Harvard Nominees Pty Ltd v Tiller (No 2)
[2020] FCA 604
•11 May 2020
FEDERAL COURT OF AUSTRALIA
Harvard Nominees Pty Ltd v Tiller (No 2) [2020] FCA 604
File number: WAD 250 of 2019 Judge: JACKSON J Date of judgment: 11 May 2020 Catchwords: CONSUMER LAW - misleading or deceptive conduct - express oral representations regarding involvement of party in proposed leases - certain representations found to have been made - reliance on representations - whether representations misleading or deceptive - involvement in misleading or deceptive conduct - causation of loss or damage - applicant not pursuing 'no transaction' or 'different transaction' case - whether detriment or disadvantage required - whether counterfactual required to establish causation - whether entry into contractual relations amounts to loss or damage - whether misleading or deceptive conduct had continuing operative effect - no loss or damage caused by misleading or deceptive conduct
CONSUMER LAW - misleading or deceptive conduct - non-disclosure of deeds of assignment - terms of deeds falsified letter - whether omission to disclose deeds misleading or deceptive - whether applicant would have been able to terminate leases if the deeds had been disclosed - whether respondents engaged in misleading conduct involving non-disclosure
LANDLORD AND TENANT - equitable leases - assignment of equitable interest in equitable lease - requirement of delivery of deeds - whether deeds implemented - deeds held to be legally effective - whether clause in leases prohibiting assignment applies to equitable assignment - construction of leases - clause held to prohibit assignment in equity
CONTRACT - prohibition on assignment - whether fundamental breach or repudiation - application of general contractual principles to leases - privity of estate between lessor and lessees not displaced by equitable assignment - breach not going to root of contract - fundamental breach or repudiation not established - application dismissed
Legislation: Acts Interpretation Act 1901 (Cth) s 15AC
Competition and Consumer Act 2010 (Cth) sch 2 (Australian Consumer Law) ss 2, 13, 14, 18, 236, 237, 243
Competition and Consumer Act 2010 (Cth) s 139B
Evidence Act 1995 (Cth) ss 50, 59, 81, 87, 135, 140, 142
Trade Practices Act 1974 (Cth) ss 52, 75B, 82, 87
Fair Trading Act 2010 (WA) s 111
Land Act 1933 (WA) ss 143, 151
Property Law Act 1969 (WA) s 9
Transfer of Land Act 1893 (WA) ss 58, 68, 82
Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth)
Cases cited: Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) [2006] NSWCA 282; (2006) 67 NSWLR 341
ACE Insurance Limited v Trifunovski [2013] FCAFC 3; (2013) 209 FCR 146
Addenbrooke Pty Limited v Duncan(No 2) [2017] FCAFC 76; (2017) 348 ALR 1
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353
Amaca Pty Ltd v Booth [2011] HCA 53; (2011) 246 CLR 36
Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408
Battik Pty Ltd v Hawkesbury Nominees Pty Ltd [1999] ACTSC 55; [2000] ANZ ConvR 182
Bennett v Minister of Community Welfare (1992) 176 CLR 408
Browne v Dunn (1893) 6 R 67
Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 218 CLR 592
Caffey v Leatt‑Hayter (No 3) [2013] WASC 348
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Canberra International Airport Pty Ltd v Ansett Australia Ltd [2002] FCA 329; (2002) 41 ACSR 309
CGM Investments Pty Ltd v Chelliah [2003] FCA 79; (2003) 196 ALR 548
Chappel v Hart (1998) 195 CLR 232
Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47
Corporation of Bristol v Westcott (1879) 12 Ch D 461
Cummins Generator Technologies Germany GmbH v Johnson Controls Australia Pty Ltd [2015] NSWCA 264; (2015) 326 ALR 556
Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406
David Blackstone Ltd v Burnetts (West End) Ltd [1973] 1 WLR 1487
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471
Donut King Australia Pty Ltd v Wayne Gardner Racing Pty Ltd [2001] NSWCA 275
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167
Fitzgerald v Masters (1956) 95 CLR 420
Flogineering Pty Ltd v Blu Logistics SA Pty Ltd (No 3) [2019] FCA 1258; (2019) 138 ACSR 172
Gentle v Faulkiner [1900] 2 QB 267
Girgis v Poliwka (No 6) [2019] WASC 230
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221
Hall v Bainbridge (1848) 12 QB 699
Harvard Nominees Pty Ltd v Tiller [2019] FCA 1672
Hely Hutchinson v Brayhead Ltd [1968] 1 QB 549
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
Hooker Industrial Developments v Trustees of the Christian Brothers [1977] 2 NSWLR 109
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [No 4] [2006] NSWSC 90
Jackson v TCN Channel 9 Pty Ltd [2002] NSWSC 1229
Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; (2000) 104 FCR 564
Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449
Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25; (1999) 199 CLR 413
Ladies Sanctuary Pty Ltd v Parramatta Property Investment Ltd (1997) 7 BPR 15,156
Langley v Foster (1906) 4 CLR 167
MacDonald v Robins (1954) 90 CLR 515
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
McEacharn v Colton [1902] AC 104
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357
Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182
Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388
Northside Developments Pty Ltd v Registrar‑General (1990) 170 CLR 146
Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No 2) (1979) 1 WLR 1397
Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Putland v Royans Wagga Pty Limited [2017] FCA 910
Rafferty v Madgwicks [2012] FCAFC 37; (2012) 203 FCR 1
Re Turner Corporation (in liq) (1995) 17 ACSR 761
Richardson v Somas [1967] WAR 109
Scala House & District Property Co Ltd v Forbes [1974] QB 575
Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263; (2003) 28 WAR 124
Secure Parking (WA) Pty Ltd v Wilson [2005] WASC 264
Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268; (2008) 38 WAR 350
Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253; (2012) 16 BPR 31,235
Shevill v Builders Licensing Board (1982) 149 CLR 620
Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1966] 2 All ER 61
Swanson v Forton [1949] Ch 143
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
Travel Compensation Fund v Tambree t/as R Tambree & Associates [2005] HCA 69; (2005) 224 CLR 627
UBAF Ltd v European American Banking Corporation; The Pacific Colocotronis [1984] 2 All ER 226
Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Watson v Foxman (1995) 49 NSWLR 315
Westpac Banking Corporation v Jamieson [2015] QCA 50; [2016] 1 Qd R 495
Wyzenbeek v Australasian Marine Imports Pty Ltd (No 2) [2018] FCA 1517
Yorke v Lucas (1985) 158 CLR 661
Texts cited: Bradbrook A, Croft C and Hay R, Commercial Tenancy Law (3rd ed, LexisNexis, 2009)
Lockhart C, The Law of Misleading and Deceptive Conduct (4th ed, LexisNexis, 2015)
Date of hearing: 2-6 December 2019 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 678 Counsel for the Applicant: Mr MC Hotchkin with Mr AW Buchan Solicitor for the Applicant: Hotchkin Hanly Lawyers Counsel for the Respondents: Dr JT Schoombee with Mr A Freund Solicitor for the Respondents: Lawton Gillon ORDERS
WAD 250 of 2019 BETWEEN: HARVARD NOMINEES PTY LTD (ACN 008 761 037)
Applicant
AND: SIMON CLIFFORD TILLER
First Respondent
DIMENSION AGRICULTURE PTY LTD
Second Respondent
GIOVANNI BASILIO NICOLETTI
Third Respondent
DAMIAN GLEN BRYCE
Fourth Respondent
FELICITY HELEN TILLER
Fifth Respondent
JUDGE:
JACKSON J
DATE OF ORDER:
11 MAY 2020
THE COURT ORDERED ON 19 MARCH 2020 THAT:
1.The application for the orders sought at paragraphs A, B, C and D of the amended originating application is dismissed.
2.Judgment on the balance of the amended originating application is reserved, including in relation to costs.
3.Pursuant to r 36.03(b) of the Federal Court Rules 2011 (Cth), the date fixed for the purpose of filing a notice of appeal from paragraph 1 of these orders is the 28th day after the date on which the Court delivers reasons for judgment.
4.There is liberty to apply on three days' written notice in relation to paragraph 3 of these orders.
THE COURT FURTHER ORDERS THAT:
5.The balance of the application is dismissed.
6.On or before 25 May 2020 the respondents must file and serve an outline of written submissions, no longer than five pages, on the costs of the proceedings, including any reserved costs.
7.On or before 8 June 2020 the applicant must file and serve an outline of written submissions, no longer than five pages, on the costs of the proceedings, including any reserved costs.
8.The submissions referred to in paragraphs 6 and 7 must include submissions on whether an assessment of costs before a Registrar is appropriate and, if not, how the amount of costs should be determined.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
JACKSON J:
Warriup Farm and Howick Farm (the Farms) are two large tracts of farming land near Esperance, Western Australia. The applicant, Harvard Nominees Pty Ltd, is the registered proprietor of Warriup Farm. John Caratti is a director of the company. He and his brother, Allen Caratti, are the registered proprietors of Howick Farm.
At the beginning of 2019, each of the Farms was leased to Mammoth Investments Pty Ltd, of which John Caratti is also a director. At that time the first and fifth respondents, Simon and Felicity Tiller, were sub‑leasing the Farms from Mammoth. In early February 2019, Harvard and Mammoth entered into several deeds under which Harvard was to lease Warriup Farm to Mr Tiller and the second respondent, Dimension Agriculture Pty Ltd, and Harvard was to be the lessee of Howick Farm and was to sub‑lease it to Mr Tiller and Dimension. As a result, Mr Tiller and Dimension became the lessees/sub‑lessees of the Farms, and Harvard took Mammoth's place as lessor/sub‑lessor. This took effect from 1 March 2019. I will refer to the new lease and the new sub‑lease together as the New Leases.
This proceeding involves a claim by Harvard that it entered into the transactions of early February 2019 in reliance on misleading representations made by Mr Tiller and Dimension. The representations are said to have concealed the involvement of the third respondent, Mr Giovanni Nicoletti, in Dimension and in the Farms. Harvard claims that in making the representations, Mr Tiller and Dimension engaged in misleading or deceptive conduct in breach of s 18 of the Australian Consumer Law (ACL), as applied respectively by the Fair Trading Act 2010 (WA) (FTA) and the Competition and Consumer Act 2010 Cth) (CACA). Harvard alleges that it entered into the transactions of early February in reliance on the misleading or deceptive conduct. It claims that Mr Nicoletti and a director of Dimension, the fourth respondent Mr Damian Bryce, were involved in the misleading or deceptive conduct.
The proceeding also involves a claim by Harvard that, on 15 February 2019, shortly after the New Leases were signed, Mr Tiller and Dimension executed deeds (15 February Deeds) by which Mr Tiller assigned his interest in the New Leases to Dimension and relinquished any involvement in the Farms. Harvard alleges that, in the context of certain correspondence between its solicitors and the solicitors for Mr Tiller and Dimension, the omission of Mr Tiller, Dimension, Mr Nicoletti and Mr Bryce to disclose the existence of the 15 February Deeds was also misleading or deceptive conduct. Harvard did not find out about the deeds until October 2019, as a result of discovery in this proceeding.
