Fazzari v Hamra

[2023] SADC 59

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

FAZZARI & ANOR v HAMRA & ANOR

[2023] SADC 59

Judgment of his Honour Judge Burnett  

17 May 2023

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS

CORPORATIONS - FORMATION - REGISTRATION OR INCORPORATION - DEREGISTRATION

RESTITUTION - CLAIMS ARISING OUT OF INEFFECTIVE CONTRACTS - GENERALLY - TOTAL FAILURE OF CONSIDERATION OR AGREED RETURN

EQUITY - GENERAL PRINCIPLES - UNJUST ENRICHMENT

These proceedings concern a number of claims brought by the applicants, Mr Fazzari and Mr Chehade, in relation to payments made by them totalling $242,950. The applicants claim against the first respondent, Mr Hamra, for restitution based on a total failure of consideration and damages for misleading conduct. The consideration is claimed to have failed because the agreement that was the subject matter of the payments is alleged to be void for uncertainty. The applicants also claim that the first respondent engaged in misleading and deceptive conduct to induce them to enter into the agreement and pay the monies. In the alternative, (if the agreement was enforceable), the applicants claim against the first respondent for breach of the agreement, namely, to repay the monies invested together with interest at 10% per annum. The applicants also claim against the second respondent, Mrs El  Hamra, the wife of the first respondent, for restitution based on total failure of consideration and breach of trust.

In 2008, the first respondent, through corporate entities, invested the sum of $2,617,000 for the marketing and sale of a product known as Supaloc in the Middle East. Supaloc was a steel building system used in the construction of steel framed houses. The intellectual property in the Supaloc system was owned by a Mr Kevin Weeks or companies associated with him, Steel Building Systems Australia Pty Ltd and SBS International Pty Ltd (collectively SBS). SBS and a third party in the Middle East also each invested $2,617,000 in 2008. The monies invested by the first respondent were advanced primarily through two of his companies, Retirement SA Pty Ltd and Hamra Developments Pty Ltd. There was a shortfall in the money required to be invested by the first respondent, so he procured a third party, who, because adverse allegations were made against them, I will call by the pseudonym, the Bauers, to advance the sum of $300,000. There is a dispute as to whether the investment made by the third party was a loan or an investment, but I find that it was an investment.

It is not clear in what entity the first and second respondent and the Bauers received an interest.

In 2014, the Bauers demanded the return of their investment of $300,000 plus interest of $50,000 from the first respondent. They claimed it was a loan. Their demand was accompanied by threats of physical violence against the first respondent and it was claimed that they had links to bikies who would carry out those threats.

The first respondent approached the applicants in late 2014 to purchase the shares held by the Bauers.  It was represented to the applicants that (1) they would purchase the shares held by the Bauers; (2) they would purchase shares in a company known as Supaloc; (3) the shares were in a company which would sell the Supaloc product in the Middle East; (4) Mr Kevin Weeks was another shareholder in the company.

The applicants claim that there was no company that had these characteristics and the agreement was void for uncertainty. The respondents contend that the applicants were purchasing the shares held by the Bauers in a company known as Hamra Holdings (Middle East) Pty Ltd (HHME). The respondents claim that a Mr Nabil El Hamra (the brother in law of Mr Hamra and a resident of the United Arab Emirates) held his 25% interest in a British Virgin Island Company, Supaloc JV UAE Pty Ltd, on an oral trust for HHME. The respondents further claim that Supaloc JV UAE Pty Ltd held the rights to licence a company to sell the Supaloc product in the Middle East.

The applicants paid the sum of $242,950 for the shares. The monies were paid, at the request of the first respondent because he was bankrupt at that time, by the applicants into the bank account of the second respondent. The monies were mixed with other funds in that account but ultimately a sum in excess of $242,950 was paid to the Bauers from that account.

Held:

1 The agreement by which the applicants were to purchase shares from the Bauers was void for uncertainty. The subject matter of the agreement (that is the shares that were to be sold and purchased) could not be ascertained: Austra Tanks Pty Ltd v Running [1982] 2 NSWLR 840 applied.

2 In any event, HHME was, at the time of the agreement, deregistered. A consequence of the deregistration was that HHME itself and shares in it ceased to exist: Tom Michael Oates v Consolidated Capital Services Pty Ltd [2007] NSWSC 680 applied. Although any agreement for the sale and purchase of shares (if such an agreement was enforceable and not void for uncertainty) was subject to an implied contingent condition precedent that HHME be reinstated, such a condition was not satisfied as HHME was never reinstated.

3 The applicants were entitled to an order for restitution in the sum of $242,950 against the first respondent for unjust enrichment. There had been a total failure of consideration for the payments: Baltic Shipping Co v Dillion (The Mikhail Lermontov) (1993) 176 CLR 344 and Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 applied.

4 The first respondent was enriched by the payment in that the payment was made at his request, any liability that he personally had to the Bauers was extinguished and he was relieved from the threat of physical violence: Riverside Legion & Community Club Ltd v Repaja & Co Pty Ltd [2015] NSWSC 383 and Johnson v Leader Computers Pty Ltd (2014) 118 SASR 408 applied. The first respondent was not entitled to the agent’s defence in that he was not a mere conduit who had not retained the benefit of the payment: Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 applied.

5 The claim for restitution for unjust enrichment or for monies had and received against the second respondent is dismissed. The second respondent had not been enriched. She was also entitled to the agent’s defence in that she had passed on the payments in their entirety: Jaffer v Commonwealth Bank of Australia [2001] SASC 91 and Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 applied.

6       The claim against the second respondent for breach of trust is dismissed. She is not liable as a constructive trustee and there is no evidence that she committed any breach of trust or breach of fiduciary duty personally or was an accessory to any such breach. The monies were paid from the account of the second respondent according to the instructions of the applicants.

7       The first respondent had engaged in misleading and deceptive conduct in that he had misrepresented the nature of the company in which they were to purchase shares. There was no Supaloc company that was to sell Supaloc product in the Middle East and further there was no such company of which Mr Weeks was a shareholder. The oral trust alleged by the first respondent was unenforceable.

8       The first respondent also engaged in misleading and deceptive conduct in that he misrepresented that, on demand, he would repay to the applicants the amount of their payments plus interest at the rate of 10% per annum.

9       The applicants are entitled to damages for misleading and deceptive conduct in the sum of $242,950 against the first respondent and an order in restitution against the first respondent in that sum.

10     The claim against the second respondent is dismissed.

Trade Practices Act 1974 (Cth) s 82; Misrepresentation Act 1972 (SA) s 7; Corporations Act 2001 (Cth) s 601, s 1072E(1), referred to.
Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1; Payne v Parker [1976] 1 NSWLR 191; Manly Council v Byrne [2004] NSWCA 123; Smith v Samuels (1976) 12 SASR 573; Burke v LFOT Pty Ltd (2002) 209 CLR 282; McLaughlin v Daily Telegraph Newspaper Co Ltd (No 2) (1904) 1 CLR 243; Hoare v McCarthy (1916) 22 CLR 296; Cadd v Cadd (1909) 9 CLR 171; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815; Slater v Strawberry John Pty Ltd [2002] WASC 204; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Victoria v Tatts Group Ltd [2016] 90 ALJR 392; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990; Byrnes v Kendle (2011) 243 CLR 253; Franklins Pty Ltd v Metcash Trading Ltd (2009)76 NSWLR 603; Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Holt v Bunney [2020] SASCFC 89; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213; Lym International Pty Ltd v Marcolongo [2011] NSWCA 303; Ellul & Ellul v Oakes (1972) 3 SASR 377; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Godecke v Kirwan (1973) 129 CLR 629; G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251; Axelsen v O’Brien (1949) 80 CLR 219; Thorby v Goldberg (1964) 112 CLR 597; Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429; Masonic Homes Ltd v Oppedisano & Platinum Property Retirement Pty Ltd [2016] SASC 196; ACN 006 530 132 Pty Ltd (in liq) v Freedman [1999] VSC 441; Austra Tanks Pty Ltd v Running [1982] 2 NSWLR 840; Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989; Thorner v Major [2009] 1 WLR 776; Air Studios (Lyndhurst) Ltd v Lombard North Central PLC [2013] 1 Lloyd’s Rep 63; Boral Resources (Qld) Ltd v Donnelly [1988] 1 Qd R 506; York Air Conditioning and Refrigeration (A/sia) Pty Ltd v Commonwealth (1940) 80 CLR 11; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Bentworth Finance Ltd v Lubert [1968] 1 QB 680; Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 97326; Minsoul v Federal Commissioner of Taxation (FCT) (1974) 48 ALJR 283; Tom Michael Oates v Consolidated Capital Services Pty Ltd [2007] NSWSC 680; In the matter of Garfox 86 Pty Limited [2019] NSWSC 442; In the matter of Austral Bronze Pty Limited; In the matter of John Darlington Pty Limited; In the matter of John Darlington Pty Limited (No 2) [2020] NSWSC 1633; Bell Group Limited v Australian Securities and Investments Commission [2018] FCA 884; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20; Meehan v Jones (1982) 149 CLR 571; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; David Securities Pty Ltd v Commonwealth of Australia Bank (1992) 175 CLR 353; Australian & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; Crown Prosecution Service v Eastenders Group [2014] UKSC 26; Riverside Legion & Community Club Ltd v Repaja & Co Pty Ltd [2015] NSWSC 383; Goss v Chilcott [1996] AC 788; Johnson v Leader Computers Pty Ltd (2014) 118 SASR 408; Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; Twinsectra Ltd v Yardley [2012] 2 AC 164; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783; Foran v Wight (1989) 168 CLR 385; Baltic Shipping Co v Dillon (The Mikhail Lermontov) (1993) 176 CLR 344; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51; Sharard v Mildura Base Hospital [1999] VSC 519; Moses v MacFarlane (1760) 2 Burr 1005; Martin v Pont [1993] 3 NZLR 25; South Australian Cold Stores Ltd v Electricity Trust (SA) (1957) 98 CLR 65; Muschinski v Dodds (1985) 160 CR 583; Rover International Ltd v Cannon Film Sales Ltd [1989] 1 WLR 912; Portman Building Society v Hamlyn Taylor Neck [1998] 4 All ER 202; Jaffer v Commonwealth Bank of Australia [2001] SASC 191; Barnes v Addy (1874) LR 9 Ch App 244; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (In Liq) (1978) 141 CLR 335; Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Sutton v AJ Thompson Pty Ltd (In Liq) (1987) 73 ALR 233; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; March v Stramare (E &MH) Pty Ltd (1991) 171 CLR 506; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; Gould v Vaggelas (1985) 157 CLR 215; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; Henjo Investments v Collins Marrickville Pty Ltd (1988) 39 FCR 546; Edgington v Fitzmaurice (1885) 29 CH D 459; Henville v Walker (2001) 206 CLR 459; Sidhu v Van Dyke (2014) 251 CLR 505; Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd [1992] FCA 550; Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; Barton v Armstrong [1976] AC 104; Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501; Australian Steel and Mining Ltd v Corben [1974] 2 NSWLR 202; Henville v Walker (2001) 206 CLR 459; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Potts v Miller (1940) 64 CLR 282; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd [2015] FCA 227; Australia Competition and Consumer Commission v Woolworths Group Ltd [2020] FCAFC 162; Rana v Hyatt Regency Hotel Ltd [2007] SASC 7, considered.

