Grande Enterprises Ltd v Pramoko
[2014] WASC 294
•22 AUGUST 2014
GRANDE ENTERPRISES LTD -v- PRAMOKO [2014] WASC 294
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 294 | |
| Case No: | CIV:3371/2011 | 3-6, 13 DECEMBER 2013 | |
| Coram: | LE MIERE J | 22/08/14 | |
| 34 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for the plaintiff for $2,250,000.00 and interest of $362,835.62 | ||
| B | |||
| PDF Version |
| Parties: | GRANDE ENTERPRISES LTD TJANDRA ADI PRAMOKO |
Catchwords: | Misleading or deceptive conduct pursuant to Fair Trading Act 1987 (WA) s 10 Breach of contract Conduct in trade or commerce Representation as to a future matter Whether defendant intended and had capacity to perform the representation Whether defendant had reasonable grounds for making representation Individual director liable for contravention of corporation Practice and procedure Unexplained failure by defendant to call witness Whether Jones v Dunkel inference can be drawn Claim for loss and damage Reliance Proportionate liability Whether plaintiff and its representatives and advisors are concurrent wrongdoers Whether claim is apportionable Measure of damages |
Legislation: | Australian Consumer Law 2010 (Cth), s 87CB, s 87CD Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, s 12GF(1)(B) Civil Liability Act 2002 (WA), pt 1F Corporations Act 2001 (Cth), s 1325 Fair Trading Act 1987 (WA), s 9, s 10, s 77, s 79 Supreme Court Act 1935 (WA), s 32 Trade Practices Act 1974 (Cth), s 52, s 81(a), s 82, s 87, s 87CB, s 87CD |
Case References: | Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 Adams v Morellini [2010] WASC 61 APIR Systems Ltd v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45 Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 Cafe v Australian Portland Cement Pty Ltd [1965] NSWR 1364; (1965) 83 WN (Pt1) (NSW) 280 Concrete Constructions Group Ltd v Litevale Pty Ltd (2002) 170 FLR 290 Cummings v Lewis (1993) 41 FCR 559 Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 Grainger v Williams [2009] WASCA 60 Houghton v Arms (2006) 225 CLR 553 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 Nella v Kingia Pty Ltd [1989] ATPR 40-952 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 Rapid Roofing Systems Pty Ltd v Natalise Pty Ltd [2007] QCA 94 Stumer Investments Pty Ltd v Azzura Holdings Pty Ltd [2010] QSC 352 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
TJANDRA ADI PRAMOKO
Defendant
Catchwords:
Misleading or deceptive conduct pursuant to Fair Trading Act 1987 (WA) s 10 - Breach of contract - Conduct in trade or commerce - Representation as to a future matter - Whether defendant intended and had capacity to perform the representation - Whether defendant had reasonable grounds for making representation - Individual director liable for contravention of corporation
Practice and procedure - Unexplained failure by defendant to call witness - Whether Jones v Dunkel inference can be drawn
Claim for loss and damage - Reliance - Proportionate liability - Whether plaintiff and its representatives and advisors are concurrent wrongdoers - Whether claim is apportionable - Measure of damages
Legislation:
Australian Consumer Law 2010 (Cth), s 87CB, s 87CD
Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, s 12GF(1)(B)
Civil Liability Act 2002 (WA), pt 1F
Corporations Act 2001 (Cth), s 1325
Fair Trading Act 1987 (WA), s 9, s 10, s 77, s 79
Supreme Court Act 1935 (WA), s 32
Trade Practices Act 1974 (Cth), s 52, s 81(a), s 82, s 87, s 87CB, s 87CD
Result:
Judgment for the plaintiff for $2,250,000.00 and interest of $362,835.62
Category: B
Representation:
Counsel:
Plaintiff : Dr J T Schoombee
Defendant : Mr C Slater
Solicitors:
Plaintiff : Bennett + Co
Defendant : P A Martino
Case(s) referred to in judgment(s):
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Adams v Morellini [2010] WASC 61
APIR Systems Ltd v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45
Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119
Cafe v Australian Portland Cement Pty Ltd [1965] NSWR 1364; (1965) 83 WN (Pt1) (NSW) 280
Concrete Constructions Group Ltd v Litevale Pty Ltd (2002) 170 FLR 290
Cummings v Lewis (1993) 41 FCR 559
Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Grainger v Williams [2009] WASCA 60
Houghton v Arms (2006) 225 CLR 553
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361
Nella v Kingia Pty Ltd [1989] ATPR 40-952
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257
Rapid Roofing Systems Pty Ltd v Natalise Pty Ltd [2007] QCA 94
Stumer Investments Pty Ltd v Azzura Holdings Pty Ltd [2010] QSC 352
Sykes v Reserve Bank of Australia (1998) 88 FCR 511
- LE MIERE J:
Overview
1 The plaintiff company, Grande Enterprises Ltd (Grande), and Southern Cross International Investments Ltd (Southern Cross) executed an agreement by which Southern Cross sold and Grande purchased 30 million shares in Zen Resources Ltd for $2,250,000. The agreement is in writing and constituted by a document in three parts. The first part entitled 'Letter of Offer to an Individual Investor Southern Cross International Investments Limited' (Letter of Offer) was signed by the defendant on behalf of Southern Cross. The second part entitled 'Acceptance of the Offer by an Individual Investor' (Acceptance of the Offer) was signed by Tommy Lee Boon Jun (Jun) under the name 'Tommy Lee Boon Jun Grande Enterprises Ltd'. It is common ground that Jun signed on behalf of Grande and the resulting agreement is an agreement between Southern Cross and Grande.
2 Clause 5 of the Letter of Offer provides that if Zen Resources was not taken over by a company listed on the Australian Securities Exchange or not itself listed on a major stock exchange within two years then Southern Cross would buy back the shares from Grande for the same price. Grande says that by signing the Letter of Offer the defendant made the representations contained in cl 5 which it describes as the 'SCI Buy Back Representation'. Grande says that immediately before the agreement was executed the defendant orally represented to Jun, on behalf of Grande, that if Southern Cross was not in a position to honour the SCI Buy Back representation then he would, upon request from Grande, buy back the shares personally from Grande for the price paid by Grande. Grande describes this as the defendant's Buy Back Provision.
3 Grande paid $2,250,000 to Southern Cross and received the shares in Zen Resources. Zen Resources was not taken over by a company listed on the Australian Securities Exchange and was not itself listed on a major stock exchange within two years. Neither Southern Cross nor the defendant has bought back the shares from Grande.
4 Grande says that by signing the Letter of Offer containing the SCI Buy Back Representation, and by making the defendant's Buy Back Provision, the defendant engaged in misleading or deceptive conduct in contravention of the Fair Trading Act 1987 (WA) (FTA) s 10, the Trade Practices Act 1974 (Cth) (TPA) s 52 and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) s 12 DA. Grande says that the shares in Zen Resources are worth nothing or have nominal value and it has suffered loss of $2,250,000 as a result of the defendant's misleading or deceptive conduct. Grande claims damages or other relief resulting in payment to it of $2.25 million pursuant to the ASIC Act, the TPA or the FTA.
5 The defendant admits that he signed the Letter of Offer but denies that he made the defendant's Buy Back Provision. The defendant denies that he engaged in misleading or deceptive conduct and says that insofar as he made any representation with respect to any future matter he had reasonable grounds for making the representation. The defendant denies that Grande made the agreement in reliance upon the SCI Buy Back Representation or the defendant's Buy Back Provision. The defendant denies that the Zen Resources shares are worthless or are of only nominal value.
Main characters
6 I will refer to the defendant as Tjandra. His father, Tanto Adi Pramoko, who I will refer to as Tanto, is an influential businessman in Indonesia. The Pramoko family is a successful business family in South East Asia with business interests in Malaysia, elsewhere in Asia, including a marble and granite quarry and factory in Indonesia, and in Australia. Tjandra's siblings include an older brother, Hengky, and a younger brother, Hendro. Tjandra trusted and relied upon his father's business experience and judgment. It is the custom of Tjandra's family and culture that he abide by his father's wishes.
7 Jun went to school with Hengky and Tjandra in Singapore in the early 1980s. Jun was in the same year as Hengky. In the 1980s the Pramoko family moved to Australia. Jun visited Hengky several times in Australia. Jun considered Hengky to be a close and trusted friend. Jun sought Tanto's advice and trusted that advice. Jun is the sole director of Grande. For the past 15 years he has been a company director and businessman based in Singapore but he does business in Australia. Prior to that time he was a stockbroker for approximately 20 years. During his time as a stockbroker Jun gained extensive experience in managing investment portfolios for institutions and high net worth individuals and gained extensive experience in book building and identifying growth industries.
