John Shearer Holdings Limited v Anthony Paul Ahrens and Lynette Fay Ahrens No. SCGRG 95/836 Judgment No. 6159 Number of Pages 12 Contracts

[1997] SASC 6159

IN THE SUPREME COURT OF SOUTH AUSTRALIA

MATHESON, J

Contracts - written agreement to sell shares in company that manufactured compactor type waste removal trucks and bins in Queensland - clause stating that agreement constituted the sole and entire agreement between the parties - extent of warranties contained therein - extent of disclosure required of any claims against the company - whether vendors breached agreement or breached s38Fair Trading Act (Qld) - onus not discharged and claims dismissed.

ADELAIDE, 10-14 February 1997 (hearing), 23 May 1997 (decision)

#DATE 23:5:1997

#ADD 29:5:1997

Plaintiff:

Counsel: Mr J M Wilkinson with him Mr J C Clarke

Solicitors: Cowell Clarke

Defendants:

Counsel: Mr M N Rice with him Mr J Warde

Solicitors: Johnson Winter & Slattery

Order: application dismissed.

MATHESON J

1. This claim arises out of a contract executed on 19 October 1994 whereby the plaintiff purchased all the defendants' ordinary shares in Tusk Industries Pty Ltd ("Tusk") for the purchase price of $559,956.15. The defendants were the only shareholders. Tusk manufactured large compactor type waste removal trucks and bins at Currumbin in Queensland. The plaintiff alleges that the defendants breached the contract or that they breached s38 of the Fair TradingAct (Qld), and claims $208,096.00 damages, interest and costs.

2. In 1993 Tusk incurred cash flow problems resulting from substantial losses to its recently established Sydney operations, and the defendants decided to look for a purchaser or a partner. The plaintiff was interested as a purchaser, and negotiations between the plaintiff and the defendants appear to have commenced in April 1994, and continued until the contract was executed. There were other parties interested.

3. It is convenient to mention here that four witnesses gave evidence at the trial, namely, Mr Cheng Hong, managing director of the plaintiff, Mr Peter Carr, an accountant and also a director of the plaintiff, Mr Anthony Ahrens, (the first defendant), an engineer, and Mr Harry Porter, an accountant and former finance adviser of Tusk. As will appear, on several critical issues I preferred the evidence of Messrs Ahrens and Porter to the witnesses for the plaintiff. I found Mr Hong in particular to be an unconvincing witness, and I reached the conclusion that the unfavourable impression that he made on me was certainly not due to any language or comprehension problem.

4. On 10 May a meeting took place between Messrs Hong and Ahrens at the premises of Tusk at Currumbin. During the meeting, Mr Hong said he wanted Tusk to make a full disclosure of its liabilities, and expressed concern about the possibility of receiving claims after any settlement had taken place. I have no doubt that Mr Ahrens in turn expressed concern that there might be claims in the future resulting from defects in equipment that Tusk had manufactured and sold of which the defendants were not then aware.

5. Their negotiations continued, and I note that in his letter to Mr Hong of 9 June, Mr Ahrens said, inter alia: "6. I am not prepared to warrant and account for the figures stated in our balance sheet. My suggestion is that we conduct a combined audit of the companies assets and liabilities prior to agreement of sale."

6. On a date which I am unable to fix, but between 22 and 30 June, the plaintiff submitted to the defendants a draft agreement prepared by their Brisbane solicitors, Freehill Hollingdale and Page, clause 10.1 of which required the first defendant to give the plaintiff an indemnity which was drafted very widely and which read: "10.1 Anthony Paul Ahrens indemnifies the Purchaser and agrees to keep the Purchaser always indemnified against any claim, action, damage, loss (including consequential loss), liability, cost, expense, or payment howsoever arising that the Purchaser pays, or directly or indirectly suffers, incurs or is liable for, in respect of any claim made to the Company after the Date of Sale."

7. Upon receiving the draft agreement, Mr Ahrens was concerned about the breadth of this clause, and about the risk that the defendants would run, if they signed an agreement containing such a clause, of being made liable for claims against Tusk after the sale of their shares to the plaintiff arising out of circumstances of which they were not aware at the time of sale. By facsimile message to Mr Hong dated 30 June, Mr Ahrens sought many amendments to the draft agreement, including the deletion of Clause 10.1

8. On 25 August, Mr Porter faxed to Mr Hong copies of the draft profit and loss statement and balance sheet of Tusk for the year ending 30 June 1994. After analysing these documents, Mr Hong prepared a statement on 1 September which assumed Tusk had stock in the sum of $587,000 and creditors in the sum of $762,000, and assumed a capital injection from the plaintiff of $300,000. The statement indicates that Mr Hong estimated that the defendants' equity was $560,000.

