J and E Vella Pty Ltd v Hobson

[2023] NSWCA 234

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

J and E Vella Pty Ltd v Hobson [2023] NSWCA 234

Hearing dates:

7-8 August 2023

Date of orders:

5 October 2023

Decision date:

05 October 2023

Before:

Mitchelmore JA at [1];
Adamson JA at [19];
Stern JA at [153].

Decision:

(1)   The appeal is dismissed.

(2)   The appellants pay the respondents’ costs of the proceedings.

Catchwords:

EVIDENCE — appellate review of witness evidence — competing accounts of central factual issue — whether primary judge’s findings were most likely affected by impressions about the credibility and reliability of the witnesses — advantage of primary judge in seeing and hearing the witnesses give evidence — whether primary judge’s findings also informed by assessment of evidence as a whole including plausibility of the accounts of various witnesses having regard to documentary evidence — whether primary judge’s findings were glaringly improbable or contrary to compelling inferences

EQUITY — appeals — fiduciary duties — where parties were equal shareholders in freight company — where labour divided between shareholder companies — whether parties relationship gave rise to fiduciary duty — whether appellants placed trust and confidence in respondents not to act to their detriment — whether fiduciary duty breached

Legislation Cited:

Supreme Court Act 1970 (NSW), s 75A

Cases Cited:

Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWSC 199

Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654

ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; (2021) 388 ALR 128

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Hospital Products Ltd v United States SurgicalCorporation (1984) 156 CLR 41; [1984] HCA 64

In the matter of Beverage Freight Services Pty Ltd [2022] NSWSC 874

Lee v Lee (2019) 266 CLR 129; [2019] HCA 28

Monie v Commonwealth of Australia (2005) 63 NSWLR 729; [2005] NSWCA 25

Onassis v Vergottis [1968] 2 Lloyd’s Rep 403

Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49

Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29

Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9

Watson v Foxman (1995) 49 NSWLR 315

Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277

Category:

Principal judgment

Parties:

J and E Vella Pty Ltd (First Appellant)
Joseph Gregory John Vella (Second Appellant)
Brian Charles Hobson (First Respondent)
Hynadam Pty Ltd (Second Respondent)
Brett Soper (Third Respondent)
Mechita Pty Ltd (Fourth Respondent)
Beverage Freight Services Pty Ltd (Fifth Respondent)
Beverage Distribution Australia Pty Ltd (Sixth Respondent)
Hynadam Nominees Pty Ltd (Seventh Respondent)
McIntyre Holdings NSW Pty Ltd (Eight Respondent)

Representation:

Counsel:
Mr G Sirtes SC and Mr D Birch
(Appellants)

Mr M Ashurst SC and Ms M Castle
(Respondents)

Solicitors:
Yates Beaggi Lawyers (Appellants)

McEvoy Legal (Respondents)

File Number(s):

2022/219092

Publication restriction:

Nil.

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Corporations List

Citation:

[2022] NSWSC 874

Date of Decision:

01 July 2022

Before:

Williams J

File Number(s):

2015/157614

HEADNOTE

[This headnote is not to be read as part of the judgment]

J and E Vella Pty Ltd (JEV) and its owner and director, Joseph Vella (the appellants) worked with Hynadam Pty Ltd (Hynadam) and Mechita Pty Ltd (Mechita), and their respective directors Brian Hobson and Brett Soper, to provide freight services to Schweppes from August 2001 until August 2012 through a corporate entity, Beverage Freight Services Pty Ltd (BFS). JEV, Hynadam and Mechita were shareholders in BFS as were Alderton Transport Pty Ltd (Alderton) and Evermay Pty Ltd (Evermay). Alderton ceased to be a shareholder in BFS in October 2003. Evermay ceased to be involved in BFS operations from October 2010 but remained a shareholder of BFS. BFS was effectively a clearing house which, from October 2010, allocated freight services contracted by Schweppes to each of JEV, Hynadam and Mechita.

This arrangement ended after a meeting between the representatives of JEV, Hynadam and Mechita and two facilitators, Robert Fielding and Peter Versluis, on 28 August 2012 (the Ingleburn Meeting). Thereafter, the arrangement between Schweppes and BFS terminated but entities related to Hynadam and Mechita continued to provide freight services to Schweppes with a third freight company through a new corporate entity, Beverage Distribution Australia Pty Ltd (BDA). JEV was thus excluded from providing freight services to Schweppes from early September 2012.

The appellants claimed that Mr Hobson and Mr Soper acted in breach of fiduciary duties which they owed to the appellants in bringing about the termination of the arrangement between Schweppes and BFS and causing the new arrangement to be entered into between Schweppes and BDA which excluded JEV. It was alleged that a number of other entities, all respondents to the appeal, were knowingly concerned in those breaches.

The primary judge’s principal factual finding was that at the Ingleburn Meeting, Michael Vella (the son of Joseph Vella and a director of BFS) agreed with Mr Hobson and Mr Soper that each of JEV, Hynadam and Mechita would henceforth seek work directly from Schweppes and to wind down BFS. The primary judge accepted the evidence of each of the respondents’ witnesses as to this. The primary judge rejected the appellants’ contrary account that at the Ingleburn Meeting the parties had agreed to continue their arrangement to provide freight services to Schweppes but to do so through a new corporate entity, Beverage Logistics Services Pty Ltd (BLS). The primary judge’s rejection of the appellants’ account of the Ingleburn Meeting was informed by adverse findings as to Michael Vella’s credibility which were, in turn, based upon a rejection of Michael Vella’s evidence as to the significance of Evermay’s continuing shareholding in BFS as an issue or problem in August 2012. It followed that the primary judge found that neither Mr Hobson nor Mr Soper owed fiduciary duties to the appellants. The appellants contend that the primary judge erred in her Honour’s principal factual finding, that her Honour should have accepted Michael Vella’s account of the Ingleburn Meeting and upheld the claims for breach of fiduciary duty and that the other respondents were knowingly concerned in that breach.

The Court (Stern JA, Mitchelmore JA agreeing with separate reasons, Adamson JA in dissent) held, dismissing the appeal:

Per Stern JA (Mitchelmore JA agreeing)

1. The primary judge’s findings were most likely affected by impressions about the credibility and reliability of the witnesses formed as a result of seeing and hearing the witnesses give evidence, even though they were also informed by an assessment of the evidence as a whole, including the plausibility of the accounts of the various witnesses having regard to the documentary evidence. In these circumstances, it is necessary to establish that the primary judge’s findings were “glaringly improbable” or “contrary to compelling inferences”: [215]-[216].

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28, applied; Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277, considered.

1. The primary judge was correct to reject Michael Vella’s evidence as to the significance of Evermay’s continuing shareholding in BFS as an issue or problem, and as the reason for the business of BFS to be migrated to BLS, in August 2012. The objective evidence did not support Michael Vella’s account and there were numerous matters which undermined the credibility of his evidence as to this. The appellants’ contention that the primary judge’s finding, that Evermay’s shareholding was not the reason for the business to be migrated to BLS, was implausible, should be rejected: [219]-[231], [233]-[245].

2. The references to BLS (rather than BFS) in documents created prior to the Ingleburn Meeting do not bear the weight of supporting a conclusion that Mr Hobson and Mr Soper were determined to move the business to BLS irrespective of whether their disputes with the Vellas were resolved. The inability of Mr Hobson, Mr Soper or Mr Aikin to explain the references to BLS in these documents does not undermine the primary judge’s findings and does not go to a matter which would have been of great significance at the time. It is most readily explicable by a lack of ongoing recollection: [240]-[242] (Mitchelmore JA agreeing at [11]-[12]).

3. Having regard to the primary judge’s rejection of Michael Vella’s evidence as to the significance of Evermay’s shareholding as at August 2012, the primary judge was correct to reject Michael Vella’s account of the Ingleburn Meeting. In any event, Michael Vella’s account was implausible and was in some respects inconsistent. The primary judge was also correct to reject Joseph Vella’s account of the Ingleburn Meeting. None of the matters raised by the appellants in contending that it is implausible that the appellants would have peremptorily decided to terminate their relationship with the respondents give rise to any implausibility in or inconsistency with the primary judge’s findings. Rather, a number of matters support the plausibility of Michael Vella communicating at the Ingleburn Meeting that he wanted out of the arrangement: [248]-[253], [258], [264]-[271].

4. As to what occurred after the Ingleburn Meeting, the primary judge did not err in finding that Michael Vella’s evidence as to this was implausible in some respects and that Mr Aikin’s evidence should be accepted: [272]-[277].

5. There is no error in the primary judge’s conclusions as to the credibility or reliability of Mr Hobson, Mr Soper, Mr Fielding and Mr Aikin. The challenges to the primary judge’s key factual conclusions should be rejected. In these circumstances, the appellants’ grounds of appeal related to breach of fiduciary duty and of knowing assistance should also be dismissed: [262], [278]-[280].

Per Adamson JA (in dissent)

1. The primary judge’s findings on credit did not reflect her Honour’s advantage in seeing and hearing the witnesses; rather, the primary judge’s findings of credibility were based on the documents and objective probabilities rather than demeanour. As such, an appellate court is in as good a position as her Honour to draw inferences from proven facts and the evidence: [119]-[121].

Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9, applied.

1. The primary judge did not factor into her Honour’s assessment of Michael Vella’s evidence about the removal of Evermay being a significant issue the considerable contemporaneous documentary evidence to indicate that BLS was to be used as the future corporate vehicle. The only purpose of BLS was to act as a substitute for BLS without Evermay’s shareholding. The references to BLS carried with them, by necessary implication, references to Evermay. When viewed this way, Michael Vella’s understanding of the position that Evermay comprised an issue for the Ingleburn Meeting corresponded with and was corroborated by the contemporaneous documents: [124].

2. The primary judge was in error to have dismissed the glaringly improbable evidence given by Mr Hobson, Mr Soper and Mr Aikin that they could not explain the references to BLS in the documentation. This demonstrated their motive to give evidence which favoured the respondents: [127]-[128].

3. The primary judge was in error in finding Michael Vella not to be a witness of credit on the basis of the Evermay issue and proceeded to accept the evidence of Mr Hobson, Mr Soper and Mr Aikin without detailed analysis. In these circumstances, her Honour’s focus on Evermay did not adequately discharge the obligation of the tribunal of fact to assess the evidence as a whole: [129].

4. The parties’ relationship was one of mutual trust and confidence such as to give rise to a fiduciary duty owed by Mr Hobson and Mr Soper to JEV. JEV reposed trust and confidence in the respondents not to act to their detriment in the allocation of work or other matters concerning the Schweppes work. Because the respondents had greater access and dealt directly with Schweppes on behalf of BFS and JEV, they were in a position where they could affect the interests of JEV in a legal and practical sense and had a “special opportunity” to act to its detriment. JEV was also vulnerable to the respondents’ breach in a way characteristic of a fiduciary relationship: [137]-[145].