Harvard claims that each of these two instances of misleading or deceptive conduct caused it to suffer loss or damage. That is because, it says, by April 2019 it had leased the Farms to third parties, the Fowler family, at a rent significantly higher than the rent under the New Leases (the Fowler Lease). The alleged misleading representations are said to have caused Harvard to have been unable to give vacant possession under the Fowler Lease and thus earn the higher rent. It will be necessary to explain that claimed causal connection in further detail later in these reasons.
In relation to the alleged concealment of the 15 February Deeds, Harvard says that the entry into the deeds was a fundamental breach constituting a repudiation of the New Leases. It claims that if it had known of the 15 February Deeds by April 2019, it would have accepted the repudiation and gained vacant possession of the Farms in time for the Fowler Lease to come into effect. Harvard knew of Mr Nicoletti's involvement in the Farms by that time.
In relation to the alleged misrepresentations of January 2019, Harvard claims orders which would result in it obtaining vacant possession of the Farms, and damages. In relation to the cause of action concerning the alleged concealment of the 15 February Deeds, it only claims damages. In both cases, the damages are equal to the difference between the first year of rent under the Fowler Lease and the annual rent under the New Leases.
Harvard requested that orders confirming who was entitled to possession of the Farms be made before the commencement of the current farming season, if necessary without publishing reasons at the same time. I therefore made orders dealing with that subject on 19 March 2020. These are my reasons for making those orders and for the further orders that I make on publication of these reasons.
The outcome is that the application will be dismissed. Harvard's claim in respect of the first instance of misleading or deceptive conduct fails because, while it has established that it relied on misleading representations made by Mr Tiller and Dimension, it has not proved that it suffered any loss or damage because of that reliance. Also, it has not established that Mr Nicoletti or Mr Bryce had sufficient knowledge of the misleading or deceptive conduct to attract liability for the conduct under the ACL. Harvard's claim in relation to the second instance of misleading or deceptive conduct fails because, while the conduct was misleading or deceptive or likely to mislead or deceive, and while the entry into the 15 February Deeds was a breach of the New Leases, it was not a fundamental breach which would have permitted Harvard to re‑enter the Farms, had it been aware of it. Also, Harvard has not established that Mr Bryce engaged in the relevant conduct.
Given the possibility of an appeal, it is not appropriate to confine these reasons to those matters, and I will make such findings as are necessary to determine the factual issues that arise on the pleadings, as described below.
It is necessary to make clear at the outset that there was no allegation that the fifth respondent, Mrs Tiller, engaged in or was involved in any misleading or deceptive conduct. She appears to have been named as a respondent because some of the orders sought potentially affected her interests as a former lessee of the Farms. I will make no adverse finding against Mrs Tiller.
The pleadings and the issues to be determined
I gave a broad description of the pleaded issues in Harvard Nominees Pty Ltd v Tiller [2019] FCA 1672, but there have been substantial amendments since, then so it is convenient to give a full description here.
Background
John Caratti is a central figure in the relevant events. I will refer to him as 'Mr Caratti', except when it is necessary to avoid confusion between him and other members of his family.
According to the Further Further Amended Statement of Claim filed on 3 December 2019 (SOC), Mr Caratti and other entities in which he had an interest leased farming properties in the Esperance and Yilgarn districts to Mr Nicoletti and his wife. That included the Farms, which from about 1994 were leased to the Nicolettis via a sub‑lease from Mammoth.
Harvard claims that various disputes arose about arrears of rent and other defaults. Harvard says that in or about November 2016, Mr Nicoletti told Mr Caratti that he and his wife wanted to cease farming in Esperance. It also alleges that Mr Tiller told Mr Caratti that Mr and Mrs Tiller wanted to take over operating the Farms. It is said that Mr Caratti told both Mr Nicoletti and Mr Tiller that he would agree to lease the Farms to Mr and Mrs Tiller if all arrears of rent were satisfied. It is also alleged that Mr Caratti told them, and it was the fact, that he did not want to deal with Mr Nicoletti again in relation to the Farms as he was dissatisfied with the manner in which Mr Nicoletti had addressed (or not) the alleged defaults.
Mr and Mrs Tiller became sub‑lessees of the Farms from Mammoth for a five year term commencing on 1 March 2017 under an instrument I will call the Tiller Lease. On 18 January 2019, Mammoth issued a default notice to them for non-payment of rates. Harvard alleges that on or about 22 January 2019, Mr Tiller told Mr Caratti that Mrs Tiller had asked for a divorce.
The alleged conversations on 31 January 2019
On or about 31 January 2019 two conversations between Mr Caratti and Mr Tiller are claimed to have taken place, with the second of these being the occasion on which the first alleged instance of misleading or deceptive conduct occurred. It is pleaded that in the first conversation on that day, Mr Tiller told Mr Caratti that (SOC para 10):
(a)he had formed a new company called Dimension Agriculture Pty Ltd (being the Second Respondent);
(b)he wished to surrender the Tiller Lease and enter into a new lease of the Farms with himself and [Dimension] as lessee, in place of [Mrs Tiller], on the same terms;
(c)the partnership between [Mr and Mrs Tiller] would need to be dissolved and all the assets in the partnership assigned to [Dimension];
(d)[Mrs Tiller] had said she would sign a surrender of the Tiller Lease as part of implementing the divorce arrangements;
(e)because the latest season had seen a bumper crop and good market prices for grain, he would be able to pay off all outstanding arrears and debts owed by the Tiller partnership to [Harvard] and Mammoth in return for [Harvard] and Mammoth agreeing to surrender the Tiller Lease and entering into a new lease with [Dimension].
Harvard alleges that immediately after that conversation, Mr Caratti obtained a company search of Dimension which revealed that Mr Tiller and the fourth respondent, Damian Bryce, were its directors, and that Mr Bryce held the only issued share. It is then pleaded that Mr Tiller, on his own behalf and on behalf of Dimension, orally represented to Mr Caratti on behalf of Harvard and Mammoth that (SOC para 12):
(a)[Mr Bryce] had been referred to [Mr Tiller] by [Mr Nicoletti];
(b)[Mr Bryce] was a director of [Dimension] because he was to assist [Mr Tiller] by taking over all of the work previously undertaken by [Mrs Tiller] ('the First Bryce representation');
(c)the share in [Dimension] held by [Mr Bryce] was held by [Mr Bryce] beneficially for [Mr Tiller] ('the Second Bryce representation');
(d)other than referring [Mr Bryce] to [Mr Tiller], [Mr Nicoletti] had no and would not have any involvement in [Dimension] ('the First Nicoletti representation'); and
(e)[Mr Nicoletti] would not be involved in [Dimension's] activities on the Farms ('the Second Nicoletti representation').
31 January representations - reliance, falsity and loss and damage
The SOC pleads that in reliance on the four defined representations, Harvard entered into various transactions, the effect of which was that it replaced Mammoth as the lessor or sub‑lessor of the Farms, and Mr Tiller and Dimension replaced Mr and Mrs Tiller as the lessees or sub‑lessees.
Harvard claims that the representations defined as set out in [18] above are false because at the time they were made, Mr Nicoletti had and would continue to have an involvement in Dimension, it was intended that he would be involved in Dimension's activities on the Farms, Mr Bryce was a director of Dimension not to assist Mr Tiller but to act as Mr Nicoletti's nominee, and Mr Bryce held the share in Dimension beneficially for Mr Nicoletti.
The falsity of the defined representations is said to have been confirmed when Mr Nicoletti admitted to John Caratti, in a conversation on 21 March 2019, that he owned Dimension, that he had been and would continue to be involved in Dimension, and that he was taking over the operations of the Farms because Mr Tiller owed him a lot of money. It is also said to have been admitted in several items of solicitors' correspondence that Mr Nicoletti had caused Mr Bryce to be described as the sole shareholder of Dimension, when at that time Mr Nicoletti was the intended and actual beneficial owner of issued shares in Dimension.
The SOC also pleads, as falsifying the representations, certain transactions or proposed transactions which, broadly speaking, concerned the assignment of Mr Tiller's rights in the Farms to Dimension. The first was a proposed deed of assignment of sub‑lease, by which Mr and Mrs Tiller would assign the Tiller Lease to Dimension. Mammoth was to be a party to that deed. However it is pleaded that Harvard ('the Applicant') refused to execute it, and required Mr Tiller to be a named party to the New Leases.
The second set of transactions said to falsify the representations was a pair of deeds (one for each Farm) by which Mr Tiller assigned his interest in the New Leases to Dimension and relinquished any involvement in the Farms; that is, the 15 February Deeds. Harvard claims that they show that even as he signed the New Leases, Mr Tiller intended to cease operating the Farms, so that executing the New Leases concealed Mr Nicoletti as the controlling mind of Dimension and as solely managing the Farms.
These matters are said to mean that Mr Tiller and Dimension engaged in misleading or deceptive conduct in trade or commerce, in contravention of s 18 of the ACL. Harvard alleges that Mr Nicoletti and Mr Bryce were involved in the contraventions of s 18.
Harvard claims that on 2 April 2019, by its solicitors Hotchkin Hanly, it gave notice of rescission of the New Leases. It says that it granted the Fowler Lease on 17 April 2019, subject to a condition precedent requiring it to give vacant possession of the Farms by 1 May 2019, which was not satisfied.
The conduct of each of Mr Tiller, Dimension, Mr Nicoletti and Mr Bryce is said to have caused Harvard to suffer loss and damage. By particulars, Harvard claims damages equal to the difference between the rent under the Fowler Lease and the rent under the New Leases. The claim is made only in respect of the rent for the first year of the Fowler Lease which, if the condition as to vacant possession had been satisfied, would have run from 1 May 2019 to 1 May 2020.
In addition to damages, Harvard seeks orders under s 237 and s 243 of the ACL declaring the New Leases to be void, alternatively requiring Mr Tiller and Dimension to execute a deed terminating the New Leases. It also seeks consequential orders for delivery up of vacant possession of the Farms, for the removal of chattels and improvements and for the removal of caveats that Mr Tiller and Dimension have lodged.
The non-disclosure case
Harvard also pleads that the same four respondents engaged in misleading or deceptive conduct by failing to disclose the existence of the 15 February Deeds. It alleges that entry into those deeds without Harvard's consent was a fundamental breach and a repudiation of the New Leases.
It will be necessary to describe the pleaded claim in more detail later on; for now, it is sufficient to say that the omission to disclose the deeds is alleged to be misleading or deceptive because the deeds falsified a letter that Mr Tiller's and Dimension's solicitors sent to Harvard's solicitors on 5 April 2019.
Harvard pleads that in reliance on this misleading or deceptive conduct it did not terminate the New Leases as it was then entitled to do, and was precluded from relying on its right of termination. This is said to have caused loss or damage because if the existence of the 15 February Deeds had been disclosed, Harvard would have exercised its right to terminate the New Leases before 30 April 2019, and delivered vacant possession of the Farms under the Fowler Lease by 1 May 2019. Damages are claimed in relation to the additional rent thus foregone, particularised in the same way as the damage claimed to have been caused by the alleged representations of 31 January 2019.
