Kairouz v Jasper Nominees Limited
[2025] VSCA 16
•24 February 2025
| SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2024 0010 |
| PIERRE KAIROUZ | Applicant |
| v | |
| JASPER NOMINEES LIMITED (SEYCHELLES COMPANY NUMBER 224224) | Respondent |
| S EAPCI 2024 0011 | |
| ANTONIO MURDACA | Applicant |
| v | |
| JASPER NOMINEES LIMITED (SEYCHELLES COMPANY NUMBER 224224) | Respondent |
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| JUDGES: | NIALL CJ, McLEISH and LYONS JJA | |
| WHERE HELD: | Melbourne | |
| DATE OF HEARING: | 11 September 2024 | |
| DATE OF JUDGMENT: | 24 February 2025 | |
| MEDIUM NEUTRAL CITATION: | [2025] VSCA 16 | First Revision (21 March 2025): name of respondent |
| JUDGMENT APPEALED FROM: | Jasper Nominees Ltd v Kairouz [2023] VSC 718 (Osborne J) | |
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CONTRACT – Offer and acceptance – Offer constituted by applicant signing document – Respondent signing version of document with handwritten amendment not communicated to applicant – Whether acceptance of offer or counter-offer – Reasonable person in position of applicant – Whether amendment material – Whether amendment making explicit something already implicit – Outer Suburban Property Ltd v Clarke [1933] SASR 221; Gjergja v Cooper [1987] VR 167; Global Tankers Inc v Amercoat Europa NV [1975] 1 Lloyd’s Rep 666; Capital Plumbing Service Pty Ltd v FML Assurance Ltd (1986) 4 ANZ Insurance Cases 60-867; Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] 1 Lloyd’s Rep 475; Lark v Outhwaite [1991] 2 Lloyd’s Rep 132, applied – Applicant’s offer accepted by respondent – Leave to appeal granted – Appeal dismissed.
CONTRACT – Guarantee – Terms of agreement referring to applicants as guarantors – Whether applicants bound by guarantees – Terms of proposed agreement changed by page swaps – Second applicant signing agreement as guarantor after page swaps – Applicant argued agreement not binding because changes introduced by page swaps not adverted to – Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, applied – Correspondence with applicant contained multiple indications that substance of agreement had changed – Applicant’s signature represented willingness to be bound – Leave to appeal refused.
CONTRACT – Doctrine of penalties – Loans – Two agreements – Interest of 60 per cent or 120 per cent per annum accruing upon failure to pay certain amounts at end of term – No interest payable before end of term – Obligation at end of term to pay amount higher than amount borrowed – Whether clause imposing interest an unenforceable penalty – Clause providing for accrual of interest in respect of certain monies outstanding after ‘Termination Date’ or ‘Expiry Time’ and where ‘Event of Default’ subsists – ‘Events of Default’ widely defined – Whether presumption 4(c) from Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 applicable – Characterisation of clause to determine whether penal purpose – Two stipulations – Applicable stipulation not engaging presumption 4(c) – Purpose of stipulation to require borrower to pay for use of money not repaid after money became due and payable – Clause not a penalty – Leave to appeal granted – Appeal dismissed.
CONTRACT – Signature – Instruments Act 1958, s 126 – Agreement signed before page swap – Whether s 126 required fresh signature after page swap – Stewart v Eddowes (1875) LR 9 CP 311; Koenigsblatt v Sweet [1923] 2 Ch 314; New Hart Builders Ltd v Brindley [1975] 1 Ch 342, applied – No requirement in s 126 for document to be signed again where new or different terms introduced before parties contractually bound and signature intended to apply to alterations – Leave to appeal refused.
LEGAL PRACTITIONERS – Scope of solicitor’s authority – Whether clear and cogent evidence of solicitor’s authority to authorise page swap on behalf of party – Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146, applied – Evidence of solicitor’s authority clear and cogent – Leave to appeal refused.
CONSUMER LAW – Trial judge dismissed allegations of misleading and deceptive conduct and unconscionable conduct – No error shown – Leave to appeal refused.
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| Counsel | ||
| Applicant in S EAPCI 2024 0010, Pierre Kairouz: | Mr M Clarke KC with Mr JG Levine | |
| Applicant in S EAPCI 2024 0011, Antonio Murdaca: | Mr JA Ribbands with Mr HC McAvaney | |
| Respondent: | Mr PJ Bick KC with Mr JP Tomlinson SC | |
| Solicitors | ||
| Applicant in S EAPCI 2024 0010, Pierre Kairouz: | FA Sanna | |
| Applicant in S EAPCI 2024 0011, Antonio Murdaca: | Melbourne Legal Chambers | |
| Respondent: | SBA Law | |
TABLE OF CONTENTS
Overview of issues
Background
Relevant terms of the LNSA and AAD
Trial judgment
Proposed grounds of appeal
Structure of these reasons
Whether the applicants were bound by the guarantee
Mr Murdaca (ground 1)
Mr Murdaca (ground 2)
Mr Kairouz (grounds 5, 6, 7(a)–(c), 10(a), (b) and (f), 13(a)–(c))
Whether interest provisions in the LNSA and AAD are unenforceable as penalties
Mr Murdaca (ground 3), Mr Kairouz (grounds 8, 9, 11 and 12)
Judge’s reasons
Submissions
Consideration
Misrepresentations alleged in Mr Kairouz’s counterclaim
Credit of Mr Hopp (ground 1)
Conduct of Mr Dahan (ground 2)
Reliance by Mr Kairouz (ground 3)
Alleged agency of Mr Hopp (grounds 4, 7(d), 10(c), 13(d) and 15)
Jones v Dunkel and Rebecca Loh (grounds 7(e), 10(d), 13(e) and 14)
Conclusion as to Mr Kairouz’s counterclaim
Conclusion
NIALL CJ
MCLEISH JA
LYONS JA:
Overview of issues
Under two short term loan agreements entered into on 5 October 2021, the respondent Jasper Nominees Limited (‘Jasper’), as trustee for certain financiers, advanced substantial sums to Global Meat Exports Pty Ltd (‘GME’) in connection with the purchase of a business called ‘Cedar Meats’. That business was operated by members of the Kairouz family including Pierre Kairouz (‘Mr Kairouz’). Antonio Murdaca was a significant shareholder in GME. The two loan agreements provided for guarantees on the part of Mr Kairouz and Mr Murdaca. After default by GME, they were each found liable to Jasper under those guarantees, following a trial in the Trial Division.[1] Each of them now seeks leave to appeal against the judgment.
[1]Jasper Nominees Ltd v Kairouz [2023] VSC 718 [372] (Osborne J) (‘Reasons’).
The first agreement took the form of a loan note subscription agreement (‘LNSA’). It provided for an advance of $36.5 million, with $41.25 million to be repaid nine weeks after the date of the agreement, on 7 December 2021 (the ‘Termination Date’). The second agreement was called ‘Additional Advance Deed’ (‘AAD’). It provided for an advance of $2 million, with $2.4 million required to be repaid one month after the date of the agreement, on 5 November 2021 (the ‘Expiry Time’).
The loan agreements provided for interest to be charged and capitalised monthly after the Termination Date or the Expiry Time, at an annual rate of 60 per cent per annum and 120 per cent per annum respectively.
The moneys were advanced to GME on 5 October 2021. GME did not repay the $2.4 million due under the AAD on 5 November 2021, or the amount of $41.25 million due under the LNSA on 7 December 2021.
At trial, Mr Kairouz and Mr Murdaca defended Jasper’s claims seeking to enforce the guarantees, on three broad grounds. First, each of them raised matters particular to the circumstances of their execution of the LNSA. Mr Murdaca alleged that those matters had the effect that he was not bound by his signing of the execution pages of the guarantee (contained within the LNSA), including because its terms were changed after he executed the relevant pages. Mr Kairouz alleged that the circumstances of his execution of the guarantee were such that he too was not bound or, if he was, that the guarantee was limited to the value of the assets owned by Mr Kairouz or a company of which he was a director at the time of enforcement or recovery.
Secondly, Mr Kairouz and Mr Murdaca alleged that the default interest rates for which the LNSA and the AAD provided constituted unenforceable penalties.
Thirdly, they alleged that they entered into the LNSA in reliance upon misrepresentations said to have been made by two brokers, Jason Hopp (‘Mr Hopp’) and Jack Dahan (‘Mr Dahan’), allegedly as agents for Jasper. By way of counterclaims, Mr Kairouz and Mr Murdaca sought orders setting aside the guarantees. Those counterclaims were dismissed by the trial judge. Mr Kairouz seeks to raise issues regarding the alleged misrepresentations in this Court, but Mr Murdaca does not. We will therefore deal only with Mr Kairouz’s counterclaim.