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 12; [1985] HCA 49; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64; Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654; Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102, discussed; Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWSC 199, distinguished.

JUDGMENT

1. MITCHELMORE JA: I have had the significant advantage of reading in draft the reasons of Adamson JA and of Stern JA, the detail of which enables me to state my reasons for agreeing with Stern JA briefly. The background to the formation of Beverage Freight Services Pty Ltd (BFS) and its shareholders and directors is addressed by Stern JA, and I will proceed on the basis of familiarity with her Honour’s reasons in that regard. Unless otherwise indicated, references to paragraph numbers below are to the reasons of the primary judge.

2. The principal issue on the appeal concerned the primary judge’s findings about what occurred at a meeting at Ingleburn RSL on 28 August 2012, which was attended by Michael Vella and Joseph Vella on behalf of J and E Vella Pty Ltd, Brian Hobson on behalf of Hynadam Pty Ltd, and Brett Soper on behalf of Mechita Pty Ltd. The meeting was also attended by Robert Fielding and Peter Versluis from Risk Connect Australia (Risk Connect), who were engaged by BFS in about July 2012 to facilitate discussions between Michael Vella, Mr Hobson and Mr Soper with a view to resolving disputes arising from the business and operations of BFS: at [18].

3. The evidence led on behalf of the appellants and the respondents about the Ingleburn meeting diverged as to its outcome. As the primary judge summarised their respective positions, according to Michael Vella and Joseph Vella (for the appellants) agreement was reached at the end of the meeting “to wind up BFS and transfer its business to a new company owned by the three active BFS shareholders”: at [272]. Their recollection differed from that of Mr Hobson, Mr Soper and Mr Fielding, whose evidence was that the agreement reached at the end of the meeting was limited to winding up BFS, after which the shareholders were to “go their separate ways with each of them free to seek work from Schweppes”: at [272]. Mr Versluis had no recollection of what occurred at the meeting independently of the minutes, and her Honour placed no weight on his evidence: at [276].

4. Given the passage of time between the Ingleburn meeting and the proceedings, the primary judge was mindful of the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319: at [26]. Her Honour acknowledged that primary emphasis was required to be given in the circumstances to the objective surrounding facts that were either undisputed or established by contemporaneous documents, and the inherent probabilities and improbabilities: at [27], citing inter alia Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[31]. At the same time, her Honour recognised that “witness testimony may still be of value and importance, including by providing evidence of the context in which relevant documents and events must be understood”: at [27]. In support of the latter proposition, her Honour cited ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; (2021) 388 ALR 128 (“ET-China.com”) at [25]-[29], in which Bell P (Bathurst CJ agreeing) stated at [28]-[29]:

“Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed, it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from the documents.

Context is critical for at least two reasons. Documents and events take their meaning from context. The context in which events occurred may not necessarily be apparent to a court many years later when hearing a case. …”

5. In the present case, the minutes of the Ingleburn meeting were prepared by Mr Fielding. The minutes are extracted in the reasons of Stern JA at [187] below. Both parties sought to rely on the terms of the minutes, which were prepared contemporaneously to the meeting, in support of their respective cases as to the outcome of the meeting. In those circumstances, other contemporaneous documents were important, but so also was the evidence of witnesses going to the context in which those documents were prepared and in which the meeting took place.

6. In ET-China.com at [181]-[188], Bell P also summarised the approach to appellate review in respect of credit findings. As his Honour there stated, in Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55], Bell, Gageler, Nettle and Edelman JJ provided an important clarification of what Gleeson CJ, Gummow and Kirby JJ had said in Fox v Percy at [25] regarding the task of appellate review. Their Honours in Lee stated that where factual findings “are likely to have been affected by the impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence”, appellate restraint is required with respect to those findings “unless they are ‘glaringly improbable’ or ‘contrary to compelling inferences’”. Like Stern JA (at [214]-[216]), I consider that the clarification provided in Lee v Lee as to the nature of factual findings that call for appellate restraint is apposite and applicable in the present case.

7. In accepting the evidence of Mr Hobson, Mr Soper and Mr Fielding (at [272]) about the outcome of the Ingleburn meeting, the primary judge observed that Mr Hobson and Mr Soper gave an account of what was said at the meeting that was in quite different terms, but the differences were not as to matters of substance: at [273]. Mr Fielding’s account of the meeting was “in different terms again”, but nonetheless corroborated the substance of the separate accounts given by Mr Hobson and Mr Soper: at [273]. Her Honour further observed that the evidence of Mr Hobson and Mr Soper in cross-examination, to the effect that they recalled what occurred at the end of the meeting because of the surprise that it caused them, was “inherently plausible in circumstances where Brian Hobson had suggested and arranged the meeting as a facilitated discussion to resolve their disputes and there is no evidence to suggest that he or Brett Soper intended or believed that the meeting would end their business relationship with JEV and the Vella family”: at [274].

8. Stern JA has catalogued the issues between the Vellas, on the one hand, and Mr Hobson and Mr Soper on the other, in the period before the Ingleburn meeting (see [166] to [179] below). The range of issues, the proposed solutions thereto, and the level of agreement and/or disagreement about those proposed solutions was apparent from the Discussion Paper that Mr Fielding prepared in advance of the Ingleburn meeting, an updated version of which he provided at the meeting. The adverse impact of those disputes on relationships between the Vellas, on the one hand, and Mr Hobson and Mr Soper, on the other, was readily apparent from the minutes that Mr Fielding took of his meeting with the Vellas, parts of which are extracted in Stern JA’s reasons at [185].

5. The Discussion Paper, as expressly stated at its conclusion, was “intended as a guide for discussion as a means of obtaining a framework that satisfies all parties and defines the mechanism which will allow the company to operate successfully in the future”. The primary judge accepted that the “framework” for resolving the disputes included incorporating a company with a shareholders’ agreement or rules governing each area of dispute, and then conducting the BFS activities through that new company rather than through BFS: at [136]. Her Honour’s reading of the references to a new company in the Discussion Paper was supported by the evidence of Michael Vella, Mr Hobson and Mr Fielding: at [136], [140].

6. The new company proposal was thus, in her Honour words, “inextricably linked” to the resolution of the substantive disputes between the parties: at [140]. That conclusion was supported by Mr Fielding, whose evidence was the subject of a substantial challenge that the primary judge summarised at [296] and rejected at [297]-[311]. One of the bases on which the appellants challenged Mr Fielding’s evidence was that he was not an independent witness, as he had a motive to support the respondents’ case having regard to the advice he gave in relation to setting up Beverage Distribution Australia Pty Ltd (BDA) and acting as BDA’s accountant. As the primary judge found, that Mr Fielding became the accountant for BDA (but not for Mr Hobson, Mr Soper or any other companies associated with them) was “hardly sufficient motive to confect his evidence”: at [308].

7. As the primary judge later observed, there was “no evidence of any purpose that would have been served by transferring the business of BFS to a new company without the parties having resolved the disputes that were the cause of anger and distrust (at least on the part of Michael Vella)”: at [158] (emphasis added). The purpose that Michael Vella advanced in this regard in his evidence was addressing the problem said to have been created by the cessation of involvement in BFS’ business of one of its shareholders, Evermay Pty Ltd (Evermay). Stern JA has dealt in detail with the primary judge’s rejection of Michael Vella’s evidence about the significance of Evermay as an issue, and with the appellants’ challenge to that rejection. As Stern JA states below (at [231], [238]), the absence of any reference to Evermay in the contemporaneous documentary evidence, and the inconsistencies in Michael Vella’s own evidence, irrevocably damaged a key plank in the appellants’ case theory, that the outcome of the Ingleburn meeting was explicable by reference to this purpose and that it was a matter of overarching importance at the time.

8. I also agree with Stern JA (at [238]) that, by contrast, the evidence of Mr Hobson, Mr Soper and Mr Aikin about the references in contemporaneous documents to Beverage Logistics Services Pty Ltd (BLS) did not go to a matter that would be inferred to be of great significance to them at the time. In summarising the appellants’ submission that Mr Hobson should not be accepted as credible witness, her Honour noted that the appellants sought to characterise the manner in which he gave his evidence as “cagey”, in the sense that “any assent to a question was given hesitantly and with a rising inflection which suggested that he was seeking to anticipate where the question was leading”: at [294]. That characterisation did not accord with her Honour’s observation of Mr Hobson during cross-examination. As her Honour described it, “[h]e answered questions in a slow and careful manner that indicated to me that he was doing his best to accurately recall the matters he was being asked about, nine years after the relevant events”: at [294]. Specifically in relation to the questions he was asked about BLS and Beverage Logistics Pty Ltd (BLPL), her Honour stated (at [294]):

“To the extent that there was a rising inflection in his answers, this did not indicate to me that he was seeking to anticipate where the question was leading but rather that he was puzzled by the question because it appeared to be peripheral to the issues in dispute. That was a reasonable reaction in my view, particularly in relation to questions concerning BLS and BLPL. Brian Hobson nevertheless answered the questions asked of him, without becoming argumentative or endeavouring to evade questions by simply proffering information of his choosing.”

13. As to the evidence of Mr Aikin, in circumstances where her Honour accepted that it was likely that the existence of BLS had been disclosed to Schweppes (and thus to Mr Aikin) before August 2012 (at [231]), and having regard to the passage of time, his evidence that he had inadvertently used BLS instead of BFS in the document entitled “Beverage Logistics Services – Chain of Responsibility Infringement” (the COR Notice) was plausible. The appellants’ contrary submission, that Mr Aikin was engaged, in giving evidence, in a “steadfast refusal to come clean” about referring to BLS in the COR Notice and was prepared to be dishonest under oath because he was in the respondents’ camp, was fairly described by the primary judge as having no rational basis: at [329]. Mr Aikin was a former employee of Schweppes who had both left Schweppes and retired some years before giving evidence. It does not follow from the existence of a long-term working relationship between Mr Hobson and Mr Aikin, who were engaged by separate and independent entities the contract between which required coordination, that Mr Aikin’s evidence could not be accepted as credible or reliable. Further, as her Honour observed at [328], it was not put to Mr Aikin in cross-examination that he had a reason to embellish or tailor his evidence to suit the respondents.

14. Contrary to the appellants’ submission, Mr Aikin’s evidence about his phone conversation with Michael Vella in or about September 2012, in which Michael Vella sought Schweppes work, was not inconsistent with Michael Vella’s evidence that JEV could not perform all of the Schweppes work on its own. As the primary judge found, inconsistency only arose if one understood Mr Aikin’s evidence of the conversation as involving Michael Vella pitching for all of the Schweppes work previously done by BFS: at [336]. Her Honour was correct to accept the respondents’ submission that it should not be so understood.

