James Harry Allaway as Trustee for the James & Andy Allaway Superannuation Fund v Joel Daniel Steel as Trustee for the Steel Family Trust

[2014] WADC 83

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   JAMES HARRY ALLAWAY as Trustee for the JAMES & ANDY ALLAWAY SUPERANNUATION FUND -v- JOEL DANIEL STEEL as Trustee for the STEEL FAMILY TRUST [2014] WADC 83

CORAM:   DERRICK DCJ

HEARD:   1-2 & 9 MAY 2014

DELIVERED          :   16 JUNE 2014

FILE NO/S:   CIV 1160 of 2013

BETWEEN:   JAMES HARRY ALLAWAY as Trustee for the JAMES & ANDY ALLAWAY SUPERANNUATION FUND

First Plaintiff

HARRY ANDREW ALLAWAY as Trustee for the JAMES & ANDY ALLAWAY SUPERANNUATION FUND
Second Plaintiff

AND

JOEL DANIEL STEEL as Trustee for the STEEL FAMILY TRUST
First Defendant

JOEL DANIEL STEEL
Second Defendant

Catchwords:

Claim for debt due and owing under share sale agreement - Duress - Undue influence

Legislation:

Nil

Result:

Judgment for the plaintiffs

Representation:

Counsel:

First Plaintiff                :     In person

Second Plaintiff            :     In person

First Defendant             :     In person

Second Defendant         :     In person

Solicitors:

First Plaintiff                :     Not applicable

Second Plaintiff            :     Not applicable

First Defendant             :     Not applicable

Second Defendant         :     Not applicable

Case(s) referred to in judgment(s):

Barton v Armstrong [1976] AC 104

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40

Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2013] WASCA 36

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447

Johnson v Buttress (1936) 56 CLR 113

Kerridge v Simmonds [1906] HCA 66; (1906) 4 CLR 253

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353

Scolio Pty Ltd v Cote (1992) 6 WAR 475, 480

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366

Westpac Banking Corporation v Cockerill (1998) 152 ALR 267

1. DERRICK DCJ:  Brothers James Allaway (the first plaintiff) and Harry Allaway (the second plaintiff), each acting in their capacity as trustee of a superannuation fund, have brought an action against Mr Joel Steel (the defendant), in his capacity as trustee of a family trust, claiming payment of a sum of money allegedly owing under a share sale agreement.  The action is also brought against the defendant as guarantor under the terms of the share sale agreement.

2. The plaintiffs appeared in person at the trial, although the second plaintiff presented the case on behalf of himself and his brother.  The defendant also appeared in person at the trial.

Non-contentious background facts

1. In December 2011 the plaintiffs and the defendant agreed to go into business together.  The business was called Total Health & Performance (the business).  The business operated as a retailer of sports supplements.  The terms of the business 'partnership' were set out in a Shareholders Agreement dated 7 December 2011 (the Shareholders Agreement).

2. The business was owned by a company called Total Health & Performance Pty Ltd (THP).  The directors of THP were the first plaintiff and the defendant.  The issued capital of THP consisted of 1,000 ordinary fully paid shares.  The plaintiffs, as trustees of the James & Andy Allaway Superannuation Fund (the Allaway Fund), were the legal and beneficial owners of 490 of the shares in THP.  The defendant, as trustee of the Steel Family Trust (the Steel Trust), was the legal and beneficial owner of the remaining 510 shares in THP.

3. By around April 2012 the relationship between the plaintiffs and the defendant had deteriorated markedly.  The deterioration was due, in essence, to the plaintiffs' concerns about the way the business was being conducted by the defendant.  The plaintiffs' concerns were exacerbated by the defendant's failure to comply with their repeated requests for THP's financial statements and accounts.

4. By around May 2012 the relationship had deteriorated to such an extent that the plaintiffs no longer wanted to remain in business with the defendant.  It was against this background that on 24 May 2012 the plaintiffs, in their capacity as trustees of the Allaway Fund, and the defendant, in his capacity as trustee of the Steel Fund and as guarantor, executed as a deed a Share Sale Agreement (the Sale Agreement).  Under the terms of the Sale Agreement the defendant agreed to buy the plaintiffs' 490 shares in THP.

5. In the Sale Agreement the plaintiffs as trustees of the Allaway Fund were named as 'the seller' and the defendant as trustee of the Steel Trust was named as 'the buyer'.  The Sale Agreement also named the defendant in his own right as 'the guarantor'.

6. The recitals to the Sale Agreement were in the following terms:

   A.The Seller is the owner of 490 ordinary shares (the Sale Shares) in Total Health & Performance Pty Ltd ACN 150 416 872 (the Company).

   B.The Seller has agreed to sell and the Buyer has agreed to buy the Sale Shares upon the terms of this Agreement.

1. Clause 1.1 of the Sale Agreement provided:

   The Seller agrees to sell to the Buyer and the Buyer agrees to buy from the Seller the Sale Shares free of all encumbrances for an amount of ONE HUNDRED AND FIFTY THOUSAND DOLLARS ($150,000.00) (the Purchase Price).

2. Clause 2 of the Sale Agreement provided:

   2.1Completion of the sale and purchase of the Sale Shares shall take place on 1 June 2012 (the Completion Date).

   2.2On the Completion Date the Seller must deliver to the Buyer duly executed and completed transfers in favour of the Buyer of the Sale Shares free of all encumbrances in registrable form (except for the impression of duty) together with the relevant share certificate (if any) and do all other things necessary or desirable to transfer the Sale Shares in order to complete the transaction contemplated by this Agreement and to place the Buyer in effective control and ownership of the Sale Shares.

   2.3On the Completion Date the Buyer must pay to the Seller FORTY THOUSAND DOLLARS ($40,000.00) of the Purchase Price.

3. Clause 4 of the Sale Agreement provided:

   4.1The balance of the Purchase Price in the amount of ONE HUNDRED AND TEN THOUSAND DOLLARS ($110,000.00) (the Balance) shall be paid by the Buyer to the Seller together with Interest (the Interest) calculated on the Balance from the Completion Date at eight (8%) percent per annum in equal instalments of TWENTY NINE THOUSAND SEVEN HUNDRED DOLLARS ($29,700.00) (the Instalment) on 1 September 2012, 1 December 2012, 1 March 2013, 1 June 2013.

   4.2In the event that any Instalment is not paid on due date for payment then the Balance then outstanding together with interest shall be immediately payable by the Buyer to the Seller without any requirement for notice to the Buyer (the Default).

4. Clause 7 of the Sale Agreement provided:

   7.1In consideration of this Agreement the Guarantor unconditionally guarantees to the Seller the payment of the Purchase Price, interest and costs and the due and punctual performance by the Buyer of the terms covenants conditions and provisions on the part of the Buyer under this Agreement.

   7.2…

   7.3The Seller ender (sic) shall be at liberty to regard the Guarantor in all respects as principal debtor and shall not be obliged to take action first against the Buyer.

   7.4The Guarantor further acknowledges and declares that his obligation in terms of this guarantee shall not merge or be deemed to have merged in any judgment obtained by the Seller against the Buyer and the Guarantors (sic) shall remain liable to the Seller in terms of this guarantee notwithstanding that the Seller may in the meantime have obtained a judgment against the Buyer.

5. Finally, cl 8.5 of the Sale Agreement provided:

   This Agreement:

   (a)constitutes the entire agreement between the parties as to its subject matter; and

   (b)in relation to that subject matter, supersedes any prior understanding or agreement between the parties and any prior condition, warranty, indemnity or representation imposed, given or made by a party.

6. On 1 June 2012 the defendant failed to pay to the plaintiffs the sum of $40,000 as required by cl 2.3 of the Sale Agreement.

7. On 6 June 2012 the defendant paid to the plaintiffs as a 'first payment' for the 490 shares (the sale shares) $3,000.

8. Since 6 June 2012 the defendant has not paid any further money to the plaintiffs pursuant to the terms of the Sale Agreement.  The sale shares are still legally and beneficially owned by the plaintiffs.  The plaintiffs are ready and willing to comply with their obligations under cl 2.2 of the Sale Agreement on payment of the balance owing under the Sale Agreement for the sale shares.

The cases of the parties

1. The plaintiffs' claim is for the payment by the defendant in his capacity as the trustee of the Steel Trust and as guarantor, of the amount of $147,000, being the balance of the amount payable by the defendant to the plaintiffs under the terms of the Sale Agreement.  The plaintiffs' claim, although not expressly pleaded as such, is therefore for recovery of the sum of $147,000 as a debt due and owing under the Sale Agreement.  The plaintiffs also claim interest on the amount of $147,000 calculated in accordance with the terms of the Sale Agreement.

2. In the plaintiffs' amended statement of claim dated 18 December 2013 the plaintiffs also plead a claim for damages allegedly arising from the defendant's alleged breaches of various provisions of the Sale Agreement and the Shareholders Agreement.  However, the claim for damages was not pursued at trial and no evidence was adduced in support of the claim.