The Defence - the history of dealings between the respondents and Mr Caratti
The further amended defence dated 21 November 2019 (Defence) pleads the history of the arrangements between Mr and Mrs Nicoletti and entities associated with Mr Caratti in more detail than the SOC does. According to the Defence, there were two leases between Mr and Mrs Nicoletti and Mammoth in relation to the farms, one for a term of five years commencing on 1 March 2005, and the other for a 10 year term commencing on 1 March 2010. Six other leases of farming land in the Yilgarn and Esperance districts are also pleaded, with Mammoth as lessor and, as lessees, Mr and Mrs Nicoletti (and, in one instance, Malcolm Nicoletti) or a company controlled by Mr Nicoletti, Apache Investments Australia Pty Ltd. These cover various periods commencing in 2001 and ending in 2019.
The respondents deny that the Nicolettis or their associated entities were ever issued with a default notice under any of these other six leases. It is said that all the dealings Mr Nicoletti had in relation to those six leases were with John Caratti's brother, Allen.
In about February 2012, Mr and Mrs Nicoletti granted a sub sub‑lease of the Farms to Mr and Mrs Tiller for a three year term, and this was extended for a further two years from March 2015. It is pleaded that all dealings between Mr Tiller and Mammoth were with Allen Caratti. He is said to have agreed in March 2016 that Mr and Mrs Tiller, operating as a partnership called 'SC & FH Tiller', would pay rent and other amounts due under the sub sub‑lease direct to Mammoth in discharge of Mr and Mrs Nicoletti's liability under the sub‑lease. From then on that is what happened, and Mammoth accepted the payments. It is pleaded that Mr Tiller only had limited dealings with John Caratti until early December 2016. It is also pleaded that, except for executing a deed of surrender for the Nicolettis' sub‑lease from Mammoth, Mr Nicoletti did not have any dealings with John Caratti in relation to that sub‑lease or the Farms.
The Defence goes on to plead that in December 2016, John Caratti raised the issue of expenses being deducted from rental payments for the Farms, and alleged that the rent was in arrears. It claims that the Tillers had paid the allegedly missing amounts to Allen Caratti on behalf of Mammoth, so there were no arrears. It is further alleged that Mr Nicoletti had no dealings with John Caratti in relation to that issue.
The conversations in late 2016
Harvard's allegations of conversations between Mr Caratti and each of Mr Nicoletti and Mr Tiller in late 2016 have been set out above. The respondents deny the alleged discussion with Mr Caratti in which Mr Nicoletti said he wanted to surrender the sub‑lease from Mammoth because he wished to stop farming in Esperance. As for the conversation between Mr Tiller and Mr Caratti about Mr Tiller's wish to take over the Farms, it is common ground that this did take place, but the respondents plead that Mr Caratti said a new lease over the farms to Mr Tiller would be OK provided he paid the alleged arrears. Mr Tiller decided he had no choice, and he and Mr Caratti agreed to go ahead on that basis, so that the terms of the new lease of the Farms to the partnership of Mr and Mrs Tiller were agreed in December 2016.
It is common ground that the Tiller Lease was entered into as Harvard pleads. It is also common ground that Mammoth issued a default notice for non‑payment of rates to the Tillers under that lease on 18 January 2019.
The conversation between Mr Tiller and Mr Caratti on 18 or 22 January 2019
I have referred to a plea by Harvard that on or about 22 January 2019, Mr Tiller told Mr Caratti that Mrs Tiller had asked for a divorce. The account of that conversation pleaded in the Defence is that Mr Caratti asked Mr Tiller after 18 January 2019 why the rates had not been paid, and Mr Tiller said that SC & FH Tiller were having some financial issues and Mr and Mrs Tiller's marriage had broken down and the partnership may have to be dissolved. The respondents also plead that Mr Tiller said he wanted to restructure the farming business and he was in discussions with two or three farmers, one of whom was Mr Nicoletti, about being a financial backer for the farming business through a corporate entity. It is alleged that Mr Caratti said that he did not care if Mr Tiller wanted to restructure and he just wanted the rates paid.
So, the respondents allege, Mr Caratti knew that Mr Nicoletti was potentially involved in the Farms, as a financial backer.
The alleged conversations of 31 January 2019 in the Defence
In relation to the key conversations between Mr Caratti and Mr Tiller that are alleged to have taken place on 31 January 2019, the respondents' pleading differs from Harvard's account in a number of material respects. The respondents do not necessarily accept that there were two key conversations on 31 January. They refer instead to a number of telephone conversations in late January 2019. They plead that when told about Dimension, Mr Caratti asked who Mr Bryce was and Mr Tiller said that he was both his (Mr Tiller's) farm consultant and Mr Nicoletti's farm consultant. It is said that Mr Caratti asked why Mr Bryce was a director of Dimension, and Mr Tiller said that Mr Bryce was assisting with the business. Mr Caratti asked where the money was coming from to finance the farming business and who was behind Dimension, and Mr Tiller said that was none of Mr Caratti's business. Mr Caratti is alleged to have said he did not care who was behind Dimension as long as the rates were paid.
In summary, the respondents deny each of the defined 'Bryce representations' and 'Nicoletti representations' which Harvard alleges were made in a second conversation on 31 January 2019. They allege that Mr Caratti knew that someone other than Mr Tiller was going to finance Mr Tiller's farming activities and knew that Mr Tiller would not tell him who it was, and that Mr Caratti said he did not care who it was.
Reliance, falsity, rescission, loss and damage
The respondents also deny that Mr Tiller said that he could pay all arrears in return for a new lease. They claim that in a conversation in early February, in return for agreeing to a new lease, Mr Caratti extracted accelerated payment of $70,000 of the $140,000 which was by then remaining from the alleged rental arrears. The respondents thus plead that Mr Caratti did not cause Harvard to enter into the New Leases in reliance on any of the alleged representations (if they are found to have been made), but that the did so in order to obtain payment of the outstanding rates and of the accelerated arrears payment.
The Defence goes further to allege that Mr Caratti himself engaged in misleading or deceptive conduct in saying, in effect, that he did not care who was financing, associated with or involved with Dimension or Mr Tiller. This was not raised by way of cross‑claim but was said to disentitle Harvard to the relief it seeks. However at trial counsel for the respondents indicated that this aspect of the Defence was not pressed, so it is not necessary to address it further.
The defence to the non-disclosure case
The Defence denies Harvard's allegations that the four pleaded representations were false. Yet the respondents claim that Mr Caratti knew before he spoke to Mr Nicoletti in late March 2019 that Mr Nicoletti was involved with Dimension and the Farms. It is not clear how he is said to have become aware, since the respondents' pleas above only go so far as to say that he was told that Mr Nicoletti might become a financial backer for the farming business through a corporate entity, and that when Mr Caratti asked subsequently, Mr Tiller refused to say who was financing Mr Tiller and Dimension's activities. While the respondents accept that Mr Caratti did speak to Mr Nicoletti in late March 2019, they allege that he acknowledged Mr Nicoletti's involvement with the Farms and offered him $500,000 to cease farming the Farms because he (Mr Caratti) could get a lot more money for the Farms. Mr Nicoletti is said to have rejected that offer.
The respondents say that Harvard was not entitled to rescind the New Leases, as it purported to do by its solicitors' letters in early April 2019, and that the attempt to do so was a repudiation which Mr Tiller and Dimension did not accept. They deny that Mr Tiller and Dimension engaged in misleading or deceptive conduct and deny that Mr Nicoletti and Mr Bryce were involved in any such conduct. As to loss and damage, they say that even if there was misleading conduct and it was relied upon, Mr Tiller and Dimension have performed all their obligations under the New Leases. The respondents plead that if Mr Caratti, Mammoth and Harvard had not taken the actions they are alleged to have taken in reliance on the conduct, SC & FH Tiller would have remained the lessee of the Farms pursuant to the Tiller Lease with Mammoth. So, they say, Harvard has suffered no loss and damage anyway.
In defence of Harvard's case as to non-disclosure of the 15 February Deeds, the respondents give a number of reasons as to why the deeds were not a breach of the New Leases and did not amount to a repudiation or, if they did, why that would not have led to the termination of the Leases. First, it is said that the 15 February Deeds were never implemented or acted or relied upon. In submissions there was added to this the argument that the formal requirement of delivery of the deeds was not satisfied. Second, it is said that it was not intended that the deeds would alter the legal relationship under the New Leases between Mr Tiller and Dimension on the one part and Harvard on the other part. That was said to effect an equitable assignment only, when the prohibition on assignment in the New Leases only applied to the assignment of legal estates or interests. Third, it is said that the 15 February Deeds were in any event rescinded by a deed of rescission dated 31 July 2019 and a deed of confirmation dated 7 November 2019, so that any breach was remedied. It is alleged that relief against forfeiture would therefore have been granted. So in the end, Harvard would not have been able to rely on the 15 February Deeds in order to obtain vacant possession of the Farms anyway.
As far as Lawton Gillon's letter of 5 April 2015 goes, the respondents deny that there was any misleading or deceptive conduct as a result of it, and say that Mr Tiller alone instructed Lawton Gillon in respect of the letter. Reliance on the alleged conduct is denied because, it is said, the 15 February Deeds were not a repudiation of the New Leases and in any event Mr Caratti by that time believed that Mr Nicoletti was in control of farming operations on the Farms.
The key issues
The following issues are the main ones that arise in this proceeding. They are defined by the pleadings as I have summarised them, in light of the way the parties conducted their cases at trial. As will be seen, it has turned out not to be necessary to determine the final issue, about remedies.
(1)What was said in conversations between Mr Caratti and Mr Tiller in late January 2019 about the involvement of Mr Bryce and Mr Nicoletti in Dimension Agriculture and its activities on the Farms? This breaks down into a number of sub‑issues:
(a)What did Mr Tiller tell Mr Caratti in late January 2019 about the issues that the Tiller partnership and his marriage were facing at that time? In particular, did he tell Mr Caratti that he was talking to Mr Nicoletti (among others) about backing his farming business?
(b)Were any of the four pleaded representations made? Or did Mr Tiller tell Mr Caratti that it was none of Mr Caratti's business who was going to finance the farming business and who was behind Dimension?
(2)Did Harvard enter into the instruments of early February 2019, which resulted in it leasing the Farms to Mr Tiller and Dimension, in reliance on the pleaded representations?
(a)This raises the question of whether Mr Caratti considered Mr Nicoletti to be an unsatisfactory tenant.
(b)It also raises the question of whether, as the respondents allege, Harvard entered into the instruments in order to bring forward receipt of the arrears payment of $70,000 and to obtain payment of the Shire rates.
(3)Were the four pleaded representations false? It is common ground that Mr Nicoletti came to be the sole shareholder and a director of Dimension and came to be involved in the Farms. But the timing, nature and extent of Mr Nicoletti's interest in Dimension and his involvement in it and in the Farms is in issue.