FAZZARI & ANOR v HAMRA & ANOR
[2023] SADC 59

Civil

Introduction

1. The applicants in these proceedings, Mr Nicola Fazzari and Mr Nabil Chehade, have sought damages and restitution in the sum of $242,950, being the amount they paid for the purpose of an investment in a company. On the applicants’ case, the shares in the company were to be purchased from a third party, (whom because adverse allegations are made about them and they were not a party to the litigation and were not called as a witness, I will call by a pseudonym, the “Bauers”). It was with the first respondent, Mr Hayssam (Sam) Hamra (Mr Hamra), with whom the applicants had all dealings in relation to the purchase of the shares. The monies were paid into the account of the second respondent, Mrs Noura El Hamra (Mrs El Hamra), at the direction of the first respondent, Mr Hamra, but were ultimately forwarded to the Bauers. The circumstances surrounding the payment were by no means clear and this lack of clarity has led to these proceedings.

2. The applicants claim that the agreement by which they were to purchase the shares was uncertain and unenforceable. The applicants never received any shares and contend that was a total failure of consideration for the monies they had advanced. This total failure of consideration gives rise to the applicants’ claims in restitution for unjust enrichment or for moneys had and received against Mr Hamra and Mrs El Hamra. They also claim for breach of trust by Mrs El Hamra. Mr Fazzari and Mr Chehade further contend that they entered into the transaction and paid the $242,950 as a consequence of misleading and deceptive conduct or misrepresentations of Mr Hamra. In the alternative, the applicants contend that they entered into an agreement with the Bauers and Mr Hamra, which included a term that Mr Hamra would, on demand, repay to the applicants the moneys advanced, together with interest of 10%. Although the primary case of the applicants was that the agreement was uncertain and unenforceable, they claim that if that is not the case, Mr Hamra breached the terms of the agreement by failing to repay the moneys advanced and interest of 10% per annum.

3. The respondents deny the claims of the applicants. The respondents say that the applicants entered into a contract with the third party, the Bauers, to purchase shares in a company registered in South Australia named Hamra Holdings (Middle East) Pty Ltd (HHME) and that Mr Hamra was only acting as the agent of the Bauers. The respondents say that it was a term of the contract that the shares would only be transferred once payment was made in full. The respondents contend that there was no misleading conduct as the applicants were to receive shares in the company as represented and it was their failure to make the payments in full which had the consequence that no shares were transferred by the Bauers to the applicants. The respondents contend that there was no basis for a claim in restitution or for moneys had and received for two reasons: first, because there had been no total failure of consideration and therefore no factor justifying restitution and secondly, because neither Mr Hamra nor Mrs El Hamra had not been enriched as the moneys that had been paid by the applicants had been passed on to the Bauers. They further submit that there was no evidence of any breach of trust on the part of Mrs El Hamra.

   The parties respective positions

4. The case of the applicants was that it was represented to them by Mr Hamra that they were purchasing shares from a third party, the Bauers, in a company called Supaloc, which was to sell the product known as Supaloc in the Middle East. Supaloc was a steel building system used in the framing of houses. The Supaloc company in which they were to purchase shares would initially sell exported Supaloc product but would later manufacture the product in a factory in the Middle East. The applicants submitted that no such company existed. They received nothing for the payment of the moneys and there was a total failure of consideration.

5. The position of the respondents was that the applicants were going to get an interest in the company that manufactured the Supaloc product in a factory in Abu Dhabi and sell that Supaloc product to customers in the Middle East. Mr Fazzari and Mr Chehade were to obtain that interest by purchasing the shares in HHME that were held by the Bauers, which in turn, through an oral trust of which a Mr Nabil El Hamra (the brother of Mrs El Hamra and a resident of the United Arab Emirates) was the trustee, had an interest in Supaloc JV UAE Pty Ltd, a British Virgin Islands company. Supaloc JV UAE Pty Ltd was the company that was said to have the exclusive rights to manufacture and sell the Supaloc product in the Middle East. Mr Hamra said that on their 2013 visit to the factory the applicants “saw the machines they were buying, they saw the machines there, they saw it with their own eyes what it was.” Mr Hamra further said “But I told them they would be getting shares in the Supaloc factory, the Supaloc business they saw when they went there twice to have a look at it.”

   Course of the trial and factual background

6. Each of the applicants, Mr Fazzari and Mr Chehade, gave evidence about the investment and payments and the circumstances in which they were made and in particular the communications between them and Mr Hamra. Some documents were tendered. However, because most of the communications between the parties were informal and oral, none of the written communications could be considered determinative. The written documentation puts in context the oral evidence given by the parties.

1. None of the parties were impressive in the way they gave evidence.

2. Mr Chehade was frequently evasive in answering questions in cross-examination. He had a tendency to try and defend statements he made during the course of his evidence, even when it was clear that they were wrong. For example, Mr Chehade gave evidence that Mr Hamra was bankrupt in 2011 when they were establishing the building company, Fazche Pty Ltd (Fazche). When confronted with evidence that the bankruptcy did not occur until 2013, he said that Mr Hamra “was going through bankruptcy, it was in the papers. He was going through bankruptcy, he was dealing with administrators.” Eventually, he conceded that he was not sure if administrators had been appointed.

3. Mr Chehade’s evidence as to why he ceased to be a director of Fazche in 2015, but was re-appointed and then resigned again, was vague and not convincing. Mr Chehade was charged with an offence in relation to his conduct as real estate agent (and later convicted of that charge) but was reluctant to link that charge to his resignation as a director of Fazche.

4. Mr Chehade was on occasions obstructive. He would not admit what he had previously said. He tended to be argumentative with the cross-examiner and at times, evasive.

5. Mr Chehade gave evidence that he did not visit the Supaloc factory during the 2015 visit to the Middle East. The evidence from both Mr Fazzari and Mr Hamra was that a visit to the Supaloc factory took place during the course of that visit. It is likely that such a visit took place. However, neither party asserts anything of particular relevance to these proceedings was discussed during the course of the 2015 visit. I do not therefore consider that his failure to recall that visit requires me to reject all of his evidence.

6. There were some inconsistencies with his affidavit evidence. For example, he said in his affidavit that in 2017 he was told by Mr Fazzari that the business of Fazche was failing and needed a substantial injection of funds. In cross-examination, he said that it was Mr Hamra who made that statement.

7. I also do not accept Mr Chehade’s evidence about the reason why he requested the Supaloc brochure in June 2013. He said in his affidavit that he wanted that brochure because at that time he was selling houses that had the Supaloc framing. However, those houses had been sold prior to June 2013. Other reasons proffered by Mr Chehade were merely speculation and not convincing. Mr Chehade was reluctant to accept documentary evidence which established that the properties had been sold prior to June 2013.

8. Mr Chehade tended to dismiss errors in his statements as to dates (which were understandable) as “clerical errors.” He would not accept obvious propositions as to matters that had been pleaded.

9. Mr Fazzari was also a problematical witness. He tended to make gratuitous comments in an attempt to argue his case. On several occasions, he would seek to disparage Mr Hamra’s character or acts done by Mr Hamra. He also was evasive and at times unhelpful in his responses. His responses to questioning about the performance of Mr G Bauer during the period that he worked at Fazche falls into this category. At other times, he simply attempted to engage the cross-examiner in argument.

10. He was also evasive and argumentative. He would not agree to obvious propositions and became very defensive. For example, when asked “But you accept that a place where you should not be making mistakes is an affidavit”, he replied “I don’t accept anything.” On the same topic, he would not accept that he made mistakes in his evidence and replied that was the opinion of the cross-examiner.

11. He did not try to assist the Court on occasions. When asked whether he recalled approximately the year when Mr Chehade ceased to be a director of Fazche, he said not exactly. He then gave the same answer to a question whether he recalled anything at all about the circumstances in which Mr Chehade ceased to be a director of Fazche. He did not try to explain an inconsistency between his affidavit that he was very concerned when Mr Bauer left Fazche and his evidence that he was not concerned.

12. Rather than answer a question directly, he would simply respond by saying if that is what the document says. He would not attempt to give his own independent evidence on a topic.

13. Many times he said that he could not recall, when it might have been expected that he would have some recollection of the matter being discussed. I accept the submission of the respondents, as one example, that Mr Fazzari could have been expected to have some recall of discussions during the 2015 visit to the Supaloc factory in the Middle East.

14. These matters do not cause me to reject all of the evidence of Mr Chehade and Mr Fazzari or to cause me to find them to be dishonest. It causes me to scrutinise their evidence with care. In significant respects, their evidence accorded broadly with that given by Mr Hamra. Where it differed, I have set out why I prefer the evidence of one party over the other.

15. The applicants also called evidence in rebuttal from a bookkeeper, Ms Rossi. Her evidence was very minor and dealt with the receipt of one email dated 19 August 2016. I accept that she received that email.

16. The respondents called only one witness Mr Hamra. Mrs El Hamra did not give evidence. It might have been expected that the respondents would also have called Mr Nabil El Hamra to give evidence but they did not do so. Mr Weeks fell into the same category. It might also have been expected that the respondents would have tendered certain documentation that would have confirmed the arrangements that Mr Hamra said were in place.

17. The principle formulated by the High Court in Jones v Dunkel[1] sets out the consequences of such a failure to call witnesses or tender documents. There are three conditions for the application of the principle:[2]

    (1)the missing witness would be expected to be called by one party rather than the other (which implies that the witness must be available to give evidence).

    (2)his evidence would elucidate a particular matter, which is a live matter at the trial.

    (3)his absence is unexplained.[3]

    [1] (1959) 101 CLR 298 at 308.

    [2]    Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1 at [449].

    [3]    Payne v Parker [1976] 1 NSWLR 191 at 201-2 per Glass JA, dissenting; cited with approval by Campbell J, with whom Beazley JA and Pearlman A-JA agreed, in Manly Council v Byrne [2004] NSWCA 123 at [53].

18. The onus of establishing the unavailability of a witness, for the purposes of the principle in Jones v Dunkel, rests on the party against whom the principle would operate.[4] Each of those criteria are self-evidently established in the present case in relation to the evidence of Mr Nabil El Hamra and Mr Weeks and in relation to the documents which I will identify. Mr Hamra admitted both witnesses were available and that he did not ask them to give evidence. In many cases, Mr Hamra admitted that there were documents on various issues, but did not produce them or make enquires as to their whereabouts.

    [4]    Australian Securities & Investments Commission v Rich (2009) 75 ACSR 1 at [457], see also Cross on Evidence at [1215] and the majority judgment in Smith v Samuels (1976) 12 SASR 573.

19. It is commonly stated that two consequences may apply where the principle is invoked:[5]

    (1)The tribunal of fact might infer that the evidence of the absent witness, if called, would not have assisted the party who failed to call that witness.

    (2)The tribunal of fact might draw with greater confidence any inference unfavourable to the party who failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should properly be drawn.

    [5] Ibid at [451].

20. The principle applies both to failure to bring forward a witness and failure to tender a document or other evidence.[6]

    [6]    Jones v Dunkel at 320 per Windeyer J; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at [134].

21. Menzies J in Jones v Dunkel[7] summarised the principle in the following terms:

    In my opinion a proper direction in the circumstances should have made three things clear: (i) that the absence of the defendant Hegedus as a witness cannot be used to make up any deficiency of evidence; (ii) that evidence which might have been contradicted by the defendant can be accepted the more readily if the defendant fails to give evidence; (iii) that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.

    [7]    Ibid at 312.

22. Mr Hamra also was not an impressive witness.

23. He downplayed the importance of the threat of the Bauers as a motivation for assisting in the sale of their shares.

24. Mr Hamra was involved in a number of transactions where he preferred his own interests over others. Although his evidence permits at the very least of a strong suspicion that he was willing to structure his affairs so as to avoid his responsibilities in his bankruptcy and to benefit himself or companies associated with himself, the evidence is not sufficient for me to make definitive findings on those matters.