9. On 9 September, the plaintiff's solicitors, on instructions from Mr Hong, faxed Mr Ahrens a revised draft of the agreement to purchase the defendants' shares. The purchase price was specified as $559,956.15, and the wording of the vendors' undertaking and indemnity was altered to wording which was very close to that in the contract ultimately executed. I note, however, that the draft spoke of claims "of which [the vendors] are or ought reasonably to be aware ...". I stress the fact that the contract finally executed omitted the words I have underlined.

10. I find that on 12 September during a meeting at Tusk's premises Mr Porter explained Tusk's accounting system to Messrs Hong and Carr. He said that Tusk's accounting computer software had limitations. If the accounts were "closed off" on a particular date, for example on the last day of a month, it was not possible subsequently to "instruct" the computer to "re-open" the accounts up to that date in order to add additional information regarding additional liabilities incurred up to the date that the accounts were closed off, and for goods ordered prior to the date that the accounts were closed off but in respect of which the invoices had not yet been received by Tusk. Mr Porter explained that because of this limitation Tusk's usual practice was to refrain from closing off Tusk's accounts for a particular month for approximately four weeks after the last day of that particular month, in order to take account of and include in the accounts invoices received after the last day of the particular month for goods ordered before the last day of the particular month. He explained that because of the lead time of up to approximately four weeks between the day that goods might be ordered and the day that an invoice might be received for those goods, it would not be possible to provide on the settlement day a set of fully updated accounts. Mr Porter told Messrs Hong and Carr that Tusk had recently ordered new computer software from a computer software company to overcome this accounting limitation. Mr Hong asked Mr Porter to cancel the order. Acting upon this request and apparently assuming the sale would go ahead, Mr Porter cancelled the order by letter dated 3 October.

11. I also find that during the said meeting Messrs Ahrens and Porter said to Messrs Hong and Carr words to the effect that they were happy to provide such assistance and such accounting information as they were able to provide in order to assist the plaintiff in conducting its "due diligence" investigation of Tusk's books and records, including a complete physical stock check. I understand the phrase "due diligence" investigation is commonly used in this sort of situation. It is actually used in clause 4 of the contract finally executed. It is convenient here to mention that I find that on 12 and 13 September employees of the plaintiff did a stock-take, using the Tusk list as at 30 June 1994 as a starting point.

12. By facsimile transmission from Mr Porter to Mr Carr dated 12 October, the defendants informed the plaintiff that a computer run as at 11 October disclosed that Tusk's creditors as at 30 September amounted to $528,718.53.

13. I find that Messrs Hong and Carr spent some time with Messrs Ahrens and Porter at Tusk's premises on 17, 18 and 19 October. Mr Porter said to Mr Carr on 17 October words to the effect that he and Tusk's staff had carried out accounting work to bring Tusk's ledger, trial balance and general ledger trial balance up to date as at 30 September. I find that Mr Carr knew and understood these words to mean that the accounts had been brought up to date to 30 September except for goods and services ordered in September in respect of which invoices had not yet been received and brought to account.

14. On either 17 or 18 October a creditors' control reconciliation, a creditors' ledger trial balance and a general ledger trial balance were provided to Mr Carr by Mr Porter. The said creditors' ledger trial balance and general ledger trial balance recorded the amount owing by Tusk to its trade creditors up to 30 September to the extent that invoices had been received and brought to account as at 16 October for goods and services ordered up to 30 September. The creditors' control total was $530,226.57. This figure was $1,508.04 higher than the figure of $528,718.53 provided by Mr Porter to Mr Carr on 12 October as it took into account invoices received for goods and services ordered up to 30 September 1994 and brought to account between 11 and 16 October. I find that at no time up to the date of completion on 19 October did the plaintiff request the defendants to provide a creditors' ledger trial balance or a general ledger trial balance for Tusk for the month of October 1994 or for any portion of the month of October 1994. I reject the evidence of the plaintiff's witnesses that the defendants or Mr Porter represented to the plaintiff that the creditors of Tusk at 17 October 1994 amounted to $530,226.57 in total.