The Zen Resources Project
8 Since 2002 Tjandra has been buying and developing mining tenements in Western Australia. Between 2002 and 2007 he was the sole director and shareholder of Hard Rock Minerals Pty Ltd and Oz Gem Pty Ltd. Hard Rock Minerals bought mining tenements which contained iron ore. Oz Gem bought mining tenements which contained tantalite.
9 In 2007 Tjandra wanted to develop the mining tenements and list his companies on the ASX. Tanto told Tjandra he did not want Tjandra to do that. Tanto said that he wanted Tjandra to use the tenements in a project involving a company listed on a stock exchange. The project was to list on the ASX a company which would acquire the tenements owned by Tjandra's companies. Tanto told Tjandra to use the financial and investment skills of William Soong, a Malaysian merchant banker, and Gary Loong, a Malaysian stockbroker. Tanto said that he wanted Hengky to be the main investor on behalf of the family. Tanto said that Hengky should be, and should appear to be, the main person for deciding or determining the business plans of the family. Haidong Li, an acquaintance of Tanto, was the owner of Bounty Resources International Ltd, a company based in Singapore which engaged in the exploration and mining of natural resources and was a joint venture partner with China Railway. Tanto told Tjandra that Haidong Li could secure contracts for the supply of the iron ore and tantalite to China Railways.
10 Soong caused Zen Resources to be incorporated in the British Virgin Islands to be the corporate vehicle for the project. Zen Resources was a holding company. It acquired three wholly owned subsidiary companies - Zen Minerals Pty Ltd, Zen Mining Pty Ltd and Zen Resources International Ltd. Both Zen Minerals and Zen Mining were incorporated under the laws of Australia. Tjandra caused Hard Rock Minerals to sell its iron ore tenements to Zen Mining. Tjandra sold his shares in Oz Gem to Zen Resources. The tantalite tenements held by Oz Gem were then transferred to Zen Minerals.
11 Soong and Loong held shares in Zen Resources through their companies, Grandchamp Partners Limited and Grenville Investments International Limited. The Pramoko family interest in the project in the form of shares in Zen Resources was held by Southern Cross, a company incorporated in the British Virgin Islands. The initial directors of Southern Cross were Hengky and Hendro. In January 2008 Tjandra became a shareholder and director of Southern Cross.
12 In March 2008 Soong and Tjandra were working towards listing Zen Resources on a stock exchange. Soong was responsible for the corporate structure, listing and financial matters. Tjandra was responsible for organising the geologists' reports, drilling, obtaining costs quotations and estimates, payment structures for the contractors and specification sheets for the iron ore and tantalite.
13 Tjandra and his wife, who I will refer to as Simone, approached friends to become seed investors by buying shares in Zen Resources at 5 cents per share. In about April 2008 Hengky, Simone and Tjandra travelled to Kuala Lumpur to talk with Paul Poh of the Hong Leong Group to see whether the group would invest $60 million into Zen Resources. Hengky and Soong knew Poh, who was a senior executive with a large Malaysian financial, manufacturing, and property development group. The promoters of Zen Resources intended the Hong Leong Group to be the cornerstone investor of the project which was required for the purpose of listing Zen Resources on the ASX.
Jun becomes involved in the project
14 In about April or May 2008 Jun had dinner with Hengky and Soong in Kuala Lumpur. Hengky told Jun that he and Tjandra were involved in a business venture in Western Australia in the mining industry involving iron ore and tantalite. Hengky asked Jun if he would be interested in investing in the business venture. Hengky told Jun that the Pramoko family owned 51% and Soong and Loong together owned the remaining 49% of Zen Resources, the company through which the business venture was being pursued. Hengky told Jun that they intended to list Zen Resources on the ASX in 2008 or if that did not eventuate he would negotiate a back door listing or a takeover of Zen Resources by another company. Hengky told Jun that Tjandra and Tanto were managing Zen Resources and if he was interested in investing in Zen Resources he should speak to either of them about it. Jun contacted Tanto. Tanto told Jun that he should discuss the details of any investment with Tjandra but that as the Pramoko family was the major shareholder in Zen Resources he would ensure that if Jun invested then his interests would be looked after.
15 Tanto and Hengky told Tjandra that Jun wanted to invest in the project. Jun contacted Tjandra. On 11 August Tjandra emailed to Jun an offer to subscribe for 60 million shares in Southern Cross at a price of $0.075 per share for a total of $4 million. The form of offer was based on an offer and acceptance that Soong had prepared for investors in Perth. There was then some discussion between Jun and Tjandra or Hengky about Jun acquiring options to acquire shares in Zen Resources rather than buying shares in Southern Cross. On 12 August Tjandra sent an email to Jun in which he referred to Jun having asked about taking options in 60 days for 10 cents a share. Tjandra said that he could not offer that but since Jun was 'adamant in investing $4 million' then Tjandra offered Jun shares in Zen Resources for a weighted average price of 7.5 cents per share or three lots each of $1 million at a price of 5 cents, 10 cents and 15 cents per share for each lot respectively. Tjandra said that it was not fair to ask for the options in 60 days' time because the float would be done by then and the share price would be 40 cents per share. Tjandra said that Jun would have to make a commitment before Tjandra signed the contract with Soong and Haidong Li in Singapore on 22 August.
16 On 20 August Jun emailed to Tjandra an amended version of the offer sent by Tjandra to Jun on 11 August. The amended version of the offer was in the form of an offer by Southern Cross to sell to Jun or his appointed company 60 million shares in Zen Resources at 7.5 cents per share for a total of $4.5 million. The offer contained a new clause which became cl 5 of the Letter of Offer:
Purpose
The purpose for the offer of sale is for the successful injection of the Company into an existing publicly traded company listed on the Australian Securities Exchange ('Takeover') or listing of the Company's shares on any major stock exchange ('Listing'). In the event the Takeover or Listing is not successful within six months ('Due Date') from the date hereof for any reason whatsoever, Southern Cross International Investments Limited shall undertake to buy back the Sale shares with the same Total Sale Price (ie AUD4,500,000), within 1 month from the date of the written receipt of rejection by the relevant authorities. Any extension of the Due Date shall only be effective if made by the parties in writing.
- The proposal contained in that clause had not been discussed by Jun and Tjandra before Tjandra received the email.
17 Jun says that in or about August 2008 he met with Tjandra and Simone at their home in Karrinyup, Western Australia, to discuss the potential investment by Grande in Zen Resources. Tjandra says that he did not meet with Jun at his home in Karrinyup at that time but he did meet with Jun and Hengky in Singapore on 22 August. I find that the meeting took place in Singapore. Simone says that there was only one meeting that she was present at prior to Jun buying the shares, that is the meeting on 5 September. Simone says there was no meeting in August between Jun, Tjandra and herself. That the meeting took place in Singapore is consistent with Tjandra's email of 12 August which said that he would be in Singapore on 22 August. Tjandra says that at the meeting they discussed the project and Tjandra said that Jun could not buy 60 million shares and Jun said that he would revise the offer and send it to Tjandra. That is consistent with the emails sent by Jun to Tjandra on 23 August which enclosed a revised offer. The offer was in the same form as the letter of offer forwarded by Jun to Tjandra on 20 August but offered to sell Jun or his appointed company 30 million shares in Zen Resources at a price of 7.5 cents per share for a total of $2.25 million.
18 On 26 August Tjandra responded to Jun's email of 23 August. Tjandra said that the offer was the same as the contracts with Simone's friends except for the additional cl 5 inserted by Jun. Tjandra said that he thought the contract should be the same as the others because 'this way you believe in this project like Simone's friends'.
Peak Resources Heads of Agreement
19 After Tjandra had met with Hengky and Jun in Singapore, Tjandra and the other shareholders in Zen Resources executed a heads of agreement with Peak Resources Ltd, a company listed on the ASX. The heads of agreement provided for the shareholders in Zen Resources (the Zen Vendors) to sell their shares to Peak Resources. The heads of agreement provided that it was binding upon the parties notwithstanding that they would negotiate and execute a formal contract in respect of the sale of the shares on terms and conditions not inconsistent with the terms and conditions of the heads of agreement. However, the heads of agreement was never executed by Peak Resources. Tjandra said that Peak Resources did not go ahead with the agreement because of the global financial crisis which reached a critical stage in September 2008.
