly held the total share capital of 100 shares. It appears that Mr Easton alone has held the total share capital since 4 May 2015.

The companies were in the garden supply business. The couple ran the business together. Mr Easton would decide on matters such as employees, ordering products, dealing with suppliers and negotiating prices. Together, they would serve customers, pay people and pay bills and would decide on purchasing vehicles. Both of them had access to internet banking.

In late-2013, the companies were audited as a result of a complaint by an employee about unpaid superannuation entitlements. They had not been making or keeping up with superannuation payments as a result of the global financial crisis (“GFC”) in 2008. Mr Easton, said Ms Gibson, was not very keen on paying “super”. He said that they would worry about that later.

In March 2013, Mr Bates was employed as a book-keeper after an interview with Mr Easton. Ms Gibson and Mr Easton would meet or speak to Mr Bates weekly or fortnightly about what taxes, superannuation payments or bills were due. These meetings were in the back office of the business premises.

Ms Gibson confirmed, among other things, that the following documents revealed the following pieces of information:

a) Spivson’s “Balance Sheet” for the year ending 30 June 2013 (produced 9 October 2014) showed, under “Liabilities”, that “Superannuation Payable Previous Year” was over $98,000; that “Superannuation Payable”, as an additional item, was over $31,000; and that the “ATO — Integrated Account” was over $23,000;

b) Spivson’s “Balance Sheet” for the year ending 30 June 2014 showed, under “Current Liabilities”, that “Superannuation Payable” was over $142,000; and that the “ATO – Integrated Account” was over $53,000; and

c) Spivson’s “Profit & Loss Statement” for July 2013 through to June 2014 (produced 14 October 2014) showed, under “Employee Expenses”, that “Superannuation” in that year alone was over $31,000.

Ms Gibson said that these were the documents that would be printed off for the weekly or fortnightly meetings.

Ms Gibson said that Mr Easton first discussed with her the selling of the business in December 2014. He asked if she would be interested in buying him out (he had his own separate company), but she was not. He then said that maybe he would look to buying her out, which she said she was open to doing. He made a “general sort of offer [which they] agreed upon”. In order for the transfer to occur, Mr Easton needed to be director, which he became at that time.

The agreement became documented finally after negotiation on 5 May 2015.

The ATO sent a letter to Spivson (dated 25 March 2015) detailing a garnishee notice of $66,910 and an account statement (dated 28 March 2015) showing that debt. The account statement also showed amounts of $1,600 per week being taken from the company’s account. Both Mr Easton and Ms Gibson saw these documents and were aware of the bank withdrawals (by the ATO) from the company accounts.

Ms Gibson also identified a Spivson MYOB balance sheet (dated 1 April 2015), which showed “superannuation payable” of $164,997 and an “ATO integrated account” amount of $58,133. Ms Gibson, Mr Easton and Mr Bates all saw this document. At this time, Ms Gibson and Mr Easton were still negotiating “an exit price or an agreement for [Ms Gibson] exiting the business”. Ms Gibson said that they discussed unpaid tax and superannuation liabilities “all the time”.

Ms Gibson and Mr Easton personally were owed at least $70,000 between them in superannuation by 5 May 2015. But, at Mr Easton’s insistence, they agreed that the written agreement would contain a clause ensuring that each would be responsible for his or her own superannuation and that neither could claim against the company in that regard.

Mr Easton stopped paying the payments due under the agreement in about August or September 2015. When she asked him why he had stopped, he said that “he has a lot of bills and he … can’t pay it”.

Ms Gibson denied that in or about May 2015 she represented orally to Mr Easton either that Spivson owed a debt to the ATO of $23,000 or that Spivson and Dalton had unpaid superannuation liabilities to their employees of about $40,000.

Cross-examination

In cross-examination, Ms Gibson said that the weekly (or fortnightly) meetings involving Mr Easton had been happening since the business commenced. The meetings were always about what was owing, as they struggled to pay a lot of the bills.

Ms Gibson accepted that Mr Easton did not input the data into the MYOB system as that was not his role. She performed that role earlier and then the book-keeper took it on. Mr Bates — but not Mr Easton or Ms Gibson — produced balance sheets and the like.

Mr Easton’s role was like that of a general manager — he “just ran everything”. He was involved in the manual aspects of the business, including dealing with customers in person and over the phone, ordering products, occasional emailing, allocating truck drivers and loading trucks. Mr Easton preferred to be in the yard over the office. Ms Gibson would do these things too, when they were busy.

Ms Gibson said that she was not concerned about the financial position of the companies in 2015, although she could not recall the precise details.

When Ms Gibson rejected Mr Easton’s suggestion that she buy him out, she declined because she did not like “the way he had set it up, … the people he had employed, and [she] wasn’t interested”.

When asked whether there were any other terms in their agreement, Ms Gibson said that there were not.

While Ms Gibson was not sure of the date, which could have been in 2014 or 2015 (but was after a previous partner of the business had been bought out), she accepted that Mr Easton transferred his half-share in the unit to her. However, she denied that they discussed that Mr Easton was to transfer his interest in the unit as part of the deal for him to take over Spivson and Dalton. Instead, “that was a personal settlement for [their] relationship”.

The following exchange then occurred:[9]
[9]My emphasis.

So, you said that — you say that when you were having discussions in December 2014, the issue of the house never came up? - - - Ah, no, it came up, but it was a — it was a separate issue. It wasn’t about the buying of the business.
In what context did it come up? - - - It came up that we were completely separating everything. Separating ourselves and — and separating the business.
Right. Do you recall what [Mr Easton] was to gain in exchange for him transferring 50 per cent of his interest in that property to you? What was in it for him? - - - Ah, well, when we were living together in 2006, he didn’t have anything. It was my house that we were living in, and it was the sale of that property that bought the [unit at] Ringwood … . So, on a personal level, it was, as [Mr Easton] said, it was your[s] anyway, so that should still be yours.
So, he gave you a 50 per cent interest in a property that sold in May 16 for $710,000, because he felt that — it was what, a gesture of good will, do you say? - - - No, it was not good will. It was mine. That was — it was my property, the sale of my property that bought that property. So, it was — it wasn’t good will, it was a — it was, I suppose, mine, because I put everything in. Um, I paid the mortgage on it, um, I paid the mortgage on the first house by myself. I sold it. I paid the mortgage on the [unit]. So, it was just a personal settlement.
You gave evidence a moment ago that you and [Mr Easton] owned that property in equal shares? - - - Yes.
But now you say that it was effectively your property. Is that your evidence? - - - Well, I’m telling you that on paper we were 50 per cent owners, um, and that’s how I felt about it at the time. When we separated, [Mr Easton] was, well, “It was yours, you put all the money in, so you should have it.” I said, “Yep, I agree.”
So, he was quite willing to transfer it to you without receiving anything in exchange? - - - Yes.
Well, I put it to [you] that that’s nonsense? - - - Well, I say it’s not.

Objection and discussion vis-à-vis transfer of interest in unit as partial consideration

At this point, Mr Dean objected. He submitted that the evidence was not relevant; that the allegation was not pleaded; and that the agreement was admitted on its face.

After discussion with the magistrate, Mr Latham submitted that the evidence was relevant because his client’s case was that a component of the arrangement to transfer the companies from Ms Gibson to him was his share of the unit. He explained that this allegation had not been pleaded because it was not material to his client’s cause of action. Rather, the evidence would go to an assessment of the plausibility of the parties’ respective accounts. The argument would be that, if the consideration for the companies included Mr Easton’s interest in a unit that sold for $710,000, then, given the financial state of the companies, no one in his right mind would do such a thing — unless he was misled about those financial affairs.

The magistrate remarked that he could not “quite see how the arrangement about the sale of the house has anything to do with it” and that he had “trouble seeing the relevance of it”.

Despite the foregoing exchange, the magistrate allowed Mr Latham to continue after he said that he would finish his puttage and then move to another point.

Further cross-examination

The cross-examination then continued in this fashion:[10]

You and [Mr Easton] agreed that in addition to the items that are mentioned in the agreement, he would also give you, in exchange for the transfer of Spivson and Dalton, his 50 per cent interest in the property? - - - No. I said that wasn’t for the sale of the property. How that actually transpired was that [Mr Easton] was cheating on me and when I, ah, when we spoke about it he just said, “Well, you know, you’ve paid everything, you get that,” and then we discussed later on about the sale of the business. It was – that’s purely what it was. There were two separate things.

[10]My emphasis.

Ms Gibson denied that the written agreement was completed wholly by her and handed to Mr Easton to sign. Instead, they discussed it together and she wrote it up in pen and then typed it.