25. Satori Projects Pty Ltd (Satori Projects), a company in which his wife was the sole director and shareholder, received payments for work performed by Mr Hamra whilst he was bankrupt. Mr Hamra undertook consultancy work for Satori Projects.

26. Mr Hamra caused Fazche to enter into contracts which were for the benefit of Satori Projects but not Fazche. There were building contracts undertaken by Fazche which were executed by Mr Hamra on behalf of Fazche which were at or below cost price.

27. Mr Hamra executed on behalf of Fazche a contract between Fazche and Mr Sami Mounzer and Mrs Leilia Mounzer pursuant to which Fazche agreed to undertake building work for the sum of $167,000. Mr Hamra agreed this sum was at approximately cost price to build the house. Mr Hamra also agreed that on the day that the contract was signed, he asked Mr Raid Mounzer to make a payment of $51,700 to Satori Projects. He further agreed that in advance of the work being performed on 19 May 2017, he asked for payment of $100,000 to be paid to Satori Projects. Mr Hamra said that Nick Fazzari (on behalf of Fazche) received half of the amount that was paid to Satori Projects, so that each company received $75,000. Fazche went into liquidation prior to that contract being completed. Even if Fazche received one half of the contract sum as Mr Hamra claims, it was abundantly clear to Mr Hamra that the contract was not in the best interests of Fazche. There was no benefit to Fazche for the upfront monies were paid to Satori Projects and it was not in the interests of Fazche that those payments were made. Again, although I have a strong suspicion that Mr Fazzari did not consent to or approve Fazche entering into the contract, there was no evidence on that matter and I am not able to make a finding in relation to that issue.

28. Satori Projects also received an insurance payout which was due to Sami and Leila Mounzer in settlement of a claim for faulty work by Fazche which had gone into liquidation. Mr Hamra himself signed the settlement agreement for Mr and Mrs Mounzer. He signed the agreement as Sami Mounzer. Mr Hamra stated that he placed the signatures on the settlement agreement with the authority of Mr Raid Mounzer, the son of Mr and Mrs Mounzer. He said that he understood that Mr Raid Mounzer had a power of attorney on behalf of Mr and Mrs Mounzer and had authorised the placing of the signature. Even if this was so, the conduct of Mr Hamra showed a lack of observance of proper formalities and a willingness to cut corners. He signed a document, the settlement agreement, which was on its face false. The insurer, QBE, would not have paid out if it had known there was a false signature on the document without further evidence of authorisation. There was no satisfactory explanation as to why Satori Projects received that payment from the insurer. There was no documentation showing that he had been authorised by Mr Raid Mounzer to sign the document or that Mr Raid Mounzer had a power of attorney. Mr Hamra agreed that he had no authority from Mr Sami Mounzer and Mrs Leila Mounzer to sign the agreement (who were overseas) but said that he had authority from Mr Raid Mounzer. Mr Hamra stated that he had documents which he could produce showing a paper trail from the insurer and Mr Raid Mounzer but did not produce those documents. In these circumstances, I find that the documents would not have assisted Mr Hamra.

29. Another instance where Mr Hamra caused Fazche to enter into a contract for less than cost price was for a friend of Mr Hamra’s, a Mr Tarik Nassereddine. Mr Hamra said that he signed that building contract on behalf of Fazche. The contract recorded the contract price at $70,000. Mr Hamra agreed that there was no way that Fazche could build the house for $70,000 but said that there were cash payments. Whilst there is a dispute as to whether or not Mr Fazzari approved the arrangement, Mr Hamra implicitly accepted that Mr Fazzari only found out about the arrangement after the contract was signed. In answer to a question “he [Mr Fazzari] only found out after you’d signed the contract”, Mr Hamra replied “He could have still stopped it by not getting built”.

30. Mr Hamra further agreed that he signed another contract on behalf of Fazche for $101,500. He agreed that was undervalue but said that was because cash payments were involved. He said that the money was split between Fazche and Satori Projects.

31. At the very least, this transaction shows that Mr Hamra was willing to sign documents that did not reflect the true legal position.

32. It is not possible to make findings about all aspects of these transactions. I can make the following findings which arise from admissions made by Mr Hamra:

    (1)Mr Hamra executed contracts on behalf of Fazche which he knew to be false. He knew that the contract price that was specified in the contract was not the true contract price and that the owner of the premises in which the building work was to be undertaken was in fact paying sums in excess of those amounts.

    (2)Mr Hamra executed contracts on behalf of Fazche where he knew that cash payments were to be made to Fazche and Satori Projects.

    (3)Mr Hamra signed a contract on behalf of Mr and Mrs Mounzer and affixed a signature that purported to be the signature of Mr Mounzer’s, thereby conveying to the insurer that Mr Mounzer had signed the agreement and the proceeds could be paid out.

    (4)Mr Hamra executed contracts on behalf of Fazche which he knew were not in the best interests of Fazche as the contract price was below cost price.

    (5)Mr Hamra arranged for preferential payments to be made to Satori Projects such as upfront payments which were not in the best interests of Fazche.

    (6)Mr Hamra, on his own evidence, was prepared to act without requiring proof that he was authorised to act, such as acting without seeing the power of attorney he claimed Raid Mounzer had for his parents.

33. Mr Hamra stated that he or his companies had, in 2008, advanced over $2.3m to manufacture and sell the Supaloc product in the Middle East. Mr Hamra gave evidence that he (or his companies) did not have any agreement with Mr Weeks (who owned the copyright to the Supaloc product) for Mr Hamra or his companies to sell the Supaloc product in the Middle East. Mr Hamra claimed that there was an early agreement (a joint venture agreement) between him or one of his companies (or possibly a company of Mr Nabil El Hamra) and Mr Week’s company in relation to the sale of the Supaloc product in the Middle East. That agreement could not be produced by Mr Hamra, even though he said that he had a good relationship with Mr Weeks. Mr Hamra said that it did not cross his mind to ask Mr Weeks for a copy of the agreement. He said it might be that Mr Nabil El Hamra had such an agreement but he did not recall asking him for it. Mr Hamra agreed that he had not called or sought to call Mr Nabil El Hamra to give evidence.

34. No documentation was produced relating to the purpose or allocation of any of the initial payments made for the sale of products in the Middle East. Mr Hamra was very vague about the details of Retirement SA Pty Ltd (Retirement SA) and how the sum of $887,000 which was paid by it in relation to Supaloc in the Middle East was treated in the books and records of Retirement SA. He said that he could not recall how the money was treated in the books of Retirement SA. Retirement SA was a company owned by Mr Hamra. The report as to affairs, signed by Mr Hamra, shows that Retirement SA had no assets of any value. The only relevant debtor that was specified in the report as to the affairs of Retirement SA was Hamra Developments Pty Ltd.

35. Further, Mr Hamra was very vague about how the sum of $1.4m which had been paid by Hamra Developments in relation to the joint venture in the Middle East had been treated in the books and records of Hamra Developments. He said that he did not know how the payment was treated by Hamra Developments. He could not produce any documentation in relation to the purpose for which this money was paid or how it was allocated. The Report as to Affairs for Hamra Developments does not record any debtor that could represent the borrower of that payment or any asset purchased with this sum. Again Hamra Developments was a company owned by Mr Hamra.

36. The failure of Mr Hamra to produce any records of Retirement SA or Hamra Developments leads me to infer that the documents would not have assisted Mr Hamra. They would leave unexplained why Retirement SA and Hamra Developments did not have any assets when they went into liquidation and why they did not have any interest in a company in the Middle East.

37. Mr Hamra did not produce any records of HHME or how any assets the respondents allege that it held in the Middle East were treated.

38. Mr Hamra knew little about the actual structure of companies that were operating the Supaloc joint venture. He did not know of the company that was manufacturing in the Middle East (only a very small amount of product was manufactured there, as samples). He did not know the entity in the Middle East that was to trade. The following exchange occurred concerning the name of the company to trade in the Middle East:

    QSo what do you say is the entity which was to trade in the Middle East, what was its name.

    ASupaloc, from my understanding there is Supaloc JV UAE LLC. I think that was a BVI company and there was another one, Supaloc Machines or something, that was a BVI - the structure, the whole structure was done by lawyers and accountants but there was BVI companies involved as well as Australian companies, UAE companies but the main shareholder I believe where the actual assets sit were a BVI company.

    QSo in terms of an actual company registered in the Middle East, is it the - so I'm not asking about companies registered in the British Virgin Islands or Australia or anything like that, I'm asking about a corporation located in the Middle East, that's registered in the Middle East, do you know the name of any company in the Middle East which was trading as Supaloc.

    AI can't recall the exact company that was in the Middle East. I know there was Middle East, BVI and Australia, I'm not sure of the exact name but as far as I'm concerned it is all in one. It's legal structures are done by accountants and lawyers.

    QSo are you saying you don't know what the entity was in the Middle East that was to trade.

    ANo, I'm saying you are trying do this to me and I'm telling you I'm not exactly sure, pinpoint the exact company but I know there are BVIs, there's companies in there that are UAEs and companies in Australia.

1. Mr Hamra was similarly vague about the trust arrangements he said were in place between Mr Nabil El Hamra and himself. He said that everything was owned on trust, we classed ourselves as a family business. He said that any interest was held on trust for anyone involved in the family business. He said that there was no written document that recorded the trust arrangement.

2. Mr Hamra also could not produce any document showing how money was spent in the Middle East.

3. The monies advanced by Mr Chehade and Mr Fazzari were paid, at the direction of Mr Hamra, into the bank account of Mrs El Hamra. The monies were then paid from that account to the Bauers. An invoice had been raised by the Bauer Corporation to Mrs El Hamra dated 17 July 2015 for “fee for professional services rendered.” Mr Hamra agreed that there were no professional services rendered. From email communications that occurred in the period between 29 April 2015 and 11 May 2015, it is clear that Mr Hamra was involved in and agreed to the false invoice being sent to Mrs El Hamra.

4. Mr Hamra was not able to produce any document, agreement or email that recorded the sale of any shares from the Bauers to Mr Chehade and Mr Fazzari. There was also no document produced showing what the Bauers had purchased when they made their investment in 2008.

5. Mr Hamra was not always responsive to questioning and was liable to repeat his version of events that the investment was speculative. Similarly, he was liable to repeat that the onus was on the purchaser to obtain any information about the investment that they required and to conduct any due diligence on the transaction. He was on occasions argumentative and unhelpful. Mr Hamra was apt to be vague or not recollect matters which he perceived to be against his interest.

6. Mr Hamra was not accurate in relation to his treatment of Hamra Corporation in the statement of affairs for his bankruptcy. Hamra Corporation was the trustee of the Hamra Supaloc Family Trust but was recorded in the statement of affairs as a shelf company. In answer to the question as to whether it was a trustee company, he wrote “No’. Also in the Statement of Affairs, there was no disclosure of that trust or any interest in any other Supaloc trust. There was no disclosure in the statement of affairs of any interest in HHME.

7. I also do not accept Mr Hamra’s evidence that he said to Mr Chehade and Mr Fazzari that until they paid for the investment in full, they had no entitlement to any shares. Such a position would be quite extraordinary and impose a very substantial risk for Mr Chehade and Mr Fazzari. There is no reason why Mr Chehade and Mr Fazzari would receive no shares until they paid the money in full.