15. At a meeting at Tusk's premises on 18 October Mr Ahrens gave Mr Hong a letter of the same date which read: "John Shearer (Holdings) Pty. Ltd. 18 October 1994

RE: DETAILS OF PAST INCIDENCES WHICH MAY ARISE IN FUTURE ACTION AGAINST TUSK INDUSTRIES PTY. LTD.

1) Staples Waste - A dispute with Mr. Bruce Staples over continual hydraulic problems with a vehicle which we refurbished, a Rapid Rail Compactor body and fitted a Tusk Tentical Lifter to a Mercedes chassis. Staples refused to pay an amount of $17,239.71 on account and claim they may take legal action if Tusk take steps to retrieve monies outstanding, although we have discussed coming to some agreement.

2) Cleanaway Northmead - Dispute between Tusk and Cleanaway employee Mr. Ian Grundy. Tusk supplied 9 one man units all up with the last five being altered by request of Mr. Grundy which did not work as well as original units. Tusk upgraded these units at cost to Tusk of approx. $35,000.00. Some six months later Mr. Grundy requested a price to upgrade these five units to our latest 2 cylinder packing mechanism.

We quoted him approx $15,000.00. He had the work carried out by Formark at a reported cost of $25,000.00. After some time Mr. Grundy and the then N.S.W. manager Mr. Mike Illiff visited me and stated they could see no sense in taking legal action to recoup their losses, but put forward a deal of purchasing 20 units over 2 years with a 10% discount. I agreed to this but the deal never eventuated.

3) Ipswich City Council - Hydraulic problems occurred in these units over the first 9 months. Although after repeated requests to our hydraulic supplier Simon Hydraulics that the system was not performing as it should, Simon's were very slow in reacting to help solve the problem.

Along with this there were problems with some units which we were completely unaware of until it came to the attention of the council that there was abnormally high bin damage on particular runs. The council understandably were very upset over this and sent Mr. Mike Zarbo and the two main mechanics down for a meeting with me. It was resolved at the meeting that yes there was a problem, but Tusk could not be held responsible as we were not informed of this particular problem.

It was also resolved to return each truck one by one to Currumbin to have them completely checked over and modify as necessary to a proper working order. With an amount of pressure on Simon Hydraulics to help clarify the problems, we eventually have these machines working to a very high standard. At this time I am under the understanding that there will be no claim by the council against Tusk Industries for any consequential loss.

4) Collex Melbourne - Have a dispute with Mr. Frank Vanezia over the charge for two top wind doors supplied to them.

Collex ordered 1 unit for Tasmania and 3 for Melbourne. At the time of order our standard unit did not have this wind door. It was on request of Mr. Wilf Adams from Tasmania if we could fit a wind door due to the very windy conditions in Tasmania. As an act of good faith we supplied this free of charge. The first two units supplied to Melbourne did not have these doors.

It was when Mr. Mick Mills of Collex was brought to Currumbin for maintenance training on the third unit from Melbourne he requested if it could be supplied with a wind door, which we again supplied free of charge. He then asked if we could supply kits for the two units without wind doors.

As these items were not included in the original quote I felt it was quite reasonable to charge for the two kits. Collex claim these doors should be a standard feature of the units. This was not the case, and my opinion is that Tusk has been quite reasonable in supplying and fitting two units free of charge and charging for the other two kits supplied.

Regards

[Signed]Tony Ahrens"

16. I find that Mr Hong understood that the said letter was not intended, and did not purport, to disclose all outstanding creditors of Tusk as at 18 October 1994 for goods ordered from suppliers in respect of which no invoices had been received.

17. I find that Mr Porter and employees of Tusk made available to the plaintiff between 17 and 19 October 1994 by way of assistance to its due diligence investigation all books and records of Tusk disclosing liabilities in respect of employees' wages for October 1994, electricity, telephone, lease and loan repayments and payments to the Australian Taxation Office for arrears of sale tax, group tax and penalties. Further, they made available to the plaintiff for inspection and disclosed all of Tusk's accounting books and records, including Tusk's order book which recorded details of orders given by Tusk to its suppliers for the supply of goods and services up to and including the said settlement date of 19 October.

