Hannah Louis Group Pty Limited ACN 122 439 392 t/as Maxum Transport v Maxum Taxi Trucks Pty Limited
[2011] NSWSC 291
•15 April 2011
Supreme Court
New South Wales
Medium Neutral Citation: Hannah Louis Group Pty Limited ACN 122 439 392 t/as Maxum Transport & Anor v Maxum Taxi Trucks Pty Limited [2011] NSWSC 291 Hearing dates: 11, 12, 13, 14, 15, 18, 19, 21, 22, 25, 26 and 27 October 2011; 3, 11, 22 and 24 November 2010; 10 December 2010 Decision date: 15 April 2011 Jurisdiction: Equity Division Before: Bergin CJ in Eq Decision: Joint venture as claimed by the plaintiff
Catchwords: [CONTRACT] - oral agreement - joint venture to operate transport/courier business - whether plaintiff's involvement limited to lending his name to venture or to share in profits of the business - defendant's clandestine conduct in moving the business into other companies - whether plaintiff's or defendant's version of oral agreement supported by surrounding circumstances - trial limited to liability Legislation Cited: Trade Practices Act 1974 (Cth)
Fair Trading Act 1987 (NSW)
Corporations Act 2001 (Cth)Cases Cited: B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
McCann v Switzerland Insurance Australia Limited [2000] HCA 65; 203 CLR 579Category: Principal judgment Parties: Hannah Louis Group Pty Limited ACN 122 439 392 (1st plaintiff)
Michael Saba (2nd plaintiff)
Maxum Taxi Trucks Pty Limited ACN 118 987 143 (1st defendant)
CDM Transport Pty Limited ACN 118 987 134 (In Liq) (2nd defendant)
Dominic Savo (3rd defendant)
Sandra Savo (4th defendant)
Christina Savo (5th defendant)
Savo Holdings Pty Limited ACN 118 963 312 (In Liq) (6th defendant)
Total Transport Services (NSW) Pty Limited ACN 129 753 671 (7th defendant)
Lindsay LeRau (8th defendant)
Michael Walker (9th defendant)Representation: Mr P Bruckner/Mr E Walker (plaintiffs)
Mr B Goldsmith, solicitor (3rd defendant)
Mr P Cook (4th, 5th and 7th defendants)
Kelvin Solari (plaintiffs)
Goldsmiths Lawyers (3rd defendant)
KP Lawyers & Barristers (4th, 5th and 7th defendants)
File Number(s): 2007/00257804
Judgment
Introduction
This litigation relates to a dispute about the nature of the commercial relationship between the second plaintiff, Michael Saba (the plaintiff) and the third defendant, Dominic Savo (the defendant). It is common ground that the plaintiff and the defendant reached an agreement in October 2006 in relation to the establishment and operation of a courier/transport business known as "Maxum Transport" (the Agreement). The parties are at issue as to the terms of the Agreement.
The plaintiff and the first plaintiff, Hannah Louis Group Pty Limited ACN 122 439 392 trading as Maxum Transport (HLG), make various claims in respect of loss and damage alleged to have been caused by the defendants as a result of breaches of contract and misleading or deceptive representations in breach of section 52 of the Trade Practices Act 1974 (Cth) and sections 42 and 54 of the Fair Trading Act 1987 (NSW). There are also claims of passing off and misappropriation.
The defendants named in the pleadings are Maxum Taxi Trucks Pty Limited ACN 118 987 143 (the 1 st defendant); CDM Transport Pty Limited ACN 118 987 134 (the 2 nd defendant), subsequently CDM Transport Pty Limited (In Liq), in respect of which an order under section 471 of the Corporations Act 2001 (Cth) was made granting leave to proceed against it; Dominic Savo (the 3 rd defendant), to whom I will refer as "the defendant"; Sandra Savo, the estranged wife of the defendant (the 4 th defendant); Christina Savo, the daughter of the 3 rd and 4 th defendants (the 5 th defendant); Savo Holdings Pty Limited ACN 118 963 312 (the 6 th defendant), subsequently Savo Holdings Pty Limited (In Liq) in respect of which an order under section 471 of the Corporations Act was made granting leave to proceed against it; Total Transport Services (NSW) Pty Limited ACN 129 753 671 (the 7 th defendant); Lindsay LeRau (the 8 th defendant); and Michael Walker (the 9 th defendant).
There were numerous interlocutory orders made prior to trial restraining the defendant and companies owned or controlled by him from certain conduct and freezing the defendant's assets and those of some of the other corporate defendants. These orders, with some adjustments, were continued during the trial and are still in force.
The trial (limited to the determination of liability) proceeded on 11 to 15, 18, 19, 21, 22, 25, 26 and 27 October 2010 and 3, 11, 22 and 24 November 2010. On 24 November 2010 the defendant was granted leave to file further written submissions by 10 December 2010 from which date judgment was reserved. Mr P Bruckner, of counsel, leading Mr E Walker, of counsel, appeared for the plaintiffs; Mr B Goldsmith, solicitor, appeared for the defendant; and Mr P Cook, of counsel, appeared for the 4 th and 5 th defendants and subsequently on 12 October 2010 appeared also for the 7 th defendant.
During the trial the parties advised that as between the plaintiff and the defendants, other than the defendant, the matter had been resolved in principle. There was mention of the necessity for documentation to be completed in respect of those proposed settlements, however no formal application for final orders was made. On 18 October 2010 the parties advised that the matter had settled "in principle" between the plaintiff and the defendant. However on 21 October 2010 the parties advised that final settlement had not been reached and the trial continued. During final oral submissions on 24 November 2010, the plaintiff advised that in addition to the defendant, it was only proceeding against the 1 st defendant (Maxum Taxi Trucks Pty Ltd), the 2 nd defendant (CDM Transport Pty Ltd (In Liq) and the 6 th defendant (Savo Holdings Pty Ltd (In Liq)), and that it was anticipated that consent orders would be filed in relation to all other defendants. This has not yet occurred.
The plaintiff propounds an agreement in which, amongst other things, he was to pay $150,000 for the setting up and operation of Maxum Transport and share in the profits of the business, as operated and/or sold. The defendant propounds an agreement in which, amongst other things, the business was to be owned by him, registered in the plaintiff's name and transferred into the defendant's son's name when he turned eighteen years of age. The defendant claims that although he offered the plaintiff 10% of the profits of the business he declined such offer allegedly on the basis that the defendant had already been very good to him, in particular in looking after his children.
In McCann v Switzerland Insurance Australia Limited [2000] HCA 65; 203 CLR 579 Gleeson CJ said that a commercial contract should be given a "businesslike interpretation" and that interpreting a commercial document (in that case a policy of insurance) "requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure": [22]. The present case does not involve the interpretation of a commercial document. It requires the determination of the terms of the commercial agreement reached between the parties. Although there is no occasion in this case to apply any "businesslike interpretation" to a written agreement, it is appropriate in determining, as a fact, what the terms of the agreement were to consider the surrounding circumstances, including that this was an agreement to govern the commercial relationship between the parties.
The surrounding circumstances to be taken into account in the process of determining the terms (as opposed to interpreting the terms) extend to both pre-agreement and post-agreement conduct: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193, per Spigelman CJ at [17]. It is settled law that post-agreement conduct may be considered to decide whether an agreement was formed: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 per Heydon JA, as his Honour then was, at [25].
There is no real issue that the defendant diverted the business of Maxum Transport and traded an identical business under various names and corporate structures, so that the plaintiff was excluded from any share in the profits of Maxum Transport. There is no dispute that the defendant controlled the corporations to which the business of Maxum Transport was diverted, being the 1 st , 2 nd and 7 th defendants. If the plaintiff's version of the Agreement is accepted it is not in dispute that the defendant was not entitled to divert the business and it was conceded that an order would be made for an account of profits or an assessment of damages. If the defendant's version of the Agreement is accepted there is no issue that he was entitled to divert the business and the plaintiff's claim should be dismissed.
Although the issue of determining the terms of the Agreement between the parties may present as reasonably straightforward, it belies the complexity of the history between the parties and the numerous events and attendant undercurrents upon which both parties relied to submit that their version of the Agreement should be preferred. The relevant surrounding circumstances include strong arm tactics ("bothering") against third parties by the plaintiff to protect the defendant, large cash payments without receipts and other documents, allegations of underworld connections, physical altercations between the parties and dealings with large commercial corporations under false pretences, where the defendant masqueraded as the plaintiff in correspondence with TNT Australia Pty Ltd (TNT).
This is not the usual backdrop to the determination of the terms of a commercial agreement. However, it is important to identify what the parties appeared to regard as acceptable conduct to judge which of the competing versions is the more probable. For instance where commercial parties usually transact business with detailed records bringing to account their capital contributions to a project, a claim of payments of large amounts of cash without receipts may present as questionable and/or less probable than where commercial parties operate in a less rigorous and disciplined fashion. There is no dispute that the defendant acted furtively in his diversion of the business. However he provided a number of explanations for this conduct that he claimed are consistent with his version of the Agreement rather than that propounded by the plaintiffs.
It is therefore necessary to analyse the parties' relationship in some detail over the relevant period. There were various challenges by each party to what might appear to be minor matters in the other party's evidence. However having regard to the fact that the plaintiff and the defendant rely largely on oral communications for the establishment of the terms of the Agreement, it will also be necessary to deal with these challenges to the recollections and/or credibility of each of the parties.
Century Couriers
It is common ground that as at 2006 the defendant had been involved in the transport industry for over 20 years. After his first five years as an employee he commenced his own business using the contacts that he had already made in the transport industry. The defendant owned a number of courier businesses the last of which, before entering into the Agreement with the plaintiff, was Century Couriers. This was a large courier business with forty-five vehicles, sixteen of which were owned outright by the defendant's company, Century Couriers Pty Limited. The other vehicles were owned by drivers contracted to Century Couriers.
The parties are introduced
In about February 2006 Paul Baldini, who had been an acquaintance of the plaintiff for some time, introduced the plaintiff to the defendant at a chance meeting at premises in Forest Road, Hurstville (the Forest Road premises). There was discussion about a motor vehicle that the defendant's wife was selling that resulted in the plaintiff's mother-in-law purchasing that motor vehicle at the beginning of April 2006.
Century Packaging
Some months prior to August 2006 the defendant started a new business known as a Century Packaging Supplies (Century Packaging). It was owned by State Packaging Pty Ltd and Century Packaging Supplies Pty Limited and sold disposable packaging to the catering and restaurant industries. Century Packaging operated out of the Forest Road premises. The defendant's partner in that business was Paul Baldini who, the defendant claimed, advised him that it would probably cost him about $180,000 to set the business up but the defendant claimed that, as it turned out, it cost him about $550,000. The defendant then decided to sell his shares in the business and the companies.
On 4 July 2006 the defendant entered into "Heads of Agreement" with Nicola and Saverio Russo (the Russo brothers) for the "total acquisition" of his shares in the companies, State Packaging Pty Ltd and Century Packaging Supplies Pty Ltd. There was also provision for the total acquisition of the defendant's shares in another company, Extreme Scooters Pty Ltd. The Russo brothers agreed to acquire the defendant's shares in the three companies for $450,000 by payments of $250,000 at the time the defendant transferred his shares and resigned as a director and $200,000 within 24 months of the share transfers. There were also provisions for the defendant to resign as a director of the three companies and for the Russo brothers to become directors of those companies at the time the Heads of Agreement were signed.
The Heads of Agreement also provided that the Russo brothers would provide to the defendant "the existing space occupied by Century Couriers Pty Ltd" (although the location of the space was not specified) "free of rent for up to six months from the date of share transfer" and that the Russo brothers would "re negotiate new lease terms with the owner of occupied premises or have the existing agreement transferred away from" the defendant.