Ms Gibson denied that the reason for the insertion into the agreement of the clause about her being indemnified upon resignation as a director was because she wanted to protect herself when Mr Easton discovered the superannuation liabilities. Instead, she said she did not want Mr Easton using her name to be able to gain things for the business — i.e. she was concerned about being lumbered with any liabilities that might be incurred in her name.

Ms Gibson said that Mr Easton said he was going to pay the superannuation liabilities. But he did not ask her specifically about the amount owing. Instead, Mr Bates would make printouts of the balance sheets that showed those numbers, which were in front of Mr Easton, and, at the meetings, they would discuss them, along with the companies’ other debts — whether they were tax or money owed to suppliers — and what they were owed.

Ms Gibson said that Mr Easton told her that he and Mr Bates had discussions about the financial circumstances of the companies, which was how he came to his decision as to what to offer her for the companies.

Again, Ms Gibson denied telling Mr Easton that the debt to the ATO was $23,000 and that the superannuation liabilities were $40,000. She would have discussed only what was on the balance sheets.

Ms Gibson agreed that the tax and superannuation matters were left to Mr Bates. However, she denied that Mr Easton had no understanding of that debt or those liabilities. On the contrary, he knew exactly what they were as they were raised almost weekly.

Objection to question whether Ms Gibson believed she received fair price for companies

When Ms Gibson was asked in cross-examination whether the payments outlined in the written agreement, as well as the car, were a fair price for the companies, Mr Dean objected. He submitted that it was an admitted agreement and that, in the absence of any claim of duress or the like, it would be of no assistance to the court to know whether it was fair or not.

Mr Latham submitted that the question went to the plausibility of the evidence, for no one would pay, say, $1 million for something that was worthless.

After some discussion, the magistrate said, “I don’t think it’s relevant.”

Further cross-examination

Mr Latham then moved on to other topics.

Ms Gibson was away overseas on occasions during the period they were in business together. She said that Mr Easton would pay the bills while she was away, which may have included paying ATO debts. This would not have included making superannuation payments, as they were not being made at all during that period.

No re-examination

Mr Dean did not re-examine Ms Gibson.

Application for further cross-examination on (a) meetings and (b) bank records

When the matter resumed on the second day of hearing, Mr Latham foreshadowed two things. First, he proposed to call Mr Tofts, a manager of the business, who would say that there were no regular meetings between the parties. Mr Dean objected, arguing that Mr Tofts’ version had not been put to Ms Gibson. The magistrate acknowledged that was so, but determined that she should be recalled in order that she be given a chance to provide her account in response. Mr Dean accepted that there was no prejudice in taking that course.

Secondly, Mr Latham foreshadowed that Mr Easton would give evidence that the bank records showed that payments were being made monthly to Ms Gibson in respect of payment of the mortgage on the unit. He submitted that this would be relevant because it went to Ms Gibson’s credit, because she had said that she alone paid the mortgage. He submitted that, in those circumstances, the bank records should be put to her.

Mr Dean pointed out that the magistrate had already indicated that this was irrelevant. The magistrate observed that “[i]t’s only put that it goes to credit and I suppose that that’s the way I understand it …, in which case I think Mr Latham is bound by the answers he gets from [Ms Gibson] about that”. Mr Dean then said, “Yes. He can’t call any evidence in support of it. He can only put it to her.” His Honour said, “I think that’s the situation, isn’t it?” Mr Dean then said, “He [is] stuck with what she says.” Mr Latham said nothing against these observations.

Further cross-examination

Ms Gibson was duly recalled, and cross-examination resumed.

Mr Latham put to Ms Gibson that the weekly meetings about which she had given evidence did not occur. Ms Gibson denied that, and confirmed her account that the meetings were held between weekly and fortnightly, depending upon whether anyone was away.

Next, Mr Latham confirmed with Ms Gibson that she had given evidence that Mr Easton had transferred his half-share of the unit to her and that she, rather than he, had been paying the mortgage.

Mr Latham then pointed Ms Gibson to Spivson’s bank statements, which showed $1,500 being transferred to her account on 6 November 2013. Ms Gibson confirmed that this was her weekly wage.

Mr Latham then pointed her to the same statement showing $2,000 being transferred to her account on 30 December 2013. He put to her that this was a payment towards the mortgage on the unit that she owned with Mr Easton. Ms Gibson denied this. She said that her mortgage payments were direct-debited. Also, she said that it was possible that this was a reimbursement, because she “was reimbursed a few times when [she] had to use [her] own money to pay things [relating to the business]”. But she was clear that it was not for the mortgage.

Mr Latham then took Ms Gibson to transfers of $2,000 to her account on each of 30 January, 28 February, 31 March and 1 May 2014, and put to her that each was a payment towards the mortgage on the unit. Again, she disagreed. She said that, if it was not part of her pay, it would have been just a reimbursement for funds she had already expended. Instead of getting repaid in one lump sum (such as $20,000), it would be paid back in instalments.

Mr Latham then suggested to Ms Gibson that she received the same payment about each month. After answering, “No,” Ms Gibson said she would have to go through all of the accounts to answer the question, but she denied receiving a weekly[11] payment, like a wage, of this amount.

A shortcut is proposed

[11]The context suggested that Ms Gibson meant “monthly”.

Mr Latham then sought to shortcut the matter. He foreshadowed the possibility of the witness being given time to read the bank records in order that she might concede that $2,000 payments were made right up until the unit was sold.

Preliminary indication of irrelevancy and prohibition on calling evidence as to credit

The magistrate, however, intervened. His initial reaction was that “[t]his is not a relevant matter to the court of this case [and it’s] only as to credit”. His Honour noted that Ms Gibson had answered the questions. Mr Latham said that he was prepared to proceed on the basis that Ms Gibson denied that the payments continued and to elicit from his client that they did in fact continue. The magistrate then said that “you can’t call evidence as to credit”. Mr Latham disagreed. He submitted that to prove that the witness gave false evidence would be an exception to the credibility rule. He undertook to make good that submission after completing the cross-examination.

Further cross-examination

The cross-examination then continued in this way:[12]
[12]My emphasis.

… Ms Gibson, you continue to receive deposits of $2,000 into your bank account from this account each month. What do you say to that? Or I should say in fairness, around about each month. What do you say to that? - - - Ah, at no time was — at no time did the business pay anything towards the mortgage at all. If this was the case, it would’ve been I had credit cards that were used for, ah, purchases to — and it could’ve — I’d have to check my documents myself but it could also be the payments were used for my card to pay the previous business partner, I’m — I’m not exactly sure of the dates because I can’t check my own records. But at no time did the business ever pay any money towards the mortgage.

And I put to you that those payments ended before or leading up to the sale of the property in Ringwood. What do you say to that? - - - Well, I would have to double-check that but it has — still has nothing to do with the mortgage.

And I put to you that each of those payments represented the repayment of the defendant’s — a repayment of the defendant towards the mortgage of the property that you jointly owned with him? - - - No. …

And lastly that when you gave evidence in this proceeding on Thursday and you said that [Mr Easton] did not make repayments towards that mortgage, that evidence was untruthful. What do you say to that? - - - No, it was completely truthful.

Re-examination

In re-examination, Ms Gibson was shown the balance sheet for Spivson for the year ending 30 June 2014. She confirmed that there was nothing recorded in there as a loan that had been made to her by Spivson.

Mr Bates

Evidence-in-chief

Mr Bates was the next witness. His evidence may be summarised in this way.

Mr Bates worked as an accountant for a firm but also operated privately as a book-keeper. He commenced employment as a book-keeper with Spivson and Dalton in March 2013 and ceased in May (or April) of 2015. He worked there two days a week — usually on Tuesdays and Thursdays. He performed data input, reconciled bank accounts, prepared balance sheets and had meetings about those things.

After he commenced employment with Spivson and Dalton, the first quarter’s superannuation payments became due. At that time, there was an existing debt in excess of $100,000. He spoke to Ms Gibson and Mr Easton about it, but they said there were insufficient funds to pay it. When he left, the debt was in “the high hundreds [of thousands]”.

Mr Bates said he would discuss financial matters with Mr Easton and/or Ms Gibson at meetings held in the office. The meetings were usually held weekly. Unpaid tax and superannuation were discussed at those meetings.

In late-2013, an audit was conducted following which the companies were required to file superannuation documents for the previous three quarters. Then, in around April 2014, $17,000 was paid to the ATO in consequence. Both Mr Easton and Ms Gibson were aware of this.

Mr Bates confirmed that, in March 2015, Mr Easton and Ms Gibson became aware of the ATO letter advising of a debt of $66,910, and that this was learned via a meeting held around that time.

Similarly, Mr Bates identified the Spivson MYOB balance sheet (dated 1 April 2015), which showed unpaid superannuation of nearly $165,000 and an ATO obligation of at least $58,000. The document was printed by Mr Bates and was the subject of a meeting with Mr Easton and Ms Gibson.