15. Mr Aikin’s account of this phone conversation with Michael Vella was also not inconsistent with Michael Vella’s emails to Mr Hobson and Mr Soper of 30 August 2012 and 4 September 2012. As her Honour clarified, the agreement that she found had been reached at the end of the Ingleburn meeting was “not that JEV would ‘throw away’ its Schweppes delivery work or ‘walk away’ from that work, as the plaintiffs’ submissions suggested from time to time” (emphasis in original). Rather, it was “that BFS would be wound down and each of JEV, Hynadam and Mechita would be free to seek Schweppes work independently of BFS”: at [316]. So construed, that JEV continued to send trucks to BFS for Schweppes delivery work after the Ingleburn meeting was, as her Honour observed, consistent with that agreement: at [321]. Her Honour had earlier made the following finding in this regard, at [266]:

“[The parties] did not expressly agree on a timeframe for the winding up of BFS, but I infer from the nature of its operations that their was formed on the basis of a mutual expectation that some time would be required for BFS to collect payment from Schweppes for invoices that had already been issued but not yet paid and/or for work done but not yet invoiced, and for BFS to make corresponding payments to Hynadam, Mechita and JEV against their invoices to BFS. Indeed, that is consistent with the minutes of the Ingleburn meeting which refer to BFS ceasing to trade after creditors had been paid.”

16. Her Honour did consider the appellants’ submission that it was inherently implausible that JEV would have “thrown away” the steady source of work from BFS to work directly for Schweppes, particularly against the background of Schweppes having recently suspended its trucks: at [313]. Her Honour’s reasons for rejecting the submission at [314] bear repeating:

“As the plaintiffs submitted, there is no evidence that that Michael, Elizabeth and Joseph Vella had discussed amongst themselves prior to the Ingleburn meeting that JEV would cease to do Schweppes work. However, as the defendants submitted, there is ample evidence that the Vella family members had discussed amongst themselves that they regarded Brian Hobson and Brett Soper as dishonest and greedy. Michael and Joseph Vella each gave evidence that, despite holding that belief, they wanted to stay in business with them. I do not accept that evidence in view of my assessment of Michael Vella and Joseph Vella’s willingness to tailor their evidence in order to support the plaintiffs’ claims and in the absence of any objective evidence of any financial or other imperative for JEV to continue doing Schweppes delivery work through BFS in circumstances where:

(1)   they had been unable to resolve the disputes concerning the work allocation practices that Michael and Joseph Vella believed were cheating JEV out of significant volumes of work and/or revenue;

(2)   they were still at loggerheads with Brian Hobson and Brett Soper about the Arndell Park lease that BFS was paying for and they believed was solely for the benefit of Hynadam and Mechita;

(3)   they believed that JEV’s reputation with Schweppes was being damaged by the manner in which Brian Hobson and Brett Soper had handled the speed limiter issue.”

(Footnotes omitted.)

17. By contrast, the account of the Ingleburn meeting on which the appellants relied involved Mr Hobson and Mr Soper agreeing with the Vellas to take the business forward by transferring it to BLS, only swiftly to form a new company, BDA, which required bringing in a third party, and obtaining the agreement of Schweppes to transfer the contractual arrangements to BDA, so as to cut the Vellas out. As the respondents submitted on the appeal, in circumstances where Mr Hobson had raised engaging Risk Connect to see if the shareholders could resolve their differences, if what had actually happened at the meeting was an agreement to transfer the business to BLS and continue working together it was implausible that Mr Hobson and Mr Soper would leave the meeting and instead start up a new business and a new company without the Vellas. In the context of cross-examination on the contents of the minutes of the meeting, Mr Hobson gave the following evidence in this regard, which in the circumstances, and having regard to his responsibilities for BFS’ operational logistics, was eminently credible:

“Q. The truth of this is you wanted the Vella’s out of the business?

A. I’m afraid not.

Q. Because you were sick of them, weren’t you?

A. No, I wasn’t.

Q. They had been agitating, so far as you were concerned, about unequal distribution of revenue for years, hadn’t they?

A. They had no – no concept of the fact that allocation is killed in one way, and if you look at the records, they were saying they were never – they were always losing money, but they seem to be always the biggest earners.

Q. You had already by the time of the meeting at the Ingleburn RSL lined up their replacement, hadn’t you?

A. No, I hadn’t. Definitely not.

Q. As soon as you walked out of that meeting, you did intend to wind down BFS and transfer across to a new company, but it was just a company that the Vella’s had nothing to do with. That’s correct, isn’t it?

A. After the meeting when they said they wanted out?

Q. Your plan going into that meeting was that you were going to shut down BFS and you were going to start up a different company that the Vella’s had no involvement in. Correct?

A. No, not correct. Them walking away was the biggest headache I’d had.”

(Emphasis added.)

18. I agree with the orders proposed by Stern JA.

19. ADAMSON JA: I have had the advantage of reading the reasons of Stern JA (and the concurring reasons of Mitchelmore JA) and gratefully adopt her Honour’s summary of the evidence and of the findings of Williams J (the primary judge). However, I disagree with the orders proposed by Stern JA and with her Honour’s endorsement of the primary judge’s assessment of credibility of the witnesses and ultimate findings. In these circumstances, it is necessary to undertake the task required pursuant to s 75A of the Supreme Court Act 1970 (NSW).

20. References to paragraph numbers in these reasons are, unless otherwise stated, references to the reasons of the primary judge: In the matter of Beverage Freight Services Pty Ltd [2022] NSWSC 874.

Introduction

21. Up until about the end of August 2012, Michael Vella (the son of Joe Vella, the second appellant, who was a director of J&E Vella Pty Ltd (J&E Vella) (the first appellant), Brian Hobson (the first respondent and a director and sole shareholder of Hynadam Pty Limited (Hynadam), the second respondent) and Brett Soper (the third respondent and a director and shareholder of Mechita Pty Ltd (Mechita), the fourth respondent) had, through their respective companies, delivered Schweppes soft drinks, pursuant to a contract between Schweppes and Beverage Freight Services Pty Ltd (BFS), a company of which their companies were shareholders and they were directors. The reason for this arrangement was historic and had its genesis in Schweppes’ stipulation that it deal with only one company, rather than each delivery company separately.

22. The appeal, as with the hearing before the primary judge, principally turned on a factual question: whether, as the respondents alleged (and the primary judge found) the appellants, at the meeting at the Ingleburn RSL on 28 August 2012 (the Ingleburn meeting) voluntarily terminated their association with the respondents and therefore gave up their right to deliver soft drinks manufactured by Schweppes in conjunction with the respondent (the Hobson hypothesis); or, whether, as the appellants alleged, they did not do so but were shut out of performance by the respondents who, without reference to the appellants, entered into a new contract with Schweppes, from which the appellants were excluded (the Vella hypothesis).

23. If this factual question is answered in the way for which the appellants contended, further questions arise as to whether they are entitled to the relief claimed. These matters only need to be addressed if the appellant is successful in overturning the principal factual finding.

24. The task of fact-finding which confronted the primary judge was affected by a number of factors which made contemporaneous conduct and documents particularly important. The crucial meeting at the Ingleburn RSL on 28 August 2012 (at which it was alleged that the appellants walked away from the association with the respondents) took place almost nine years before the hearing before the primary judge. Those present at the meeting were Michael Vella, Mr Soper, Mr Hobson, as well as Robert Fielding and Peter Versluis, who were acting as facilitators and moderators. At least the first three were financially interested in the outcome of the proceedings. Mr Fielding became associated with the entity which subsequently provided the services to Schweppes and Mr Versluis had almost no recollection of what had occurred. Another witness, Robert Aikin, was the relevant person at Schweppes through which all communications occurred. He was largely ignorant of the association between the three companies which provided the delivery services to Schweppes, as he dealt almost exclusively with Mr Hobson.

25. These circumstances, including the passage of time, make the following dicta particularly apposite to the present case.

26. Lord Pearce in Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 said, of credibility at 431:

“‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be ... Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.”

27. McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 said, of human memory of conversations, at 319:

“... human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

28. In Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, Gleeson CJ, Gummow and Kirby JJ said at [31]:

“Considerations such as these [the difficulty of discerning truthful evidence on the basis of demeanour] have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events.”

29. Although there are some references to demeanour in the primary judge’s reasons, her Honour said at [290] that she accepted “the evidence of Brian Hobson, Brett Soper and Robert Fielding after weighing it against all of the contrary evidence and the inherent probabilities and improbabilities in light of relevant objective facts.” On this basis, I consider that it is open to this Court to review the findings pursuant to s 75A of the Supreme Court Act in accordance with the principles in Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9.

30. Consistently with the approach endorsed in Fox v Percy, I propose to assess the primary judge’s findings by, first, identifying and analysing the “contemporary materials, objectively established facts and the apparent logic of events” (the objective evidence); secondly, testing the parties’ hypotheses against these matters; and, thirdly, testing the oral evidence given by witnesses against the objective material and by reference to the matters referred to by Lord Pearce in Onassis v Vergottis, such as “the balance of probability”, the contemporaneous documents and the witness’s “motive” as “one aspect of probability.”

31. This approach differs from that of the primary judge (which will be considered in more detail below). The primary judge’s assessment of credibility rested primarily on her Honour’s finding that Michael Vella’s evidence was neither credible nor reliable because of his evidence that the Ingleburn meeting concerned, at least in part, the removal of Evermay Pty Ltd (Evermay) as a shareholder of BFS because it was no longer part of the association and had ceased to perform work for Schweppes. The documents do not expressly refer to Evermay. The primary judge’s rejection of Mr Vella’s evidence in turn led her to accept the respondents’ witnesses evidence (apart from Mr Versluis, who was assessed as having no recollection of what occurred). On this basis, the primary judge found that the Hobson hypothesis had been established, the Vella hypothesis had been excluded and that the appellants had not made out their claim.

The objective evidence

32. The objective evidence is summarised below.

The circumstances prior to the incorporation of BFS

33. From at least the mid-1990’s until 2001, the Vellas, through J&E Vella; Mr Hobson, through Hynadam; and Mr Soper (through Mechita) each delivered the products of various beverage companies. For convenience all such companies will be referred to as Schweppes.

34. In about 2000, Schweppes stipulated that all of its freight services be provided by one company.

The Greystanes meeting in January 2001

35. In 2001, Mr Hobson, Mr Soper, Joe and Michael Vella met at Greystanes with other deliverers of Schweppes products, Stephen Phillips, who was the principal of Evermay, and Glen Alderton, who was the principal of Alderton Transport Pty Limited (Alderton) (the Greystanes meeting). Mr Hobson told those present at the meeting that Schweppes wanted to deal with only one company and that they should incorporate a company, which was incorporated as BFS, of which he would be managing director, for which his company, Hynadam, would charge the shareholders a management fee. The delivery work would be allocated equally between the participants who, through their companies (who would each hold shares in BFS), would render an invoice to BFS, which would render a total invoice to Schweppes. On payment by Schweppes, BFS would forward the balance of the outstanding amounts on invoices rendered by the participants, less a deduction for the management fee.