8. Further, Mr Hamra acknowledged that Mr Chehade and Mr Fazzari had sent emails asking for share certificates and for share documentation. First, by email dated 28 December 2015 Mr Hamra asked Mr Chehade and Mr Fazzari which name or entity they wanted the shares in. This does not suggest that the share certificates would not be issued until all monies were paid. Further, by email dated 27 February 2017, Mr Fazzari asked Mr Hamra for the share certificates. He did not receive any response denying that he was entitled to the share certificates. On 25 April 2017, Mr Fazzari sent a further email to Mr Hamra asking for a receipt for his share purchase. It was not until an email dated 5 September 2017 that Mr Hamra stated that they would need to pay the full value although he does not state that he would get nothing until the full value was paid. Further and significantly, by email dated 22 March 2021 (which should be dated 22 March 2017) sent by Mr Hamra to Mr Fazzari and Mr Chehade, Mr Hamra stated “Regarding supaloc you knew the deal from day 1, I cannot refund any monies, I will however try to sell ur interest.” However, according to Mr Hamra, neither Mr Fazzari nor Mr Chehade had anything to sell as the monies had not been paid in full.

9. I also do not accept Mr Hamra’s evidence that it was at the instigation of Mr Fazzari that moneys were paid into the account of Mrs El Hamra. Mr Hamra gave evidence that Mr Fazzari suggested this because of his personal animosity with the Bauers and that he wanted to keep his identity secret from the Bauers. Mr Hamra’s evidence was that “if Nabil Chehade was in, G would have known that Nic [Mr Fazzari] was in too. Nic’s the one that suggested can we use another account. I suggested let’s use Noura’s account, they agreed.”

10. The email from Mr Hamra dated 18 March 2015 setting up the payment makes no reference to such a reason. There are many other ways in which payment could be made through a third party. Payment was not made immediately to the Bauers from that account, suggesting that it was in the interests of Mr Hamra that the money was paid into that account. In my view, Mr Hamra wanted to demonstrate to the Bauers that the money was coming from him.

11. Mr Hamra gave evidence in his written statement that was directly contradictory to the proposition that the identity of the buyers of the shares, Mr Chehade and Mr Fazzari, was being kept secret from the Bauers. At paragraph [171] of his statement, Mr Hamra stated that in 2014 he said words to Mr G Bauer that:

    Nabil Chehade and a friend of his is prepared to buy your family’s 11.5% shareholding in HHME. They will pay the full $350,000 that you are after, but the funds will need to be paid in instalments.

12. I also do not accept the evidence of Mr Hamra that it was incorrect to say that the position of the Bauers was that he had to pay them that money regardless of the source of that money. On Mr Hamra’s evidence, the Bauers did not know the source of the money. The emails from the Bauers in the period 29 April 2015 and 29 June 2015 make it clear the Bauers required the whole amount to be paid. Payment schedules were drawn up together which included monthly interest payments (see Payment Schedule-Hamra). The email from A Bauer to Mr Hamra dated 29 June 2015 made reference to interest. It is clear that the Bauers required Mr Hamra to pay the whole amount of what they called their debt. The payment to them from Mr Bauer was not, from their perspective, dependent on the sale of any shares or Mr Hamra procuring a purchaser. Nowhere did Mr Hamra inform the Bauers that he had found a purchaser for their shares.

13. I also do not accept Mr Hamra’s evidence that it was only when the payments had been made in full that the agreement would be drawn up. That is not logical. The agreement is to protect the parties before the agreement is carried out. Email communication from Mr Hamra supports this position. On 28 December 2015, Mr Hamra sent an email to Mr Fazzari and Mr Chehade requesting them to advise him what name or entity they wanted the shares to be in. The implication from that request is that he needed to know for the purposes of the agreement. On 5 September 2017, Mr Chehade sent an email to Mr Hamra stating “…you promised we will get paperwork over a year and still nothing…” On the same date Mr Hamra responded by email stating “Bro your right. I have been slack regarding the paperwork. But it doesn’t change that we had an agreement about this and how it would work…”

14. I also reject the plea in paragraph 5.7 of the defence that Mr Hamra advised Mr Fazzari and Mr Chehade that the agreement was going to be prepared by Mrs El Hamra’s solicitors in the United Arab Emirates when the payment was made in full by Mr Fazzari and Mr Chehade. There was no documentary evidence from any law firm in the Middle East recording their involvement in the preparation of an agreement. It would make no commercial sense that any agreement would be drawn up by solicitors in the Middle East, when, on the respondents’ case, the agreement involved the transfer of shares in an Australian Company, HHME by the Bauers, individuals based in Adelaide, to Mr Fazzari and Mr Chehade who were also based in Adelaide. Payments were also made in Adelaide.

    Factual findings

    The Parties

15. Mr Chehade, Mr Fazzari and Mr Hamra became friends in about 2001. At that time, Mr Chehade was employed in a real estate business and worked as a licensed real estate agent. Mr Fazzari came to work in that business for about 12 months in about 2003 as a trainee salesman. Mr Hamra owned the neighbouring shop and he and Mr Chehade also became friends. Mr Chehade acted in a real estate transaction in 2009 in which Mr Hamra sold a block of land to Mr Fazzari for the purpose of Mr Fazzari developing that block. Mr Fazzari developed that block through his company, Fazzari Developments Pty Ltd.

16. From about 2003, Mr Hamra became involved in property development. He established a business known as Hamra Homes which developed and built over 1000 homes. Hamra Homes sometimes used a steel building system known as Supaloc in the houses that it constructed. Supaloc was a steel building system used in the framing of houses. The Supaloc system (i.e. the intellectual property) was owned by a Mr Kevin Weeks or companies associated with him. Mr Hamra did not have any interest in the Australian operations of Supaloc.

17. Mr Hamra married the second respondent, Mrs Noura El Hamra in 2005.

18. In 2006, Mr Chehade and Mr Hamra attended a trade show in Dubai. Mr G Bauer also attended that trade show. Mr Howard Montgomery, who Mr Chehade and Mr Hamra knew to be an employee of Mr Weeks, also attended. During the course of their attendance at the trade show, they visited the Supaloc display. Mr Hamra told Mr Chehade about Supaloc. Mr Hamra said that there were plans to export the steel framing system from Australia to the Middle East. Whilst he was in Dubai, Mr Chehade met the brother-in-law of Mr Hamra, Mr Nabil El Hamra.

19. By about 2011, Mr Hamra’s businesses were suffering financial difficulties. Hamra Homes went into administration and later liquidation in 2011. Other companies controlled by Mr Hamra went into administration including Hamra Developments in 2011 and Retirement SA in May 2012. Mr Hamra became bankrupt on 20 May 2013.

20. In 2011, Mr Chehade, Mr Fazzari and Mr Hamra established a construction business together. They incorporated Fazche to conduct that business. Mr Hamra introduced the Supaloc product to Fazche and that company used the product in some of its developments. Mr Fazzari went to the factory of Supaloc at Elizabeth with Mr Hamra and learnt that Mr Kevin Weeks was the owner of that operation.

21. Mr Fazzari and Mr Chehade were the initial directors of Fazche. Mr Fazzari held 33% of the shares (through Fazzari Investments Pty Ltd) and Mr Chehade held 66 % of the shares, half of which he held on behalf of Mr Hamra. Mr Hamra was not a director or shareholder in his own name because of his financial situation at the time and the risk that he might go into some form of administration which as observed above, turned out to be correct. Fazzari Investments held shares in Fazche and also in the Integrity Homes franchise.

22. Mr G Bauer was employed as a manager for Fazche. Mr Bauer had been the managing director of Hamra Homes. He was paid about $130,000 per annum in that role. Mr Bauer and Mr Fazzari had responsibility for the day-to-day operations of Fazche. Fazche used the Supaloc product in a group of townhouses in Mawson Lakes, the construction of which it took over from Hamra Homes. The townhouses in this stage of the Mawson Lakes development were completed in 2012 and 2013.

23. Fazche suffered a loss of about $500,000 in its first year of trading. It also suffered a loss about $119,102 in the year ending 30 June 2013. It made a profit of $138,378.88 in the year ending 30 June 2014, an increased profit of $357,478.14 for the year ending 30 June 2015. The financial year ending 30 June 2016 showed a profit of about $233,000 before a small loss in the financial year ending 30 June 2017 of $67,000 and a much greater loss in the financial year ending 30 June 2018 of about $1.5m.

24. Mr Chehade ceased to be a director of Fazche for a short time in 2015 when his wife replaced him on the board. Mr Chehade was reappointed as a director in March 2015 and then ceased to be a director again on 30 June 2015.

    The Supaloc product and its corporate ownership

25. Steel Building Systems Australia Pty Ltd (SBS Australia) and SBS International Pty Ltd (SBS International) are and at all material times were the owners of the intellectual property associated with the Supaloc product. Both companies are associated with Mr Kevin Weeks and were ultimately owned by him. A brochure published by SBS International in 2011 describes the Supaloc product as a:

    … series of unique lightweight steel building products used in the construction of steel framed homes. The Supaloc system provides builders with preassembled house frames, packed for transportation and efficient assembly at construction sites. The unique patented frame simply connects bolt or clip together [sic] reducing the construction time significantly and guaranteeing structural integrity.

26. Supaloc was manufactured at Elizabeth West in Adelaide and in Newcastle in New South Wales. One of the companies in the SBS Group had been granted a patent in Australia and New Zealand and had a number of pending patents elsewhere in the world.

    2008 investment in establishing Supalock in the Middle East

27. Considerable time and money were spent by the SBS Group of Companies and others in attempting to establish Supaloc in the Middle East. The evidence relating to this investment is lacking and Mr Hamra’s role in this task and the structure of this investment cannot be precisely determined. Certain matters can be established by some documentation although that is by no means comprehensive.

28. In November 2008, the sum of $2,617,500 was transferred by Mr Hamra or persons or entities associated with him to James Berry and Associates, a legal firm in Dubai. These funds comprised:

    (1)The sum of $887,077.35 from Retirement SA (a company owned by Mr Hamra);

    (2)The sum of $1,400,000 from Hamra Developments (another company associated with Mr Hamra);

    (3)The sum of $330,092 from the account of Mrs Noura El Hamra of which the sum of $300,000 came from the Bauers.

29. Although it can be accepted that these monies were sent for the purpose of developing a market for the sale of Supaloc product in the Middle East, there is a dearth of evidence as to how this investment was recorded, what interests were purchased and what companies were established to market and sell Supaloc in the Middle East. Mr Hamra said that the funds were used to buy all the machinery, the IP software that was required to set up a Supaloc facility in the Middle East and working capital.

30. As I observed earlier in these reasons, there was no evidence produced of a joint venture agreement between the Bauers, Mr Hamra and his associated entities or any other contributor. There is no document recording the interest held by reason of the investment of these moneys. Retirement SA and Hamra Developments, both of which went into liquidation in 2011, did not record any asset relating to the advance of these monies. There was no loan account or any other asset recorded in the statement of affairs of Retirement SA or Hamra Developments.

31. Mr Hamra could only recall that these monies were part of the Supaloc investment in the Middle East. He could not recall the entities to which the monies were paid. He said (in relation to the $1.4m advanced by Hamra Developments) that it was never intended that Hamra Developments would have an interest in a Middle East company. Mr Hamra said in evidence:

    It was paid into a trust account so it was paid into a trust account. My understanding would be it was paid into a trust account while the entity was getting worked out.

32. Mr Hamra said that there would have been an underlying agreement, settlement statement and trust account statement recording the purpose for which the monies were advanced but could not produce any of these documents.