3. As it is apparent from my statement of the non-contentious facts, the defendant does not dispute that the Sale Agreement was duly executed as a deed.  Nor does the defendant dispute that under the terms of the Sale Agreement he is liable to pay the $147,000 claimed by the plaintiffs plus interest.  The defendant's defence to the claim is that he executed the Sale Agreement under duress or undue influence or both and that the Agreement is therefore voidable and not binding upon him.

The duress claim

Applicable legal principles

1. In the context of the present case, the elements of duress may be stated as follows:

   1.the plaintiffs applied pressure (physical, psychological or economic) to the defendant;

   2.the plaintiffs applied the pressure in order to compel the defendant to enter into the Sale Agreement;

   3.the pressure applied by the plaintiffs to the defendant was illegitimate; and

   4.the illegitimate pressure caused the defendant to enter into the Sale Agreement:  Barton v Armstrong [1976] AC 104, 118 - 119; Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366, 400; Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, 45 – 46; Scolio Pty Ltd v Cote (1992) 6 WAR 475, 480 – 481, 489-490; Westpac Banking Corporation v Cockerill (1998) 152 ALR 267, 278, 288; Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2013] WASCA 36 [24], [44], [159], [176]; JW Carter, Contract Law in Australia (6th ed, 2013), 495; Seddon NC, Ellinghaus MP and Bigwood RA, Cheshire and Fifootc's Law of Contract (10th Australian ed, 2012), 743.

2. In determining if one party has 'applied pressure' to another party, the words and conduct of the party are to be judged as a matter of substance and reality, and not mere form.  Accordingly, in considering whether pressure has been applied a threat may be veiled, even if there is no specific demand:  Electricity Generation Corporation v Woodside [180] ‑ [182].

3. If the applied pressure involves an actual or threatened unlawful act, it is prima facie illegitimate: Electricity Generation Corporation v Woodside [25], [44], [176].  Thus threats of violence or threats to commit an unlawful act will generally constitute illegitimate pressure.  However, even if the applied pressure is lawful, it may still be illegitimate if there is no reasonable or justifiable connection between the pressure being applied and the demand which that pressure supports: Universe Tankships v International Transport Workers Federation (401); Westpac v Cockerill (277, 289); Electricity Generation Corporation v Woodside [25], [44], cf [159], [176].

4. The illegitimate pressure does not have to be the sole cause for the defendant entering into the Sale Agreement.  It is sufficient if it is one of the causes: Barton v Armstrong (119); Crescendo Management v Westpac (46); Electricity Generation Corporation v Woodside [24], [44].

5. Once it is established that the party applied illegitimate pressure, the burden lies on the party who applied the illegitimate pressure to show that it did not operate as an operative cause of the party entering the agreement:  Barton v Armstrong (120); Crescendo Management v Westpac [46].

6. Binding agreements vitiated by duress are voidable, not void: Universe Tankships v International Transport Workers Federation (383, 400); Electricity Generation Corporation v Woodside [201].

7. I note that the decision in Electricity Generation Corporation v Woodside was overturned on appeal:  Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447. However, the decision on the appeal was not concerned with the principles relating to, or the elements of, duress.

Relevant evidence

1. Given that the parties were unrepresented there was, with respect to them, a considerable amount of evidence adduced at trial which was not directly relevant to the question whether the defendant executed the Sale Agreement under duress (or for that matter, under undue influence).  Further, the evidence which the parties did adduce in relation to the matters in issue between them was in some respects scant or incomplete.

2. The relevant evidence that was adduced consisted of email exchanges which took place between the main protagonists as well as some oral evidence given by some of the called witnesses.  It is necessary to set out the relevant evidence before turning to analyse the merits of the defendant's duress claim.

Email evidence

1. The relevant email exchanges occurred in April and May 2012.  I will, in quoting from the emails, refrain from correcting the typographical, grammatical and spelling errors contained in the emails.  That is, the quotations will reflect precisely the contents of the emails.

2. On 4 April 2012 at 9.15 am the plaintiffs' accountant, Mr Chris Venter, sent an email to the defendant and his assistant Ms Kristy Morton, copied to the plaintiffs, in the following terms:

   Dear Kristy/Joel,

   James has instructed me to obtain the management accounts from you today to be able to discharge his duties as director and trustee of the 49% shareholder of THP.  This is extremely serious as it appears from what you said last night that the company may be trading insolvent.

   Please advise.

   Regards

   Chris Venter CA; FCMA

   Arnold Associates

3. Later on 4 April 2012 at 11.13 am Mr Venter sent an email addressed to Ms Morton but copied to the plaintiffs and the defendant.  The email was in the following terms:

   Hi Kristy,

   Thanks for this.  The company is definitely in serious trouble, things are going pear shaped very quickly and my clients stand to lose a lot of money. 

   Joel the main reasons why James invested in THP was because of Alphabrain.  Could you please confirm that the agreement with Onit has been signed and send me a copy as we may be able to capitalise some of the costs.

   Kristy could you please supply details of:

   1.Aged creditors $55,098

   2.Stock list $78,290

   3.Please supply a breakdown of the accountants costs of $10,972 is this in relation to THP or is it in relation to Joel's previous business?

   4.What is the capital to be returned of $20k?

   5.It looks even worse if you would need to write off the investment in Amaril should that venture not succeed.

   6.$6,351 other international travel.

   7.The J Steel funds introduced should this not have been as share capital in terms of clause 2.1.1. as this would make the position slightly better.

   8.Also send me a copy of the lease agreement for both stores.

   9.In whose name was the vehicle purchased?

   10.For whom were the donations for $475?

   11.Breakdown of entertainment of $1800?

   12.The $3,265 hardware computers and servers should surely be capitalised?

   13.Why is the $3507 Sumo costs not capitalised as part of the investment/loan account?

   14.Give details of the legal costs of $1,819 should this not be sumo?

   IMPORTANT NOTE: Both directors need to be aware that knowingly trading whilst liabilities exceed assets could make them personally liable to creditors.

   Regards

   Chris.

4. On 5 April 2012 at 10.57 am Mr Venter sent to the defendant, copied to the plaintiffs, the following email:

   Joel,

   We are extremely concerned that you are not acting with the care and diligence required as director of THP.  This has serious implications especially as we believe that you have acted recklessly and with dishonesty and we wish to advise that if you do not supply the information for inspection by Tuesday 10 April 2012 we will proceed to lay charges with ASIC and with the police that will have serious implications on you personally and your future.

   My offer for a meeting at 9.00 am Tuesday still stands.

   Regards

   Chris Venter CA; FCMA

   Arnold Associates

5. On 30 April 2012 at 3.36 pm the second plaintiff, who is commonly referred to as 'Andy' being an abbreviated version of his middle name, sent an email to the defendant in the following terms:

   G'day Joel,

   I feel at this point I would like to step in and make my position clear as regards to future involvement with the THP Partnership.

   I will refer to a discussion I had face to face with you before making payment of the $10,000.00.  In that discussion you asked where I saw the partnership in the future - my reply was that,

   'Whilst things were a bit strained at the moment I saw no difficulty ahead once the detailed financials were supplied and in order.'

   You questioned that partnership and said that

   'Trust had been lost and therefore you couldn't see it working at all in the future'.

   I suggested that ..

   'We get past where we were at first and revise in 3 to 6 months when things had calmed down and all books were in order'.

   Up to that point I was in favour of continuing our association with yourself and THP, having partially reviewed the Financials, that you supplied as complete, my position has changed.

   That being the case James and I sought to end our involvement sooner than later and taking a lesser percent in THP whilst recovering some of the initial financial backing we supplied seemed on the surface to be a good idea and a way of moving forward, James did send a text to you requesting how you saw us being remunerated in the future without James or myself being involved.  No Reply from yourself.

   After lengthy discussion last night between James and myself we see no point in continuing the association with yourself and THP or Onnit Labs for that matter, and therefore we rescind the TEXT offer between James and yourself, especially given the %age agreement would require us to have access to and evaluate the Financials you would need to provide to verify the dollar value prescribed to the James & Andy Super Fund, in short I do not have faith in your abilities to provide us the definitive financials as shareholders we would require for that verification.  I sure you would agree another round of disagreement over the 'BOOKS' in the future would almost certainly occur and is not desirable.

   Both James and myself see a bright future in THP going forward without our involvement and do recognise that its current position is only temporary so the offer made to you by Chris, which is basically our money back, is a fair deal and solves any issues that would arise in the future from all parties if it was to continue under ALTERNATIVE 1 OR 2 (no agreement needs to be drawn up other than as Chris has stated).

   Look forward to your next reply.

   Kind regards,

   Andy Allaway

1. On 11 May 2012 at 10.51 am the defendant sent an email to the plaintiffs.  The email was as follows:

   Hi James and Andy,

   Please find attached an amended contract.  Please make sure you read it clearly as somethings have been reformatted and/or slightly altered.

   I have outlined the 2 major changes below.

   1.The Total Price has reduced to $141,500.00 – this included the $1,500 for the Armwrestling.  The reason it has been changed is because it was verbally agreed with James that THP would not be paying any interest on this loan.  James said on many occasions that the interest would be filtered back into THP and therfor NO INTEREST WOULD BE PAID.  The other reason is i cannot see how you could come out of this experience making any kind of Profit.