Jun and Tjandra sign the agreement
Jun came to Perth and stayed at the Burswood Hotel on 5 September. That afternoon Jun had a copy of the heads of agreement between Peak Resources, Zen Resources and the Zen Vendors. On that afternoon Tjandra sent Jun an email which included preliminary advice from Deacons lawyers reviewing the heads of agreement. Clause 6.1(d)(v) of the heads of agreement relevantly provides that the Zen Vendors must ensure that until completion of the sale and purchase of the shares Zen Resources does not, without Peak Resources agreement, allot, issue or sell or agree to allot, issue or sell any share or loan capital or any security convertible into any share or loan capital other than as provided for in the heads of agreement or pass any special resolution. Jun made a note on hotel stationery:
6v) cannot sell shares after MOU
x) pass any special resolution.
In cross-examination Jun agreed that he then knew that a listed company was about to buy the shares of Zen Resources and he realised that if he was to take advantage of that he had to be a Zen Resources shareholder and therefore needed to purchase Zen Resources shares before the heads of agreement was concluded.
20 On the evening of 5 September Hengky picked up Jun and drove him to Tjandra's house. Jun had with him two copies of the letter of offer that he had prepared for Southern Cross to sell to Jun or his appointed company 30 million shares in Zen Resources for $2.25 million. The agreement contained cl 5. Tjandra signed each copy of the Letter of Offer on behalf of Southern Cross and Jun signed the Acceptance of the Offer. Jun says, and Tjandra denies, that before they signed the offer and acceptance he said to Tjandra words to the effect of what would happen if Southern Cross was not in a position to honour the buy back provision. Jun says, and Tjandra denies, that Tjandra replied with words to the effect that if that happened Jun did not have to worry because he, Tjandra, personally would buy back the shares purchased by Grande from Southern Cross. After the Letter of Offer and the Acceptance of Offer had been executed Jun, Tjandra, Simone and Hengky went to dinner. Hengky then took Jun to the airport. I will return to the issue of whether or not Tjandra made that promise or representation later in these reasons.
21 After Jun and Tjandra had executed the Letter of Offer and the Acceptance of the Offer, Jun caused Grande to pay $2.25 million to Southern Cross.
Zen Resources does not list
22 By May 2010 Zen Resources had not been listed on a stock exchange or been taken over by a company listed on the ASX. Jun contacted Tjandra and informed him that given the delay and the inability of Zen Resources to list on the ASX and attract a takeover, Grande would be invoking the buy back provision in the offer document. Jun says that Tjandra said that he should delay requesting Southern Cross buy back Grande's shares as he, Tjandra, would try and negotiate a deal with a Japanese company called Kings Sun Rare Metals Company (KSRM) by which they would buy Grande's shares. Tjandra said that he was already negotiating with KSRM on behalf of the minority shareholders and Grande's shares would be bought after the minority shareholders were bought out by KSRM.
23 Shortly after that Jun flew to Perth and met with Tjandra and Simone at Burswood Casino. Jun said that given it did not appear that KSRM would be buying Grande's Zen Resources shares, Grande was requesting that Southern Cross buy back its shares. Jun says that on 12 May 2010 he caused a letter to be sent on behalf of Grande to Tjandra requesting that Southern Cross buy back Grande's shares in Zen Resources. Jun says that on 12 May 2010 he received an email from Simone confirming receipt of Grande's letter and confirming that the necessary arrangements would be made with respect to the buy back of the shares. Jun says that he took the email as being written on behalf of Tjandra. The plaintiff produced an email from Simone's email address to Jun's email address dated Wednesday, 12 May 2010 at 1.21 pm and addressed 'Derar Tommy Lee' and stating: 'This is to confirm that I have received your letter for the sell back of Zen shares. I will make the necessary arrangements as requested'. The email said that it was sent from Simone's blackberry.
24 In his defence Tjandra denies that Simone sent the email. In his evidence Tjandra said that Jun produced the 12 May letter at the Burswood Hotel and asked Tjandra to sign it. Tjandra did sign it. Then Jun asked Tjandra if Tjandra could send an email to confirm that he had received the letter. Tjandra asked his wife to send an email confirming that he had received the letter but he does not know if his wife, Simone, sent an email or not. Simone says that she did not send the email. Simone's belief that she did not send the email is based on the contents of the email. The email is addressed 'Derar Tommy Lee'. Simone says she would not misspell 'Dear'; she always corrects her grammar and spelling. Simone says she does not refer to 'Tommy' as 'Tommy Lee'. Furthermore, she does not sign emails 'Best regards'.
25 I find that Simone did send the email of 12 May 2010 to Jun and she did so at the request of Tjandra. It is curious that the email refers to 'Tommy Lee' rather than 'Tommy' and is signed 'Best regards' in contrast to Simone's usual practice. Nevertheless, I find that Jun did not fabricate the email. It was sent by Simone at Tjandra's request and was received by Jun. However, the email is of little importance. The first sentence confirms that Tjandra received the letter of 12 May 2010. That is common ground. The second sentence says 'I will make the necessary arrangements as requested'. I do not take that to be an undertaking by Tjandra that he would personally buy back the shares. The letter of 12 May 2010 to which Tjandra was responding is a request for Southern Cross to buy back the shares. The email is a reference to Southern Cross buying back the shares not Tjandra doing so.
26 No arrangements were made for Southern Cross to buy back Grande's shares. On 22 September 2010 Jun caused a further letter to be sent to Tjandra requesting that Southern Cross buy back the shares. Jun says that after sending the letter he had several conversations with Tjandra in which he requested that Southern Cross buy back the shares and during these conversations Tjandra said that he would arrange for this to take place and that Jun needed to give him time. Jun says that Tjandra said to him several times that Southern Cross was waiting on potential negotiations with KSRM to be finalised and once that happened Grande's Zen Resources shares would be bought back. Jun says that he told Tjandra that that was not acceptable and Grande required its shares to be bought back immediately and that Tjandra had personally guaranteed him that Southern Cross would buy back the shares. The shares were not bought back.
27 The primary means of communication between Jun and Tjandra was by text message. A transcript of text messages between Jun and Tjandra between August 2010 and February 2011 was produced by Jun. Those messages include communications between Jun and Tjandra about Southern Cross buying back Grande's shares and about negotiations with KSRM. No agreement was concluded with KSRM. On 19 August 2011 Malaysian solicitors acting for Grande wrote to Southern Cross demanding that Southern Cross honour its undertaking to buy back the Zen Resources shares. Southern Cross did not do so. On 14 December 2011 Grande commenced this action.
Pleadings
28 Grande claims damages or other relief resulting in payment to it of $2.25 million pursuant to the ASIC Act, TPA s 81(a) and s 82 and FTA s 77 and s 79. It is sufficient to set out Grande's claim for relief pursuant to FTA s 77 and s 79. Grande says that it suffered loss or damage by conduct of Tjandra that was done in contravention of FTA s 10 and Grande is entitled under FTA s 77 or s 79 to recover the amount it paid for the shares from Tjandra. Grande says that Tjandra contravened FTA s 10 by, in trade or commerce, engaging in conduct that is misleading or deceptive or is likely to mislead or deceive.
29 Grande pleads that the misleading or deceptive conduct engaged in by Tjandra was twofold. First, Tjandra signed the Letter of Offer containing cl 5. Grande says that Tjandra thereby represented what is set out in cl 5, relevantly that if the Takeover or Listing is not successful by 5 September 2010, then Southern Cross shall buy back the shares from Grande for $2.25 million. Grande describes that as the SCI Buy Back Representation. Grande says that in making the SCI Buy Back Representation Tjandra engaged in conduct on behalf of Southern Cross within his actual or apparent authority as a director of Southern Cross with a result that that conduct is deemed by FTA s 82(2) to have been engaged in by Tjandra. Grande says that the SCI Buy Back Representation was conduct in trade or commerce. Grande further says that the SCI Buy Back Representation was a representation of the then current state of mind of Tjandra and Southern Cross that each intended that the representation would be honoured by Southern Cross. Grande says that it was also a representation in respect to a future matter within the meaning of FTA s 9(1) and (2) which deems Tjandra not to have had any reasonable grounds for making the representation unless Tjandra adduces evidence to the contrary. Grande says that the SCI Buy Back representation was misleading or deceptive or likely to mislead or deceive in that Tjandra and Southern Cross each had no intention that the SCI Buy Back Representation would be honoured by Southern Cross and did not have reasonable grounds for making the representation. Grande says that neither Southern Cross nor Tjandra had any reasonable grounds to believe that funds would be available to Southern Cross to buy back the shares if Zen Resources failed to list on a major stock exchange or was not taken over by a company listed on the ASX.