Mr Kairouz’s counterclaim was brought against Jasper, Mr Hopp personally and his company Santini Group Pty Ltd (‘Santini’) and Mr Dahan and his company Hennessey Capital Partners Pty Ltd (‘Hennessey’). The counterclaim against Mr Dahan and Hennessey was dismissed by consent and need not be considered further.
We will defer consideration of the counterclaim.
Background
Between approximately April 2021 and early October 2021, there were a series of meetings between representatives of GME, AustAgri Group Pty Ltd (‘AustAgri’) (which by then owned the entire issued share capital in GME), Mr Kairouz, Mr Murdaca, Mr Hopp and Santini, and Mr Dahan and Hennessey. The parties also included Jasper, and Baltic River Ltd and Taurus Advisors Ltd (the ‘Financiers’).
On 20 August 2021, Mr Kairouz and Mr Murdaca (and others) signed a term sheet setting out terms of a short-term (nine week) loan, including guarantees from Mr Kairouz and Mr Murdaca, security over specified properties, ‘face value’ in the amount of $40,250,000, an ‘establishment fee’ of one per cent of the face value amount, and an advance amount of $36,500,000.
On 17 September 2021, Will Constable of Mills Oakley (solicitors for Jasper and the Financiers) emailed Grant Guenther of Macpherson Kelley and Peter Guy of Kennedy Guy (solicitors for GME and the Kairouz family, respectively), copied to others including Mr Hopp and Mr Dahan and attaching numerous documents for execution. The documents included a copy of the LNSA which among other things provided for the issue of a loan note with a total face value of $40,750,000, the payment of an establishment fee of $402,500, an interest rate of 0.00 per cent per annum, an overdue rate of 60 per cent per annum and a termination date nine weeks after the date of the agreement. Clause 3.1(b) of the LNSA provided for the loan note to be issued at a discount to the face value in the amount of $36,500,000, with the Financiers only being required to lend the discounted amount to GME. The LNSA also included a guarantee, the guarantors relevantly including Mr Kairouz and Mr Murdaca.
In mid-September 2021, Mr Murdaca went to Oakley Thomson, solicitors for AustAgri, and was presented with a copy of the LNSA. He was told that he was no longer required to sign it. His name was crossed out on the guarantors’ execution page. He did not sign any version of the LNSA in September 2021 or at any point around that time.
Mr Kairouz executed a version of the LNSA on 21 September 2021. In this version, the total face value amount was $41 million (not the $40,750,000 contained in the version attached to Mr Constable’s email of 17 September 2021). Mr Kairouz had written words in by hand at the end of paragraph 14.1 (on page 48), and he and his nephew Tony Kairouz had initialled those alterations. Clause 14.1 read as follows (with the handwritten additions emphasised):
14.1 Guarantee
Each Guarantor irrevocably and unconditionally jointly and severally:
(a)guarantees to each Financier punctual performance by each Obligor of all that Obligor’s obligations under the Finance Document;
(b)undertakes with each Financier that:
(i)whenever an Obligor does not pay any Secured Money when due (or anything which would have been due if the Finance Document or the amount was enforceable, valid and not illegal), that Guarantor will immediately on demand pay the Secured Money as if it was the principal obligor; and
(ii)if an Ipso Facto event has occurred or is continuing, then immediately on demand that Guarantor shall pay all Secured Money, accrued interest and other amounts referred to clause 13.2(a) as if it was the principal obligor.
(c)Notwithstanding anything to the contrary in the Finance Documents, the maximum amount the Security Trustee[2] can recover from Jeskan Nominees Pty Ltd, Birrawae Pty Ltd, Rachel Elliot Schmidt, Pierre Kairouz, P and K Kairouz Pty Ltd and Hennessey Capital Partners Pty Ltd is the value, at the time of any enforcement of recovery, of those assets that are the subject of the Property Mortgage for which that guarantor is the Landowner or in the case of Pierre Kairouz, the property mortgages of which Pierre Kairouz is a director of the Landowner.
[2]Jasper is the Security Trustee.
Mr Kairouz’s completion of the execution clause in the draft LNSA was witnessed by Mr Guy, but Mr Guy did not initial this handwritten change.
At 10:18 am on 1 October 2021, Mr Constable sent Mr Guenther and Mr Guy an email containing a list of matters outstanding in order to settle (the ‘1 October Constable email’). The email attached seven documents, one of which was a further draft of the LNSA, marked with changes. The email stated that Mr Kairouz’s guarantee was required to be unlimited noting that a page swap of page 48 to the LNSA was attached. Page 48 contained cl 14.1 and omitted the handwritten amendments made by Mr Kairouz on 21 September 2021. The email also advised that Mr Murdaca ‘is required to sign the LNSA’ and requested arrangements be made for a certificate of legal advice to be signed for him. The execution pages provided for his signature as a guarantor.
Mr Constable further advised that he had instructions that the face value of the loan note was to increase by $250,000. He stated:
I have instructions that the Face Value of the Loan Note is to increase by $250,000. Please find attached a mark-up of the LNSA and an updated Loan Note. Could you each (Peter and Grant) authorise us to swap pages 12, 18, 48, 70 and 73[3] of the signed LNSA with those contained in the attached mark-up. Please also find attached an amended loan note to be signed by Alan.[4]
[3]The swaps for pages 12, 18, 70 and 73 gave effect to the $250,000 increase while the swap for page 48, among other things, had the effect of making Mr Kairouz’s guarantee unlimited.
[4]Emphasis in original. ‘Alan’ is a reference to Alan Schmidt, a former director of GME and AustAgri.
At 10:46 am on 1 October 2021, Mr Dahan forwarded the 1 October Constable email with attachments to Mr Kairouz and Mr Murdaca, stating ‘Gents, P Guy has doc foe [sic] Pierre to sign’ (the ‘1 October Dahan email’) .
At 11:58 am on 1 October 2021, Mr Guy sent an email to Mr Constable, copied to others including Mr Guenther, which relevantly stated ‘I have been instructed to advise … my clients consent to the swap of pages 12, 18, 48, 70 and 73’. Mr Kairouz and Mr Murdaca were not copied to this email.
At 12:15 pm on 1 October 2021, Mr Dahan sent Mr Murdaca an email with the subject line ‘PLEASE SIGN’ and attaching a copy of page 90 of the LNSA, which provided for Mr Murdaca’s signature.
At 12:20 pm on 1 October 2021, Mr Constable sent Mr Dahan, and copied to Mr Hopp, a copy of a waiver of independent legal advice for Mr Murdaca. Mr Constable asked Mr Dahan to forward the document to Mr Murdaca ‘as well as the LNSA and security trust deed which need to be signed’.
At 12:22 pm on 1 October 2021, Mr Dahan sent Mr Murdaca a waiver of legal advice to be signed. At about the same time, Mr Dahan emailed Mr Constable, copied to Mr Hopp, stating:
With the LNSA, it’s a page swap right. He has signed just the signing page (having received the entire doc) this is being brought to your office shortly.
Between 12:22 pm and 12:51 pm on 1 October 2021, Mr Murdaca signed the execution page of the LNSA.
At 12:39 pm on 1 October 2021, Mr Constable emailed Mr Guenther and Mr Guy noting that documents had been sent to Mr Murdaca for signing. He sought confirmation from Mr Guenther with respect to the page swap previously described.
At 12:51 pm on 1 October 2021, Mr Guenther emailed Mr Constable and Mr Guy. Among other things, he advised that he was getting instructions on the page swaps and would reply to Mr Constable soon.
At or shortly before 1:07 pm on 1 October 2021, a bundle of documents, which included the LNSA execution page and a waiver of independent legal advice, was hand-delivered to the reception at Mills Oakley’s Melbourne office. Mr Murdaca had signed the execution page and the waiver, witnessed by Mr Alan Schmidt. The receptionist took scans of the documents and emailed them to Mr Constable at 1:07 pm.
At 1:09 pm on 1 October 2021, Mr Guenther confirmed by email to Mr Constable (copied to Mr Guy) that GME and Agricultural Australia Group Pty Ltd (‘AAG’) consented, relevantly, to the page swap proposed in Mr Constable’s 10:18 am email. AAG was a wholly-owned subsidiary of AustAgri. It was to acquire the real estate interests of the Cedar Meats business as part of the transaction.
At 1:24 pm on 1 October 2021, Mr Constable sent an email to Mr Guenther, copied to Mr Guy and others, stating that he had received the scanned documents from Mr Schmidt. Mr Constable asked Mr Guenther to arrange for Mr Murdaca to re-execute them with an independent witness.