   2.The Terms of the contract payment needs to be extended for 2 years.  I am not going to be able to personally guarantee the original contract.  I will be happy to personally guarantee the 2 year contract.  The initial payment has also been reduced to $31,500 to ensure i can make the payment and personally guarantee it.

   I have signed the contract and hope we can get this finalised today as we all want.  We can sort out the originals on another day, the scanned copies are fine and legally binding.

   Regards,

   Joel Steel

   Managing Director

   THP Go Further

2. Attached to the defendant's email was a share sale agreement which the defendant had signed as the trustee for the Steel Trust and as guarantor.  The terms of the document reflected the statements made by the defendant in his covering email and were similar to, albeit by no means the same, as the terms of the Sale Agreement.    The defendant's signature on the document was witnessed by a Mr Paul Lincoln.  Mr Lincoln was an employee of the defendant. 

3. On 21 May 2012 at 1.09 pm Mr Lincoln sent an email to the defendant in the following terms:

   Hi Joel,

   I would like to make you aware of an incident that has just taken place at the Jolimont Hay Street shop, I was working in the back office and James Alloway stormed through the shop where we had customers and into the back office where he shoved some share sale papers into my hands and then said the following.

   'Where is that f**king c**k sucker Joel' 'tell him I want my f**king money now.'

   He then started saying that 'Amiral was just set up to take everyone's money and Tariq had a secret agenda where he and a number of Arabs had all the shares in sumo and they were going to f#ck everyone over and Joel would be left holding his d*ck and taking the fail when the company failed.

   Then I tried to clam him but he verbally attached me say 'your a f**king dog like the rest of them' and as far as he was concerned 'THP could burn to the ground with everyone inside.'

   As you can understand I am left quite shaken by the incident especially that last thing he said.

4. The reference to 'Tariq' in Mr Lincoln's above email was a reference to a Mr Tariq Ahmed who was a former business partner of the defendant.

5. On 21 May 2012 at 3.35 pm the first plaintiff sent an email to the defendant which was relevantly in the following terms:

   Joel

   I find it very hard to put words together to let u know what a low life u are … well I guess that is all I can say … without going on and on so I want.

   I'm glad my dealings with u where only small.  I did learn a very good lesson from u and that was never trust as I did with u and I only did as it was such a small amount of money…

   …

   U are a liar, a thief, a dishonest low life with no sense of honer.

   I do hope I never run into u or hear about u again as it's been very hard for me to let u run this like u have … I guess u can say thank u to Andy for how this has worked out for u so tomorrow I will pick the signed contract up from you and my lawyer's money $1,500 or so.

   Now sumo all u had to do was show me the books and give feed back to me instead of that u lied u fucking low life see now I am getting made at u.

   Over what u and that fat fuck u got me to sign me off as director not put Tariq back on u dog.

   I do hope he fucks u over as u have with me and he will.  Tariq is the only shear holder and u are the only director so when it goes under u will be the only fucker that is left in the shit.

   And we will all have a drink and say what goes around comes round low life.

   Did u con money out of calm or any other fucker … don't u ask yourself why doesn't Tariq put his money in or his dad well it doesn't matter does it as the way it is now if u get $10mil.

   In your acc Tariq will be off like a shot it's funny how u are the one doing all the dirty work and Tariq just sits back and lets u shit on ever one so at the need of this myself Andy and all my partners will only remember u.

   U are a bit of shit Joel.

   Kind regards

6. On 22 May 2012 at 9.42 am the defendant responded to the first plaintiff's email of the previous day by sending an email to the first plaintiff and the second plaintiff in the following terms:

   Hi James,

   Following your email below and your verbal attack on my staff yesterday I wish to conclude this matter ASAP.

   Unfortunately the papers appear to have been altered in regard to names and addresses. 

   Can you please correct these ASAP.

   Regards

   Joel Steel

7. Later on 22 May 2012 at 1.02 pm the first plaintiff sent an email to the defendant as follows:

   HI Joel,

   Is that better can plz sign the contract and put it in the post for me or get Paul to drop it off at my office

   Along with the $1,500 u owe for lawyer fees and by the way I did not abuse the strafe at thp if u had of been there then this would be does now

   Instead of hiding in the toilet u should of just signed the contract and given me my money

   I do think u are a thief, liar, con man and a low life

   And we are here as u don't know how to do the books or even look after money

   It is illegal for u not to sign the contract

   Let me know when its signed

   U still owe Chris $750 as well

   Kind regards

   James Allaway

8. On 23 May 2012 at 9.03 am the defendant responded to the first plaintiff's email of the previous day in the following terms:

   Hi James,

   The payment to your lawyer will be paid direct to your lawyer.

   The contract you dropped of was again not complete. 

   There are no dates at all on the contract and both you and your brothers signatures were not witnessed.

   In regards to you verbally abusing 'our' staff.  Yes you did do this and you also intimidated staff yesterday when you were in the Jolimont shop.

   Can you please post the completed form to THP as I think it's best you don't return to any of the THP premises.

   Regards

   Joel Steel

9. On 23 May 2012 at 5.01 pm the first plaintiff sent the following email to the defendant:

   I will be dropping of contracts.

   Soon

   Joel all you have done is show all concerned that you are hard to deal with like a baby if I was u I would of just printed docs and got someone to drop them to u

   But it just shows that u just want to keep this going on and on..

   And u owe me $40k very very soon don't you

   As for the lawyers bill if u don't pay that to me by Friday I will just give it to the debit collectors

   And I think they are plus 25%.

   Joel just give me what is mine and I don't have to have anything to do with u

   By the way as a director I can put in a time slip for the time I spend doing Thp work ie

   Checking to make shore staff are happy and to make shore the stocks in the shops are up to date.

   And to do the banking and make shore no one is stealing from us u don't want anyone stealing do U.

   Regards James director Thp

   Ps I will need the keys to the shops so we can do a stock take.

   …So if this is good for u Joel

   I will drop to contacts off

   Tonight and you can drop them back to my office by 12.00

   Put the $1,500,00 into

   This account

   306 …

   If you pay the lawyer then you will still owe me $1500.00

   I know you will try and do just to make me think u are smarter than me.

   And u are

10. The defendant responded to the first plaintiff's above email at 8.42 pm on 23 May 2012.  The defendant's email, so far as is relevant, was in the following terms:

    James

    You say that i am acting like a child but you are the only one abusing, swearing, threatening, sending multiple emails and texts per day all of which are meaningless.  None of your emails or texts ever make sense.  They are never spelt correctly and are very hard to decipher what you actually mean …

    It seems like you are fighting against yourself with this whole thing James.  I really don't get offended by anything you say or bother reading most of your abusive texts and as you know i certainly don't reply.  But for some reason you continue to argue and fight.  The only people who are affected by this are the THP staff and you.

    All i have ever wanted is to have the contract signed and for you to leave us all alone.  Though on two occasions you have brought a contract for me to sign which were not complete.  The first time you brought them you had spelt your own name wrong, it was missing signatures and my address was not correct.  The second time you brought the contract you were still missing signatures.  It makes me wonder if you were trying to stall this process?  I don't know where you get off telling me that i am the one holding this process up.  If you can remember back a couple of weeks ago i actually already signed a copy of your contract and emailed it to you, all you needed to do was print that email and sign it yourself with a witness.  Why didn't you just do this? 

    I don't know what you were thinking paying the Lawyer for something that someone else should be paying.  I will be paying the lawyer and i will be paying it into the lawyers account.  Its none of my business what monies change hands between you and your lawyer.

    In regards to you abusing, yelling, disrupting staff and customers and saying you want THP to burn to the ground with everyone inside.  This is not acceptable anymore and if it happens again the police will be called.  I do have many witness's to this so you can not deny any of this has happened. 

    The monies will be paid to your lawyer tomorrow and the contract will be signed and ready for you to pick up from me on Friday.  Please let me know what time you will be available on Friday as i have a fully booked day but i will make some time to meet with you.

    Regards

    Joel

11. On 23 May 2012 at 10.09 pm the first plaintiff sent an email to the defendant copied to the second plaintiff.  The email, so far as is relevant, was as follows:

    Yes Joel u are right about my spelling but the point is emailed contacts are not legal not in my book anyway

    I sent the other contracts like that just to see if u could work it out but u could not

    All u had to do was print the contracts yourself and sign them why did u not do that Joel

    As for going to the shop I will do that as much as I need to.

    Like I seed I paid my lawyer as u would just not pay him as u did not …

    Why can't u just give me the money u owe me..u have not given Pauls money back have u…and by the way he is a bigger back stabber then u are god what he is going to do to u if he does not get his $20K

    Like I seed I will give that debit to the debt collators if u don't pay me

    And u can call the police if you like then we can chat about the books with the fraud police and may be some other thing

    I have never threatened u or anyone in the shop or out of the shop Paul will say exactly what u tell him to say u have $50K of his money or should I say u drank and well we know what u did with that money  Paul has the pic.