(4)Did Mr Tiller make the representations (if they were made) on behalf of Dimension? If Mr Tiller and/or Dimension did engage in misleading or deceptive conduct, were Mr Nicoletti or Mr Bryce knowingly involved?
(5)Has Harvard suffered loss or damage because of the four pleaded representations (if they amounted to misleading or deceptive conduct)?
(6)Was the making of the 15 February Deeds a fundamental breach or repudiation of the New Leases which would have entitled Harvard to terminate those leases? At [43] above I have set out the reasons why the respondents say that is not so.
(7)Was the omission to disclose the existence of the 15 February Deeds to Harvard misleading or deceptive conduct? That needs to be assessed in the context as pleaded, in particular the correspondence between Hotchkin Hanly and Lawton Gillon between 25 March and 5 April 2019.
(8)Did each of Mr Tiller, Dimension, Mr Nicoletti and Mr Bryce engage in that second instance of alleged misleading or deceptive conduct?
(9)Did Harvard, in reliance on that misleading or deceptive conduct, become precluded from terminating the New Leases for repudiation, because it did not know about the opportunity to terminate? If the 15 February Deeds had been disclosed to Harvard on 5 April 2019 or within a reasonable time thereafter, would Harvard have terminated the lease and obtained vacant possession of the Farms before 1 May 2019, so as to comply with the condition precedent of the Fowler Lease?
(10)What remedies should follow if loss or damage because of misleading or deceptive conduct is established?
(a)Should the New Leases be declared to be void ab initio? In written submissions Harvard indicated that it only pursues this on the basis of the representations of late January, not on the basis of the non-disclosure of the 15 February Deeds.
(b)What amount of damages should be awarded, if any?
The witnesses
John Michael Caratti
John Caratti is a director of Harvard and of Mammoth. It is Mr Caratti, on behalf of Harvard, whom Harvard claims was misled by the alleged conduct of Mr Tiller, Dimension, Mr Nicoletti and Mr Bryce. Mr Caratti gave evidence of the conversations with Mr Tiller which, it is said, comprised the first instance of alleged misleading or deceptive conduct.
There was little evidence before the court as to Mr Caratti's background and business history. It appears that through Harvard, Mammoth and other companies, and also in his own name with his brother Allen, Mr Caratti has acted, in effect, as the landlord of large areas of farming land in (at least), the Shire of Esperance and the Shire of Yilgarn. It can be inferred that he is a very experienced businessperson and, given the substantial amount of property apparently under his control, has had considerable success. He accepted in cross‑examination that he had considerable experience in the operations of companies, and that he controlled Harvard (ts 121).
In the witness box Mr Caratti presented as someone with a forthright way of communicating his views. It was clear from observing him under cross‑examination that he was not a credulous or trusting person. It was also clear that when it came to looking after the interests of Harvard, Mammoth and himself, Mr Caratti was far from quiescent. In matters of business, at least, he was not disposed to passively accept matters put to him by others. Rather, he presented as someone who would actively interrogate any proposition or proposal put to him, and who would be reluctant to accept it unless he was confident that it preserved or enhanced his business interests.
For reasons I will now give, I have approached Mr Caratti's evidence with caution.
One reason was how Mr Caratti conducted himself in cross‑examination. He did not qualify or retract any of his evidence on key points. His answers were invariably categorical and emphatic. He had no hesitation in describing the proposed evidence of others as 'totally false'. He was often combative with the cross‑examiner, and he appeared to take umbrage at any challenge to his version of events, no matter how innocuous. Of course, an unyielding approach of that sort can be a mark of conviction, and therefore of the truth of the evidence. But the overall impression left by Mr Caratti's lack of hesitation or reservations was of a wish to convey complete conviction, or perhaps a habit of doing so, which are not necessarily the same as actually holding the conviction.
Another cause for doubt about Mr Caratti's evidence emerged when he was cross-examined on the fact that the accounts given in his witness statements of key conversations put the words used in inverted commas. That is, there was nothing to indicate that they contained Mr Caratti's recollection only of the effect or substance of what was said. This included the alleged conversation of 22 January 2019 and much of the second alleged conversation of 31 January 2019, in which the misleading representations were said to have been made. In numerous other places, a statement that he did not remember the precise words, only the substance of what was said, did appear. That suggested that where that statement was absent, Mr Caratti was giving the exact words used. I have set out an example at [191] below.
It would be implausible to suggest that Mr Caratti could recollect that many conversations with such precision. That his memory was not so precise was confirmed by his answers at one point when the cross‑examiner invited him, in a non-leading way, to give his recollection of the first conversation he is said to have had with Mr Tiller on 31 January 2019. His account of the conversation in the witness box omitted large parts of the account given in the witness statement. Similarly, when cross‑examined in a largely non-leading way about the second alleged conversation on that day, Mr Caratti omitted several details that appear in his witness statement (ts 113). That by itself does not necessarily damage the credibility of his evidence; variability in recollection is a human phenomenon. But it does confirm that Mr Caratti does not possess any unusual faculty for recalling conversations verbatim, so it casts doubt on the reliability of his witness statements, which rather suggested that he did.
When cross‑examined about the inverted commas in his witness statement ('direct quotes' might have been a better way of describing it) Mr Caratti did not claim that he did remember the exact words. Nevertheless, his answers on the point were unsatisfactory. At one point he said he could not recall whether they were the exact words or not (ts 115). Elsewhere, he claimed not to understand the significance of inverted commas, and to say he was never very good at English (ts 103). Whether that is so, I have no doubt that he did understand the import of what the cross‑examiner was asking him. But rather than frankly say that the inverted commas did not mean that he remembered every word, Mr Caratti refused to accept any general proposition on the subject, and insisted that the cross‑examiner take him to every passage in his witness statements where inverted commas were used, of which there were many. In the course of this questioning he also refused to accept that he was an experienced litigant. I consider that Mr Caratti was being less than candid at these points, and it was one of the factors that caused me to approach his evidence with caution.
The main factor, however, which causes me to take that approach was that several times, it appeared to me that Mr Caratti's evidence exaggerated and embellished his claims in ways that did not seem plausible, judged against the inherent probabilities, or did not seem consistent with, or at least went beyond, other evidence such as his own diary notes. I will provide specific instances of this below. In general, I was not prepared to accept Mr Caratti's evidence on such issues unless it was common ground with the respondents or supported by the documentary record or by the inherent probabilities of the relevant situation. However, as will be seen, in the end, on the main aspects of the claim his evidence had that support.
Simon Clifford Tiller
The first respondent, Mr Tiller, is a wheat and livestock farmer and truck driver. His parents were farmers and he grew up on a farm and worked on farms as a teenager and young man. He married the fifth respondent, Felicity Tiller, in 2004. In 2008 he took over the family farming business, which by then was in the Esperance area. He sold that farm in around 2011 and in 2012 began farming at Warriup and Howick Farms, pursuant to a sub‑lease which Mr and Mrs Nicoletti granted to Mr and Mrs Tiller.
I did not find Mr Tiller to be a credible witness. His evidence was full of inconsistencies and implausibilities. I will refer to several instances in the course of making findings of fact below. Too often, when challenged on such matters in cross‑examination, Mr Tiller retreated to equivocal answers or expressions of incomprehension. This both indicated that he did not have a satisfactory explanation, and that at the same time he was unwilling to concede that he may have been mistaken, even when faced squarely with the improbability of the evidence he had given. Also, in cross‑examination his evidence changed frequently. In the witness box he often appeared to be confused as to a relevant sequence of events. He would frequently not listen to questions properly. I accept that being cross‑examined in court is a stressful experience, and there was no evidence to suggest that Mr Tiller had much prior experience of the court process, if any. Nevertheless, I was left with the impression that he sometimes retreated into incomprehension as an alternative to facing the improbable consequences of the evidence he was giving.
An example of how Mr Tiller's account of events changed is in the following excerpt from the transcript, concerning the 15 February Deeds. At paragraph 159 of his statement he said 'I did not read the document closely. I however understood from my brief read of it at the time that it just acknowledged that I had not put anything into Dimension, which was the case'. The cross‑examination on that point was as follows:
Now, you say at paragraph 159 of your statement that you did not read the document closely, but you:
… understood that I have not put anything into Dimension.
?---That's right.
Which was the case. Which bit did you read that gave you that impression? --- I ---
Go to the document. Just show us what you read?---I didn't read much of it.
Yes. I understand that. So, I want you to tell us what you did read?---Like I said, I didn't read very much of it. And I talked to [Mr Nicoletti] about this, and that's my understanding of the document.
Did you read it at all?---Not really.
Not really, or not at all?---I had a - I had a glance at it. That was it.
You signed a document that you didn't read?---Yes.
So why did you say that from your brief read of it that was your understanding? Are you now saying that your understanding is derived solely from what you were told by John Nicoletti?---No. I had a - I had a bit of a look at it and - - -
So, what bit did you look at?---I don't remember.
You don't remember? So how could you possibly testify as you did in paragraph 159?---Well, I had a brief look at it and I had a chat with John Nicoletti and - - -
So, what part did you read when you briefly looked at it?---Well, let me read it again. Just give me a moment. Well, it says in - in the first couple of lines:
Simon and Dimension agree and acknowledge that on and from the date of the lease agreement Simon has not provided a contribution in funds.
Okay. So, you stopped then, did you?---Yes.
You didn't think anything else was worth reading?---No.
Later in his cross‑examination Mr Tiller said, 'I didn't even read the assignment and release anyway'. He was then cross‑examined as follows (ts 264):
You didn't read it, or you only read it briefly?---I read it briefly, like I said.
Well, what's your story, Mr Tiller? Did you read it or not read it?---I read the first couple of lines, like I said to you.
So, Mr Tiller's evidence about how he knew what was in the 15 February Deeds was variously: that he had a 'brief read of it' (suggesting that he read the whole thing, albeit quickly); that he 'didn't read much of it' (suggesting that he read some, but not all of it); that he did not 'really' read it (which may mean he did not read it at all); that he 'had a glance at it' (which may also mean that he did not actually read it); that he 'had a bit of a look at it' (which could mean anything); that he did not 'even read the assignment and release anyway' (suggesting he did not read it at all); that he did not remember what part he looked at; that he read 'the first couple of lines' only; and that his understanding of the document came at least in part from Mr Nicoletti. Only the last of these matters was directly inconsistent with the others. But even so, the variations in Mr Tiller's account of his review of the 15 February Deeds were so numerous as to undermine confidence in the account he was giving.
Stephen James Vaughan
Mr Vaughan is a licensed real estate agent with over 30 years' experience in the rural industry and a long history of advising both John and Allen Caratti. He provided Mr Caratti with a market appraisal of the Farms in mid‑2018 and he helped to negotiate the Fowler lease. He gave his evidence under cross‑examination in a straightforward manner which was consistent with his position as a professional intermediary and adviser with no vested interest in the outcome of the litigation. I accept Mr Vaughan as a witness of truth.