By email sent at 2:29 pm on 1 October 2021, Mr Guenther advised Mr Constable that he should have the documents shortly.
At some time before 2:48 pm on 1 October 2021, Mr Murdaca executed the execution page of the LNSA for the second time, along with a waiver of independent legal advice, witnessed by Alba Furci, an employee of a business owned by Mr Murdaca. Mr Murdaca had his secretary email those documents to Mr Schmidt.
At 2:48 pm on 1 October 2021, Mr Schmidt forwarded the documents to Mr Constable and Mr Guenther, expressing the view that ‘we are set to go’.
On 5 October 2021 at 2:29 pm, Mr Constable emailed Mr Guenther and Mr Guy ‘seeking final instructions to sign off on the workspaces and settle’. He also asked that, on behalf of their respective clients, they authorise the amendment of the establishment fee under the LNSA from $402,500 to $412,500 (being one per cent of the face value of the note). Mr Constable said that, once those authorisations were obtained, he anticipated receiving instructions to settle. No such authorisation was sought from Mr Murdaca, who was not advised of the increase in the establishment fee.
Mr Guenther and Mr Guy each provided their clients’ consent by emails sent shortly thereafter.
On 5 October 2021, Jasper and the Financiers executed the LNSA, in a form which included a handwritten amendment to increase the establishment fee by $10,000. On the same day, GME issued a loan note under the LNSA with a face value amount of $41,250,000. GME accessed the utilisation amount provided by the Financiers under the LNSA of $36,500,000 and received the additional advance of $2 million pursuant to the AAD. It may be inferred that, consistently with cl 5.5 of the LNSA,[5] the establishment fee of $412,500 was withheld by the Security Trustee from the utilisation amount.
[5]See below at [66].
Relevant terms of the LNSA and AAD
It is convenient to describe relevant terms of the documents in summary form. Some provisions are set out in more detail later in these reasons.
Under the LNSA:
(a)the Financiers agreed to make available to GME a term loan note facility up to an amount not exceeding the Total Commitment, being $36,500,000 (cl 3.1(a));
(b)each loan note would be issued to the Financiers at a discount to the face value amount (being $41,250,000), so the Financiers would only be required to lend the discounted amount in respect of each loan note (cl 3.1(b));
(c)an establishment fee was payable on or before utilisation of the facility, and GME authorised Jasper to withhold the fee from the initial utilisation (cl 5.5);
(d)on the Termination Date (7 December 2021), GME was required to repay in full each loan note at its face value, together with other secured moneys (cl 6.1);
(e)the interest rate under the LNSA was defined as ‘0.00% per annum’ (cl 1.1);
(f)from the first day after the ‘Termination Date’ and on each day thereafter, as well as on each day where an ‘Event of Default’ was subsisting, interest would accrue on the ‘Principal Outstanding’ and any money that was due and payable but unpaid, and on any interest payable but unpaid, at the ‘Overdue Rate’, being 60 per cent per annum (cl 5.3(a));
(g)interest accrued from day to day from the first day after the ‘Termination Date’ or the date of the ‘Event of Default’ (whichever was earlier) until the day that ‘Principal Outstanding’ and other amounts due under any ‘Finance Document’ were repaid in full (cl 5.3(b));
(h)the ‘Overdue Rate’ payable would be capitalised at monthly intervals such that the amount of that interest payable would form part of the ‘Principal Outstanding’ and interest would accrue on that amount (cl 5.3(c)); and
(i)failure to repay the ‘Principal Outstanding’ and other amounts due under any ‘Finance Document’ in full before or on the ‘Termination Date’ was an ‘Event of Default’ (cl 5.3(d)).
Under the AAD:
(a)the ‘Finance Parties’ under the LNSA agreed to provide an ‘Additional Advance’ of $2,000,000 to GME, in addition to the sums to be provided under the LNSA (cl 2);
(b)GME agreed to repay the sum of $2,400,000 (the ‘Repayment Amount’) to Jasper by 9:00 am on the date falling one month after the date of the Additional Advance (the ‘Expiry Time’) (cl 3); and
(c)any failure to pay the Repayment Amount by the Expiry Time would result in default interest being charged on the Repayment Amount at a rate of 120 per cent per annum. Interest would accrue in accordance with the LNSA (cl 12).
Trial judgment
The trial judge found that:
(a)each of Mr Kairouz and Mr Murdaca were bound by the LNSA.[6] In particular:
(i)as a result of the page swap, Mr Kairouz was bound by the guarantee as drafted without his handwritten amendments;
(ii)Mr Murdaca’s signing of the execution page was not an agreement to be bound only by an earlier version of the LNSA;[7] and
(iii)the change in the establishment fee had no effect on the scope of the liability the subject of Mr Murdaca’s guarantee;[8]
(b)the overdue interest rate provisions of the LNSA and the AAD were not unenforceable penalties;[9] and
(c)Jasper had not engaged in misleading or deceptive conduct.[10]
[6]Reasons [307].
[7]Ibid [292].
[8]Ibid [297].
[9]Ibid [368].
[10]Ibid [222].
Judgment was given for Jasper in the amount of the face value of each of the LNSA and AAD loan notes, with interest under the LNSA and AAD at the overdue or default rates stipulated in the respective agreements, totalling $141,372,006.80.[11]
[11]Ibid [372].
The judge dismissed the counterclaims. In relation to the misrepresentation issues raised by the counterclaims, the judge broadly found that:
(a)Mr Dahan was not acting on behalf of Jasper;[12]
(b)the alleged representations were not made by Mr Hopp;[13]
(c)in any event, Mr Hopp was not acting on behalf of Jasper at the relevant times;[14] and
(d)it had not been shown that Mr Kairouz and Mr Murdaca relied upon the alleged representations.[15]
[12]Ibid [196(g)].
[13]Ibid [214].
[14]Ibid [227]–[247].
[15]Ibid [224]–[225].
Proposed grounds of appeal
Mr Murdaca seeks leave to appeal on the following proposed grounds:
(1)His Honour erred in finding at [292]–[293] that by reason of his execution of page 90 of the LNSA [Mr Murdaca] assented to the form of the LNSA as it then was on 1 October 2021, so that a binding agreement in those terms was then made;
(2)His Honour erred in finding at [303]–[304] that the subsequent amendments to the LNSA by varying the amount of the establishment fee payable by the principal debtor, a contract of guarantee dated 5 October 2021 arose;
(3)His Honour erred in finding at [368] that the amounts payable in the event of a default under the LNSA and AAD were enforceable when properly construed they are unenforceable as penalties.
Mr Kairouz raises considerably wider proposed grounds, as follows:
Ground 1
The Trial Judge erred in accepting the oral evidence of Mr Hopp without taking into account the inconsistent answers that he gave in relation to his remuneration.
Ground 2
The Primary Judge should have considered Mr Dahan’s conduct in determining whether Jasper had engaged in misleading and deceptive conduct in relation to the Working Capital Representations and Exit Strategy Representations.
Ground 3
The Primary Judge erred in holding that Mr Kairouz did not take any steps in reliance upon either the Working Capital Representations or the Exit Strategy Representations.
Ground 4
The Primary Judge erred in holding that Mr Hopp was not Jasper’s agent in August 2021, despite his admissions in cross examination.
Ground 5
The Primary Judge should not have held that Mr Kairouz was bound by the LNSA dated 5 October 2021, because Mr Kairouz had not signed the amendments that his liability would be unlimited for the following reasons:
a) The terms of the LNSA
b) The email of Mills Oakley dated 17 September 2021
c) Section 126 of the Instruments Act 1958 (Vic)
Ground 6
The Primary Judge should not have held that Mr Kairouz conferred authority upon Mr Guy to agree to the amendment to the LNSA dated 5 October 2021 that made his liability unlimited.
Ground 7
The Primary Judge erred in failing to address the following submissions made on behalf of Mr Kairouz:
a)The LNSA and any amendments thereto had to be signed by him in order to bind him.
b)The email dated 1 October 2021 was not a contractual document and could not bind him.
c) Mr Guy (Mr Kairouz’s solicitor) did not have authority on behalf of Mr Kairouz to agree to the amendment to the LNSA that made Mr Kairouz’s liability unlimited.
d)Mr Hopp admitted to being an agent of Jasper from August 2021 to June 2022.
e) A Jones v Dunkel inference should be drawn from Jasper’s failure to call Ms Loh to give evidence (who was the sole director of Jasper and the financiers).