18. I find (contrary to evidence led by the plaintiff) that no stock take (additional to that conducted on 12 and 13 September) was conducted by anyone on behalf of the plaintiff on the occasion of the visits of its representatives on 17 - 19 October inclusive. This is significant, because the plaintiff knew the defendants were continuing to operate the business after 13 September and to purchase materials. The plaintiff was unable to establish any change in the value of its stock and work in progress "on the floor". I find that during the visits on 17 - 19 October inclusive there was no suggestion of any review or variation of the price which had been agreed and entered in the 9 September draft.

19. The contract was signed on 19 October at the office of the Development Bank in Brisbane. After settlement Mr Ahrens continued to work for Tusk full time as a technical adviser. He had been living in an old house on the premises at 19 Traders Way, Currumbin since early January 1994, and he continued to live there. He resigned in early January 1995 owing to an argument with Mr Hong. At settlement, Mr Ahrens had told Mr Hong that he would repay his debt of $60,000 to the Directors' Loan Account when the balance of the purchase price of $200,000 was paid pursuant to clause 3.2 of the contract after the expiration of six months, but Mr Hong demanded payment forthwith. Mr Ahrens paid it and resigned. He was asked to retract his resignation. Eventually he agreed to work for Tusk on a consultancy basis on an hourly rate, and he did so until 19 April 1995. On that day he was served with an injunction issued out of this court in effect restraining payment of the balance owing to the defendants of $140,000. I find that at no time did Mr Hong ever approach Mr Ahrens personally for any explanation relating to the claims which are the subject of these proceedings. Prior to being served with the injunction, Mr Ahrens had not received any notice from the plaintiff or their solicitors that they might be making a claim against the defendants for breach of contract. In the event, the injunction was discharged on 1 May 1995, and the defendants subsequently received their final payment.

20. Clause 1.1 of the contract executed on 19 October contained the following relevant definitions: "In this agreement (including the Schedule) unless the context otherwise requires: (a) 'Accounts' means the Balance Sheet of the Company at the Accounts Date and the Profit and Loss Account of the Company for the period ending on the Accounts Date copies whereof are signed by the parties for identification and annexed hereto and marked "A". (b) 'Accounts Date' means 30 June 1994; ... (f) 'Completion' means the completion of the sale and purchase of the Shares as provided in Clause 5; (g) 'Completion Date' means 19 October 1994, or such other date as the parties may agree; (h) 'Date of Sale' means the date on which the Contract is made"

21. It would appear that in the event the date of 19 October 1994 was not only the date the contract was made, but also the completion date.

22. It is also convenient here to set out other relevant clauses: "3. Purchase Price The Purchase Price shall be paid or satisfied as follows:

3.1 The sum of $359,956.15 be paid in cash on the Completion Date to the Vendors or as they direct.

3.2 The balance of the Purchase Price being the sum of Two hundred thousand dollars ($200,000.00) will be paid in cash to the Vendors or as they direct on the day six months after the Completion Date. On the Completion Date the Purchaser will provide an unconditional Bank Guarantee to the Vendors for this amount.

3.3 All payments made under this Clause shall be by bank cheque.

4. Conditions Precedent

4.1 As promptly as possible after the date hereof the Purchaser and its auditors shall complete an examination of the Company's books and records which shall include a complete physical stock check."

23. I interrupt my quotations from the contract to observe that the plaintiff appears to have waived, or at least ignored this clause, and clause 4.2(a), and it seems to me that in consequence its case is weakened. "4.2 Notwithstanding anything to the contrary herein the Purchaser will not be obliged to proceed to Completion unless: (a) Books and Accounts: The Purchaser and its auditors or representatives thereof have on or before ten (10) Business Days from the Date of Sale successfully completed the examination of the books, accounts, records and other documents of the Company and the results of that examination are satisfactory to the Purchaser. (b) Due Diligence:

(1) The Purchaser informs the Vendors in writing that it is satisfied following a due diligence investigation of the Company that the books, accounts, records, other documents and responses produced by the Company to the Purchaser or its professional advisors during the due diligence process disclose no material adverse change or substantial difference in the business, financial or trading position, assets, liabilities or prospects of the Company to that contained in or disclosed by the Accounts.