Peter William May
Mr May has worked on farms for Mr Nicoletti over the past 10 years and also runs his own non‑agricultural businesses. He was an employee of Mr Nicoletti at the beginning of that 10 year period but he gave evidence that in more recent years, including 2019, he has worked as a contractor (ts 186). He ran the Farms for Mr Nicoletti from April 2019. Mr May only gave evidence because he was subpoenaed to do so, and did not provide a witness statement. Like Mr Vaughan, he gave his evidence in a straightforward way, and there was nothing to suggest he had any interest in the outcome of the litigation. I accept that Mr May gave his evidence truthfully.
Giovanni Basilio Nicoletti
Mr Nicoletti is 65 years old. People refer to him as 'John' or 'Nico' and Mr Tiller calls him 'Nicko'. He is a very successful wheat and livestock farmer and businessman. He was born in Merredin, Western Australia, and grew up on the family farm in Westonia. He left school in Year 9 at the age of 14, and for the next 10 years he worked on a family farm in Verona, Italy, which is where he met his wife, Giuliana (Julie). He returned to Western Australia in 1978 and began farming for himself on leased land in Westonia in 1979. According to his evidence, which was not contested on this point, by around 2008 to 2009 he was the single biggest wheat grower in Western Australia. He conducted business through companies including Apache Investments Australia Pty Ltd. One business which he established in 2001 and which has since thrived is the agricultural machinery dealership Ag Implements, which is owned by his company Ag Implements Pty Ltd.
I did not find Mr Nicoletti to be a credible witness. Unlike Mr Tiller, his demeanour in the witness box was generally calm and measured. He did not appear to be perturbed by any of the questions he was asked in cross‑examination. But like Mr Tiller, his evidence was often implausible and internally inconsistent, indeed contradictory. Once again, examples will appear in the findings of fact below. Also like Mr Tiller, in cross‑examination Mr Nicoletti often retreated to a position of equivocation or apparent incomprehension, rather than either provide a satisfactory explanation for the inconsistency or implausibility of his evidence, or candidly admit that the evidence was mistaken. My impression was that Mr Nicoletti was more focussed on giving evidence that suited the respondents' case than on answering questions truthfully.
Damian Glen Bryce
Mr Bryce is an accountant specialising in agriculture. He lives in Queensland. He worked for PricewaterhouseCoopers until 2006 and then in chief financial officer roles in the rural sector until he set up his own 'agribusiness finance' company, Map19 Consulting, in 2016.
Mr Bryce was also calm and measured in the witness box and answered questions in a straightforward manner. The evidence he gave as to his involvement in Dimension Agriculture and the Farms was consistent with the nature of his role, which was to provide professional services to Mr Nicoletti. His evidence was not seriously shaken in cross‑examination. The overall impression which I gained from Mr Bryce's evidence was that he did what Mr Nicoletti instructed him to do, and Mr Nicoletti did not, for the most part, disclose his reasons for giving him those instructions. Nothing about that impression was inherently implausible or falsified by the objective documentary record. So in general, there was no reason to disbelieve Mr Bryce's evidence, given on oath.
Felicity Helen Tiller
Mrs Tiller's witness statement was admitted by consent and she was not cross‑examined, so she did not enter the witness box. I accept that her evidence was given truthfully.
An issue of admissibility
Before embarking on a narrative of the relevant events it is necessary to resolve one evidentiary objection. The objection was to hearsay evidence which Mr Caratti gave based on things he was told by Mr May. In broad terms, it was evidence to the effect that Mr Tiller had relinquished control of the farms to Mr Nicoletti, and when that is said to have occurred. It was evidence of things that Mr May said to Mr Caratti on three occasions, being 10 April 2019, 7 May 2019 and 20 June 2019.
The evidence was plainly hearsay. It was, to use the words of s 59(1) of the Evidence Act 1995 (Cth) '[e]vidence of a previous representation made by a person' that was relied upon 'to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation'. The facts sought to be proved were things that were not within Mr Caratti's knowledge from any direct observation.
Harvard submitted that the evidence was nevertheless admissible because it was comprised of admissions. Under s 81 of the Evidence Act, the exclusionary hearsay rule found in s 50(1) does not apply to evidence of an admission, or to evidence of a previous representation made at or shortly before or after the time the admission was made which is reasonably necessary to refer to in order to understand the admission. On the definition in the Dictionary to the Evidence Act, an admission is a previous representation that is made by a party to a proceeding and is adverse to the party's interest in the outcome of the proceeding. Section 87 provides:
(1)For the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that:
(a)when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made; or
(b)when the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person's employment or authority; or
(c)the representation was made by the person in furtherance of a common purpose (whether lawful or not) that the person had with the party or one or more persons including the party.
(2)For the purposes of this section, the hearsay rule does not apply to a previous representation made by a person that tends to prove:
(a)that the person had authority to make statements on behalf of another person in relation to a matter; or
(b)that the person was an employee of another person or had authority otherwise to act for another person; or
(c)the scope of the person's employment or authority.
Harvard relied on s 87(1)(b), alternatively s 87(1)(c), to submit that the things that Mr May told Mr Caratti should be taken to be representations, and therefore admissions, made by Mr Nicoletti. The standard to which Harvard was required to prove the necessary elements of each of those paragraphs was that it was reasonably open to find those elements. That means it is not necessary to make a concluded finding of the relevant employment, authority or common purpose: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [No 4] [2006] NSWSC 90 at [11]. It also means that the standard of proof on the balance of probabilities, which would otherwise apply to the relevant evidentiary question by reason of s 142 of the Evidence Act, does not apply. I do not consider it necessary to gloss the meaning of 'reasonably open' further than that: cf. Jackson v TCN Channel 9 Pty Ltd [2002] NSWSC 1229 at [40].
Mr May's evidence was that he had worked on and off for Mr Nicoletti for the last 10 years. He said he was employed by him in the early part of that period but in the last few years he had been 'a subcontractor' to him (ts 186).
There was no written contract between Mr Nicoletti and Mr May. Mr May said that, apart from working for Mr Nicoletti he had two other businesses, none of which had anything to do with Mr Nicoletti or with agriculture (ts 187). Mr May did not suggest that his recollection was precise, but he said that in late February or early March of 2019 Mr Nicoletti asked him whether he was interested in coming to manage Warriup, and that there may be an opportunity if he wanted to come and look after Warriup for him, that is, for Mr Nicoletti.
Mr Nicoletti did not mention that Mr May would be working for any other person or entity (such as Dimension). When asked on whose behalf he was going to manage the farm, Mr May said 'Well, John approached me', that is, Mr Nicoletti. Apache Investments paid Mr May for his work on the Farms, although Mr May readily identified that company with John Nicoletti (ts 188). Mr May rendered invoices under his Australian Business Number. He was on a day rate and Apache Investments did not deduct any tax (ts 192).
Mr May lived in Esperance and would sometimes, but not always, stay overnight on the Farms (ts 189). There were breaks for him to work in his tourism business. But he was at the Farms most days; on average he would be there four to five days a week, and at least eight to 10 hours per day.
In terms of the work he did, Mr May said that he organised the staff and managed the day to day running of the Farms (ts 187). His evidence was, 'I ask what John wants to do and I just work from day to day and run the farm' (ts 188). If Mr Nicoletti told him what to do, he would do it: 'He's the boss'.
Mr May did not have authority to pay creditors of the Farms (ts 188). He still manages the Farms (ts 189).
Mr Nicoletti gave evidence in cross‑examination to the effect that he telephoned Mr May in late March 2019 - he appeared to be certain that it was March but could not be sure it was late March - and said, 'If there's a possibility I need your help, would you be there?' and Mr May said, 'If it's farming I will help you'. Although this is vague as to the nature of the relationship, Mr Nicoletti did then accept that the conversation was to appoint a farm manager 'to help me manage the farm' (ts 291).
Does the above evidence show that Mr May was an employee of Mr Nicoletti? There is no definition of 'employee' in the Evidence Act, so the common law meaning of the term will apply. In ACE Insurance Limited v Trifunovski [2013] FCAFC 3; (2013) 209 FCR 146, after a lengthy survey of relevant authorities, Buchanan J (Lander and Robertson JJ agreeing) observed (at [102]‑[103]) that there was:
no single or unifying test to determine whether an employment relationship exists. Some features of a particular relationship may tend strongly against such a conclusion. Principal amongst such features, in my view, are contractual terms which deny any requirement for personal service or represent clear indications of the pursuit of an independent business. Even where such features are absent the proper conclusion may be that a particular relationship is not one of employment, but the analysis is less straightforward.
Of the indicia of employment it is clear that a right of control remains an important consideration in many cases. It may be found in a right of organisation and allocation of work, as much as in some theoretical right to say how actual work should be done.
However while the degree of control remains important, the modern approach is multifactorial and the totality of the relationship must therefore be considered: Putland v Royans Wagga Pty Limited [2017] FCA 910 at [30] (Bromwich J). It may be difficult to give much independent weight to such things as taxation arrangements, because they reflect a subjective view of the nature of the relationship and may therefore be considered in the same category as declarations of intent, which, while not necessarily wholly irrelevant, must be approached with caution and may not assist at all: Putland at [26].
A number of factors speak against any conclusion that Mr May was an employee in relation to his work on the Farms, let alone an employee of Mr Nicoletti. These are:
(1)Mr Nicoletti was not personally a sub‑lessee of the Farms so on the face of things the business of the Farms was not his, personally - however this factor is of little help in resolving the present issue because if I were to give it significant weight, it would point to the conclusion that Mr May was Dimension's employee, and the representations could still be admissible on that basis because they were adverse to the interests of Dimension, as a party;
(2)Mr May was paid by Apache Investments, not Mr Nicoletti personally (or Dimension);
(3)Mr May was paid on the basis of a day rate on the rendering of invoices and without the deduction of tax (noting Bromwich J's observations about the limited weight that may need to be placed on such factors);
(4)it appears that Mr May had no regular and set hours to work at the Farms, he was free to continue to run his businesses that were not related to the Farms, and it was expected that he would work in his tourism business when the tourist season recommenced; and
(5)Mr May's own statement of the legal character of his relationship with Mr Nicoletti as being a 'subcontract', although that of course cannot be conclusive and in the circumstances, including the absence of any documents evidencing the contract, I give it little weight.
Factors that speak in favour of the view that Mr May was an employee of Mr Nicoletti are:
(1)there is no suggestion that Mr May supplied any tools or machinery for use at the Farms and the evidence suggests that he did not, as Mr Caratti said Mr May told him 'all Nico's gear and men are on the farm' (Mr Caratti's first witness statement dated 11 November 2019 (Caratti I), para 219.3) (that hearsay is admissible under s 87(2) of the Evidence Act);
(2)Mr Nicoletti asked him whether he was interested in coming to 'look after Warriup for him' and did not mention any other entity - Mr Nicoletti's own evidence was in terms that Mr May would be helping Mr Nicoletti to manage the Farms;
(3)while Mr May's hours may not have been set, and were subject to breaks, it would appear from his evidence that he worked four to five days a week and eight to 20 hours a day, so that his hours were fairly regular and consumed most of Mr May's working life during the relevant period;
(4)it also seems that the position is a permanent one or at least long term, as Mr May still works on the Farms; and
(5)most importantly, it was clear that Mr Nicoletti had actual and, it may be inferred, legal authority to control Mr May in the way he managed the Farms - 'He's the boss'.