Ground 8
The Primary Judge should have held that clause 5.3 of the LNSA and clause 12 of the AAD were penalties (penalty provisions) as there was no evidence of the loss or damage that would be suffered on a breach of the LNSA and AAD.
Ground 9
The Primary Judge erred in holding that it was insufficient that the impugned penalty provisions resulted in a sum that was extravagant or out of all proportion to or unconscionable in comparison with the maximum amount of damage that might be suffered but that there had to [be] an inference drawn from the penalty provisions that its purpose was to punish the borrower for the breach of contract and to compel the borrower to perform the provisions of the contract.
Ground 10
The Trial Judge failed to provide proper reasons for any decision made on the following factors:
a) The LNSA and any amendments thereto had to be signed by him in order to bind him.
b) The email dated 1 October 2021 was not a contractual document and could not bind him.
f) Mr Guy (Mr Kairouz’s solicitor) did not have authority on behalf of Mr Kairouz to agree to the amendment to the LNSA that made Mr Kairouz’s liability unlimited.
c) Mr Hopp admitted to being an agent of Jasper from August 2021 to June 2022.
d) A Jones v Dunkel inference should be drawn from Jasper’s failure to call Ms Loh to give evidence (who was the sole director of Jasper and the financiers).[16]
[16]Numbering in original.
Ground 11
The Primary Judge erred in holding that an inference could not be drawn from the penalty provisions that its [sic] purpose was to punish the borrower for the breach of LNSA and AAD and to compel the borrower to perform the provisions of the LNSA and AAD.
Ground 12
The Primary Judge erred in holding that the damage that might be suffered on a breach of the penalty provisions could be determined on the basis that the LNSA and AAD continued, as opposed to compensatory damages that might be suffered for a contractual breach.
Ground 13
The Primary Judge failed to provide proper reasons for any decision made on the following factors:
a) The LNSA and any amendments thereto had to be signed by him in order to bind him.
b) The email dated 1 October 2021 was not a contractual document and could not bind him.
c) Mr Guy (Mr Kairouz’s solicitor) did not have authority on behalf of Mr Kairouz to agree to the amendment to the LNSA that made Mr Kairouz’s liability unlimited.
d) Mr Hopp admitted to being an agent of Jasper from August 2021 to June 2022.
e) A Jones v Dunkel inference should be drawn from Jasper’s failure to call Ms Loh to give evidence (who was the sole director of Jasper and the financiers).
Ground 14
The Primary Judge should have drawn a Jones v Dunkel inference from Jasper’s failure to call Rebecca Loh of Jasper, the financiers and the lenders as a witness.
Ground 15
The Primary Judge should have held that Mr Dahan was Mr Hopp’s agent, and that Jasper was liable for his conduct.
Structure of these reasons
It is convenient to divide the issues into the following sections. First, in both appeals issues are raised as to whether or not the applicants are bound by the LNSA and the AAD. The bases on which these matters are argued are different in each application. This subject matter concerns proposed grounds 1 and 2 in the Murdaca appeal and grounds 5, 6, 7(a)–(c), 10(a), (b) and (f), and 13(a)–(c) of the Kairouz appeal.
Secondly, in both matters it is contended that the provisions governing interest in the LNSA and the AAD are unenforceable by virtue of the doctrine of penalties. This issue is raised in ground 3 of the Murdaca appeal and grounds 8, 9, 11 and 12 of the Kairouz appeal.
Finally, as noted, Mr Kairouz seeks to advance grounds regarding the misrepresentations alleged in his counterclaim, principally grounds 1–3, but also grounds relating to:
(a)the judge’s treatment of an alleged admission as to agency by Mr Hopp in cross-examination (grounds 4, 7(d), 10(c), 13(d) and 15); and
(b)the judge’s refusal to draw a Jones v Dunkel inference against Jasper in respect of its failure to call a witness, Rebecca Loh: grounds 7(e), 10(d), 13(e) and 14.
We will treat these matters in turn, starting with the judge’s reasons in each instance.
Whether the applicants were bound by the guarantee
Mr Murdaca (ground 1)
Mr Murdaca contended at trial that his execution of the execution page alone, together with the waiver of independent legal advice, was insufficient to constitute his execution of the LNSA in a way which bound him. The judge found that it was not in dispute that Mr Murdaca signed the execution page of the guarantee, twice, on 1 October 2021. The judge found that Mr Murdaca received the LNSA in its final form by the time that he signed the execution page (except that the amount of the establishment fee was changed subsequently without his knowledge, the subject of proposed ground 2).[17]
[17]Reasons [288]–[289].
The judge recorded Mr Murdaca’s submission to the effect that he was not bound by the guarantee because its form had changed from that in existence on 19 September 2021 when he had been told that he did not need to sign it. Mr Murdaca contended that there was no reason for him to have been alerted to any changes in the document by the 1 October Dahan email (sent to Mr Murdaca as well as to Mr Kairouz ) which stated ‘Gents, P Guy has doc foe [sic] Pierre to sign’. It was said that this email did not, on its face, have anything to do with Mr Murdaca and it could not be said to have drawn his attention to the fact that the document had changed since he was shown a copy in mid-September and been told he did not have to sign it.[18]
[18]Ibid [290]–[291].
The judge rejected this argument. He held that, by affixing his signature to the execution page, Mr Murdaca conveyed his assent to be bound by the form of the guarantee then in existence. The judge noted that the waiver of independent legal advice which Mr Murdaca signed at the same time made it clear that the waiver was required in relation to a guarantee and indemnity which it described by reference to the LNSA. The waiver document stated that the relevant loan documents in respect of which the guarantee applied was the LNSA for notes with a face value of $41,250,000. That was a different amount to the $40,750,000 in the document Mr Murdaca had seen in mid-September.[19]
[19]Ibid [292].
The judge held that, by affixing his signature to the execution clause and signing the waiver, whether or not he read the LNSA, Mr Murdaca was taken to have executed the guarantee and indemnity in respect of the LNSA for notes to the value of $41,250,000 in the form which existed on 1 October 2021, which in any event had been provided to him when Mr Dahan forwarded him the 1 October Constable email earlier that day.[20]
[20]Ibid [293].
In this Court, counsel for Mr Murdaca contended that the 1 October Dahan email noting that Mr Guy had documents for Mr Kairouz to sign gave no indication to Mr Murdaca that the document to which he had previously been referred had changed in any way. It was submitted that Jasper had no basis upon which to conclude that Mr Murdaca had read the document. It was submitted that there was no unity of offer and acceptance.
Counsel contrasted the case with Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (‘Toll’).[21] While that case stands as authority that a person may be bound by their signature without having read the document in question,[22] it was submitted that the case was different from the present because, in Toll, the attention of the signatory had been drawn to the terms and conditions, which were readily apparent on the other side of the document that was signed; the document asked the signatory to read the terms and conditions before signing. In the present case, Mr Murdaca signed a standalone document and his attention had not been drawn to the changed terms and conditions of the guarantee in question.
[21](2004) 219 CLR 165 (‘Toll’).
[22]Ibid 185 [57] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
These submissions must be rejected. Despite the factual differences between this case and Toll, the principle in that case is applicable. The basis advanced for distinguishing the case cannot be accepted. As set out in [16]–[18] above, the 1 October Dahan email sent to Mr Kairouz and Mr Murdaca noted that Mr Guy had documents for Mr Kairouz to sign and also contained the 1 October Constable email. The 1 October Constable email in turn set out the substance of the changes to LNSA since Mr Murdaca had previously encountered it. In particular, the 1 October Constable email made plain that Mr Murdaca was required to sign the LNSA (whereas his name had previously been crossed out on the execution page) and the need for arrangements for Mr Murdaca to obtain a certificate of legal advice to be signed by him. It also referred to the swap of five pages. In addition, as the judge pointed out, the waiver of independent legal advice went further. It indicated that the LNSA was for notes with a total face value of $41,250,000, whereas the earlier version provided for notes with a total face value of $40,750,000.
In any event, as already noted, the 1 October Dahan email attached the LNSA, marked with the amendments. In substance, this is indistinguishable from setting out terms and conditions on the reverse side of a document. Paragraph [45] of the reasons of the High Court in Toll is applicable to the present case:
It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.[23]
[23]Toll (2004) 219 CLR 165, 180–1 [45] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). The reference to Latham CJ relates to Wilton v Farnworth (1948) 76 CLR 646, 649, quoted at 180 [43] of the judgment.