30 Grande says that the oral statement by Tjandra that if Southern Cross was not in a position to honour the SCI Buy Back Representation he would buy back the shares personally from Grande, which it describes as the defendant's Buy Back Provision, was conduct in trade or commerce and was a representation of Tjandra's then current state of mind that he intended to honour the representation. Grande says it also a representation in respect to a future matter within the meaning of FTA s 9(1). Grande says that the defendant's Buy Back Provision was misleading or deceptive or likely to mislead or deceive in that Tjandra had no intention to honour the representation and did not have reasonable grounds for making it. Grande says that in making the representation Tjandra did not have any reasonable grounds to believe that funds would be available to him to buy back the shares if Zen Resources failed to list on a major stock exchange or was not taken over by a company listed on the ASX and Southern Cross had failed to honour the SCI Buy Back Representation.
31 Grande says that in reliance upon the SCI Buy Back Representation and the defendant's Buy Back Provision, Jun executed the Acceptance of the Offer on Grande's behalf and paid the $2.25 million consideration to Southern Cross. Grande says that the takeover or listing did not occur by 5 September 2010 and Southern Cross did not honour the SCI Buy Back provision. Grande says that, despite demand, Tjandra has not bought back the Zen Resources shares from Grande.
32 Grande says that its Zen Resources shares are worth nothing or have only nominal value. Grande says that by reason of Tjandra's misleading or deceptive conduct it has suffered loss or damage of $2.25 million, being the amount it paid for the Zen Resources shares.
The defendant's Buy Back Provision
33 The major factual controversy is whether or not Tjandra made the defendant's Buy Back Provision. There were four people present at Tjandra's house on 5 September 2008. Jun says that prior to Tjandra signing the Letter of Offer, Jun said to Tjandra words to the effect 'what would happen if Southern Cross was not in a position to honour the buy back provision' and Tjandra responded with words to the effect that if that happened he did not have to worry because Tjandra personally would buy back the shares purchased by Grande from Southern Cross. Tjandra denies that any such conversation took place. Simone says that she has never heard Tjandra say to Jun that he would personally buy back the shares in Zen Resources from Grande. Hengky did not give evidence.
34 The plaintiff says that Jun's evidence should be preferred to that of Tjandra because Tjandra was not a credible or reliable witness and the plaintiff's version is supported by other objective circumstances. The plaintiff says that Simone's evidence that Tjandra did not say to Jun that he will personally buy back the shares if Zen Resources failed to list or was not taken over should be disregarded because she was not present all the time during the meeting. The plaintiff also says that a Jones v Dunkel inference should be drawn against the defendant because he did not call Hengky to give evidence.
35 The plaintiff submitted that Tjandra was an unsatisfactory witness. It was submitted that Tjandra tried to argue his case in the witness box, he tried to twist some fairly obvious facts around and he sought to minimise his personal role. The plaintiff put forward eight matters in support of that contention. I have considered each of those matters. Those matters lead me to the conclusion that I should not unequivocally accept the evidence of Tjandra as credible and reliable. But they do not, individually or collectively, cause me to reject Tjandra's evidence.
36 I find that Tjandra did not say to Jun that if Southern Cross was not in a position to buy back the Zen Resources shares then he would, upon request by Grande, buy back the shares personally. I make that finding having regard to the evidence of Jun, the evidence of Tjandra and the evidence of Simone. I have come to that finding by placing primary emphasis on the objective factual surrounding circumstances and the inherent probabilities, together with the documents before and after the Letter of Offer and the Acceptance of the Offer were signed.
37 The plaintiff advanced four circumstances which it said supports Jun's evidence that Tjandra gave a personal undertaking to buy back the shares if Southern Cross did not do so. First, it submits there was good reason for Jun to seek a personal undertaking from the defendant and to rely on that because Southern Cross is a British Virgin Islands company and is outside the reach of Australian law. It was submitted that obtaining such an undertaking had a double function: to encourage Tjandra to make sure in the first place that Southern Cross repurchased the shares and, failing that, to get him to repurchase them himself if Southern Cross was not in a position to do so. It was submitted that Tjandra reminded Jun of Southern Cross' British Virgin Islands status in written communication. The written communication referred to by the plaintiff is an email of 27 December 2010 from Tjandra to Jun in response to an email from Jun earlier that day. In Jun's email he warned that if the issue of his Zen Resources shares was not resolved he would have to resort to more drastic methods which included sending information to ASIC and the ASX. It was in response to that email that Tjandra stated, amongst other things, that the shares Jun had bought were of a British Virgin Islands company. That exchange does not render it more likely that Tjandra gave a personal undertaking to buy back the shares at the 5 September 2008 meeting. That Southern Cross is a British Virgin Islands company may be a good reason for Jun to seek a personal undertaking from Tjandra but, as I refer to later in these reasons, there is no evidence that Jun raised that issue at any time before the 5 September 2008 meeting notwithstanding that he had given thought to obtaining some security for his investment. Jun made the investment in Zen Resources at least in part because of his relationship with the Pramoko family and in particular, Hengky. It was Hengky who introduced Jun to the investment. When Jun decided to invest in Zen Resources he contacted Tanto and Hengky because they were the people he felt he should communicate his decision to and because he knew that their approval was important. Jun knew that Southern Cross was the vehicle by which the Pramoko family was participating in the project. Jun believed that the Pramoko family was a wealthy family. It is not at all obvious that Jun would consider a promise by Southern Cross to buy back the shares to be an inadequate security or that if he did so he would seek a personal undertaking from Tjandra.
38 The second circumstance referred to by the plaintiff is that Jun trusted Tjandra; he sought a personal assurance about buying back the shares from Tjandra when his brother Hengky was present. I place little weight on that argument. Hengky was Jun's friend, not Tjandra. Jun trusted Hengky and Tanto. He had discussed the investment with them. Tanto was the head of the family and Hengky was the one who had referred the investment to Jun.
39 The third matter referred to by the plaintiff is that Tjandra gave personal undertakings to the seed investors in Zen Resources. That is a contested matter. The evidence in support of it is a letter written by Tjandra, Soong and Loong to an investor which said that in consideration of the investor subscribing for shares in Zen Resources they agreed that if the price of the shares on listing is less than six times the subscription price, they would jointly and severally credit to the investor's account such additional number of shares in Zen Resources such that the aggregate listing price will be six times the subscription price. In an email of 18 March 2008 to another investor, Soong said that if there was any shortfall in the IPO price then the promoters, that is himself, Tjandra and Loong, would transfer such number of shares to the investors such that there will be at least six times return at the IPO stage. Counsel for the plaintiff submitted that these were personal undertakings by Tjandra, Soong and Loong. In cross-examination Tjandra denied that this 'top up promise' was a personal undertaking by himself, Soong and Loong. He said that they made the undertakings on behalf of Southern Cross and the companies through which Soong and Loong held shares in Zen Resources. Tjandra, Soong and Loong did not personally hold shares in Zen Resources. The shares were held by Southern Cross and Soong and Loong's companies. If the promise was a personal undertaking it was a personal undertaking to cause those companies to transfer shares in Zen Resources to the investor. That is a very different undertaking than the personal undertaking Jun alleges Tjandra made at the 5 September meeting. First, the undertaking given to the seed investor was not to refund the subscription price but to give him more shares in Zen Resources. Secondly, it would be Southern Cross, not Tjandra, who would be providing the shares in Zen Resources to be given to the seed investor in fulfilment of the undertaking. Thirdly, the undertaking was the only form of security or assurance given to the seed investor; it was not a personal undertaking in addition to security or assurance given by Southern Cross and Soong and Loong's companies in case they did not fulfil their promises.
40 The fourth matter submitted by the plaintiff is that the letters of demand sent by Jun when the payment for the shares fell due was also addressed to Tjandra personally and was replied to by Tjandra personally. I do not find this advances the argument. The communications between Jun and Tjandra prior to the signing of the Letter of Offer and the Acceptance of the Offer were addressed to Tjandra and Jun personally. That is nothing more than a reflection of the informal nature of the discussions or negotiations. The letter of 12 May 2010 from Grande demanding the buy back of its Zen Resources shares is a demand that Southern Cross buy back the shares. The plaintiff referred to the text messages between Jun and Tjandra between August 2010 and February 2011. In those exchanges Jun refers to himself, not Grande. He asks of news on getting 'my $ $ back' of getting them 'to take me out'. He says 'I really need the money', 'when can I get $ $?' In all those messages Jun is referring to Grande when he says 'I'. Similarly, references by Tjandra, for example 'I will sell the shares to the Japanese' are references to him doing things or causing things to be done by or on behalf of Southern Cross. In none of the text messages does Jun call upon Tjandra to personally buy back his shares. To the contrary, Jun refers to Tjandra's father and Hengky and to 'you and your family'. The messages do not support the argument that Tjandra had given a personal undertaking.