Mr Caratti's evidence was that Mr May told him that he was employed by Mr Nicoletti to manage the Farms (Caratti I, para 212.3). While this is admissible for present purposes under s 87(2), as a characterisation of the nature of the relationship by a witness of fact I would give it little weight, and in circumstances where Mr May's sworn testimony contradicted it I give it no weight.
These competing indicia are perhaps finely balanced, and if the question were to be determined on the balance of probabilities as an issue at the heart of the case, it may be that one would conclude that Harvard had not discharged its onus to prove an employment relationship. But that is not the question here. In my view the indicia I have described, including importantly the clear presence of control by Mr Nicoletti over Mr May's activities on the Farms, mean it is reasonably open to find that when Mr May spoke to Mr Caratti on the three occasions I have mentioned, he was an employee of Mr Nicoletti. It is not necessary to go further than that in determining the nature of the relationship.
As for the scope of Mr Nicoletti's employment, Mr Caratti's admissible hearsay evidence on the point was that ' He was employed by Mr Nicoletti to manage the Farms' (Caratti I, para 212.2) and he said 'I am managing the Farm for Nico like I told you before' (Caratti I, para 219.1). Mr May's own evidence, which I have described, is to the effect that he managed the day to day operations of the Farms. With limited exceptions, the representations (according to Mr Caratti's evidence) which he made to Mr Caratti were all about that subject, including the extent and timing of Mr Tiller's involvement in the running of the Farms. I am comfortably satisfied that it is reasonably open to find that those representations related to matters within the scope of Mr May's employment with Mr Nicoletti.
Subject to the limited exceptions I just mentioned, I rule that Mr Caratti's hearsay evidence about the content of the three conversations he had with Mr May is admissible to prove the facts which Mr May told Mr Caratti in those conversations. The exceptions are certain statements about the repossession of Mr Tiller's machinery, how much money Mr Tiller owed, and the whereabouts of Mr Tiller's parents after they left the Farms. Those matters are not within the scope of Mr May's employment.
Counsel for the respondents submitted that to the extent that it was a discretionary decision whether to admit the evidence, the discretion should be exercised against doing so because, he said, Mr May's evidence in the witness box differed in material respects from Mr Caratti's evidence about what he said and 'we should [not] be saddled with two sets of evidence … from the same witness' (ts 392). I take this to be a submission that the court should exercise its discretion under s 135 of the Evidence Act to refuse to admit the evidence because its probative value is substantially outweighed by the danger that it might be misleading or confusing or (perhaps) cause or result in undue waste of time. But I do not consider that the two different accounts of what Mr May said are likely to result in either of those outcomes. There will be no impediment to reconciling the two different accounts, or choosing between them, in the usual way.
A chronological account of the evidence
In Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 218 CLR 592 at [102] and [109], McHugh J observed that s 52 of the Trade Practices Act 1974 (Cth) (TPA), the predecessor to s 18 of the ACL, required the court to examine the impugned conduct as a whole in the light of the relevant surrounding facts and circumstances, not in isolated parts. His Honour was in dissent but not on this principle: see also the majority (Gleeson CJ, Hayne and Heydon JJ) at [74]: 'in cases under s 52, read in the light of the particular structure and goals of the Act, everything must depend on an appropriately detailed examination of the specific circumstances of the case'. See also Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [102] (Gummow, Hayne, Heydon and Kiefel JJ).
It is convenient before making specific findings about the key factual issues to place the factual disputes in the context of the relevant course of events as a whole. That includes the documents which, with one exception, were admitted into evidence by consent. Where the testimony adduced by the parties on key issues is contradictory, I will describe the competing versions of events but defer findings until the subsequent sections of these reasons.
The history of lease dealings between the Nicolettis and Caratti interests
There is an extensive history of lease dealings between the Nicolettis and companies associated with them, and John and Allen Caratti and companies associated with them.
Mr Caratti's evidence was that he has known Mr Nicoletti for 30 years (ts 119). Mr Nicoletti's evidence was that he has farmed properties owned by the Caratti family since around 1999 (Mr Nicoletti first witness statement dated 11 November 2019 (Nicoletti I), para 21). That is borne out by the numerous leases and extensions of lease in evidence; and it is not necessary to go into detail about them.
Mr Nicoletti gave evidence that his dealings with the Caratti family have always been through Allen Caratti (Nicoletti I, para 19). That statement is too wide and unqualified to be accepted in its entirety, but John Caratti did accept in his evidence‑in‑chief that Allen Caratti was largely responsible for the management of the Nicolettis' leases up until about 2012 (Mr Caratti's responsive witness statement dated 27 November 2019 (Caratti II), para 40). He said that he (John Caratti) took a more proactive role after that, although in cross‑examination, he said that Allen only stopped managing farms on behalf of Mammoth in 2015 or 2016 (ts 126). When asked whether he accepted that Mr Nicoletti dealt with Allen Caratti in relation to the management of the farms he was leasing, Mr Caratti said that 'Allen and Nicoletti were bonded together' (ts 128). I accept that until 2016, Mr Nicoletti had few if any direct dealings with John Caratti over the leases. As will be seen, by late 2016 John Caratti was taking steps to assert more active control over the leasing arrangements for the Farms. It is not necessary to make a finding as to precisely when in 2016 he began to have dealings with Mr Nicoletti about those matters.
Turning to those leasing arrangements for the Farms themselves, John Caratti gave evidence, which I accept, that by an undated deed of lease entered into in July 1994, Harvard and John and Allen Caratti leased the Farms to Mammoth (Caratti I, para 6). Mr Caratti cannot now find a copy of the deed of lease, and it was not produced in evidence. There is no evidence as to the rent paid under that lease, including whether it was more than nominal.
Mr Caratti said in evidence that there was a lease by which Mammoth sub‑leased the farms to Mr and Mrs Nicoletti, although he could not locate a copy of it. There is, in evidence, an undated lease (or sub‑lease) of the Farms from Mammoth to Mr and Mrs Nicoletti which seems to have been made some time in 2004 (without two particular lots which appear to have been added in 2009 - see TB pp 61‑62). It is for a term of five years from March 2005. The annual rent was $800,000 plus GST. There is also in evidence a deed of lease by which it appears that in 2009 Mammoth sub‑leased the Farms to Mr and Mrs Nicoletti for 10 years from March 2010 (TB 10). Once again, the annual rent was $800,000 plus GST. John Caratti claimed in cross‑examination that he had not seen that deed until discovery in these proceedings and that the signature of his mother, Madeleine Caratti, as a director of Mammoth was forged, but there is no need to make a finding about that.
The basis of Harvard's claim that it relied on the misleading conduct which is said to have occurred on 31 January 2019 is essentially that Mr Caratti was content to have Mr Tiller as a tenant, but would not have accepted Mr Nicoletti's involvement with the Farms, because he did not think that he was a good tenant. Assessing that claim requires the court to have regard to the history of dealings between Mr Caratti and each of Mr Tiller and Mr Nicoletti concerning actual and alleged defaults under the various leases.
Mr Caratti said in his evidence that the Nicolettis were not good tenants of the Farms and the other properties. This is, he said, because they were regularly in breach of their leases for non‑payment of rent (Caratti I, para 11). There is some support for this in the documents. Emails between Mammoth's financial controller and the Nicolettis from February 2017 and May 2018 list outstanding invoices, presumably for rent, in relation to farms at Marvel Loch and Bullfinch. The outstanding invoices were said to total $643,500. Some of them were nearly one year old, and in the course of the email exchange, Mrs Nicoletti accepted the correctness of the list (TB 21). Payments for 2017 rent were made in 2018, even though the rent under the Marvel Loch sub-lease was payable in advance (TB p 191). Despite Mr Nicoletti's evidence that he always dealt with Allen Caratti, it appears from these emails that the pressure to pay the outstanding rent came from John Caratti. There is another email exchange in December 2018 seeking rent for those farms, which had fallen due in March and September of that year (TB 61). Mr Nicoletti's evidence, however, was that he could not recall those emails and that he and Mrs Nicoletti did not leave Bullfinch and Marvel Loch with any money owing under the leases (Nicoletti I, para 139).
Mr Nicoletti provided a witness statement responding to many of the claims made in Mr Caratti's statement in some detail, but he did not deny being late with payment of rent, other than in respect of the Farms themselves. I find that from time to time, Mr Nicoletti was significantly late in paying rent on some of the properties he leased from Caratti interests and that John Caratti was aware of that.
Mr Caratti's evidence was that as at December 2018, Caratti entities claimed interest on rental arrears by Mr Nicoletti in relation to leases at Yilgarn (Caratti I, paras 31‑41) but he refused to pay and the Caratti entities did not litigate over that. Mr Caratti said that the arrears were eventually paid when Mr Nicoletti needed his consent to the assignment of the Yilgarn leases to the Saudi Agricultural and Livestock Investment Company (SALIC). That was under a transaction settled in April 2019, by which Mr Nicoletti sold his farms to SALIC. Mr Bryce first met Mr Nicoletti when he began to work for him in preparing his farming business for sale in 2017, and Mr Bryce worked on the transaction throughout 2018 and into early 2019 (Mr Bryce's first witness statement (Bryce I), paras 12‑13). He and Mr Nicoletti worked closely together and developed a friendship (Bryce I, para 14).
Mr Nicoletti denied that he needed Mr Caratti's 'assistance' (Mr Nicoletti's responsive witness statement dated 15 November 2019 (Nicoletti III), para 17) in relation to the SALIC transaction but he did not specifically deny that the Yilgarn leases were in arrears or that the consent of landlords to aspects of the transaction was needed, and it is inherently likely that it was required. Mr Caratti gave evidence elsewhere that he met SALIC representatives in relation to the transaction on numerous occasions in December 2018 concerning the assignment of the Yilgarn land (Caratti I, para 190) and there is no reason to doubt that he did. I prefer Mr Caratti's version of events concerning the Yilgarn arrears to that of Mr Nicoletti.
Mr Caratti also gave evidence that three homes in the Bullfinch township which the Nicolettis leased from Caratti interests were not maintained and were left derelict. Mr Caratti also gave evidence of an implied oral admission from Mr Nicoletti that he 'destroyed' a house on a Marvel Loch farm he leased from Mammoth, although Mr Nicoletti is supposed to have said that the destruction was the result of white ants (Caratti I, paras 43‑44). Mr Nicoletti's evidence was that he spent a substantial amount of money on that house to make it habitable and he does not recall the discussion in which the implied admission is said to have been made (Nicoletti III, para 19). Only Mr Caratti was cross‑examined on this issue, and then only briefly to confirm his denial of Mr Nicoletti's version of events (ts 147‑148). It is not possible on the basis of the limited evidence to determine whose version of events is correct, but it is a peripheral issue on which it is not necessary to make a finding.
