Gulabovski v Integrity Financial Planners Pty Ltd
[2021] VCC 842
•25 June 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-05799
| Jimmy Gulabovski | Plaintiff |
| v | |
| Integrity Financial Planners Pty Ltd | Defendant |
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JUDGE: | Her Honour Judge Brimer | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2, 3, 4, 5, 10, 11 & 12 March, 30 April 2021 | |
DATE OF JUDGMENT: | 25 June 2021 | |
CASE MAY BE CITED AS: | Gulabovski v Integrity Financial Planners Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 842 | |
REASONS FOR JUDGMENT
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Subject:CONTRACT
Catchwords: ASSIGNMENT – Whether assignee is proper plaintiff to proceeding – Validity and enforceability of deed of assignment – Whether causes of action are rights under agreement
NOTICE – Whether plaintiff is legal or equitable assignee – Whether plaintiff provided express notice of assignment to defendant
TERMINATION – Financial planning advisor licence agreement – Australian financial services licensee – Corporate and individual authorised representatives – Whether corporate authorised representative had notice or knowledge of termination – Whether corporate authorised representative consented to termination – Credibility issues
BREACH – Failure to comply with notice requirements in agreement – Termination by mutual agreement
ESTOPPEL – Whether plaintiff is estopped from asserting breach by reason of conduct of corporate authorised representative
LOSS OR DAMAGE – Loss of book of clients – Causation
Legislation Cited: Corporations Act 2001 (Cth) ss 477(2)(c), 917B, 917E and 917F(1); Property Law Act 1958 (Vic) s 134
Cases Cited:Briginshaw v Briginshaw (1938) 60 CLR 336; Cardwell Shire Council v Calabese (1975) 49 ALJR 164; Chappel v Hart (1998) 195 CLR 232; Commonwealth v Verwayen (1990) 170 CLR 394; Consolidated Trust Company Limited v Naylor [1936] HCA 33; Crown v Cosmopolitan (2016) HCA 26; Dadwal v Tax Practitioners Board [2018] AATA 2878; Jones v Dunkel (1959) 101 CLR 298; Native Bond Pty Ltd (Controller Appointed) v Cant [2016] VSC 206; Owners of Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285; Pentridge Village Pty Ltd v Capital Finance Australia Ltd [2018] VR 633; Szepesvary v Weston [2018] FCA 87; Walton Stores v Maher (1988) 164 CLR 387
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Galvin QC Mr S Schrapel | Hendersons Legal |
| For the Defendant | Mr P Wallis QC Ms S Jacobson | Hope & Co Lawyers |
HER HONOUR:
The claim
1In or around December 2014, Great Financial Pty Ltd (in liquidation) (Great Financial) and the defendant, Integrity Financial Pty Ltd (Integrity) entered into a Financial Planning Advisor Licence Agreement (the Agreement).[1] Great Financial was appointed Integrity’s corporate authorised representative for the purpose of giving financial planning, life insurance and investment advice under Integrity’s Australian financial services licence. Great Financial was a corporate authorised representative of Integrity from 6 December 2014 to 13 November 2015.
[1] CB 1046–1068.
2The plaintiff, Jimmy Gulabovski (Mr Gulabovski) sues pursuant to a deed between himself and Great Financial’s liquidator dated 8 June 2018, purporting to assign any causes of action Great Financial may have against Integrity for breach of the Agreement (Deed of Assignment).[2]
[2] Schedule A to the Deed of Assignment (CB 2911).
3Mr Gulabovski claims that Integrity breached the Agreement by:
(a) without notice to and without the knowledge or consent of Great Financial, on 13 November 2015 terminated the Great Financial Agreement and deregistered Great Financial as an authorised representative of Integrity with the Australian Securities and Investments Commission (ASIC); and
(b) without the knowledge or consent of Great Financial, on 14 November 2015 entered into a Financial Planning Advisor Licence Agreement with Supacoach Pty Ltd (Supacoach)[3] and allocated all of Great Financial’s clients to Supacoach (the Supacoach Agreement).[4]
[3] Supacoach was incorporated on 24 September 2015.
[4] Mr Galvin referred to termination or repudiation of the Agreement in his closing submissions.
Repudiation was not pleaded — it does not appear in the Statement of Claim (CB 4–7).
4Further, Mr Gulabovski claims that Integrity failed to pay fees and commission to Great Financial after 6 February 2016.[5]
[5] Integrity pleaded that in the period 14 November 2016 to 2 February 2016, Great Financial received
commissions from Integrity in error totalling $31,476.65: see Further Amended Defence dated 10 August 2020, [21] (CB 48–57). Commissions in connection with Great Financial’s clients were subsequently paid to Supacoach.
5Mr Gulabovski claims loss and damage in respect of the market value of Great Financial’s client book as valued by his expert witness, Andrew Firth (Mr Firth).[6]
[6] Mr Gulabovski accepted that he cannot claim both the commissions and the market value of the client
book. As such, Mr Gulabovski elected to claim only the market value of the client book.
6Integrity denies it breached the Agreement and contends that Great Financial had notice or knowledge of and consented to the termination of the Agreement, deregistration of Great Financial as a corporate authorised representative, entry into the Supacoach Agreement and allocation of Great Financial’s clients to Supacoach (the plan).[7]
[7] It was not disputed that Mr Gulabovski bears the onus of proof on absence of notice and knowledge of
the plan.
7Integrity’s position is that Great Financial’s sole director at the relevant time, Mr Spiro Politis (Mr Politis)[8] had notice and knowledge of the plan and consented to it, which notice, knowledge and consent was attributable to Great Financial.
[8] Sole director of Great Financial from 1 May 2015 to 17 December 2018.
8Alternatively, the former sole director of Great Financial, Grant Hope (Mr Hope)[9] and Great Financial’s financial adviser at the relevant time, Chris Haggart (Mr Haggart)[10] had the requisite notice and knowledge and provided the requisite consent to the plan, which was attributable to Great Financial.
[9] Sole director of Great Financial from 5 December 2013 to 1 May 2015.
[10] Financial advisor / individual authorised representative at Great Financial from 22 June 2015 to 30
October 2015, then at Supacoach until 24 June 2016. Mr Haggart was the director of Planwealth Services Pty Ltd (Planwealth), which was incorporated on 28 October 2014.
9Alternatively, Mr Gulabovski is estopped from asserting that Integrity breached the Agreement by reason of the conduct of Mr Politis, Mr Hope and/or Mr Haggart[11] in requesting Integrity to terminate the Agreement as part of the transfer of Great Financial’s clients to Supacoach, upon which requests it relied.
[11] Integrity pleaded that by reason of Mr Politis’ conduct, Mr Gulabovski is estopped from disputing the
lawfulness and validity of the matters alleged: see Further Amended Defence dated 10 August 2020, [20B] (CB 54). However, Integrity contended on the evidence at trial, Mr Gulabovski is estopped from asserting that Integrity is in breach of the Agreement by reason of any conduct of Mr Politis, Mr Hope and/or Mr Haggart in requesting termination of the Agreement.
10Integrity challenges the lawfulness of the purported assignment to Mr Gulabovski and contends Mr Gulabovski is not a proper plaintiff.[12]
[12] The assignment was not made in accordance with the Agreement and insufficient notice to satisfy the
requirements of s 134 of the Property Law Act 1958 (Vic) was given.
11In respect of the claimed loss and damage, Integrity submits that even if it breached the Agreement, the breach did not cause Mr Gulabovski any loss because Great Financial did not have an individual authorised representative at the time of Integrity’s alleged breach, meaning Great Financial could not provide services to clients and Mr Politis was intent on taking steps to put Great Financial in liquidation. Further, Mr Gulabovski cannot prove which clients were Great Financial’s clients and not Mr Haggart’s clients pursuant to a deed entered into around June 2015 (the Haggart Agreement).[13] The Haggart Agreement allowed Mr Haggart to take such “CH Clients” and the rights to income streams generated by them away from Great Financial if he resigned or the Haggart Agreement terminated. Mr Gulabovski did not call any evidence to establish which (if any) of Great Financial’s clients were “CH Clients” and as such, it is impossible to value Great Financial’s client book. Should valuation of the book of clients be possible, the valuation provided by its expert witness, Robert Neill (Mr Neill) is more appropriate.
The plaintiff put forward a draft version of the Haggart Agreement (CB 1318), but not the executed version of the Haggart Agreement. Mr Politis gave evidence that Great Financial and Mr Haggart entered into such agreement in around June 2015.
Conclusion
12Mr Gulabovski has failed to prove his claim. The evidence demonstrates overwhelmingly that Mr Politis was aware of, had knowledge of and consented to the plan from at least 14 September 2015. As Great Financial’s sole director, his notice and knowledge of and consent to the plan is attributable to Great Financial. Accordingly, Integrity did not breach the Agreement by terminating it on 13 November 2015, deregistering Great Financial as an authorised representative, entering into the Supacoach Agreement and allocating Great Financial’s clients to Supacoach with the consent of Great Financial. For the reasons set out below, I find for Integrity.
Background
13Mr Gulabovski and his brother, Alexanndar Gulabovski (Mr A Gulabovski) operate a financial services business called the ‘Aperio Group’. The Gulabovskis had a long-standing relationship with Mr Hope, who operated a financial planning business through the Aperio Group from mid-1995 to June 2014.
14Great Financial was incorporated on 5 December 2013 with Mr Hope its sole director.[14] In or around June 2014, Mr Hope separated from the Aperio Group. His separation was governed by an agreement for the sale of shares, units and assets dated 20 June 2014 (the Aperio Agreement). Great Financial was a party to the Aperio Agreement.
[14] Mr Hope and his brother Mr L Hope held 10 ordinary shares each.
15On 18 August 2014, Mr Hope met Toni Sparkes (then compliance manager for Integrity) (Ms Sparkes)[15] to discuss operating his financial planning business through Integrity.[16] Ms Sparkes knew Mr Hope and the Gulabovskis from her involvement in an annual industry conference.
[15] Ms Sparkes was Integrity’s compliance manager from 2013 to 2018.
[16] CB 997.
16After the meeting, Ms Sparkes spoke to Darryn Borg, managing director of Integrity (Mr Borg) and Mr Hope was appointed an individual authorised representative of Integrity[17] and Great Financial a corporate authorised representative on 6 December 2014.[18]
[17] ASIC Australian Financial Services Representative Search for Mr Hope dated 1 June 2019 (CB
4612–13). Integrity and Mr Hope entered into a Representative Deed on 7 November 2014 (CB 5064–5071).
[18] ASIC Australian Financial Services Representative Search for Great Financial dated 1 June 2019 (CB
4621). Integrity and Great Financial entered into the Agreement in or around December 2014 (CB 1046–1068).
17In or around May 2015, it was apparent that Mr Hope was likely to become bankrupt as a consequence of investments made in the Timbercorp managed investment scheme. Mr Hope and Mr Politis met to discuss Mr Politis’ appointment as sole director of Great Financial to replace Mr Hope.[19]
[19] Witness Statement of Mr Politis dated 4 December 2020, [16]–[23] (CB 74–75).
18On 1 May 2015, Mr Hope resigned as sole director of Great Financial and Mr Politis was appointed sole director.[20]
[20] ASIC Company Search for Great Financial dated 15 October 2019 (CB 4631–4631).
19On 15 May 2015, Mr Hope met with Ms Sparkes. The discussion included his pending bankruptcy, Mr Hope being removed as an individual authorised representative of Integrity but remaining as a paraplanner within Great Financial, and Mr Haggart being appointed as an individual authorised representative of Integrity to service Great Financial’s clients.
20On 21 May 2015 at 2.32pm, Ranjit (Ray) Dadwal, accountant for Great Financial (Mr Dadwal)[21] emailed Mr Hope and Mr Politis (emphasis in original):
“… As discussed, Spiro has been appointed as a Director & Secretary of “Great Financial Pty Ltd”. The form has now been lodged and please find acknowledgment attached.
I will leave copies of signed forms with Spiro. Only Spiro has to sign these as he is the current director ...”[22]
[21] Mr Dadwal later became the accountant for Supacoach.
[22] CB 1357.
21On 22 May 2015 at 1.21pm, Mr Hope emailed Ms Sparkes:
“… Just touching base to organise a time to catch up with yourself and Darren, to go thru where I am up to with the bankruptcy issue…
Every thing being equal, it is likely that I will head down this path that has been forced on me by Timbercorp and FABAL from July 1st.
Let me know when we can book it in to Darren's diary …”[23]
[23] CB 1358–1359.
22Later that day at 2.13pm, Ms Sparkes replied to Mr Hope:
“… Would 10am suit on Friday at the Clarion before PD day. I’ve just booked another meeting with Joe, James, Brian, Darryn and I at 11am at the Clarion that morning.”[24]
[24] CB 1358.