33. He said HHME was set up for the purpose of holding the shares for him and the Bauers in the Supaloc joint venture in the Middle East. I do not accept that evidence. HHME was not incorporated until September 2009, almost a year after the monies were advanced. There was no evidence as to the Middle East company which held the assets (and received the money) and how HHME was said to have had an interest in that company.

34. One of the few documents that sheds some light on the advances is an email dated 24 November 2008 from James Berry & Associates to Fadi Ghaith, Mr Hamra, Nabil El Hamra and Joe Tassone and Peter Zitis of the Weeks group. That confirms that three groups contributed monies comprising $2,617,439 from the Foresight Group, $2,617,439 from SBS ME and $1,399,992 from Hamra Building Materials, and $887,069 from Mr Nabil El Hamra. The email recorded that there was a shortfall of $330,392.65 on the part of Hamra Building Materials although that money was on its way. The email also records that $6,175,000 of those funds were to be sent to SBS for machinery. According to Mr Hamra, Makram Ghais and Fadi Ghaith owned the Foresight Group.

35. Mr Hamra stated that the machines had been purchased in the Middle East but the Supaloc joint venture had not sold any product in the Middle East. No income was generated from the Supaloc venture in the Middle East. Mr Hamra said that a couple of small buildings were built as samples. There was a factory from which the Supaloc product would be manufactured. That was owned by Fadi Ghaith and was to be leased to the joint venture once the factory started making money,

36. The group structure of the entities which held interests in the proposed manufacture and sale of Supaloc products in the Middle East is obscure. KPMG sent a letter to Mr Hamra dated 21 February 2011 in which it set out what it understood to be the group structure relating to Supaloc in the Middle East. That structure records:

    (1)That a company by the name of Supaloc JV UAE LLC (a company incorporated in the UAE) would make and sell Supaloc products in the Middle East.

    (2)Two companies incorporated in the British Virgin Islands would effectively receive all the profits of the venture and hold all the assets. Supaloc JV UAE Pty Ltd (a British Virgin Island Company) would hold 49% of the shares in Supaloc JV UAE LLC. Whilst the other 51% of those shares would be held by a Sheikh of the UAE, other evidence suggests that this 51% shareholding is only nominal and to satisfy local resident rules. The second British Virgin Island Company, Supaloc JV Machines UAE Pty Ltd, was to own all of the machines, and have the benefit of a licence agreement with SBS Steel to permit it to manufacture the machines and a management agreement with Supaloc JV UAE LLC.

    (3)Three shareholders, Fadi Ghaith, Makram Ghais (both UAE residents) and SBS Steel would hold 75% of the shares in the two British Virgin Island Companies and HHME would hold the remaining 25% of the shares in the British Virgin Island Companies. The shares in HHME were in turn held as to 11.5% by the Bauer International Trust and 88.5% by the H Hamra Family Trust.

37. It is apparent that this structure forms the basis of the respondent’s defence.

38. There are a number of difficulties with this asserted structure:

    (1)There is no evidence that the UAE Company, Supaloc JV UAE LLC exists or has ever existed.

    (2)There is no evidence that the British Virgin Island Company, Supaloc JV Machines UAE Pty Ltd, exists or has ever existed. There is no evidence of any management or licence agreement with Supaloc JV UAE LLC.

    (3)Although there is documentary evidence that the British Virgin Island Company, Supaloc JV UAE Pty Ltd, does exist, the corporate records suggest that Mr Nabil El Hamra is a 25% shareholder of that company and not HHME.

39. Further complicating matters is that an unsigned valuation report states that M/s Supaloc Middle East UAE is the owner of machinery and a factory. There is no evidence as to the existence of that company. That report valued the machinery as at 13 June 2012 in the sum of AED 45,673.000. Mr Hamra did not know what the M/s stood for. Mr Hamra stated in his evidence that Mr Fadi Ghaith owned the factory. The Forsyth group commissioned the valuation report.

1. The evidence of Mr Hamra was that he thought that Supaloc JV UAE LLC, was to trade in the Middle East, but as I have said there is no evidence that such a company existed. He also said that there was “Supaloc Machines or something.” He said that the main shareholder where the assets sat was a British Virgin Island Company.

2. On the evidence before me, I cannot make any finding as to how the parties who advanced money in 2008 held their interests in the Middle East. I cannot make any finding as to what company received the benefit of the approximately $7.8m that was advanced or what company held any machines that were purchased.

3. Supaloc JV UAE Pty Ltd (the British Virgin Island company that does exist) was incorporated on 20 October 2009. The share certificates issued on 26 October 2009 record that Nabil El Hamra, SBS Steel Pty Ltd, Fadi Ghaith and Makram Ghais each held 25% of the shares in that company. An email from Tony Saint of Thomsons lawyers dated 9 March 2011 attached a draft email which stated that Mr Nabil Hamra held his 25% interest for HHME and that HHME was the effective owner of these shares. The draft email went on to say that the shares were currently registered in the name of Mr Nabil El Hamra for convenience.

4. There is a record of the minutes of the first meeting of directors of Supaloc JV UAE Pty Ltd held on 26 October 2009 which record the issue of 12,500 shares to each of Nabil El Hamra, SBS Steel Pty Ltd, Fadi Ghaith and Makram Ghais .

5. The Articles of Association of Supaloc JV UAE Pty Ltd record:

   9      No notice of trust, whether expressed, implied or constructive, shall be entered into the register of members.

   10    Except as required by law, no person shall be recognized by the Company as holding any share upon any trust and the company shall not be bound or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share.

6. The position of the respondents was that Mr Nabil El Hamra held his interest in Supaloc JV UAE Pty Ltd on trust for HHME. The trust was said to be oral. There is no written documentation produced at trial that evidences this trust. In cross-examination, in responses to the question whether there was anything in writing from Mr Nabil El Hamra or signed by him which records this trust arrangement, Mr Hamra, said “not that I can recall”.

7. The vagueness of the evidence given by Mr Hamra concerning the trust is evident from the following passage:

   QI think you say that in respect of the share certificate at p.12 of the book, Exhibit A1, you say that Nabil Hamra holds that share on trust.

   ATrust for the Hamra family and the Bauers, that's correct.

   QDoes that trust include Nabil El Hamra himself.

   ACorrect, he's involved, yes.

   QIn what percentage.

   AI don't know the exact percentage, but like I said, we are a family unit so I can't remember the exact percentage or what we agreed upon but as far as I'm concerned, he's part of the Hamra family.

   QIs it the case that there is no document in writing that comes from Nabil El Hamra or is signed by Nabil El Hamra which says that he holds that share on trust for anyone.

   AHe’s family, it's a trust arrangement.

   QMy question is there anything in writing from the Nabil El Hamra or signed by Nabil El Hamra which records this trust arrangement.

   ANot that I can recall.

   QIf there was such writing, you would have produced it in this case.

   ACorrect. I can't recall there ever being something

8. The only evidence as to the existence of the trust came from Mr Hamra. Mr Hamra gave evidence that he had an oral conversation with Mr Nabil El Hamra in which Mr Nabil El Hamra said that he was holding the shares on trust for the family while HHME was being set up. Mr Hamra said that the plan changed from holdings shares directly in a Middle Eastern company as opposed to an Australian company. Mr Hamra did not disclose the existence of the trust in his statement of affairs.

9. For the reasons which I express later in these reasons, I am not satisfied that any trust was enforceable. Mr Nabil El Hamra was not called to give evidence about the trust and I infer that his evidence would not have assisted Mr Hamra.

10. To complete the analysis of the corporate structure, HHME was a company incorporated in South Australia on 2 September 2009. Mr Hamra gave evidence that it was established for the purpose of holding the shares in Supaloc JV UAE Pty Ltd. I do not find that purpose established on the evidence. There is no documentary evidence to that effect. The monies that were advanced for the purchase of equipment in the Middle East were advanced in November 2008. Supaloc JV UAE Pty Ltd had not been incorporated as at 2 September 2009.

11. Hamra Corporation Pty Ltd held 885 shares in the company and Bauer Corporation International Pty Ltd held 115 shares. Hamra Corporation was the trustee of the Hamra Supaloc Family Trust. It was deregistered in 2014. The trust deed records that the trust was a discretionary trust.

12. HHME was also deregistered on 27 January 2013. HHME did not have a bank account. Mr Hamra said that the only investment that it held were the shares in Supaloc JV UAE but I do not find that interest established.

13. Mr Hamra admitted that there was no written documentation, including emails or agreements, that showed that Mr Fazzari and Mr Chehade were buying shares in HHME.

    The Bauer interest

14. The position of the Bauers assumes some importance in this dispute. It does so because it was the desire of the Bauers to recoup the monies that they had invested in the development of Supaloc in the Middle East in 2008 that provided the catalyst for the investment and payments by Mr Fazzari and Mr Chehade.

15. In the discussions between Mr Hamra, Mr Chehade and Mr Fazzari, Mr Hamra referred to the Bauers as requiring their investment to be repaid. There was no discussion as to which specific individual or entity was to be repaid.

16. The evidence established that the Bauers had invested $300,000 in 2008. It is unclear what interest they received for their investment. None of the Bauer representatives were called to give evidence. The $300,000 formed part of the $330,000 which was forwarded from the account of Mrs El Hamra on 21 November 2008 to James Berry & Associates in Dubai. Mr Hamra said the funds, together with the other funds that were advanced, were used to purchase machinery to produce Supaloc in the Middle East and for working capital.

17. Mr Hamra gave evidence that the interest of the Bauers was held through HHME and that the 115 shares held by them represented 11.5% of the 25% interest in Supaloc JV UAE Pty Ltd that was held by Mr Nabil El Hamra.

18. It is not clear and is not established on the evidence that the Bauers agreed that their investment was to be held by way of shares in HHME. Although there is some evidence that the advance was by way of loan, I consider that nature of the investment was such that the Bauers would have some interest in the Supaloc sales in the Middle East and to be able to participate in any profits, if achieved.

19. On 9 October 2008, Mr S Bauer sent an email to Mr Hamra asking for details concerning what was then the proposed investment. Mr Hamra replied stating that the Bauers would have a % ownership of Hamra Building Materials LLC which was to be set up in the Middle East and that the Bauer name would be on the trade licence of Hamra Building Materials. Hamra Building Materials would own shares in Supaloc Middle East. The email expressly states that the investment was speculative.

20. On 22 October 2008, Mr Bauer sent a letter to Mr Hamra (as managing director of Hamra Building Materials) in which he made reference to a formal loan agreement being enclosed. No formal loan agreement was produced. The letter however went on to provide a summary of key details which included (1) the sum to be advanced was the $300,000; (2) the interest rate was 0% per month; and (3) the term of the loan was 2 months but once Supaloc Middle East LLC was established then the $300,000 was to be converted into Hamra Building Materials LLC shares (12%).

21. Mr Hamra counter signed the letter.

22. Hamra Building Materials LLC was never established. Mr Hamra gave evidence that he could not recall whether Hamra Building Materials LLC was established, but that conflicts with paragraph [131] of his affidavit where he said that Hamra Building Materials LLC was not incorporated and that he substituted HHME as the relevant entity. That provides a further example of Mr Hamra not being truthful or consistent in his evidence. Supaloc Middle East LLC also was not established.

