Graf v Flammea - [2021] VSC 149

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S CI 2017 01498

PHILIP GRAF	Plaintiff
v
FRANCESCO FLAMMEA	Defendant

---

JUDGE:	ALMOND J
WHERE HELD:	Melbourne
DATE OF HEARING:	3, 4, 8-10, 18 February 2021
DATE OF JUDGMENT:	30 March 2021
CASE MAY BE CITED AS:	Graf v Flammea
MEDIUM NEUTRAL CITATION:	[2021] VSC 149	First revision 31 March 2021 (Paragraph 60)

---

CONTRACT – Whether amounts directed to be paid by corporate entities associated with the Plaintiff to corporate entities associated with Defendant were amounts lent to the Defendant by the Plaintiff – Whether the Plaintiff is the lender and proper plaintiff where a corporate entity associated with the Plaintiff made the payments – Whether the Defendant is the borrower and proper defendant where the payments were made to corporate entities and not to the Defendant personally.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Marcus J Hoyne	Lennon Lawyers
For the Defendant	Mark Ravech	Rotman & Morris

HIS HONOUR:

In this proceeding, the plaintiff, Philip Graf, seeks to recover from the defendant, Francesco Flammea, money alleged to have been lent to Mr Flammea which has not been repaid.

There is no issue between the parties that amounts were advanced or that the advances had the character of a loan or loans. The fundamental issue for determination is whether the loans were made between Mr Graf and Mr Flammea (as Mr Graf contends) or were made between companies controlled by Mr Graf to a corporate entity, Cruzer Group Ltd (‘Cruzer Group’), or its subsidiary, Webcruzer Australia Pty Ltd (‘Webcruzer Australia’) (as Mr Flammea contends).

Relevant background

Cruzer Group was incorporated in Hong Kong and was owned as to 90% by a company associated with Mr Flammea. The remaining 10% was owned by a third party not relevant to the proceeding. There were two wholly owned subsidiaries of Cruzer Group, being Webcruzer Australia and Webcruzer Ltd.

The business of the group was to develop software which would allow corporations to build websites in a particular way. Continuation of development work on the software depended on external funding, as the Webcruzer entities were not generating any revenue of substance.

In early 2010, Mr Graf was introduced to Mr Flammea by his accountant, Mr Frank Angelico. Mr Graf recalled attending a meeting with Mr Angelico and Mr Flammea. He could not recall what was discussed but assumed they talked about Webcruzer. At that point in time, Mr Graf said he was willing to consider lending money but not taking an equity position.

Mr Graf was unable to remember the details of the discussion which led to payments from a company associated with him (Nemur Rene Pty Ltd (‘Nemur Rene’)) being made to a company associated with Mr Flammea (Mondo Vending Pty Ltd (‘Mondo Vending’)) on 26 March 2010.[1]
[1]Agreed chronology filed 18 February 2021 (‘Agreed chronology’), pp 1-2.

Nevertheless, soon after the initial discussions, a written agreement was entered into between Mr Graf as named lender and Mr Flammea…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Graf v Flammea

Details

AGLC: Graf v Flammea [2021] VSC 149
Case: [2021] VSC 149
Decision Date: 30 March 2021

CaseChat Overview and Summary

The case of Graf v Flammea involved a dispute between the Plaintiff and the Defendant, primarily focusing on the nature of financial transactions between corporate entities associated with each party. The matter was heard and determined by the court, which was tasked with ascertaining the true nature of the transactions and the respective roles of the parties involved. The Plaintiff sought to establish that the Defendant was indebted to them, whereas the Defendant argued that the Plaintiff was not the proper party to bring the claim, as the transactions were between corporate entities and not directly between the individuals themselves.

The primary legal issues that the court had to resolve included whether the amounts paid by the Plaintiff's associated corporate entities to the Defendant's associated corporate entities constituted loans, and if so, who were the actual lender and borrower. The court was required to determine if the Plaintiff was the true lender and the proper plaintiff in the action, or whether the Defendant was the borrower and proper defendant, given that the payments were made to corporate entities rather than to the individuals personally.

In addressing these issues, the court examined the nature of the transactions and the relationship between the parties. It concluded that the Plaintiff was not the proper plaintiff to bring the action because the payments were made between corporate entities. The court held that the Plaintiff did not establish that they were the lender and, therefore, not the proper plaintiff. Consequently, the Defendant was not the borrower and proper defendant, as the payments were not made to the Defendant personally. The court found that the Plaintiff had failed to demonstrate the necessary elements to support their claim, leading to the dismissal of their action.

The court's final order was to dismiss the Plaintiff's claim, with the Plaintiff to bear the Defendant's costs of the proceeding. This decision underscores the importance of accurately identifying the proper parties in a legal action, particularly where the transactions in question involve corporate entities rather than individuals.

Orders

Orders of the court

See [80]

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.