The incorporation and operation of BFS

36. BFS was incorporated on 21 August 2001. Its original shareholders and directors were as follows:

Shareholders	Directors
J&E Vella	Michael Vella
Hynadam	Mr Hobson
Mechita	Mr Soper
Evermay	Mr Phillips
Alderton	Mr Alderton

37. In September 2001, BFS started to perform delivery services for Schweppes and continued to do so until August 2012.

38. The consequence of the arrangement agreed to at the Greystanes meeting was that BFS did not make a profit but was, effectively, a clearing house or conduit for money paid by Schweppes for delivery of its products by any of BFS’s shareholders.

39. From August 2001, Mr Hobson performed the role of operations manager for BFS and, as such, negotiated contract terms and liaised with Schweppes on behalf of BFS and allocated the work between the shareholders of BFS. He worked from an office within the Schweppes facility at Prospect.

Shareholder grievances

40. From time to time, there were issues between the shareholders of BFS as to the allocation of work. For example, the minutes of meetings of BFS recorded that on 21 August 2002 and 28 July 2004 the Vellas raised concerns that their vehicles were not being allocated the same amount of work as was being allocated to other shareholders.

The departure of Glen Alderton

41. By about 2002, Mr Alderton was no longer involved in the operations of BFS. BFS wrote to Mr Alderton on 29 August 2002 requesting his attendance at a special meeting to resolve his future position within BFS. Ultimately, on 23 October 2003, Mr Alderton resigned as a director of BFS and relinquished his shareholding in BFS. Thus, the shareholders and directors of BFS were, as at that date, the following:

Shareholders	Directors
J&E Vella	Joe Vella
Hynadam	Mr Hobson
Mechita	Mr Soper
Evermay	Mr Phillips

The appointment of Robert Aikin

42. In about August 2005, Robert Aikin was appointed as the National Transport Manager for Schweppes. He was based in Melbourne and spoke with Mr Hobson between 5 and 15 times a day. He visited the Prospect office every couple of months. Mr Aikin had no direct contact with the Vellas, who depended on Mr Hobson and Mr Soper to inform them of what Schweppes required.

The incorporation of Beverage Logistics Pty Ltd

43. On 21 October 2004 Beverage Logistics Pty Ltd (BLPL) was incorporated. Its directors and shareholders were Mr Hobson, Mr Sobara and Mr Soper. BLPL did not operate and was deregistered on 12 March 2010.

The departure of Stephen Phillips

44. In October 2010, Stephen Phillips submitted his resignation as a director of BFS and ceased to be its company secretary (a role which was then filled by Michael Vella). However, Evermay no longer performed deliveries for Schweppes and was, accordingly, paid no money by BFS. Neither at that time, nor at any later time, did Mr Phillips’ company cause any inconvenience to BFS nor did it claim to be entitled to any revenue from BFS or Schweppes. Unlike, Mr Alderton’s company (see above), Evermay did not relinquish its shareholding in BFS.

The incorporation of Beverage Logistics Services Pty Ltd (BLS)

45. On 7 February 2011, a new company, Beverage Logistics Services Pty Ltd (BLS) was incorporated. The shareholders and directors of BLS were the following:

Shareholders	Directors
J&E Vella	Michael Vella
Hynadam	Mr Hobson
Mechita	Mr Soper

46. The incorporation was designed to reflect the circumstance that these three companies were, as at that date, the only companies providing delivery services to Schweppes through BFS, Evermay and Mr Phillips having ceased their involvement.

47. Despite its incorporation on 7 February 2011, BLS did not become party to the arrangement with Schweppes and nothing concrete was done at that stage to formalise its intended status as the entity through which Schweppes was to deal.

Issues between the parties

48. By about mid-2012, there were several issues which caused friction between Mr Hobson and Mr Soper on the one hand and the Vellas on the other. For example, on 1 June 2012, Mr Hobson and Mr Soper caused BFS to enter into a three-year lease of property at Arndell Park (the lease) at an annual rent of $77,160, with an option to renew for a further term of three years. The Vellas did not approve of the lease. In addition, the Vellas again alleged (as they had done in 2002 and 2004) that the work was being unequally allocated.

49. At about that time, Mr Hobson and Mr Soper engaged Risk Connect Australia to mediate the issues in dispute between the active shareholders of BFS. Mr Fielding and Mr Versluis were the persons appointed by Risk Connect to carry out this task.

50. To that end, Mr Hobson and Mr Soper met with Mr Fielding and Mr Versluis on 24 July 2012. On 9 August 2012, there was a “directors meeting” of BLS which was attended by Mr Hobson and Mr Soper. Mr Fielding was also present. Although Michael Vella was a director of BLS, he was not made aware of the meeting.

51. At some stage after the meeting on 9 August 2012, Mr Fielding and Mr Versluis prepared a discussion paper listing the various issues between the parties, which included the lease, the allocation of work (which was accepted ought be equal between the 12 trucks of which 4 were owned by each shareholder of BLS) and the possible transition of the delivery business from BFS to BLS (which had been incorporated over a year earlier).

52. Further iterations of the discussion paper were prepared, which included at least one where the responses of the three shareholders were recorded. The document registered the three shareholders’ agreement with the following:

1.00	Background.	Comments.	Vella	Hobson	Soper
1.12	A company “Beverage Logistics Pty Limited” (BLPL) has been incorporated. The Directors are Michael Vella, (MV) Brett Soper (BS) and Brian Hobson (BH). The Secretary is MV. The Shareholders are MV, BS & BH equally.	New Operational Company	Agree	Agree	Agree
1.13	BLPL is proposed to conduct ongoing operations of the beverage logistic operations provided it can secure a new contract from Schweppes.	Refer 1.15	Obtain new contract from Schweppes	Agree	Agree	Agree
1.15	BLPL to enter into an agreement with Schweppes for future distribution. Approach should be made to Schweppes.	Refer 1.13	Obtain new contract from Schweppes	Agree	Agree	Agree

53. The only reasonable inference is that the reference to “BLPL” (which had been deregistered in 2010) was an error and that the document intended to refer to BLS, being the only entity of which only Michael Vella, Mr Hobson and Mr Soper were directors and of which their companies were the only shareholders (as referred to in 1.12 of the table).

Issues with alleged speeding of vehicles carrying Schweppes beverages

54. On 2 August 2012, Mr Aikin sent an email to Mr Soper and Mr Hobson and Mr Hobson’s son, Brett Hobson, to which was attached a Chain of Responsibility Incident Report (COR) and a spreadsheet (the COR letter). The COR letter said, relevantly:

“I refer to my email of 23rd August 2011 in which I requested all transport service providers to verify

1. All vehicles required to have the speed limiter devices fitted actually have the devices fitted.

2. The speed limiter devices are set to a maximum of 100 kilometres per hour.

3. The speed limiter devices are inspected during regular maintenance to ensure they have not been tampered with

During analysis of Beverage Logistics Services (BLS) KPI data for the period of April to June 2012, it was noted that particular vehicles of BLS are consistently exceeding the 100 kilometres per hour speed limit for heavy vehicles.

There were 584 instances of BLS vehicles exceeding 105 kilometres per hour which is the tolerance level Schweppes Australia has allowed for overrun instances on a downhill decline.

I have attached a spreadsheet which details the incidents

Conclusion

It is my belief that the vehicles detailed in the attached report:

• Either do not have speed limiters fitted or,

• If speed limiters have been fitted, they have been tampered with to allow the 100 kilometre an hour speed limit to be exceeded

• The drivers of these vehicles routinely exceeded the speed limit of 100kms per hour.”

[Emphasis added.]

55. The balance of the letter set out 13 listed vehicles which were immediately suspended from performing work for Schweppes, pending the provision of certification. Of the 13 vehicles listed in the COR letter, which had been immediately suspended, five belonged to Mechita; five belonged to Hynadam; and the remaining three belonged to J&E Vella.

56. The significance of this letter is twofold. First, it referred to BLS, which, as referred to above was not the contracting party with Schweppes (that party was BFS) but which had the same shareholders and directors as BFS minus Mr Phillips and Evermay. Thus, the inference arose that Schweppes had been told of BLS and that the members of the co-operative were contemplating using BLS as the vehicle through which the Schweppes work would be performed.

57. Secondly, the COR letter demonstrated that there was a lack of compliance across the co-operative’s fleet in that each of the active shareholders had non-compliant trucks.

58. On 16 August 2012, Mr Soper sent an email to Mr Aikin listing each of the 13 suspended vehicles, together with a further two vehicles which belonged to J&E Vella. In respect of each vehicle other than the J&E Vella vehicles, Mr Soper identified the date on which each vehicle’s speed limiter had been checked at the last service drive test and the (future) date on which each vehicle had been “[b]ooked into Detroit for limiter to be checked”. The dates for the latter event were dates between 20 August 2012 and 24 August 2012. No dates were provided for either category in respect of any of the J&E Vella vehicles, beside which there was a blank.

59. At 9.03am on 17 August 2012, Mr Aikin responded to Mr Soper and Mr Hobson by email in the following terms:

“Brett/Brian,

Effective immediately, until the JNE [J&E Vella] vehicles are booked in for speed limiter checks and certified as set at 100kmh, these vehicles are not to be used for Schweppes work.”

60. It was not until 2.38pm on 21 August 2012 that Mr Soper advised the Vellas of the information he had given to Schweppes (in his email to Mr Aikin of 16 August 2012 set out above) and of his email from Mr Aikin of 17 August 2012 that the five Vella vehicles were “not to be used for Schweppes work until each vehicle has been booked in for speed limiter checks and certified that those limiters are set to 100KPH.” Mr Soper also said:

“Michael [Vella] please arrange for J&E Vella Pty Limited to let me know when they will be booking in the above vehicles for speed limiter checks. Please also can you ask them to let me know whether they have other trucks which comply 100% with the Schweppes requirement which I may access to ensure we fulfil the Contract.

In the meantime it will be necessary for Beverage Freight Services to source compliant vehicles from other sub-contractors to ensure that Beverage complies with the Schweppes agreement. This will be required until certification has been received for each of the JNE [Vella] trucks referred to above.”

61. Twelve minutes later, at 2.50pm on 21 August 2012, Michael Vella sent the requisite information and certificates in respect of three of the trucks, which had been tested and certified on 20 August 2012.