23. I accept the evidence of Mr Hamra that the advance made by the Bauers had been converted to an interest in shares. A number of matters support this conclusion. First, it was not until many years later that the Bauers started asking for their money back. It is inconceivable that they would wait so long when they were not receiving interest on their loan. Secondly, Mr Bauer on behalf of the Bauer Corporation signed or apparently signed the constitution of HHME with Mr Hamra. Thirdly, the interests of the Bauer Corporation in HHME coincided with the ratio of their advance to the advance of the interests associated with Mr Hamra.

24. Communications between the Bauers and Mr Hamra in 2011 also support that the Bauers’ interest was held by way of shares and not by way of loan. On 11 April 2011, Mr S Bauer requested that a Shareholder Agreement be prepared in light of information received about the granting of a trade licence for the sale of Supaloc product in the Middle East. A draft shareholder agreement was prepared by Thomsons lawyers and sent to Mr Bauer by email dated 4 September 2011.

    Request by Bauers for repayment of moneys

25. Mr G Bauer worked for Fazche and therefore was well known to Mr Fazzari, Mr Chehade and Mr Hamra. During the course of this employment, he had a physical fight with Mr Hamra. Mr Chehade said he was told about the fight and said that the fight occurred before 2013 because Mr Bauer resigned in 2013. Mr Fazzari said that he witnessed the fight. He said that the fight occurred in 2013. He said that Mr Bauer left the employ of Fazche not long after the fight.

26. Mr Hamra gave evidence that the fight occurred about 12 March 2013. He said that he knows that the fight occurred about that date because he took over the use of the email account of Mr Bauer at Fazche for a few days when Mr G Bauer left the employ of Fazche.

27. I accept the evidence of Mr Fazzari and Mr Hamra that the fight occurred in 2013, shortly prior to Mr Bauer leaving the employ of Fazche.

28. Mr Hamra in re-examination said that the Bauers first commenced intimidating him in 2012 regarding the repayment of the monies that they advanced when he and Mr G Bauer had that altercation. He said that in 2012, Mr G and Mr S Bauer informed him that they wanted to exit their investment because of their falling out with Mr Hamra and because they considered that the Middle East was not rebounding from the global financial crisis as well as they had been expected. He said that that Mr G or Mr S Bauer said that they wanted $350,000 for their shares and that if someone agreed to that price, they could pay in instalments. Mr Hamra stated that later in 2012 he approached Mr Fazzari and Mr Chehade about purchasing the shares.

29. He said that the Bauers “got over it” in late 2013 and 2014, but that the intimidatory conduct recommenced in 2015, in early to mid-2015, when he said that he had sold the shares but no money had been received. Mr Hamra said that the intimidatory conduct consisted of a threat being made to him including that they were going to get someone to come and bash him if he did not get rid of their shares and if they did not get the money back that they had invested in Supaloc. Mr Hamra said that he took the threat seriously because he thought that the Bauers had connections to outlaw bikie gangs. Mr Hamra makes reference to that threat when he states in an email dated 20 June 2015:

    You are a very powerful man and have many connections and I don’t want to upset you nor do I want to disrespect you..

    I don’t want any trouble S. I have gone through too much mentally over the last four years of my life. I am paying you interest when I believe I shouldn’t be… because I am intimidated and don’t want any trouble

30. Mr Hamra gave evidence that following the agreement made by Mr Fazzari and Mr Chehade to advance monies for Supaloc Middle East, he made a commitment to the Bauers that they would be repaid $350,000 for their shares over a 12 month period.

31. I find that no conversation occurred between Mr Hamra and the Bauers in 2012 regarding the sale of their shares nor any conversation between Mr Hamra, Mr Fazzari and Mr Chehade in 2012 concerning the purchase of the shares by Mr Fazzari and Mr Chehade from the Bauers. I make this finding for the following reasons:

    (1)the altercation between Mr G Bauer and Mr Hamra occurred in 2013 and that was the catalyst for the desire to sell the shares.

    (2)for the reasons that I have expressed, I prefer the evidence of Mr Fazzari and Mr Chehade as to when negotiations commenced regarding their purchase of the shares.

    (3)I do not, on the evidence, accept that the Bauers “got over it” for a period. The contention that the Bauers “got over it” for a period of time is not consistent with what is alleged to be their intimidatory conduct. It is also not consistent with the evidence of Mr Hamra that he believed that he started making payments of interest of $750 per month in October 2013. He said that he was being intimidated at the time and under pressure. He further accepted that the Bauers gradually increased the required payments to $1500 per month. He said that he didn’t agree but they increased it. That is also inconsistent with the evidence that the Bauers got over it in late 2013 and 2014.

    (4)Mr Hamra was made bankrupt in 2013 and had no capacity to repay the money that the Bauers claimed was owed to them.

    (5)there were no communications with the Bauers as to the progress of negotiations for the sale of their shares and the return of their moneys until 17 April 2014 when Mr G Bauer sent a text message to Mr Hamra asking for payment of some interest and asking whether there was any news about the sale to Nabil. For persons engaged in intimidatory conduct, I consider it unlikely for the Bauers to have waited such a period of time with no progress before seeking information as to the progress of the sale of their shares.

    (6)I consider that the reference in the text message dated 17 April 2014 and subsequent text on 8 May 2014 and 25 June 2014 were references to Nabil El Hamra and not Nabil Chehade. The evidence from Mr Hamra was that he was not informing the Bauers of any interest from Mr Chehade or Mr Fazzari given the animosity of Mr Fazzari to Mr G Bauer. Further, Mr Hamra gave evidence that he did not advise Mr Bauer that Mr Chehade was interested in purchasing the shares as Mr Bauer would then know that Mr Fazzari was also involved. Although the text messages of 17 April 2014 and 8 May 2014 could apply to either Mr Chehade or Mr Nabil El Hamra, the text message of 25 June 2014 is, in my opinion, referring to Mr Nabil El Hamra. On 12 June 2014, Mr G Bauer sends a message to Mr Hamra where he states “Thanks bro, how you going with the funds, we are nearly middle of June, any word from Nabil.” Mr Hamra replies on the same day “Bro he’s trying.” Mr Bauer then replies on 24 June 2014 stating, inter alia “it’s nearly the end of the month I hope you and Nabil have the money sorted. He can use the same bank details you have.” On 25 June 2014, Mr Hamra replies “G all is well thanks. Nabil is still trying. As discussed I’m not buying back ur shares. I an [sic] trying my best to get u them sold.” That suggests that suggests that “Nabil” is trying to get the shares sold, not that he is the purchaser of the shares. Nabil Chehade was never trying to get the shares sold.

    (7)Apart from the text messages in April-June 2014, it was not until May 2015 that there was evidence of further written communications by the Bauers in relation to the amount owed. That delay is inconsistent with a threat being made in 2012.

32. I therefore find that it was not until at least 2013 that the Bauers first demanded the return of their moneys. I find that initially it was contemplated or the Bauers were advised of a proposed purchase of shares by Mr Nabil El Hamra or someone introduced by him. That was still the position in June 2014. It was not until sometime in late 2014 that Mr Fazzari and Mr Chehade were approached by Mr Hamra to purchase the shares.

    2013 visit to Dubai

33. It was common ground that Mr Fazzari, Mr Chehade and Mr Hamra travelled to Dubai in 2013 and when in the Middle East, visited the Supaloc factory. What is in dispute is the purpose of that visit and what was said during the course of that visit.

34. Mr Chehade said they visited Dubai in 2013 for a holiday. He disagreed with the proposition, put to him in cross examination, that it was a business trip. He said that there was no talk of investing in Supaloc on that trip. He said that during the course of that trip he visited a factory which he was informed was the Supaloc factory. He said that Mr Nabil El Hamra was also present when they visited the factory (he said that he also took them around to other sites and attractions in Dubai). He said at that time that he had no interest in the Supaloc factory.

35. Mr Fazzari gave evidence to similar affect. He also said that the factory did not appear to be running or making anything. He said there was very little in the factory. Mr Fazzari denied that Mr Nabil El Hamra said during that visit that he was holding a 25% share in the Supaloc companies for the benefit of the Bauers, the Hamras and himself.

36. Mr Hamra gave a different account of the trip. He said that he spoken to Mr Fazzari and Mr Chehade prior to the trip about purchasing the Bauers’ interest in the Joint Venture. He said that the trip to Dubai, along with being a holiday, was for the purpose of inspecting the Supaloc facility. He said that during the course of that trip they had a number of discussions about Supaloc. Those discussions included a statement by Mr Nabil El Hamra that he was holding his shares in the Supaloc company for the benefit of the Bauers and the Hamras in the proportions 11.5% and 88.5% and that he (Mr Nabil El Hamra) had been told by Mr Hamra that they (Mr Fazzari and Mr Chehade) were interested in taking over the Hamras’ stake but they must understand that the venture was speculative.

37. Mr Hamra admitted that factory was not running. He said that machines were there but he could not recall if staff were present. Mr Hamra agreed that no trading statements were given to Mr Fazzari or Mr Chehade. Mr Hamra said that:

    QSo Nick and Nabil weren't being told what particular entity they were buying shares in.

    AI recalled that we probably did tell them, yes, I did probably tell them, yes, that was Hamra Holdings (Middle East), I can't recall exactly, but they saw what they were buying with their own eyes, or what they potentially were going to buy with their own eyes.

    QI'm focusing on the shares, I think you've given several different answers in the one answer but do you agree they were not told what entity they were buying share in.

    ALike I said, I recall that's what I said but I'm not 100% certain. They saw the business they were buying, they saw the machines there, they saw it with their own eyes what it was.

38. For the reasons that I have already expressed, I do not consider that at the time of the visit to the Supaloc factory in 2013, Mr Hamra had brought up the possibility that Mr Chehade and Mr Fazzari would purchase the shares of the Bauers. There is no explanation as to why no progress was made on that potential purchase until 2015. There is no documentation of any nature in the period to 2015 recording the proposed interest of Mr Chehade and Mr Fazzari in the purchase of the interest. It is inconsistent with the asserted intimidatory conduct and threats of the Bauers that Mr Hamra would do nothing to advance the sale in that period.

1. The relevant conduct must be viewed as a whole as distinct from selectively.[104] As McHugh J stated in Butcher (above), viewing isolated parts of the conduct of a party invites error.[105]

   [104] Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199.

   [105] See also Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102].

2. Where the conduct occurs (as in the present case) in dealings between individual persons, characterisation may proceed by reference to the circumstances and context of the questioned conduct and the state of knowledge of the person to whom conduct is directed may be relevant, at least insofar as it relates to the content and circumstances of the conduct.[106] That involves consideration of the particular respondent in relation to the particular applicant, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them or which each may be taken to have known[107].

   Representations as to future matters

   [106] Campbell at [26].

   [107] Ibid at [27].

3. Section 4 of the Australian Consumer Law (Cth) (ACL) provides that where a person makes a representation with respect to any future matter and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. Section 4(2) goes on to provide that unless the person adduces evidence to the contrary, the person will be taken not to have had reasonable grounds for making the representation.

4. Whether there were reasonable grounds is to be determined objectively.

5. In City of Botany Bay Council v Jazabas Pty Ltd[108], the New South Wales Court of Appeal held:

   In determining whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, it is necessary to judge the matter as at the date of the representation. This does not preclude examining evidence of later events which may throw light upon the overall probabilities. The overall probabilities and circumstances may offer the most reliable guidance. However, it remains vital to guard against hindsight illusion.

   Causation

   [108] [2001] NSWCA 94 at [83].

6. Pursuant to s 236 of the ACL, a person who suffers loss and damage because of the misleading or deceptive conduct of another person may recover the amount of that loss and damage from that person. Section 82 of the Trade Practices Act 1974 (Cth) required the loss or damage to be caused by the conduct of the respondent. Little turns on that difference:

   The use of the word “by” (or similarly “because of”) import common law concepts of causation[109], including importantly, that causation is essentially a question of fact to be determined by reference to common sense and experience.[110]

   [109] Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525.