    By the way Joel I can sware whenever I want to and I will.

    So when can I get a set of keys Joel so we can do a stoke take or do I just call the police as the last figure u gave us … there was $96,000 in stock just in that one shop.

    And I am happy u can spell but u are still a low life lier and a thief

    By the way I did not say I hope it burns down with ever one in it

    U should not hid in the toilet should u when someone comes to see u is that what u do when others come for money lol

    So u have 8 days left to pay the $40K into my acc and if u think I am going to let u off for one minute think again … I will call my money in with the bank.

    Joel I have had all sorts of ass holes try and wind me up over my education and there is a kind of person that does that and u are one of them low life

    So to end this now … Hey did your boss make u a shear holder yet????

    1.get the docs back to me asap signed.

    2.pay me the $1,500 to my acc for the lawyer.

    3.pay me all the money u owe me and now u seem to have lots.

12. On 31 May 2012 at 7.54 pm, which was of course after the Sale Agreement had been executed, the first plaintiff sent the following email to the defendant:

    Hi Joel I hope u are good

    And all is going good

    This is account # for u to put the first payment into

    306 …

    Thant u

    Regards James

13. On 1 June 2012 at 12.35 pm the defendant sent an email to the first plaintiff in the following terms:

    Hi James

    I wanted to catch up with you to explain my financial position.

    If you can find the time to meet soon that would be great.

    But in Short.  The funds i thought would be available today are not yet available.  You will be getting all of you money by the final deadline and you will be getting your bulk upfront payment ASAP though right now I cant pull it out of thin air as i am waiting for a few other things to fall into place.

    I hope you can understand my position and believe me when i tell you that you will get all your money and in no way am i trying to stall or piss you off.

    There's just nothing i can do right now and i appologise for this.  If you could please just bear with me for a while.

    Would still like to catch up if your free as i think we are now back on talking terms and I appreciate your advice.

    Regards

    Joel

14. At 1.49 pm on 1 June 2012 the first plaintiff responded to the defendant's earlier email as follows:

    Ok Joel I will not push u right now for the money ok

    Joel u need to pay something

    Regards James

15. At 1.59 pm on 1 June 2012 the defendant sent the following email to the first plaintiff:

    Thank you James! I will work out how much I can afford today and transfer it ASAP.

    Joel Steel

16. On 5 June 2012 at 10.58 am the defendant sent an email to the first plaintiff as follows:

    Hi James

    I will be transferring you some money today.  Once i do i will send you the transferred amount and proof of payment.

    Unfortunately our day has changed and we now have a couple of meeting which we cannot re schedule.  I will contact you in the next couple of days to set up a time to catch up.

    Regards,

    Joel

Oral evidence

James Allaway

1. In examination-in-chief the first plaintiff said the following.

2. In the first few months of his business relationship with the defendant he made numerous requests for books on transactions which THP had engaged in.  He made these requests every day.  The defendant did not provide him with any books that were legible.  Rather, the defendant responded to his requests by saying that he would get the books when the first defendant was 'good and ready to give them'.  He found this very frustrating.  He and the second plaintiff informed the defendant that if the defendant did not give them the books they would have to take legal action to get the books.

3. He and the second plaintiff arranged meetings with their accountants and with the defendant's accountant to sit down and go over getting the books.  They still did not receive anything that was legible from the defendant.  Then at the end of the day because the defendant would not provide any legible books, he said to the defendant, 'If you are not going to do the books then we need to part company.  We will draw up a share sale agreement.  You buy our 49%'.

4. The defendant was all for buying the plaintiffs' 49% in THP.  The agreement for the sale of the shares was therefore drawn up and sent to the defendant.  The defendant sent the agreement to his lawyer and then sent the agreement back to him.  He then sent the draft agreement back to the defendant.  Everything was signed and everything was 'okay'.  All correspondence with the defendant was 'okay' until the point where the defendant did not want to pay anything.  He and the second plaintiff let the defendant off for three months with only a $3,000 payment.  After that there were no payments at all and then the defendant started 'coming with duress'.

5. He has called the defendant every single name under the sun.  In his mind everything that he has said about the defendant is true.

6. Everything with the defendant was fine until three or four months when the defendant decided he was not going to pay any more money.

7. As he is with everyone, he was 'pretty forthright and pretty straight forward' with the defendant about producing the books and 'where it was going to end up'.  At no stage did he 'personally threaten' the defendant either by text or voicemail, although he called him a lot of names.

8. Prior to the signing of the Sale Agreement, the defendant never said anything to him about being scared.  The defendant never said that he did not want to sign the Sale Agreement.  The defendant never said to him that he was frightening the defendant.

9. With respect to the incident referred to by Paul Lincoln in his email sent to the defendant on 21 May 2012, the position is that on that day the defendant was supposed to meet him at the THP office to give him books for him to see.  He went to the office.  The defendant was not there.  The only person that was in the office was Paul Lincoln.  He 'voiced his opinion' to Mr Lincoln to say 'Get Joel to give me the books.  I don't give a fuck if the place burns down.  I need the books'.

10. He understood the email sent to him by the defendant at 8.42 am on 23 May 2012 to indicate that the defendant was pushing for the share sale agreement to be signed and sealed and delivered as soon as possible.  He understood from the email that the defendant wanted the contracts signed as soon as possible.

11. In cross-examination the first plaintiff said the following.

12. He has never said to Callum Osborne that he owned shot guns or firearms and that he uses his 'thugness' to persuade people to do certain things.  He does not own any guns.

13. He did tell the defendant that he was going to come to the defendant's house but he did not threaten the defendant.  He had been chasing the books for THP for two years.  He thought that telling the defendant that he would come to the defendant's house would help the situation so far as obtaining the books was concerned.  He had a duty of care to obtain the books for the 'tax man'.  The defendant was not giving him the books at work or seeing him at work or answering him in any shape or form.  He had to try everything he could to get the books.  He did say that he would come to the defendant's house but he did so for no other reason than to try and finalise whether THP had become insolvent and was trading insolvent.

14. As at 31 May 2012 he was on talking terms with the defendant.

15. Prior to the signing of the Sale Agreement there was no verbal abuse or text abuse or email attacks relating to the Sale Agreement.

16. He would 'put value' on the THP business in April/May 2012 even if there had been no contract between Onnit Labs and THP, provided the defendant was not running THP.

Paul Lincoln

1. In examination-in-chief Mr Paul Lincoln, who was called by the plaintiffs to give evidence, said the following.

2. He has known the defendant for 'a couple' of years.  They worked together in THP's premises in Jolimont.  He also worked for another company that the defendant was running.

3. He was present when the defendant signed the Sale Agreement.  At the time of signing the Sale Agreement the defendant seemed 'normal, excited about business coming up with something else and was running in and out of the office just being very busy'.  He would not say the defendant was 'acting strangely or under duress or stressed out or anything like that.'  The defendant seemed in quite a good mood.

4. The defendant did make a comment that someone was going to 'kick his butt' now that he has signed 'an agreement'.  The defendant said this in a 'joking format'.

5. In cross-examination Mr Lincoln said the following.

6. He 'believes' that when the defendant referred to someone going to 'kick his butt' the defendant made reference to Tariq Ahmed.

1. He would class the first plaintiff as a friend.  He classed the defendant as a friend at the time.

2. After the incident referred to in his email to the defendant dated 21 May 2012 the first plaintiff came to see him.  They had a conversation.  The first plaintiff 'explained … it was a misunderstanding at the time and I'd taken something the wrong way'.  He may have taken what the first plaintiff said 'the wrong way and it was a misunderstanding'.

3. After the incident the defendant came to see him and asked him to explain fully how he felt at the time.  He explained to the defendant that he was a 'bit shaken'.  The defendant therefore told him to 'just write it down' in an email.

4. In re-examination Mr Lincoln said that during the incident referred to in his email the first plaintiff had not said, 'I'm going to burn the place down and with everybody in it'.  He said that those words were not said by the first plaintiff 'in that manner'.

Second plaintiff

1. In his evidence-in-chief the second plaintiff said the following.

2. He and his brother signed the Sale Agreement at their business offices situated at 42 Lancaster Road, Wangara.  Elena Walker witnessed the signatures.  She was their administration officer.

3. He is not 100% sure but he believes that the defendant brought the documents to him and his brother for signature already signed by the defendant.  He believes that the defendant had Callum Osborne with him when he came to the offices to get the Sale Agreement signed.

4. He is not sure if the defendant was actually present when he signed the Sale Agreement.  He certainly recalls that Callum Osborne was there.  It was Callum Osborne who witnessed his signature.

5. In cross-examination the second plaintiff said the following.

6. He does not specifically recall attending a meeting on 3 April 2012 with the defendant, Tariq Ahmed, the first plaintiff and Chris Venter in his office to discuss the 'Amaral shares'.  However, he is not saying that it did not happen.

7. He does not recall saying to the defendant at any meeting that if the defendant did not do the right thing James (that is, the first plaintiff), would throw him out of the office window.