It is true that, unlike in Toll, in the present case Mr Murdaca was not expressly asked to read the document, and again unlike in Toll, he was not legally represented. Those considerations might, in an appropriate case, bear on the prospects of any claim for equitable or statutory relief, but they are not a basis for denying that a person who affixes their signature to a document known to contain contractual terms and to effect legal relations is bound by those terms, whether or not they have read them.[24]
[24]Ibid [57]; TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147 [47] (McLeish, T Forrest and, Macaulay JJA).
Leave to appeal on proposed ground 1 in Mr Murdaca’s application should be refused.
Mr Murdaca (ground 2)
Mr Murdaca also contended at trial that he was not bound by the LNSA because, after he signed the execution page, Mr Guy and Mr Guenther — on behalf of Mr Kairouz and GME respectively — consented to the request conveyed by Mr Constable on behalf of Jasper and the Financiers to an amendment to the LNSA which provided for an increase in the establishment fee from $402,500 to $412,500. That change was then made by handwritten amendment to the document before Jasper and the Financiers executed the LNSA. Mr Murdaca contended that this change, of which he was not given notice, discharged him from any liability that he would otherwise have had under the guarantee.
The judge rejected this contention. First, he observed that the change in the establishment fee had no effect on the scope of the liability and indemnity the subject of the guarantee. It did not affect the face value amount of $41,250,000 or the discounted amount, being the amount payable by the Financiers of $36,500,000. The establishment fee was part of the fees and reimbursable costs of the Financiers in accordance with the LNSA, payable by the borrower (GME) at the time when the initial utilisation was made. As such, GME was required to pay the establishment fee from the funds provided by the Financiers. The judge observed that the effect of the increase in the establishment fee was that GME had to deploy an additional $10,000 of borrowed funds to pay the increase. That did not change the amount of the principal or the extent of the obligations assumed by the guarantors. As such, the nature of the principal obligation was not altered so as to discharge Mr Murdaca’s guarantee.[25]
[25]Reasons [297]–[300].
The judge also referred to cl 14.5(f). That provision was in the following terms:
The obligations of each Guarantor under this clause 14 will not be affected by an act, omission, matter or thing which, but for this clause, would reduce, release or prejudice any of its obligations under this clause 14 (without limitation and whether or not known to it or the Financiers) including:
…
(f)any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including any change in the purpose of any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security.[26]
[26]Ibid [302].
The judge held that the change in the establishment fee amounted to an amendment of a finance document in the form of a change in the purpose of the facility provided under the LNSA, because it provided that the purpose now extended to paying a larger establishment fee. As such, by virtue of cl 14.5(f), the amendment left Mr Murdaca’s liability unaffected.[27]
[27]Ibid [303]–[304].
In this Court, Mr Murdaca submitted that, even if he was taken to have agreed to the form of the LNSA on 1 October 2021 by virtue of his execution of the execution page on two occasions, Jasper and the Financiers had effectively made a counteroffer in the period before they signed the agreement on 5 October 2021, involving an increase in the establishment fee of $10,000. It was submitted that this amendment was adverse to Mr Murdaca’s interests because GME, as borrower, was required to apply an additional $10,000 of borrowed funds towards the establishment fee, leaving less surplus to repay the principal. It was submitted that there was, in effect, a fresh offer which Mr Murdaca never accepted. Mr Murdaca called in aid the principle that guarantees are viewed strictly and that courts have historically treated guarantors in a favourable fashion.[28]
[28]Union Bank of Australia Ltd v Puddy [1949] VLR 242, 247 (Fullagar J).
In respect of cl 14.5(f), Mr Murdaca submitted that it could operate only in relation to events after entry into the contract. It could not cure Jasper’s failure to seek Mr Murdaca’s consent to the variation in the establishment fee, because the LNSA was not in force when that purported amendment was suggested or made.
The respondent embraced the reasoning of the trial judge. In addition, although it did not file a notice of contention, the respondent made a submission it had made at trial which was a variation upon the reasoning the judge ultimately adopted. The respondent submitted that Mr Murdaca was on notice of the amount of the establishment fee because, by virtue of the term sheet that had been exchanged, he was aware that the fee was fixed at one per cent of the face value of the notes under the LNSA. He was on notice from the 1 October Dahan email of the increase to that face value to $41,250,000.[29] The final figure was also recorded in the waiver of independent legal advice signed by Mr Murdaca on that day. As a result, the respondent submitted that any increase in the face value of the notes under the LNSA, of which Mr Murdaca was aware, would necessarily result in a proportionate increase in the establishment fee.
[29]As set out in [16]–[18] above.
Mr Murdaca’s argument was not, at least in this Court, that the handwritten amendment to the document discharged the guarantee or otherwise had the effect of relieving him of obligations as guarantor. The argument was that there was no contract formed involving Mr Murdaca at all, because the documents the respective parties signed were different. It was submitted that Jasper and the Financiers had received the signed version of the LNSA sent to them on behalf of Mr Murdaca and that, instead of accepting the offer constituted by the provision of Mr Murdaca’s signature, they had made a counteroffer which included a different establishment fee. Mr Murdaca had never accepted that counteroffer and so there was no contract formed between them.
The argument was framed in the traditional language of offer and acceptance. Neither party submitted that the analysis of the legal position was assisted by having resort instead to the approach which asks whether a manifestation of mutual assent can be implied from the circumstances.[30]
[30]Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, 82–3 (Ormiston J); Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, 178 (Tadgell J); Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 176–9 [71]–[81] (Heydon JA).
Clause 5.5 provided:
Establishment Fee
The Establishment Fee shall be payable prior to or at the time when the initial Utilisation is made, and the Borrower authorizes the Security Trustee to withhold the Establishment Fee from the initial Utilisation.
The effect of the increase in the establishment fee was, as Mr Murdaca submits, to require the borrower to expend an additional $10,000 by way of fees. That additional obligation formed part of the Secured Moneys whose payment Mr Murdaca guaranteed, but since it was to come out of the initial Utilisation there was no prospect of that guarantee ever being called upon in respect of the establishment fee, or the additional $10,000. As between the Financiers and Mr Murdaca, therefore, there was no substantive difference between the legal obligations in the document he signed and the one providing for the higher establishment fee. There was, however, a financial impact upon the ability of GME to repay the Financiers, because $10,000 of the advanced funds was, by virtue of the amendment, dedicated to payment of the establishment fee rather than the operation of the business. The borrower was therefore in a less advantageous financial position to that extent.
On the arguments of the parties in the present case, the offeror was Mr Murdaca when he confirmed, by his signature and through his solicitor, his assent to the terms of the written document incorporating the page swap.[31] The issue is whether the act of signing the document in a form that contained an amended establishment fee amounted to an acceptance of that offer.
[31]Outer Suburban Property Ltd v Clarke [1933] SASR 221, 224 (Angas Parsons and Napier JJ) (‘Outer Suburban’); Gjergja v Cooper [1987] VR 167, 198–9 (Ormiston J) (‘Gjergja’).
The question whether an offer to contract has been accepted, under normal contractual principles, requires assent to terms matching the offer and communication of that acceptance, being conduct which, to a reasonable person in the position of the offeror, is a final and unqualified assent to the terms of the offer.[32] An immaterial amendment to a written form of offer will not prevent a finding that the offer has been accepted.[33] Amendment of an offer in a material respect constitutes a counter-offer.[34] (There is no issue about communication in the present case, it not being in dispute that it was envisaged that the assent of the parties would be manifested by the provision of their respective signatures.[35])
[32]Turner, Kempson & Co Pty Ltd v Camm [1922] VLR 498, 502–3 (Irvine CJ, McArthur J agreeing at 504); JD Heydon, Heydon on Contract (Thomson Reuters, 2019) 27 [2.10]; Wayne Courtney, John Phillips and James O’Donovan, The Modern Contract of Guarantee (Thomson Reuters, 4th ed, 2020) 59 [2–016].
[33]Bastard v McCallum [1924] VLR 9, 23 (Schutt, McArthur JJ and Weigall AJ).
[34]Outer Suburban [1933] SASR 221, 225–6 (Angas Parsons and Napier JJ).
[35]See Gjergja [1987] VR 167, 199 (Ormiston J).
Where an offeree adds words to the document proposed by the offeror, the issue resolves to whether a reasonable person in the position of the offeror would regard the offeree as having introduced a new term into the bargain and not as having clearly accepted the offer.[36] Addition of a mere detail consistent with the terms of the offer will not prevent the offeree’s response being treated as an acceptance of the offer.[37] Similarly, there is authority to the effect that, if the new term merely makes express what would otherwise be implied, it does not destroy the effectiveness of the acceptance.[38] The same principles apply where the new term amounts to a variation of a term in the offer.[39]
[36]Global Tankers Inc v Amercoat Europa NV [1975] 1 Lloyd’s Rep 666, 671 (Kerr J) (‘Global Tankers’); Capital Plumbing Service Pty Ltd v FML Assurance Ltd (1986) 4 ANZ Ins Cas ¶60-687, 74,087 (Kelly J); Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] 1 Lloyd’s Rep 475, 515 [247] (Andrew Smith J); Lark v Outhwaite [1991] 2 Lloyd’s Rep 132, 139 (Hirst J) (‘Lark’).