   [110] March v Stramare (E &MH) Pty Ltd (1991) 171 CLR 506.

7. The conduct of the respondent only has to be a cause of the loss or damage, it does not have to be the sole or even a necessary cause.[111] It is sufficient that it may play some part in contributing to the course of action taken.[112] Reliance on the respondent’s misleading or deceptive conduct does not have to be the only factor in the decision of the applicant.[113]

   [111] I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109.

   [112] Gould v Vaggelas (1985) 157 CLR 215 at 236.

   [113] Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; Henjo Investments v Collins Marrickville Pty Ltd (1988) 39 FCR 546.

8. These principles were confirmed in Henville v Walker[114] where McHugh J referred to the requirement that contravention must have materially contributed to the loss and damage.

   [114] (2001) 206 CLR 459 at [14] (per Gleeson CJ) and at [106] per McHugh J.

9. Mistake will not negate causation. In Edgington v Fitzmaurice,[115] Bowen LJ held:

   The plaintiff admits that he would not have taken the debentures unless he had thought [mistakenly] that they would give him a charge…but [the] misstatement was material if it was actively present to his mind when he decided to advance his money….[If] his mind was disturbed by the misstatement…and if such disturbance was in part the cause of what he did the mere fact of his also making a mistake himself would make no difference.

   [115] (1885) 29 CH D 459.

10. The task of the respondent in denying causation is difficult. Whilst the legal onus lies on the applicant, there will be inference that he was induced by a material misrepresentation. In Gould v Vaggelas,[116] Wilson J held:

    If a material misrepresentation is made which is calculated to induce the representor to enter into a contract and that person enters into that contract there arises a fair inference of fact that he was induced to do so by the representation…in the general experience of mankind the facts speak for themselves…it is entirely accurate to speak of an onus resting on the defendant…to show that the inference…of inducement which would not ordinarily be drawn …should not be drawn. But it is no more than an evidentiary onus.

    [116] (1985) 157 CLR 215 at 236.

11. The High Court in Sidhu v Van Dyke[117] reaffirmed these principles.

    [117] [2014] HCA 19; (2014) 251 CLR 505 at [52]-[55] and [61].

12. It follows from the above statements of principle that direct evidence of reliance is not necessary and is necessarily hypothetical and of little weight.[118] A court may determine the effect which the representation is taken to have had.[119]

    [118] Miller’s Australian Competition and Consumer Law Annotated, Thomson Reuters 2022, citing Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares PtyLtd [1992] FCA 550; 38 FCR 471.

    [119] Ibid citing Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357.

13. A respondent will only succeed in denying causation if it can establish that the representation (or misleading conduct) did not affect the applicant’s judgment,[120] if it made no difference[121] or had absolutely nothing to do with the result.[122]

    [120] Barton v Armstrong [1976] AC 104; [1975] 2 All ER 465.

    [121]Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501; [1994] 3 All ER 581.

    [122] Australian Steel and Mining Ltd v Corben [1974] 2 NSWLR 202 at 208 and 210.

14. In Henville v Walker,[123] McHugh put the matter as follows:

    in exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional.

    Loss and damage

    [123] (2001) 206 CLR 459 at [106].

15. Loss and damage is assessed by reference to section 236 of the ACL.

16. In Gates v City Mutual Life Assurance Society Ltd,[124] the High Court held that reliance and not expectation losses could be recovered. The Court held that the question to be asked was:

    How much worse off the plaintiff is as a result of entering into the transaction which the representor induced him to enter that he would have been if the transaction had not taken place.

    [124] (1986) 160 CLR 1 at 12.

17. The same approach was taken by the High Court in Marks v GIO Australia Holdings Ltd.[125]

    [125] (1998) 196 CLR 494 at 525.

18. Where a person purchases an asset in reliance upon misleading conduct and the asset is worth less at the time of the contract than it was represented to be, the measure of damages will be the same applicable in action for deceit, namely the difference between the value of the property at the time of contract and what was paid for the asset.[126]

    [126] Henville v Walker (2001) 206 CLR 459; Potts v Miller (1940) 64 CLR 282; Gould v Vagellas (1985) 157 CLR 215 at 220.

19. In a no transactions case, the loss is determined by comparing the price paid with the value of what was received: see HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd,[127] reflecting the rule in Potts v Miller.[128] In cases involving such damages, events occurring after the transaction is entered into might help to reveal the true value of the asset acquired after the date of the transaction; Potts v Miller[129]and HTW Valuers.[130]

    First pleaded representation

    [127] (2004) 217 CLR 640 at [35].

    [128] (1940) 64 CLR 282.

    [129] Ibid at 229.

    [130] (2004) 217 CLR 640 at [37]-[39].

20. The first pleaded representation is that Mr Hamra represented to Mr Fazzari and Mr Chehade that if they paid between them $350,000 they would each receive a shareholding of 1/6^th in a company called Supaloc.

21. The first question is to characterise the nature of the representation. Although the expression of that representation suggests a future representation, I consider that the substance of the representation was a present representation. That is, the payment of the $350,000 was to be in exchange for of a shareholding in a company called Supaloc. The promise is to an existing state of affairs-that is the shares to be transferred are in a company that exists and is the vehicle in which the Supaloc product will be sold in the Middle East. That is, the company in which the shares are to be transferred. The respondents in their closing address accepted that when they submitted that it was a representation that the company would sell product in the Middle East rather than it was actually doing that.[131]

    [131] Transcript 723.

22. That characterisation of the representation as a present representation can be contrasted with what is necessary to constitute a future representation. In Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd[132] (approved by the Full Court of the Federal Court in Australia Competition and Consumer Commission v Woolworths Group Ltd):[133]

    The expression “future matter” is not defined by the ACL. The same expression as used in s 51A of the TPA, was also not defined. However, when read in context, the expression is not hard to understand. A “representation with respect to any future matter” for the purposes of s 4 of the ACL and, before it, s 51A of the TPA, is a representation which expressly or by implication makes a prediction, forecast or projection, or otherwise conveys something about what may (or may not) happen in the future.

    [132] [2015] FCA 227 at [84].

    [133] [2020] FCAFC 162 at [35].

23. There is also clearly a representation that it is the present intention that the company in which the shares were to be transferred state was the vehicle in which the Supaloc product will be sold in the Middle East (and on Mr Hamra’s evidence owned the machines that were to manufacture the product).

24. Although Mr Hamra made the representation as agent for the Bauers in the sense that Mr Hamra was seeking to sell the shares on behalf of the Bauers, he was not a mere conduit for the conduct of the Bauers. On the evidence before the Court, the Bauers had no involvement in the sale other than setting two criteria: (1) they be paid $350,000 for the shares and (2) that sum could be paid progressively over a period of 12 months.

25. Other than those matters, they did not seek to constrain Mr Hamra as to how he went about selling the shares. Indeed on Mr Hamra’s evidence, the Bauers did not know the identity of the purchasers. It is clear that Mr Hamra negotiated the sale of the shares without any guidance or input from the Bauers. It was Mr Hamra who knew the details about the shares held by the Bauers and whether, by virtue of that shareholding, they held an interest in another company.

26. The representation must be viewed in the context of the discussions between the parties. In the present case, I have found that the reference to the company called Supaloc was a reference to the Supaloc company that was to trade the Supaloc product in the Middle East (and on Mr Hamra’s evidence, owned the machines). Further, the context of the discussions suggested that Mr Fazzari and Mr Chehade would receive the interest held by the Bauers.

27. Mr Hamra submitted that the representation was not misleading or deceptive because shares in HHME were to be transferred to Mr Chehade and Mr Fazzari and that HHME had the qualities and characteristics that were represented to Mr Chehade and Mr Fazzari.

28. In my opinion, the representation was false and misleading. The evidence established that at the time that the money was paid, there was no Supaloc company that was to trade in the Middle East. HHME did not meet those criteria. It did not hold any interest in Supaloc JV UAE Pty Ltd as (1) Supaloc JV UAE Pty Ltd was not bound to recognise any trust (2) there was no evidence of the establishment of an oral trust by Mr El Hamra (3) even if there was such evidence, the terms of the oral trust were uncertain (4) there were no shares to sell in that HHME was deregistered. There is a fundamental difference between holding shares in a company in the Middle East directly and holding that interest in a British Virgin Island company (which does not recognise a trust) via an oral trust from a resident in the Middle East and were not told about and did not know of its existence. Even if the above matters were proven and it was established that HHME held an interest in JV UAE Pty Ltd, the evidence did not establish that JV UAE Pty Ltd held any interest in the machines that were to make the product in the Middle East. That evidence established that the interest in the machines was to be held by another company.

29. Even if, contrary to my finding, the representation was properly characterised as a future representation, I consider it to be misleading and deceptive as Mr Hamra did not have a reasonable basis for making the representation. There was not a reasonable basis given (1) the articles of Supaloc JV UAE Pty Ltd did not recognise any trust (2) the lack of evidence about the existence of and terms of the alleged oral trust (3) the evidence that another company (and not Supaloc JV UAE Pty Ltd) owned the machines and (4) the shares in HHME were deregistered and (5) there was no evidence that Supaloc JV UAE Pty Ltd held any interest in a company that was to trade in the Middle East.

30. The respondents submitted that Mr Fazzari and Mr Chehade must have known that they were not receiving a direct shareholding and that they were receiving an indirect interest via a trust arrangement. The respondents further submitted that the pleading of the claim reflects this position. Dealing first with the pleading point, I do not consider that the claim is so limited. Paragraph [6.1] of the Claim pleaded a representation that the applicants were to receive a shareholding in a company called Supaloc. While paragraph 5.3 of the claim refers to an interest in the company, paragraph 5.1 refers to other shareholders such that the natural inference is that the relevant interest is a shareholding. Mr Fazzari or Mr Chehade did not know and were not told that they were going to receive the interest via a trust in a British Virgin Island company. In its context, including the reference to the other shareholders, the representation was that they were to receive their interest by way of shares.

31. Mr Hamra made submissions to the effect that he told Mr Chehade and Mr Fazzari that the investment was speculative and they should do their due diligence before entering into the transaction. Even accepting that Mr Hamra said words to that effect, that does not alter the nature of the misleading conduct. The applicants made their assessment to buy the shares and pay the money on the basis of the representation that they were getting an interest in the Supaloc company that was to trade the Supaloc product in the Middle East. That representation was false. Any investment in a company that is yet to trade is speculative. However, that does not alter the nature of the misleading conduct or its causative effect.

32. There can be no doubt that Mr Fazzari and Mr Chehade suffered loss because of this conduct of Mr Hamra. The substance of the transaction, from Mr Fazzari and Mr Chehade’s perspective, was that they would receive the shares in the company that would trade Supaloc products in the Middle East in exchange for their payment. That is, Mr Fazzari and Mr Chehade would have the opportunity to particulate in the profits of that venture. As a matter of fact, and common sense and experience, the representation caused them to make the payment. They believed that they were receiving an interest in the company selling Supaloc product in the Middle East and therefore would be able to participate in any profits that might be derived from that venture. That was critical to their decision to enter into the transaction and to make payments.