8. After the Sale Agreement was signed there were a couple of occasions when he texted the defendant and said either that he could meet the defendant somewhere to pick up some documents or he could send the first plaintiff to the defendant's house to pick up the documents.  He sent these texts simply as a means of arranging to pick up documents.  It was either that he would come and pick them up from the defendant or the first plaintiff would come around and get them from the defendant's place because he could not pick up the documents in the evening.

9. He did meet the defendant at the 'Subway' which was two minutes from the defendant's house.  He had several meetings with the defendant for the purpose of transferring papers 'at the Subway'.  He did say to the defendant prior to coming to one such meeting that there were options the defendant could choose, namely either he would pick the papers up during the day or the first plaintiff would come and pick them up from the defendant at a later date.

10. His understanding as at April/May 2012 was that THP's business was 'going fine'.  The only problem that he and his brother had with the business was that the defendant would not produce evidence on what the defendant had been spending their money on.  Even if there was no contract in place between Onnit Labs and THP he would still in April 2012 have placed worth on the value of THP.  As he understood the position in April 2012 he would have placed worth on the value of THP.

11. Despite the terms of the email received by him on 4 April 2012 from his accountant telling him that THP was in financial difficulty, he still believed in April/May 2012 that THP had value.

12. It is not true that from the time that he received the copy emails from Chris Venter to Kristy Morton on 4 April 2012 he took steps to relinquish himself from THP and pass his shares back to the defendant.  The position is that he remembers a meeting at the defendant's house during which the defendant said to him, 'You don't want this to continue anymore, I can't see our business arrangement proceeding'.  This was when the defendant was trying to convince him to put another $10,000 into THP.  The defendant said, 'I don't think we can continue like this, this is not a working arrangement'.  He responded to the defendant's statements by saying, 'How about we just keep going and see how this goes'.

13. When it came to giving evidence in what would ordinarily have been re-examination (had the second plaintiff not been appearing in person and for the first plaintiff also), the second plaintiff said the following.

14. The discussion which he had with the defendant at the defendant's house when the defendant was asking him for another $10,000 took place prior to the sending by Mr Venter of the emails on 4 April 2012.

15. He did receive the emails dated 4 April 2012 regarding the affairs of THP.  He understood the emails.  At this stage he and the first plaintiff had not discussed anything to do with pulling out of the business or not being involved with the business.

16. In his email to the defendant dated 30 April 2012 he is referring to the discussion he had with the defendant prior to 4 April 2012 and prior to making the $10,000 payment.  In that discussion the defendant asked him where he saw the partnership's future and his reply was that whilst things were a bit strained at the moment he saw no difficulty going ahead once the detailed financials were supplied and in order.  It was at this meeting that the defendant questioned the partnership and said that trust had been lost and that he could not see the business partnership working at all in the future.  In response he suggested to the defendant that they 'get past where they were' and then revise the position in three to six months when things had 'calmed down and all the books were in order'.

17. So prior to 30 April 2012 his involvement was that he and the first plaintiff would get past whatever difficulty that existed with the defendant once the defendant had produced all the books and 'they had been accounted'.  But as of 30 April 2012, once he and the first plaintiff got the 'full details' and given that the defendant had still not provided complete books, they decided that it was definitely time to part company with the defendant.  It was at this time that the share sale agreement conversation started, that is, after 30 April 2012.

Defendant

1. In his evidence-in-chief the defendant said the following.

2. The meeting at the plaintiffs' office at which he, the plaintiffs, Mr Venter and Tariq Ahmed were in attendance took place on 3 April 2012.  Tariq Ahmed was an 'old business partner'.  The purpose of the meeting was to discuss the financial position of THP.

3. As he was walking up the stairs for the meeting towards the plaintiffs' top office where they have quite a large window, the second plaintiff said to him that if he did not do what the first plaintiff wanted the first plaintiff would throw him out of the window.

4. After the meeting on 3 April 2012 he received the email sent by Chris Venter on 4 April 2012 at 9.15 am.  What is in the email is what was discussed during the meeting on the previous night.  It was from this point that the plaintiffs did everything in their power to get out of THP and to get their money back.

5. When he received the email from Chris Venter dated 5 April 2012 he perceived the reference by Mr Venter to the possible laying of charges with ASIC as an intimidating tactic.

6. After the meeting on 3 April 2012 the plaintiffs were extremely concerned about the possible loss of their investment.  This is why they did anything possible to get their investment back.

7. With respect to the incident that occurred on 21 May 2012, when Mr Lincoln contacted him to tell him about the incident he (that is, the defendant) felt extremely intimidated.  His thoughts were that if the first plaintiff 'says and does these things to Paul, imagine what he would do to me'.

8. It was the next day that he received the email from the first plaintiff dated 22 May 2012 sent at 1.02 pm in which the first plaintiff made the statement that it would be illegal for him not to sign the contract.  Given the 'threats' from Mr Venter about the police, the incident which had occurred the day before at THP's premises and the fact that the first plaintiff was now telling him that it was illegal for him not to sign the contract, he really felt 'back up against a wall with nowhere to go'.

9. On 24 May 2012 he arranged to meet the plaintiffs at a restaurant on the corner of Main Street called Café Amaretto.  He is not 100% sure if it was a mutual decision to meet there or if he was told by the plaintiffs to meet there.

10. He went to the restaurant with Callum Osborne.  He took Mr Osborne with him because he did not want to go by himself due to the fact that he did not feel safe.

11. When he and Mr Osborne arrived at the restaurant the second plaintiff was there by himself.  There was a heated argument, more from the second plaintiff's side.  No threats but just 'more name calling and general abuse, verbal'.

12. The second plaintiff signed the Sale Agreement at the restaurant.  Mr Osborne witnessed the second plaintiff's signature.

13. From the restaurant he and Mr Osborne went to the plaintiffs' office to meet the first plaintiff.  He made it clear to Mr Osborne that they were not going to go inside.  They actually parked out the front on the verge.  They did not go into the premises.  The second plaintiff came out.  The second plaintiff signed the Sale Agreement and then he and Mr Osborne then left.

14. He is not 100% sure if he signed the Sale Agreement at the restaurant or later at the plaintiffs' office at the time that the second plaintiff signed the agreement.

15. In cross-examination the defendant said the following.

16. When he sent the share sale agreement under cover of his email dated 11 May 2012 he was of the view that if the agreement had been signed by the plaintiffs it would have been a binding agreement although he and the plaintiffs would 'still … have been in this position right now'.

17. He took the first plaintiff's reference in his email dated 21 May 2012 to hoping that he never ran into him again as being a veiled threat.  He thought that the statement was a veiled threat.

18. When he said in his email to the first plaintiff sent at 8.42 pm on 23 May 2012 that he did not get 'offended' by anything the first plaintiff said, he was referring to when the first plaintiff called him a 'dog' and that 'kind of stuff'.

19. He does not accept that the paragraph in his email dated 23 May 2012 in which he refers to only having ever wanted to have the contracts signed and for the first plaintiff to leave him alone, indicates that he did not believe that there was any coercion so far as signing the Sale Agreement was concerned.

20. He did pay the $1,500 referred to in his email dated 23 May 2012 to the lawyer.  This payment was for the putting of the Sale Agreement together in conjunction with the plaintiffs' lawyers.

21. He made the statement in his email dated 23 May 2012 asking the first plaintiff to tell him what time the first plaintiff would be available to meet with him on Friday, 'more out of the fact that [he] wanted to control that situation and keep it at arm's length'.  The reason why he made this statement was to control  the situation to the best of his ability and to keep the first plaintiff at arm's length.  He never had any intention to meet with the first plaintiff.

22. When it came to giving evidence in what would ordinarily have been re-examination (had the defendant not been appearing in person), the defendant said the following.

23. After the signing of the Sale Agreement he basically acted as cheerful as possible in order to control the situation.  Given that he had signed the Sale Agreement he just wanted to keep the first plaintiff as happy as possible.  He had no intention of actually meeting with the first plaintiff.  His purpose in paying the $3,000 was to keep the first plaintiff happy.  At the time he did not know that he had a 'case for duress and undue influence' and that the Sale Agreement should not be in existence.  He was therefore doing what he could to keep the first plaintiff happy because he was concerned as to what might happen if he did not.

Analysis

1. Many of the assertions made and arguments advanced by the defendant in his closing address in support of his duress claim lacked any foundation in the evidence adduced at trial.  However, putting to one side the unsupported assertions and arguments, the defendant's case as advanced was, in essence, that he did not at any time want to enter into the Sale Agreement and that he only did so because he felt compelled to do so as a result of the following matters:

   1.The statement made by the second plaintiff prior to the meeting on 3 April 2012 that if he did not do what the first plaintiff wanted, the first plaintiff would throw him out the window.

   2.The statement made by Mr Venter in his email dated 5 April 2012 that if he did not supply information by 10 April 2012 'we' will proceed to lay charges with ASIC and with the police.

   3.The conduct of the first plaintiff during the first plaintiff's attendance at THP's shop in Jolimont on 21 May 2012.