41 Tjandra denies that at the 5 September 2008 meeting he undertook to personally buy back the shares if Southern Cross could not. Tjandra's denial is consistent with the objective circumstances. There is no evidence that Tjandra was anxious for Jun to make the investment. At the time Tjandra believed that the agreement between Zen Resources, the Zen Vendors and Peak Resources was likely to go ahead and the Zen Resources shares would soon be worth much more than 7.5 cents. The prior communications show that Tjandra had been reluctant for Southern Cross to give Jun any security for his investment and had not at any time suggested that he would personally give any security.
42 In her witness statements Simone said that she did not at any time hear Tjandra give such a personal undertaking. Counsel for the plaintiff submitted that Simone's evidence should be disregarded because 'it was evident in cross-examination that [Simone] was not present all the time when the contract was dealt with on 5 September 2008'. In cross-examination Simone said that she may not have been present the entire time when Jun, Hengky and Tjandra discussed business matters. She said that Tjandra handed her the two signed copies of the agreement but she could not remember if she saw Tjandra sign the contract. It is possible that, as the plaintiff's counsel submits, Simone did not hear Tjandra give the personal undertaking because she was elsewhere in the house and not present when Tjandra gave the undertaking. However, that is not consistent with Jun's evidence. In his written statement Jun said:
In the presence of his wife Simone and myself and Hengky and the defendant I made several handwritten amendments. I believe the defendant then signed the offer document and gave it to me for signing. Prior to the defendant signing the offer I said to him words to the effect of what would happen if [Southern Cross] was not in a position to honour the buy back provision. The defendant said to me words to the effect that if that happened I did not have to worry because he personally would buy back the shares purchased by Grande from [Southern Cross]. I then signed the acceptance on behalf of Grande.
- In cross-examination counsel for the defendant put to Jun that Jun said that Tjandra undertook a personal obligation in the presence of Hengky and his wife and that there was no discussion with Hengky or Simone about whether he should undertake this obligation. Jun responded:
They probably discussed it beforehand. I don't know, but during that dinner, or rather that meeting, I - there was no discussion.
The following exchange then took place:
Your evidence was there was your prompted request for information, and immediately Mr Tjandra's response. No discussion with his wife or his brother standing in the room?---They were - they were part of the discussion as well, because they were listening to the words that I was reading out from the contract, word for word, and they acknowledge and they nodded whenever I finished a point, and I looked at Tjandra. He agreed, and then I moved on to the next point.
You have added that now, because it wasn't previously your evidence that anyone else was acknowledging or agreeing to anything in that room?---Tjandra agreed to everything. I mean, the points that - - -
Yes, you have now added that there were also - - -?---They were listening in to the agreements as well.
You have added the words that they were acknowledging. That's not correct, is it?---No, it is correct. They were there. They were listening, and they did nod in approval.
44 Secondly, prior to the meeting Jun had considered how to protect his investment if the takeover or listing did not occur, but at no time prior to the meeting did Jun request or make any reference to any protection or assurance in addition to Southern Cross' buy back promise. After Hengky introduced Jun to the investment he had discussed it with Tanto and Tjandra. Jun undertook a due diligence exercise including reading the information memorandum provided to him and having discussions with Tanto, Soong and Loong. Jun considered the issue of security for his investment. On 20 August Jun drafted and sent to Tjandra a draft offer which contained the undertaking by Southern Cross to buy back the shares if the takeover or listing was not successful within six months. It was Jun who proposed the Southern Cross buy back undertaking as a means of security for his investment. Jun did not at any time prior to the 5 September meeting express any doubt about the sufficiency of that undertaking or seek any additional security or assurance.
45 Thirdly, Jun did not request that Tjandra put his personal buy back undertaking into writing. Nor did Jun make any note of it. There is no reference to such a personal undertaking in any of the emails or SMS messages between them. Fourthly, Jun did not request that Tjandra personally buy back the shares. His requests were that Southern Cross buy back the shares or that Tjandra make arrangements with his father for Jun to be paid back.
46 Fifthly, the formal letter of demand of 12 May 2010 refers to the Southern Cross buy back undertaking and demands that Southern Cross buy back the shares but makes no reference to a personal undertaking by Tjandra or request that Tjandra buy back the shares. Sixthly, the Malaysian lawyers' letter of demand which preceded the commencement of proceedings is addressed to Southern Cross, refers to the Southern Cross undertaking and demands that Southern Cross buy back the shares but makes no reference to Tjandra's personal undertaking or demand that he buy back the shares.
47 Hengky was present at the meeting but did not give evidence. The plaintiff says a Jones v Dunkel inference should be drawn against the defendant. The rule in Jones v Dunkel was explained by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361:
The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. …The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn …
The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party [63] - [64].
48 Whether the Jones v Dunkel principle can or should be applied depends upon whether the conditions for its operation exist. One condition is that the witness' absence is unexplained. That condition is satisfied if no explanation is offered for the absence of the witness. A satisfactory explanation for the absence of a witness may be that he lives overseas. Hengky lives in Indonesia. However, Tjandra did not offer that as an explanation for why he had not called Hengky as a witness. When he was asked in cross-examination why he had not called Hengky as a witness, Tjandra said he did not call him because the plaintiff did not ask Tjandra to call Hengky, did not make Hengky a defendant and did not make Southern Cross a defendant. Later Tjandra said that he did not ask Hengky to give evidence because Jun had never formally in writing asked Tanto or Hengky for his money back and that is why Hengky did not appear as a witness. Tjandra's explanation is not clear and it was not elaborated upon in re-examination. Tjandra has given an explanation for Hengky's absence but it is not a satisfactory explanation.
49 The unexplained failure by a party to call a witness may, but not must, in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted that party's case: Cafe v Australian Portland Cement Pty Ltd [1965] NSWR 1364; (1965) 83 WN (Pt1) (NSW) 280, 287. In this case I decline to draw the inference because Tjandra's evidence is supported by the evidence of Simone and the objective circumstances and documentary material. An inference adverse to Tjandra is open to be drawn and it is a factor to be weighed in the balance and may add to the weight to be given to Jun's evidence. However, Simone's evidence, the objective circumstances and documentary evidence support the evidence of Tjandra. I do not draw an inference that Hengky's evidence would not have assisted Tjandra.
SCI Buy Back Representation
50 The plaintiff says that by signing the Letter of Offer Tjandra engaged in misleading or deceptive conduct in contravention of FTA s 10, TPA s 52 and ASIC Act s 12DA as follows. Clause 5 is a representation in trade or commerce and is a representation as to a future matter. Tjandra made the representation by signing the Letter of Offer. The representation entailed two implied representations. The first representation is that SCI intended and had the capacity to perform the promise. The second representation is that there were reasonable grounds for making that representation. Independently of any implied representation as to the existence of reasonable grounds for the representation, FTA s 9 provides that where a person makes a representation with respect to a future matter and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading and the onus of establishing that the person had reasonable grounds for making the representation is on that person.
Breach of contract and misleading conduct
51 In Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 (Accounting Systems) the majority, Lockhart and Gummow JJ, held that contractual warranties are conduct for the purposes of TPA s 52. Their Honours said that where the conduct relied upon involves a representation as to a future matter, which is contained purely in a contractual promise, than a case for contravention of TPA s 52 will involve consideration of the extra steps spelled out in TPA s 51A and that some of the issues that would arise in such a case are discussed by Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217, 233 - 241 (Futuretronics).
52 In Futuretronics the defendant made a successful bid at an auction but later sought to avoid the contract of sale. Ormiston J found that the defendant had made an oral contract for purchase but the vendor was prevented from enforcing the contract because it was not in writing. The plaintiff alleged two misrepresentations: that the bid was genuine and that the defendant intended to be bound by the auction conditions. Ormiston J held that a contractual promise would amount to an implied representation that the promisor had an intention to carry out that promise and if he had no such intention then he would be guilty of misleading or deceptive conduct. Furthermore, a representation connotes a present ability to fulfil that promise which, if shown to be untrue at the time of making, would characterise the implied representation as misleading or deceptive.