23On 1 June 2015 at 3.35pm, Mr Hope emailed Ms Sparkes:
“… Have you had a chance to look at a time for Thursday or Friday to meet Spiro , with Darren.
Also do you need anything to show the change of directors for Great Financial.”[25]
[25] CB 1364 / 1365.
24On 10 June 2015, Mr Hope became bankrupt and Norman Jones (Mr Jones) was appointed his trustee in bankruptcy.[26]
[26] CB 1367.
25By email dated 19 June 2015, a meeting for 11am on 26 June 2015 was confirmed.[27]
[27] CB 1369.
26On the same day, Mr Hope was deregistered as an individual authorised representative of Integrity.[28]
[28] CB 1396–1397.
27Three days later, on 22 June 2015, Mr Haggart was appointed as an individual authorised representative of Integrity.[29]
[29] ASIC Australian Financial Services Representative Search for Mr Haggart dated 1 June 2019 (CB
4622–4623).
28On 26 June 2015, there was a meeting between Mr Hope, Mr Politis, Mr Borg and Ms Sparkes at the Clarion Hotel (the 26 June 2015 meeting).[30] Mr Hope’s bankruptcy and its consequences for Great Financial’s continued operations were discussed, including the appointment of Mr Poiltis as new sole director and Mr Haggart as new individual authorised representative.[31]
[30] CB 1391.
[31] Plaintiff’s Written Closing Submissions dated 22 April 2021, [7]. Other aspects of the meeting are in
dispute, most relevantly whether or not Mr Hope introduced Mr Politis as his solicitor: see paragraph 150 below.
29On 3 July 2015 at 3.16pm, Mr Politis emailed Mr Borg confirming that Great Financial was finalising the engagement of Mr Haggart[32] and attaching his CV.[33]
[32] CB 1453.
[33] CB 1445–1452.
30On 17 July 2015 at 1.27pm, Ms Sparkes emailed Mr Hope advising that Mr Haggart had replaced him as authorised representative of Integrity.[34]
[34] CB 1496.
31On 7 September 2015 at 3.55pm, Mr Hope emailed Ms Sparkes (copying Mr Haggart and Mr Politis):
“… Two quick things,
Firstly, Spiro and I would like to catch up with yourself and Darren to talk about a couple of possible changes internally that we are looking at making. All positive, so it’s all good…
Secondly, Chris and I have a client that is an ethical investor and is looking for some international investment options and while Chris has looked we are struggling a little to find some options that don’t include, MacDonald’s, Nike, etc.
We were hoping that you may have of a couple of managed funds that you use that may help …”[35]
[35] CB 1501.
32On 9 September 2015 at 4.32pm, Ms Sparkes emailed Mr Hope (copying Mr Haggart and Mr Politis):
“Confirming your meeting at Croydon with Darryn on the 14th at 4pm.”[36]
[36] CB 1502.
33On 14 September 2015, there was a meeting between Mr Hope, Mr Politis and Mr Borg at Integrity’s Croydon office (the 14 September 2015 meeting).[37] Integrity’s position is that, on Mr Borg’s account of the 14 September 2015 meeting, Mr Politis informed Integrity that Great Financial wished to transfer the Agreement to a new company in which Mr Haggart would own shares and transfer all of Great Financial’s clients to that new company. Mr Politis denied that he so informed Integrity and disputed the content and duration of the meeting. This meeting is addressed in Issue 3 below.
[37] CB 1506.
34On 24 September 2015, Supacoach was incorporated with Mr L Hope as sole director.[38]
[38] Electric Hope Pty Ltd (Mr L Hope’s company) and Planwealth Services Pty Ltd (Mr Dadwal’s company)
were the shareholders (50 ordinary shares each) (CB 1508 –1510).
35On 26 September 2015 at 1.23pm, Mr Dadwal emailed Mr Hope and Mr Haggart (copying Mr Politis) in relation to having “hard copies” of Supacoach documents “in the office on Monday to sign”.[39] The parties agreed this email was sent, but Mr Politis said he did not read it.
[39] CB 1527.
36On 27 September 2015 at 12.58pm, Mr Hope emailed Mr Borg (copying Mr Politis and Mr Haggart):
“I’m just following up to see if you remembered who may have a couple of advisors that may be interested in working with Chris and myself …
Also can you let me know when we can have the new company start the process of becoming a Corporate Authorised Rep.”[40]
The parties agreed this email was sent, but Mr Politis said he had no recollection of receiving it.[41]
[40] CB 1564 / 1565.
[41] Mr Politis accepted in cross examination that he did receive it but said: “No, I don’t believe I did read it”
(T 269 L 8–17).
37On 15 October 2015, Aperio Taxation & Business Services Pty Ltd (Aperio Taxation) commenced legal proceedings against Great Financial alleging that Great Financial had breached the terms of the Aperio Agreement and had engaged in unconscionable and misleading or deceptive conduct.
38On 16 October 2015 at 4.31pm, Mr Hope emailed Mr Borg:
“… Is Toni the person to meet with to start the process of changing corporate authorised rep from one company to the other.”[42]
[42] CB 1585.
39On 16 October 2015 at 4.45pm, Mr Borg replied to Mr Hope:
“… She (Toni) sure is! ...”[43]
[43] CB 1584.
40On 21 October 2015, Mr Politis spoke to Aperio Taxation’s solicitor, John Lancefield of Frenkel Partners.[44] Mr Lancefield asked whether Mr Politis had instructions to accept service of a County Court Writ on behalf of Great Financial in a proceeding against Great Financial.[45]
[44] Witness Statement of Mr Politis dated 4 December 2020, [52] (CB 80–81).
[45] Ibid.
41On 21 October 2015 at 3.59pm, ASIC Connect emailed Mr Politis in relation to registering “a business name that is identical to your company name”.[46]
[46] CB 1589.
42At 5.09pm, Mr Politis forwarded the ASIC Connect email to Mr Hope and asked:
“Guys I have received this from asic – looks like asic think Great Financial Pty Ltd is trying to register a business name?”[47]
[47] CB 1588.
43Seven minutes later, at 5.16pm, Mr Hope replied to Mr Politis (copying Mr Dadwal):
“That’s ok. It’s the ASIC issue from last night. We want to keep the name GF and as a business we can then transfer it to supa coach Pty but can’t apply for name from different entity
GF Pty can then b dropped …”[48]
The parties agreed this email was sent, but Mr Politis said he had no recollection of receiving or reading the email response.
[48] CB 1588.
44On 22 October 2015 at 12.04pm, Mr Hope emailed Ms Sparkes (copying Mr Politis):
“… Was wondering if you could please contact Spiro in relation to alterations and transfer of the clients from “Great Financial” to “Supacoach” as discussed with Darren 4 weeks ago?”[49]
[49] CB 1591–1592.
45Later that day at 1.06pm, Ms Sparkes replied to Mr Hope (copying Mr Politis and Mr Borg):
“… I’ve copied Darryn in as he is in today and may have some time to assist, otherwise I will follow up on Monday …”[50]
[50] CB 1591.
46In his witness statement, Mr Politis said he had no recollection of receiving either of the emails sent on 22 October 2015.[51] At trial, Mr Politis said he read the email of 1.06pm but not the email of 12.04pm. This issue is addressed below in Issue 3.
[51] Witness Statement of Mr Politis dated 4 December 2020, [60] (CB 83).
47On the same day at 3.00pm, Aperio Taxation’s solicitor, John Lancefield of Frenkel Partners, emailed Mr Politis:
“I refer to our telephone conversation yesterday and confirm that we act for Aperio Taxation & Business Services Pty Ltd.
As discussed, please find attached by way of courtesy the writ[52] and statement of claim[53] in the above matter [Aperio Taxation & Business Services Pty Ltd v Great Financial Pty Ltd]. These documents have been posted to the registered office of Great Financial Pty Ltd by way of service.”[54]
[52] CB 1566–1569.
[53] CB 1570–1583.
[54] CB 5134.
48On 30 October 2015 at 2.44pm, Mr Haggart emailed Mr Politis:
“… I would like to inform you that I wish to resign as the authorised representative for Great Financial.
I have decided to move on to other opportunities.
Please note that this is effective immediately ...”[55]
[55] CB 1602–1603.
49Later that day at 2.54pm, Mr Haggart emailed Ms Sparkes (copying Mr Borg):
“… Just wanted to let you know that I have resigned as the authorised rep for Great Financial.
I would like to apply to be licensed through integrity under a new company if possible:
·Business name: Progressive Wealth Management
·ABN – 60 608 420 195 (Supacoach Pty Ltd)
·Address – 12 Kareela Street, Mordialloc Vic 3195
Please let me know what further information you need. If possible can we start setting up adviser codes so I can lodge business? (not sure how this works etc) …”[56]
[56] CB 1604.
50At 3.05pm, Mr Borg sent an email to Mr Haggart in response to the above email asking:
“No problem Chris – just to be clear – has there been an issue between you and Grant?”[57]
[57] CB 1597.
51Three minutes later at 3.08pm, Mr Haggart telephoned Mr Borg and left him a message requesting that he call him.[58]
[58] CB 1595–1596.
52On 2 November 2015 at 11.31am, Mr Politis forwarded Mr Haggart’s resignation email to Mr Borg, stating:
“I received this resignation email on Friday from Chris Haggart, our adviser. We have been having issues for some time so I am not surprised.
I am not sure where this leaves Great Financial as we have no other adviser currently to service our clients.
As we are not travelling well financially, and now this, I am considering ceasing trading.
I will be speaking to an insolvency adviser shortly and let you know what we decide.
In the interim could you retain revenue until a decision is made ...”[59]
The parties agreed this email was sent, but Mr Borg said he did not read it at the time.
[59] CB 1602.
53On 13 November 2015, Ms Sparkes met with Mr Hope and Mr Haggart, who confirmed that the clients serviced by Great Financial should be moved to Supacoach and Great Financial’s corporate licence should be revoked.[60]
[60] Witness Statement of Ms Sparkes dated 5 January 2021, [55] (CB 112–113). Ms Sparkes’ evidence
was not challenged.
54On 13 November 2015 at 11.31am, Mr Haggart emailed Ms Sparkes (copying Mr Borg):
“…We would like the following new corp rep please:
I would like to apply to be licensed through integrity under a new company:
·Business name: Cirque Financial
·ABN – 60 608 420 195 (Supacoach Pty Ltd)
·Address – 12 Kareela Street, Mordialloc VIC 3195 …”[61]
[61] CB 1618.
55On the same day, Great Financial was deregistered as a corporate authorised representative of Integrity[62] and “Cirque Financial” was registered as a business name for Supacoach.[63]
[62] ASIC Australian Financial Services Representative Search for Great Financial dated 1 June 2019 (CB
4621).
[63] Record of Registration for Business Name ‘Cirque Financial’ dated 13 November 2015 (CB 1614).
56On 14 November 2015, Supacoach was appointed as an authorised representative of Integrity[64] and:
(a) Integrity and Supacoach entered into the Supacoach Agreement;[65] and
(b) Integrity and Mr Haggart entered into a Representative Deed.[66]
[64] ASIC Australian Financial Services Representative Search for Supacoach dated 20 November 2016
(CB 1622).
[65] CB 1623–1645.
[66] CB 1649–1655.
57On 20 November 2015 at 11.50am, Jenny Riley of Integrity sent Mr Borg an email with the subject line “Please phone Spiro Politis re: Great Financial on 0490 XXX XXX”.[67]
[67] CB 1657. Telephone number redacted for privacy reasons.
58On 8 December 2015, Integrity sent a letter to its product advisors advising:
“Please be advised Grant Hope and Great Financial trading as Superannuation Coach Pty Ltd, have ceased as Authorised Representatives of Integrity Financial Planners Pty Ltd (ASFL 225051) effective 13th November 2015.
This letter confirms authorisation to update the Corporate Representative name from Great Financial trading as Superannuation Coach Pty Ltd to Supacoach Pty Ltd trading as Cirque Financial. All client servicing rights and ongoing commission payments are to remain with Integrity Financial Planners Pty Ltd. A letter containing updated bank details is attached.
The servicing rights pertaining to clients on your database for Great Financial trading as Superannuation Coach Pty Ltd, are to be assigned to and updated effective immediately to the new company name of Supacoach Pty Ltd trading as Cirque Financial (ASIC 1237378). Any clients listed under the adviser code for Grant Hope are to be transferred to authorised representative Christopher Haggart (ASIC Rep Number: 343176).”[68]
[68] CB 1670.
59On 19 January 2016 at 3.20pm, Mr Politis emailed Claude Trimboli (Mr Trimboli), Chartered Accountant and Registered Liquidator at Charles & Co:
“… I am the sole director of a company called Great Financial Pty Ltd, which provides financial advice to clients. I am not an advisor myself, but had employed an advisor to work with the clients who has recently departed and I am unable to employ anyone suitable.