Early meetings - mid 2006
The plaintiff claimed that in mid 2006 the defendant arrived uninvited at his home. This was the first time that the plaintiff had seen the defendant since his meeting with him earlier in the year in relation to the purchase of the motor vehicle. The plaintiff did not know how the defendant obtained his address but, once there, the defendant asked the plaintiff whether he would like to purchase a boat. The plaintiff claimed that he informed the defendant that he thought it was "a bit strange" to knock on his door as he did and he said: "you're not here to sell a boat. Why did you come and see me?" The defendant said that he would like the plaintiff "as a friend". In his cross-examination the plaintiff said that what the defendant was looking for was "protection" because he was in "a lot of trouble in the past with some of his ex partners" (tr 81).
The defendant's first affidavit sworn on 30 September 2009 made no mention of the detail of the meeting in mid 2006. However in the defendant's affidavit sworn on 6 April 2010, he denied going to the plaintiff's house at that time. That affidavit included the following (par 7):
I did not know where Saba lived at that time and all of my contact with him was by phone. I did however by telephone offer to sell my boat to him and he indicated that he was interested.
It was suggested to the plaintiff in cross-examination that the "conversation never took place" (tr 80). The plaintiff was rather adamant that it did take place as he recounted it (tr 80-81). Notwithstanding the defendant's denial in his affidavit that he attended the plaintiff's house and notwithstanding the cross-examination of the plaintiff consistently with such denial, the defendant gave the following evidence in cross-examination (tr 248):
Q. And I suggest to you that you went and saw Michael Saba and you asked him if he wanted to buy a boat?
A. Yes.
I am satisfied that in mid-2006 the defendant went uninvited to the plaintiff's house and I am satisfied that that he did so initially on the pre-text of offering to sell his boat to the plaintiff.
The plaintiff claimed that over the next few days the defendant visited his home on numerous occasions. These meetings obviously took place after the defendant had executed the Heads of Agreement because he was complaining to the plaintiff about the Russo brothers, to whom he referred as the "pizza boys" (apparently because of the pizza business they operated elsewhere). The plaintiff claimed that the defendant informed him that he needed to "kick out" the pizza boys from the Forest Road premises.
The plaintiff claimed that the defendant asked him whether he would like to be a director of Century Packaging and suggested that he would give him whatever salary he wanted and proposed a payment of $2,500 per week "cash in the hand". After consulting his solicitor the plaintiff advised the defendant that he did not mind working at Century Packaging but he did not want to be a director. The plaintiff gave evidence in cross-examination that the reason he was at the Forest Road premises was to "bother" the defendant's ex-partners (tr 90). When he was pressed to describe what it was that he did to "bother" the ex-partners, the plaintiff said that he instructed them to "get out" (tr 91).
In cross-examination the defendant denied that he engaged the plaintiff to protect him. However he gave the following evidence (tr 249):
Q. What do you say you engaged Mr Saba to do in that period of time, in the last half of 2006?
A. I engaged, I engaged Mr, I asked Mr Saba would he, would he let me, allow me to, safe passage back into the offices of Century Packaging by firstly telling the ... brothers to go away, and secondly by controlling Mr Baldini ... that is why I engaged Mr Saba, is for, for a period of time of four weeks.
In his affidavit sworn 6 April 2010 the defendant claimed (at par 8) that he did not offer the plaintiff a directorship and he did not discuss wages or any payment to the plaintiff. He also claimed (par 11):
Saba was not appointed general manager of Century Packaging Supplies Pty Ltd and was never an employee of that company and for that reason did not receive a wage.
Notwithstanding these claims in his affidavit the defendant gave the following evidence in cross-examination (tr 256):
Q. Did you believe that Mr Saba was entitled to any money out of this business when it went into administration?
A. Apart from his pay, no.
HER HONOUR
Q. Apart from his what?
A. Apart from his wage that he was paid, no.
BRUCKNER
Q. How much wage was he paid?
A. He was paid $1,200 a week for four weeks.
Q. That money was paid to him, you say?
A. I believe so.
It was suggested in final written submissions that the plaintiff's claim that he was engaged by the defendant for an agreed amount of $2,500 per week was "inconceivable". I disagree. It is quite clear that the defendant wanted to secure the plaintiff's services to protect his interests at the Forest Road premises
The defendant agreed that he engaged the plaintiff but said that it was only for "around 4 weeks" for the purpose of providing him with a "smooth and hassle free passage" to regain the directorship and access to the offices (tr 280). He said he engaged the plaintiff to "enforce" his wishes for the business at that particular time (tr 281). It is obvious that the defendant had to discuss payment or wages with the plaintiff for the "services" he was to provide. Whether it was for $2,500 or $1,200 per week and whether it was for services as a general manager or simply to "enforce" the defendant's wishes to allow him "safe passage" back into the Forest Road premises does not matter for the purpose of the assessment of the competing claims on this aspect of the matter. The fact is that the defendant admitted that the plaintiff was to be paid his "pay" or his "wages". I am satisfied that the defendant discussed wages with the plaintiff for either $1,200 or $2,500 per week.
The defendant gave affidavit evidence that he terminated the Heads of Agreement with the Russo brothers because they had not paid the purchase price after 3 months. I do not have to decide the legality of any termination of that Agreement in these proceedings, however the Heads of Agreement did not oblige the Russo brothers to pay the defendant any money until he transferred his shares and resigned as a director. It is apparent that the defendant did resign as a director but did not transfer his shares. His affidavit evidence claimed blandly that he "changed the directorship back". There was nothing in his first affidavit about the engagement of the plaintiff to provide him with a "safe passage" back in to Century Packaging offices. There was no mention of any request of the plaintiff to tell the Russo brothers to "go away". Nor was there any mention of any request by the defendant of the plaintiff to control Mr Baldini. It is apparent that the only way the defendant could enforce what he regarded as an appropriate termination of the Heads of Agreement was with the assistance of the plaintiff.
Although the path to the achievement of the defendant's wishes is not detailed in the evidence, it is clear that the plaintiff provided the "safe passage" the defendant was after because the defendant was reinstated as a director of Century Packaging Supplies Pty Ltd (and probably State Packaging Pty Ltd and Extreme Scooters Pty Ltd) in late September 2006. The defendant agreed that this had cost him $15,000 and that he had paid that amount by credit card (tr 274-275).
Sale of Century Couriers - August 2006
On 12 August 2006, the defendant and his wife, their partnership, the defendant trading as Century Couriers, Century Couriers Pty Limited, Century Couriers Pty Limited as trustee for the Century Couriers Trust and the defendant trading as Recall Couriers, collectively as "Seller", entered into a Sale of Business Agreement (the Sale Agreement) with Century Couriers (NSW) Pty Ltd as "the Purchaser" to sell the "Business" defined as "the courier and taxi truck business carried on by the Seller" for $250,000. The Purchaser was referred to in the evidence as "Civic Transport" (Civic), apparently a Melbourne based business that incorporated the Purchaser company to operate the Century Courier business. The purchase price was to be paid by instalments of $50,000 on the Completion Date, 14 August 2006, and $200,000 on 2 October 2006.
The defendant agreed to assist the Purchaser to retain the goodwill and business of the Customers of the business and to provide ongoing assistance as directed until 2 October 2006 in return for payment of $1,500 per week: (Clauses 7.1 and 7.2). The Sale Agreement also included the following:
14. RESTRAINT OF TRADE
14.1 Restraint of Trade
The Seller agrees with the Purchaser that in order to protect the Goodwill, the Seller will not for three (3) years after the Completion Date within New South Wales or the Australian Capital Territory either directly or indirectly:
(a) undertake, carry on or be engaged in or concerned with (whether as director, employee, agent, principal, partner, representative, shareholder, debenture holder, trustee, the holder of any security or in any other capacity) any business which competes with the Business or is similar in nature to the Business.
(b) counsel, procure or otherwise assist or encourage any person to do anything referred to in clause 14.1 (a);
(c) canvass or solicit any employee of the Business to leave his employment with the Purchaser; or
(d) canvass or solicit any person who has been a client or customer of the Business at any time during the year prior to the Completion Date.
Notwithstanding the above, it is agreed that after the expiration of one (1) year from the Completion Date the Seller may be an employee or subcontract (sic) owner/driver of a business that competes with the Business or is similar in nature to the Business.
The defendant agreed in cross-examination that the purchase price was paid in accordance with the Sale Agreement. Thus, he received $50,000 in August 2006 and the balance of $200,000 on about 2 October 2006. He was cross examined about clause 14 of the Sale Agreement and said that the clause was not the subject of any negotiation between himself and Civic. He claimed that his manager at the time, Rob Hyham, had informed him that there was a restraint of trade clause in the Sale Agreement and he agreed that he was aware there was a period of three years with some restraints. He denied being aware of a one year period in relation to other restraints. He was cross-examined further as follows (tr 240-241):
Q. This would have been an important clause to you at the time, wouldn't it?
A. I was not aware of this clause.
...
Q. This would have been an important clause to you at the time you signed this agreement, wouldn't it?
A. Yes.
Q. Your conversation with Mr Hyham about the restraint of trade, was that prior to the signing of the agreement or after the signing of the agreement?
A. Prior.
Q. And did you ask Mr Hyham what you were restrained from doing?
A. Yes I did.
Q. What did he tell you, to the best of your recollection, that you were restrained from doing?
A. Not starting a transport company within a 3-year period. There was one other, I just need to remember it.
Q. Take your time sir?
A. I was able to be a driver only and a manager of any transport companies I might have worked for in the future. That is the extent of it.
The defendant said that once he sold Century Couriers to Civic he was "technically unemployed for the first time in twenty odd years". He said that this was a "concern" and that he had lost a lot of money, about $600,000, in Century Packaging, although the sale of Century Couriers made up for some of that loss. He said that he had "technically" lost his family's company and gambled on his family's wealth (tr 273). Within days of the receipt of the balance of the purchase price for Century Couriers, the defendant approached the plaintiff to discuss his plan to establish another courier/transport business, which he accepted was in breach of the restraint of trade provision of the Sale Agreement (tr 242).
When asked what the "catalyst" was that made him comfortable with breaching his obligations under the Sale Agreement to set up a new courier/transport business the defendant said (tr 267):
In no importance of order, firstly, there were 16 drivers that I employed between 2 and 5 years, all of a sudden unemployed as a result of my selling Century Couriers Pty Limited. That is one. There was the fact that the owners of Civic Transport [the Purchaser] dropped this contract in the laps of my wife and myself on Saturday morning-whatever date it was, they commenced trading with my company on the Monday, two days later, Friday afternoon we had all the phones computers everything ripped off. They come to my home office with this document Saturday morning. My wife and I had no time to get legal representation to read this contract on our behalf, and to be very honest that peeved me off, for want of a better word, and thirdly I had money troubles at the same time so, it was a combination of all three of those things I would say.
It is clear from this evidence that the defendant was claiming that he had "money troubles" at the time that he approached the plaintiff with his plan to establish a new transport/courier business in October 2006. However, the defendant gave the following evidence in cross-examination (tr 283):
Q. You accept that at the time of the initial agreement, in early October 2006, you were short of money?
A. No.
He said that he was looking for a way to make money (tr 283). However when he was referred to his earlier evidence in which he said that he had money troubles he said that he stood by that evidence (tr 284). The defendant's affidavit sworn 30 September 2009 included evidence that "at about the same time", meaning about October 2006, his "marriage was becoming increasingly shaky". He said he was "cautious about building up assets" in is own name and "therefore decided to try to set up another courier business, but putting it in someone else's name" (pars 16-17).
The Agreement - October 2006
It is common ground that the plaintiff and the defendant met in early October 2006 and discussed the proposal the defendant put forward for the establishment of the new transport/courier business. They did not reduce their discussions or their outcome to writing. The competing versions of the conversation in early October 2006 are contained in their respective affidavits.
The plaintiff claimed that the following conversation took place in about October 2006 in the garage of his home:
Defendant: The warehouse is giving me a headache - I am still paying the rent. I know a lot about transport and I have a lot of connections. There is big money to be made from running transport drivers. Do you want to go into business? The business will be run from the offices at the Forest Road premises, but it will operate for a short time from my home until things settle down from the packaging company liquidation, because lots of creditors are chasing me for money at the Forest Road premises, so I don't want to work from there straight away.