   4.The first plaintiff's statement in his email dated 22 May 2012 sent at 1.02 pm that it was 'illegal' for the defendant not to sign the contract relating to the sale of the shares.

   5.The content and tenor of the various emails sent by the first plaintiff to him during the period 21 May 2012 to 23 May 2012.

2. The defendant contended, in effect, that the above matters, individually and collectively, compelled him to enter into the Sale Agreement against his will.

3. During his closing address the defendant spent a good deal of time arguing that the plaintiffs had a motive for wanting to sell their shares in THP, namely that the business was as at April and May 2012 on the verge of bankruptcy.  In support of his assertion that THP was on the verge of bankruptcy in April and May 2012, the defendant pointed to the emails sent by Mr Venter to Ms Morton on 4 April 2012 in which Mr Venter stated that THP 'may be trading insolvent' and that THP was in 'serious trouble'.

4. Mr Venter was not called by either party to give evidence about the financial position of THP in April and May 2012.  In the absence of evidence from Mr Venter in relation to this issue, the statements apparently made by him in his emails as to THP's financial position are not evidence of the company's financial position in or around April and May 2012.  The emails are evidence only of what Mr Venter told the parties about the financial position of THP.

5. Leaving aside the absence of admissible evidence as to the financial position of THP at the relevant time, the submission made by the defendant about the plaintiffs' motive tends, with respect, to miss the point.  I am in no doubt on the evidence to which I have referred that by no later than 30 April 2012 the plaintiffs were very eager to cease their association with the defendant and  to recover their investment in THP by selling their shares to the defendant.  However, the question which must be addressed, as is apparent from my above statement of the relevant legal principles, is whether the plaintiffs, in an attempt to achieve their objective, applied illegitimate pressure to the defendant in order to compel the defendant to enter the Sale Agreement which caused the defendant to enter into the Sale Agreement, or which was a cause of the defendant entering into the Sale Agreement.   In dealing with this question it is convenient to first consider whether each of the above identified matters relied upon by the defendant in support of his duress claim amounted to the application of illegitimate pressure aimed at compelling the defendant to enter the Sale Agreement.

The alleged illegitimate pressure

Second plaintiff's statement prior to 3 April 2012 meeting

1. As I have already indicated, the defendant gave evidence that immediately prior to the meeting on 3 April 2012 the second plaintiff said to him that if he did not do what the first plaintiff wanted the first plaintiff would throw him out of the office window.  When the second plaintiff was cross-examined briefly on this point he said, as I have already noted, that he did not recall attending a meeting on 3 April 2012 and that he did not recall making the relevant statement at any meeting.

2. On a number of occasions during his evidence the defendant gave evidence in what appeared to me to be a vague and uncertain manner.  However, this was not the case when it came to his evidence about the statement allegedly made by the second plaintiff in the moments immediately preceding a meeting on 3 April 2012.  The defendant gave this aspect of his evidence with a degree of conviction.  Moreover, the defendant's evidence as to the occurrence of the meeting was, as he pointed out, consistent with the terms of the first of Mr Venter's emails to Ms Morton on 4 April 2012.  It was also broadly consistent with the first plaintiff's evidence that he and the second plaintiff arranged meetings with their accountants and with the defendant's accountant to sit down and go over getting the books.

3. Generally speaking the second plaintiff gave his evidence in a confident, assertive and relatively convincing way.  However, in contrast to his generally confident and assertive demeanour, the second plaintiff's evidence in relation to the alleged making of the relevant statement to my mind lacked confidence and conviction.  Although the second plaintiff said that he could not recall the meeting, he also testified that he was not saying the meeting 'did not happen'.  Further, by saying that he did 'not recall' making the relevant statement to the defendant the second plaintiff stopped short of giving an absolute denial to the allegation that he did make the statement in circumstances where one might reasonably expect, given the terms of the statement, that he would have a clear recollection as to whether or not he did make the statement.

4. For these reasons I prefer the evidence of the defendant to that of the second plaintiff in relation to this issue.  I am satisfied that a meeting did take place between at least the plaintiffs, the defendant and Chris Venter on 3 April 2012, and that in the moments prior to the meeting the second plaintiff did say to the defendant words to the effect that if the defendant did not do the right thing or did not do what the first plaintiff wanted, the first plaintiff would throw him out the window.

5. There is no question that the statement which I have found was made by the second plaintiff amounted to a threat that the first plaintiff would engage in unlawful conduct against the defendant if the defendant did not do what the first plaintiff wanted.  I am therefore satisfied that the statement made by the second plaintiff amounted to an application of illegitimate pressure by the second plaintiff on the defendant.

6. I am not, however, satisfied that the second plaintiff made this statement in order to compel the defendant to enter into the Sale Agreement or any agreement by which the defendant was to purchase the plaintiffs' shares in THP.  There is no evidence before me that at this point in time the plaintiffs had decided that they wanted to sell their shares in THP or were even contemplating this course of action.  Indeed the defendant's evidence, which in this regard was consistent with the second plaintiffs' evidence as to the substance of the communications that were occurring between the parties around early April 2012, was that the purpose of the meeting on 3 April 2012 was to 'discuss the financial position of THP'.  I am satisfied that the statement which I have found was made by the second plaintiff to the defendant was not directed at compelling the defendant to enter into an agreement to buy the plaintiffs' shares in THP, but was rather aimed at 'persuading' the defendant to comply with the plaintiffs' previous requests that they be provided with properly prepared accounts (i.e. the 'books') for THP so that they could make their own assessment of the company's financial position.  This finding is consistent with the terms of Mr Venter's email dated 5 April 2012 which are directed at the provision by the defendant of 'information for inspection', that is, the management accounts for THP referred to in his email sent at 9.15 am on the previous day.

1. In summary, while I am satisfied that the second plaintiff, by making the relevant statement, did apply illegitimate pressure to the defendant, I am not satisfied that the illegitimate pressure was applied in order to compel him to enter into the Sale Agreement.

Statement made by Mr Venter

1. Mr Venter was acting on the plaintiffs' instructions.  The statement made by Mr Venter in his email was, in substance, that if the defendant did not supply the management accounts for THP and the other information requested of Ms Morton in the second of the emails sent by him on 4 April 2012 by the specified date, the plaintiffs and/or Mr Venter would report the defendant's conduct in the running of THP to the Australian Securities and Investments Commission and the police.  Accordingly, the statement made by Mr Venter clearly amounted to an application of pressure by the plaintiffs to the defendant.

2. Although the making by Mr Venter of the statement amounted to an application of pressure by the plaintiffs to the defendant, the pressure was not, in my view, applied in order to compel the defendant to enter the Sale Agreement.  As I have just said, the pressure was applied in order to compel the defendant to provide the management accounts and other requested information relating to the financial position of THP.

3. Furthermore, in my opinion the pressure applied by the plaintiffs in this instance cannot be categorised as an illegitimate form of pressure.  A threat by one director of a company to report to an investigating authority alleged misconduct by another director in the management of the affairs of the company if information is not provided which would enable the director making the threat to ascertain for himself if the misconduct has occurred, cannot be described as illegitimate: Scolio v Cote (488, 490).  Such a threat can be distinguished from a promise not to proceed with a prosecution if an agreement is signed.  A promise of this type may, depending on the circumstances, amount to an application of illegitimate pressure: Kerridge v Simmonds[1906] HCA 66; (1906) 4 CLR 253; Scolio v Cote (491), (492).

4. For these reasons I am not satisfied that the making by Mr Venter of the statement in question amounted to an application by the plaintiffs of illegitimate pressure in order to compel the defendant to enter into the Sale Agreement.

First plaintiff's conduct at THP premises

1. Subject to one qualification, the first plaintiff did not dispute that on 21 May 2012 he attended at THP's store in Jolimont and engaged in the conduct described by Mr Lincoln in his email.  The one qualification relates to whether during the incident the first plaintiff said, 'as far as he was concerned THP could burn to the ground with everyone inside' or rather, 'Get Joel to give me the books.  I don't give a fuck if the place burns down.  I need the books'.

2. My general impression of the first plaintiff as a witness was that he attempted to downplay the depth and intensity of his feelings of anger towards, and dislike of, the defendant in May 2012.  The tenor of the emails which the first plaintiff sent to the defendant in May 2012, particularly his emails sent on 21 and 22 May 2012, reveal in my view that he was more than just 'pretty forthright and pretty straight forward' with the defendant.  I did not find the first plaintiff's evidence that he merely 'voiced his opinion' when he attended at THP's premises on 21 May 2012 to be convincing.   Nor do I think it likely, given the emotional state that he was no doubt in at the time, that the first plaintiff could realistically have a clear recollection of the precise words that he used.

3. I did not find Mr Lincoln's oral evidence as to precisely what the first plaintiff said about THP's premises burning down to be credible.  In my view Mr Lincoln's evidence that the first plaintiff 'explained … it was a misunderstanding at the time and I'd taken something the wrong way' smacks of Mr Lincoln having allowed himself, or more specifically his recollection of precisely what the first plaintiff said, to be influenced by the first plaintiff.  I am satisfied that Mr Lincoln, who since the incident in the THP premises has for reasons which were not disclosed by the evidence apparently become friends with the first plaintiff, tailored his evidence on this point in an attempt to provide what he considered to be assistance to the first plaintiff's case.