I am conscious of avoiding a situation of trading while insolvent and wish to avoid that possibility at all costs …”[69]
[69] CB 1785–1786.
60On 22 February 2016, Mr Trimboli was appointed as administrator of Great Financial.[70]
[70] Notice of Appointment of Administrator for Great Financial dated 22 February 2016 (CB 5160).
61On 2 March 2016, Mr Politis completed a director’s questionnaire[71] and emailed in to Mr Trimboli.[72] In response to question 8, “How much capital did you put into the company?”, Mr Politis wrote:
[71] CB 2223–2231.
[72] CB 2222.
“… ● Other: CONTRIBUTED LEGAL AND ADMINISTRATION FEES
APPROXIMATELY $15,322
● Give details:
LEGAL FEES PAID TO ERA LEGAL $6522
ADMINISTRATION COSTS $8800”[73]
In response to question 25, “What did [the balance sheets and profit and loss accounts] show to be a profit or loss?”, Mr Politis wrote:
“LEAVING ASIDE LOAN TO AND FROM PREVIOUS DIRECTOR, THE COMPANY REMAINED SOLVENT UNTIL ITS AFSL AUTHORISATION WAS REVOKED IN NOVEMBER 2015 …”[74]
In response to question 37, “When did you first realise that the company might have to go into administration?”, Mr Politis wrote:
“WHEN SERVED WITH WRIT IN NOVEMBER 2015
AND DUE TO DEPARTURE OF FINANCIAL ADVISOR CHRIS HAGGART IN OCTOBER 2015
CORPORATE AUTHORISED REPRESENTATIVE STATUS REVOKED BY AFSL LICENSEE INTEGRITY FINANCIAL PLANNERS PTY LTD ON 13/11/2015 DUE TO ABSENCE OF A FINANCIAL PLANNER TO SERVICE CLIENTS — THIS MEANT CLIENT TRAIL REVENUE CEASED”[75]
[73] CB 2224.
[74] CB 2227–2228.
[75] CB 2229.
62On 3 March 2016, the first meeting of Great Financial’s creditors was held.[76]
[76] Notice of First Meeting of Creditors of Great Financial dated 23 February 2016 (CB 5161).
63On 29 March 2016, Mr Trimboli published his Administrator’s Report.[77] At paragraph 8.1 headed “Offences under the Act by the Director(s)”, Mr Trimboli wrote:
“From my preliminary investigations, it appears that the Director may have breached his duties owed to the Company by potentially transferring the Company's book of financial planning clients to Supacoach for no consideration.”[78]
At paragraph 9.2.2 headed “Compensation for breach of director’s duties”, Mr Trimboli wrote (emphasis in original):
“Based on my preliminary investigations, it appears that the director may have breached his duties in relation to the Company by potentially not obtaining the best possible price for the apparent transfer of the Company's financial planning clients to Supacoach…”[79]
[77] CB 2343–2362.
[78] CB 2354–5. This was not relied on for the truth of the statements but as to Mr Politis knowledge of Mr
Trimboli’s view: see paragraph 139 below.
[79] CB 2358.
64On 6 April 2016, at the second meeting of creditors, it was resolved to place Great Financial into liquidation and appoint Mr Trimboli as liquidator.[80]
[80] Notice of Deemed Special Resolution to Wind Up a Company (CB 2412).
65On 12 September 2018, Mr Gulabovski’s solicitors sent a letter of demand to Integrity (letter of demand) in relation to claims made by the liquidator against Integrity for breaches of the Agreement. Mr Henderson stated “I am unequivocally instructed that the sole director of Great Financial did not agree to and was not aware of these actions”.[81]
[81] CB 3049–3051.
Evidence at trial
66The following persons gave evidence for the plaintiff at trial:
(a) the plaintiff himself;
(b) Mr A Gulabovski;
(c) Mr Politis; and
(d) Mr Firth, a chartered accountant and director of the Rushmore Group.[82]
[82] On the issue of loss and damage.
67The following persons gave evidence for the defendant at trial:
(a) Mr Borg;
(b) Ms Sparkes; and
(c) Mr Neill, chartered accountant and director of Seaview Consulting.[83]
[83] On the issue of loss and damage.
68Neither Great Financial nor Integrity called the following persons to give evidence at trial:
(a) Mr Hope;
(b) Mr L Hope;
(c) Mr Haggart; and
(d) Mr Dadwal.
69Mr Galvin submitted that a Jones v Dunkel[84] inference ought be drawn against Integrity by Integrity’s failure to call, in particular, Mr Hope, Mr Haggart and Mr Dadwal. Mr Hope and Mr Haggart are in Integrity’s camp.[85]
[84] (1959) 101 CLR 298.
[85] Integrity has the onus of proving its estoppel case.
70He contended further, that this case involves an allegation that Mr Hope and Mr Haggart embarked on a ‘phoenix transaction’ which was concealed from Mr Politis.[86] Mr Politis was, in effect, a victim of Mr Hope’s conduct. There is no justification for drawing a Jones v Dunkel[87] inference against Mr Gulabovski by reason of not having called Mr Hope and Mr Haggart — they are plainly not in Mr Gulabovski’s camp. In closing, however, Mr Galvin submitted:
“I said genuinely in the opening that I delivered to Your Honour … that it may be that [Mr Hope and Mr Haggart] are in nobody's camp. They have perhaps spoiled their relationships with both sides of this dispute.”
[86] Although Mr Gulabovski contended that Integrity participated in the plan, he did not suggest that Integrity
was a party to any fraud. Mr Galvin submitted in closing: “We do not say that the defendant is a party to fraud. We do not seek any equitable relief arising out of the case in fraud. What we say is that Mr Hope, apparently assisted by Mr Haggart, contrived to defeat not only Great Financial's creditors, but his own creditors, by transferring the business of Great Financial to a new entity. The reason we have challenged Mr Borg's awareness is because it goes to his credit.”
[87] (1959) 101 CLR 298.
71Integrity contended that no findings ought be made regarding the allegation that Mr Hope and Mr Haggart engaged in “phoenixing” in the absence of Mr Gulabovski pleading or pursuing a claim against Mr Hope and Mr Haggart, and in the absence of them giving evidence. Further, Mr Wallis submitted in respect of Mr Borg:
“… the case is not about … whether Mr Borg should have been more diligent to ask questions about the motivations of Mr Politis, Mr Hope and Mr Haggart in transferring Great Financial's clients to Supacoach, and that he should have realised what was going on was really some sort of Phoenixing transaction designed to defeat the creditors of either Mr Hope or Great Financial … the defendant may well have approached this proceeding in a different manner if that allegation had been pleaded against it … It might have even called Mr Hope or Mr Haggart.”
72Integrity contended that the evidence indicates that Mr Gulabovski’s motive in pursuing the claim against Integrity was to obtain compensation for what he perceived to be an inadequate payment received from Mr Dadwal when he took clients from Aperio Group, allegedly with the assistance of Mr Hope.[88]
[88] A transaction with which Integrity was not associated.
73Mr A Gulabovski acknowledged that he sent a message to Mr Hope and Mr Haggart around March 2016, stating:
“The liquidator of great financial is about to begin legal action against integrity and supacoach forcing either the client base to be returned or $ paid for them. I am funding the legal action and can stop it before it gets to point of no return if my dispute is resolved. The only way that's going to stop is for Ray to pay for what he has taken from Aperio. Ray deals with what he owes, all other action stops!”[89]
[89] CB 2341–2342.
74Mr Gulabovski has the burden of establishing the absence of notice, knowledge or consent of Great Financial to the plan. He did not call key witnesses or obtain relevant documents, such as from the liquidator. Without calling Mr Hope and Mr Haggart, regardless of whose ‘camp’ they are in, Mr Gulabovski has failed to discharge that burden.
75Given my finding in respect of Issue 3 that I am satisfied on the balance of probabilities[90] on the evidence called at trial that Mr Politis had notice and knowledge of and consented to the plan, which notice, knowledge and consent is attributable to Great Financial, there is nothing requiring explanation or contradiction by Integrity requiring it to call Mr Haggart or Mr Hope. I consider there is no basis for the drawing of an adverse inference.
[90] On the Briginshaw v Briginshaw (1938) 60 CLR 336 standard.
Issues for determination
76There are six issues for determination in this proceeding:[91]
1. Is the purported Assignment invalid or unenforceable by reason of the fact that clauses 15.3 and/or 23.2 of the Agreement prohibit its assignment by Great Financial without the consent of Integrity and such consent was never provided, with the result that Mr Gulabovski is not a proper plaintiff to the proceeding?
2. Is the purported Assignment invalid or unenforceable because Mr Gulabovski did not provide notice of the assignment to Integrity in accordance with the requirements of s 134 of the Property Law Act 1958 (Vic) (PLA), with the result that Mr Gulabovski is not a proper plaintiff to the proceeding?
3. Did Great Financial have notice or knowledge of, or provide its consent to, the termination of the Agreement, the entry into the Supacoach Agreement and allocation of Great Financial’s clients to Supacoach?
4. Was Integrity’s conduct in relation to the termination of the Agreement, entry into the Supacoach Agreement and/or allocation of Great Financial’s clients to Supacoach a breach of the Agreement?
5. If the answer to question 4 is yes, is Mr Gulabovski estopped from asserting that Integrity is in breach of the Agreement by reason of any conduct of Mr Politis, Mr Hope and/or Mr Haggart in requesting the defendant to engage in that conduct?
6. If Integrity has breached the Agreement, has Mr Gulabovski suffered any loss or damage by reason of the breach and if so, what is its quantum?
[91] Joint List of Key Issues dated 26 February 2021.
77I deal with these issues in the order set out above, although Issue 3 determines the proceeding on the merits. Issues 1, 2, 4, 5 and 6 are addressed in shorter compass.
Issue 1: Is the purported Assignment invalid or unenforceable by reason of the fact that clauses 15.3 and/or 23.2 of the Agreement prohibit its assignment by Great Financial without the consent of Integrity and such consent was never provided, with the result that Mr Gulabovski is not a proper plaintiff to the proceeding?
78Clauses 15.3 to 15.6 of the Agreement provide:
“15.3 Prohibition against assignment by Authorised Representative
[Great Financial] must not sell, assign, transfer or encumber this Licence Agreement or any right under this Licence Agreement or change the effective control of [Great Financial] in accordance with clause 15.7 or subcontract any of its obligations under this agreement unless [Great Financial]:
(a)has complied with its obligations under this clauses 15.4, 15.5 and 15.6;
(b) is not in breach of a material term of this Licence Agreement;
(c)has paid all outstanding amounts due to [Integrity] and any Related Body Corporate of [Integrity]; and
(d)obtains [Integrity]'s consent which must not be unreasonably withheld, subject to clause 15.4
15.4 IFP's first rights
Despite any other provision of this clause 15, [Great Financial] must not accept an offer to purchase or otherwise transfer, deal with, encumber all or any part of the Business or any of the assets used in the conduct of the Business or change the effective control of [Great Financial] unless:
(a)[Great Financial] is permitted to assign this agreement to the proposed transferee under this clause 15.3;
(b)a bona fide written offer to purchase has been received by [Great Financial];
(c)[Great Financial] gives to [Integrity] a notice that contains a copy of the offer to purchase or the terms of the proposed assignment, including the proposed price or consideration (Transfer Notice); and
(d) [Integrity] does not exercise its right of first refusal under clause 15.5.
15.5 Right of first refusal
[Integrity] may:
(a)within 14 Business Days of receiving the Transfer Notice, elect to purchase the interest the subject of the proposed assignment for the price (minus any sales Fees/Commission which would have been payable but which is not actually paid as a result of the proposed sale) and on the terms and conditions contained in the Transfer Notice; and
(b) if [Integrity] exercises its right under clause 15.5(a):
(i)substitute an amount of cash equal in [Integrity]’s reasonable opinion to the value of the proposed consideration for any non-cash form of consideration proposed in the Transfer Notice;
(ii)deduct from the purchase price any unpaid debts of [Great Financial] to [Integrity]; and
(iii)enter into a sale of business agreement for sale of [Great Financial]’s business on the terms and conditions agreed to between [Integrity] and [Great Financial], failing which on the terms and conditions of the standard Law Institute of Victoria January 2010 Version Contract of Sale with settlement in 60 days from acceptance of the election to purchase.
15.6 Authorised Representative's First Rights
Despite any other provision of this clause, [Integrity] must not accept any offer to purchase or otherwise deal with it’s business unless:
(a)A bona fide written offer to purchase has been received by [Integrity]; and
(b)IFP gives to all Authorised Representative’s a notice setting out the terms of the third party offer (without identifying the third party) to purchase, including the proposed price or consideration (“IFP Transfer Notice’) ; and
(c)Twenty five percent of the Authorised Representative’s of [Integrity] do not exercise their right of refusal under annexed.”[92]
[92] CB 1059–1060.