Plaintiff: OK.
Defendant: The business will be in your name or the name of one of your companies, and I will be a silent partner. I will manage the business' day to day operations, but everything will be in your name.
Plaintiff: OK.
Defendant: The Forest Road Lease will also need to be transferred to your name or one of your companies. The business will use the offices and pay $2,000 a week from January. The business will be making money by then.
Plaintiff: OK
Defendant: The company will earn about $20,000 a week profit once it is up and running.
Plaintiff: OK.
Defendant: The company will need about $300,000 to get up and running and for working capital during the first year. You will only need to put in $150,000 as the company requires it over the first 12 months, because I will put in the first $150,000. If I put in $150,000 cash for the company's initial capital needs, and I manage the company's day to day operations, I want 50% of the company's profit and, after we each take out our contributions upon selling the company, I want 50% of the balance. After setting up the company and getting it earning for a while, the company will be sold in 12 months time, in October/November next year. The company should then be worth at least $500-$600K."
Plaintiff: OK.
The defendant claimed that the following conversation took place when he was out fishing with the plaintiff:
Defendant: I am thinking about starting a new courier business but I can't put it in my name. Can I use your name? It will be my business and I will run it. I will fund it all. I have everything ready to start including drivers and clients.
Plaintiff: Yes, I'll do it. You can use my name, but don't fuck it up. The only thing is I want my accountant to do all the taxes.
Defendant: Does he have transport experience?
Plaintiff: He used to work for the tax department. He can do everything.
Defendant: Ok. We can use your accountant to ensure that you are protected.
The defendant claimed that when they arrived back at the plaintiff's home after the fishing trip the following conversation took place:
Defendant: Do you want 10% of the profit?
Plaintiff: No, I don't want anything. What you did for my kids is worth a million dollars to me.
The defendant claimed that on a subsequent fishing trip shortly after the fishing trip referred to above, the following conversation took place:
Defendant: The business will be run from my house. After three years you can transfer the business to my son's name.
Plaintiff: OK.
The defendant also claimed that around that time there was a further conversation at the defendant's house in the presence of his wife. He claimed the following was said:
Defendant: Are you sure you want nothing?
Plaintiff: Yes, I'm sure.
The plaintiff was cross-examined in relation to his version of the conversation as follows (tr 104-106);
Q. Mr Saba, you accept, do you not, that prior to this conversation in October 2006 Dominic had a lengthy experience in the courier business?
A. That's what he said, yes.
Q. In October 2006 you accepted that, you knew that?
A. I knew, yeah.
Q. And you had no experience in October 2006 about the courier business, did you?
A. No. That was new for me, even packaging too as well.
Q. To make sure I fully understand what you say the agreement is, let me summarise for you my understanding. You say Dominic approached you about the joint venture?
A. Yes, he did.
Q. Dominic said to you that he knew a lot about transport and he had a lot of connections?
A. Yes. He explained more things than that.
Q. He asked you if you wanted to go into business with him?
A. Yes, he did.
Q. He said to you he would be the silent partner?
A. Yes, he did.
Q. He said to you he would manage the business, day to day operations?
A. Yes, he did.
Q. He said he would put in $150,000 straight away?
A. Yes, he did.
Q. He said to you you only have to put $150,000 over the 12 month period?
A. Yes, he did.
Q. And he said in return for that he wanted 50% of the profit?
A. Yes, he did.
Q. Mr Saba, I put to you that as a business proposition makes no sense?
A. Did for me then and he said it.
Q. I'm asking you in the witness box now, I put to you that makes no sense, does it?
A. What do you mean by that? It does make sense. Why not making sense?
Q. He's providing all of the connections?
A. Yes.
Q. He is managing the business day to day?
A. Hmm.
Q. He's putting in $150,000 at the beginning, you're only to put in $150,000 at any time over 12 months and then he is only to get 50% of the profit. I put to you that doesn't make any sense?
A. Did make a lot of sense to me happening with the packaging as well.
Q. Are you telling her Honour today that it makes sense to you now?
A. Did make sense all the time.
Q. So it makes sense to you as a business proposition?
A. As a business opportunity.
Q. As a business proposition he would introduce all the contacts, he would work in the business full-time, he put the money in now, you didn't have to put it in now and he would still only get 50%?
A. Yes.
Q. In this conversation Mr Saba there was no discussion about any work that you would do, was there?
A. Actually the concern was I'll be doing the packaging part.
Q. There was no discussion in this conversation about any duties you would perform in the new business which we know is called Maxum Transport, there was no discussion was there?
A. No, mainly was as a share business like packaging and transport all under one roof, the drivers for the courier company do the delivery for the packages. That's what I said. We have a lot of things in common together.
Q. So 50:50, he works full-time but there is no discussion about what you do, is that your evidence?
A. No. We did discuss that I was.
Q. It's not in your affidavit is it?
A. Like in affidavit that was the packaging part was involved in it as well.
Q. And there was no discussion on that occasion about weekly drawings or weekly salary, monthly salary, was there?
A. It wasn't, no. We haven't discussed that briefly that much, no.
Q. Mr Saba, at the time of this conversation Dominic had told you that he'd sold the previous business and that he was subject to a 3 year restraint of trade?
A. He told me he sold the business but I have no knowledge about him having restraint against him.
Q. I put to you Mr Saba he told you.
A. No, he didn't Sir.
Q. And I put to you Mr Saba that that is the reason and that is the explanation that he gave to you as to why he wanted to put the business in your name?
A. That wasn't explanation for me at that time. At that time we had - the packaging was heavily involved with the transport which is we talking about a warehouse money, a lot of money to be collected, two businesses run under the same roof. He did not mention anything about restraint order against him.
Q. I put to you Mr Saba that on or just before 5 October 2006 you had a conversation to this effect with Dominic and tell me if you agree or don't agree and I'll do it in each part. I put to you that Dominic said to you that he was thinking about starting a new courier business but he couldn't put it in his name, he asked you if he could use your name, he said to you it would be his business and he would run it, he said to you he would fund it all, he said he had everything ready to start including drivers and clients?
A. That's not correct.
Q. I put to you that you then said in response "I'll do it, you can use my name but don't fuck it up, the only thing is I want my accountant to do all the taxes". Did you say that?
A. I say the last part. That was one of the main concern to be safe and secure like I want my accounting to do my paperwork, yes.
Q. And in fact Mr Amine, the accountant, is your accountant isn't he?
A. He is actually our accountant.
...
Q. And he was your accountant before any dealings with Dominic?
A. Yeah, before then and he was accounting for our packaging company actually Century Packaging Supplies.
The plaintiff could not recall the defendant asking him if the accountant had transport experience but denied that he said that Mr Amine had worked for the Australian Tax Office. He also denied that the defendant said that they could use Mr Amine to ensure that the plaintiff was "protected". The plaintiff also denied that the defendant asked him whether he wanted 10% of the profit. He was cross-examined further as follows (tr 108):
Q The conversation you had with Dominic about this new business, I put to you it didn't happen in your house at all?
A. It did happen in my house in my garage.
Q I put to you it happened on Dominic's fishing boat?
A. Couldn't be, couldn't be, no way fishing trip I went with Dominic it's way over Christmas which is the company was a couple of months old.
Q. And I put to you that the conversation that you had with him was on the fishing boat in the presence of Daniel, Dominic's son, your daughter and two of your sons?
A. First of all I would never discuss business in front of my kids and I never heard somebody discussing a business deal on a fishing boat while you're fishing putting baits for your children, you have children, you've got children and what you want to get that fishing trip. That was way over Christmas. I mean if you're talking about October, that fishing trip was I'll say two or three months after the company started.
Q. Mr Saba, I'm not putting to you that you discussed business in the presence of your children. What I am putting to you is that the conversation you had with Dominic about this new business took place on the fishing boat and your daughter and two of your sons were also on the fishing boat?
A. Exactly what I repeat again what I said. That fishing trip you talking about I only been once or twice fishing trip with him, couldn't be more than once or twice and definitely that happened way over Christmas which is if you're saying that happened in October it definitely wasn't in Christmas time. After Christmas that fishing trip took place.
There was cross-examination of the plaintiff to suggest that on his version of the conversation there appeared to be little discussion with his only response to all of the defendant's propositions being "okay". It was suggested that such a conversation was most unlikely. However it is interesting that even the defendant's version of the conversation suggests that the plaintiff responded in this fashion to some of the propositions put by the defendant. The plaintiff explained in cross-examination that the conversation about which he gave evidence took place over a number of days (tr 102-103). In any event, the determination of which version of the Agreement is to be preferred requires consideration of all the surrounding circumstances and not merely challenges to the content of the conversations.
The parties have adopted an "all or nothing" approach to the issue as to which version of the Agreement is to be preferred. I prefer one party's version then the other party does not suggest that some of the terms of the Agreement propounded by that party have not been established. Nor has it been suggested that there are any legal impediments to the Agreement if either version is preferred. Accordingly it is necessary to deal with the various aspects of the evidence that have been relied upon by the respective parties to suggest that their version of events is to be preferred.
Set up costs
One of the matters upon which the defendant relied to suggest that his version of the Agreement was more probable than the plaintiff's version was his contention that the plaintiff did not make any payments or contributions to Maxum Transport including the set up costs. The defendant claimed in his affidavit sworn on 30 September 2009 that he did not ask the plaintiff to pay any money for the set up of the business and he also claimed that the plaintiff did not pay any money at any stage. He said: "I did everything to set the business up". His affidavit evidence was that the "only thing" that the plaintiff did was to go with him to open a bank account at the Commonwealth Bank and to the Post Office to sign up for a Post Office box. The defendant claimed in his affidavit that he received and retained all of the relevant tokens, passwords, keys, cheque books and documents relating to the bank account and the post office box. He claimed that he thought up the business name "Maxum Transport" and that he designed the logo and arranged business stationary. His affidavit dated 30 September 2009 included the following (par 23):
I registered the business name, for which I paid the registration fee of $132.00.
The defendant reiterated this evidence as follows (par 75):
Apart from agreeing to the use of his name (and later his company's name) as the business owner ... Saba had absolutely no involvement in the business whatsoever. He paid no money whatsoever into the business. Until about March 2007, he showed and had no interest in the business whatsoever.
In his affidavit sworn on 6 April 2010 the defendant returned to the topic and gave the following evidence (par 30):
I reiterate that I paid for the registration of the business name in cash and I received the receipt.
The defendant was cross examined on these claims as follows (tr 307-308):
Q. As at the date of the original agreement, the initial agreement, you regarded that there was no reason for Michael Saba to pay anything in relation to this transport business?
A. Correct
Q. It is your evidence, is it, that he did not pay for anything?
A. Never.
Q. You say you paid the fee for the PO Box?
HER HONOUR:
Q. Is that right?
A. I'm just thinking, your Honour. I can't recall the transaction about the PO Box.
BRUCKNER:
Q. You say that he did not contribute any money to the business?
A. No.
Q. You say that he was not involved in the registration of the business name. Is that your evidence?
A. No. No. He was involved in the registration, yes, of the business name.
Q. So, he attended, did he?
A. Yes.
Q. And he paid the fees?
A. No. I paid that one. $123.
Q. You paid that one?
A. The Department of Fair Trading. I paid the registration. $123.
Q. Are you sure about that?
A. As sure as my mind can allow me to remember from those times. He may have lent me $60 for the post office box, which I returned. That's why I can't remember, but the registration at the Department of Fair Trading, I'm certain that I paid it, because I remember the amount. $123.
Q. Did you pay it with a credit card?
A. No. Cash.
Q. Are you sure about that?
A. Pretty certain.
The defendant was then shown documents produced by the Department of Fair Trading under subpoena (Ex E) that included a copy of the Application for Registration of a Business Name that recorded the plaintiff as the applicant for the proposed business names of "Maxum Transport", "Maxum Couriers" and "Maxum". The certification at the conclusion of the form was dated 4 October 2006 and was signed "M Saba". That exhibit also included the Business Name Extract showing that the business name "Maxum Transport" was registered on 5 October 2006 and that the proprietors were HLG and the plaintiff. It also included a receipt dated 5 October 2006 for "EFTPOS Michael Saba" in the amount of $137.