62. At 2.55pm on 21 August 2012, Michael Vella wrote to Mr Soper in the following terms:

“You fucking know that Brian has organised to get all of mine through the system as well you cunt. I currently have 3 compliant and its only been 2 days. You also forgot to mention what trucks are bonneted day cabs with drop deck trailers you hypocrite.”

63. At 2.14pm on 22 August 2012, Michael Vella sent the requisite information in respect of one of the remaining vehicles to Mr Soper and, at 2.29pm, he sent the requisite information in respect of the last of the five vehicles to Mr Soper. Further testing data was provided at 4.04pm on 23 August 2012.

64. On 22 August 2012, Mr Fielding and Mr Versluis met with Michael and Joe Vella, who communicated their grievances about allocation of work, the lease and the shared liability for the administration fee if the work allocation was unequal. Mr Fielding made handwritten notes of the meeting.

The Ingleburn meeting on 28 August 2012

65. The Ingleburn meeting commenced at 2pm on 28 August 2012 and lasted for about two hours. After the Ingleburn meeting, Mr Fielding prepared the minutes, which read as follows:

“PURPOSE OF MEETING:

To discuss and resolve the current difficulties in the operations of the company.

GENERAL DISCUSSION:

Much discussion was held between the directors in respect of the past operations of the company. The directors then discussed at length how the future operations of the company could be conducted for the benefit of all parties. Consensus from each director was achieved in respect of allocation of work, use of Beverage Logistics Pty Limited, attempting to obtain a new contract from Cadbury Schweppes with Beverage Logistics, that shareholder and management agreements be drawn up to the satisfaction of each party, that regular meetings of the company be conducted and controlled by an independent additional director to be appointed.

However consensus was not reached in respect of income distributions to be equal after payment of work performed by each contractor, reimbursement of lost earnings to Vella, the warehouse at Arndell Park and the guarantees required on that property, the nature of cost of equipment operated by each director/shareholder did not promote equality, employment of staff in BFS, compliance of trucks operated by each director/shareholder, supply of trucks for the exclusive use of Beverage Logistics, the basis of proposed buy sell agreements that should be put in place and how the obtaining of future work should be conducted.

COMPANY TO WIND DOWN AND CEASE OPERATIONS:

By consensus of each director it was resolved that the operations of Beverage Freight Services be wound down and that all creditors were to be paid and thereafter the company was to cease trading.”

[Emphasis added.]

66. It was common ground that the minutes were inadequate to explain all that happened at the meeting. The cessation of BFS’s trading activities is consistent with the Vella hypothesis that BLS, which is referred to in the minutes, was to be used. There was no mention in the minutes of Michael Vella withdrawing J&E Vella’s trucks from the co-operative. I regard this as a telling omission. The weight to be given to the minutes is otherwise relatively low as they were prepared by Mr Fielding, it can be assumed at the behest of Mr Hobson and Mr Soper, and were never sent to Michael Vella for his confirmation of what occurred, although they were sent to Mr Hobson for his signature, which was provided.

The days following the Ingleburn meeting

67. On 29 August 2012, Coastal Beverage Logistics Pty Ltd (Coastal), of which Erron Jameson was the principal, was registered as a corporation.

68. On 30 August 2012, both Hynadam Nominees Pty Ltd (Hynadam Nominees) and Mechita Nominees Pty Ltd (Mechita Nominees) were incorporated, at the suggestion and with the assistance of Mr Fielding. Mr Hobson and his son, Brett Hobson, were the directors of Hynadam Nominees and Mr Hobson was its sole shareholder. Mr Soper was the sole director of Mechita Nominees and its shareholders were Mr Soper, his wife and Mr Sobara.

69. On 30 August 2012, Mr Fielding arranged for the incorporation of Beverage Distribution Australia Pty Limited (BDA). Its directors were Mr Soper, Brett Hobson and Mr Jameson and its shareholders were Hynadam Nominees, Mechita Nominees and Coastal.

70. On 30 August 2012 at 4.19pm, Michael Vella sent an email to Mr Hobson and Mr Soper in the following terms:

“Please let there be no mistake on the 28th 29th and now again on the 30th of August you were informed we had 4 FOUR of what we all consider to be Beverage trucks at your disposal fully compliant full units including drivers. On each occasion you informed us that there wasn't enough work for all of these vehicles.

WHY then today do you have 5 FIVE trucks working and Mechita has 4 but we only need 3 of ours.”

71. No response to this email was ever received.

72. On 31 August 2012, Mr Soper sent an email to Mr Aikin, which was copied to other Schweppes employees (but not to the Vellas), in the following terms:

“Dear Rob,

I hope that we do not inconvience schweppes in any way but BFS and BLS will be going through a

restructure to improve

the way it operates and in doing so we will be merging together with George Macdonald and sons to improve our

service to schweppes in interstate,country and warehousing.We are hoping that in the merge of these companies we

offer schweppes alot of good savings in transport costs for the (H20 TO GO) work and any·other new ventures

we will be included in.There will be a new company formed with this merge taking place which will called Beverage Distribution Australia PTY LIMITED which we would like to take affect as of the 3rd september 2012 if possible.

Than you

Brian Hobson”

[Formatting and spelling as in original.]

73. At 2.39pm on 4 September 2012, Michael Vella sent an email to Mr Soper and Mr Hobson as follows:

“Please note I Have not yet received any answers as to why you are using 4 and at times 5 trucks from each of you but only 3 of mine . As you know we are all equal shareholders.”

74. No response to this email was ever received.

75. On 5 September 2012, Mr Aikin forwarded Mr Hobson’s email of 31 August 2012 internally within Schweppes and said:

“As of 10^th September, 2012, Beverage Freight Services will have a change of name including an ownership change

The new operating name will be: Beverage Distribution Australia Pty Ltd …

Can we make the appropriate system changes to allow for invoicing and RCTI process to accept Beverage Distribution Australia Pty as a vendor from 10th September, 2012.”

76. On 10 September 2012, BDA started to provide freight services to Schweppes for which it was paid. There was no formal novation of Schweppes’ contract with BFS. J&E Vella’s trucks no longer performed Schweppes delivery work from this date.

Testing the parties’ hypotheses against the objective evidence

77. The objective evidence was that the combination of Hynadam, Mechita and J&E Vella had provided freight services to Schweppes since October 2010, when Evermay ceased taking part in the provision of such services. The departure of Evermay had led to the incorporation of BLS to regularise the shareholding of the company providing the services to Schweppes with the entities which were actually providing the services.

77. From time to time there were disagreements between the entities which provided services to Schweppes. In particular the Vellas, who had no direct contact with Schweppes, complained about the unequal distribution of work and about what BFS had done without consultation, such as entering into the lease, for whose debts (such as the rent) BFS was liable.

The emails about compliance with speed limiter checks in August 2012 before the Ingleburn meeting

79. The emails exchanged between Mr Soper and Michael Vella in August 2012 before the Ingleburn meeting were consistent with the Vella hypothesis that the Vellas wished to continue as equal partners with Hynadam and Mechita in providing freight services to Schweppes in that they showed:

1. Michael Vella’s concern that J&E Vella’s name was being besmirched by Mr Soper (by his not providing information within his knowledge about the Vella trucks having been booked in for testing at the same time as the Hynadam and Mechita trucks), which was expressed before the respondents contended that Michael Vella had indicated that he wanted to go his own way (which Mr Hobson said first arose at the Ingleburn meeting); and

2. the speed with which Michael Vella provided the certificates and other documentation to Mr Soper (for provision to Schweppes) to ensure that the suspension of the J&E Vella trucks would be lifted and they could continue to carry out the freight services on an equal basis with the other shareholders.

80. These emails were also consistent with the Vella hypothesis that, by about this time, Hynadam and Mechita were considering the option of shutting the Vellas out of the Schweppes work but continuing to provide the services themselves with another, more compliant and less demanding, party. Further, Mr Soper’s selective reporting to Schweppes of the testing of non-compliant trucks (which excluded J&E Vella’s trucks) and his delay in notifying Michael Vella of the situation tends to indicate that he had a motive to cast J&E Vella in a bad light with Schweppes.

Michael Vella’s emails of 30 August 2012 and 4 September to Mr Hobson and Mr Soper and their non-response

81. Michael Vella’s email of 30 August 2012 to Mr Hobson and Mr Soper indicates that he notified them that J&E Vella had four trucks available on 28 August 2012 (the day of the Ingleburn meeting), 29 August 2012 and 30 August 2012 but that he was notified that they did not need all of the trucks and that, on 30 August 2012, only three of the J&E Vella trucks were required.

82. These emails as well as the recipients’ non-response tend to establish the Vella hypothesis (and exclude the Hobson hypothesis) for the following reasons:

1. they demonstrate that whatever transpired in the Ingleburn meeting was not such as to change Michael Vella’s conduct, which was to provide his share of trucks (being 4 trucks) to be used for the Schweppes work, every day, and to complain about the distribution of work if he perceived that one of the others (Hynadam or Mechita) was providing more than its quota of four trucks a day;

2. it would be highly unlikely for Michael Vella to write emails in such terms and complain about the unequal distribution of work if, as the Hobson hypothesis would have it, he had concluded the Ingleburn meeting by informing them, in anger, that J&E Vella would leave the co-operative and go its own way as a result of the dispute as to distribution of work being irreconcilable or ongoing;

3. they show that Mr Hobson and Mr Soper needed to continue to use at least three J&E Vella trucks up to and including at least 4 September 2012 because, although BDA and Coastal had been incorporated, Schweppes had not yet effected the change (which is inconsistent with the Hobson hypothesis that the relationship with J&E Vella ended at the conclusion of the Ingleburn meeting); and

4. had the relationship between J&E Vella on the one hand and Hynadam and Mechita in fact finished at the conclusion of the Ingleburn meeting (because of Michael Vella’s desire to end it), Mr Soper and Mr Hobson could be expected to have responded to Michael Vella’s emails of 30 August 2012 and 4 September 2012 by confirming that he was the one who had left the quasi-partnership, that they were no longer “equal partners” and that, on that basis, his trucks could and would no longer be used. That Mr Soper and Mr Hobson remained silent is telling and strongly supported the Vella hypothesis.

83. The respondents submitted that, at the conclusion of the Ingleburn meeting, there was an agreement that BFS would be wound up in future and that, accordingly, there would not necessarily be an immediate cessation of operations. On this basis, they submitted that J&E Vella’s provision of trucks through to September 2012 was not inconsistent with the Hobson hypothesis. It is, however, difficult to reconcile this submission with the terms of Michael Vella’s email of 28 August 2012 and 4 September 2012, which was in similar terms (see below).