53 There are different views as to the potential application of TPA s 52 (FTA s 10) to contractual promises, for example, see Derek Neve 'Concurrent Liability for Breach of Contract and Breach of Section 52' (2005) 33 ABLR 249, 255. However, the authorities, including Accounting Systems and Futuretronics, are to the effect that a contractual promise will at least imply representations as to present intent and ability to perform them and those representations are representations with respect to future matters within TPA s 51A (FTA s 9).
Tjandra made the representations
54 The plaintiff's case is that by signing the Letter of Offer Tjandra made the relevant representation notwithstanding that he, Tjandra, executed the agreement on behalf of Southern Cross. Individual directors or employees of corporations which contravene FTA s 10 (TPA s 52) due to the conduct of the director or employee can be liable for the contravention on one of two bases. First, they may be primarily liable. A director who is responsible for the breach by the corporation will be personally liable. In Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 Carr, Tamberlin and RD Nicholson JJ said:
The authorities show that a director of a corporation who acts on its behalf in the course of trade or commerce also acts himself or herself in trade or commerce and, if the corporation is liable under a State Fair Trading Act for their conduct, they also attract primary liability under the same statute … It is not correct, as the case for the third respondent asserted, that the principle recognised in these authorities is applicable only when there is a finding of 'separate conduct' by the director; that is, conduct other than in the capacity of director or agent [13].
- See also Houghton v Arms (2006) 225 CLR 553.
55 Secondly, FTA s 79 (TPA s 82), when read together with FTA s 68 (TPA s 75B), empowers the court to make an award of damages against any person knowingly concerned in contravention of the Act by a corporation. A claim for damages under FTA s 79 (TPA s 82) can be made against anyone involved in the contravention as that term is interpreted under TPA s 75B.
56 The plaintiff's case is that the Letter of Offer contained implied representations that Southern Cross intended and had the capacity to perform the promise to buy back the shares and had reasonable grounds for making that representation. Tjandra signed the letter in his capacity as a director of Southern Cross. He did not purport to act as a principal. He signed the letter acting within his authority as an agent for Southern Cross. However, that does not mean he escapes personal liability under FTA s 79. Tjandra is a person to whom FTA s 10 applies. On behalf of Southern Cross, he made the representations in the Letter of Offer. Those representations were made by him as well as by Southern Cross. If the representations were misleading or deceptive, then he has a primary liability under that section which does not depend upon it being established that he knew that the representations in the Letter of Offer were misleading or deceptive.
57 The plaintiff says that the Letter of Offer contains the implied representations that Southern Cross had the intention and capacity to buy back the shares if the listing or takeover did not occur. I find that by signing the Letter of Offer Tjandra made those representations to Grande.
58 The plaintiff says that each of those representations is a representation with respect to a future matter and therefore subject to the deeming provision in FTA s 9.
59 The question whether FTA s 9 applies in relation to representations implied from contractual promises arises because those representations relate to present intent and ability, albeit as to future performance. The preponderance of authority is that representations as to intent and ability implied from promises are representations with respect to a future matter and fall within TPA s 51A or FTA s 9: Futuretronics (241); Accounting Systems (505 - 506); Concrete Constructions Group Ltd v Litevale Pty Ltd (2002) 170 FLR 290, 349; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 [94] - [108].
60 It follows that Tjandra's implied representation that Southern Cross intended to buy back the shares if the listing or takeover did not occur and had the capacity to do so is, by reason of FTA s 9(1), taken to be misleading unless Tjandra had reasonable grounds for making that representation and, by reason of FTA s 9(2), Tjandra has the onus of establishing that he had reasonable grounds for making the representation.
Failure of condition is not reasonable grounds
61 The promise by Southern Cross to buy back Grande's shares was a conditional promise; it was conditioned on Zen Resources not being taken over or listed on a stock exchange. At the time of signing the Letter of Offer Tjandra had reasonable grounds for believing that the condition would not be satisfied and therefore Southern Cross would not be called upon to buy back the shares. That is because there were reasonable grounds for believing that Zen Resources would be taken over by Peak Resources or alternatively be listed on a major stock exchange within two years. However, that does not provide reasonable grounds for representing that Southern Cross intended to buy back the shares and had the capacity to do so if Zen Resources was not taken over by a company listed on the ASX or was not itself listed on a major stock exchange within two years.
62 In his responsive witness statement Tjandra said that when he signed the Letter of Offer he was aware of the buy back clause and he intended at that time that if the clause was ever called upon then Southern Cross would honour it. He further says that he saw no reason why his father or Hengky would prevent such a buy back.
63 The question whether there are reasonable grounds for making a particular representation is an objective not a subjective question. A genuine or honest belief on the part of the representor is relevant but not sufficient to show reasonable grounds: Cummings v Lewis (1993) 41 FCR 559, Sheppard and Neaves JJ at 565. For there to be reasonable grounds for a representation, including a representation as to intention and ability, there must exist facts which are sufficient to make the representation reasonable.
64 Southern Cross was owned and controlled by the Pramoko family. The decision-makers and operators of Southern Cross were Tjandra and Hengky. They were the directors of Southern Cross. Together with their brother, Hendro, they were the shareholders. Tjandra considered that Southern Cross belonged to the Pramoko family, especially Tanto and Hengky. Southern Cross was used to hold profits and investments. Apart from the Zen Resources shares, the principal profits and investments of Southern Cross came from Hengky's oil business. Jun was a close friend of Hengky. Jun had approached Tjandra about investing in Zen Resources after he had spoken to Hengky and Tanto. Furthermore, Tjandra signed the Letter of Offer in the presence of Hengky. Tjandra's evidence, which was not challenged, is that Hengky was aware prior to 5 September 2008 of cl 5 of the Letter of Offer, that is Southern Cross' promise to buy back the shares if Zen Resources was not listed or taken over. Jun had earlier sent a draft Letter of Offer, which included the buy back provision, to Hengky. When Tanto told Jun that he should discuss the details of any investment in Zen Resources with Tjandra, Tanto told Jun that as the Pramoko family was the major shareholder in Zen Resources he would ensure that if Jun invested then his interests would be looked after. Tanto was the head of the Pramoko family and his wishes were likely to prevail. Tjandra's unchallenged evidence is that prior to 5 September 2008 he discussed the buy back clause in the agreement with his father and his father had said that he spoke to Jun and he would sort it out with Jun.
65 The plaintiff's case that there were no reasonable grounds for Tjandra to represent that Southern Cross intended and had the capacity to perform the promise to buy back the shares is that Southern Cross did not have the funds available to buy back the shares or assets which it could realise to raise the funds to do so. No financial statements of Southern Cross are in evidence. Tjandra produced no written evidence of the assets and liabilities, profit and loss or cash flow of Southern Cross. The only bank statement produced by Tjandra is a one page statement of Southern Cross's account with HSBC which shows that on 30 August 2008 the account had a balance of $US43,450 and on 30 September the account balance was $US2,731,968, which was after the deposit of funds by Grande to purchase the Zen Resources shares. There is no evidence, and Tjandra does not claim, that on 5 September 2008 Southern Cross, or its directors or controllers, intended to maintain those funds in its account in case it had to buy back Grande's shares. The directors of Southern Cross did not set aside the money paid over by Grande in case it had to be repaid. There is no evidence of any strategy or plan by the directors or controllers of Southern Cross of how the money would be repaid if it had to be done.
66 Tjandra's evidence is, in essence, that from 2007 Southern Cross received profit from Hengky and in particular from Hengky's successful oil business which had the sole rights from a French company to distribute in Indonesia an oil lubricant known as Total Oil. Tjandra believed that Southern Cross was not in debt, had paid its financial obligations and was receiving profit from Hengky's Total Oil distribution. In his closing submissions Tjandra's counsel submitted that the basis for Tjandra's representation concerning Southern Cross' ability to buy back the shares was his experience of the dealings with his family and his family's company - Southern Cross, Southern Cross' circumstances and the value of the mining tenements of Zen Resources.