[37]Campbell v University of Adelaide (2006) 150 IR 225, 242 [62] (Debelle J); [2006] SASC 92, citing cases including Carter v Hyde (1923) 33 CLR 115, Stevenson, Jacques & Co v McLean (1880) 5 QBD 346 and Global Tankers [1975] 1 Lloyd’s Rep 666, 671 (Kerr J).
[38]Lark [1991] 2 Lloyd’s Rep 132, 139 (Hirst J), citing Chitty on Contracts (26th ed, vol 1 [56]).
[39]See [34]–[37] of [9] in Narayan v Narayan [2022] NSWSC 1685 (Kunc J), citing Wong v Wong [2022] FCA 78 (Halley J).
At the outset, Mr Murdaca’s argument that the rules governing offer and acceptance operate in a more favourable way in respect of a person said to have entered into a contract of guarantee must be rejected. While the law is traditionally protective of the rights of guarantors,[40] there is no such dispensation in the case of those negotiating to become guarantors. The ordinary principles apply.[41] That is not to deny, however, that the fact that the proposed contract is one of guarantee is a matter relevant to the objective evaluation of the actions of the parties.[42]
[40]Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, 561 (Mason ACJ, Wilson, Brennan and Dawson JJ).
[41]Wayne Courtney, John Phillips and James O’Donovan, The Modern Contract of Guarantee (Thomson Reuters, 4th ed, 2020) 59–60 [2–016]–[2–018].
[42]Northstate Carpet Mills Pty Ltd v BR Industries Pty Ltd [2006] NSWSC 1057 [38] (Young CJ in Eq).
In our view, a reasonable person in the position of Mr Murdaca would have regarded the signature of Jasper and the Financiers on the document with the amended establishment fee as constituting an acceptance of the offer, and not as having introduced a new term into the bargain. There are two related reasons for that conclusion.
First, a reasonable person in the position of Mr Murdaca would have regarded the difference between the documents as immaterial. Mr Murdaca was still guaranteeing payment of the same total amount, by the same borrower. (If anything, because $10,000 of the amount subject to the guarantee had already been paid, the total amount that might be called upon under the guarantee was effectively reduced by $10,000 since the amendment meant there was no prospect of the guarantee ever being called upon in respect of that additional $10,000.) There was therefore no substantive difference between the legal obligations of the guarantor in the document Mr Murdaca signed and the version providing for the higher establishment fee. Although, as explained above, GME was in a less advantageous financial position after the increase in the establishment fee to the extent that it had $10,000 less available to it to repay the moneys due, in the overall context of a loan in excess of $40 million, this could not have made any material difference to the risk taken on by Mr Murdaca in giving the guarantee.
Secondly, by virtue of the term sheet that had been exchanged, Mr Murdaca was aware that the fee was fixed at one per cent of the face value of the notes under the LNSA. He was also on notice of the increase to the face value to $41,250,000, from the 1 October Dahan email and the waiver of independent legal advice he signed.[43] The result is that Mr Murdaca was on notice that there would be a proportionate increase in the establishment fee. In making the handwritten amendment, Jasper and the Financiers merely made explicit what was already implicit in the offer. This reinforces our conclusion that a reasonable person in the position of the parties would have regarded the amendment as immaterial.
[43]As set out in [16]–[18] above.
It is not necessary for us to consider the second reason upon which the trial judge relied, namely the application of cl 14.5(f). That provision addresses events that might affect the extant guarantee, rather than the anterior question whether there is a contract of guarantee at all. We have some doubt whether that clause was capable of applying to an amendment made before the LNSA came into effect, but it is not necessary for us to decide that question. The clause does, however, reinforce our conclusion above as to materiality — if, as appears from cl 14.5(f), the establishment fee could have been varied after the contract was entered into, then it could not have been material that the same change was made before the contract was signed by all parties.
Leave to appeal on proposed ground 2 in Mr Murdaca’s application should be granted, but the ground cannot succeed.
Mr Kairouz (grounds 5, 6, 7(a)–(c), 10(a), (b) and (f), 13(a)–(c))
At trial, Mr Kairouz submitted that, when he executed the guarantee on 21 September 2021, with his handwritten amendment on page 48, he was offering to provide a guarantee in that form. That offer was rejected by Jasper and it was submitted that no binding agreement therefore came into existence. The judge noted that Mr Kairouz did not advance a case to the effect that Mr Guy did not act with his instructions when he sent the email to Mr Constable on 1 October 2021 conveying the consent of Mr Kairouz to the page swap and replacement of the page with the handwritten amendments with an unamended page. Rather, Mr Kairouz submitted at trial that the extent of his authorisation of Mr Guy was confined to the page swap and handwritten amendments, not extending to binding Mr Kairouz to a guarantee in an amended LNSA without the further step of fresh execution of the LNSA in a form reflecting the amendments.[44]
[44]Reasons [311].
The judge rejected that submission. He held that it was inconsistent with the objective intention of the parties as revealed by the terms of Mr Constable’s email of 1 October 2021 (sent in the context of prior execution of the LNSA by Mr Kairouz and others) which set out a list of steps required in order for the transaction to settle, including the page swap in the case of Mr Kairouz. The judge held that the entire exchange took place in circumstances which objectively conveyed the mutual intention of the parties that, once the outstanding matters, which did not include re-execution by Mr Kairouz, had been attended to, the transaction would settle and funds would be provided.[45]
[45]Ibid [312].
Mr Kairouz now submits that the evidence showed that Mr Guy had authority as a ‘messenger’, or authority to negotiate, as opposed to being authorised to amend the LNSA on behalf of Mr Kairouz. It was submitted that ‘clear and cogent evidence’ was required of a solicitor’s authority to bind a client to a contract.[46]
[46]Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605, 630 [147] (Beazley P, Meagher JA agreeing at 633 [162]); Re Sparkling Beverages Pty Ltd[No 2] [2023] VSC 419 [138] (Connock J).
Mr Kairouz submits that the LNSA was a deed which was required to be signed, by virtue of: the email from Mr Constable dated 17 September 2021 specifically requiring that the LNSA be signed; what is characterised as a ‘whole agreement clause’ in the LNSA (cl 21.5(f));[47] and s 126 of the Instruments Act 1958, which required the essential terms to be signed.[48] The Instruments Act submission is, in effect, that s 126 required Mr Kairouz to sign the LNSA again following the page swap.
[47]Clause 21.5 is titled ‘Variation and waiver’ on the LNSA.
[48]Goldsmith v Macquarie Leasing Pty Ltd [2013] VSC 332 [26] (Dixon J).
The respondent submits that it is impermissible for Mr Kairouz to rely on s 126 of the Instruments Act in this Court as the matter was not raised at trial, nor pleaded. It is submitted that a defence based on that provision is required to be specifically pleaded.[49] In any event, s 126 was complied with because Mr Kairouz did sign the guarantee, witnessed by Mr Guy. It is submitted that there is no rule that a contract must be re-executed as a whole in circumstances such as the present.[50]
[49]Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 440 (Latham CJ, Williams and Fullagar JJ).
[50]Bluck v Gompertz (1852) 7 Exch 862, 868; 155 ER 1199, 1202 (Pollock CB); New Hart Builders Ltd v Brindley [1975] 1 Ch 342, 351–2 (Goulding J) (‘New Hart Builders’).
In so far as Mr Kairouz argues that the judge should have held that he did not confer authority upon Mr Guy to agree to an amendment to the LNSA making his liability unlimited, the respondent submits that Mr Kairouz did not deny authorising Mr Guy to agree to the page swap having the effect of making his liability unlimited, and that the ground of appeal seeks to revisit the judge’s adverse findings as to the credibility of Mr Kairouz without identifying any error in the approach taken by the judge at trial. In any event, the objective contemporaneous record established that Mr Kairouz had consented to entering into the LNSA.[51] No argument was put at trial that Mr Guy did not act in accordance with the instructions of Mr Kairouz. It is submitted that Mr Kairouz gave evidence to the contrary.
[51]Reasons [308]–[313].
For the reasons advanced by the respondent, these grounds cannot be accepted.