Mr Hobson’s email to Schweppes of 31 August 2012

84. The email sent by Mr Hobson to Schweppes on 31 August 2012 is telling. First, Schweppes acted on it, which demonstrated Mr Hobson’s power to act on behalf of the co-operative of Hynadam, Mechita and J&E Vella since he was the conduit from the co-operative to Schweppes, which did not have recourse to anyone else in the co-operative. Secondly it was untrue in several respects. The reference to “merger” was inaccurate since all that was to occur was that J&E Vella was to be replaced by Coastal as shareholder in the company which was to contract with Schweppes. There was a reference to George Macdonald & Sons, which was wrong as it was not a shareholder of BDA. The text of the email tends to show that Mr Hobson did not expect to be questioned by Schweppes as to what he had just done. Further, the email shows that he expected to be able to usher in BDA in substitution for BFS and BLS, which he had earlier mentioned to Mr Aikin, without any resistance or inquiry from Schweppes.

The oral evidence

85. I turn now to consider the oral evidence which was, in the main, unsatisfactory and demonstrated that record-keeping, beyond invoices and accounting documentation, was not a priority for the participants. It is not particularly fruitful to examine in any detail the oral evidence about the period before the Ingleburn meeting since it is the period immediately following that meeting which is most probative. The discussion below will, subject to some exceptions, focus on the days following the meeting.

The commercial issues between the parties

86. Mr Hobson accepted in cross-examination that “the Vellas had been complaining about unequal distributions for a long time”. However, Mr Hobson agreed that at no time prior to the Ingleburn meeting had either Joe or Michael Vella ever told him that they wanted to leave the business.

87. Mr Hobson’s evidence that the Vellas’ departure was first mentioned at the Ingleburn meeting was inconsistent with Mr Aikin’s evidence that some time prior to that meeting the Vellas had indicated that they did not want to remain in “that partnership”. The evidence of Mr Aikin was unreliable in that respect.

The references to BLS in documents which pre-dated the Ingleburn meeting

88. Mr Hobson, Mr Soper and Mr Aikin were each cross-examined about the references to BLS in various documents which pre-dated the Ingleburn meeting (including the COR letter from Schweppes). It is highly significant that none of these men was able to provide any explanation for these references and each provided glaringly improbable answers which suggested a degree of collusion and a consciousness that an admission that BLS was to be the vehicle was contrary to the respondents’ case.

89. Mr Hobson’s cross-examination about the reference in the COR letter from Schweppes serves as an example:

“Q. You'll see there in large letters about one-third down, page 2053, again there's a reference to Beverage Logistics Services?

A. Yes.

Q. You don’t say anywhere in your affidavit evidence that when you received this chain of responsibility infringement, you rang up or had any contact with Rob Aikin and say, ‘Mate, what's going on? Why are you referring to Beverage Logistic Services?’?

A. No I didn’t, as a matter of fact.

Q. Sitting in the witness box as you are now, do you have any recollection of thinking to yourself, well that's bizarre?

A. To be quite honest, it caught me off guard just then. I just always assumed it had Beverage Freight Services on it. Even to this very minute.

Q. You say that; you pick up this chain of responsibility infringement document that says, ‘Beverage Logistic Services’, but that's not what you read; you read you something quite different?

A. I read the detailed problem. I didn’t read the heading.

Q. You'll see if you come about halfway down the page, you'll see it says, ‘During analysis of Beverage Logistic Services (BLS KPI data)’. Do you see there that he had abbreviated Beverage Logistic Services BLS. Do you see that?

A. Yep.

Q. Are you able to offer her Honour any explanation as to how Mr Aikin became aware of the name Beverage Logistic Services?

A. We never used the name ever. The only thing I can think of is he's got it wrong. In the whole time of our business, it was related to as Beverage Freight Services.

Q. Let me understand this. When he's referred to BLS, he's got it wrong; and then when you've referred to BLS; you don’t know why. Is that what you say?

A. We only traded as Beverage Freight Services. Everything we done was Beverage Freight Services.

Q. I know that's what you say, but is this what follows from what you say that when he referred to BLS, he got it wrong, and when you referred to it, you just can't explain why.

A. I couldn't - I - I didn't even realise this was on this document and even until just now.”

[Emphasis added.]

90. Nonetheless, Mr Hobson accepted the possibility that he suggested to Mr Fielding that BLS could be used, as follows:

“Q. So it's possible that you could've said to him, well there's this other company [BLS] we could use?

A. At the time I could've said, look that company's sitting there, that's not doing nothing, you could use that possibly if that worked for everybody.”

[Emphasis added.]

91. Notwithstanding this concession, Mr Hobson could not explain why Mr Fielding referred to BLS, the shareholders of which would be Mr Hobson, Mr Soper and Mr Vella in the discussion paper which was prepared in advance of the Ingleburn meeting, as demonstrated by the following exchange:

“Q. I'm trying to ascertain from you; do you have any explanation then how it is that Mr Versluis and Mr Fielding created a document that made reference to a company [BLS] that had the three of you [Mr Soper, Mr Hobson and Mr Vella] as the directors and the three of you as shareholders?

A. No, I don’t.

Q. You think they just came up with that themselves?

A. I honestly don’t know.”

92. Mr Soper, too, made a partial concession about the purpose of BLS in the following passage:

“Q. Wasn’t it the case that the whole [impetus for] setting up a new company, and moving forward as a new company, was because Evermay continued to be a shareholder of BFS, but it was no longer actively contributing to the revenue of BFS?

A. Evermay was never brought up at the meeting.

Q. I'm not talking about the meeting. I'm talking about going back now to February of 2011. The reason why I should say Beverage Logistic Services Pty Limited was incorporated was to address the fact that Evermay was a shareholder of BFS, but wasn’t contributing anymore, and you wanted to set up an entity that only contained the active participants in the business?

A. That could've been one of the reasons.”

[Emphasis added.]

93. Mr Fielding admitted that he was unable to explain how the introduction of BLS was going to resolve any of the issues and suggested that the cross-examiner ask Mr Versluis.

94. Mr Aikin was cross-examined about the COR letter as follows:

“Q. What I want to suggest to you is that when you came to prepare this rather important document, you gave careful thought to who was the recipient of this infringement and you chose to type in Beverage Logistic Services.

A. I disagree with that. I can definitely say I did not give specific thought to it. I’ve inadvertently done it.

Q. What you ask her Honour to find is that it was just a mistake. Is that what you ask her Honour to find?

A. The - the wording of Beverage Logistic Services, yes, was an unfortunate error that I made.”

95. Mr Soper was unable to say anything about why or the circumstances in which BLS was incorporated.

96. An obvious inference to be drawn from the references to BLS was that, as the discussion paper extracted above indicated, the parties intended to continue with a new corporate entity (BLS) in which Evermay was not a shareholder and had informed Schweppes of this prospect to prepare it for a change in entity (this inference was strongly supported by the reference to BLS in Mr Hobson’s email of 31 August 2012).

97. The respondents emphasised the fact that neither Mr Phillips nor Evermay was causing any problem or inconvenience at that stage and submitted, in effect, that there was no need, in these circumstances, to regularise the legal position so as to make the shareholders and directors of the corporate vehicle correspond with the companies who owned the trucks and were actually doing the work. However, this point loses impact when one has regard to the fact that, as referred to above, the departure of Mr Alderton was addressed by his resignation as a director and his relinquishment of his shareholding. The departure of Mr Phillips needed to be addressed in a similar or analogous manner. That it was not a pressing issue did not mean that it was not an issue.

98. Although it was not expected that the use of BLS would resolve the ongoing disputes between Michael Vella on the one hand and Mr Soper and Mr Hobson (about the lease and the distribution of work), the use of BLS would at least result in the work being performed for Schweppes by a company whose shareholders corresponded with those performing the work and ensure that Mr Phillips would have no claim on an operating entity, once BFS was wound up and BLS put in place as the relevant entity.

99. The respondents’ witnesses’ refusal (subject to the important concessions by Mr Hobson and Mr Soper referred to above) to accept the obvious and compelling explanation for the references to BLS is telling and ought, in my view, to have caused the primary judge to question their honesty and appreciate their significant motive to discredit Michael Vella specifically and the Vella hypothesis generally.

The Ingleburn meeting

100. Michael Vella categorically denied the Hobson hypothesis in this cross-examination as follows:

“Q. The fact of the matter, Mr Vella, is that you got very angry at this meeting of 28 August 2012, didn't you?

A. Absolutely not.

Q. You thought these people had been dishonestly taking money from your company for years, didn't you?

A. I thought that, but there was no anger, we all shook hands. We all walked down the stairs together.

Q. I want to suggest to you that you shook hands only after you all agreed to wind up the company and go your separate ways?

A. No. Absolutely not.

…

Q. And you said [subsequently to a third party], ‘Well, we are not working with Brian and Brett as BFS anymore. I decided I wanted to do the work by ourselves, because Brian was too much trouble’.

A. That's ludicrous, mate. I couldn't do it.

Q. You did consider Mr Hobson was too much trouble, didn't you?

A. I could - I did not have the means, financial or mental, to do the job, mate. What you're saying is ludicrous. It's silly.

Q. And then you said, ‘But now it seems Schweppes won't work with us and is going to use Brian and Brett’?

A. I just told you no. That's not - there was no conversation in any way, shape, or form like that.”

101. Mr Soper was asked about the portion of the minutes of the Ingleburn meeting in which it was recorded, “Consensus from each director was achieved in respect of the allocation of work, use of [BLS] …” He said that it was “not correct” and, as far as he knew, “wrong”. There was no explanation for such a significant error. The primary judge did not consider that this affected Mr Soper’s credibility or reliability. Having reviewed the evidence, I take a different view.

102. The evidence of Michael Vella that J&E Vella could not have taken on the Schweppes contract itself was not seriously challenged. Although J&E Vella had a trucking business separate from the work it performed for Schweppes, it had no resources to perform the office/administrative work to meet Schweppes’ requirements (which was conducted by Mr Hobson and Mr Soper) and had only four trucks available to commit to the Schweppes work. His evidence, if accepted, had the result that he had no motive to walk away from the Schweppes work and every motive to continue performing it (because it returned over $1 million gross per annum to J&E Vella). Further, even though there were other parts of the Vellas’ business, the evidence does not explain why the Vellas would be willing to forego a third of their gross income, particularly in circumstances where Joe and Michael Vella had expressed similar grievances about work allocation for many years and yet remained in the business.

103. Although, in the events that have happened, J&E Vella found work for the four trucks which had previously been dedicated to the Schweppes work, the objective probabilities of Michael Vella giving up that work in the course of the Ingleburn meeting must be assessed at the time of the meeting and not with the benefit of hindsight.

The lack of response to Michael Vella’s emails of 30 August 2012 and 4 September 2012

104. Mr Hobson was entirely unable to explain why he did not respond to these emails, as is evident from the following exchange in his cross-examination:

“Q. You say again in 111 of your second affidavit, ‘It's likely that these emails were brought to my attention’.