Mr Bates was aware that, around that time, Ms Gibson and Mr Easton were in the process of separating themselves financially and that they were negotiating. Mr Bates denied that Mr Easton indicated to him that he wanted to know the financial position of the company. But he accepted that Mr Easton was always presented with the balance sheet at the meetings and that the normal course of those meetings was to go through what needed to be paid.

Cross-examination[13]

[13]While the transcript of the hearing records much of the following as a continuation of Mr Bates’s evidence-in-chief, it strikes me, from the leading nature of the questions, and the direct puttage involved, that it must be his cross-examination from this point onwards in the transcript and that, later, where it is indicated that cross-examination commences, it is in fact re-examination.

Mr Bates said that these meetings would occur each week. The figures would be discussed. If Ms Gibson was not there, Mr Bates would discuss them with Mr Easton. On each occasion that Mr Bates attended a meeting, Mr Easton was there.

In response to the suggestion that Mr Easton never said anything to him to indicate that he knew “the precise specific sum of the ATO debt”, Mr Bates said that he did “because he … had the printouts” and “he did read [them]”. When asked whether Mr Easton ever indicated to him that he was aware of the specific quantum of the ATO or superannuation debts, Mr Bates said that he did, by stating as much at their Thursday meetings. Mr Bates denied that he was guessing. He said that Mr Easton said that the debt was $160,000 for superannuation and that the GST was in accordance with the reports.

Mr Bates accepted that he was sacked by Mr Easton. He believed that Mr Easton was unhappy that he (Mr Bates) was taking too long to obtain finance. Mr Easton did not pay Mr Bates’s last invoice. Mr Bates denied that it was made clear to him by Mr Easton that he considered his work to be dishonest and that he managed the companies’ affairs poorly. Mr Bates accepted, however, that he was upset about losing his employment.

At his point, I should point out that there was one part of Mr Bates’ evidence that struck me as confusing. Despite the evidence given a little earlier, in response to the suggestion that Mr Easton “never said to [him] anything that indicated that he knew of the company’s ATO debt or of the superannuation debt”, Mr Bates said, “No, he never said that to me.” And, yet again, in the next breath, Mr Bates said that he (Mr Easton) “knew the specific sum” and that “[h]e knew the amount of the money that was owing for tax and superannuation”.

Back to the narrative of his evidence. Mr Bates said that the company was not paying the superannuation requirements at the time because there was insufficient cash flow. However, Mr Bates did not consider the performance of Spivson to be poor. Instead, it was “holding its own”.

Mr Bates accepted that the balance sheet showed that Dalton had a loss of $3,606 as at 30 June 2015, but added that he had left by that stage. (Of course, this is also after the formation of the agreement, which occurred on 5 May 2015.)

Mr Tofts

Evidence-in-chief

Mr Tofts was the next witness. Briefly, the substance of his evidence was as follows.

Mr Tofts had been with the business since 2011 and had worked as a yard manager since 2015. His duties included working in the office, taking orders, dealing with customers, loading things for customers — “a bit of everything, really”. He was there Monday to Friday between 7:00 a.m. and 5:00 p.m., and sometimes after hours on weekends.

He said that there were no “weekly regular meetings” between Ms Gibson, Mr Easton and Mr Bates. Had there been meetings of that kind, he would have been aware of them.

Cross-examination

In cross-examination, Mr Tofts said that he was contacted by Mr Easton the previous day and asked to give evidence. He accepted that Mr Easton wanted him to address the question whether there were any meetings with Mr Bates. Mr Tofts also appeared to concede that Mr Easton had told him there were no such meetings, but he went on to say that that was common knowledge anyway and that he (Mr Tofts) had not seen any.

As for opportunity to witness whether or not meetings occurred, Mr Tofts said that, if he was out of the office one minute, he could be back again five minutes later. He maintained that, if there were meetings, he would have seen them and that it is highly unlikely that there were any.

Submissions and ruling on so-called “credit point”

Mr Easton was to be the next and final witness. But, before he was called, Mr Latham returned to the argument as to the admissibility of evidence tending to prove that Ms Gibson had lied about contributing solely to the mortgage.

Initially, Mr Latham sought to rely on s 106(2)(a), (c) and (e) of the Evidence Act as exceptions to the so-called “credibility rule” in s 102. After some brief discussion with the magistrate, Mr Latham’s focus became paragraph (e). That said, as will be seen shortly, it appears that his Honour ruled on all three paragraphs, as well as on an application for leave under s 106(1)(b).

In the course of argument, the magistrate suggested that he might have been in error to have allowed cross-examination of Ms Gibson about the payments towards the mortgage. His Honour also said that, in any event, it was not apparent to him that Ms Gibson “has knowingly or recklessly made a false representation while under an obligation to tell the truth” (within the meaning of s 106(2)(e)). After further discussion, the magistrate declared that the evidence was “not relevant to the substantive dispute”. His Honour then heard more submissions on “credibility” under s 106(2)(a), (c) and (e).

Apart from submitting that there was no evidence engaging any of the paragraphs, Mr Dean added that the point had been raised on the run and that, in consequence, Ms Gibson had not had the ability to examine her own home loan payments (by which I took him to refer to her own banking records). Further, he submitted that Mr Easton carried the burden of proving misleading or deceptive conduct, which he could not do on evidence going to credit only.

The magistrate ruled in these terms:

All right, well, I’m not going to grant leave. It would have to come within one of the exceptions [in] s 106(2), and it’s narrowed down to (a), (c) or (e). It’s, I think, clearly not (c) or (e), and (a), which is, “is biased or has a motive for being untruthful,” well, that’s no more than — it’s got to be something more than just what any witness with conflicting evidence would give evidence about. And I don’t accept that it’s been demonstrated to me that Ms Gibson is biased or has any greater motive for being untruthful than anybody else, anyone else under oath. There’s no particular reason to conclude that that’s the case if leave isn’t granted to cross-examine as to credit — sorry, to lead evidence as to credit.

Mr Latham then resumed his client’s case.

Mr Easton

Evidence-in-chief

Mr Easton was the final witness. In summary, the main features of his evidence were as follows.

Mr Easton said that he and Ms Gibson ran the companies together from the beginning. His role was to make sure everything worked — people, trucks, supplies and general day-to-day running.

He accepted that he had knowledge of the financial circumstances of the companies. From day one, it was “a battle … always short of money”. He gained that knowledge by running the companies, making sure everyone was paid and “seeing what was coming in”.

He denied attending weekly meetings with Ms Gibson and Mr Bates. He accepted that he may have attended “three or four over a period” and “possibly one in 2015”. His memory of the latter meeting was that he looked at “the debtor sheet”, which “was never right”.

Mr Easton was aware that there was a superannuation debt. In his view, however, it was pointless asking Mr Bates about it, as he said, “Don’t worry about it because we’re going to walk away from it anyway.” While Mr Easton and Ms Gibson had made arrangements to fund their own superannuation, he still wanted to know what the actual superannuation debt was, as he was unsure whether he had to pay people.

Mr Easton was told something about the superannuation by Ms Gibson, but only when he asked. This was when they had the first informal discussion about “the split”, which could have been in late-October to late-November in 2014. He said this:[14]

What was said was we’d split up and we had to sort of work out what we were doing. I said to her in the very initial discussion, I said, “The house is yours as much as this place is mine, so I’ve had input into the house, you’ve had input into here,” so we talked about either one of us keeping the house, one doing the business. We decided straight away that I’ll keep the business, [Ms Gibson] would keep the house. So, then [she] said she also wanted some money because she wouldn’t be getting a wage, which I agreed to. I also agreed to ah, the car, agreed to that. Um, I then said, “Well, can I do all this?” And I said, “What are the superannuation debts, the real debts, what are they?” And I was told an amount for integrated — and this is in, I reckon, November-December — definitely $23,000, and I was told the super sat around 40 [thousand] and discussions after that [maybe] drifted a bit and I sort of allowed 60,000.

[14]My emphasis.

When asked whether, before entering the written agreement, he returned to conversations with Ms Gibson about the superannuation and the tax debts, Mr Easton said he spoke to her on two or three occasions. And he asked her to tell him what were the real superannuation and integrated debts. He asked her again because he assumed that they would have increased since he first asked. He also knew that there was a problem with the integrated account because there was a garnishee order on it and he was not sure whether that had been rectified. On this occasion, he did not hear anything different from “the 23,000”. He said, “[I]f I heard a 30, I don’t recall.” He knew the superannuation liability was “fairly substantial”, and he wanted to establish what had to come out of it and what had to be paid.

He denied being shown a Spivson balance sheet of February 2015. He said he first saw a Dalton balance sheet of 30 June 2015 around the date it was generated.