When the defendant was first confronted with these documents he gave evidence that he signed the signature "M Saba". However, when he was shown the EFTPOS receipt in the plaintiff's name he gave the following evidence (tr 310):
Q. Do you stand by your evidence that the payment for registration of these business names was done by cash?
A. Obviously not.
...
Q. Do you stand by your evidence that you paid for the registration of these business names?
A. No. I paid for the post office box, so I've got it wrong.
Q. The reason why Michael Saba paid for the registration of these business names was because he was contributing money to the businesses, wasn't he?
A. Yes.
Q. It was part of his agreed contribution, wasn't it?
A. $137?
Q. Yes.
A. No. It was not part of the agreed contribution.
I am satisfied that the plaintiff paid for the registration of the business name. I am also satisfied that the defendant's original claims that the plaintiff did not make any payments towards the set up costs of the business and his reiteration of those claims were made to suggest that the plaintiff had no entitlement or interest in the business other than allowing the use of his name and that of HLG. Irrespective of whether the defendant's affidavit evidence in relation to the payment of the registration fee was merely mistaken or intentionally deceptive, the fact that the plaintiff paid for the registration of the business name tends to support his greater involvement in the business than that claimed by the defendant.
Meeting with Accountant - late 2006
It is common ground that after the business name was registered the plaintiff and the defendant met with the plaintiff's accountant, Sayed Amine. The defendant claimed that at this meeting he informed Mr Amine that: (1) he had started up a transport company; (2) it was in the plaintiff's name; (3) he was "funding it all" and he would be "running it all from home"; and (4) he would own the business but the plaintiff wanted him, Mr Amine, to be the accountant. The defendant also claimed that he informed Mr Amine that he had a restraint on him in relation to the courier company that he had sold that prevented him from owning a business but that it did not prevent him from managing a business. He claimed that he informed Mr Amine that the business was to be transferred into his son's name when he turned eighteen years of age. The defendant also claimed that he informed Mr Amine that his bookkeeper did all the documents for the Business Activity Statements (BAS) and that he would personally deliver them to Mr Amine each quarter when they were ready.
Mr Amine has been in practice as an accountant for seventeen years. He met the plaintiff fifteen years ago when he completed one tax return for him and did not see him again until 2006 when the plaintiff's brother (a client of Mr Amine) referred the plaintiff to him. Mr Amine said that he went to the Forest Road premises and met with the plaintiff and the defendant and that this was the first time that he discussed the transport business with the plaintiff. Prior to that he had a number of meetings with the plaintiff in relation to Century Packaging.
Mr Amine's affidavit evidence of his conversation with the plaintiff and the defendant at the meeting in October 2006 was that the defendant informed him that: he and the plaintiff wanted to start a transport business together; he would be managing the transport business because of his experience in the industry; and his bookkeeper would prepare everything and he would give him a print out for the business activity for every quarter.
Mr Amine made no notes of this conversation. He was cross-examined as follows (tr 166):
Q. And you don't think it is appropriate to make any notes of these new instructions that you had?
A. I didn't take any notes.
Q. Mr Amine you didn't ask any questions, did you, about this new business, did you? You didn't ask who was putting in money for the new business, did you?
A. Really, I didn't ask, so I thought in the first BAS when I do the BAS for them they should provide me with all like, there's any capital contribution, who contribute, I take it from them. It is not my job to like, go deeply in this discussion. I didn't ask question, no, really.
Q. You are being asked to be the accountant, you are being told that there is a new business venture but you don't think it is your job to ask questions about who is putting in money or who is allowed to take profit or drawings or anything?
A. Yeah, look, this meeting well, was not intended to like, go into further discussion but only we set up the like, the headline, you know, for this business but it didn't go through with it.
Q. I put to you Dominic Savo never said those words, "Michael Saba and I want to start a transport business together under Hannah Louis", I put to you he never said those words, do you agree or you don't agree?
A. This, what I heard in the meeting.
When the defendant's version of the meeting was put to him in cross-examination, Mr Amine said he "never heard this words, never" (tr 166).
When Mr Amine was being cross-examined to suggest that he had not produced any timesheets or invoices to the Court in response to a subpoena he gave the following evidence (tr 160):
Q. In fact Mr Amine the documents that you have produced to the Court, there are no invoices from your practice to Maxum Transport or Hannah Louis Group, did you not render invoices to them?
A. Really I invoice in the past for Hannah Louis, look because Maxum Transport is a part of Hannah Louis, so. What I invoice, I invoice to Hannah Louis, I think I invoice one and after that it didn't pay me, to tell you the truth, more than two years I didn't get any cents from them.
Q. So, you haven't been paid?
A. Only once, they gave once, I think, yeah. Because I know it was in hard financial situation, you know, the business was struggling and really I wait and wait. But I have to issue invoice for Maxum Transport, I have to issue invoice for them.
Although it was suggested that Mr Amine's memory of the transaction relating to the Maxum Transport business was not assisted by notes, I am satisfied that the defendant did not inform Mr Amine that the business was to be owned by him and that the plaintiff was merely providing his name for the business. I accept Mr Amine's evidence.
Maxum Transport set up - October 2006
The business name Maxum Transport was registered on 5 October 2006. The defendant claimed in his affidavit that after he had done the preliminary work to set up Maxum Transport, there was a period of about six to eight weeks where he had little to do because he was waiting on a commitment from TNT to use his new business.
Century Packaging - administration and liquidation
An administrator was appointed to Century Packaging on 27 November 2006 and a liquidator was appointed on 22 December 2006.
HLG purchases Century Packaging - January 2007
On 22 January 2007 HLG, as purchaser, and the plaintiff, as guarantor, entered into a Sale Agreement with Century Packaging Supplies Pty Ltd (In Liq) to purchase the business. That agreement included a covenant by HLG "to assume all the Liabilities in respect of the leases and other tenancy arrangements in respect of the Premises": (Clause 9(a)). The completion of the Sale Agreement was not conditional upon the grant of a new lease or on granting any possession rights in respect of "the Premises". "Premises" was not defined in the agreement, however it is common ground that Century Packaging Supplies Pty Ltd was operating from the Forest Road premises. HLG also agreed that from the date of execution of this Sale Agreement it would pay "all monies to the landlord" with respect to any liability in respect of the lease of the Premises.
Maxum Transport Invoice
The business and financial documents of Maxum Transport were provided to Mr Amine between January and mid 2007. The cash journal for 28 February 2007 recorded a capital acquisition of $88,000. The defendant was cross examined about this entry as follows (tr 531):
Q. Sir, can you explain why at page CB71 the document provided to Mr Sayed Amine referred to capital acquisition of $88,000?
A. Would you like me to explain this to you?
Q. Yes.
A. I was ordered to do this by Mr Saba so he could collect $8,000 of unwarranted GST, and I specifically told his accountant that, and to deal with it between them two.
The defendant was then shown an invoice purporting to be from him directed to Maxum Transport and dated 20 October 2006. It listed various computers, printers, filing cabinets and other equipment with various amounts totalling $88,429. The defendant was cross examined in relation to this invoice (it appeared at CB70) as follows:
Q. If you could turn to page CB70. Did you prepare that invoice?
A. Not that one, but one very, very similar that only totalled $88,000.
Q. You provided this invoice to Mr Sayed Amine personally, didn't you?
A. This one here?
Q. Yes?
A. It was amongst the second lot I think of BAS statements or the first, I'm not sure. But, yes, I did personally give it to him. I pointed out to him that it had nothing to do with me. It is not a legitimate invoice. What I have produced is not a legitimate invoice. This has been turned into a replica. $400 has been added, and a tax invoice number. My one does exist somewhere in all this paperwork and is a lot cruder in format than this one.
Q. Mr Saba didn't tell you to lie in the accounts as to $88,000, did he?
A. Yes, he did.
Q. Sir, you wanted to convince Mr Saba that you were contributing your fair share to the business?
A. I contributed everything to the business. Not my fair share, everything.
...
Q. So is it your evidence that you were requested by Michael Saba to prepare a false invoice?
A. I didn't prepare a false invoice. I was asked to provide a list of all the equipment used for Maxum Transport, which I did. It was never an invoice.
The claim that the plaintiff ordered the defendant to do certain things in relation to the invoices, whether it be true or not, is a claim made by the defendant which seems to me to be inconsistent with the plaintiff only letting the defendant use his name for the business. Rather, it suggests that the defendant was involved with the plaintiff in the way in which the business would be structured and invoices rendered and moneys brought to account.
Maxum Transport flourishes
The defendant claimed that after TNT started providing work he "arranged" for Rob Hyham to join Maxum Transport as the General Manager. At that time Mr Hyham was working with Civic and the restraint of trade clause prevented the defendant from canvassing or soliciting any employees of the business. The defendant was cross examined about this as follows (tr 352):
Q. Did you understand when you asked Mr Hyham to come and work for you that you were subject to a restraint not to canvass or solicit any employee of the business to leave his employment with the purchaser?
A. No.
Q. You gave evidence when I first cross-examined you that you did understand that to be your obligation, do you now change that evidence, do you?
A. Yes.
Q. I suggest to you that you were aware of that obligation but you didn't care as to whether or not your breached it when you spoke to Mr Hyham in late 2006, you agree or disagree with that proposition?
A. I agree in part with that summation.
Q. I suggest that you were aware when you spoke to Mr Hyham in late 2006 that you were subject to a restraint prohibiting you from canvassing or soliciting any employee of the business to leave his employee with the purchaser?
A. No.
Q. I suggest to you that when you spoke to Mr Hyham you didn't care as to whether or you breached any restraint with the purchaser of that business?
A. Any restraint or just that restraint? You said any restraint.
Q. Any restraint?
A. Yes.
Q. I suggest to you that you did not care whether or not you breached that restraint in paragraph (c) on CB17?
A. I wasn't aware of that restraint, so, I don't know the answer.
Q. I suggest to you that any time from when you first asked Mr Hyham to come and work for you that you didn't care whether or not Civic Transport or the purchaser found out as to whether you were breaching your restraint?
A. I didn't care about, no, I didn't.
The defendant said that after Mr Hyham commenced working for him and TNT provided him with further work the business was growing well so in February 2007 he decided to employ Chris Moustakas as a manager and Kerrie Hollands as an office manager. The Maxum Transport business showed steady growth with an increase in drivers from nine in February 2007 to thirty one by March 2007.
The diversion of the business
It was in March 2007 that the defendant and his wife separated. The defendant claimed that at this time he became concerned that Mr Moustakas was spending more and more time at the Forest Road premises. He said that he noticed that there were many calls between the plaintiff's mobile telephone and Mr Moustakas' number. He claimed that the growth in the business "just stopped" in around late March or April 2007. He said that he "therefore" formed the view that Mr Moustakas was not doing his job and that he and the plaintiff had taken steps to try to take over the Maxum Transport business. It was in April 2007 that he decided that the current situation was "dangerous" and that he had to take steps to protect his business.
The defendant was cross-examined about his claim that he regarded the situation as dangerous and there was a need to protect his business (tr 376). He said that he did not ask the plaintiff why Mr Moustakas was spending time at the Forest Road premises nor did he ask Mr LeRau, a person he had known for some fifteen years, who was working for the plaintiff at the Forest Road premises. He was cross-examined as follows (tr 377):
Q. And you didn't ask Mr Lerau whether he knew anything about why Mr Moustakas was spending time at the Forest Road premises in March or April of 2007, did you?
A. He wouldn't have known. He was a delivery guy. He would be on the road. No, never entered my mind, no.
Q. I suggest to you that in March or April of 2007 you weren't concerned at all about Mr Moustakas spending time at the Forest Road premises in March or April of 2007, were you?
A. There was a point when I was not concerned, then there became a point when I was concerned. As to the exact months, I can't say.