2012 sub-lease from the Nicolettis to the Tillers
Mr Tiller's evidence was that he first met Mr Nicoletti in February 2012, and it appears they soon began to talk about Mr Tiller taking a 'sub-sub-lease' of the Farms (Mr Tiller's first witness statement dated 11 November 2019 (Tiller I), paras 14‑19). By an undated instrument which appears to have been made in 2012, Mr and Mrs Nicoletti sub‑leased the Farms (TB p 294) to Mr and Mrs Tiller. The term of the sub‑lease was three years, commencing on 1 March 2012, with an option for a further two years. At $1,260,000 per annum, the rent was significantly higher than the rent the Nicolettis were paying under the sub‑lease from Mammoth. Mr and Mrs Tiller moved onto the Farms at around this time (Tiller I, paras 20‑21). There was a market rent review scheduled for March 2015, being the commencement of the further term.
The sub‑lease from the Nicolettis to the Tillers was extended by deed, for two years from 1 March 2015. The rent stayed at $1,260,000 per annum (TB 12).
Mr Caratti said that from about 2015, Mr and Mrs Tiller paid the rent under the lease directly to Mammoth (Caratti I, para 14). Mr Tiller gave evidence of a meeting he had with Mr Nicoletti and Allen Caratti at which they indicated they were happy for Mr Tiller to pay the rent direct to Mammoth (Tiller I, para 29). It is not clear how that arrangement worked, given the apparent significant difference between the rent payable under the Tillers' sub-lease and the rent payable under the sub‑lease to the Nicolettis.
On Harvard's case what, then, did make it necessary for the respondents to disclose the existence of the 15 February Deeds? The fact (as Harvard sought to put it) that Harvard could have terminated the New Leases on the basis of the deeds is not enough by itself. The only other circumstance Harvard identified was the misleading character of Lawton Gillon's letter of 5 April 2020. The reasonable expectation is said to have arisen because the 15 February Deeds falsified the Lawton Gillon letter.
In Miller & Associates French CJ and Kiefel J referred to a plea in that case where the plaintiff had alleged that the defendant did not disclose any facts said to falsify positive representations alleged to have been made. Their Honours observed (at [7]) that:
failure to confess a misrepresentation is not a necessary element of the cause of action in misleading or deceptive conduct by misrepresentation. It can raise a false issue and suggest that a case relying upon non-disclosure is being presented when it is not.
Later (at [23]) their Honours said:
Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete.
On the basis of these observations it is open to characterise, as misleading or deceptive conduct, a failure to disclose something specific that falsified or qualified statements made in a prior representation. In truth, many of the cases in which silence or non-disclosure is an element are susceptible to that kind of analysis: see the cases referred to in Lockhart C, Law of Misleading or Deceptive Conduct (4th ed, LexisNexis, 2015) [5.21]; and see the analysis in Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193 at [54] (McLure P).
In the present case it would be wrong to describe the respondents' alleged conduct as a mere failure to correct an earlier false statement. That would involve superfluity of the kind that French CJ and Kiefel J identified. And for reasons I have given, Harvard does not and cannot rely on the allegedly misleading character of the letter of 5 April, independently of the non‑disclosure of the 15 February Deeds. It is that non‑disclosure which, it is said, made the failure to disclose those instruments part of a course of misleading or deceptive conduct.
In my view, Harvard has made out this aspect of its case. I have rejected the arguments put on behalf of the respondents that the 15 February Deeds had no effect. So, on any view, they created rights and obligations that were directly inconsistent with many of the statements made in Lawton Gillon's letter of 5 April 2020. The letter said that Mr Tiller was to remain in control of the farming operations. But the 15 February Deeds prohibited him from having any interest or involvement in the farming operations undertaken by Dimension on the Farms (cl 3(d)). The letter said that Mr Tiller always intended to remain in control of farming operations. But by the 15 February Deeds he had signed away any right to take part in those operations or even to enter the Farms (cl 3(a)). The letter denied that Dimension was a means by which Mr Nicoletti would obtain exclusive control of the farming operations in order to retire Mr Tiller's debts to Mr Nicoletti. But by the 15 February Deeds, Mr Tiller had ceded the right to conduct activities on the Farms and to undertake farming operations on the Farms to Dimension and Dimension alone (cl 3(b) and cl 3(d)). The letter said that Mr Tiller had always intended, and his intentions remained, to be a long term tenant of the Farms. But by the 15 February Deeds he had assigned all of his interest in the New Leases to Dimension (cl 1) and had acknowledged that he had no legal, equitable or financial rights or interest in the New Leases (cl 4(b)).
I need not continue. I am satisfied that, after Harvard had the letter of 5 April 2019, the omission to disclose the existence and terms of the 15 February Deeds was, at the very least, likely to mislead or deceive. That is so even if I were to accept that as at 5 April there was still some prospect that Mr Tiller would control the farms (as difficult to accept as that is). The statements in the letter were categorical and unqualified. The existence of the 15 February Deeds, at the very least, raised significant doubts about Mr Tiller's intentions. So the failure to disclose them meant that the course of conduct including the letter was misleading. At this stage of the analysis, that is an objective test, so whether Harvard was in fact misled is not to the point.
The fact that the 15 February Deeds amounted to a repudiation of the New Leases (if Harvard's submissions were to be accepted) and that Harvard needed to be aware of the deeds to obtain comprehensive advice, does not add to the analysis. Just because non‑disclosure placed Harvard in a less advantageous position in its dealings with the respondents, that does not make it misleading or deceptive. It is the character of the 15 February Deeds as falsifying the impression liable to be created by the letter of 5 April 2019 which makes the failure to disclose the deeds to Harvard conduct that was misleading or deceptive or likely to mislead or deceive.
Issue (8): Who engaged in the misleading or deceptive conduct?
As I have said, Harvard alleged that each of the first to fourth respondents engaged in the misleading or deceptive conduct that involved the non‑disclosure of the 15 February Deeds. There is no plea that any of them are liable on the basis of involvement in the conduct within the meaning of s 2(1) of the ACL.
The SOC alleged knowledge of certain matters on the part of Mr Tiller, Dimension and Mr Nicoletti, and also sought to impute Mr Bryce's knowledge to Dimension and Mr Nicoletti. It has been said that as a general proposition it is not necessary in order to show misleading or deceptive conduct for the purposes of s 18 that the contravenor intended to mislead or deceive, and in a case of an alleged non-disclosure it is not necessary to show that the contravenor knew of the facts not disclosed: Johnson Tiles at [66] (French J, Beaumont and Finkelstein JJ agreeing). Knowledge can be a relevant circumstance, for example, where disclosure of a fact would reasonably be expected if the fact were known to the alleged contravenor: Johnson Tiles at [66]; and Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209(ii)] (Sackville AJA, Beazley and Campbell JJA agreeing).
On the other hand, it has been held that conduct cannot be attributed to a defendant unless it had actual or constructive knowledge of the circumstances that affect its content. Contextual circumstances of which the defendant had no actual or constructive knowledge, and which alter the scope of what would otherwise be attributed to the defendant, are irrelevant: Owston No 2 Pty Ltd at [62] (McLure P). In that regard, reasonable inferences, reasonable assumptions and reasonable expectations arising from the objectively determined circumstances will be in the constructive knowledge of the parties: Owston No 2 Pty Ltd at [62]. The respondents did not rely on s 2(2)(b) and s 2(2)(c) of the ACL, which together relevantly define conduct to include the refusing to do any act and the refusing to do an act as including refraining otherwise than inadvertently from doing an act. But in Owston No 2 Pty Ltd McLure P held (at [66]) that '[t]he need to establish a deliberate omission will only arise if the defendant's actual conduct together with all the relevant surrounding circumstances are (objectively) incapable of giving rise to the misleading or deceptive contextual conduct complained of'. By 'contextual conduct' her Honour meant the actual conduct (in its natural and ordinary meaning) of the defendant, examined in its broader context: see Owston No 2 Pty Ltd at [60].
I will not attempt to resolve this conflict in the authorities (if conflict it be), but will proceed, favourably to the respondents, on the basis that McLure P articulated in Owston No 2 Pty Ltd (although in the case of Mr Bryce I will also apply the Johnson Tiles approach in the alternative). In the case of Mr Tiller and Dimension, there can be little doubt that the misleading conduct must be attributed to them. Lawton Gillon's letter of 5 April 2019 was sent on behalf of them. On the face of the letter, Lawton Gillon was acting as the agents of those clients and within the scope of their authority. There was no suggestion to the contrary from the respondents in this case. So, if it is necessary to resort to s 139B(2) of the CACA, that provision means that the conduct involved in sending the letter is attributed to Dimension. The similar provisions of s 111 of the FTA mean that conduct is attributed to Mr Tiller. In any event, Mr Tiller accepted in cross‑examination that he 'would have' read the letter carefully at the time it was sent (ts 258).
Dimension and Mr Tiller executed the 15 February Deeds and had the relationship of lessee with Harvard during the relevant period, essentially April 2019. They were in a position to provide the 15 February Deeds to Harvard, and did not. They knew, or must be taken to have known, what the deeds they made provided for. Viewed in the context of those matters, and of what they knew, or must be taken to have known about the letter and the deeds, their actual conduct in instructing Lawton Gillon to send the letter together with the failure to disclose the deeds gives rise to the misleading or deceptive conduct I have identified in the previous section of these reasons. That conduct should be attributed to Mr Tiller and Dimension for the purpose of s 18 of the ACL.
To the extent that it is relevant, I do not accept Mr Tiller's evidence that he thought the deeds just acknowledged that he had not put anything into Dimension. I have been through how inconsistent and unsatisfactory his evidence was on the subject of his reading and understanding of the deeds. I accept that Mr Tiller could not be expected to understand them the way a lawyer would, but their terms and effect were clear. Mr Tiller signed them, and he did so in a context where he had tried, unsuccessfully, to have the Tiller Lease assigned to Dimension, and had also tried unsuccessfully to have his name taken off the New Leases. Mr Bryce's email of 6 February 2019 to Nova Legal, which started the process of drafting the 15 February Deeds, says that Mr Tiller was happy to relinquish his rights under the deeds. Mr Tiller knew enough about the deeds to know that they were directly inconsistent with the content of Lawton Gillon's letter of 5 April 2019.
I find that both Mr Tiller and Dimension engaged in the misleading or deceptive conduct constituted by the non‑disclosure of the 15 February Deeds in the context of the 5 April 2019 letter.