First, although it is true that s 126 of the Instruments Act was not pleaded, Mr Kairouz did rely upon the provision in opening and closing submissions. The respondent’s point that the provision must be pleaded, while formally correct, does not deal with the fact that the point was taken, albeit without being pleaded. As far as can be ascertained, no objection was taken to the absence of a pleading at trial.
The requirement to plead the section is in substance a statement that the onus lies on the party contending non-compliance. Be that as it may, s 126 does not avail Mr Kairouz. The section provides:
126 Certain agreements to be in writing
(1)An action must not be brought to charge a person upon a special promise to answer for the debt, default or miscarriage of another person … unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note.
If the submissions of Mr Kairouz denying that he entered into the LNSA and the AAD are accepted, nothing is added by reliance on s 126. If, on the other hand, those submissions are rejected, then there was an agreement and Mr Kairouz signed the execution page. As Heydon on Contract explains:
If a memorandum is altered after it has been signed but before the parties have become contractually bound, parol evidence is … admissible to show that the signature was intended to apply not only to the initial memorandum but also to the alteration.[52]
[52]JD Heydon, Heydon on Contract (Thomson Reuters, 2019) 201 [6.400], citing Stewart v Eddowes (1875) LR 9 CP 311; Koenigsblatt v Sweet [1923] 2 Ch 314 and New Hart Builders [1975] 1 Ch 342. The variation of a contract after it has become binding on the parties, as distinct from a document yet to be agreed, was distinguished in New Hart Builders.
In this case, Mr Kairouz clearly indicated his intention that the changes effected by the page swap were to form part of the agreement ultimately entered into on 5 October that he had signed on 21 September 2021. Mr Guy’s email indicated Mr Kairouz’s consent to the page swap and Mr Kairouz’s testimony confirmed Mr Guy’s authority to send that email.[53]
[53]See [90]–[92] below.
The contention that the agreement could not be enforced due to non-compliance with s 126 of the Instruments Act must fail. It is true that the judge did not address this argument. In the circumstances, nothing turns on that fact. Moreover, given that the point was not pleaded, or addressed in oral submissions except in the most perfunctory terms, it is not surprising that it was not given attention.
The argument that Mr Guy lacked ‘clear and cogent’ authority to substitute the pages in the page swap, so as to bind Mr Kairouz to the agreement in the form it thereby took, is also without merit. A solicitor does not have authority to bind a client to a contract without clear and cogent evidence of that authority.[54] Such evidence may demonstrate the solicitor’s authority either expressly or by necessary implication.[55]
[54]Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146, 154 (Menzies J, Kitto J agreeing at 153, Owen J agreeing at 158) (‘Pianta’); Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605, 629 [138], 630 [147] (Beazley P); see also 607 [1], 610 [20]–[21] (Bathurst CJ), 633 [161]–[162] (Meagher JA).
[55]Pianta (1964) 180 CLR 146, 152 (Barwick CJ).
Here, the judge pointed out that Mr Kairouz did not advance any case that Mr Guy did not act with his authority when he sent the email to Mr Constable at 11:58 am on 1 October 2021 stating that he had been instructed to advise that his clients consented to the swap of the five pages. Mr Kairouz had been sent the earlier 1 October Constable email identifying the matters that remained outstanding before settlement could proceed. Mr Kairouz was shown the 11:58 am email under cross-examination and the following exchange ensued:
Mr Guy sent this email, after obtaining instructions from you that he could do so?---Not necessarily instructions from me, he had notified me that there was going to be changes to the NSA [sic], and I said ‘No problem’.
All right, did he tell you what the changes would be?---I can’t remember all of it.
I suggest to you that he did tell you what the changes would be - - - ?---I can’t — can’t recall the exact conversation.
All right, in any event, you told him that you were happy for the LNSA to be amended?---I don’t know about the word ‘happy’, but, ah, I said ‘Yes, that’s okay.
…
The sending of this email was consistent with what you had told Mr Guy?---Mr Guy — Mr Guy told me, I — so, we had — just go back to my original comment I made earlier, I didn’t instruct, I — basically, he said ‘There’s going to be amendments to the – to the deed, LNSA’, and I said ‘No problem’, and he would - - -
He told you what the amendments were, I suggest - - -?---Sure, sure, he must have told me the amendments were - - -
All right, and you approved?---I consented to them, yes.
Mr Kairouz submitted in this Court that he ‘consented to changes being made save that he did not consent to his liability being unlimited’. This submission relies on the following answers after Mr Kairouz was taken to page 48 of the LNSA, where his name was deleted from cl 14.1(c), the provision limiting the liability of certain guarantors which Mr Kairouz had previously amended by hand:
You’ll see that your name has been crossed out there?---Yeah, noticed that.
Your name was crossed out with your authority given through Mr Guy, was it not?---I can’t answer that, sorry.
Is that because you don’t recall?---I can’t answer that. I – I honestly don’t know.
You knew that you would have to give an unlimited guarantee, didn’t you?---I knew I had to give a guarantee.
You knew it had to be unlimited because Mr Guy told you it had to be unlimited?---Mr Bick, I knew I had to give a personal guarantee.
Well, let me put it to you again?---Yep.
Mr Guy told you that you had to give an unlimited guarantee not a limited guarantee. Do you agree?---No.
Sorry?---No. It was a guarantee I was given.
This is hardly compelling evidence that Mr Kairouz did not consent to an unlimited guarantee. He had earlier confirmed that he consented to the page swap, which included page 48, and that Mr Guy would have explained the amendments. His assertion that he was not told that the guarantee was unlimited (which was the effect of the new page 48), coming after saying that he ‘honestly’ didn’t know whether he had authorised the deletion of his name in cl 14.1(c) that effected that very change, is belated, vague and unconvincing. His evidence is not corroborated by any objective evidence, which means that the judge’s unfavourable view of Mr Kairouz’s credibility applies.[56] Ultimately, the evidence of Mr Guy’s authority was ‘clear and cogent’. Mr Kairouz authorised Mr Guy to consent to the page swap on his behalf.
[56]See [148] below.
Mr Kairouz seeks to avoid that conclusion by submitting, albeit faintly, that a further step was required, by which the LNSA was freshly executed in the form reflecting the amendments. But there is no reason, as a matter of law, why the operation of the agreement was subject to any such condition being satisfied. Mr Kairouz pointed to no evidence of a stipulation to that effect, or any such understanding between the parties. Nor is there any principle of law prescribing the taking of such a step. The cases cited by the respondent concerning provisions similar to s 126 of the Instruments Act suggest the contrary.[57] Although Mr Kairouz submitted that they were to be distinguished because they did not concern page swaps, there is no reason why that particular mode of altering a signed document should be treated any differently. Moreover, the submission is flatly inconsistent with the communications between the parties which referred to matters outstanding to settlement, and did not mention the execution of fresh documents but rather specified that pages would be swapped. The two courses are mutually exclusive.
[57]See [86] and n 50 above.
Finally, Mr Kairouz refers to what he designates the ‘whole agreement’ clause in the LNSA, cl 21.5(f). That provision is not, however, a ‘whole agreement’ clause in the sense of a provision specifying that the agreement of the parties is contained within the document itself and not in any other documents or communications between them. Instead, it provides that any variation of the agreement must be in writing and signed by GME as borrower and Jasper Group Limited (Seychelles Company 224 223) (‘the Agent’) on behalf of itself, Jasper and the Financiers. This provision has no relevance to the entering into of the agreement itself, which involves no question of variation.
For these reasons, each of the proposed grounds advanced by Mr Kairouz under this heading must fail.
Whether interest provisions in the LNSA and AAD are unenforceable as penalties
Mr Murdaca (ground 3), Mr Kairouz (grounds 8, 9, 11 and 12)
Under cl 3.1 of the LNSA, the Financiers were to subscribe for Loan Notes issued by GME as borrower and thereby make available to GME a term loan note facility. The ‘Total Face Value Amount’ for the facility was $41,250,000. However, the notes were to be issued at a discount, so that the Financiers were only required to lend up to $36,500,000.
Clause 6.1 provided that GME must repay each Loan Note, at its Face Value, and all other Secured Moneys in full on the Termination Date and otherwise as required by the LNSA. The ‘Termination Date’ was the date nine weeks after execution of the LNSA: cl 1.1.
Clause 5.3 is the provision said to impose a penalty. It provided:
5.3 Interest
(a)From the first day following the Termination Date and on each day thereafter as well as on each day where an Event of Default is subsisting interest will accrue and be calculated in the manner set out in this clause 5.3 on the Principal Outstanding and any money that is due and payable by it, but unpaid and on any interest payable but unpaid, at the Overdue Rate.