On 24 April 2007 the defendant's daughter, Christina Savo, was appointed as a director of Extreme Scooters Pty Limited. The defendant gave evidence that he did not provide Ms Savo with any information about her duties as a director. On 26 April 2007 Extreme Scooters Pty Limited's name was changed to Maxum Taxi Trucks Pty Limited.
The defendant was crossed examined in relation to Ms Savo's appointment to Extreme Scooters Pty Limited and subsequently Maxum Taxi Trucks Pty Limited. He gave the following evidence (tr 361-362):
Q. Sir, three things happened on or about 24 April 2007. You ceased to be a director, you ceased to be a secretary and Christina Savo became a director of the company now known as Maxum TaxiTrucks Pty Ltd; do you accept that?
A. Yeah, I've agreed to that, yes.
Q. And can you think of any reason why any of those steps occurred?
A. As I said, I used her as she was available and it was a trusting member of the family. That's why I did it.
Q. You say you used her?
A. Yeah, I did use her. Yeah, I used her. I used her name.
Q. What were you trying to achieve by ceasing to be an office holder of that company and making your daughter an office holder of that company?
A. A quick and smooth transaction of the transport business of Maxum into Maxim.
Q. Do you mean Maxum Transport into Maxum Taxi-Trucks?
A. Yes.
Q. Any other reason?
A. Not that I can remember.
Q. And why was it necessary for you to cease to be an office holder of that company in order to have a smooth transition?
A. Of what company, sir?
Q. Of the company now known as Maxum TaxiTrucks Pty Ltd?
A. From your Honour's documents, I ceased to be a director of Extreme Scooters. I don't think I was ever a director of --
Q. I will ask another question. Why was it necessary for you to cease to be an office holder of Extreme Scooters in order to ensure a smooth transition, as you describe it?
A. I don't know. Just what I outlined before; I just needed someone I could trust in that position.
Q. Couldn't trust yourself to remain in the position of office holder?
A. No, no, I had the restraint on me still. I had the Civic Transport restraint on me.
Q. I suggest to you at that time you didn't care about whether or not you breached the restraint?
A. No, I've never cared.
Q. And I suggest to you, at the time, that you didn't care whether or not the purchaser of the business formerly known as Century Couriers found out as to whether you were breaching the restraint?
A. They were aware of they were aware almost from the beginning, yes, they were.
Q. So there would be no reason for you to be concerned about remaining a director of Extreme Scooters, would there?
A. There's 60 million reasons. They were a big powerful company and could squash me at an instant. It's the biggest transport company in Melbourne brought me out, so --
HER HONOUR
Q. Which one?
A. Civic Transport is the biggest transport company in Melbourne. I didn't want to mess with them in court.
Guarantee/Security Bond
Michael Ayache, solicitor, recalled a meeting with the plaintiff and the defendant on 6 June 2007 in which the plaintiff advised that he was taking over a lease of the Forest Road premises. The plaintiff advised Mr Ayache that he had spoken to the landlord and that the defendant had agreed that he would transfer his bond to the plaintiff. The plaintiff advised Mr Ayache that he needed him to talk to the agent who was somehow related to the landlord or involved as an owner to get the lease "moving". At that stage Mr Ayache had received an email from George Zogheb, the agent, that he showed to the plaintiff. Mr Ayache recalled that the plaintiff instructed him that the defendant had informed the landlord that he was going to sign his bond over to the plaintiff.
Mr Ayache said he asked the defendant whether the bond was a bank guarantee or a cash bond and was informed that it was a bank guarantee. Mr Ayache advised the plaintiff and the defendant that they could not just "simply" transfer the bond. He advised them that it would have to be assigned in a specific way. He recalled being shown a letter, which he advised the plaintiff and defendant was "insufficient" and that they would need to go and see the bank. His recollection was that the defendant had the letter in his possession.
There is a letter in evidence on the letterhead of Century Packaging Supplies Pty Ltd dated 31 May 2007 directed to the Manager of Blakehurst Prestige Properties Pty Ltd, the agent for the landlord, Sentumar Pty Ltd. That letter is in the following terms:
I, Dominic Savo of Century Packaging Supplies Pty Ltd wish to surrender my lease to my Managing Director Mr Michael Saba at Unit 1 & 2/61-65 Forrest Road, Hurstville NSW 2220.
I would like my security deposit of $21,500 to be transferred to the new company-Hannah Louise (sic) Group Pty Ltd, ABN 95122439392.
The defendant gave the following evidence in relation to that letter (tr 418 -419):
Q. Is that your signature?
A. Yes.
Q. Did you sign this document?
A. No.
Q. Are you sure about that?
A. Yes. I read that document this morning in my files, I did not sign it.
Q. What makes you sure that you didn't sign it.
A. Because I don't put Mr Dominic Savo, Century Packaging Supplies Pty Ltd. And I have never seen this document before.
Q. I didn't ask you whether you had drafted the text, I am asking you whether you signed the document?
A. No, I did not sign this document.
...
Q. As at 31 May 2007 you agree that you wished to surrender your lease?
A. No.
Q. To Michael Saba?
A. No, at no stage.
Q. Do you agree that as at 31 May 2007 you wanted your security deposit transferred to Hannah Louis Group?
A. No.
Q. You disagree?
A. I didn't wish for my security deposit to be given to Hannah Louis Group.
Q. At any time in 2007?
A. Never, never, at any time, any year.
The defendant denied attending the offices of Mr Ayache in relation to the lease or the security deposit. He claimed that the only times that he attended upon Mr Ayache were in relation to the administration of Century Packaging (when he attended with the plaintiff) and in respect of a speeding fine matter (tr 419).
On 14 June 2007 Mr Zogheb, on behalf of Blakehurst Prestige Properties, wrote a letter addressed to the defendant as a director of Century Packaging Supplies Pty Limited at the Forest Road premises with the additional words "Att. Mr Michael Saba Managing Director". That letter included the following:
Thank you for your letter and your instructions that you wish to surrender your lease to your Managing director Mr. Michael Saba of Hannah Louise ( sic ) Group Pty Ltd. This letter has been sent to the Landlords solicitors for completion of the transfer of the security Bank Guarantee to Hannah Louise (sic) Group Pty Ltd.
On 22 June 2007 the landlord's solicitors wrote to the plaintiff's solicitors on matters relating to the proposed lease including the following:
3. A security deposit or bank guarantee of $44,000 will be required. The current bank guarantee from Century packaging will be released to the former tenant when the new bond is in place.
The defendant's affidavit sworn 30 September 2009 included the following:
102. Saba's lease of the Forest Road warehouses was not finalised until June or July 2007. Around that time he came to me and said words to the effect:
"The lease requires me to pay $22,000 bond for each unit, which is a total of $44,000. Can you leave your bond in place so that I only have to pay $22,000?"
103. The bond that I had put up was by way of a bank guarantee. I agreed to leave my bank guarantee in place, but the lessor did not agree to that.
104. Without my knowledge or permission, the bank guarantee was called upon and the cash was paid out. Documents authorising the bank to pay out under the guarantee were not signed by me and were forged.
There are two letters dated 18 July 2007 that contain the defendant's signature. One letter is directed to the Westpac Banking Corporation in the following terms:
I, Dominic Savo ("the Customer"), agree to Sentumar Pty Limited calling on the Bank Guarantee (a copy of which is attached to this letter) in the sum of $21,450.00.
The second letter of the same date was addressed to Mr George Zogheib (sic) at Sentumar Pty Limited and was in the following terms:
I, Dominic Savo, agree to Sentumar Pty Limited calling on the Bank Guarantee in the sum of $21,450.00 and holding the money paid pursuant to the Bank Guarantee on behalf of Hannah Louis Group Pty Ltd as security bond payable under the Lease to Hannah Louis Group Pty Ltd.
The defendant agreed that his signature is on these letters but claimed that he did not sign the letters. He said, "it's my signature on this page, yes, I agree with that but not in relation to what the document says" (tr 421).
On 19 July 2007 Mr Zogheb wrote to the plaintiff's solicitors as follows:
We have received authority letter handed by Mr. Michael Saba this morning to transfer the security bond $21,450.00 from Mr. Dominic Savo to Hannah Louise (sic) Group Pty Ltd and Westpac told us that this couldn't be completed in this manner. Mr. Dominic Savo has to go personally to Westpac and do this transaction.
There is also a letter in evidence from Mr Zogheb to the Westpac Banking Corporation dated 23 July 2007 advising that Blakehurst Prestige Properties were the managing agents for the landlords. That letter included the following:
Please find Copies as follows: -
1. Westpac Banking Undertaking 2 pages dated 5 th May 2006 for $21, 450.00.
2. Letter Authority from Dominic Savo to Westpac to pay $21,450.00 to Sentumar Pty Ltd dated 18th of July 2007.
That letter also included in handwriting the statement, "I am making a demand for $21,450 to be paid to myself" with a signature or initials and the date 26 July 2007. There is a further signature with the word "verified" next to a bank stamp of the Ramsgate branch of the Westpac Banking Corporation. There is also a note "CC Mr D Savo". It would appear that the handwriting in relation to the demand is that of Mr Zogheb.
The plaintiff recalled receiving a telephone call from the lawyer acting on behalf of the landlord or the agent who asked him whether the defendant would go with them to the bank to sort things out (tr 633). The plaintiff gave evidence that the defendant handed him the letters dated 18 July 2007 directed to the agent and to Westpac Banking Corporation which he then gave to the agent when the agent attended the Forest Road premises (tr 635).
On 31 July 2007 Westpac Banking Corporation wrote to the defendant in the following terms:
We write to advise you that the Bank received a formal demand from the favouree pursuant to the Banker's undertaking for the amount of $21,450.00.
The Bank has therefore acted as follows:
1. Made payment to the favouree.
2. Opened and debited account ... in name of Dominic Savo to fund payment.
Should you have any queries with respect to the above, please contact your account manager.
On 8 August 2007 the defendant wrote to the Collections Department of Westpac Banking Corporation in the following terms:
I would like to be advised why this money was released without any correspondence to me.
This was 'bond' money for a warehouse I leased in 61-65 Forest Road Hurstville N.S.W. 2220
I did not default any rent payments. The agent issued a new lease to the company who took over my business.
This was done successfully last November 2006. The new owners should have paid their own bond and my documents returned to me.
On 17 August 2007 Westpac wrote to the defendant thanking him for his recent enquiry and suggesting that he discuss the matter with some other department.
On 28 August 2007 Chris Lee Lawyer, acting on behalf of the landlord wrote to the defendant referring to his letter of 24 August 2007 (which is not in evidence). Mr Lee advised that he had forwarded that letter to the agent and noted that it was clear that the funds would not be released until the $49,000 guarantee from the plaintiff was received. The email from the agent to Mr Lee dated 28 August 2007 was in the following terms:
We confirm receiving your facsimile letter from Dominic Savo dated 24 th August 2007.
Mr. Dominic Savo has voluntary (sic) released to the landlords the security Bond of $21,450.00 to help Mr. Michael Saba meet his new leases ( sic ) commitments.
It is understood that Mr Michael Saba is to recompense Mr Dominic Savo for these Funds.
As stated this was a voluntary action by Mr. Dominic Savo, who instructed the Westpac Bank to release of the funds.
I find this letter is very amusing that now Mr. Savo is threatening legal action, this matter is between Mr. Michael Saba and Mr Dominic Savo, we have nothing to do with their arrangements.
By the way Mr. Saba has instructed me not to transfer $21,450.00 to the Dept of fair-trading as part of the security deposit until he get a new bank guarantee to cover his security deposit as per the lease agreement.
So far I am still waiting to receive the Bank Guarantee for $49,000.00
am not releasing $21,450.00 until I receive the full Bank Guarantee as per lease agreement.
On 1 September 2007 Mr Zogheb wrote to the defendant in the following terms:
We received copy of your letter addressed to Chris Lee Lawyer's, and noted the contains ( sic ).
May I remind you that the agreement was these funds $21,450.00 security bond money were to be released by me until Mr. Saba paid his full security bond $49,000.00.