(2) The Purchaser informs the Vendors in writing that it has completed a due diligence investigation of the Land which is satisfactory in all respects to the Purchaser."

24. Again I interrupt my quotations to observe that the plaintiff proceeded to completion notwithstanding that it did not "inform" the defendants that it was satisfied with the "due diligence investigation". The evidence suggests that Mr Hong was so satisfied, but did not "get round" to writing the necessary letter. "(c) Employment Contract: Anthony Paul Ahrens has entered into an Employment Contract with the Company in the form contained in the Third Schedule before the Completion Date;

(d) - (h) ..."

"5. Completion

5.1 Completion shall take place on the next Business Day after the thirtieth day after the date of execution of this Agreement by all parties or at such other time as shall be agreed in writing between the Vendors and the Purchaser.

5.2 On Completion ..." [The Contract then set out what the vendors and purchaser had to do on completion.]

"6 Warranties

6.1 Each of the Vendors severally and all of them jointly hereby represent, warrant and undertake to the Purchaser as an inducement to the Purchaser to enter into this Agreement and it is a condition of this Agreement that save as disclosed to the Purchaser or in the Accounts each of the warranties contained in the Second Schedule is at the date hereof and will at Completion to the best of his knowledge and belief be true and accurate in all material respects and not materially misleading.

..."

"8. Inspection of Documents

8.1 Pending Completion the Vendors shall procure that all of the books of account, records, documents and other papers of the Company and all information in relation to the Land shall be available by prior arrangement at all reasonable times during normal business hours for inspection by the Purchaser or its servants or agents."

25. Again, I interrupt to observe that there is no suggestion in the evidence that this clause was not complied with by the defendants. "9. Undertakings

9.1 (a) The Vendors must disclose to the Purchaser prior to Completion: (1) all claims of any nature which have been or may be made against the Company; and (2) all circumstances which may result in such a claim,of which the Vendors are aware either as Shareholders or Officers of the Company in respect of any event matter or thing occurring prior to and including the Completion Date. (b) The Vendors indemnify the Purchaser and agree to keep the Purchaser always indemnified against any claim, action, damage, loss (including consequential loss), liability, cost, expense, or payment howsoever arising that the Purchaser pays, or directly or indirectly suffers, incurs or is liable for, in respect of any claim made against the Company and not disclosed by the Vendors in accordance with clause 9.1(a).

9.2 The indemnity provided in Clause 9.1 does not apply to Warranty Claims.

9.3 ...

9.4 For the purpose of Clause 9.1, all Warranty Claims made to the Company must be approved by Anthony Paul Ahrens as genuine and properly brought within the terms of the warranty document provided with the machines sold by the Company. If Anthony Paul Ahrens rejects a Warranty Claim as not satisfying these requirements, and the Purchaser does not agree with this determination, a person may be appointed at the request of either the Vendors or Purchaser by the President of the Institute of Engineers, Australia or his appointee who shall determine whether the Warranty Claim is genuine. The parties agree that the person approved shall act as an expert and not as an arbitrator and the costs of the determination will be borne by the Vendors.

9.5 - 9.6 ..."

"16.5 This Agreement constitutes the sole and entire agreement between the parties and no warranties, representations, guarantees or other terms or conditions of whatsoever nature not contained and recorded herein shall be of any force or effect."

"SECOND

Warranties

1. All information which has been given by the Vendors, the Directors of the Company or the auditors or officers of the Company to the Purchaser or to the solicitors for the Purchaser in the course of the negotiations leading to this Agreement is true and accurate in all material respects.

2. - 3. ...

4. Except as otherwise agreed between the parties hereto the Company has no liability in respect of unpaid or unassessed taxes (save for an amount of $35,909.76 tax and penalties, as at 30 June 1994, owing to the Australian Taxation Office) nor will the Company on any date in the future become subject to taxes: (a) on or in respect of or by reference to profits, gains or income for any period up to and including the Last Accounting Date; or (b) in respect of any other matter or thing referable to any time prior to or to any period ending on or before the Last Accounting Date;

in excess of the provisions for taxation included in the Accounts and that the only liabilities for tax arising since the Last Accounting Date and prior to completion are liabilities arising out of normal business and trading activities. 5 - 24 ..."