33. Put another way, would Mr Fazzari and Mr Chehade have paid the $242,950 if they knew that they were not going to receive any interest in the Supaloc company. The answer to that question is self-evidently “no”. The interest in the company was the quid pro quo for their payment. I accept the evidence of Mr Chehade and Mr Fazzari that they would not have paid the money if they were to receive an interest in a company, HHME, that had been deregistered and which was said to have an interest in a company in the British Virgin Islands by way of an oral trust which had not been documented.

34. The loss suffered by Mr Fazzari and Mr Chehade is easily quantified. They have lost the sum of $242,950 which they have paid into the account of Mrs El Hamra at the direction of Mr Hamra. They are $242,950 worse off as a result of entering into the transaction which Mr Hamra induced them to enter into than they would have been if the transaction had not taken place. Their loss could also be determined by ascertaining the difference between what the paid and what they received. Mr Fazzari and Mr Chehade paid the sum of $242,950 but received nothing in return for that payment.

35. Further, as HHME was deregistered, shares in that company could never have had any value.

36. The respondents submitted that there was no loss because the applicants could have mitigated their loss by proceeding to acquire the shares in HHME , re-register HHME and assert the trust and acquiring the shares. There can be no question of mitigation: it was not pleaded and it clearly was reasonable for Mr Fazzari or Mr Chehade to have to take action in the Middle East to enforce a trust against Mr Nabil El Hamra of which they were not parties to any relevant communication establishing the trust. The respondents reliance on the rule in Saunder v Vautier is misplaced as (1) they were not the sole beneficiaries of the alleged trust (2) the trust was not governed by Australian law (3) on my findings, the trust was not enforceable (4) the trust was not recognised by Supaloc JV UAE Pty Ltd under the constitution of the company.

37. It follows that I consider that the applicants have made out their claim for damages for misleading and deceptive conduct under the ACL.

    Second pleaded representation

38. The second pleaded representation was that Mr Kevin Weeks, Mr Hamra, Mr Nabil El Hamra and an additional person were also shareholders in the company. I have found that there were representations made by Mr Hamra about the involvement of Mr Weeks in the company. Mr Fazzari said he was told by Mr Hamra that one of the three shares was owned by Mr Trevor [sic] Weeks. Mr Chehade gave evidence that Mr Hamra told the meetings that the other shareholders in Supaloc were Mr Kevin Weeks and Mr Hamra but he could not recall whether Mr Nabil El Hamra was also a shareholder. Mr Hamra’s evidence was that he told Mr Fazzari and Mr Chehade that he referred to expanding Supaloc in the Middle East and that “Kevin Weeks, the inventor of Supaloc, was a big part of it.” Mr Hamra gave evidence that at the first meeting he said that Mr Weeks was a shareholder and held 25% and that there were also Middle Eastern shareholders.

39. I consider that a representation was made that Mr Weeks was a shareholder of the Supaloc company which was to trade in the Middle East and in which Mr Fazzari and Mr Chehade were to purchase shares. I also find that a representation was made that Mr Hamra and Mr Nabil El Hamra were also to be part of the venture, although for the reasons that I will set out later, the involvement of those parties was not material to the decision of Mr Fazzari and Mr Chehade to enter into the transaction and advance the money.

1. The representation was of an existing fact.

2. The representation was false and misleading. There was no company in which shares were to be purchased by Mr Fazzari and Mr Chehade in which Mr Weeks had a shareholding. Mr Weeks was never a shareholder of HHME. In fact, as I have found, Mr Fazzari and Mr Chehade were not ever going to purchase shares in a Supaloc company that was to trade in the Middle East. It follows therefore that Mr Weeks was never going to be a shareholder along with Mr Fazzari and Mr Chehade in such a company.

3. The presence of Mr Weeks as a shareholder was a material fact in causing Mr Fazzari and Mr Chehade to enter into the transaction. They knew that Mr Weeks was the founder of the Supaloc product. Mr Week’s involvement gave legitimacy to the venture. As a matter of common sense, Mr Week’s involvement as a shareholder gave comfort to Mr Fazzari and Mr Chehade that the necessary parties were involved in the venture for it to succeed. It provided comfort that the company in which they were to invest had the appropriate licence to sell the Supaloc product. The materiality of the representation concerning Mr Week’s involvement as a shareholder was significant given the vagueness of the discussion about the entity in which Mr Fazzari and Mr Chehade were to purchase shares.

4. I do not consider that the involvement of Mr Hamra and Mr Nabil El Hamra as shareholders was material in the same way. Mr Hamra was bankrupt at the time and therefore any shares that he held in any company would be vested in his trustee in bankruptcy. His bankruptcy was known to Mr Fazzari and Mr Chehade. There is no evidence that Mr Fazzari and Mr Chehade placed any particular reliance on the involvement of Mr Nabil El Hamra. There is no evidence that Mr Fazzari or Mr Chehade placed any particular trust or confidence in Mr El Hamra such that his involvement was important to them.

5. Accordingly, I find that the representation made about Mr Weeks by Mr Hamra caused loss and damage to the applicants as it was a cause of them entering into the contract to purchase shares and a cause of them paying $242,950 into the bank account of Mrs El Hamra.

6. It follows from the above findings that the applicants have suffered loss and damage in the sum of $242,950 as a consequence of this misleading and deceptive conduct on the part of Mr Hamra under the ACL and are entitled to damages under the ACL.

   Third pleaded representation

7. The third pleaded representation was that the company and the Supaloc business was profitable. The applicants properly did not press that claim. The evidence was clear that the relevant company (as represented) had not traded. Mr Chehade and Mr Fazzari knew that any profit would not be derived for a number of years. They were provided a spreadsheet to that effect. Mr Chehade said that the spreadsheet did not show any profit until at least 2017 and possibly until 2019.

8. In the context of the discussions between the parties, Mr Hamra did not make any representation that the company in which the shares were to be purchased was profitable at that time and Mr Fazzari and Mr Chehade certainly did not rely upon any such representation.

   Fourth pleaded representation

9. The fourth pleaded representation was that Mr Fazzari and Mr Chehade would be paid interest on their investment. On the evidence before me, there was no representation that interest would be paid on their investment, separate from the alleged representation that the applicants could have their money back plus 10% if dissatisfied with their investment.

10. In any event, a representation that interest would be paid on their investment is too vague to justify a claim for misleading and deceptive conduct. Such a representation does not say who had the obligation to pay interest, what rate of interest was payable and when such interest was to be repaid. Further, Mr Fazzari and Mr Chehade knew that the company in which shares were to be purchased had not traded and therefore had no track record of profits from which interest was to be paid.

    Fifth pleaded representation

11. The fifth pleaded representation was that the applicants could have their money back if they were dissatisfied plus interest of 10%.

12. For the reasons that I have previously stated, I am satisfied that the representation was made. Mr Fazzari gave evidence that Mr Hamra said that that “if there was no profitability on the company by the end of 2017, beginning of 2018 in January the moneys would be returned with a 10% per annum interest component.” The applicants knew that Mr Hamra was involved in a series of land owning corporations.

13. The representation is a future representation and therefore the onus is on Mr Hamra to show that he held that belief and that he had reasonable grounds to believe that the money could be returned.

14. Mr Hamra did not adduce any evidence on either of these issues. It follows therefore that he has not discharged the onus imposed on him to prove that he held the belief and had reasonable grounds for holding that belief. It follows that the representation was misleading and deceptive.

15. I consider that the representation caused the applicants to enter into the transaction and pay the money. The circumstances of the representation support this conclusion. The applicants knew that the company in the Middle East that was to sell the Supaloc product was not trading at the time that the representation was made and therefore the financial position of the company in which the shares were to be bought was speculative. They knew that it was not until 2017 at the earliest, that a profit was forecasted for the venture. They knew that there was a great deal of uncertainty about the venture but were conscious of and influenced by their desire to assist Mr Hamra in dealing with the threats made by the Bauers. The evidence does not suggest that Mr Fazzari or Mr Chehade were wealthy such that they were prepared to risk losing their money without the additional protection of the guarantee of the return of their money.

16. The representation caused Mr Fazzari and Mr Chehade to make the payments. The loss they have suffered is the amount of the payments. The applicants have made out their claim for misleading and deceptive conduct under the ACL and are entitled to damages.

    Sixth pleaded representation

17. The sixth pleaded representation was that the arrangements would be formally reflected in a written agreement prepared by Commercial and Legal Lawyers. For the reasons that I have already stated, I am satisfied that a representation to this effect was made.

18. I consider that this was a representation as to a future matter. The onus is therefore on Mr Hamra to show that he held that belief and that he had reasonable grounds for that belief.

19. I do not consider that Mr Hamra has discharged the onus imposed on him to prove that he held the belief. The events occurring after the time of the representation are telling. Mr Hamra made no attempt to arrange for the preparation of the agreement. The applicants were continually pressing him for the agreement to prepare. His failure to take any step to cause the agreement to be prepared leads to the inference that he never held an intention for the agreement to be prepared.

20. It follows that the representation was misleading and deceptive under the ACL.

21. However, again I do not consider that the misleading and deceptive conduct of Mr Hamra was causative of any loss. The applicants paid the $242,950 before any agreement was prepared. The lack of an agreement did not inhibit or influence the applicants from paying the money prior to the receipt of the written agreement.

    Claim under the Misrepresentation Act

22. The applicants also brought a claim for damages under s 7 of the Misrepresentation Act 1972 SA. In the circumstances of this case, the claim for misleading and deceptive conduct under the ACL is wider than a claim under the Misrepresentation Act and I do not need to consider in detail whether a claim is made out under that Act.

23. Section 7(1) provides:

    (1)Where a contracting party is induced to enter into a contract by a misrepresentation made –

    (a)            by another party to the contract; or

    (b)    by a person acting for, or on behalf of, another party to the contract; or

    (c)    by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract,
    
    and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort.

24. In the present case, Mr Fazzari and Mr Chehade have been induced to enter into the contract of the purchase of the shares as a result of the misrepresentations that I have set out above. Mr Hamra was a person acting on behalf of another party to the contact. There is however doubt as to whether the loss was suffered by Mr Fazzari and Mr Chehade as a result of the formation of the contract in circumstances where I have found the contract to be void for uncertainty. In Rana v Hyatt Regency Hotel Ltd,[134] David J observed that s 7 had a relatively narrow focus and the reference to damages only being payable as a result of the formation of the contract meant that the section only provided remedies where a contract has actually been formed.

    [134] [2007] SASC 7 at [26].

25. The reference to damages being payable as a result of the formation of the contract suggest that the damages can only be claimed in respect of an existing contract and not a contract that is void. However, I do not need to determine that matter.

    Conclusion

26. On my findings, Mr Fazzari is entitled to judgment in the sum of $174,200 against Mr Hamra and Mr Chehade is entitled to judgment in the sum of $68,750 against Mr Hamra. I have made the following findings:

    (1)Mr Hamra acted as the agent for the Bauers in the sale and purchase of the shares held by the Bauers.

    (2)There was an agreement between the applicants and the Bauers for the sale and purchase of the shares.

    (3)The agreement was void for uncertainty because of the lack of certainty as to the subject matter of the agreement.

    (4)The claim by the applicants for breach of contract therefore failed.

    (5)There was a total failure of consideration for the payments made by the applicants.

    (6)The applicants’ claim against Mr Hamra in restitution for unjust enrichment succeeds.

    (7)The applicants’ claim against Mrs El Hamra in restitution for unjust enrichment or for monies had and received fails.

    (8)The applicants’ claim against Mrs El Hamra for breach of trust fails.

    (9)The applicants’ claim against Mr Hamra for misleading and deceptive conduct succeeds.

27. I will hear the parties as to the formal orders that should be made and interest and costs.