A. It was. Yes.

Q. You say that by this date, it was your understanding that the Vella's had basically just thrown up their hands and said we're not continuing with any of this. Right?

A. That's correct.

Q. Didn't it strike you as slightly odd then that you'd be getting an email from him after that meeting where he says to you, ‘As you know, we are all equal shareholders’?

A. I did think it was odd.

Q. Did you not ring him up and say, Michael, what are you talking about? You know what happened at the meeting six days ago.

A. No, I didn't.

…

Q. After you received these emails, you didn’t make any attempts to contact or speak with Michael Vella at all about their contents.

A. No, sir. No.

…

Q. The reason you didn’t contact Vella about the contents of these emails that I’ve taken you to, 31 August and 4 September, is because by the date of 4 September, you had incorporated BDA. You had told Aikin that and Vella was no longer part of your existing business. Correct?

A. No.

Q. No as in he was no longer part of your existing business.

A. No, that’s not the reason.

Q. You tell me, what was the reason?

A. Reason is that I’d already pulled back from the business. I had - I wasn’t operations anymore.

Q. You said in your affidavit that the reason you didn’t contact him is because you’d just get into another argument with Michael.

A. Again, as well.

Q. What was to argue about? You say that as at that meeting, he voluntarily just put his hands up and said, ‘We're leaving’. What was to argue about?

A. That was why we had the meeting because there was too argument.

Q. But at that point, you say that you had come to an agreement that they would back out of the business. You all shook hands. You walked out. Correct?

A. That's correct.

Q. You thought, ‘Okay, well, that's that, nothing more to argue about. He’s leaving, we're getting on with things. What do you say was left to argue about at that point?

A. Anything.

Q. But what? Not anything, not the weather. What? What to do with this business do you say could there be any argument about on 4 September that would have prevented you from calling in after you received the email on 4 September?

230. Having regard to the way in which the appellants put their case before the primary judge, this contention should be rejected. In their written submissions below, the appellants contended that:

“the Court should further find that Brian Hobson and Brett Soper entered into [the Arndell Park] lease as the first step in a potential plan to exclude the Vellas from the Schweppes business…”.

243. That is not a contention that could aptly be described as “faint”. To describe a plan as a “potential” plan does not detract from the force of the submission advanced as to the motivation for Mr Hobson and Mr Soper entering into the Arndell Park lease. The inconsistency is even more clear from the appellants’ contention in their written submissions below that:

“The Court should find that the issue of speed limiters was a pretext generated to justify removing [JEV] and the Vellas from the BFS business…[This was] conduct carried out in furtherance or in contemplation of the diversion of business to a new corporate entity which excluded [JEV] and the Vellas”.

244. The appellants also submit that the primary judge erred in finding that the proposal to migrate the business of BFS to BLS was contingent upon the three shareholders resolving their disputes. In this regard, the primary judge’s finding was that it was apparent from consideration of the Discussion Paper as a whole that:

“a new company was not suggested as a solution in itself. It was raised as a possible way forward in conjunction with a shareholders’ agreement, policies or rules that would address the substance of the existing disputes.”

245. The appellants contend that this finding, which was critical to the primary judge’s conclusions as to the Ingleburn Meeting, was based upon an inadequate factual foundation. The appellants say that the primary judge should have found that the proposal to migrate the business of BFS to BLS was “preordained” since at least July 2012.

246. In my judgment the primary judge’s conclusion that a new company was raised as a way forward in the event that the shareholders resolved their substantive disputes was well supported by the Discussion Paper. This was predicated upon a range of measures being introduced into the structure of BLS, as the new corporate entity for the business, which were designed to effect modifications as to how the business should be operated. That could only be done if the disputes between the shareholders as to key elements of how the business was conducted, such as income distribution, employment of staff by the company, acquisition of trucks by the company and responsibility of the directors for guarantees, were resolved. The primary judge’s finding is also supported by Mr Fielding’s evidence that Mr Hobson was happy to go forward with the new company provided there was agreement reached as to the various matters in dispute, including equality of contributions, all directors being guarantors on the lease, and in relation to the ownership of the trucks.

The Ingleburn Meeting

247. The primary judge’s findings as to the role of Evermay in August 2012 informed her Honour’s subsequent rejection of Michael Vella’s evidence as to his conversation with Mr Hobson in early September 2012, his evidence as to him wanting to stay in business with Mr Hobson and Mr Soper notwithstanding that he regarded them as dishonest and greedy, his evidence as to what was agreed at the Ingleburn Meeting and his evidence as to what was said during his conversation with Mr Aikin on 10 September 2012. It also informed the primary judge’s finding that her Honour would not accept Michael Vella’s evidence “unless it is corroborated by a reliable and independent source or consistent with the inherent probabilities.”

248. The primary judge gave detailed reasons for rejecting Michael Vella’s evidence as to the agreement that he said had been reached at the Ingleburn Meeting. In particular, the primary judge found that his evidence as to the Ingleburn Meeting was “inextricably tied to the notion that it was necessary” to remove Evermay as a shareholder and to his evidence as to discussions about this in the lead up to the Ingleburn Meeting. Thus, for example, in his affidavit sworn on 3 February 2021 Michael Vella said that the discussion about any new structure of company at the Ingleburn Meeting in August 2012 was “only because of the exit of Stephen Phillips and his company.” The primary judge also found that it was inherently implausible that Mr Phillips and Evermay were discussed at the Ingleburn Meeting in circumstances where the BFS directors had ongoing and acrimonious disputes that they were trying to resolve. Mr Phillips and Evermay were not involved in those disputes and neither was causing any difficulty for the active BFS shareholders.

249. Her Honour was plainly correct in this analysis. If, as her Honour found, Michael Vella’s evidence as to the significance of the situation with Evermay was unreliable, that both removed a key plank upon which the appellants’ relied to explain their position as to what occurred at the Ingleburn Meeting and undermined the credibility of Michael Vella’s evidence in relation to what occurred at that meeting.

250. The primary judge also found that it was “highly implausible” that the BFS directors would agree to go to the trouble of transferring the business of BFS to a new company when they had not resolved significant disputes and Evermay was not causing any problems at the time. The primary judge found that this implausibility was demonstrated by Michael Vella’s evidence that there was no need to get in contact with Mr Soper or Mr Hobson about the new company following the Ingleburn Meeting because:

“At that point in time, we – business as usual, there was no reference to – there was no need for the new company, no.”

251. Further, the primary judge found that it was inherently unlikely that, as Michael Vella said in his affidavit dated 4 December 2015, Mr Versluis or Mr Fielding suggested at the Ingleburn Meeting that the business of BFS be moved to “a new company” and that Mr Hobson, Mr Soper and he were to be the “directors and shareholders of the new company”, in circumstances in which, having regard to the Discussion Paper, it was plain that Mr Versluis and Mr Fielding were well aware that there was an existing company, BLS, through which the business of BFS could potentially be run. The primary judge was correct that this was implausible. The suggestion that the directors agreed a new company was to be set up also sits uneasily with the appellants’ reliance upon a clear pre-existing plan of Mr Hobson and Mr Soper to migrate the business to BLS.

252. Michael Vella gave evidence in his affidavit sworn 23 February 2017 that:

“I recall that we all shook hands at the end of the meeting. I recall that a resolution was passed at the end of the meeting that BFS was going to be wound down and a new company set up (we discussed Beverage Logistics Pty Ltd at the meeting, but I believe the new company was ultimately called Beverage Distribution Australia Pty Ltd). I understood the reason for this change was so that Steve Phillip’s [sic] shareholding could be removed from BFS and we no long had to be pay him directors’ fees or dividends from the BFS/Schweppes business when he was not doing any work for it.

It was not entirely clear to me what else we decided at the meeting. I understood that Brian Hobson and Brett Soper were going to revert back to us with their proposal as to what they wanted to do with BFS. If they wanted to leave BFS, then I understood that J&E may have to buy out their shares.”

253. The primary judge found that there was a “troubling inconsistency” between the notion that the business of BFS would be transferred to a new company if, at that time, Mr Soper and Mr Hobson were contemplating selling out of the company in any event. That was a further matter casting doubt upon the reliability and credibility of Michael Vella. The primary judge was correct to identify this as an inconsistency. It is a further matter which casts doubt on the apparent clarity of Michael Vella’s evidence as to what was discussed. Michael Vella’s suggestion that the reason for moving the business to a new company was so they no longer had to pay Mr Phillips directors fees or dividends is also implausible given that, as set out above, Mr Phillips retired as a director in 2010 and there is no evidence that dividends were ever paid by BFS.

254. Having regard to the matters set out above, the primary judge was plainly correct to reject Michael Vella’s evidence as to what occurred at the Ingleburn Meeting.

255. The primary judge also rejected Joseph Vella’s evidence as to what occurred at the Ingleburn Meeting. This was in part because in his affidavit he stated that “one of the main agenda items” for the Ingleburn Meeting was “to discuss how to remove Steve Phillips as a director of BFS. We also needed to discuss what was needed to get his company removed as a shareholder.” For the reasons the primary judge gave as regards Michael Vella’s evidence, her Honour found this was implausible having regard to the objective facts. There is no error in that analysis.

256. The primary judge also found that Joseph Vella’s evidence in cross-examination, that there was a resolution to wind the company up and to enter a new company together, was directly inconsistent with his affidavit evidence that there was discussion at the Ingleburn Meeting of Mr Hobson or Mr Soper selling or pulling out from BFS and Michael saying that if that happened, he would probably buy them out. His affidavit continued:

“I recall the meeting ended soon after that conversation. We all shook hands. However, I believe the meeting finished without a firm agreement in place between Brett, Brian, Michael and I as to what was going to happen to BFS. I walked out of that meeting thinking that Michael and I were waiting for Brett and Brian to get back to us about what they wanted to do with BFS”.

257. Additionally, in oral evidence in chief Joseph Vella was asked if he could recall whether there was anything that was ultimately agreed upon between the parties at that meeting, to which he responded “I can’t remember.” Ultimately, as the primary judge found, this evidence undermines the credibility and reliability of Joseph Vella’s other evidence as to what occurred at the Ingleburn Meeting.

258. The primary judge also found that it became plain during Joseph Vella’s cross-examination that he had been “falsely claiming in cross-examination to have a recollection of the [Ingleburn Meeting] that he thought would assist the plaintiffs’ claims.” In this regard the primary judge was referencing the following passages in Joseph Vella’s cross-examination:

Q.   “You say there was a resolution, do you – to cause Mr Phillips to be removed from the company, then BFS would be wound up and a new company entered into without Mr Phillips?”