4. In my view the best evidence of precisely what the first plaintiff said about THP's premises burning down is the email prepared by Mr Lincoln to the defendant on the same day and within a short time of the incident having occurred.  It follows, given my adverse assessment of the evidence given by the first plaintiff and Mr Lincoln in relation to the issue, that I am satisfied that the first plaintiff did, during his attendance at THP's premises on 21 May 2012, say to Mr Lincoln that as far as he was concerned 'THP could burn down to the ground with everyone inside'.

5. The next question is whether the statement made by the first plaintiff actually amounted to a threat by the first plaintiff to burn THP's premises down while everyone was inside the premises; that is, amounted to a declaration of an intention by the first plaintiff to burn down THP's premises with everyone inside even though the first plaintiff may not actually have possessed that intention.

6. The words used by the first plaintiff did not amount to an express statement by him that he would burn THP's premises to the ground.  Indeed, on one view the statement might be construed as amounting to nothing more than an angry statement by the first plaintiff that given that he had not been paid his money he did not care if THP's premises burnt down to the ground.  However, as I have already indicated the words and conduct of the first plaintiff are to be judged as a matter of substance and reality, and not mere form.

7. The relationship between the first plaintiff and the defendant had by 21 May 2012 all but completely broken down.  The first plaintiff had 'stormed' into THP's premises with the papers for the sale of the THP shares.  He was quite obviously very angry.  He had demanded to know from Mr Lincoln the whereabouts of the defendant.  He had referred to the defendant in very derogatory terms and had told Mr Lincoln to tell the defendant that he wanted his money 'now'.  He told Mr Lincoln that he was a 'f**king dog like the rest of them'.  Moreover, and although this is not decisive of the issue, it is clear from the last paragraph of his email to the defendant that Mr Lincoln clearly took the relevant statement by the first plaintiff as an implied threat to burn THP's premises down.  In these circumstances, I am satisfied that the first plaintiff's statement that 'as far as he was concerned THP could burn to the ground with everyone inside' was, in substance, a threat, albeit a veiled threat, to burn THP's premises down with everyone inside if the defendant did not sign the contract for the sale of the first plaintiffs' shares in THP to the defendant and did not pay the first plaintiff for the shares.  I note that my finding that the first plaintiff made this threat is not a finding that he actually intended to carry out the threat.

8. There is no question that the first plaintiff behaved in the way that he did, and made the threat which he did, knowing, or at least intending that, Mr Lincoln would pass on to the defendant what had occurred and what had been said.  This is, of course, exactly what occurred.  It follows that the first plaintiff, by making the threat to engage in unlawful behaviour comprised of burning THP's premises down to the ground 'with everyone inside' if the defendant did not sign the agreement for the sale of the shares, applied illegitimate pressure to the defendant, and did so in order to compel the defendant to sign the contract (that is, the 'papers') which he had brought with him for the sale by the plaintiffs of their shares in THP to the defendant.

9. Although, it would appear from the defendant's email to the first plaintiff dated 22 May 2012 that the contract which the first plaintiff took with him to THP's premises may not have been identical to the Sale Agreement, there is no dispute between the parties that the two documents were substantially the same.  Accordingly, I am satisfied that the first plaintiff, by making the threat, applied illegitimate pressure to the defendant in order to compel him to sign the Sale Agreement.

First plaintiff's statement that it was illegal for defendant not to sign contract

1. As is apparent from the terms of first plaintiff's email dated 21 May 2012, he quite obviously made the statement that it was illegal for the defendant not to sign 'the contract' in an attempt to compel the defendant to sign the Sale Agreement.  Further, it was not illegal for the defendant not to sign the Sale Agreement.  I am therefore satisfied that the first plaintiff, by making the statement in his email that it was illegal for the defendant 'not to sign the contract', applied illegitimate pressure to the defendant in order to compel him to sign the Sale Agreement.

Emails

1. The essence of the argument advanced by the defendant in relation to the emails sent by the first plaintiff is that they were abusive and bullying in nature, that they amounted to an implied threat that if the defendant did not sign the Sale Agreement the first plaintiff would inflict physical violence on him and that they therefore constituted an application of illegitimate pressure in order to compel the defendant to sign the Sale Agreement.

2. There is no question that the emails sent by the first plaintiff to the defendant on 21 May 2012, 22 May 2012 and 23 May 2012 were expressed in angry terms and contained the first plaintiff's highly derogatory expressions of opinion about the defendant's character.  To this extent the emails were abusive and reflect poorly on the first plaintiff.  Nor is there any question that the first plaintiff, by sending these emails intended to, and did, exert pressure on the defendant to sign the Sale Agreement.  However, a reading of the emails does not, in my view, warrant the conclusion that any of them, either expressly or impliedly, amounted to a threat by the first plaintiff to inflict personal violence on the defendant if he did not sign the Sale Agreement.  There is a difference between telling a person (even in angry and derogatory terms) what you think of them in the context of trying to pressure the person into a particular course of conduct - which in my view is what the first plaintiff did by sending his emails - and threatening violence to the person if they do not follow the course of conduct advocated for.  For these reasons I am not satisfied that the first plaintiff, by sending his emails to the defendant during the period 21 to 23 May 2012, applied illegitimate pressure to the defendant in order to compel him to enter into the Sale Agreement.

Did the illegitimate pressure cause the defendant to enter the Sale Agreement?

1. I have found that the first plaintiff, by making his threat on 21 May 2012 and by stating in his email dated 21 May 2012 that it was illegal for the defendant not to sign the 'contract', applied illegitimate pressure to the defendant in order to compel the defendant to enter into the Sale Agreement.  The question which remains for my determination is whether the plaintiffs have proved that these forms of illegitimate pressure, individually or collectively, were not a cause of the defendant entering into the Sale Agreement.

2. Before turning to deal directly with this question I need to make some observations about that portion of Mr Lincoln's evidence concerning his witnessing of the defendant's signing of the Sale Agreement.  Although Mr Lincoln's evidence on this point was not challenged by the defendant, his evidence was inconsistent with the evidence given by the second plaintiff and the defendant as to the circumstances of the signing of the Sale Agreement.  Further, Mr Lincoln in his evidence made no mention of seeing Callum Osborne present at the time of the defendant's signing of the agreement, Mr Osborne being the person who, as is clear from the Sale Agreement, witnessed the signatures of the defendant and the second plaintiff.  In these circumstances I am satisfied that the document which Mr Lincoln saw the defendant sign was not actually the Sale Agreement but rather the contract which the defendant sent to the first plaintiff for signing under cover of his email dated 11 May 2012.

3. I return to the question whether the plaintiffs have proved that the applied illegitimate pressure was not a cause of the defendant entering into the Sale Agreement.

4. Having observed the appearance and demeanour of the first plaintiff in the witness box, I accept that in an angry state he would be an intimidating figure.  I accept that the defendant would at various times have felt intimidated by the first plaintiff.   I also accept that the defendant was very keen to end his business relationship with the plaintiffs.  Nonetheless, I am also satisfied, contrary to the evidence given by the defendant, that the forms of illegitimate pressure applied by the first plaintiff which I have found were applied to the defendant in order to compel him to enter into the Sale Agreement did not, either individually or in combination with each other, actually cause the defendant to enter into the Sale Agreement.  I do not accept the defendant's evidence that he signed the Sale Agreement because he 'really felt back up against a wall with nowhere to go'.  My reasons for coming to this conclusion are as follows.

5. Firstly, on the undisputed evidence of the second plaintiff, which in this respect is consistent with his email to the defendant dated 30 April 2012 and which I accept, it was the defendant, who at some point prior to 3 April 2012, first raised the issue of his business partnership with the plaintiffs coming to an end.  It was the defendant who expressed the view to the second plaintiff that he did not think that he and the plaintiffs could continue working together; that the business partnership was not a 'working arrangement'.  Thus even as far back as late March or very early April 2012 the defendant was contemplating bringing his business relationship with the plaintiffs to an end.  This, in my view, does not sit comfortably with his assertions that by May 2012 he felt compelled by the first plaintiff's illegitimate pressure to sign the Sale Agreement.

6. Secondly, and consistently with his statements to the second plaintiff prior to 3 April 2012, the defendant on 11 May 2012 provided to the plaintiffs for signature by them a contract for the purchase by him of the plaintiffs' shares in THP.  At the time that the defendant provided this document to the plaintiffs he had already signed it.  He had done so, on the unchallenged evidence of Mr Lincoln, in an apparently 'stress free' manner.  In his covering email to the plaintiffs the defendant said, 'I have signed the contract and hope we can get this finalised today as we all want'.  In short, and although the contract sent by the defendant on this date was in slightly more favourable terms to him than the Sale Agreement, the fact that the defendant as at 11 May 2012 was pushing for the finalisation of a share sale agreement is in my view inconsistent with his assertions that he felt compelled to enter the Sale Agreement by the first plaintiff's later application of illegitimate pressure.