79Clause 23.2 of the Agreement provides:
“23.2 Assignment
[Great Financial] may only assign this Licence Agreement or a right under this Licence Agreement with the prior written consent of [Integrity].”[93]
[93] CB 1066.
80Integrity submitted clauses 15.3 and 23.2 provide that Great Financial may only assign the Agreement or any rights under the Agreement with the prior consent of Integrity. As Great Financial did not obtain Integrity’s consent before entering into the deed with Mr Gulabovski, the Assignment is invalid and Mr Gulabovski is not a proper plaintiff in this proceeding.
81Further, Integrity contended that the liquidator cannot assign a right greater and different to the one vested in Great Financial. To allow the assignment in this case would infringe the principal that an assignor can assign no greater right that it has nor can an assignee obtain a right greater than that held by the assignor. Section 477(2)(c) of the Corporations Act 2001 (Cth) (Corporations Act), provides that:
“Subject to this section, a liquidator of a company may… sell or otherwise dispose of, in any manner, all or any part of the property of the company.”
82However, in the Victorian Supreme Court decision of Pentridge Village Pty Ltd v Capital Finance Australia Ltd [2018] VR 633, Connock J noted that s477(2)(c) of the Corporations Act, whilst broad, only permits assignments of courses of action which are inherently assignable. His Honour referred to and followed the New South Wales Court of Appeal’s decision in Owners of Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285 (Owners), Sackville AJA held at [59] (emphasis added):
“The language of s 477(2)(c) of the Corporations Act (Cth) is not apt to bring about the somewhat startling result that a liquidator, by exercising the statutory power to sell or dispose of the company’s property, can override an otherwise perfectly valid restraint on assignability which arises by virtue of a specific agreement entered into and binding on the company and which… renders property inherently incapable of being assigned. If that were the correct construction of s 477(2)(c), it would be open to the liquidator, by exercise of the statutory power, to affect adversely the right of a third party who has entered into a contract with the company on the express basis that the contract is not to be assignable.”
83Citing Professor McCormack,[94] Sackville AJA observed at [60]:
“… there may be very good reasons to insert a non-assignability clause in a contract … For example, non-assignment clause may be designed to prevent an obligor dealing with a party with whom he or she would not have chosen to deal.”
[94] Gerard McCormack, ‘Debts and Non- Assignment Clauses’ (2000) Journal of Business Law 422, 424-
425.
84Integrity submitted that there is good reason for the non-assignment clauses in the Agreement, including that Integrity:
(a) retains ultimate responsibility under the Corporations Act for Great Financial’s actions;[95] and
(b) must monitor and supervise the conduct of and advice given by Great Financial pursuant to the Agreement.[96]
[95] See Corporations Act ss 917B, 917E and 917F(1).
[96] See clauses 5 (CB 1053–1054) and 9 (CB 1055) of the Agreement
85Mr Gulbovski contended that the effect of the non-assignment clause is a matter for interpretation in any given case.[97] It would be an absurd interpretation of cl15.3 to include any decisions made by Great Financial or its liquidator to assign causes of action relating to alleged breaches or repudiation of the Agreement by Integrity itself. Such an interpretation would, effectively provide Integrity with the opportunity to avoid liability for breaches of the Agreement by “purchasing” those liabilities. Further, such an interpretation would give Integrity the power to refuse to consent to any such assignment pursuant to cl 15.3(d), effectively creating a shield from liability. Clause 23.2 should not be interpreted to give any wider rights than clause 15.3.
[97] Nick Seddon and Rick Bigwood, Cheshire & Fifoot Law of Contract (LexisNexis, 11th Aus ed, 2017)
[8.8].
Conclusion and analysis
86I do not consider that clauses 15.3 or 23.2 of the Agreement create a bar to the maintenance of Mr Gulabovski’s claim in this proceeding.
87Both clauses relate to actions in respect of “this License Agreement” or “any right under this License Agreement”. In my view, the assignment of Great Financial’s causes of action against Integrity to Mr Gulabovski does not constitute an assignment of any right “under” the Agreement.
88Rather, on their proper construction, both clauses seek to govern decisions that may be made by Great Financial to sell part or all of its financial advice business as a going concern to a third party.[98]
[98] Particularly in light of clauses 15.4 and 15.5 of the Agreement, which are directed to offers to purchase,
transfer, deal with or encumber any part of the business unless certain steps are taken, including giving Integrity the first right of refusal.
89Such an assignment does not, therefore, defeat a limitation on assignability resulting from an express agreement as contended for by Integrity.
90Integrity’s ultimate responsibility and obligation to monitor and supervise Great Financial may provide good reason to prevent Great Financial selling part or all of its financial advice business to a third party without consent. However, I do not consider it provides good reason to prevent Great Financial assigning causes of against Integrity without consent.
Issue 2: Is the purported Assignment invalid or unenforceable because Mr Gulabovski did not provide notice of the assignment to Integrity in accordance with the requirements of s 134 of the PLA, with the result that Mr Gulabovski is not a proper plaintiff to the proceeding?
91Section 134 of the PLA provides (emphasis added):
“Legal assignments of things in action
Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be and shall be deemed to have been effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—
(a) the legal right to such debt or thing in action;
(b) all legal and other remedies for the same; and
(c)the power to give a good discharge for the same without the concurrence of the assignor:
Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice—
(a)that the assignment is disputed by the assignor or any person claiming under him; or
(b)of any other opposing or conflicting claims to such debt or thing in action—
he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the Trustee Act 1958.”
92Mr Gulabovski relied on the letter of demand dated 12 September 2018 to satisfy the requirements contained in s 134 of the PLA and contended that the letter was sufficient to put Integrity on notice that he made his claims against it as an assignee.[99]
[99] CB 3049–3051.
93The subject line of the letter is (emphasis in original):
“LEGAL DEMAND
Jimmy Gulabovski as assignee from Great Financial Pty Ltd (in liquidation) (“Great Financial”) v Integrity Financial Planners Pty Ltd (“Integrity”)”[100]
[100] CB 3049.
94The first paragraph of the letter provides (sic):
“I act for Jimmy Gulabovski who is the assignee of Great Financial’s of rights under to a Financial Planning Advisor Licence Agreement dated 2014 (“Agreement”) against Integrity.”[101]
[101] CB 3049.
95Mr Gulabovski contented that the PLA creates no formal notice requirements, other than that the notice be express. The content of the 12 September letter was sufficient to put Integrity on notice that Mr Gulabovski made his claim as an assignee.
96Integrity submitted that the letter of demand does not constitute “express notice” pursuant to s 134 of the PLA. It is not expressed to be a notice, it does not identify which rights pursuant to the Agreement had been assigned to Mr Gulabovski, and does not so much as refer to “causes of action”. The relevant part of the Deed of Assignment assigns “All causes of action of [Great Financial] against Integrity for breach of the Agreement”.[102]
[102] Schedule A of the Deed of Assignment (CB 2911).
97A notice must specify the subject matter of the assignment with clarity and with whom the assigned rights are vested. As stated by the High Court in Consolidated Trust Company Limited v Naylor [1936] HCA 33 at 439, citing Warren’s Choses in Action (1899) at 177, 178:
“It means a notice which indicates an express intention — a direct and definite statement of a thing, as distinguished from supplying materials from which the existence of such a thing may be inferred.”
98The Court went on to state at X (citations omitted, emphasis added):
“The purpose is to make essential actual notice that the debt has been assigned. “One of the objects of the giving of notice to the debtor is that he shall ‘know with certainty’ in whom the legal right to sue him is vested” … notice to the debtor is necessary only to acquaint him with the fact that the debt is payable to the assignee …”
99In Native Bond Pty Ltd (Controller Appointed) v Cant [2016] VSC 206, whilst Judd J found that the notice complied with the notice requirements of s 134 of the PLA with respect to the assignment of a loan, the notice identified the subject matter of the assignment being “the loan”. It also identified the loan agreement, that the loan was assigned by a deed of assignment, relevant details of the loan agreement and default. In Szepesvary v Weston [2018] FCA 87, the notice identified “the Debt” which had been assigned.
Conclusion and analysis
100I do not consider the letter of demand meets the requirements of s 134 of the PLA. The first paragraph of the letter refers to the assignment of Great Financial’s rights “under the Agreement.” The relevant rights assigned by the deed of assignment were “All causes of action of [Great Financial] against [Integrity] for breach of the [Agreement].” There is no reference in the letter to the subject matter of the assignment being “causes of action”. Even if it could be said that the right assigned was a right “under the agreement”,[103] the letter does not identify which rights it says were assigned pursuant to the Agreement.
[103] Which I consider it is not, see above under Issue 1.
101In my view, the letter of 12 September 2018 does not constitute express notice to Integrity that any causes of action against it had been assigned such as to know with certainty in whom the legal right to sue it was vested. Therefore, Mr Gulabovski is not a legal assignee of Great Financial’s causes of action against Integrity.[104]
[104] I have invited the parties to provide draft orders which give effect to my reasons.
Issue 3: Did Great Financial have notice or knowledge of, or provide its consent to, the termination of the Agreement, the entry into the Supacoach Agreement and allocation of Great Financial’s clients to Supacoach?
102Mr Gulabovski contended that Integrity terminated the Agreement, entered into the Supacoach Agreement and allocated Great Financial’s clients to Supacoach without notice to and without the knowledge or consent of Great Financial. Mr Politis was not aware of and did not consent to the plan to terminate the Agreement, enter into the Supacoach Agreement and allocate Great Financial’s clients to Supacoach. Mr Hope and Mr Haggart did not have authority to bind Great Financial.
103Integrity contended that Mr Politis was aware of, had knowledge of and consented to the plan. Alternatively, the application of corporate attribution principles means that the knowledge of Mr Hope and Mr Haggart is attributable to Great Financial.[105] If a finding is made that Mr Politis was aware of, had knowledge of and consented to the plan, issue 3 must be decided in favour of Integrity. Mr Gulabvoski has the burden of proof as to the absence of notice, knowledge or consent of Great Financial in relation to the plan.
[105] There was no issue that Mr Haggart and Mr Hope had such notice and knowledge and provided such
consent. See for example, Witness Statement of Ms Sparkes dated 5 January 2021, [55] (CB 112). Given my findings in relation to Mr Politis’ notice, knowledge and consent, it is not necessary for me to address the issue of Mr Hope and/or Mr Haggart’s authority to bind Great Financial. Should it have been necessary to determine this issue, however, I would have been satisfied that the knowledge of Mr Hope and Mr Haggart should be attributed to Great Financial for the reasons advanced by Integrity.
104Mr Gulabovski accepted that if the Court finds that Mr Politis was aware of, had knowledge of and consented to the plan, then Mr Gulabovski’s claim fails because Mr Politis, as its sole director, must have had the authority to bind Great Financial to such a transaction.
Conclusion and analysis
105The evidence demonstrates overwhelmingly that Mr Politis was aware of, had knowledge of and consented to the plan from at least 14 September 2015. This is apparent from:
(a) the discussion at the meeting of 14 September 2015. I prefer the evidence of Mr Borg as to what was said at the meeting;
(b) the contemporaneous documentary evidence, which sheets home knowledge of the plan to Mr Politis. I reject Mr Politis’ denials that he read relevant emails; and
(c) Mr Politis’ conduct after Mr Haggart’s ‘resignation’ on 30 October 2015, which is consistent with him having attended the meeting and read the emails into which he was copied. I reject Mr Politis’ denial that he had knowledge of the plan.
The 14 September 2015 meeting
106Mr Borg’s and Mr Politis’ accounts of the 14 September 2015 meeting were irreconcilable. According to Mr Borg:
(a) The meeting took place in one of Integrity’s “small meeting rooms.” Mr Borg entered the room with his notepad and Mr Hope and Mr Politis “were already seated at the table”. Mr Borg took notes, “nobody else ha[d] taken any notes.” Mr Politis “pretty well opened the meeting” by mentioning “Grant having some issues with his former business partners, the Gulabovskis” the “potential for some litigation against Grant by the Gulabovski brothers.”
(b) Mr Politis emphasised that the litigation “was of a personal nature” and “did not have anything to do with Grant’s [Hope] financial services business.” Mr Politis said “Chris is going pretty well in the role as advisor and authorised representative” and he was “looking to make Chris [Haggart] a shareholder so that he's got the right sort of motivation”, however he had concerns that Mr Haggart “could potentially be tainted by the bankruptcy of Grant and… potential litigation.”
(c) Mr Politis said:
“it would be cleaner and his preference was to set up a new company that hopefully Integrity would be happy to authorise … Chris would then be the authorised representative within that new entity, and deliver the ongoing services to the clients, that they would necessarily need to … move the clients across to the new entity, and that they would issues the shares to Chris inside of that new entity and that by all of that being achieved, that hopefully Chris would have the right motivation and be incentivised to not just services the existing clients, but to hopefully help with the growth of the business as well.”