Mr Easton said that he did not find out that the ATO debt was greater than he had been told until within two weeks of Ms Gibson leaving. There was about $32,000 to be paid straight away in May 2015 and another $39,000 in June 2015.

He found out about the superannuation debt (of over $190,000) in around November or December 2015, after getting an initial call in September.

When asked whether he would have entered the written agreement if he had known that the superannuation and tax liabilities were more than he was told they were by Ms Gibson, he said:

No, this isn’t doable. … Because it’s a small company it had no cash flow. I got a loan to pay out the previous, ah, partner and [Ms Gibson] and a few bits and pieces so this just wasn’t doable. At the smaller amount, which I believed it to be, I could do it. I didn’t worry about the debt, I didn’t worry about — I just wanted to know two numbers, these numbers aren’t doable, the number I was told a hundred per cent (indistinct) … They’re just too high, like I’ve just finished paying these off in January, that’s the, ah, superannuation … January of this year, 2019, they were completed.

When asked why he did not complain to Ms Gibson in 2015 when, on his account, he found out that the representations were not true, Mr Easton said this:[15]

I didn’t complain, I just thought I’d do it and the first time I said — I think there have been about three solicitors involved and the first solicitor I said — I looked at the first misrepresentation as an oversight which may — and well, it may well have been. But misrepresentation or whatever it may be, it’s just far too much. The second one, ah, when I got the phone call in September, I had no intention of ever honouring the final part of that agreement ‘cause, um, I — one, fair’s fair, two, I’ve got a lot of people that I’m in charge of and I had to make sure their lives continued and, ah, they’d done nothing wrong. … Well, in every meeting from the very first one which was regarding the house and the business which is informal, I’ve said yes, yes, yes, yes, and I’ve asked for two — I’ve asked two questions and they were both, for whatever reason, not reported to me properly. So, I made a decision based on not that amount, definitely not the integrated amount because that was critical to cash flow. The integrated amount coming in, when I’ve paid 32 [thousand] and then was told I still owed another 36 [thousand], that would kill me, it just, ah, we just were — and I’ve struggled — we’re … coming out of it eventually but it has been four years of seven days a week, 12 hour days for, oh, everyone concerned. So, that’s what’s fair’s fair is that just wasn’t fair.

[15]My emphasis.

Again, Mr Easton denied that there were weekly meetings between Ms Gibson, Mr Bates and himself. There were two or three over a long period. He did not have time for the figures because they were “never right”.

As for the written agreement, he said this:[16]

We agreed on it together and there were a few tack-ons as we went and that was presented to me — we didn’t write it out together, I’m pretty sure, but it was virtually what we’d agreed upon. So, it was written by [Ms Gibson] and that was presented to me I think there or about the day that she got her cash payout, which was 150,000. … Well, I looked at it. I saw that the house wasn’t mentioned, I thought well that’s pretty unusual but I was in the mood then to expedite everything, it was, ah, pretty awkward at … the workplace. And I just signed it, no probs, and I intended to … follow through with it. I thought it was pretty fair for her, good luck to her. Um, but I think I signed it, I sort of recognised it for what it was, noticed there was a glaring exception which didn’t bother me either here nor there. As I said, house is hers more than mine. And, yeah, that’s what happened. I got presented — I just can’t remember the exact time it was presented to me, but I was asked to sign it, which I duly did, and it could have been, from memory, at the accountant’s office, when we were transferring or organising transferring money across. I’m pretty sure.

Cross-examination

[16]My emphasis.

In cross-examination, Mr Easton denied either telling Mr Tofts to say that there were no meetings or discussing the matter with him.

Mr Easton conceded that he was aware of the garnishee notice as at March 2015, but denied that he saw the notice. He added that, “If I saw that, I don’t remember” and, “If it was presented to me, I wouldn’t — I didn’t read it.”

Mr Easton conceded that, after realising that the ATO debt was something like $57,000, he did not contact Ms Gibson and complain that she had told him it was only $23,000. He also conceded that he continued to make payments pursuant to the agreement up until September 2015.

When it was suggested to him that the first time he complained about anything concerning the ATO debt was in his email response to the letter of demand of April 2016, Mr Easton said, “No, I spoke to a solicitor.” He went on to say that he looked at the first one as “an oversight”, but that he was “not prepared to do the second one as an oversight”.

As for the delay of a year or so before making any complaint about the ATO debt, Mr Easton said he was “pretty busy” and that he was “up to [his] eyeballs in debt”.

While Mr Easton accepted that he was interested in knowing the debts of the business, he “didn’t really look at anything [Mr Bates] provided because none of it was ever, ever, ever right”.

As for the evidence that he, Mr Bates and Ms Gibson had meetings “from time to time”, again, Mr Easton said, “Not from time to time. Very rarely … I reckon two or three times over the course of two years.”

Mr Easton accepted that assets and liabilities may have been discussed in those (few) meetings, but that “it wasn’t what I really did”. He said that he asked Mr Bates what the superannuation liabilities were, and his answer was, “Don’t worry about them, we’re going to walk from them.” And it was “exactly the same with the integrated [ATO account] — I never got any sense out of it”.

When it was suggested to Mr Easton that this had not been put to Mr Bates, the following exchange occurred:

So, he told you that you wouldn’t have to pay superannuation. Is that correct? - - - That’s what he’s told me.
Yes. Why? - - - Ah, because that’s what he wanted to do. It’s an easy solution for him. He said walk from the deck, start another company, burn everyone here, burn [Ms Gibson] — they wouldn’t have come for me, because she had the house — so, why? You’d have to ask him, he’s gone …

Mr Easton was asked whether, on becoming aware that the superannuation debt was $190,000, he contacted Mr Bates. He said he contacted the accounting firm for which Mr Bates worked, who gave the same advice (i.e. about walking away from the debt). But he did not act on this advice. Instead, he paid the debt.

Mr Easton accepted that, upon becoming aware of the extent of the superannuation debt, he did not ring Ms Gibson and complain that it was nearly five times the $40,000 she had said it was. Nor did he complain of the superannuation debt in his email in response to the letter of demand in April 2016. His reason was that he was still thinking of walking away from that debt at the time.

Mr Easton said that, while he had no recollection of the balance sheets discussed in the evidence of Ms Gibson and Mr Bates, he conceded that it was possible that he saw them. He also conceded that a balance sheet may have been discussed (including one with the ATO debt shown as around $57,000 and the superannuation liability of about $164,000), but when shown the balance sheets in question, he said, “Look, I look at these and they mean nothing to me.”

Mr Easton conceded that, given information received from his new book-keeper, he knew within a short time of Ms Gibson and Mr Bates’s departure that the companies’ debts for tax and superannuation were much greater than (on his account) he had been told.

That said, he was still not aware of the full extent of the indebtedness because he did not know who had to be paid. He knew, for example, that the superannuation debts attributable to Ms Gibson and him as employees were to come off the total debt to be paid. He also said that he was so busy at that time and had so little money to spare that he put it all “on the back burner until the time [he received] a phone call [about the debts]”.

Mr Easton said that he did not see any point in saying anything to Ms Gibson when he realised the true extent of the indebtedness because he had no intention of bringing her to court over the matter and, in any event, his view was “pretty common knowledge”.

Submissions to the magistrate

After the close of the evidence, each party made only brief submissions to the magistrate.

Mr Dean submitted that Mr Easton carried the burden of proving his defence and counterclaim. Neither Mr Latham nor the magistrate cavilled with that submission.

Mr Latham submitted that the magistrate’s decision would turn on his being satisfied of the strength of Mr Easton’s evidence in respect of whether the alleged misrepresentations were made and, if so, whether they were relied on by Mr Easton in entering the agreement in May 2015.

Magistrate’s findings and reasons

After standing the matter down, the magistrate returned later in the day with his decision. Following a detailed summary of the background to the matter and large parts of the evidence, his Honour said this:[17]
[17]My emphasis.