May I repeat these funds $21,450.00 will be released to you when Mr Saba will pay the full bond.
We enclose part of your instructions for the record letter dated 31 st May 2007
There are some curiosities to the correspondence in relation to the security bond and the surrender of the lease. Notwithstanding the defendant's denial, I am satisfied that Mr Ayache had a conference with the plaintiff and the defendant in relation to the lease and the security bond. I accept that Mr Ayache gave advice to the plaintiff and the defendant that it was necessary to take further steps to ensure that the security bond was dealt with appropriately. Although the defendant accepted that his signature is on the letter of 31 May 2007 he denied that he signed the letter. It is clear that the letter of 31 May 2007 was provided to the agent and the agent's letter of 14 June 2007 was in response to that letter. It is probable that the letter that the defendant had when he and the plaintiff met with Mr Ayache was the letter dated 31 May 2007 (or a copy of it).
At this stage in mid 2007 the defendant had already embarked upon his course of conduct to secretly transfer the business of Maxum Transport to Maxum Taxi Trucks. I am satisfied that he did not wish the plaintiff to know that he was transferring the business to Maxum Taxi Trucks. It was in the defendant's interest not to alert the plaintiff to his conduct by refusing to assist in the leasing arrangements for the Forest Road premises. The defendant's affidavit evidence was that the letters were "forged". However in cross-examination the defendant admitted that it was his signature on the letters but that he did not sign the letters. This tended to suggest that his signature was somehow manipulated onto the letter. There was an inconclusive handwritting expert opinion (Ex L) that did not support this suggestion.
The defendant's affidavit evidence was that he agreed that he would leave his bank guarantee in place but that the lessor did not agree to that. I am satisfied that irrespective of his complaints to Westpac, the defendant knew from his conference with Mr Ayache that there was a need to take steps to deal with the security bond with Westpac and that he willingly signed the letters to facilitate that arrangement.
I am satisfied that the defendant signed the letter of 31 May 2007 and I am also satisfied that the defendant signed the letters of 18 July 2007 directed to the agent and to the Westpac Banking Corporation. I am satisfied that the defendant gave the letters dated 18 July 2007 to the plaintiff who handed them to the agent.
Communications with TNT - June 2007
Around the same time that the defendant was meeting with the plaintiff and Mr Ayache, an harassment complaint was made to TNT by one of its clients in relation to one of the defendant's drivers. TNT wrote to "Michael Sava" on 20 June 2007 confirming recent discussions in relation to the driver in question and confirming that "Maxum Transport" had disciplined the driver for inappropriate behaviour and assigned another driver for deliveries to the particular client in question. TNT noted that notwithstanding the disciplinary action the driver in question had once again contacted an employee of the client. TNT requested that Maxum Transport's employees receive appropriate training and that a policy be put in place to ensure such incidents did not occur in the future. TNT requested written confirmation of these matters.
The defendant admitted writing to both TNT and the driver in question and signing the letter "Michael Saba". These letters are dated 20 June 2007. The letter to TNT inlcuded a list of drivers with their telephone numbers and confirmation of being made aware of the policy. One person on that list was identified as "Michael Saba". The defendant admitted that the telephone number next to that name was his own telephone number. The defendant accepted in cross-examination that he signed these letters to deliberately mislead the recipient to believe that it was corresponding with a director of the company at the time. He said that it did not enter his mind to ask the plaintiff to sign the letters (tr 440-443).
Saba Transport
The defendant claimed that he assisted the plaintiff to set up Saba Transport as a "mirror image" of Maxum Transport (tr 211). This occurred in about June 2007. He also claimed that he secured clients for Saba Transport to store their goods at the Forest Road premises (tr 213). He also provided his office staff, Ms Michels, as the accounts officer and Mr Moustakas to oversee the operation. He claimed that he was the principal and the plaintiff was the silent partner. He also claimed that he received no payment for performing any of those activities and gave the following evidence-in-chief (tr 213):
Q. Why did you do them if you weren't being paid?
A. Mr Saba, I tried to assist Mr Saba to cover his rental costs each month of $15,000. The man was sinking and that was my way to help him as a repayment for what he done for me, for allowing me to use his name, is the main reason behind it. I was having a lot of pressure put on me by him, lending him money all the time and I saw this as a cost effective way, very cheap way out for me. The plan was to take the pressure off him of his rent each month and that would flow down to taking the pressure off me substantially having to lend him money. I was successful to about half of that, I think the best we done was about 7 to $8,000 a month income on Saba Transport.
The defendant accepted in cross-examination that the business was not a mirror image of Maxum Transport (tr 445-446). This was a business for the storage of goods at the Forest Road premises rather than a business that was to be identical to or a mirror image of Maxum Transport. This was a business that was set up at the time that the defendant was diverting the business of Maxum Transport into Maxum Taxi Trucks. This was hardly the conduct of a person who was suspicious of the plaintiff and Mr Moustakas attempting to take over Maxum Transport. Rather it was conduct that enabled the defendant to continue his clandestine activities of diverting the Maxum Transport business without alerting the plaintiff to his conduct.
Change in banking details
On 10 July 2007 in an email purportedly from "Michael Saba" at Maxum Transport, TNT was advised of a change in Maxum Transport's banking details. That email requested TNT to update their details as soon as possible. The details provided were the BSB and account numbers for "Maxum Taxi Trucks".
On 31 July 2007 the defendant, or his employee, wrote to TNT this time in a letter signed by "Michael Savo". That letter requested TNT to change "Maxum Transport" to "Maxum Taxi Trucks Pty Ltd". It also provided the ACN number and confirmed the banking details for Maxum Taxi Trucks.
Lease
HLG entered into a new lease with the landlord of the Forest Road premises for the period 8 July 2007 to 7 July 2012 with an option for a further five years at a monthly rental of $14,747.73. The permitted use was noted as "Office and Storage" and included a provision that the lessor would provide to HLG written consent to lodge a development application "to operate a party supply store/florist".
Meeting - 23 July 2007
The plaintiff gave affidavit evidence that he had a conversation with the defendant on 23 July 2007 in the presence of the 8 th defendant, Mr LeRau, and Mr Merhav Atiyas. The plaintiff claimed that he asked the defendant if he could have the accounts and other paperwork for Maxum Transport because he needed to give them to the accountant. He also said that he needed the documents to see how the company was going. According to the plaintiff, the defendant said that he could not provide them "now" but that he would "do it soon". The plaintiff claimed that he then informed the defendant that he did not feel secure in relation to the company and he wanted it to start paying rent and to move into the Forest Road premises so that he could see what was going on. The plaintiff claimed that the defendant then said: "you can trust me. Look, I will sign a blank piece of paper". The plaintiff claimed that at this time the defendant signed a piece of paper, dated it "23-7-2007" and gave it to him. The defendant said: "This is to cover you. You can fill in whatever you like on it". The plaintiff claimed that Mr LeRau then said: "He could write on here that you are responsible for every unsolved murder" to which the defendant said: "You can write whatever you want".
GOLDSMITH
Q. You said that this morning, didn't you, Mr Saba. You said that the first payment was in February 2007?
A. Beginning, first--
Q. $80,000 cash?
A. Yeah.
Q. You just peeled off $80,000, gave it to him, no receipt, no acknowledgement?
A. No, actually it's a new partner came into the packaging company, he just deliver hundred thousand dollars in the bag and all in cash, which he got few businesses, all cash flow, I took 20 out of there, he took 80.
Q. I put to you again you did not put any money into this business?
A. You absolutely wrong.
The defendant submitted that "overall" the plaintiff is both an unreliable and an untruthful witness. It was submitted that his evidence lacked credibility, was contradictory and false. It was submitted on the defendant's behalf that the plaintiff was "clearly a person of questionable character". However, in making this submission it was conceded that similar findings would be made in relation to the defendant.
The plaintiff's mother-in-law Lorraine Edwards, who was not cross-examined, gave affidavit evidence that she withdrew amounts totalling $176,390 from her account which she provided to the plaintiff and his wife in cash. Those withdrawals are contained in the transactions statements exhibited to her affidavit and range between 22 December 2006 and 2 May 2007.
Although the plaintiff originally read the affidavit of Mr Abbas Choukor sworn 25 November 2009, he was not available at the time it was intended to call him to give evidence during the trial. An arrangement was reached between Mr Bruckner and Mr Goldsmith that Mr Choukor's affidavit would not be read and there would be no complaint made in respect of the failure to call Mr Choukor. In those circumstances the absence of evidence from Mr Choukor cannot be taken into account adversely to the plaintiff's version of events.
The defendant submitted that the plaintiff's claim that he collected $300,000 from the debtors of Century Packaging should be treated with circumspection having regard to the fact that the liquidator sold all the assets of Century Packaging Supplies Pty Limited for $20,000. That is odd, however it is common ground that the plaintiff had a capacity for persuasion, albeit utilising less than conventional methods. In any event this is just one factor that needs to be taken into account when considering this aspect of the plaintiff's claim.
The plaintiff admitted that he had received a loan of $20,000 in a transfer of funds from Mrs Savo in December 2006 or January 2007 (referred to later). The plaintiff claimed that he repaid this amount. It may be thought that borrowing that amount at that time is inconsistent with the plaintiff's claims that he recovered outstanding debts of Century Packaging and paid large amounts of cash to the defendant. The plaintiff claimed that he paid the cash amounts to the defendant between February 2007 and mid 2007. The purchase of the Century Packaging business did not occur until 22 January 2007. In those circumstances it is not inconsistent with his claims that he was at that later time able to make those payments to the defendant.
There is no doubt that the absence of any documentary support for the plaintiff's claims that he paid $165,000 to the defendant over the period February 2007 to mid 2007 is an apparent weakness in the plaintiff's case. However the absence of records in respect of the payments the plaintiff claimed he made is in this case not as surprising as it may be in other cases. It appears to me that both parties behaved in a less than conventional manner. This is evidenced in part by their failure to record any agreement either in relation to the plaintiff's provision of services in "bothering" the Russo brothers or the establishment of the Maxum Transport business, whether in accordance with the plaintiff's version or the defendant's version of the Agreement. The unchallenged evidence of the plaintiff's mother-in-law was that the plaintiff had an available source of cash to make the payments to the defendant.
Keeping it secret
The defendant claimed that he informed the plaintiff that he was the subject of a restraint of trade clause and that he needed the plaintiff to lend his name to the Maxum Transport business because of that restraint. However in April 2007 the defendant manoeuvred the Maxum Transport business into the Maxum Taxi Truck business via Extreme Scooters, apparently because, as he said, he did not want to "mess with" Civic.
The defendant was asked a number of times during the trial why he did not inform the plaintiff that he was moving the Maxum Transport business into Maxum Taxi Trucks. His responses to those questions included that he "didn't feel I had to tell Mr Saba anything about transport, that was, Maxum was mine, as was Maxum Taxi-Trucks, they were all mine. I had no qualms about answering to Mr Saba in relation to anything to do with transport" (tr 320); and "There was no suggestion to keep anything secret from Mr Saba" because "[h]e wasn't involved in the business and it was my business and I had no cause or thought of ever telling him anything about the business, the transport business" (tr 453).
If the only agreement reached with the plaintiff was for the use of the plaintiff's (or HLG's) name then it would certainly have been reasonable to expect that the defendant would advise the plaintiff that it was no longer necessary for his name or that of HLG to be used because the business was now going to be in Maxum Taxi Trucks Pty Ltd's name. The defendant's contention in response to such an expectation was that he formed the view that the plaintiff and Mr Moustakas were attempting to "take over" the Maxum Transport business and in those circumstances he was taking steps to protect the business from the plaintiff. Accordingly it would not be reasonable to expect that he would advise the plaintiff of the change. He gave the following explanation as to whey he diverted the business of Maxum Taxi Trucks (tr 315-316):
My accounts manager, Nicky Michaels (sic) , pointed out that things were being scanned from my computer, and I didn't even know that the computer can be scanned. Its, what are you talking about? And she did something on the computer and, that I was not aware of, had an in-built protection system. And she brought that up and showed me exactly what was being scanned and it was client lists, drivers lists, bank statements. She blamed Chris Moustakas and I put two and two together and I was aware that Chris Moustakas was spending a lot of time with Michael Saba and I formed the opinion that they were conspiring for a takeover of that business.