Turning to Mr Nicoletti, Mr Tiller's evidence was that he (Mr Tiller) gave the instructions in relation to the letter of 5 April 2019, and he said he was sure that Mr Nicoletti did not (Tiller I, para 193; ts 256). But in cross‑examination Mr Nicoletti accepted that by the time of the letter, Dimension was his company, and when asked whether he instructed Lawton Gillon on the occasion of the letter he said 'obviously I did' (ts 299). But he said he could not recall whether he did and he did not know whether it was both he and Mr Tiller who did so (ts 299). I do not take Mr Nicoletti's evidence, as a whole, to contain an admission that he instructed Lawton Gillon on the letter. In my view, it is better read as an acknowledgment that as a director of Dimension he could be expected to have given instructions, coupled with a disclaimer of any recollection that he actually did.
Nevertheless, there are reasons on the face of the letter to conclude that Mr Nicoletti did give instructions on its content. It contains statements about the history of Mr and Mrs Nicoletti's relationship with the Carattis, Mr Nicoletti's instructions to Mr Bryce about the incorporation of Dimension, and Mr Nicoletti's discussion in late March with Mr Caratti. Mr Nicoletti was, at the time of the letter a director and sole shareholder of Dimension and in cross‑examination he accepted that by this time it was his company (ts 299). It is open to infer that he gave instructions on the letter and his evidence on the point, while not a clear admission, supports that inference. I find that Mr Nicoletti gave instructions on the letter to an extent which means that the sending of it is conduct attributable to him and he knew what it said. That is a conclusion of fact which does not rely on s 111 of the FTA.
Section 111(1) does, however, assist in coming to a conclusion that Mr Nicoletti knew of the 15 February Deeds. Similarly to s 139B(1) of the CACA, s 111(1) of the FTA provides that where in a proceeding under the ACL in respect of conduct that is engaged in by a person (the principal) it is necessary to establish the state of mind of the principal, it is sufficient to show that an employee or agent of the principal engaged in that conduct within the scope of their actual or apparent authority, and that the employee or agent had that state of mind. It is clear from the evidence I have described above that Mr Bryce is the person who gave instructions directly to Nova Legal on the deeds and is the person who kept the deeds after they were executed. It is also clear that he did so on behalf of Mr Nicoletti. In connection with Dimension's affairs Mr Bryce accepted he acted on instructions from Mr Nicoletti (ts 328) and the evidence I have summarised at [214] above indicates that he brought about the preparation and execution of the deeds in order to realise Mr Nicoletti's wishes. For the purposes of s 111(1), Mr Bryce's knowledge of the terms of the 15 February Deeds establishes that Mr Nicoletti had the same knowledge.
However, independently of s 111, the evidence leads to the conclusion that Mr Nicoletti knew of the deeds and of their contents. They were prepared to give effect to Mr Nicoletti's wish that Mr Tiller relinquish his rights in the Farms. Mr Nicoletti's lawyers, Nova Legal, prepared them and it can be inferred that Mr Nicoletti paid for that. Mr Nicoletti did not authorise payment of the outstanding rates and rent until after the deeds had been executed and Mr Tiller had provided a post-dated resignation as director of Dimension, so it can be inferred that the deeds were important to him. And Mr Tiller's evidence was that Mr Nicoletti gave him the deed to sign. That is likely to be true because Mr Bryce's evidence was that he had not even spoken to Mr Tiller by the time of the 15 February Deeds (ts 329) and there are no written communications in evidence in which the deeds were given or explained to Mr Tiller. Someone must have done that, and the only person who is likely to have done so is Mr Nicoletti. I therefore do not accept Mr Nicoletti's apparent denial that he did (ts 294). I find that as at 5 April 2019 Mr Nicoletti knew of the existence of the deeds and at least enough of their contents to know that they falsified the Lawton Gillon letter.
So Mr Nicoletti instructed on the sending of the letter, he knew about the 15 February Deeds, and he had at least one conversation with Mr Caratti in late March about the control of the Farms, so he was in a position to disclose the deeds to him. That is sufficient to find that Mr Nicoletti engaged in the misleading or deceptive conduct.
As for Mr Bryce, plainly he knew about the 15 February Deeds. But he could not recall giving any instructions on Lawton Gillon's letter, and he did not recall whether it was he or Mr Tiller or Mr Nicoletti who did so. He accepted as correct the proposition that Dimension Agriculture could only really have instructed Lawton Gillon, and he was sure he saw the letter at around the time it was sent, but could not say whether that was before or after. He accepted that he saw the letter 'not that long after it was sent' but he did not know whether that was a '[c]ouple of days after it was sent' (ts 327).
He said he did not think much about the inconsistency between the letter and the 15 February Deeds. He did not deliver the 15 February Deeds to Lawton Gillon until discovery in the proceeding was underway. The tenor of his evidence was that at this time he left the management of Dimension to Mr Nicoletti. He took instructions from Mr Nicoletti, who was his client. He said he trusted Mr Nicoletti had 'sorted out' the contradiction between the letter and the deeds (ts 326‑329).
I accept Mr Bryce's evidence about these matters. It is consistent with his role, which was clearly that of a professional consultant and intermediary for Mr Nicoletti, and the fact that he was based in Queensland and therefore not close to events in Western Australia. I did not get the impression on viewing him in cross‑examination about these matters that he was trying to evade responsibility for the 5 April Letter. In my view he genuinely did not have a clear recollection of it. And given that Mr Nicoletti and Mr Tiller gave instructions on it to Lawton Gillon, where there is no indication that Mr Bryce had any prior contact with them, there is no reason to infer that Mr Bryce had a hand in those instructions.
It is also relevant that Mr Bryce did not have any dealings with Mr Caratti at the time of the 5 April 2019 letter or, as far as one can tell, any time afterwards. Any omission on Mr Bryce's part to disclose the 15 February Deeds to Harvard needs to be viewed in that context. That fact, along with Mr Bryce's lack of involvement in the letter, means that even if knowledge of relevant circumstances is not required to establish misleading or deceptive conduct by silence, Mr Bryce simply did not engage in conduct of that kind in the present case.
Issue (9): did the failure to disclose the 15 February Deeds cause loss or damage?
Mr Caratti did not believe what Lawton Gillon said in their letter of 5 April 2019, so I do not accept Harvard's plea that it relied on any misleading or deceptive conduct constituted by that letter. But the question of reliance is not a substitute for the essential question of causation (Campbell v Backoffice at [143]) and it is clear from the SOC that the operative causal link pleaded is that if Mr Caratti had known of the existence of the 15 February Deeds, he would have elected to terminate the New Leases for repudiation and would have re-entered the Farms and delivered vacant possession to the Fowlers in time for the commencement of the Fowler Lease. That is consistent with the principle that 'in a case where non-disclosure is misleading, or renders other statements misleading, the reliance/causation question is addressed by asking what the plaintiff would have done if it was aware of the undisclosed facts': Caffey v Leatt‑Hayter (No 3) [2013] WASC 348 at [337] (Beech J).
The first part of the pleaded causal link may be accepted. Mr Caratti's evidence was that he would have re-entered if he had known of the 15 February Deeds at any time after 5 April 2019, and he was not cross‑examined on that. To the contrary, counsel for the respondents accepted that if Mr Caratti had known of the deeds, he would have 'had a go' (ts 371).
But counsel went on to say, 'Whether he would have succeeded, we say no'. For the reasons I have given, I agree that any purported election to accept a fundamental breach of the New Leases would not have been effective, because there was no fundamental breach.
Even if I am wrong about that, it may be inferred from the circumstances and from the content of Lawton Gillon's letter of 5 April 2019 that if Harvard had sought to re‑enter, Dimension would have sought an injunction to prevent Harvard from giving vacant possession to a third party such as the Fowlers. The discussion of the question set out above shows that there was at least a serious question to be tried and the balance of convenience would decisively favour permitting Mr Tiller and Dimension to stay on the Farms. Forcing existing farming tenants to vacate - in the case of Mr Tiller tenants of long standing - would have been no small thing, and any loss Harvard suffered as a result of missing out on the rent differential would be adequately compensated by damages. So on any view, Harvard would not have obtained vacant possession in time for the Fowler Lease to commence. It has not established that the failure of the respondents to disclose the 15 February Deeds caused it to suffer the particular loss that it claims, namely the difference in rent for the first year of the Fowler Lease.
Issue (10): Remedies
Since I have found that Harvard has failed to establish that it has suffered loss or damage because of the misleading or deceptive conduct, it is not necessary for me to determine any question of the appropriate remedies. Nor would it be appropriate to do so on any entirely hypothetical basis: the numerous discretionary considerations that arise when determining the appropriate remedy under s 237 and s 243 should be based on actual findings of fact, rather than 'what ifs'.
I have, however, made findings on some questions would have been relevant to questions of remedy. That includes the state of knowledge and intentions of Mr Tiller, Dimension and Mr Nicoletti concerning the misleading or deceptive conduct that occurred. It also includes that fact that Mr Nicoletti or entities associated with him have spent a substantial amount of money on the Farms for the purposes of the 2019 farming season (see [328] above). But the evidence did not permit any findings about the precise amount of the money, the terms on which it was provided, or precisely by which entity. Nor was there any evidence as to whether Dimension, Mr Nicoletti or someone else earned a profit from the 2019 season as a result of some or all of that expenditure. Mr Nicoletti dealt with this very briefly in cross‑examination, saying that he would be barely break even on the grain harvest, would make some money from of shearing sheep and selling lambs, but the cattle were 'an unknown quantity until I sell them' (ts 306). Similarly, while there was very general evidence that capital improvements including fencing, catchment areas, dams and other water works had been made on the Farms in 2019, there was no evidence as to how much expenditure was attributable to them or what ongoing value they had.
Another matter to note in this regard is that the evidence of Mrs Tiller, which I have accepted as true, was to the effect that she told Mr Tiller on a number of occasions that he could keep the farm and she had no interest in it. That would be relevant because the effect of the orders that Harvard sought would not be to return to the status quo before the misleading or deceptive conduct, under which Mr and Mrs Tiller were the tenants of the Farms. Plainly the impact of that on Mrs Tiller's interests may need to be judged in a different light to the impact on Mr Tiller's interests, since she had no involvement at all in the misleading or deceptive conduct.
One more issue should be noted as it was raised at trial, although there was limited argument and hardly any evidence about it. The respondents submitted that if damages for the loss of the rent for the first year of the Fowler Lease were to be assessed, that should be done on the basis that it was a loss of opportunity. While a lease had been signed, it had not commenced, and the new tenants had not gone into possession. The respondents submitted that Harvard should have pleaded how the loss of opportunity was to be discounted to take account of the possibility that it might not have eventuated: see for example Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221 at [50]. Harvard did not, however, approach the case on this basis. Its loss was particularised, in effect, as 100% of the difference between a year's rent under the New Leases and the first year's rent under the Fowler Lease. In view of the findings I have made, it is not necessary to decide which of these approaches to the assessment of damages in this case is correct.
Conclusion
Harvard's claim will be dismissed as against all five respondents. I will make directions for the parties to provide submissions as to costs.
I certify that the preceding six hundred and seventy-eight (678) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jackson. Associate:
Dated: 11 May 2020
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