So, the question is whether … I can be satisfied that Ms Gibson gave false and misleading information to Mr Easton and that he relied on it and I’m satisfied in fact that she didn’t give false and misleading evidence to Mr Easton. I might say I don’t make any particularly adverse findings about any of the witnesses so far as their honesty. I’m not able to do that, but I found that Ms Gibson and Mr Bates were credible witnesses in the matters that I’ve just referred to. I accept Ms Gibson’s account of the negotiation that went on and her account of what she said and didn’t say in relation to the information about the finances of the business at the time when the agreement was made on 5 May.
… I find it highly improbable that Mr Easton didn’t attend regularly at the meetings. He said he was worried about the finances, about paying the day-to-day — the week-to-week bills and working out what needed to be paid and that’s exactly what was being talked about at those weekly meetings. It seems highly probable that there were weekly meetings and that he was working at the workplace at that time and did attend those meetings.
That he was provided, and I think he conceded that he was provided with a balance sheet which showed the correct figures, but he didn’t take notice of it. It’s unlikely, it seems to me, that if Ms Gibson was trying to mislead him about the figures, that she’d be handing him a document with the correct figures on it. I suppose someone might do that if they know another person isn’t going to look at it or read it, but I don’t accept Mr Easton’s evidence that he didn’t look at it and wasn’t aware of the actual figures that were in those balance sheets, and the actual state of the business at that time.
… I don’t accept the evidence of Mr Tofts. I just don’t think he was in a position to know what he was talking about, really, or how much he observed what was happening in the — I don’t suggest that he was deliberately dishonest, but I don’t accept that he knew what was going on in the office at the time when he was out in the yard. There must have been the regular meetings … and if he wasn’t aware of it, well, that may be, but I don’t accept that the meeting didn’t happen.
There was other evidence, too, about the sequence of complaint about the payments, and the fact that some payments continued after Mr Easton became aware of having, in his opinion, been misled. But in the end, I go to the credibility of the various witnesses, and I accept the evidence of Ms Gibson and Mr [Bates] as to the sequence, as I said (indistinct) a finding for the plaintiff on the amounts that have been agreed. …

PART 3: APPEAL TO THE SUPREME COURT

Questions of law and grounds of appeal

Before turning to the argument in this Court and my reasons, I shall set out the questions of law and grounds of appeal listed in Mr Easton’s amended notice of appeal. (I shall include the question and grounds concerning procedural unfairness, which, as shown by the strike-throughs, were abandoned, a matter which Mr Latham confirmed at the hearing of the appeal.)

Questions of law

1. Whether the learned [m]agistrate erred by failing to take into account evidence relevant to an assessment of [Ms Gibson’s] creditworthiness and reliability, being the bank statements of Spivson … .

2. Whether, on a proper construction of s 106(2)(e) of the Evidence Act … , evidence may be led from a witness to prove that another witness knowingly or recklessly made a false representation in the same proceeding.

3. Whether the learned [m]agistrate was bound to, and failed to, have regard to the consideration provided under, and/or the relevant circumstances surrounding, the agreement in determining whether [Ms Gibson] engaged in misleading or deceptive conduct pursuant to [s 18 of the ACL].

4. Whether the learned [m]agistrate erred in ruling that the consideration provided under, and/or the circumstances surrounding, the agreement were not relevant to determining whether [Ms Gibson] engaged in misleading or deceptive conduct pursuant to [s 18 of the ACL].

~~4. Whether the learned [m]agistrate failed to afford [Mr Easton] procedural fairness by denying a full or adequate opportunity to:~~

~~a. cross-examine [Ms Gibson] on the bank statements of Spivson … , as a matter relevant to her credit;~~

~~b. cross-examine [Ms Gibson] as to the consideration provided for the agreement;~~

~~c. lead evidence to rebut [Ms Gibson’s] denial of receipt of mortgage repayments for the parties’ jointly owned property; and/or~~

~~d. lead evidence of the consideration provided for the agreement.~~

Grounds of appeal

1. In finding that [Ms Gibson] did not engage in misleading or deceptive conduct under [s 18 of the ACL] by misrepresenting the liabilities of Spivson … and Dalton … , the learned [m]agistrate erred by failing to take into account the following relevant evidence:

a. that [Mr Easton] transferred his interest in the parties’ jointly owned property to [Ms Gibson] as consideration for the agreement to purchase Spivson … and Dalton … ;

b. that the value of [Ms Gibson’s] interest in the jointly owned property was or about $355,000~~; and~~

~~c. that Spivson … was unable to satisfy its liabilities, which exceeded its total equity, at the time of the agreement~~.

2. In finding that [Ms Gibson] was a creditworthy and reliable witness, the learned [m]agistrate erred by failing to have regard to:

a. [Ms Gibson’s] evidence that she alone made mortgage repayments to the parties’ jointly owned property; and

b. The bank statements of Spivson … which disclosed regular payments to [Ms Gibson] in the sum of or about $2,000 each month.

3. The learned [m]agistrate erred in finding that s 106(2)(e) of the Evidence Act … did not permit evidence to be led from [Mr Easton] to prove that [Ms Gibson] knowingly or recklessly made a false representation in cross-examination, namely, that she alone made mortgage repayments to the parties’ jointly owned property.

4. Alternatively, the learned [m]agistrate erred in ruling that the following matters were not relevant to the question of whether [Ms Gibson] engaged in misleading or deceptive conduct under [s 18 of the ACL] by misrepresenting the liabilities of Spivson … and Dalton … :

a. that [Mr Easton] transferred his interest in the parties’ jointly owned property to [Ms Gibson] as consideration for the agreement to purchase Spivson … and Dalton … ; and

b. that the value of [Ms Gibson’s] interest in the jointly owned property was or about $355,000.

4. The learned [m]agistrate failed to afford [Mr Easton] procedural fairness by finding that [Ms Gibson] did not engage in misleading or deceptive conduct in circumstances where [Mr Easton] was denied a full or adequate opportunity to:

~~a. cross-examine [Ms Gibson] as to the transfer of [Mr Easton’s] interest in the parties’ jointly owned property as consideration provided for the agreement; and~~

~~b. lead evidence-in-chief from [Mr Easton] as to the consideration provided for the agreement.~~

5. The learned [m]agistrate failed to afford procedural fairness to [Mr Easton] by accepting [Ms Gibson] as a creditworthy and reliable witness in circumstances where [Mr Easton] was denied a full or adequate opportunity to:

~~a. cross-examine [Ms Gibson] on the bank statements of Spivson …, which disclosed her receipt of monthly payments in the sum of or about $2,000; and~~

~~b. lead evidence-in-chief from [Mr Easton] regarding the bank statements of Spivson … to rebut [Ms Gibson’s] denial that the statements disclosed her receipt of mortgage payments.~~

Questions 3 & 4 and Grounds 1 & 4: Transfer of interest in unit as consideration

Introduction

I turn then to the question whether Mr Easton’s evidence — that the transfer of his half-interest in the unit was part of the consideration for the transfer of the companies (when coupled with the evidence of the price at which the unit was sold a year later) — was relevant evidence to which the magistrate ought to have had regard in making his determination.

Mr Latham explained that Question 4 and Ground 4 were added to the amended notice of appeal because, in his view, the scope of the magistrate’s ruling and remarks on this issue was not clear. On the one hand, despite hearing the evidence in question, his Honour may simply have failed to take into account that evidence. That eventuality was covered already by Question 3 and Ground 1. On the other, it may be that his Honour’s reasons should be construed as his having ruled positively that this evidence was not relevant to a fact in issue. That possibility, Mr Latham explained, was a matter he sought to address by adding Question 4 and Ground 4.

In my view, it is apparent from the magistrate’s remarks during the course of the hearing, as well as from his failure to refer to the evidence in question as part of his reasons for decision, that his Honour considered that this evidence was not relevant to facts in issue — namely, whether Ms Gibson engaged in misleading or deceptive conduct and whether Mr Easton acted on any such behaviour by entering into the agreement. Accordingly, I shall address the complaint on that basis.

Submissions

Mr Easton’s submissions

Mr Latham pointed out that the principles concerning misleading or deceptive conduct are relatively settled. In his submission, those principles included the proposition that, where there is conflicting evidence regarding the alleged conduct, a court will place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities.[18]
[18]Bullhead Pty Ltd v Brickmakers Place & Ors [2017] VSC 206 at [241] (per Sifris J).

In Mr Latham’s submission, one such inherent commercial probability concerned Mr Easton’s evidence that part of his consideration for the transfer of the companies was the transfer to Ms Gibson of his half-interest in the jointly owned unit that later sold for $710,000. In particular, the argument was that this evidence was relevant because, if accepted, it would tend to show that Mr Easton was misled or deceived by Ms Gibson, as alleged, and that he acted on that misleading or deceptive conduct, because no one would transfer an interest valued at $355,000 as part consideration for companies in such a parlous state, unless he had been misled or deceived as to the true level of the companies’ liabilities as to taxation and superannuation entitlements.

While Mr Latham conceded that it would be a matter for the magistrate to determine whether he accepted this evidence, he was obliged at least to have regard to it in considering the ultimate issues — namely, whether Ms Gibson engaged in operative misleading or deceptive conduct.

Ms Gibson’s response

Mr Dean made several points in response, including the following. First, he pointed out that there was no allegation to this effect made in the pleadings.

Second, Ms Gibson’s evidence was that Mr Easton’s interest in the unit was transferred to her in settlement of their personal relationship; it had nothing to do with the commercial arrangements between them.

Third, there was no dispute that the unit had been purchased with the proceeds of sale from a property owned by Ms Gibson.