In re-examination the defendant expanded upon his reasons for not informing the plaintiff that he had moved the Maxum Transport business into Maxum Taxi Trucks. He gave the following evidence (that was not objected to) (tr 566-567):
Q. If I could go back to the earlier parts of your crossexamination. You were asked a question as to whether or not you had advised Mr Saba that you had closed down the business. The answer that you gave was that you hadn't advised him, and you were asked why. The answer that you gave was "fear", do you recall?
A. Yes, I recall.
Q. Fear of what?
A. Reprisal.
Q. Can you elaborate what that means in your mind?
A. Could you ask the question again please?
Q. You gave evidence to say that you hadn't advised Mr Saba that you had closed down the business because of fear. The answer that you have just given to my question now is fear of reprisal?
A. Mmm.
Q. What does that mean?
A. I don't know what I'm allowed to say or not say. I don't want to accuse someone of --
Q. If you can give your answer to my question the way that you want to give your answer?
A. Well, Mr Saba is an underworld figure, and I didn't want to be seen to be crossing people like that.
Q. Is that the only reason you didn't advise him?
A. Yes.
HER HONOUR
Q. Why were you crossing him if he didn't own anything?
A. There was him and Mr Moustakas were attempting a takeover of my businesses and I beat them to the punch basically, your Honour, and it upset them.
The plaintiff submitted that even if one assumes that as a result of his communications with Ms Michels the defendant became concerned that Mr Moustakas and the plaintiff were planning a takeover, such communications and concern did not occur until at least the end July 2007 because Ms Michels was not employed until after that date. The accounts in evidence show that Ms Michels was paid wages and superannuation from 27 July 2007. The defendant admitted that Ms Michels did not commence her employment with Maxum Taxi Trucks Pty Ltd until late July 2007 (tr 453) and that she was not employed otherwise before that date (tr 378-379).
The plaintiff submitted that the changes to the name of the business and the diversion of the business from Maxum Transport to Maxum Taxi Trucks in April and May 2007 had nothing to do with any concern that the plaintiff and Mr Moustakas were conspiring to take over Maxum Transport. Rather, it was submitted, the defendant has concocted this version of events as the reason for not informing the plaintiff of the change of business and has relied upon communications with an "employee" who was not employed at the time that the diversion of the business of Maxum Transport commenced when Extreme Scooters changed its name to Maxum Taxi Trucks.
There were claims made in an email purportedly drafted by Ms Michels in November 2007 reporting her beliefs about Mr Moustakas approaching the "silent partner" after which there were "big problems". However that email is not evidence of any concrete steps taken by the plaintiff or Mr Moustakas in or preparatory to an alleged take over. There was no evidence called by the defendant to establish that any steps were taken by either the plaintiff or Mr Moustakas to "take-over" Maxum Transport.
Telephone number
The defendant contended that when he established Maxum Taxi Trucks he advised all the clients and drivers of Maxum Taxi Trucks' new telephone number. The telephone number for Maxum Transport was 9546 6000. In cross-examination in relation to this aspect of the new business the defendant gave the following evidence (tr 319):
Q. What was the new number?
A. There was one digit changed at the end, either a 1 or a 4, so it would have been 9546600, either numeral 1 or 4, that's the best I can remember.
Q. For the stationery and the letterhead and the like of the business of Maxum Taxi-Trucks Pty Limited, did you put the new number or the old number on it?
A. I can't remember sir, I would say the new number.
Q. Be pretty important to you, wouldn't it, you didn't want to mislead the clients that they were dealing with the old entity, did you?
A. It wasn't a case of misleading.
Q. What was the --
A. It was the case that we needed to answer the phone if they rang Maxum Taxi-Trucks, it wasn't a case misleading clients, it was a case of informing the clients of the new number.
Q. And did you feel there was a risk that if you continued to use the old number that clients might be mislead that it was the same business?
A. I don't think my office used the old number because I instructed them to deal with Telstra and get a new number.
HER HONOUR
Q. The question is what was wrong with using the old number, really?
A. We didn't use it.
Q. What was wrong with using the number that you were using for the business Maxum Transport?
A. I'm sorry, didn't make sense to use it, I don't know.
Q. Why didn't it make sense?
A. Because it wasn't our number, if they wanted to ring Maxum Taxi-Trucks they would have to ring the new number not the old number, if they rang the old number didn't make sense to me.
The letterhead of Maxum Taxi Trucks included Maxum Transport's telephone number. When the defendant was confronted with this documentation he claimed that the document was "wrong" (tr 400). It was not until October 2007 that a standard letter advising of a new telephone number for Maxum Taxi Trucks was sent out to clients of Maxum Transport. The new telephone number, as advised, was 9546 6004. The defendant was cross-examined in relation to that letter and gave the following evidence (tr 380):
Q. Is it true that communications in relation to a new telephone number only occurred with clients at about 9 October 2007?
A It occurred, but I don't know the exact date.
Q. It was in October, wasn't it, of 2007?
A. I can only guess. If you want me to guess I'll guess, but I'm not sure of exact dates, I am sorry.
Q. But it wasn't in May or June, was it, of 2007?
A. I don't think so.
Q. And you hadn't told clients in May or June of 2007 that there was a new number to dial, had you?
A. No.
It is apparent that the defendant was utilising the telephone number of Maxum Transport until late in 2007 when the plaintiff commenced these proceedings. The fact that the defendant changed the name of the business and the bank accounts, but not the telephone number, enabled him to trade on in the business without any discernable change to those that viewed it from the outside.
Other Matters
One aspect of the defendant's evidence that the plaintiff challenged was his claim that when he went back into Century Packaging in September 2006 he found debts of over $1 million related to third party suppliers (tr 262). The defendant was cross-examined in relation to entries under the heading "RATA Admitted $" totalling $1,229,695.87 in the Attendance Register for the First Meeting of Creditors of Century Packaging (Ex C). It was suggested that these entries established that the debts were significantly less than $1 million after excluding amounts listed as owed to the defendant, his wife and the plaintiff. The defendant then claimed that the figures were "manufactured". Notwithstanding that he admitted signing the document he claimed he did not read it (tr 264). It was submitted that such a claim should be rejected. If the defendant is to be believed he was in the habit of signing documents without reading them. He claimed that he signed the Sale Agreement with Civic without reading it and he also claimed that he verified his Defence (referred to below) without reading it. However the Attendance Register is different in that the defendant had to sign his name next to specific items as the Proxy. I do not accept that the defendant did not read these entries.
The plaintiff denied the defendant's claim that he had been offered 10% of the profits of Maxum Transport and that he had rejected such an offer because the defendant had done so much for his children by allegedly introducing the plaintiff's son to indoor soccer and taking his children fishing. The plaintiff submitted that the risks associated with allowing the defendant to use his name, or that of HLG, would far outweigh any favours or benefits that might have been provided to his children. The defendant claimed that the plaintiff said: "what you did for my kids is worth a million dollars to me". The plaintiff submitted that the favours or benefits that the defendant was supposed to have provided to the plaintiff's children were well after the Agreement was concluded in October 2006 and well after the defendant's alleged offer to the plaintiff of 10% of the profits of the business. The plaintiff's evidence was that it was not until February 2007 that there were discussions in relation to his son taking part in indoor soccer and taking his son to such a game (tr 211). The plaintiff also gave evidence that the fishing trip with the defendant took place after Christmas 2006, well after the Agreement was concluded. The plaintiff submitted that at the time the Agreement was concluded, no favours or benefits had been provided to his children by the defendant that he would regard as "worth a million dollars". Rather it was the plaintiff who had provided the "favour" to the defendant in easing his path back into the Forest Road premises.
At times when the defendant was challenged with documents to suggest that his evidence was inaccurate, he resorted to statements that certainly did not assist him or his case. For instance, when he was shown a copy of his Defence in which he had verified a claim that it was in about March 2008 that Maxum Taxi Trucks Pty Limited ceased trading he said that he did not read the document (tr 471). He also said that there were "so many documents I was just throwing them in the bin, I hardly read anything in this case" (tr 471-472). When pressed further his evidence became even less satisfactory as follows (tr 472):
Q. Did you realise it was important when you swore to the truth under oath that the matters you swore to were true and correct?
A. I do understand that but, as for the matters in this case I really didn't give a dam ( sic ), to be honest. So, that's, I just signed them to get out of his office and go back and do my deliveries. So, everything revolving this case is rubbish in my mind. So, whatever I signed, I signed for the purpose of signing it and to get out of there. I didn't read any documents. Documents that came home I threw them in the bin, kept nothing. I just wanted to wipe it from my mind.
Matters became a little more complex for the defendant when he was cross-examined about the accounts relating to Maxum Taxi Trucks and CDM Transport. He gave the following evidence in cross-examination (tr 554):
Q. Did you want to conceal income and assets from Mr Saba, did you?
A. No, I wanted to conceal the things with this Court so I can keep trading. I had no need to conceal nothing from Mr Saba, I was not obliged to him in any way. These companies were started from one to another to allow me to keep trading and survive.
In re-examination the defendant gave the following evidence (tr 569-570):
Q. Mr Savo, this afternoon you gave an answer to a question to the effect that you were trying to conceal something from the court. Do you recall that?
A. Yes, I do.
Q. And you said that you were trying to conceal something from the court?
A. I recall saying that, yes.
Q. It's a two part question but I'll give you the two parts and if you can answer each part separately. What were you trying to conceal and the second part is why?
A. I'd like to say that was a poor choice of words when I did answer that question and in hindsight I wouldn't say it again. I was trying to conceal the fact that I started another entity to pass on the business from the previous entity. That's what I should have said.
Q. Were you trying to conceal that information from the court?
A. No.
The defendant then said that he was trying to conceal it from the plaintiffs' lawyers. The defendant's attempt to correct his evidence in cross-examination and explain it as a mere poor choice of words was unimpressive. I have no doubt that the defendant intended to conceal his conduct. His claim that it was not the plaintiff from whom he was trying to conceal it is consistent with his claim that the plaintiff had no entitlement in knowing what he was doing because he allegedly had no interest in the business of any of the companies through which he operated the transport business. However I have no doubt that he was intending to conceal it from the plaintiff. It is clear that the defendant has little respect for the court process in which he is involved, however I am not sure that he has put all of his documents "in the bin" as he claimed. He gave the impression that this evidence was bravado rather than reality. I am satisfied that the defendant took careful steps on the one hand to conceal the diversion of the business to Maxum Taxi Trucks and on the other to present to the plaintiff as a co-operative "friend" until the plaintiff became aware of the diversion of the business from Maxum Transport.
The defendant explained the concealment of his conduct in setting up a new courier business in someone else's name in his first affidavit sworn 30 September 2009. He said that in about late 2006 his marriage was becoming "increasingly shaky" and he was cautious about building up assets in his own name. He claimed that he "therefore" decided to set up another courier business in someone else's name. There was no mention in this explanation that he informed the plaintiff that he had a restraint that prevented him from putting the business in his name. Rather he simply said to the plaintiff that he could not put the business in his name. However he claimed he informed Mr Amine of the restraint at the meeting at which the plaintiff was present.
During cross-examination the defendant said that the purpose of the Agreement with the plaintiff was to conceal his proposed role in the business in breach of the restraint of trade clause. He also claimed that the other purpose was to find employment for the sixteen drivers that had been sacked by Civic (tr 293). He agreed in cross-examination that one of the reasons that he proceeded in this way was that he did not wish to build up assets in his own name but seemed to deny that he was wishing to conceal his assets from his wife (tr 299-300). This claim was inconsistent with his affidavit evidence referred to above.