(d) Mr Borg spoke about the “sorts of documents that [Integrity] might need if [Great Financial] decided that this was the avenue that they wanted to go down.” Mr Politis said Mr Hope “would also be employed through this new entity to continue to mentor Chris and to provide him with … the back-up with the … running and operations of the business.” Mr Politis said Great Financial was “looking to recruit a new advis[o]r.”
(e) No other matters were discussed. The meeting took “no longer than 30 minutes.” Mr Hope and Mr Politis said goodbye and “took-off.”
107According to Mr Politis:
(a) The meeting was organised by Grant Hope. Mr Hope told him that the purpose of the meeting was to “clarify [Great Financial’s] intentions” in relation to “ethical investments which weren't at the time accommodated by Integrity's approved product list.”
(b) Mr Politis could not recall the precise time of the meeting, or whether it was in the morning or afternoon, but he drove to Integrity’s office “in the outer eastern suburbs” which he recalled “was near a train station.” He spoke to Integrity’s receptionist before entering what he “understood was Darry[n] Borg’s office” where Mr Borg and Mr Hope were seated and “seemed to be engaged in a friendly conversation” or “informal discussion.”
(c) Mr Hope led a discussion about “the nature of [Great Financial’s] clients,” “Grant’s long history with those clients” and issues that may arise if Mr Haggart had to “recommend that they exit from some of these ethical investments which they were already into because they were not allowed to be authorised under Integrity's licence.” Mr Borg “expressed support for a flexible approach” and “was comfortable with that approach and… was quite accommodating”. Mr Borg, Mr Hope and Mr Politis “agreed that in terms of going forward that would be that ability to recommend these ethical investments.”
(d) Mr Hope said the business was going well and asked if Integrity could help with employing additional advisors.
(e) No other matters were discussed. The meeting took “probably 15 or 20 minutes” or “[p]robably 10 or 15 minutes.” Mr Politis shook hands with Mr Borg and Mr Hope then left the meeting alone. He was “[c]onfident” that no one took notes at the meeting.
108I prefer and accept Mr Borg’s account of the 14 September 2015 meeting. It is consistent with Mr Borg’s file note of the meeting and emails sent both before and after the meeting.
Mr Borg’s file note
109Mr Borg’s file note reads:
“Grant + Spiro
-Great Financial — litigation potentially
-New Licensing Agreements / New entity
-FSG
-Rep (Corp.) Notification to fund managers
-RCTI + Bank info
-Diary..”
110I find that Mr Borg’s file note is a contemporaneous record of the 14 September 2015 meeting which supports his account.
(a) The topics recorded in Mr Borg’s note are consistent with the topic identified to be discussed at the meeting, in an email from Mr Hope to Ms Sparkes dated 7 September 2015. The email arranging the meeting identifies that it was to address “a couple of changes internally that we are looking at making”:
“… Two quick things,
Firstly, Spiro and I would like to catch up with yourself and Darren to talk about a couple of possible changes internally that we are looking at making. All positive, so it’s all good…
Secondly, Chris and I have a client that is an ethical investor and is looking for some international investment options and while Chris has looked we are struggling a little to find some options that don’t include, MacDonald’s, Nike, etc.
We were hoping that you may have of a couple of managed funds that you use that may help ...”
(b) The “couple of possible changes internally” encompasses the topics noted in Mr Borg’s file note being “New Licensing Agreements/New entity”, were issues that concerned Mr Politis as Great Financial’s director and required a meeting or “catch up”.
111I consider it is unlikely that the topic of ethical investments was discussed at the 14 September 2015 meeting because:
(a) The ethical investments issue was a matter relevant to Mr Haggart as Great Financial’s financial advisor / individual authorised representative and did not require a meeting.
(b) If the topic of the meeting was in fact ethical investments, Mr Haggart likely would have attended the meeting (which he did not) given that the investment options related to his (and Mr Hope’s) clients.
(c) It is unlikely Mr Politis would have attended a meeting about matters in which he had no involvement and then not been present for matters relevant to his role as director.[106]
(d) The notation of “Grant + Spiro” as the first entry, although not conclusive, tends to support Mr Borg’s account that both Mr Hope and Mr Politis were there when he entered the room and when the topics noted below that entry were discussed. It is unlikely that potential litigation, setting up a new entity and new licensing agreements were discussed in the absence of Mr Politis, Great Financail’s sole director and considering Mr Hope had gone to the trouble of organising for him to be there.
[106] I am not persuaded by Mr Politis’ explanation that he was involved because of potential professional
indemnity issues. There is no objective evidence that supports any concerns about professional indemnity issues having been raised or followed up.
112Mr Galvin challenged Mr Borg’s note of the meeting: “At best, the state of the evidence surrounding the Spirex notebook is such that it cannot be ruled out that the notes, scant as they are, were not taken contemporaneously.”
113Although Mr Galvin queried the positioning of the file note within Mr Borg’s notepad, and challenged Mr Borg’s evidence of his use of the notepad, he did not put to Mr Borg that he had fabricated the file note. Mr Borg’s file note is “scant”, however, no explanation was offered as to what “New Licensing Agreements / New entity” could be if not a reference the plan. To accept Mr Galvin’s submission, the Court would be required to conclude that Mr Borg fabricated his file note of the meeting. As set out above, this was never put to Mr Borg and is unsustainable in light of other objective evidence and the chronology of events.
Emails after the 14 September 2015 meeting
114The following emails exchanged after the 14 September 2015 meeting corroborate Mr Borg’s account of the meeting. The emails are written in a way that can be explained only by the fact that the prospect of a new company / corporate authorised representative of Integrity was discussed at the 14 September 2015 meeting:
(a) Mr Hope’s email to Mr Borg (copied to Mr Politis and Mr Haggart) on 27 September 2015 at 12.58pm, “following up” on other advisors that may be interested in working with Mr Hope and Mr Haggart. The last sentence of this email reads:
“Also can you let me know when we can have the new company start the process of becoming a Corporate Authorised Rep.”
(i)I accept Mr Wallis’ submission that if the plan had not been discussed at the 14 September 2015 meeting, this email would likely have been worded differently. Mr Hope would have needed to provide Mr Borg (and Mr Politis) with more context in relation to his query regarding “the new company” starting the process of becoming a corporate authorised representative.[107]
[107] Mr Politis’ denial of having read this and other emails is dealt with below.
(ii)This is clearly an email “following up” on the discussion at the meeting of 14 September 2015.
(b) On 16 October 2015 at 4.31pm, Mr Hope emailed Mr Borg:
“Is Toni the person to meet with to start the process of changing corporate authorised rep from one company to the other.”[108]
[108] CB 1585.
(i)On the same day at 4.45pm, Mr Borg replied to Mr Hope:
“… She (Toni) sure is! …”[109]
[109] CB 1584.
(ii)If a discussion in the terms of Mr Borg’s evidence had not taken place, one would have expected Mr Hope to have provided more context for his query and for Mr Borg to have asked what he meant by “start[ing] the process of changing corporate authorised rep from one company to the other.” Mr Borg understood what Mr Hope was referring to because it had been discussed at the 14 September 2015 meeting.
(c) Mr Hope’s email to Mr Sparkes (copied to Mr Politis) on 22 October 2015 at 12.04pm, which states:
“… Was wondering if you could please contact Spiro in relation to alterations and transfer of the clients from “Great Financial” to “Supacoach” as discussed with Darren 4 weeks ago?”
(i)Mr Wallis contended and I accept that it is more likely than not that Mr Hope’s reference to a discussion “4 weeks ago”, is a reference to the 14 September 2015 meeting which had occurred approximately 5 weeks earlier.
(ii)Again, had the issue of the transfer of clients from Great Financial to a new entity not been discussed at the 14 September 2015 meeting, more context would have been provided. No one contended, nor was there any evidence of, another meeting with Mr Borg around that time during which this topic was discussed.
Mr Borg’s credit
115Mr Galvin submitted that Mr Borg’s evidence of the meeting ought be rejected. Mr Borg’s account of the 14 September 2015 meeting “attracts obvious scepticism” because it is “very detailed and vivid” compared to the file note which is “very brief and sketchy”. Furthermore, Mr Borg’s account was in stark contrast to his inability to recall other events, for example, his failure to return Mr Politis’ telephone call(s) after the Agreement was terminated.
116Mr Galvin contented Mr Borg was an unimpressive witness in a number of material respects. He was combative, non-responsive to questions and reluctant to make concessions where appropriate. Mr Borg’s tendency to argue, adopt a contrary stance and refusal to give direct answers in cross-examination weighs against his credit.[110]
[110] A number of instances of Mr Borg’s uncooperative demeanour were set out in Mr Gulabovski’s written
closing submissions to which I have had regard.
117By way of example, Mr Galvin submitted that correspondence from Integrity’s former solicitors and earlier versions of Integrity’s defence do not fully disclose the version of events Mr Borg put forward at trial. Mr Borg refused to give direct answers to questions about whether he instructed Integrity’s former solicitors to send the following letters which did not reflect Integrity’s position at trial:
(a) The letter to Great Financial’s former solicitors dated 13 May 2016, states:
“We are instructed that [Great Financial] ceased to have Grant Hope acting as the Key Person… and Authorised Representative… due to Mr Hope being made bankrupt. On 22 June 2015 Chris Haggart became an Authorised Representative of [Integrity] so as to service the clients. Mr Haggart advised [Integrity] that he was taking up employment with Supacoach in or about November 2015. Accordingly, a new Financial Planning Advisor Licence Agreement was entered into by [Integrity], Supacoach and Haggart on 14 November 2015. As Mr Haggart had been employed by [Great Financial]'s clients, [Integrity] could not continue to have Great Financial as an Authorised Financial Services Representative as it had no Authorised Representative.”[111]
(b) The letter to Great Financial’s current solicitors dated 22 October 2018, states that Great Financial’s:[112]
“… status as an authorised representative of [Integrity] ended on 13 November 2015. It was ended when it was brought to [Integrity]’s attention that Great Financial was in serious financial difficulty, its director was declared bankrupt, and finally on the notice received from the then director that Great Financial no longer had anyone qualified to service clients.”
[111] CB 377–378.
[112] CB 3055–3056.
118When these matters were put to Mr Borg, he made a number of contradictory statements regarding the extent to which he instructed the lawyers or had seen the letters. Mr Galvin contended that in relation to the 2018 letter, the information as to Great Financial being “in serious financial difficulty” must have come from Mr Politis’ email of 2 November 2015 which Mr Borg said he did not see until mid-2019.[113] The suggestion made by Mr Borg that someone else in the Integrity office may have instructed the lawyers was preposterous.
[113] In written closing submissions, Mr Wallis contended that it was not put to Mr Borg that he was being
untruthful about not reading the email at the relevant time.
119Mr Wallis submitted that this is an unfair criticism of Mr Borg because Integrity’s former solicitors were responsible for making strategic decisions regarding which details were provided. There are various plausible explanations for Integrity’s former solicitors adopting such an approach. Furthermore, Mr Borg simply may not have considered some factual matters in detail until asked to do so by Integrity’s current solicitors as the proceeding approached trial.
120Mr Wallis further submitted that Mr Borg’s argumentative approach and tendency to not directly answer questions put to him reflects his inexperience in dealing with cross-examination and emotional involvement in the case, rather than any intent to give anything other than honest evidence.
121Mr Borg was argumentative and emotional. He presented as nervous and at times defensive. I accept however, that he was fundamentally honest. As set out above, his account of the meeting of 14 September 2015 is supported by contemporaneous documents and has a ring of truth about it in the context of the chronology and other objective evidence. Although early correspondence and versions of the defence do not specify or allege Mr Politis’ knowledge of and consent to the plan, contemporaneous documents tendered at trial put paid to any suggestion of recent invention.
Mr Politis’ notice or knowledge of the plan otherwise
122Apart from the meeting of 14 September 2015, acceptance of Mr Politis’ evidence that he had no notice or knowledge of the plan would require the Court to accept the unlikely circumstance that he failed to read numerous emails sent to email addresses that he reviewed regularly as part of his practice as a solicitor. It is incongruous that Mr Hope would copy Mr Politis into emails about the plan in circumstances where he contended Mr Hope kept him ‘in the dark’.
123Mr Politis said that he had no recollection of receiving the email of 27 September 2015 in which Mr Hope wrote to Ms Sparkes (copying in Mr Politis): “[a]lso can you let me know when we can have the new company start the process of becoming a Corporate Authorised Rep”. He also denied that he read other emails, the content of which can be explained only by the fact that Mr Politis had discussed the plan with Mr Hope and Mr Haggart.