Fourth, there was no evidence that the value of Mr Easton’s interest in the unit was $355,000 at the time of the transfer of that interest to Ms Gibson (that figure being drawn inferentially from the sale price of the unit, at $710,000, plus the concession that Mr Easton had a half-interest in it). The only evidence of the value of the property was that sale price, which sale occurred about a year after the agreement was struck. Further, while there was no dispute that Mr Easton had a half-interest in the unit, there was no evidence at all of his equity, if any, in that half-share at the time of the agreement. Nor was there any evidence that the property was unencumbered. On the contrary, there was evidence of a mortgage, but the extent of that mortgage was unknown on the evidence.

Fifth, in Mr Dean’s submission, in view of the absence of evidence of the foregoing type, the magistrate was not bound to have regard to such evidence as there was.

Sixth, no submissions were made by Mr Latham to the magistrate at the end of the case that this was a matter to which his Honour was obliged to have regard in coming to his decision.

Finally, in Mr Dean’s submission, the magistrate preferred, and on the evidence was entitled to prefer, the evidence of Ms Gibson and Mr Bates over that of Mr Easton and Mr Tofts. Consideration of the point urged by Mr Latham could not have made any difference to the result.

Mr Easton’s reply

In reply, Mr Latham submitted that, because the evidence was relevant to a fact in issue, the magistrate was required to have regard to that evidence.

Secondly, he submitted that it is neither here nor there that this issue was not raised in final submissions. Neither party made closing submissions on the evidence. The point had been agitated throughout the course of the hearing and should have been considered by the magistrate.

Finally, Mr Latham submitted that nothing turns on whether the point was pleaded as part of the consideration for the agreement. Instead, it was a surrounding circumstance that, on Mr Easton’s case, went to the commercial implausibility of his entry into the agreement unless he was misled or deceived, as alleged. Further, the point was raised at the outset of the hearing.

Discussion

Section 55(1) of the Evidence Act provides that “[t]he evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding”. Further, s 56(1) provides that, “[e]xcept as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding”.

I must confess that, initially, I was attracted to Mr Latham’s argument as to relevance. I could see how the evidence at issue, if accepted, could rationally affect (directly or indirectly) the assessment of the probability of whether Ms Gibson engaged in misleading or deceptive conduct and, if so, whether such conduct impacted upon Mr Easton’s decision to enter the agreement. In particular, there did seem to be a potential logical connection between Mr Easton’s evidence (that his half-share of the unit, valued at something like $355,000, was part of the consideration for the transfer of the companies), the notion of commercial implausibility and the argument that a person would be unlikely to offer such additional substantial consideration, unless he had been misled as to the true state of the companies’ taxation and superannuation liabilities. While that may be a form of indirect relevance, it seemed, on the face of it, to be reasonable to argue that the evidence fell within s 55(1), and was therefore admissible pursuant to s 56(1), and in turn was a consideration to which the magistrate should have had regard in coming to his decision.

But, as I indicated at the outset of these reasons, on closer analysis, the argument becomes more theoretical than real. This is because there was an insufficient factual substratum against which to make a meaningful assessment as to whether Mr Easton’s claim about the true reason for the transfer, and the underpinning notion of commercial implausibility, if accepted, could rationally affect (directly or indirectly) the assessment of the probability of whether there was operative misleading or deceptive conduct by Ms Gibson.

At the heart of Mr Latham’s argument for the relevance of the transfer of his client’s interest in the unit as partial consideration for the companies was the notion of commercial implausibility. But whether a transaction can be assessed as commercially implausible or otherwise cannot be determined in a vacuum. Yet, here, on each side of the relevant equation, there was a paucity of evidence.

Thus, first, the evidence of the value of Mr Easton’s interest in the unit was very thin, at best, and even involved an element of speculation. For example, while there was no dispute that he had a half-share in the unit, which Ms Gibson sold a year later for $710,000, as Mr Dean pointed out, there was no evidence of the level of equity in, or of the value of, the unit, or his share of it, at the time of, or in the lead-up to, the formation of the agreement concerning the companies. Further, while it appeared to be common ground that the property was encumbered by a mortgage, the extent of indebtedness, if any, was unknown. There was also evidence, which Mr Easton appeared to accept, that Ms Gibson had bought the unit with the proceeds of the sale of her previous property and that the property, in substance, was “hers”. Thus, the true value of any interest held in the unit by Mr Easton, at the time of entry into the agreement and of his transfer of that interest back to Ms Gibson, was simply unknown.

Similarly, as for the other side of the equation, while there was evidence of the tax and superannuation liabilities and the state of the balance sheets of the companies around the relevant time, there was no satisfactory evidence of the worth of those companies. There was, for example, no forensic accounting evidence of their true value. At most, Mr Bates gave evidence that Spivson was “holding its own”. Neither the magistrate nor this Court could be expected to trawl through the balance sheets, unassisted by expert (or agreed) evidence or submissions, in order to make an assessment of the companies’ value or viability. Further, aside from hints here and there and the figures mentioned in Mr Easton’s email of 21 April 2016 (in response to the letter of demand), there was not even any direct evidence of, and no party put squarely in issue, the total price paid for the companies.

In those circumstances, on the evidence below (and on the record before this Court), I think it was (and still is) impossible to assess whether there was (or would be) any commercial implausibility or otherwise in transferring Mr Easton’s half-interest in the unit as partial consideration for the companies. And, if that is so, the evidence, even if accepted, on Mr Latham’s own argument, could not rationally affect (directly or indirectly) the assessment of the probability of whether there was operative misleading or deceptive conduct by Ms Gibson. In other words, on closer analysis, in the absence of other supporting evidence of the type just mentioned, the evidence in issue simply did not, and could not, in the circumstances of this case, pass the test of relevance set out in s 55(1) of the Evidence Act. Accordingly, the magistrate committed no error of law in failing to have regard to that evidence.

In any event, even if the magistrate had regarded the commercial implausibility theory as having relevance, and therefore also Mr Easton’s evidence of the purpose of the transfer of his interest in the unit, I think it is certain that he would not have come to a different conclusion on the merits. Thus, any error his Honour might have made was immaterial. There are two main reasons.

First, as we have seen, there were numerous aspects of Mr Easton’s evidence that made his own case on misleading or deceptive conduct rather weak. A few examples will do. It will be remembered that Mr Easton said that, on the day he signed the agreement, he “noticed there was a glaring exception which didn’t bother [him] either here nor there.” Yet that exception was the mention of the transfer of his interest in the unit. It is hard to understand why something said to be so crucial to the agreement would not bother him. Even more curiously, he went on to say, “As I said, the house is hers more than mine.” Similarly, in his response to the letter of demand sent a year after the agreement was struck, while Mr Easton alleged he had been assured by Ms Gibson that the tax bill was $23,000 but turned out to be $67,000, he made no mention whatsoever of being misled about superannuation liabilities. Further, in his evidence, he conceded that, when presented with company financial documents, he might not have read them. Yet, while he claimed to have no recollection of the balance sheets discussed in the evidence of Ms Gibson and Mr Bates, he conceded that it was possible that he saw them. He also conceded that a balance sheet may have been discussed (including one with the ATO debt shown as around $57,000 and the superannuation liability of about $164,000). In my view, evidence of this kind strongly suggests a person either who experienced no misleading or deceptive conduct at all or whose entry into the agreement was unaffected by anything said, or unsaid, by Ms Gibson.

Secondly, the magistrate, who had the singular benefit of seeing and hearing the witnesses in the flesh, made firm findings that he preferred the evidence of Ms Gibson over that of Mr Easton. His Honour also accepted the evidence of the book-keeper Mr Bates. His evidence, as we have seen, was consistent with Ms Gibson’s account of numerous meetings at which the companies’ taxation and superannuation woes were discussed with Mr Easton. Equally, the magistrate did not accept the evidence of Mr Tofts, a business employee whose account of the occurrence of meetings (in part) supported Mr Easton’s version but conflicted with the evidence of Ms Gibson and Mr Bates. Finally, his Honour expressly failed to “accept Mr Easton’s evidence that he didn’t look at it and wasn’t aware of the actual figures that were in those balance sheets, and the actual state of the business at that time”. On my reading of the whole of the evidence, there is no surprise in these findings. Indeed, I think they were inevitable.