26. The defendants did not give the plaintiff a blanket indemnity. Their counsel properly stressed the words in clause 6.11 "to the best of his knowledge and belief be true and accurate in all material respects and not materially misleading", and the words in clause 9.1 "of which the vendors are aware". Further, I agree with counsel for the defendants that creditor invoices are not a clause 9 claim, and that the only claims that can come within that clause are those contained in pars13.4 - 13.8 of the Second Further Amended Statement of Claim to which I now turn.

Paragraph 13.4

27. The plaintiff alleges that Tusk was paid by the Ipswich City Council the sum of $10,680 prior to 16 October 1994 for the supply of a tentacle grab machine which had not been manufactured and delivered, and which Tusk was obliged to manufacture and deliver after completion.

28. Mr Ahrens gave evidence that Tusk had a contract with the Ipswich City Council to supply ten trucks each with a tentacle lifter and an extension arm or boom. Tusk also supplied them with some consignment stock to hold in their own spare parts division in case of a break-down during the twelve month warranty period. At the end of twelve months, the Council had the option of buying any particular item or returning it to Tusk. It used the consignment stock for spare parts. There were a couple of problems with the lifters and Tusk had to remove and repair them and put them back. In relation to one such damaged lifter the Council claimed on insurance. Tusk put the consignment lifter on the truck, repaired the damaged lifter and returned it to the Council's consignment stock and charged the insurance company for the cost of repairs.

29. Amongst the documents tendered was a quotation signed by the marketing manager of Tusk dated 28 September 1993 and addressed to the Ipswich City Council. It quoted $10,680 for a tentacle grab "complete" which included a lifter and $4,000 for an extension arm. The letter also said "As stated in our initial submission, Tusk Industries Pty Ltd will hold on a consignment basis at Council's stores, a complete spare parts holding which includes a complete lifter. On 27 October 1993 the Council placed an order for what it called spare parts as per quotation at a cost of $14,680. The documents tendered also included a memorandum dated 22 March 1995 indicating that the arm was delivered in the first week of June and that a cheque was received by Tusk for $14,680 on 6 July, 1994. The memorandum said that the remainder of the order valued at $10,680 was delivered on 21 November 1994. I also note that by fax dated 16 September 1994 Mr Porter advised that items held on consignment at Ipswich City Service Centre included "One Tentacle Lifter".

30. On 19 September 1994 Mr Ahrens wrote the following letter to Mr Hong: "Dear Cheng,

I have investigated the problems associated with this contract and report as follows.

Have had a conversation with Mr. Michael Szabo (plant manager) with relation to the current position. He states that the alterations we have carried out are a great improvement and the vehicles are operating to a very high standard, although the alterations have seemed to have caused some other problems which have only become apparent in the last couple of days, which we have had our service man and a service man from Simon Hydraulics investigating the problem.

If this problem is rectified, everything should be alright. With regard to the bin damage, he was unwilling to make any commitment, but off the record stated that there had been no mention of any proposed claim against Tusk.

I have received from another source they were quite happy with the backup and service from Tusk, but felt we have been let down badly by our hydraulic supplier. I am in the process of endeavouring to resolve this situation.

As I have previously encountered, it is impossible to get a Council employee [to] make any commitment in writing which is the same in this case.

Trusting this is satisfactory for your requirements.

Yours faithfully (Signed) TONY AHRENS"

31. That letter was written at the request of Mr Hong who had become aware that Tusk was having problems with the Ipswich City Council. The letter already quoted on 18 October (supra) was intended to pass on much the same information. Mr Ahrens said that they did not supply the lifter in June because they were in the process of manufacturing it and were waiting for bearings to come in from overseas. When they were preparing the June figures he was aware that a lifter had been paid for but not delivered. As at 30 June the lifter was partially completed but in quite a few pieces. He gave instructions that the lifter be included in the stock-take, and it was included in the June stock-take. The assets and liabilities therefore balanced out. Eventually when the lifter was completed it went back to the consignment stock of Ipswich City Council.