124On 21 October 2015:
(a) Mr Politis received an email from ASIC Connect at 3.59pm, regarding registration of “a business name that is identical to [Great Financial’s] company name”;
(b) Mr Politis forwarded the ASIC Connect email to Mr Hope at 5.09pm, querying:
“Guys I just received this from asic – looks like asic think Great Financial Pty Ltd is trying to register a business name?”
(c) Mr Hope replied at 5.16pm (copying Mr Dadwal):
“That’s ok. It’s the ASIC issue from last night. We want to keep the name GF and as a business we can then transfer it to supa coach Pty but can’t apply for name from different entity
GF Pty can then b dropped…”
125Mr Politis said that he did not read Mr Hope’s email reply. I consider this unlikely in light of the fact that Mr Politis’ email to Mr Hope asked Mr Hope a question, and Mr Hope replied only 7 minutes later. Had Mr Politis not read Mr Hope’s response, he would have considered his email to have been unanswered. There would likely have been a follow up email from him to Mr Hope. There was no such follow up email because Mr Hope’s reply answered his query.
126On 22 October 2015:
(a) Mr Hope emailed Mr Sparkes (copying to Mr Politis) at 12.04pm;[114] and
(b) Ms Sparkes replied at 1.06pm (also copying to Mr Politis).[115]
[114] CB 1591–1592.
[115] CB 1591.
127In his email at 12.04pm, Mr Hope asked Ms Sparkes to “contact Spiro in relation to alterations and transfer of the clients from “Great Financial” to “Supacoach”.” If Mr Politis was ‘in the dark’ about the plan and it was something between Mr Haggart and Mr Hope only, it is unlikely he would have been copied into this email. It is improbable that Mr Hope would ask Ms Sparkes to speak to Mr Politis about alterations and transfer of the clients from Great Financial to Supacoach if Mr Politis was unaware of the plan, and Mr Hope and Mr Haggart were concealing it from him, as he claimed.
128I reject Mr Politis’ evidence that he had no recollection of receiving the email from Mr Hope to Ms Sparkes:
(a) In his witness statement, Mr Politis said he had no recollection whatsoever of receiving the 12:04pm email and did not believe he received either of them;[116]
(b) In cross-examination, Mr Politis was first taken to Ms Sparkes’ reply to Mr Hopes’ email, which was at the top of the page and was the only email visible on the screen. Mr Politis agreed he received and read that email;
(c) Mr Politis was then taken to Mr Hope’s email to Ms Sparkes just below Ms Sparkes’ reply, by scrolling down the page. Mr Politis denied receiving or reading the email to which Ms Sparkes had replied, which reply he had just agreed he had read.[117]
(d) Mr Wallis asked Mr Politis how is it that he read Mr Sparkes’ reply but not Mr Hope’s email when they form part of the same email chain. Mr Politis’ unsatisfactory answer was: “I’m not aware. I’ve never received that email.”
[116] The plaintiff conceded the emails were received but not read: see Joint Chronology filed 25 February
2021.
[117] Contrary to his evidence in his witness statement.
129Mr Politis’ conduct subsequent to Mr Haggart’s ‘resignation’ on 30 October 2015 is consistent with having:
(a) attended the meeting at which the plan was discussed;
(b) read the emails which he had been copied into, which reference aspects of the plan; and
(c) an awareness of the risk that Aperio Group may pursue Supacoach in respect of Great Financial’s book of clients, having been served with the writ from Aperio Taxation on 15 October 2015.
130On 30 October 2015 at 2.44pm, Mr Haggart resigned from Great Financial. He emailed Mr Politis:
“… I would like to inform you that I wish to resign as the authorised representative for Great Financial.
I have decided to move on to other opportunities.
Please note that this is effective immediately …”[118]
[118] CB 1602.
131Later that day at 2.54pm, Mr Haggart emailed Ms Sparkes (copying Mr Borg):
“… Just wanted to let you know that I have resigned as the authorised rep for Great Financial.
I would like to apply to be licensed through integrity under a new company if possible:
·Business name: Progressive Wealth Management
·ABN – 60 608 420 195 (Supacoach Pty Ltd)
·Address – 12 Kareela Street, Mordialloc VIC 3195
Please let me know what further information you need. If possible can we start setting up adviser codes so I can lodge business? (not sure how this works etc) …”[119]
[119] CB 1604.
132Had Mr Haggart’s ‘resignation’ been a genuine surprise to Mr Politis and not simply part of the plan, one would have expected Mr Politis to have taken a number of steps, none of which were taken, including:
(a) responding to Mr Haggart’s resignation email;
(b) ascertaining which clients Mr Haggart was going to take with him pursuant to the Haggart Agreement;
(c) notifying Great Financial’s clients that there was no-one to service them at Great Financial;
(d) seeking to appoint a new individual authorised representative to ensure that Great Financial’s clients would be serviced moving forwards;
(i)Mr Politis maintained that Mr Hope was interviewing some advisers to work at Great Financial before Mr Haggart resigned and that became more critical once Mr Haggart left. However, there are no emails or other documents to show that Mr Hope or anyone else was looking for another adviser;
(e) complaining to Integrity once it was impacted by product providers being notified of the change in December 2015 and when commissions stopped being paid in February 2016;
(f) terminating Great Financial’s lease or arrangement to pay rent;
(i)Mr Politis claimed it did not “occur to [him]” to terminate the rent arrangements despite his concern that Great Financial was “not travelling well financially”;[120]
[120] Email of 2 November 2015 from Mr Politis to Mr Borg (CB 1602), dealt with further below.
(g) chasing Mr Hope for books and records of Great Financial, or putting his concerns about not being provided books and records in writing;
(i)Mr Politis said that he “ask[ed] for all book and records from the previous director [Mr Hope]” when he took over as director of Great Financial. His request was made verbally — not in writing by text, email or letter;
(ii)Mr Politis provided only five documents to Mr Trimboli in March 2016: three bank statements, the Agreement and the Aperio Agreement;[121]
[121] CB 2302–2305.
(h) checking Great Financial’s bank statements regularly;
(i)Mr Politis had access to Great Financial’s PO Box where some statements were sent, but said he did not check it;[122]
(i) supervising Great Financial’s bank account;[123]
(j) writing to or leaving telephone messages for Integrity (other than one telephone message for Mr Borg on 20 November 2015)[124];
(k) enquiring of Mr Hope where his clients had come from;
(i)Mr Politis said that he saw Mr Hope at Kareela Street after November 2015, but never asked him what he was doing there;
(ii)Mr Politis said that he knew Mr Hope was involved in the financial planning industry in some capacity in August 2017, but he did not ask Mr Hope where his clients had come from; and
(iii)one would expect that, had Mr Politis not been involved in the plan, he would have been concerned whether the clients Mr Hope was working with might have been Great Financial’s clients.
[122] See paragraph 152(b)(i) below.
[123] See paragraphs 137, 138 and 152 below.
[124] I accept that, had Mr Politis attempted to contact Mr Borg on more than one occasion, given the
existence of a written note of his having called on this occasion, there likely would have been a record of him having left a message on other occasions.
133The tone of Mr Haggart’s resignation email including the reference to “other opportunities” as the reason for the move and the absence of specific reference to the plan, coincides with Aperio Taxation having commenced legal proceedings against Great Financial on 15 October 2015. I accept Mr Wallis’ contention that from this point on, there was a clear risk that Aperio Group might pursue Supacoach in respect of Great Financial’s book of clients and thus caution ought be exercised.
134This caution is the lense through which Mr Politis’ email of 2 November 2015 to Mr Borg ought be considered:
“I received this resignation email on Friday from Chris Haggart, our adviser. We have been having issues for some time so I am not surprised.
I am not sure where this leaves Great Financial as we have no other adviser currently to service our clients.
As we are not travelling well financially, and now this, I am considering ceasing trading.
I will be speaking to an insolvency adviser shortly and let you know what we decide.
In the interim could you retain revenue until a decision is made ...”[125]
[125] CB 1602.
135When challenged about his assertion that he was not surprised as “we have been having issues for some time”, Mr Politis could not point to any correspondence that supported a falling out between Mr Hope and Mr Haggart.
136Mr Borg gave uncontested evidence that he spoke on the phone to Mr Haggart shortly after receiving the resignation email of 30 October 2015[126] and was told that “there were no issues” and that Mr Haggart’s resignation:
“was all part of the restructure being implemented by Spiro in preparation for him being appointed as a representative of the new entity to which the clients of Great Financial and servicing rights were to be transferred across and that [Mr Haggart] was to be a shareholder of.”[127]
[126] CB 1602. On 30 October 2015 Mr Haggart telephoned Mr Borg and left a message
requesting Mr Borg call him three minutes after Mr Borg’s query. There is no evidence of an email reply to Mr Borg’s query “has there been an issue between you and Grant?”
[127] Witness Statement of Mr Borg dated 15 January 2021, [112] (CB 149).
137Mr Politis’ ability to make the statement “we are not travelling well financially” on 5 November 2015 is difficult to reconcile with his evidence that he stopped looking at the bank statements after Mr Hope and Mr Haggart left,[128] and his lack of oversight of Great Financial’s financial position as set out below.
[128] T 173 L 26.
138Mr Politis’ evidence that he “had no involvement and was not informed at all about Supacoach”,[129] his denial of knowledge of Supacoach’s existence and the revocation of Great Financial’s authority with Integrity until after the liquidation of Great Financial (which was clarified to mean when Mr Trimboli was appointed administrator in February 2016) is unsustainable in light of the following:
(a) payments made to Supacoach out of Great Financial’s bank account appeared in the bank statements that Mr Politis said he was regularly checking before the resignation of Mr Haggart. Mr Politis’ explanation was that he was oblivious to those line items and had not seen them before. As I find below, it is unlikely Mr Politis looked at the bank statements, however if he did as claimed, it is unlikely he would have been oblivious to the entries and would have queried them had he no knowledge of Supacoach’s existence;
(b) Mr Dadwal sent an email titled “Documents for Supacoach Pty Ltd” to Mr Hope and Mr Haggart forwarding the incorporation documents for Supacoach, copying in Mr Politis on 26 September 2015.[130] Once again, Mr Politis said that he did not receive the email and was not aware it existed until recently, but offered no explanation as to why he did not receive it; and
(c) answers Mr Politis gave to the liquidator in the director’s questionnaire are at odds with his stated position. Mr Politis answered the liquidator’s question “When did you first realise that the company might have to go into administration?” (emphasis added). One of the factors given by Mr Politis was that the corporate authorised representative status was “revoked by AFSL licensee integrity financial planners Pty ltd on 13/11/15...”[131]
[129] Witness Statement of Mr Politis dated 4 December 2020, [66] (CB 84).
[130] CB 1527.
[131] CB 2229.
139Mr Politis said he did not feel as though he was “in the gun” for the transfer of clients to Supacoach, however he accepted the possibility that he was in the gun based on the wording of the Administrator’s Report:
“From my preliminary investigations, it appears that the Director may have breached his duties owed to the Company by potentially transferring the Company's book of financial planning clients to Supacoach for no consideration.”[132]
“Based on my preliminary investigations, it appears that the director may have breached his duties in relation to the Company by potentially not obtaining the best possible price for the apparent transfer of the Company's financial planning clients to Supacoach.”[133]
[132] CB 2354–2355.
[133] CB 2358.
140I accept Integrity’s contention that the likely explanation for Mr Politis’ assertions that he was unaware of the move of the Great Financial book of clients to Supacoach was that he believed he was at risk of being sued by Great Financial’s liquidator for breaching his director’s duties by allowing the transfer to occur for no consideration.
Mr Politis’ credit
141Mr Politis was an unimpressive witness. He gave answers which demonstrated a lack of candour. Integrity filed comprehensive written submissions on the question of Mr Politis’ credit more generally.[134] Integrity’s submissions are compelling and I agree with them. I have set out below the significant matters of credit which underscore my rejection of his evidence.
[134] Annexure A: Summary of Key Inconsistencies and Shortcoming in the Evidence of Mr Politis.
142The first matter relates to three payments made to Mr Politis (“it would have gone into my personal bank account”) by Electric Hope (a company controlled by Mr Hope’s brother, Mr L Hope) at the times set out below. In summary, Mr Politis failed to respond properly to a subpoena and sought to prove in the winding up of Great Financial in respect of liquidator’s fees which he says Mr Hope paid to him.
143A transaction report for Electric Hope records the three payments as follows:
(a) $5,000 on 9 November 2015;
(b) $2,800 on 18 February 2016; and
(c) $1,600 on 23 May 2016 with the notation “LEGAL FEES”.
144There is no mention of the three payments from Electric Hope to Mr Politis in his first witness statement dated 4 December 2020. In cross examination, he said:
“Um, it had been overlooked in my first statement, the details of the payment.”
“I didn't consider it to be material, when preparing my first statement, but it was important that it be clarified, yes.”