In those circumstances, I am persuaded that, even if Mr Easton’s evidence of the purpose of the transfer, and the notion of commercial implausibility, were to be regarded as relevant, the magistrate’s determination to reason to the contrary had no vitiating effect on his ultimate decision.[19] This is because, even if he had had regard to that evidence, the result would not — and could not — have been any different.[20] Indeed, I am satisfied that, were I to allow the appeal on the strength of this complaint and remit the matter to the same magistrate for reconsideration according to law (which was the course Mr Latham accepted would be necessary if the appeal succeeded), his Honour would be driven to the identical result. In those circumstances, such orders would be futile and therefore would not be “appropriate”.[21]
[19]See, for example, DPP v Woodward [2006] VSC 299 at [18] (per Cavanough J), citing Rumpf v Mornington Peninsula Shire Council (2000) 2 VR 69 at 76[8] (per Bamford J) and B Marsh Nominees Pty Ltd v Moonee Valley CC (2004) 17 VPR 338 at 347[29]-348[31] (per Osborn J). While these decisions concern either criminal appeals on questions of law from the Magistrates’ Court (pursuant to the old s 92 of the Magistrates’ Court Act 1989 (Vic); see now s 272 of the Criminal Procedure Act 2009 (Vic)) or appeals on questions of law from the Victorian Civil and Administrative Tribunal (pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic)), I am satisfied that the same or a similar principle applies. The same (or sufficiently similar) is true of the point for which the authorities in the next footnote stand.
[20]See, for example, DPP v Woodward [2006] VSC 299 at [18] (per Cavanough J), citing Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 384 (per Toohey and Gaudron JJ); and also at 353 (per Mason CJ with whom Brennan J agreed); see also Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335[9] (per Phillips JA).
[21]See s 109(6) of the Magistrates’ Court Act 1989 (Vic).

Accordingly, I would reject these questions and grounds of appeal.

Questions 1 & 2 and Grounds 2 & 3: Payment of the mortgage

Introduction

I turn then to Questions 1 and 2 and Grounds 2 and 3, which, as argued, may be characterised in these ways. They raise the questions whether the magistrate erred in law:

a) in failing to have regard to the bank statements of Spivson which disclosed regular payments to Ms Gibson in the sum of about $2,000 per month; and

b) in failing to allow further cross-examination of Ms Gibson on those bank statements; and

c) in failing to permit Mr Easton to give evidence to prove that Ms Gibson knowingly or recklessly made a false representation in cross-examination — namely, that she alone made mortgage repayments to the parties’ jointly owned property.

Submissions

Mr Easton’s submissions

Mr Latham submitted that a failure to have regard to evidence relevant to credit may indicate that a witness’s credibility was not properly considered.[22] In his submission, for reasons that follow, this was such a case.
[22]AB v XYZ Pty Ltd [2019] VSC 788 at [87] (per Richards J), citing, for example, Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 61 (per Brennan J).

Ms Gibson claimed that she alone had been paying off the property’s mortgage. Mr Latham then submitted to the magistrate that the bank records of Spivson demonstrated that Ms Gibson had in fact received regular mortgage payments from Mr Easton, and that this was a matter relevant to her credit because she had denied the same in cross-examination. Mr Latham went on to put to Ms Gibson in cross-examination that the bank records disclosed regular payments of $2,000 per month or so until the property was sold and that she was lying when she said that she alone paid the mortgage repayments.

Mr Latham submitted that, in his reasons, the magistrate found Ms Gibson to be a credible witness, which finding formed the basis for his decision in her favour. Yet, in assessing Ms Gibson’s credit, the magistrate had no regard to the bank records. This, in Mr Latham’s submission, was an error.

Secondly, Mr Latham submitted that the magistrate erred in failing to construe s 106(2)(e) of the Evidence Act as allowing Mr Easton (without leave) to show that Ms Gibson knowingly or recklessly made a false representation when, in cross-examination, she asserted that she alone paid the mortgage on the unit. The provision was enlivened because he had put the proposed evidence to the contrary to her in cross-examination and she had denied it.

Mr Latham relied on Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd (No 4), where Lindgren J appeared to proceed on the assumption that s 106(2)(e) would allow evidence to be admitted to show that the witness had lied in the same proceeding (as well as other proceedings) as long as the substance of the evidence had been put to the witness in cross-examination (and the witness had denied it).[23]
[23]Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd (No 4) [2004] FCA 369 at [15] (per Lindgren J).

Mr Latham also submitted that this view was consistent with the common law principles outlined by McHugh J in Nicholls v The Queen, where his Honour said that:[24]

evidence disproving a witness’s denials concerning matters of credibility should be regarded as generally admissible if the witness’s credit is inextricably involved with a fact in issue.

[24]Nicholls v The Queen (2005) 219 CLR 196 at 223[56] (per McHugh J).

As I understood Mr Latham’s ultimate submission under these complaints, it was that proof that Ms Gibson had lied about being the sole contributor to the mortgage went directly to her credit, which itself was in issue in the hearing, and was inextricably involved with facts in issue — namely, whether Mr Easton had a meaningful interest in the unit, which in turn went to the question of commercial implausibility, which in turn went to whether Ms Gibson engaged in misleading or deceptive conduct.

Ms Gibson’s response

Included among Mr Dean’s submissions were the following. First, in his submission, the proposed evidence — that Mr Easton contributed to the mortgage payments — would not have tended to prove that Ms Gibson made a false statement.

Second, he submitted that the proposed evidence was not relevant to the facts in issue, namely whether Ms Gibson had engaged in operative misleading or deceptive conduct. As I understood his point, it was that the proposed evidence was too remote from that issue to be relevant.

Third, and this may be the same point in another guise, it was submitted that the proposed evidence would not have proved a matter that was inextricably involved with a fact in issue.[25]
[25]Mr Dean referred to Nicholls v The Queen (2005) 219 CLR 196 at 223[56] (per McHugh J).

Fourth, to extend the operation of s 106(2)(e) to the present circumstances would be to allow cross-examination on, and adducing other evidence as to, credit at large. This, Mr Dean submitted, would render the other paragraphs of s 106(2) unnecessary. Such a construction should be avoided. In this regard, Mr Dean referred to the cautionary remarks of Simpson J in R v Spiteri.[26]
[26]R v Spiteri [2004] NSWCCA 321 at [50]-[51] (per Simpson J, with whom Grove J and Shaw J agreed). Mr Dean also referred to Norton v Long [1968] VR 221 at 223 (per Winneke CJ).

Finally, Mr Dean submitted that, on all the evidence, it was well open to find that Ms Gibson and Mr Bates were credible witnesses. Given the strength of that evidence and the magistrate’s findings, the proposed evidence could not have made any difference to his assessment of credibility.

Mr Easton’s reply

In reply, Mr Latham made several points about the construction of s 106(2)(e). First, he submitted that Mr Dean’s reliance on Simpson J’s remarks in Spiteri was misplaced. In his submission, Simpson J merely noted what had been observed by Stephen Odgers SC in his work on Uniform Evidence Law[27] and left for another day the interpretation of s 106(2)(e). Her Honour opined that the literal meaning of the provision would permit evidence to be led to rebut a denial made in cross-examination. In Mr Latham’s submission, this is significant, as the starting point in statutory interpretation is to apply the natural and ordinary meaning of the terms of the provision.
[27]See now, as then, Stephen Odgers SC, Uniform Evidence Law, 15^th edition, 2020, Lawbook Co., at para [EA.106.270]. See also Neil Williams SC, John Anderson, Judith Marychurch and Julia Roy, Uniform Evidence Law in Australia, 2^nd edition, 2018, LexisNexis Butterworths, at para [106-11].

Second, it was noted that the relevant passage in Mr Odgers’s work refers to a view expressed by the Australian Law Reform Commission in 2005. In Mr Latham’s submission, that view is now stale as it related to s 106 in a form that differs from its present version. At that time, s 106(1) required that a witness first deny the substance of the evidence sought to be led under one of the exceptions within s 106(2). But that requirement has since been loosened. A denial is no longer required. It is sufficient now for the witness not to admit or agree to the substance of the evidence. If evidence were put to a witness and he or she merely did not admit or agree to it — for example, by saying, “I don’t know”, or, “I can’t recall” — it would not follow that adducing contrary evidence would prove that the witness made a false representation. For this reason, in Mr Latham’s submission, s 106(2)(e) would not apply, and one or more of s 106(2)(a) to (d) would need to be relied on instead.

Third, in Mr Latham’s submission, there is no risk that his preferred construction of s 106(2)(e) would render its neighbouring paragraphs unnecessary. One illustration is that not one of the other exceptions would have applied to the evidence sought to be led in the present case. Indeed, the magistrate specifically ruled that s 106(2)(a) and (c) did not apply. In Mr Latham’s submission, each of the paragraphs operates in distinct and specific circumstances:

a) Paragraph (a) is enlivened by matters which affect the motive, temper and character of the witness, such as evidence that tends to prove a reluctance to give evidence, a personal relationship suggestive of bias, or the coaching of a witness.

b) Paragraph (b) requires that the evidence tend to prove the witness has been convicted of a criminal offence.

c) Paragraph (c) is concerned with evidence of prior inconsistent statements. The language of the provision, read with the definition of a prior inconsistent statement in the Dictionary to the Evidence Act, suggests an inconsistent statement must have been made before the commencement of the witness’s evidence.

d) Paragraph (d) is concerned with the capacity of the witness to be aware of matters, such as a capacity (or otherwise) to see something from a distance.