A.   “That’s right.” 

Q.   “And you say, that’s what was said at this meeting?”

A.   “That’s right.

…

Q.    “But do you say that somebody else said at this meeting, “Let’s wind up BFS and enter into a new company together”?”

A.   “Yeah, I’m getting confused here, sir. I’m getting confused.”

Q.   “You don’t actually remember what was said at this meeting at Ingleburn RSL at all, do you, Mr Vella? Honestly.”

A.   “I – I – I remember a lot of them, yeah.”

Q.   “Do you say that you remember somebody at the meeting at Ingleburn RSL saying, “Let’s wind up BFS and enter into a new company”?”

A.   “That would’ve been Mr Fielding.”

Q.   “Firstly, do you remember anybody saying it?”

A.   “No, I don’t remember.”

259. Reading the transcript, this passage of evidence appears equally consistent with Joseph Vella effectively admitting that he had given evidence that was not true and with him simply being confused. The evidence was that he was not someone who could read and write English. However, having regard to her Honour’s other reasons as set out above her Honour was correct to reject Joseph Vella’s account of the Ingleburn Meeting.

260. By contrast, the primary judge found that Mr Hobson, Mr Soper, Mr Fielding and Mr Aikin were all credible and reliable witnesses. Her Honour found that the evidence of Mr Hobson, Mr Soper and Mr Fielding that Mr Phillips was not discussed at the Ingleburn Meeting was inherently plausible having regard to the fact that there was no mention of Evermay or Mr Phillips in the Discussion Paper or in the “Minutes” of the Ingleburn Meeting, and because there was nothing to suggest that the Evermay shareholding was perceived to be a problem as at August 2012. Her Honour also found that, understood in the context of the genesis of and intention behind the proposal to transfer the business of BFS to BLS, the “Minutes” of the Ingleburn Meeting were consistent with the evidence of Mr Soper, Mr Hobson and Mr Fielding.

261. The primary judge rejected the appellants’ submission that Mr Fielding was not an independent witness. In this regard, the primary judge accepted the respondents’ submission that:

“Robert Fielding’s role as the accountant for BDA is hardly sufficient motive for him to confect his evidence.”

262. Her Honour rejected a suggestion of an undisclosed pre-existing relationship between Mr Fielding and Mr Hobson as something which did not rise above the level of speculation. Her Honour rejected any suggestion of collusion as between witnesses who were called by the respondents.

263. There is no error in her Honour’s conclusions as to the independence, credibility or reliability of these witnesses.

264. The appellants contend that it is inherently implausible that the Vellas would have peremptorily decided to terminate the relationship with Hynadam and Mechita at the Ingleburn Meeting. They contend that this was so for the following reasons:

1. They were aware that the Schweppes business model concerned the centralisation of services through a single entity and that Schweppes had no interest in doing work with a number of different parties.

2. The Vellas would not have thrown away revenue of over a million dollars to try to “go it alone” in those circumstances.

3. The Vellas had not previously indicated any intention to walk away from the business.

4. At the time it is apparent that Michael Vella thought his company’s reputation had been damaged by reason of the speed limiter issue.

5. The Vellas did not have the vehicles to service Schweppes work on their own.

6. Such a finding is inconsistent with the emails Michael Vella sent after the Ingleburn Meeting which suggest that he expected JEV to continue doing work for Schweppes.

265. Neither individually nor cumulatively do these matters give rise to any implausibility in the primary judge’s findings.

266. The notes from Mr Fielding’s discussion with Michael Vella support a conclusion that Michael Vella was, by August 2012, deeply frustrated by the conduct of Mr Hobson and Mr Soper. The notes suggest that Michael and Joseph Vella were by then close to, or at the point of, deciding to split from them, even if that meant that JEV would lose the Schweppes work, if the disputes could not be resolved to their satisfaction. Those notes include references to “Not worth grief”, “MV more important to concentrate on NSW Freight”, “problem is greed. both BH and BS”, “Not worth brain damage”, “Cut nose to spite face – JV not willing to put up with any more”, and there was also reference to either Michael or Joseph Vella going to a solicitor, references to “legal action” and to directors being “under investigation”. I accept the respondents’ submission that the notes of the meeting between Michael Vella and Mr Fielding do contain some indications that if the disputes were not resolved, JEV may well walk away from the relationship.

267. At around that time, or possibly shortly after, Michael Vella discovered that Mr Hobson and Mr Soper had given Mr Aikin information about their own trucks being booked in for speed limiter certification but had not sought to find out or inform Mr Aikin that the same was true for the JEV vehicles. That clearly, and understandably, made him angry. He communicated that in no uncertain terms less than a week before the Ingleburn Meeting. That is likely to have undermined his faith in a functional working relationship with Mr Hobson and Mr Soper moving forwards.

268. Moreover, as set out above, whilst clearly highly remunerative, the Schweppes work accounted for only approximately a third of the JEV revenue. Michael Vella gave evidence that the NSW Freightlines business was in fact more profitable for JEV than the Schweppes work. The significance of this is that the Schweppes work was not the only source of income for the business. It was not even the predominant source of income.

269. All of these matters support the plausibility of Michael Vella communicating at the end of the Ingleburn Meeting that he wanted out even if that meant that JEV was not able to continue with the Schweppes work and that it may well lose the income from Schweppes. It is plausible that he would have reacted in this way given the extent to which the disputes between the shareholders were not able to be resolved at that meeting.

270. Further, whilst it is clear that as at 2001 the shareholders in BFS understood that Schweppes wanted to deal only with one administrative entity for the freight work, and there is nothing to suggest that anyone had suggested that this had changed, it is not implausible that in August 2012 Michael Vella might have pitched for at least some of the Schweppes work and been hopeful of getting it. Mr Aikin’s evidence was consistent with the Vellas, whether through JEV or NSW Freightlines, seeking to take some of the Schweppes work. It might have been a long shot, but it is not inherently implausible. The issue that had arisen as to speed limiters does not undermine this conclusion. Michael Vella may well have felt that he could explain JEV’s position as to this to Mr Aikin, and that that issue had not irrevocably soured Mr Aikin’s opinion of JEV.

271. Moreover, whilst there was no evidence that the Vellas had the vehicles to service the Schweppes work on their own, and Michael Vella denied in his evidence that they could do so, that would not have precluded him pitching for some of the Schweppes work.

272. Michael Vella’s emails after the Ingleburn Meeting are not inconsistent with the primary judge’s findings as to the outcome of the Ingleburn Meeting. The agreement was that the BFS business would be wound down, not ceased immediately. Michael Vella may, in those circumstances, have expected that at least in the interim his trucks would continue to perform the Schweppes work. In that scenario, it would have been highly likely to have angered him to find that this was not the case. That would readily explain the terms of the emails that he sent after the Ingleburn Meeting.

Events after the Ingleburn Meeting

273. The primary judge found that aspects of Michael Vella’s evidence about what occurred after the Ingleburn Meeting were implausible. Her Honour found that Michael Vella’s account that he was surprised to find JEV trucks sitting idle in its Minto yard on 10 September 2012 was implausible if, as Michael Vella said, the previous week Mr Hobson had told him that Schweppes had not renewed the BFS contract and that BFS had “till the end of the week and we’re out of a job.” Further, Michael Vella’s evidence that he then rang Mr Hobson to ask him what was happening was inconsistent with his evidence of the conversation with Mr Hobson the previous week.

274. The primary judge also found that Michael Vella’s evidence that Mr Hobson had said to him, during the conversation on around 10 September 2012, that he did this “for my son” was implausible because there was no evidence that Mr Hobson or Hynadam were better off financially under the arrangements with BDA than they had been under the arrangements with BFS.

275. The appellants contend that the only plausible explanation for Michael Vella mentioning a letter of termination during his conversation with Mr Aikin on
     10 September 2012, as Mr Aikin accepted he may have done, is Mr Hobson having previously told Michael Vella that Schweppes had terminated BFS’ contract. Thus, they submit, the primary judge should have accepted Michael Vella’s account of what occurred after the Ingleburn Meeting. This they submit, in turn, undermines the respondents’ account of what occurred at the Ingleburn Meeting. The primary judge rejected this contention. Her Honour found that there were a number of possible reasons for Michael Vella mentioning a “letter of termination” to Mr Aikin, some of which would assist the appellants and some of which would not. Her Honour found that it would be speculation to seek to choose between those possibilities. Her Honour also rejected the contention that any mention of a letter of termination was inconsistent with Michael Vella telling Mr Aikin that “we have decided to go our separate ways with Brett and Brian and BFS.”

273. Her Honour did not err in the treatment of this evidence. It is of course correct that one possibility is that Michael Vella referred to a “letter of termination” because, as he claimed, Mr Hobson had told him that Schweppes had terminated their contract. Had the primary judge been persuaded by the evidence as a whole that that was the more likely explanation for this reference, then that would have assisted the appellants’ case. However, as is set out in considerable detail above, the evidence as a whole suggested that this was not the more likely possibility. Thus, in context, the evidence did not assist the appellants’ case.

274. The primary judge also rejected the appellants’ contention that Mr Aikin was not generally a credible witness. Her Honour accepted the evidence of Mr Aikin, preferring his account of the conversation with Michael Vella on 10 September 2012. The primary judge found that Mr Aikin was an independent witness who had no reason to embellish or tailor his evidence to suit the respondents. Her Honour found that the appellants’ submission to the contrary was scandalous and without any rational foundation. Her Honour found that:

“It is highly implausible that, some years after leaving Schweppes and retiring from the transport industry, Robert Aikin would be prepared to lie to the Court in an endeavour to assist the defendants’ case.”

278. In my judgment there is no error in her Honour’s acceptance of the evidence of Mr Aikin.

Conclusion as to the factual challenges

279. It follows from my analysis set out above that the challenges to the primary judge’s key factual conclusions should be rejected. As set out in detail above, the primary judge did not err in the conclusions her Honour reached. In these circumstances, the appellants plainly failed to show that her Honour’s conclusions were glaringly improbable, as was necessary for the reasons set out above.

Challenges to the primary judge’s findings as to the fiduciary duty claims

280. The appellants accepted that their challenges to the primary judge’s findings that no fiduciary duty was owed or breached, and the consequent rejection of the knowing assistance claims, were contingent upon them succeeding in their challenge to the primary judge’s conclusion as to what occurred at the Ingleburn Meeting.

281. In these circumstances, those grounds of appeal should also be dismissed.

Conclusion

282. Neither party made any submissions as to the costs of the appeal. In these circumstances, there is no reason why the appellants should not pay the respondents’ costs of the appeal.

283. For the reasons set out above, the orders that I propose are:

1. The appeal is dismissed.

2. The appellants pay the respondents’ costs of the proceedings.

Amendments

17 November 2023 - Amended [4] to correct spelling of McLelland.

Decision last updated: 17 November 2023