145The transaction reports were the subject of a subpoena. Mr Politis accepted that he did not produce the documents that showed those payments and that “it was an oversight”.
146Having seen the Electric Hope[135] transaction report (it having been obtained by Integrity), Mr Politis said in his reply witness statement dated 24 February 2021 that:
“I asked for Mr Hope to pay for the costs of putting Great Financial into liquidation. I subsequently received 2 payments to cover the costs of the liquidation, a payment of $5,000 from his brother’s company, Electric Hope Pty Ltd, on 9 November 2015 and a payment of $2,800 on 18 February 2016.”
[135] Mr Hope’s brother’s (Mr L Hope’s) company.
147Mr Politis said nothing about the third payment until he was cross examined:
“Um, it wouldn't have been for legal fees because I never completed, undertook any work for Grant Hope or any entity that he was associated with.”
“I say the payment was most likely the balance for the fees for liquidators incurred as a result for Great Financial.”
“… the only payments relating to Grant Hope or Electric Hope were in relation to my requests for payment of the administrator and liquidator's fees.”
148I do not accept Mr Politis’ evidence that the payments were for the administrator and liquidator’s fees because:
(a) The three payments totalled $9,400 when Mr Trimboli’s fees totalled $8,800.
(b) Mr Politis initially gave evidence that Mr Hope paid him only $7,800 for Mr Trimboli’s fees, and he covered the difference of $1,000. However, he later said that the third payment of $1,600 was to cover the balance of Mr Trimboli’s fees. If that was so, they do not add up.
(c) On 17 February 2016, Mr Trimboli emailed Mr Politis requesting payment of his fees:
“… can you please make payment of $8,800 to cover my remuneration and expenses for this proposed liquidation, by way of direct deposit into the following account…”
(d) Mr Politis forwarded Mr Trimboli’s request for payment of $8,800 and bank account details to Mr Hope on 18 February 2016 stating “see account details below”. I accept Mr Wallis’ contention that Mr Politis’ email is a request that Mr Hope pay Mr Trimboli’s fees directly. When taken to this email, Mr Politis said he:
“… wanted to confirm to Grant Hope that the administration was proceeding and I had to pay that amount of money less obviously what was already paid to me by Grant Hope, or Electric Hope.”
(i)This is an absurd explanation in the face of his previous evidence and the email of 18 February 2016. Mr Politis, when pressed said:
“… in the end it was paid by me … I was pressing Grant Hope for money at the time, so whether it was paid directly or to me, it was immaterial to me.”
(ii)When it was put to Mr Politis that his explanation did not make sense because if he had already received $7,800 from Mr Hope and was wanting him to pay the balance of $1,000, surely he would have put this in the email, Mr Politis answered “possibly” but agreed he had not.
(iii)Mr Politis’ evidence is difficult to reconcile with the evidence in his first witness statement that:
“After further discussions with Mr Trimboli he agreed to accept the lesser sum of $8,800 before accepting the appointment and on 17 February 2016. I transferred the sum of $8,800 into the trust account of Trimboli’s accounting firm, Charles & Co.”[136]
[136] Witness Statement of Mr Politis dated 4 December 2020, [73] (CB 86).
149If Mr Politis’ explanation is accepted, and he had been reimbursed the liquidator’s fees by Mr Hope / Electric Hope, then it begs the question why he sought to prove in the administration of Great Financial for the full amount of the liquidator’s fees. Mr Politis represented in the Administrator’s Questionnaire signed 2 March 2015 that he had personally contributed $8,800 towards administration fees in circumstances where, on his own account he received $9,400 from Electric Hope or Mr Hope for the fees. Mr Politis said he thought it was appropriate to claim that he paid the administration fees because he “didn’t believe the source of the funds was material”. This itself is a wholly inadequate explanation.
150Mr Politis gave evidence that he never provided legal advice to Mr Hope or acted for any of his companies, despite the third payment being described as “LEGAL FEES.” However, Mr Borg’s evidence was that when introducing Mr Politis to Mr Borg at the 26 June 2015 meeting, Mr Hope “said words like, 'this is Spiro Politis, he is my solicitor'”. That Mr Borg held the belief that Mr Politis was Mr Hope’s solicitor at the time is supported by the Minutes for Integrity’s Compliance Committee meeting held on 10 July 2015, which state that on the last professional development day:
“[Integrity] met with Spiro Politis (Grant’s solicitor) who is now the Director of Great Financial (corp rep).”[137]
[137] CB 1468–1470.
151That Mr Politis was Mr Hope’s solicitor is also consistent with email correspondence which shows that Mr Politis drafted agreements between Great Financial and Mr Haggart for Mr Hope.[138] Ultimately, Mr Politis was unable to offer any plausible explanation as to why Electric Hope paid him “legal fees”.
[138] CB 1352–1355, CB 1361.
152Mr Politis sought to adjust his version of events when he was presented with contemporaneous documents that rendered his account implausible. A stark example of this was Mr Politis’ evidence in relation to Great Financial’s bank statements and financial affairs:
(a) Mr Politis said he exercised financial oversight by discussing cash flow at monthly meetings. He monitored the expenditure by receiving oral updates from Mr Hope, Mr Haggart and Mr Dadwal at the monthly meetings.
(b) Mr Politis then said he saw “paper statements monthly” “at the monthly meetings.” Every month, they had the most recent month’s bank statement sitting there.
(i)Mr Politis was taken to a paper statement, addressed to Great Financial’s PO Box, for the period 13 May 2015 to 12 August 2015. Mr Politis said he recognised the format of the paper statement from the Bendigo Bank. Mr Hope collected the paper statements because he “rarely ventured down” to the PO Box.
(ii)When Mr Wallis pointed out that the paper statement was for a three month period, meaning Mr Politis could not have seen monthly bank statements at the monthly meetings, Mr Politis said that bank statements were “downloaded” for the monthly meetings. He then said “I recall seeing bank statements of this nature and I recall statements being downloaded for the monthly meetings as well.”
(c) Mr Politis said “If there was any suggestion of any improper expenditure, access would have been withdrawn, but as it occurred there wasn’t a need for that.” He said he was on the lookout for improper transactions. However, when taken to the statements which demonstrate Great Financial’s account being ‘drained’ each fortnight before the next commission payment was made, then being drained again with debits including from Coles Express, Harris Mensland, McDonalds, Essendon Football Club, Ticketmaster, Melbourne Storm, La Porchetta restaurant and ATM withdrawals etc. he said “I don’t recall the detail around all the discussion.” When asked whether he asked any questions about these expense items, Mr Politis said “I may have but I don’t recall.” Mr Politis denied that Mr Hope was basically spending all of Great Financial’s money on whatever he wanted.
(d) In relation to payments made to Planwealth (Mr Hope’s company), Mr Politis said these amounts were in effect payments to Mr Hope of Mr Hope’s entitlements to a maximum of $45,000 to $50,000 (as a paraplanner). When pressed, he accepted he undertook no reconciliation exercise. He said “… as it turned out, I didn’t remain as a director and the company did not remain in existence long enough for that sort of reconciliation to occur.”
(e) In relation to debits appearing in Great Financial’s account in favour of Electric Hope, Mr Politis did not recall that money was being paid to Electric Hope. Mr Politis then said he remembered discussions about Electric Hope coming up, but he did not recall the conversation now. He said he never received a satisfactory explanation for what those payments were for, but was unable to point to any correspondence querying the payments or seeking an explanation for them.
Continued interactions
153Contemporaneous documents show that Mr Politis remained in friendly contact with Mr Hope and Mr Dadwal over a number of years after the transfer, despite his evidence to the contrary and his position that the plan had been concealed from him.
154Mr Politis said that Mr Dadwal “misled” him in relation to Great Financial’s financial position, in particular money moving in and out of the company’s bank account. Despite this, Mr Politis attended the Magistrates’ Court on 23 November 2015 where Mr Dadwal pleaded guilty to three charges of indecent assault including with a child under the age of 16.
155On 2 March 2016, Mr Poltis was a referee for Mr Dadwal at his sentencing hearing. Mr Dadwal was sentenced to an 18-month Community Corrections Order and placed on the Register of Sex Offenders for a period of 15 years.
156Mr Dadwal failed to disclose the convictions in his 1 April 2016 declaration to the Tax Practitioners Board (TPB) and was deregistered as a tax agent. When Mr Dadwal appealed the TPB’s decision to the Administrative Appeals Tribunal in 2017, Mr Politis swore an affidavit in support of the proposition that Mr Dadwal was a person of good character.[139] The affidavit refers to Mr Politis and Mr Dadwal meeting mutual clients on a weekly basis, although Mr Politis gave evidence that he:
“might have occasionally gone to [Mr Dadwal’s] office to meet with clients but… wouldn't have had the time… to attend his office on a weekly basis.”
[139] Dadwal v Tax Practitioners Board [2018] AATA 2878, [137(d)].
157Mr Gulabovski conceded in final submissions that he “…does not make any attempt to excuse or minimise the significance of lying in an affidavit…” However, an explanation was given by Mr Politis that “he agreed to provide that reference for Mr Dadwal because he appeared quite isolated and didn’t appear to have people around him who he could ask for support, and Mr Politis felt sorry for him.” In circumstances where Mr Politis maintained that Mr Dadwal misled him and together with Mr Hope and Mr Haggart, concealed the plan from him, this explanation for swearing an affidavit in support of Mr Dadwal’s character that was not true strains credulity.
158Mr Politis gave evidence that he “had a falling out with Mr Hope” and “doesn’t think [his and Mr Hope’s] relationship was ever back on track” after the Aperio Taxation litigation was served.[140] However, email correspondence dated 18 August 2017 suggests otherwise. At 1.05pm, Mr Hope wrote (sic):
“Spiro,
Look what has finally been sent to clients after 11 months, I expect a few phone calls now, to find out what is going on. A lot will go what and have know idea about any of the names any how.
If you are available next week, I would like to catch up and have a chat about moving my clients to the advisor based in QLD.
Also, could you introduce me to the guy you are working with re leasing, with I have a potential client for him.
I have also spoke to Ray and I know fully the situation and will be moving out and on.
Thanks and talk soon.”[141]
[140] See paragraph 37 above.
[141] CB 2896.
159At 4.45pm, Mr Politis replied:
“Grant
that letter has to go out, it could have been a lot worse but no doubt will create confusion among clients.
Happy to catch up next week, probably Tuesday arvo or Wednesday morning? let me know what suits you and we will work it out.
My leasing guy is Ange Kondos… when you come in I can introduce you.
Is Ray leaving? I have tried to talk him out of it”[142]
[142] CB 2895.
160When taken to these emails, Mr Politis said that his contact with Mr Hope was “was very intermittent” and his contact with Mr Dadwal “wasn’t regular, it was intermittent”. Mr Politis refused to concede that he had frequent contact with Mr Hope and Mr Dadwal on friendly terms, despite the wording and tone of the emails.
Conclusion
161I am satisfied that Mr Politis has notice and knowledge of and consented to termination of the Agreement, entry into the Supacoach Agreement and allocation of Great Financial’s clients to Supacoach. Accordingly, Great Financial had notice and knowledge of and consented to the termination of the Agreement.
Issue 4: Was Integrity’s conduct in relation to the termination of the Agreement, entry into the Supacoach Agreement and/or allocation of Great Financial’s clients to Supacoach a breach of the Agreement?
162Clause 16 of the Agreement provides:
“16. Termination
16.1 Termination by written notice
[Integrity] may terminate this Licence Agreement at any time by giving not less than one hundred and twenty (120) days notice in writing to [Great Financial]. Any Authority given to a Representative will be revoked as at the date of such termination.
16.2 Immediate Termination by a Party
Either party may terminate this Licence Agreement immediately by written notice if:
(a)the Defaulting Party breaches any provision of this Licence Agreement and where the breach is capable of remedy:
(i)Non Defaulting Party gives the Defaulting Party (fourteen) 14 days notice in writing of the breach;
(ii)the Defaulting Party fails to remedy the breach or default within the given notice period.
(b)the Defaulting Party breaches a obligation of the Representative Deed or any condition attaching to an Authority or contravenes, or becomes subject to a banning order under, the Corporations Act;
(c)the Defaulting Party is convicted of an offence involving fraud, deception, dishonesty or misleading conduct;
(d)the Defaulting Party becomes bankrupt or commits an Act of Insolvency;
(e)[Great Financial] or any Representative holds an Australian financial services licence or holds an authority from any party other than [Integrity], without [Integrity]'s prior written consent;
(f)[Integrity] is no longer the holder of an Australian financial services licence that is required for the operation of a financial planning business; or
(g)the continuance of this Licence Agreement becomes in any way unlawful or beyond the powers of [Integrity].
For the purpose of clause 16.2(b) and 16.2(c), [Great Financial]’s Representative is included.