67 Tjandra bears the onus of proving that there were reasonable grounds for him to represent that Southern Cross intended and had the capacity to perform the promise to buy back the shares if Zen Resources was not listed or taken over. That does not require Tjandra to prove that Southern Cross had sufficient assets and expected cash flow that it was likely to be able to buy back the shares using its own money. The Court may take into account that a third party was willing to make funds available to Southern Cross without security if Southern Cross became obliged to buy back the shares. The Court may look at the arrangements for the buy back of the shares using the funds of a third party rather than artificially excluding them from consideration because the arrangements were not for the buy back of the shares using Southern Cross' own money. However, the Court must carefully scrutinise an assertion that a third party was willing to advance the necessary funds unsecured. Such willingness would have to be demonstrated, if not as a matter of legal obligation, then as a matter of commercial reality.
68 The court should have regard to commercial reality in assessing whether, at the time the Letter of Offer was signed, there were reasonable grounds for representing that Southern Cross would be able to buy back the shares if Zen Resources was not listed or taken over. Southern Cross' position must be considered by reference to not only its assets and liabilities and forecasted cash flow but also the likelihood that it would have funds available to it from Tanto or Hengky with whom it had no formalised agreement or understanding to fund the buy back. The prospects of obtaining necessary funds from Tanto and Hengky, who are not legally obliged to provide them, must be such as to give rise to something more than a chance that Southern Cross would be able to fund the buy back; the prospects must be sufficient to make it reasonable to represent that Southern Cross would do so.
69 The evidence does not establish that Tanto and Hengky's willingness to provide funds to Southern Cross to buy back the shares provided a sufficiently reliable source of funds by which Southern Cross would be able to buy back the shares if Zen Resources was not listed or taken over. Tjandra has not established that he had reasonable grounds for representing that Southern Cross would buy back Grande's shares in Zen Resources if Zen Resources was not listed or taken over within two years. I make that finding for a number of related reasons. First, it is not inherently likely that someone, even the shareholders and directors of a family company, would advance $2,250,000 unsecured to the company to enable it to purchase shares in an unlisted company whose only assets are unproven reserves and which has failed to achieve its purpose of being listed or taken over by a listed company within two years, when they were under no legal obligation to do so.
70 Secondly, Tanto and Hengky had embarked on the project using a corporate vehicle which did not expose them to personal liability and there is no evidence that they have undertaken any personal liability in relation to the project. The assurance given to the seed investors in Zen Resources involved the transfer of more shares in Zen Resources and not the assumption of any personal liability by any of the promoters. Thirdly, to the knowledge of Hengky and Tanto, Tjandra caused Southern Cross to undertake to buy back the Zen Resources from Jun's company as protection against the risk of the investment failing rather than giving any personal guarantees or assurances. That is notwithstanding that Tanto told Jun that, as the Pramoko family was the major shareholder in Zen Resources, he would ensure that if Jun invested in the project then his interests would be looked after.
71 Fourthly, at no time did Tjandra take any steps to cause Southern Cross to buy back Grande's Zen Resources shares. The non-fulfilment of the buy back promise by Southern Cross does not of itself establish that Southern Cross was not able, or did not intend, to perform it when it was made or that there were not reasonable grounds for Tjandra to represent that it would. However, the failure of Tjandra to cause Southern Cross to buy back the shares is evidence from which it might be inferred that there were no reasonable grounds for him to represent that it would do so. Whether or not such an inference might or should be made depends, amongst other things, on the interval of time between the representation and the non-fulfilment of the promise and evidence of changed circumstances. The only evidence of changed circumstances between the time of the representation and the non-fulfilment of the promise is that the proposed takeover by Peak Resources did not proceed and efforts to have Zen Resources listed or taken over failed. Those are not relevant circumstances because they are the very contingency upon which the promise was conditioned.
72 Fifthly, Tanto and Hengky did not give evidence. The unexplained failure by a party to call a witness may, in appropriate circumstances, support an inference that the uncalled evidence would not have assisted the parties' case and may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn: Kuhl v Zurich Financial Services Ltd [63]. The conditions for drawing a Jones v Dunkel inference against Tjandra exist. Neither Tanto nor Hengky are resident in Australia. However, that is not itself a reason why Tjandra could not have called them to give evidence. When asked why he did not call Tanto as a witness, Tjandra twice answered, 'because I haven't'. When asked why he did not call Hengky as a witness, Tjandra first said that he did not call Hengky because the plaintiff had not asked him to call Hengky and then subsequently said it was
because [Jun] has never formally in writing asked my father for his money back - or Hengky for that matter. He has gone … through me and I have relayed that message to my father. So my father has always told me why isn't [Jun] to talk to me?
- That is an inadequate explanation for Tjandra's failure to call his father and brother. I draw the inference that the evidence of Tanto and Hengky would not have assisted Tjandra's case that he had reasonable grounds for representing that Southern Cross would buy back Grande's shares if Zen Resources was not listed or taken over within two years.
Tjandra engaged in misleading or deceptive conduct
73 For the reasons I have stated, I find that Tjandra engaged in trade or commerce in misleading or deceptive conduct in contravention of FTA s 10. It is unnecessary to consider whether or not Tjandra was involved in a contravention on the ground that he was knowingly concerned in or party to a contravention of FTA s 10 (TPA s 52) by Southern Cross as an accessory pursuant to FTA s 68 (TPA s 75B). It is unnecessary to consider the plaintiff's claims under the TPA or ASIC Act.
Reliance
74 FTA s 79 provides that any person who has suffered loss or damage by conduct of another person that was done relevantly in contravention of s 10 may recover the amount of the loss or damage from that other person. FTA s 77 provides, in effect, that if a plaintiff has suffered, or is likely to suffer, loss or damage by reason of conduct of the defendant that contravened s 10, the court may make such order as appropriate against the defendant for the purpose of compensating the plaintiff wholly or in part for the loss or damage or preventing or reducing the extent of the loss or damage. Causation is essentially a question of fact. The offending conduct need not be the only cause of the plaintiff's loss or damage. It is sufficient if it plays a part in the plaintiff's loss or damage. The plaintiff says it suffered loss or damage by buying the Zen Resources shares because they are worth nothing or are of only nominal value. The plaintiff says that it bought the shares in reliance upon Tjandra's representation that Southern Cross would buy back the shares if it was not listed or taken over and hence the plaintiff's loss or damage resulted from Tjandra's misleading or deceptive conduct.
75 Jun's evidence is that the buy back clause was necessary to protect Grande's investment and Grande would not have purchased the Zen Resources shares without the buy back clause. I accept that evidence. It is consistent with Jun's conduct in inserting the buy back clause in the Letter of Offer. Counsel for the defendant submitted that Jun carried out due diligence enquiries and, in effect, relied upon his own assessment of the investment in deciding to purchase the shares. As I have said, the misleading conduct need not be the only cause of a plaintiff's loss or damage. I find that Tjandra's misleading conduct played a sufficient part in Jun's decision that Grande buy the Zen Resources shares. The loss or damage Grande suffered from buying the shares was relevantly caused by Tjandra's misleading or deceptive conduct.
Proportionate liability
76 The defendant pleads that the plaintiff's claim is for economic loss and the plaintiff and its representatives and advisors including Jun are concurrent wrongdoers and the claim is an apportionable claim within the meaning of TPA s 87CB, alternatively Australian Consumer Law 2010 (Cth) s 87CB and by TPA s 87CD, alternatively Australian Consumer Law s 87CD, alternatively ASIC Act s 12GF(1)(B), the liability of the defendant is limited to an amount reflecting that proportion of the damage or loss claimed by the plaintiff that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss which apportionment is to be made considering the facts and matters pleaded by the defendant. Although not pleaded, Civil Liability Act 2002 (WA) pt 1F applies proportionate liability to a claim for economic loss in an action for damages under the FTA based on misleading or deceptive conduct.
77 The only concurrent wrongdoer alleged by the defendant is Jun. A concurrent wrongdoer is a person who is one of two or more persons whose act or omission caused, independently of each other or jointly, the damage or loss that is the subject of the claim. Jun conducted a due diligence before deciding to undertake the investment. In the defendant's closing submissions it is submitted that 'the failure of that due diligence to predict the current position is a cause of the loss'. The evidence does not establish that assertion. The defendant's claim that damages should be apportioned fails.
Damages
78 The plaintiff may recover the amount of any loss or damage suffered by conduct of Tjandra in contravention of FTA s 10 (TPA s 52). The plaintiff's case is that the damages to which the plaintiff is entitled is the difference between the amount it paid for the Zen Resources shares and the value of those shares at the date of trial.