7. Thirdly, the terms of the defendant's emails sent in response to the first plaintiff's emails during the period 21 to 23 May 2012 are in my view inconsistent with a person who felt intimidated by the first plaintiff and under pressure to sign the Sale Agreement by reason of the first plaintiff's conduct.  Thus by his email dated 22 May 2012, which was the day after the incident at THP's premises, the defendant returns 'the papers' to the first plaintiff for corrections relating to names and addresses with a request that this be attended to 'ASAP'.  If the defendant at this point felt compelled to sign an agreement for the purchase of the plaintiffs' shares, it is difficult to understand why he would be concerned about corrections being made to names and addresses and why he would be asking for the corrections to be made ASAP.  Then on 23 May 2012 the defendant again by email effectively stands up to the first plaintiff by telling him that the 'contract' that had been 'dropped off' was again not complete because it was not dated and the signatures of the first plaintiff and the second plaintiff were not witnessed.  Further, he requests for the 'completed form' to be posted to THP which would again seem unusual for a person who is effectively being forced to enter into the agreement.  Finally, and perhaps most significantly, the defendant in his email to the first plaintiff at 8.42 pm on 23 May 2012, states, among other things, that he 'really [does not] get offended' by anything said by the first plaintiff, that 'all [he] ever wanted is to have the contract signed and for [the first plaintiff] to leave us all alone', that the first plaintiff's recent conduct 'makes him wonder if [the first plaintiff] was trying to stall the process', that the first plaintiff's conduct at THP's premises 'is not acceptable anymore and if it happens again the police will be called', that 'the contract will be signed and ready for…pick up from me on Friday' and that he would 'make time to meet with [the first plaintiff]' on Friday.  Again, these types of assertive responses by the defendant to the first plaintiff, and his statements concerning his desire to have the contract relating to the sale of the shares signed, are to my mind completely inconsistent with a person who feels pressured and compelled to enter into an agreement for the purchase of the plaintiffs' shares in THP.

8. Fourthly, there is no evidence before me capable of establishing that the shares the subject of the Sale Agreement did not constitute valuable consideration for the amount of money payable by the defendant to the plaintiffs under the Sale Agreement.

9. Fifthly, on 1 June 2012 the defendant attempted by way of email to arrange a meeting with the first plaintiff.  His efforts in this regard are in my view inconsistent with his assertions that he signed the Sale Agreement as a result of the illegitimate pressure applied to him by the first plaintiff prior to 24 May 2012.   If the defendant did feel as intimidated by the first plaintiff prior to the signing of the Sale Agreement to the extent that he conveyed in his evidence, I do not accept that he would have been asking to meet with the first plaintiff to explain his financial position.  I do not accept in this regard the defendant's evidence that he was simply attempting to keep the first plaintiff at arm's length.  In my view this evidence does not make sense.  The best way to keep the first plaintiff at 'arms' length' if that was in truth what the defendant was trying to do would be to avoid any face to face meeting with him.

10. Finally, at no point after the signing of the Sale Agreement and prior to the plaintiffs commencing legal proceedings did the defendant ever seek to rescind the Sale Agreement on the ground of duress or otherwise raise the issue of duress.

11. In summary, given the conduct of the defendant both prior to and after the execution of the Sale Agreement to which I have referred, I am satisfied that the illegitimate pressure which I have found was applied to the defendant by the first plaintiff in order to compel the defendant to enter into the Sale Agreement was not a cause of the defendant entering into the Sale Agreement.  It follows that I am satisfied that the defendant did not execute the Sale Agreement under duress.

12. I note for the sake of completeness that even if I had found, contrary to my previously expressed conclusions, that the other matters alleged by the defendant to amount to illegitimate pressure (namely the second plaintiff's 2 April 2012 statement, the statement made by Venter and the first plaintiff's emails), did constitute illegitimate pressure applied in order to compel the defendant to sign the Sale Agreement, I would still, for the reasons stated above, have decided that the illegitimate pressure was not a cause of the defendant entering the Sale Agreement.

Undue influence

Legal principles

1. Whereas duress is concerned with unacceptable coercive pressure being brought to bear on the victim, undue influence is more concerned with preventing the other party from taking unconscientious advantage of a position of dominance or ascendancy: a capacity to unfairly persuade rather than pressure:   Cheshire & Fifoot Law of Contract (760).

2. The relevant legal principles relating to undue influence were stated by Murphy J in Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [166] – [172], [175], [176] in the following terms:

   166.The basis of the equitable jurisdiction to set aside an alienation of property on the grounds of undue influence is the prevention of the unconscientious use of any special capacity in or opportunity for the disponee to effect the disponor's will or freedom of judgment in reference to the transaction: Johnson v Buttress (1936) 56 CLR 113, 134.

   167.The jurisdiction to set aside a transaction procured by undue influence is exercised on two bases.  The first is where undue influence is proved as a fact.  The second is where undue influence is presumed by reason of the antecedent relationship between the parties, and the presumption has not been rebutted: Johnson v Buttress (119); Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573, 575. The former is 'actual' undue influence and the latter is 'presumed' undue influence: Powell v Powell [2002] WASC 105 [120]-[121].

   168Actual undue influence requires proof that the transaction was the outcome of such an actual influence over the mind of the disponor that it cannot be considered to be the free act of the disponor: Johnson v Buttress (134).  The source of power to practise such influence or domination over the disponor may not arise from an antecedent relationship, but may arise in the particular situation, or by the deliberate contrivance of the disponee: Johnson v Buttress (134).

   169Presumed undue influence arises in two ways.  One is where there exists a class of relationship historically recognised by the law as raising a presumption of undue influence.  The recognised classes include parent and child, guardian and ward, solicitor and client, doctor and patient, religious adviser and adherent, and trustee and beneficiary: Johnson v Buttress (119, 134) (cf Meagher RP, Heydon JD & Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (4^th ed, 2002) [15-095] as to the last mentioned class).

   170Dispositions from the latter to the former fall within the presumption.

   171The other is where, outside of those recognised categories, the plaintiff positively proves that there in fact existed an antecedent relationship between the parties, the nature of which was that the defendant was in a position to exercise dominion, power, or ascendency over the plaintiff: Meagher, Heydon & Leeming, Equity: Doctrines & Remedies [15-105].

   172The recognised categories of relationship are marked by the characteristic that it is not natural to expect that 'one party would give property to the other.  That is to say, the character of the relation itself is never enough to explain the transaction and to account for it without suspicion of confidence abused': Yerkey v Jones (1939) 63 CLR 649.

   …

   175.Where a special relationship outside of the traditional categories is set up it is 'necessary to see the extent and nature of the confidence reposed and whether it involved any ascendancy over the will of the person supposedly dependent on the confidence': Jenyns v Public Curator (Qld) (1953) 90 CLR 113, 133.

   176.The doctrine of undue influence looks to the quality of the consent, or assent, of the weaker party: Commerical Bank of Australia v Amadio (474); Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457, 478.

3. Thus, with respect to 'actual' undue influence, a party seeking to escape a contract must prove that the other party in fact exerted influence over him or her and thus procured a contract that would otherwise not have been made:  Johnson v Buttress (1936) 56 CLR 113, 134.

4. In a case of presumed undue influence involving a recognised category of relationship, the burden is on the ascendant party to prove the absence of undue influence.  However, in the absence of one of the recognised categories of relationship an initial burden rests on the person seeking to escape a contract to establish that there was a special relationship of confidence: Johnson v Buttress.

Decision

1. For reasons which are apparent from what I have said in dealing with the defendant's duress claim, there is in my opinion no evidence capable of establishing that the defendant was the subject of actual undue influence or presumed undue influence as these concepts are explained by Murphy J in Permanent Mortgages Pty Ltd v Vandenbergh.  I therefore dismiss the defendant's claim based on undue influence.

Conclusion

1. I uphold the plaintiffs' claim.  No duress or undue influence has been established.  I would grant the plaintiffs judgment against the defendant in his capacity as trustee for the Steel Trust and as guarantor under the Sale Agreement in the sum of $147,000 plus interest calculated in accordance with cl 4.1 of the Sale Agreement.

2. As to the calculation of interest, cl 4.1 by its express terms provides only for the payment of interest on 'the Balance', that is, the $110,000 owing after payment of the $40,000 on the Completion Date.  However, cl 4.1 was clearly drafted on the basis of the mutual understanding of the parties that the defendant would pay $40,000 on the Completion Date in accordance with cl 2.3.  Further, 'the Purchase Price' is defined in cl 1.1 to be the total amount of $150,000 payable for the sale shares.  It is therefore appropriate, in my view, to interpret the reference in cl 4.1 to 'the balance of the Purchase Price' to include all or any part of the amount of $40,000 due to be paid but not paid on the Completion Date (that is, 1 June 2012):  Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447 [35]. Accordingly, I calculate the interest payable by the defendant under cl 4.1 at $23,520 ($147,000 x 0.08 x 2 years).