32. Finally, I observe that the plaintiff did not call any representative of the Ipswich City Council.

Paragraph 13.5

33. Next, the plaintiff claims the sum of $30,958.75 being the alleged cost to return units 1, 2, 3 and 4 at 20 Traders Way, Currumbin to a tenantable condition. Tusk leased these units from a Mr D S Snowden for a term of three years commencing on 1 August 1991. At the expiration of the lease it was agreed that the defendant would continue to occupy the premises on a month to month tenancy and that the terms and conditions of the lease would continue to apply to the tenancy. On 31 May 1995 Snowden alleges that Tusk vacated Units 1 and 2. On 14 August he alleges that Tusk vacated Unit No 3. On 19 August 1995 he alleges that Tusk vacated Unit 4. It is not disputed that throughout the occupation of the premises by Tusk it operated a sandblasting unit therein. The other three Units were used for painting.

34. Full particulars of the claim are set out in the proceedings issued by Snowden against Tusk annexed to the second Further Amended Statement of Claim. The defendants deny that they failed to disclose to the plaintiff that Tusk had a liability of the kind referred to in the proceedings issued by Snowden. Mr Ahrens said that on or about 13 September 1994 at Tusk's premises at Currumbin he told Messrs Hong and Carr that Tusk's lease on the units had expired, and that if Tusk wished to vacate those premises the terms of the lease required Tusk to make good the premises and return them to a tenantable condition. Mr Hong asked Mr Ahrens how much he estimated it might cost to effect repairs to the premises. I find that Mr Ahrens replied in words to the effect that he did not know how much it might cost, but he estimated it would cost at least $10,000. I also find that Messrs Hong and Carr walked through the units on a number of occasions during their visits to Currumbin and were themselves aware of the condition thereof. The plaintiff called no evidence as to the state of the units at any relevant time.

Paragraph 13.6

35. Next, the plaintiff claims in para 13.6 that Tusk had a liability in the sum of $77,896.63 to Staples Waste Removals Pty Ltd for the faulty installation modifications carried out by Tusk of an automatic loader on a garbage truck owned by Staples pursuant to an agreement entered into between Tusk and Staples in March 1993. The plaintiff annexed a copy of the claim issued by Staples against Tusk in the District Court of New South Wales. Par1 of Mr Porter's letter to the plaintiff dated 18 October 1994 which I have already quoted, supra, dealt with a dispute with Staples Waste, and I again refer thereto. In their defence, the defendants say that as at 18 October 1994 they did not know and could not reasonably be expected to know that the quantum of any claim which Staples Waste might make in the future in relation to that dispute would be $77,896.13. I find that Mr Ahrens told Messrs Carr and Hong that he had been trying to negotiate some sort of settlement with Mr Staples, and that he had offered to split the bill fifty-fifty, the bill at that time being $17,000. Mr Ahrens told them that Staples had made it clear that he was not prepared to pay the full bill, and that if Tusk took action to recover in full he would take legal action.

Paragraph 13.8

36. The plaintiff claims that Tusk underpaid payroll tax to the Queensland Office of State Revenue in the sum of $3,779.85 made up as follows:

" Period Amount

30 June 1992 $1382.70 30 June 1993 852.05 30 June 1994 1545.10

$3779.85"

37. The defendants say that payroll tax was calculated monthly by a Tusk employee, Mrs June Chapman, and paid regularly. The Notices of Assessment dated 30 May 1996 are reassessments of payroll tax made following an inspection of Tusk's records undertaken by the Queensland Office of State Revenue on a date in 1996. I accept that they were not aware on 18 October 1994 of any circumstances which might resolve in a claim being made against Tusk in respect of payroll tax for the years ended 30 June 1992 - 30 June 1994.

38. I have reached the conclusion that the plaintiff has not discharged the onus that lies on it in relation to any of its claims. The evidence of the plaintiff's witnesses suggests that they were unaware of clause 16.5 of the contract. Moreover, as I have said, they did not impress me, and generally speaking, where their evidence conflicts with that of Messrs Ahrens and Porter, I prefer the latter. That observation applies in particular to the evidence about Tusk's accounting procedures during the relevant period. A further weakness in the plaintiff's case is the absence of any stock-take after 13 September.

39. I am satisfied that the defendants made available to the plaintiff all relevant documents in compliance with clause 8 and at any earlier relevant time. The plaintiff had control of those documents after 19 October and although Mr Ahrens was employed until April 1995, neither he nor Mr Porter were ever asked for any explanation, nor were they the recipients of any complaint. In so far as it is relevant to the issues, I acquit both Messrs Ahrens and Porter of any intention to mislead the plaintiff, or to conceal or withhold information.

40. I reject all claims. The action is dismissed.