79 In the case of the purchase of an asset induced by misleading conduct, the general measure of damages, apart from consequential losses, is obtained by deducting the true value of the asset at the date of the purchase from the purchase price. In HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 the respondent entered into a contract to purchase a shopping arcade in reliance upon misleading statements. The respondent tried to sell the arcade without success. The High Court held that the correct measure of damages was obtained by deducting the true value of the arcade at the date of purchase from the purchase price and in determining the true value at the date of purchase regard might be had to subsequent events. The court went on to consider an alternative argument by the respondent that the compensation should be measured by the difference between the purchase price and what was left in the hands of the respondent at the time of trial. The court indicated at [63] - [67] that there may be circumstances in which that approach would be appropriate. That approach is appropriate in this case. A plaintiff induced by misleading conduct to enter into a transaction is entitled to be fully compensated. Where the plaintiff would not have entered into the transaction but for the misleading conduct and the investment cannot be realised then the appropriate measure of damages is the difference between the amount paid by the plaintiff for the asset and the value of the asset at the date of trial.
80 The plaintiff relied upon the evidence of Adam Myers, a chartered accountant with experience in corporate valuations. Mr Myers was instructed to provide his opinion whether there exists any market for the sale of the Zen Resources shares and whether it is possible to place a value on the Zen Resources shares and if so, what the current market value would be in Australia. Mr Myers described his engagement as a limited scope valuation engagement, that is an engagement to provide a valuation report where the scope of the work is restricted and he is not free to employ the valuation approaches and methods that he would employ but for the restriction. In this case the restriction arises from the lack of financial and other information available about Zen Resources and its assets.
81 Mr Myers concluded that no market exists for the sale of Zen Resources shares. Mr Myers then addressed the question of the market value of the Zen Resources shares by applying a number of different valuation methods. He could not apply the quoted market price basis because Zen Resources is not publicly listed and its securities are not publicly traded. The lack of an active market for Zen Resources shares means the shares are illiquid and pricing information (trading share price) is unavailable.
82 Mr Myers then addressed an asset based valuation method which estimates the market value of a company's securities based on the realisable value of its identifiable net assets. In his report Mr Myers said he was unable to value Zen Resources shares on that basis because he has not received any audited financial statements or recent management accounts for Zen Resources and its subsidiaries. Mr Myers is aware that Zen Resources is involved in exploration activity and its assets include tenement holdings through subsidiary companies. The valuation of those tenements requires expertise of an independent geologist. None of the existing tenement assets have been independently valued by a geologist and therefore the asset based methodology could not be applied.
83 Mr Myers could not apply the capitalisation of future maintainable earnings method because Zen Resources has no active mining operations and does not have a stable earnings figure to which a multiple can be applied. Mr Myers did not apply the discounted future cash flows method because he did not receive any information that Zen Resources exploration status has gone beyond preliminary stages and therefore there are no reasonable grounds on which to forecast future cash flows. Mr Myers could not apply the market based assessment because there is insufficient information of JORC compliant resources and reserve estimates of Zen Resources.
84 Having addressed these various valuation methods Mr Myers concluded that in the absence of the information required to undertake a valuation, it is his opinion that the market value of the Zen Resources shares is nil or nominal. In oral evidence Mr Myers explained that in essence he looked at standard valuation methodologies and sought information to undertake each of those valuation methodologies and in each instance found a lack of information which led him to conclude that he could not undertake that approach. Mr Myers then looked at what an investor would require to make an investment. He concluded that it is unlikely that there would be a purchaser in a market. Counsel for the plaintiff submitted that the effect of Mr Myers' evidence is that the Zen Resources share have a nil or nominal value.
85 The defendant argued that the Zen Resources shares have value because its subsidiaries, Zen Mining and Zen Minerals, hold valuable tenements. The evidence shows that the exploration of the tenements has not gone beyond preliminary stages. None of the tenements have been proved up to JORC standards. The financial records available show that the subsidiaries have no substantial equity.
86 The plaintiff must prove the amount of the loss or damage it suffered on the balance of probabilities and with as much precision as the subject matter reasonably permits: Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 [37] (Hayne J). Where damages are uncertain for lack of evidence, difficulties of assessment are in general resolved against the party who could or should have provided the evidence: Grainger v Williams [2009] WASCA 60 (McLure JA). Here, the lack of evidence arises from the lack of financial statements of Zen Resources. Zen Resources is registered in the British Virgin Islands. The plaintiff was unable to obtain the relevant information. The defendant, although a former director of Zen Resources, did not attempt to obtain such information from the company or its current directors.
87 The evidence is sufficient to establish that there is no market in Zen Resources shares. No sale of Zen Resources shares has taken place since August 2009. Such financial information as is available does not establish that Zen Resources subsidiaries, Zen Mining and Zen Minerals, have any substantial value. The evidence does not establish that the exploration and assessment of the tenements held by those companies has reached a stage which enables any value to be placed upon them. Nevertheless, Zen Resources, through its subsidiaries, holds tenements which might have some value. It is difficult to assess that value. For the reasons which follow this is an appropriate case for granting relief under FTA s 77 rather than an award of damages under FTA s 79.
Relief under FTA s 77
88 The plaintiff claims relief under FTA s 77 which enables the court to make such orders as the court thinks appropriate to compensate wholly or in part the person who has suffered loss or damage by misleading conduct.
89 Courts have made orders under TPA s 87 and Corporations Act 2001 (Cth) s 1325 setting aside a transaction where an assessment of loss of damage which involved a plaintiff retaining an asset acquired under the transaction was exceedingly difficulty: Rapid Roofing Systems Pty Ltd v Natalise Pty Ltd [2007] QCA 94 [80] - [83]; ; Stumer Investments Pty Ltd v Azzura Holdings Pty Ltd [2010] QSC 352 [40]; APIR Systems Ltd v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45 [54]. The same considerations apply to FTA s 77.
90 In Adams v Morellini [2010] WASC 61 the plaintiff claimed damages for misleading or deceptive conduct. They suffered loss when, in reliance upon representations by the defendant as to the circumstances surrounding the proposed public float of a mining company (Meridian Mining Ltd) they invested in Meridian's shares. They claimed that the shares they acquired were worthless and that the loss that each of them sustained was the direct result of the defendant's misleading conduct. The plaintiffs did not call any evidence which would allow a precise determination of the real value of their shares at the date of acquisition or at the date of trial. Blaxell J held that the plaintiffs were 'locked in' to their transactions once they purchased the shares; it would have been impractical and unrealistic for them to attempt to sell their shares. In view of those findings Blaxell J considered the court should not adopt the normal rule for assessment of damages and that a just outcome was to be achieved by appropriate orders under FTA s 77 rather than by awards of damages under s 79. His Honour ordered the defendant to pay to the plaintiffs the amount they paid for the shares, together with interest, and ordered the plaintiffs to transfer their shares to the defendant.
91 In this case Grande is locked into its investment. There is no market for Zen Resources shares. There is no buyer for such shares. The intrinsic value of Zen Resources shares, if any, is derived from the tenements held by its subsidiaries. The mineral resources in the tenements have not been established to be economically feasible for extraction. The resources may have some value but that cannot be calculated. The plaintiff has suffered loss or damage because whilst the Zen Resources shares may have some value derived from the tenements held by its subsidiaries, the shares are worth much less than $2.25 million. In all the circumstances the appropriate order is that Tjandra pay to Grande $2.25 million and Grande transfer to Tjandra its Zen Resources shares within 28 days of receiving a written request. Such written request may only be sent by Tjandra within 28 days of payment of the amount of $2.25 million referred to.
Interest
92 The plaintiff claims interest on such damages as are awarded. The claim is pursuant to Supreme Court Act 1935 (WA) s 32 at the rate of 6% per annum from the date such damage was incurred until judgment or payment. In its submissions the plaintiff submitted that interest should be awarded from 10 September 2010 on the basis that the two year buy back period expired on 5 September 2010 and the purchase price for the shares had been paid on 9 September 2008.
93 Interest is recoverable pursuant to Supreme Court Act s 32. This provision provides some protection against the late payment of money recovered by enabling the court to compensate the plaintiff for having been kept out of his money. Section 32 provides that the court may order interest to be paid on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect. The plaintiff's delay in commencing proceedings is a factor relevant to the discretion to award interest. To ignore the time which has elapsed prior to the trial of the claim may encourage plaintiffs to treat defendants as a kind of risk free, interest bearing investment: Nella v Kingia Pty Ltd [1989] ATPR 40-952, 50,405 (French J). In this case it is appropriate that Tjandra pay interest at 6% on the sum of $2.25 million from the date of the commencement of the action, 14 December 2011, to the date of judgment, being the sum of $362,835.62.
2
19
7