Also in reply, Mr Latham took issue with Mr Dean’s submission that the proposed evidence would not have tended to prove that Ms Gibson made a false statement. On the contrary, in Mr Latham’s submission, Mr Easton’s proposed evidence, if accepted, when combined with the bank records, could only have proved that Ms Gibson’s representation — that she alone made the mortgage repayments on the unit — was false.

Finally, on the question whether credit was inextricably involved with a fact in issue, Mr Latham submitted that the acceptance of Ms Gibson as a credible witness was the (principal) basis on which the magistrate determined that the misrepresentations alleged had not been made. This, in his submission, was the central fact in issue at the hearing.

Discussion

If, as I have accepted under the first group of complaints, the commercial plausibility theory was, in the particular circumstances of this case, of only theoretical relevance to the central issue, the same is likely to be true of the question whether Ms Gibson lied in claiming that she alone paid the mortgage. But, whether the proposed evidence said to support that proposition is thought of as admissible solely as to credibility or (as I shall explain in a moment) is also or instead potentially directly relevant to a fact or facts in issue, the reality is that, in so far as some bank statements were put to her, Ms Gibson did explain that there were times when she was reimbursed for purchases she made personally for the companies. Apart from foreshadowing evidence consistent with his puttage, Mr Latham did not suggest that Mr Easton would proffer any explanation that might counter Ms Gibson’s account of reimbursements. And, on the appeal, there was no advance on what evidence might have been led had Mr Easton been allowed to develop the point.

Of course, it might be said that the foregoing only begs the question whether things might have been different had the magistrate had regard to the commercial plausibility argument and/or allowed Mr Easton to pursue his case about the mortgage payments. Indeed, put in that way, the hearing below might be said to have had a whiff of procedural unfairness about it. At once, however, it will be remembered that, in this Court, Mr Latham eschewed any complaint of this kind. In fact, as we have seen, he abandoned grounds of appeal expressly alleging procedural unfairness. In those circumstances, nothing more need be said about the point.

A moment ago, I alluded to the view that the proposed evidence may have gone beyond mere credit, despite the absence of any submission to that effect below or in this Court. It seems to me arguable that Mr Easton’s proposed evidence — that he contributed to payments of the mortgage on the unit via Spivson’s bank account to Ms Gibson — may have gone beyond credit and been at least indirectly relevant to the ultimate fact in issue. The steps are these. First, if he was able to identify the quantum of his alleged contributions to the mortgage repayments, then that may have gone some way to establishing his equity in his half-share of the unit. Second, that in turn would add to the information as to the value of his interest in the unit that, on his account, he transferred to Ms Gibson as partial consideration for the companies. This, in turn, could go to his broader argument about commercial implausibility, which, for the reasons explained earlier, in turn could go to the question whether there was operative misleading or deceptive conduct by Ms Gibson. As also pointed out earlier, this is just the sort of evidence lacking that might otherwise have raised the commercial implausibility argument above one of merely theoretical relevance. At the same time, on this hypothesis, whether or not s 106(2)(e) allowed the admission of the evidence as to credit, the evidence would be in for all purposes in the case, and therefore, if accepted, could be used to undermine Ms Gibson’s credit as well.

All of that said, and as attractive as Mr Latham’s submissions about the scope of s 106(2)(e) may be, I, like Simpson J in Spiteri, consider it unnecessary to determine the scope of that provision in this case. And, even if I had been urged to do so, I would not consider it necessary to resolve whether Mr Easton’s proposed evidence and his further cross-examination on the bank records were capable of going beyond credit. In fact, for the purposes of argument, I am prepared to assume in Mr Easton’s favour that, prima facie, the proposed evidence would be admissible and that the further cross-examination would be permissible on either or both bases.

But, even with those (notional) assumptions in his favour, the difficulty for Mr Easton, as I see it, is manifold. First, as I have already said, if the commercial plausibility theory was, in the circumstances of this case, of only theoretical relevance to the central issue, the same is likely to be true of the question whether Ms Gibson lied in claiming that she alone paid the mortgage. This must be so at least in so far as the proposed evidence and further cross-examination is treated as capable of relevance beyond mere credit.

Second, while, as I have explained, Mr Easton’s proposed evidence, together with the proposed further cross-examination on the bank records, appears to have been capable of adding to the body of evidence required to assess the commercial implausibility argument, I am not persuaded that that evidence, taken at its highest, would have been adequate to raise the commercial implausibility point beyond merely theoretical relevance. While it was unclear, it seemed to be suggested that Mr Easton’s evidence, when coupled with the bank records, would suggest that he, somehow via Spivson’s account, caused his funds to be transferred to Ms Gibson’s personal account for the purposes of contributing to repayments of the mortgage. In addition, it seemed that the amount said to be concerned was $2,000 each month or so over something like an eighteen-month period. On that simple calculation, the total figure concerned is about $36,000. While the evidence may well have turned out to be that a much greater contribution was made over time, I simply cannot infer or assume that that may have been so, as there was no evidence or submissions to that effect before either the magistrate or this Court. When regard is had to the figures mentioned in Mr Easton’s email of 15 April 2016 to Ms Gibson’s solicitors (namely, a payment of $150,000 to Ms Gibson and one of $142,000 to Mr Spivey; a total of $292,000), $36,000 seems, by way of comparison, a rather paltry amount to me. (This, of course, is not to mention the financial obligations in the written agreement.) Indeed, it is extremely difficult to see how such a modest figure could have had the slightest impact on the question of commercial probability. Thus, again, I fear that the evidence fails the test of relevance in s 55(1) of the Evidence Act.

Third, as I also pointed out earlier, whatever the basis or bases for potential admissibility of Mr Easton’s proposed evidence or the further cross-examination on the bank records, Ms Gibson did explain that there were times when she was reimbursed for purchases she made personally for the companies. And yet, apart from Mr Easton’s foreshadowed evidence, nothing said at the hearing below or in this Court had any tendency to cut across that explanation.

Fourth, even if the proposed evidence and further cross-examination were confined in their potential relevance to credit, in order to have any meaningful impact, there must be a reasonable possibility that Ms Gibson’s credit would be so damaged by that evidence and/or cross-examination that the magistrate might have failed to accept her on an important matter — such as her denial of misleading or deceptive conduct or her account of the frequency of the meetings and the important documents to which Mr Easton was exposed at those meetings. But, as I assess the evidence and the magistrate’s approach to it and his findings, such a prospect seems so remote as to be fanciful.

Finally, I refer to, repeat and add to the opinion I expressed towards the end of my discussion of the first group of complaints. And that view is to the effect that, even if the magistrate had regarded the commercial implausibility theory as having relevance, and/or even if he had allowed Mr Easton to give evidence and cross-examine further about the contributions to the mortgage, I am persuaded by Mr Dean that it is extremely unlikely that he might have come to a different conclusion on the merits. Thus, any error his Honour might have made was immaterial. It will be remembered that I gave two main reasons. I shall not repeat the detail here other than to say this. First, there were numerous aspects of Mr Easton’s evidence that made his own case on misleading or deceptive conduct very weak. Secondly, his Honour’s firm findings in favour of Ms Gibson and Mr Bates, at the expense of Mr Easton and Mr Tofts, were not only open but were inevitable.

For completeness, my view in this regard is the same whether the two groups of complaints are assessed in isolation or together.

In those circumstances, I am persuaded that any error the magistrate may have made had no vitiating effect on his ultimate decision. To repeat, this is because, even if he had had regard to Mr Easton’s evidence about the purpose behind the transfer and/or his proposed evidence about his contributions to the mortgage, and even if his Honour had had regard to the bank records and/or any further cross-examination of Ms Gibson thereon, the result would not — and could not — have been any different. As I said earlier, were I to allow the appeal on the strength of any or all of these complaints and remit the matter to the same magistrate for reconsideration according to law, his Honour would be driven to the identical result. Such orders would be futile and therefore should not be made.

Accordingly, I would reject these questions and grounds of appeal as well.

PART 4: CONCLUSION AND ORDERS

It follows that I must dismiss the appeal.

As foreshadowed at the outset of these reasons, I see no reason that costs should not follow the event. Accordingly, I would order that Mr Easton pay Ms Gibson’s costs of the appeal to this Court on a standard basis.

If either party wishes to say anything more or to the contrary about costs, contact should be made with my chambers within a week of publication of this judgment. If no such contact is made, orders will be made in the terms foreshadowed.
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[2021] VSC 424

19 July 2021