The plaintiff and Mr Amine denied that the defendant informed them about the restraint of trade clause. In cross-examination the defendant said that he did not care about whether he was breaching the restraint (tr 352). The defendant was very cavalier about his responsibilities under the Sale Agreement with Civic. It appears that he did not care about whether he breached the restraint clause or not. I think it probable that he did not inform the plaintiff that the reason he wanted the business in his name was because of the restraint of trade clause. The defendant also claimed that the reason he behaved furtively was to protect his assets from a take over by the plaintiff. He finally claimed that the reason he behaved in this way was out of fear of reprisals. That last explanation seems to me to be closer to the truth. The only reason that there would be any reprisals was because the plaintiff felt wronged.
When the defendant was being cross-examined in relation to his role as the "principal" of Maxum Transport he responded by asking what was meant by "principal", yet earlier in his evidence he had acknowledged that he was the "principal" of Century Couriers (tr 243). He also claimed not to understand the expression "consideration" when he was asked about the consideration given for a 50% share in the company (tr 259). He also claimed not to know what "quantum" meant in respect of third party creditors (tr 264). He also claimed not to understand the meaning of "restrictive covenant" (tr 266). I found it difficult to accept that the defendant did not understand these concepts, however it may have been the length of time that he was in the witness box and the stress of having to be cross-examined about matters for which he obviously had little time that caused him to respond in this manner.
There are some extraordinary aspects of the defendant's conduct and his own solicitor accepted that his client may have "crossed the line" on occasions. Whatever that expression may mean, I am satisfied that the defendant concealed his conduct from the plaintiff not because he was concerned the plaintiff was making a take over bid but because he knew he had agreed to have a joint venture with the plaintiff as claimed in the plaintiff's version of the Agreement.
I do not accept that the plaintiff merely lent his name to the business. The plaintiff's conduct in dealing with the Forest Road premises and paying for some of the set-up costs is indicative of a person who has an interest in the joint venture rather than a mere lender of a name. I am satisfied that the plaintiff did make payments to the defendants in the amounts claimed, notwithstanding the absence of records. It is quite unusual for such large amounts of money to be paid in cash, however the nature of the relationship between the plaintiff and the defendant and the way in which the plaintiff and the defendant conducted their lives leads me to the conclusion that the payments the plaintiff claimed were made were probably made.
Implied Terms
The plaintiff made a claim in paragraph 71 of the Amended Statement of Claim that there were "implied terms" of the Agreement that after completion of the sale of the business the defendant would not for his benefit or the benefit of any other person or entity: (a) disclose, use or permit the use of any confidential information or trade secrets of the business; (b) disclose, use or permit the use of the lists of employees, contractors, drivers or clients of the business; (c) solicit or entice employees, contractors, drivers or clients of the business; or (d) compete with the business in New South Wales for 12 months. In paragraph 38 of the Amended Defence to the Amended Statement of Claim the defendant denied that such terms could be implied into the Agreement.
On the defendant's application I granted an extension of time until 10 December 2010 to file further written submissions in relation to the implied term. On 10 December 2010 Mr Goldsmith advised that he had no instructions to file any further submissions. Notwithstanding the lack of further submissions the parties have joined issue in respect of the implied terms for which the plaintiff contends. The defendant diverted the business of Maxum Transport into the other entities and the parties did not reach the point of selling the business. In those circumstances it seemed to me to be unnecessary to decide this issue. However, it may be that if the plaintiff elects to claim damages, the presence of such implied terms may be relevant to the market value of the business on sale.
The criteria for the implication of a term into a contract are well settled: B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347. Irrespective of whether the defendant informed the plaintiff that he was subject to a restraint in the Sale Agreement with Civic, the plaintiff and the defendant knew that the defendant was using the same drivers that had been employed with the defendant in Century Couriers and that he was sourcing work from the same clients. The terms the plaintiff claims should be implied into the Agreement seem to me to be far from obvious in the circumstances of the unconventional relationship between these parties. They are not necessary to give business efficacy to the Agreement. The sale could certainly have occurred without them. The restraint would be a matter for the third party purchaser to suggest. The plaintiff's claim in this regard will be dismissed.
Cross-Claim
The defendant has cross-claimed against the plaintiff in respect of a series of alleged loans and other payments. Many of those claims were abandoned when the Amended Cross-Claim was filed in Court at the conclusion of the proceedings. The only claims remaining in the Cross-Claim relate to an alleged loan of $20,000; an alleged car loan repayment of $19,580 (inclusive of interest) and two other alleged loans of $10,000 and $15,000. There is also a claim for payment of $5,000 in respect of an alleged purchase of a plasma television.
The defendant claims that he loaned $20,000 to the plaintiff in January 2007 on the basis that the plaintiff would pay him back in five weeks. The plaintiff denied that the defendant lent him $20,000 in January 2007. However he admitted that in December 2006 or January 2007 Mrs Savo transferred $20,000 to him. He claimed that this amount was repaid to the defendant in cash within a few weeks of the transfer of the funds. The plaintiff also gave evidence that neither the defendant nor Mrs Savo ever complained to him at any time that any moneys were outstanding until the Cross-Claim was filed.
Not surprisingly, Mr Goldsmith submitted that in the absence of any documentary evidence to demonstrate that the loan was repaid, a finding should not be made that it was repaid and the claim for $20,000 should be allowed. As I have already said the dealings between the plaintiff and the defendant were certainly less than conventional. However I have formed the view that I should prefer the plaintiff's evidence to that of the defendant. This conclusion combined with the fact that no complaint was made leads me to the conclusion that any loan of $20,000 was repaid.
The next item in the Cross-Claim relates to a car loan payment of $15,508 plus interest, totalling $19,580.62. The defendant gave affidavit evidence that the plaintiff said to him, "Will you pay off my car loan as I can't? I will pay you back in three weeks". His affidavit included the words "I agreed". The defendant gave the following evidence in chief (tr 195-196)
Q. If I can refer you to paragraph 82, you say in about March 2007 Saba said to you, "Will you pay off my car loan as I can't, I will pay you back in three weeks?"
A. Yes.
Q. Did you respond to that?
A. Yes I did.
Q. What was your response?
A. My response was initially no, he persisted and persisted and persisted and eventually I agreed and I did pay a car loan off which he told me was his but in the course of these proceedings I have since found out that it is his brother's car.
Q. So, you say you paid off a car loan?
A. Yes, I did.
Q. How much did you pay?
A. Approximately $15,000 odd.
Q. Where did the money come from to pay that off?
A. It came from my ANZ Visa credit card.
In cross-examination the defendant gave the following evidence (tr 537):
Q. You are aware that Mr Saba does not own a Black Toyota Landcruiser?
A. He did own a black Toyota Landcruiser. It might not have been in his name which I found out later it wasn't, it was in his brother's name but they did have one which his wife drove with their 10 kids.
Q. Mr Saba did not request you to pay money on a car loan?
A. Yes, he did.
Q. In fact, you are aware that one of Mr Saba's brothers owned a black Toyota Landcruiser?
A. No, Mr Saba's wife owned it, not Mr Saba's brother. That's what I was told.
The plaintiff denied that he received the benefit of any amount for a car loan repayment. I am not satisfied that the defendant has established that the payment was made to the benefit of the plaintiff.
There are two further loans that the defendant claimed that he had made to the plaintiff, one of $10,000 in April 2007 and the other of $15,000 in May 2007. The defendant claimed in paragraph 84 of his affidavit sworn 3 September 2009 that in April 2007 the plaintiff said to him, "I need some more money. Will you lend me $10,000.00? I will pay you back in three days." In examination in chief the defendant gave the following additional evidence (tr 195-196):
Q. If I can take you now to paragraph 84, if you can read paragraph 84 to yourself?
A. Yes.
Q. Did you respond to what Mr Saba said to you?
A. Yes. Again, it was persisted, rejected, persisted, rejected and I conceded to lend him $10,000.
Q. Did you lend him that amount?
A. Yes I did.
Q. Where did the money come from?
A. From the redraw facility with the Westpac account mortgaged on [the defendant's home].
In paragraph 86 of his affidavit sworn 30 September 2009 the defendant claimed that in May 2007, the plaintiff said to him, "I need some more money. Would you lend me $15,000.00? I will pay you back." The defendant gave the following further evidence in chief in respect of this loan (tr 196):
Q. Did you respond to that?
A. Yes.
Q. What was your response?
A. Again, I conceded after numerous attempts of trying not to.
Q. Did you lend the sum of $15,000 to Mr Saba?
A. Yes, I did.
Q. Where did the money come from?
A. From the Rocket, the Westpac Rocket Account on the redraw facility of [the defendant's home].
The plaintiff denies that he received either of those loans and there are no transactional documents in relation to these payments. I am satisfied that the defendant has not proved these allegations.
The final matter in the Cross-Claim is a claim for $5,000 in respect of a plasma television that the defendant claims the plaintiff collected from him without payment. The defendant gave the following evidence in chief (tr 198):
Q. Can you tell her Honour about the plasma TV?
A. Yes. The plasma TV was given to me by the phone company that we were using at the time. They actually gave us two plasmas, two massage chairs, a whole heap of computers as gifts for using their phone service. And my one was in my garage, never used. I already had plasmas in the house and when on visit he noticed it in my garage and I said to him the only room in my house that doesn't have a plasma TV is the dog kennel. And he offered to buy it then and there. I think I had Mr Lindsay Lerau (sic) deliver it, I could be mistaken, that is my recollection. It was delivered to him in a box and to this date I have never been paid and it has never been returned.
Q. Was there any discussion about the terms?
A. Yes, yes $5,000 was the agreed price.
In cross-examination the defendant gave the following evidence (tr 543):
Q. I'll move on to the television. Do you say that you sold a television to Mr Saba in September of 2007, do you?
A. Yes.
Q. And by that time relations between yourself and Mr Saba were strained, weren't they?
A. I think you've got the year wrong. The chair and the TV happened not long so I think it might have been 2006.
Q. And in fact the television was purchased in the first half of 2007, wasn't it?
A. By me or him?
Q. By Mr Saba from you?
A. I don't remember exactly.
Q. And he paid for the television in cash, didn't he?
A. No, he didn't.
The plaintiff gave evidence that he purchased the television in the first half of 2007 and paid for it in cash. It was not suggested by the defendant that he demanded payment from the plaintiff or that he complained that he had not paid for the television. On balance I prefer the plaintiff's evidence.
The defendant has failed to prove the claims in the Cross-Claim.
Conclusion
Although the pleadings contained a number of issues the parties confined themselves to the one issue - the determination of the terms of the Agreement. The parties agreed that I would not make any orders other than determining the terms of the Agreement and delivering judgment, with consequential orders to be agreed between the parties in respect of any further steps to be taken in the proceedings (tr 724; 747).
I am satisfied that the plaintiff and the defendant agreed in the terms propounded by the plaintiff excluding the implied terms as claimed in paragraph 71 of the Amended Statement of Claim. Those terms are:
1. The business would be in the plaintiff's name or in the name of one of the plaintiff's companies;
2. The defendant would be a silent partner;
3. The defendant would manage the day to day operations of the business;
4. The business would be operated from the Forest Road premises after operating for a short time at the defendant's home;
5. The lease over the Forest Road premises would need to be transferred into the plaintiff's name or that of one of his companies;
6. The business would use the Forest Road premises and pay $2,000 per week rent from January 2007;
7. The business would need approximately $300,000 to commence operation and for working capital during the first year;
8. The plaintiff would only need to inject $150,000 as required over the first 12 months because the defendant would put in the first $150,000;
9. In return for injecting the first $150,000 and managing the day to day operations, the defendant would have 50% of the profit of the business;
10. The business would be sold after 12 months; and
11. After both the plaintiff and the defendant took out their contributions upon the selling of the business, the defendant would have 50% of the balance.
The defendant's cross-claim is to be dismissed. The parties are to bring in Short Minutes of Order reflecting these findings. The matter is listed at 10.00 am on 4 May 2011 for the purpose of the filing of the Short Minutes of Order and directions for the further management of the proceedings. The injunctions and freezing orders are continued until 5.00pm on 4 May 2011.
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Decision last updated: 15 April 2011
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