16.3 Termination by Authorised Representative
[Great Financial] may terminate this Licence Agreement at any time by giving not less than one hundred and twenty (120) days notice in writing to [Integrity]. Any Authority given to a Representative will be revoked as at the date of such termination.”[143]
[143] CB 1060–1061.
163Mr Gulabovski submitted that the Agreement permitted termination on 120 days’ notice for any reason, or immediate termination if one of the reasons set out in clause 16.2 applied. Integrity did not provide 120 days’ notice to Great Financial and none of the reasons set out in clause 16.2 applied. Therefore, Integrity breached the Agreement by purporting to terminate it on 13 November 2015.[144]
[144] On 13 November 2015, Great Financial was deregistered as a corporate authorised representative of
Integrity.
164Integrity submitted that it is trite law that the parties to a contract can agree to terminate the contract at any time, irrespective of the specific termination provisions contained in the contract. If the Court accepts Integrity’s submissions in respect of what took place at the meeting on 14 September 2015, then Issue 4 must be decided in its favour because Mr Politis requested Mr Borg to move the Great Financial book of clients to a new entity, which necessarily involved the termination of the Agreement.[145]
[145] Integrity argued in the alternative that there is incontrovertible evidence that Mr Hope and Mr Haggart
requested Integrity to terminate the Agreement, enter into the Supacoach agreement and transfer the book of clients to Supacoach and Mr Hope and/or Mr Haggart had the requisite authority to bind Great Financial when they made these requests. As previously stated, in light of my findings in respect of Mr Politis’ conduct, this issues does not need to be determined. However, had it been necessary to determine the issue, I would have found that Mr Hope and Mr Haggart had, at the very least, ostensible authority to bind Great Financial for the reasons advance by Integrity.
165Given my findings above in relation to Issue 3, and my acceptance of Mr Borg’s version of the meeting on 14 September 2015, I find that Mr Politis requested Mr Borg to move the Great Financial book of clients to a new entity, which necessarily involved the termination of the Agreement. Accordingly, Integrity’s conduct in relation to the termination of the Agreement, entry into the Supacoach Agreement and/or allocation of Great Financial’s clients to Supacoach was not a breach of the Agreement.
Issue 5: If the answer to question 4 is yes, is Mr Gulabovski estopped from asserting that Integrity is in breach of the Agreement by reason of any conduct of Mr Politis, Mr Hope and/or Mr Haggart in requesting the defendant to engage in that conduct?
166If I am wrong and Integrity did breach the Agreement by terminating it, the issue of estoppel arises.
167Integrity contended that if the court finds that Integrity breached the Agreement, each of the six requirements of promissory estoppel set out in Walton Stores[146] are satisfied.
[146] (1988) 164 CLR 387.
168Mr Gulabovski submitted that short of finding that Mr Politis was a party to the discussions at the 14 September 2015 meeting about incorporating a new entity and transferring the book clients from Great Financial to Supacoach, Mr Politis’ failure to take any action upon being copied into the various emails is insufficient to amount to an inducement by Great Financial to Integrity to adopt an assumption that Mr Hope and Mr Haggart were entitled to deal with Mr Borg in relation to the plan. The criteria set out in Walton Stores is not satisfied.
Legal principles
169Equity will not permit an unconscionable departure from an assumption or expectation of fact or law, present or future, which that party has caused another party to adopt for the purpose of their legal relations.[147]
[147] Crown v Cosmopolitan (2016) HCA 26, [217] (Nettle J).
170Whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted.[148]
[148] Commonwealth v Verwayen (1990) 170 CLR 394, 445 (Deane J).
171The six requirements of promissory estoppel were set out by Brennan J of the High Court in Walton Stores:
“To establish an equitable estoppel it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between him and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiffs action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.”[149]
[149] (1998) 164 CLR 387, 388.
Conclusion and analysis
172I am satisfied that the six requirements of promissory estoppel have been established:[150]
(a) First, Integrity expected that the particular legal relationship that existed between it and Great Financial by virtue of the Agreement, under which Great Financial was a corporate authorised representative of Integrity would come to an end by mutual agreement;
(b) Secondly, Great Financial induced Integrity to adopt that expectation or assumption. Mr Politis made representations to Mr Borg at the 14 September 2015 meeting to the effect that a new entity would be incorporated, which would become a corporate authorised representative of Integrity in place of Great Financial, and to which Great Financial’s clients would be transferred;[151]
(c) Thirdly, Integrity acted in reliance on the expectation that the relationship between it and Great Financial would come to an end when it implemented the plan as requested. Ms Sparkes actioned the revocation of the corporate authorised representative on 13 November 2015 and then actioned the appointment of the new authorised representative, Supacoach, on 14 November 2015 in reliance on the expectation or assumption;
(d) Fourthly, Great Financial knew or intended for Integrity to terminate the Agreement on 13 November 2015. This is apparent from the numerous emails sent by Mr Hope to Integrity, copied to Mr Politis, as discussed above;
(e) Fifthly, the non-fulfilment of the assumption or expectation that the legal relationship between the parties would come to an end by their mutual agreement would occasion detriment to Integrity because Mr Gulabovski is now seeking damages from Integrity by reason of Integrity acting in accordance with Great Financial’s request for it to end the Agreement.
(f) Sixthly, Mr Gulabovski failed to avoid the detriment by purportedly taking an assignment of Great Financial’s rights pursuant to the Agreement and pressing its claim for damages for breach of the Agreement.
[150] As set out in the Defendant’s Written Closing Submissions dated 1 April 2021, [114]–[126].
[151] Alternatively, the assumption was induced by the silence of Mr Politis and his failure to raise any
objection to the emails regarding implementation of the plan into which he was copied.
173Accordingly, if I am wrong that Integrity did not breach the Agreement, Mr Gulabovski is estopped from asserting that Integrity is in breach of the Agreement by reason of any conduct of Mr Politis.[152]
Issue 6: If Integrity has breached the Agreement, has Mr Gulabovski suffered any loss or damage by reason of the breach and if so, what is its quantum?
[152] Had it been necessary to decide, Mr Hope and/or Mr Haggart.
174Mr Gulabovski submitted that but for termination of the Agreement on 13 November 2015 and transfer of Great Financial’s clients to Supacoach, the client book would have remained with Great Financial. Great Financial could have sold the client book to another financial services business or appointed a new individual authorised representative to service such clients.
175Integrity submitted that by the time of Integrity’s alleged breach, Great Financial did not have an individual authorised representative to service clients. The evidence indicates that by 13 November 2015, Mr Politis was intent on taking steps to place Great Financial into administration.[153] It follows that termination of the agreement by Integrity could not have been the cause of the loss of the value of Great Financial’s book of clients to Great Financial.
[153] CB 1602, CB 1785.
176Integrity further submitted that it is impossible for the Court to make any findings as to which clients Great Financial lost by reason of the termination of the Agreement on 13 November 2015, as opposed to by reason of Mr Haggart’s resignation from Great Financial on 30 October 2015. The Haggart Agreement provided that Mr Haggart was entitled to take “CH Clients” and the rights to all income generated by them upon his departure from Great Financial.[154]
[154] CB 1318. Mr Gulabovski discovered a draft version, but not an executed version, of the Haggart
Agreement.
177Mr Gulabovski bears the onus of establishing that the loss for which compensation is claimed was caused by Integrity, being the market value of Great Financial’s client book. [155]
[155] Cardwell Shire Council v Calabese (1975) 49 ALJR 164, 165.
178The test of causation is generally satisfied if the plaintiff can establish that, but for the breach of contract, the plaintiff would not have suffered loss,[156] although the courts overlay a “common sense” test to seek to limit liability to legally relevant causes.[157] It follows from an application of the “but for” test that, if the claimed loss would have occurred even if there had been no breach, the breach cannot be regarded as the cause of the loss.[158]
[156] Chappel v Hart (1998) 195 CLR 232, 269, 282.
[157] Ibid 243, 257.
[158] Ibid 271.
Conclusion and analysis
179I am not satisfied that but for the termination of the Agreement, the book of clients would have remained with Great Financial, given Mr Haggart’s resignation in October 2015, the absence of any individual authorised representative to service the Great Financial clients and Mr Politis’ stated intention to place Great Financial into administration. It was not possible for Great Financial to continue to service its clients and generate ongoing revenue. On the evidence, I reject the contention that there was a prospect of a new individual authorised representative being appointed to service clients.
180Further, I accept Integrity’s submission that there are insurmountable hurdles to Mr Gulabovski quantifying any loss.
181Clause 1.1 of the draft version of the Haggart Agreement defines “CH Client” as:
“any Client who is not as client of [Great Financial] but sourced by [Mr Haggart] or otherwise serviced for and on behalf of [Mr Haggart] and recorded in a document maintained by [Mr Haggart] and provided to [Great Financial] from time to time”[159]
[159] CB 1321.
182Clause 5 provides:
“(a)[Mr Haggart] retains ownership of the percentage of the CH Clients and, subject to clause 4 of this Agreement, all income generated from that Client Base as per schedule 1. This continues at all times including on termination of this Agreement… (sic)
(b)In the event that [Mr Haggart] resigns or this agreement is terminated, [Mr Haggart] is entitled to retain the rights to the CH clients detailed in schedule 1 and updated from time to time…”[160]
[160] CB 1324–1325.
183Schedule 1 states (sic):
“… All clients transferred as per client list attached Schedule 4 will not be subject to Schedule 1 and or clause 6 and 8 of this agreement [Mr Haggart] will retain ownership rights to these clients in Schedule 4 and [Great Financial] will pay 80% of any fee generated whilst they are in the name of [Great Financial] and this agreement remains in force…”[161]
[161] CB 1333.
184Schedule 4 states (sic):
“Client List existing clients transferred to [Great Financial] on date of completion.
Said list is to be maintained by [Mr Haggart] and provided to [Great Financial] on a monthly basis.”[162]
[162] CB 1335.
185On 26 May 2015 at 7.17pm, Mr Politis sent an email to Mr Hope and Mr Haggart attaching a document named ‘Agreement – Great Financial CH 21.5.15’ and stating:
“attached is a revised agreement including the staggered fee structure for Chris’ clients.
Can you both review to ensure it is consistent with your expectations and let me know of any final changes.”[163]
[163] CB 1361.
186In cross-examination, Mr Politis gave the following evidence when taken to the email:
“So Mr Haggart was bringing some of his own clients, is that correct?---Um, he would refer some of his clients to Great Financial, yes.
And they were regarded as his clients, correct?---Um, well, there was - I don't recall the exact nature of that, but he would be, his referral of clients would be recognised, yes.”
187Mr Politis was then taken to the draft version of the Haggart Agreement, and gave evidence as follows:
“... does that look like a draft of the agreement you'd been working on?---Yes.
… did this agreement ever get signed, do you know?---I believe it did, but I didn't retain, I wasn't provided with a signed copy.
…you think there were no changes [between the draft version and executed version] or you just don't know?---I don't believe there were any changes. As far as I was aware that was the final version.”
188Mr Gulabovski did not dispute that the Haggart Agreement was executed. In fact, he said in written closing submissions:
“Mr Politis gave evidence that he and Mr Haggart conducted themselves as if the draft agreement contained at CB1318 [the Haggart Agreement] was binding.”
189I do not accept Mr Gulabovski’s contention that as there is no list of “CH Clients” in the draft version of the Haggart Agreement, the conclusion is open that a list was never prepared and so no rights relating to “CH Clients” ever materialised. The plaintiff has not called any evidence enabling the court to identify which of the Great Financial clients were “CH clients” pursuant to the Haggart agreement, provision for them having been made in the agreement and Mr Politis’ evidence that Mr Haggart would retain some of his clients and that would be negotiated. In the absence of such evidence, I agree with Integrity’s submission that it is not possible to make any findings as to which of the Great Financial clients would have been lost by reason of Mr Haggart’s resignation on 30 October 2015, as opposed to those clients that would have been lost by reason of the termination of the Agreement on 13 November 2015.
190Accordingly, I accept Integrity’s contention that it is not possible to quantify any loss or damage.[164]
[164] It is therefore unnecessary for me to address the valuation evidence of Mr Firth and Mr Neill.
Conclusion
191Judgment for the defendant.
192Subject to any matters that the parties bring to my attention on the question of costs, I propose to order that Mr Gulabovski pays Integrity’s costs of the proceeding (including reserved costs) on the standard basis, in default of agreement.
193I invite the parties to prepare draft orders to give effect to these reasons.
194If the parties are unable to agree upon the form of order, those minutes of order should be accompanied by short submissions directed to the matters remaining in issue.
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Certificate
I certify that these 62 pages are a true copy of the judgment of Her Honour Judge Brimer delivered on 25 June 2021.
Dated: 25 June 2021
Taylah Stretton
Associate to Her Honour Judge Brimer
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