(b)The interest payable under this clause 5.3 accrues from day to day from the first day following the date of the Event of Default or the Termination Date (whichever is earlier) until the day that Principal Outstanding and other amounts due under any Finance Document is repaid in full.
(c)The Overdue Rate payable under this clause 5.3 shall be capitalised at monthly intervals such that the amount of that interest payable will form part of the Principal Outstanding and interest shall accrue on that amount.
(d)Failure to repay the Principal Outstanding and other amounts due under any Finance Document in full before or on the Termination Date is an Event of Default.
The ‘Overdue Rate’ was 60 per cent per annum.
‘Events of Default’ were defined in cl 13.1, which consisted of 34 sub-paragraphs. The events included a failure to pay an amount due and payable by GME or a guarantor, a guarantee becoming enforceable, insolvency of a guarantor, a change in control of GME, and the death of a guarantor. If an Event of Default subsisted, the Agent could give notice to GME declaring that the Secured Moneys were immediately due and payable, and GME must then immediately repay the Secured Moneys: cl 13.2.
The relevant provisions of the AAD were similar. The terms of the advance were contained in the LNSA except that the AAD prevailed to the extent of any inconsistency between them: cl 6.
Under the AAD, the ‘Original Beneficiaries’ agreed to advance $2,000,000 to GME. GME agreed to repay the ‘Repayment Amount’ of $2,400,000 to Jasper by 9:00 am on the date falling one month after the date of the advance (the ‘Expiry Time’): cl 9. The AAD then provided that GME undertook:
11.That any failure to pay the Repayment Amount to the Original Beneficiaries by the Expiry Time will constitute a default (however defined) under the [LNSA]. For the avoidance of doubt, all Finance Documents (including all Security, each as defined in the [LNSA]) will be immediately enforceable if [GME] fails to repay the Repayment Amount by the Expiry Time, and the amount payable will be the amount due under the [LNSA] and the Additional Advance.
12That any failure to pay the Repayment Amount to the Original Beneficiaries by the Expiry Time will result in default interest being charged at a rate of 120% per annum on the Repayment Amount. Interest accruing under this paragraph 9 [sic] shall accrue in accordance with clause 5.3 of the [LNSA] from the Expiry Date until the Repayment Amount is repaid.
Mr Murdaca and Mr Kairouz both contended that the high rates of interest payable after the Termination Date and the Expiry Time respectively were unenforceable as penalties.
Judge’s reasons
The judge identified the critical question as whether ‘the (or a) predominant purpose of the impugned provision[s] is to punish the borrower for breach and thereby compel performance’.[58] The main reason for answering that question in the negative was that, after the Termination Date (or the Expiry Time), there would otherwise have been no interest payable on the amount outstanding. From the perspective of GME, the difference between the discounted amount of $36,500,000 and the Face Value Amount of $41,250,000 represented the price of obtaining use of the $36,500,000 for a nine week period. But without cl 5.3, GME would have free use of the money after the Termination Date until the Secured Moneys were payable in full. Paradoxically, the cost of finance to GME would otherwise have lessened after default.[59]
[58]Reasons [355].
[59]Ibid [357]–[359].
In the judge’s view, the argument was, if anything, stronger in the case of the AAD because ‘the only relevant event which gave rise to the imposition of default interest … was the failure to repay the facility by the Expiry Time’.[60] This refers to the fact that the LNSA provided for the Overdue Rate to become payable upon Events of Default, as well as upon the Termination Date, allowing an argument that the clause was penal because it was triggered by a range of events, some of which would occasion only trifling damage. The judge rejected that argument as establishing only a weak presumption which was displaced by the purpose of default interest he had identified.[61]
[60]Ibid [361].
[61]Ibid [360]–[361].
The judge also observed that there were other clauses which became operative on default which had significant consequences. This made it harder to say that the imposition of high interest would be so burdensome as to compel performance.[62]
[62]Ibid [356], [362].
The judge held that, while the default interest rates were high, it was ‘tolerably clear on the evidence’ that the LNSA and the AAD were ‘perceived as extremely high risk loans’.[63] He continued:
Each of the parties to these arrangements were persons of considerable commercial sophistication and had no shortage of legal advice, or access to legal advice. As well advised, sophisticated and apparently rational actors, it stands to reason that the terms on offer in the LNSA and the AAD were the best terms that could be obtained by the borrower in the circumstances in which it was seeking the finance and, as such, should be regarded as representing market rates.[64]
Submissions
[63]Ibid [363].
[64]Ibid [364].
Mr Murdaca submitted that the Overdue Rate under the LNSA applied indiscriminately, including in circumstances which would result in only trifling damage.[65] While he accepted that he bore the onus to show that the relevant provisions were penalties, that onus was a slight one and was satisfied by the terms of the LNSA themselves.[66] Those terms included the very high rates of interest and provided for an increase in the interest rate from zero to 60 (or 120) per cent. They also imposed that rate indiscriminately on a wide range of events of default, including a failure by GME to provide internet banking passwords. Mr Murdaca submitted that, in light of this evidence, an evidentiary onus shifted to Jasper to justify the rates.[67]
[65]Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231, 243 [72], 244 [76] (McDougall J, Gleeson JA agreeing at [1]) citing Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79; Kay v Playup Australia Pty Ltd [2020] NSWCA 33 [96] (Brereton JA, Macfarlan JA agreeing at [1], Simpson AJA agreeing at [132]).
[66]Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251 [51] (White J) (‘Bay Bon’); Bellas v Powers [2023] NSWSC 1198 [66]–[67] (Robb J) (‘Bellas’).
[67]Ibid.
It was submitted that Jasper advanced no evidence to justify the rates, or to show how the moneys could have been deployed by the Financiers if repaid on time. Mr Murdaca challenged the judge’s inference that the rates were in line with market practice, reflecting the best terms that could be obtained by GME in the circumstances, such that the rates represented market rates. It was submitted that this finding could only have been made if supported by expert evidence, and it was not.
Finally, Mr Murdaca submitted that the judge was wrong to state that, without the default interest provision, GME would have ‘free’ use of the money until it was repaid. Rather, Jasper could have sued GME and the guarantors for breach of the LNSA and recovered its actual loss and damage, or it could have sued for repayment of the debt with statutory interest.
Mr Kairouz advanced arguments to similar effect. He also submitted that the judge was wrong to infer that the interest rates represented market rates for a risky loan, which was said to be unsupported by the evidence.
Mr Kairouz also submitted that his ground 10 was relevant to the penalty question. That seems to be a reference to the judge not having given reasons why the failure of Jasper to call evidence from a specific witness should not give rise to a Jones v Dunkel inference: ground 10(d). That matter is dealt with separately later in these reasons.
Jasper submitted that the party contending that a default interest provision is a penalty bears both the evidentiary and persuasive onus.[68]
[68]Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525, 581 [167] (Gageler J) (‘Paciocco’).
According to Jasper, the additional amounts payable under the LNSA and the AAD represented simple interest at an annual rate of 75.11 per cent and 240 per cent respectively. It was therefore wrong to treat the loans as having been made at effectively zero per cent interest.
Moreover, Jasper submitted that, in order to compare the interest rates before and after the dates for repayment, it was necessary to derive the compound rate for the period of the loans. These rates were said to be 73.014 per cent and 240 per cent respectively (compounding monthly).
Jasper also submitted that there was nothing inherently penal about high rates of interest, or higher rates upon default. Jasper submitted that the onus was on Mr Murdaca and Mr Kairouz to establish that the amount was out of all proportion to the loss likely to be suffered as a result of a breach.[69] The most likely default was failure to pay the amounts due on the stipulated dates. The allegedly indiscriminate application of the default rates did not affect that position.
[69]Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656, 669 [32] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ) (‘Ringrow’).
Jasper further submitted that this was not a case of interest being payable upon a series of possible breaches, so as to apply indiscriminately. There was only one breach.
Consideration
There was, apart from the issue of onus, no difference between the parties as to the applicable law. The following summary draws on that of McDougall J in Arab Bank Australia Ltd v Sayde Developments Pty Ltd (‘Arab Bank’).[70]
[70][2016] 93 NSWLR 231, 242–244 [69]–[76] (McDougall J, Gleeson JA agreeing at [1]).
Lord Dunedin’s speech in Dunlop Pneumatic Tyre Co v New Garage & Motor Co (‘Dunlop’)[71] set out ‘the principles governing the identification, proof and consequences of penalties in contractual stipulations’, and ‘continues to express the law applicable in this country’.[72] Lord Dunedin relevantly said:
[71][1915] AC 79, 86–7 (Lord Dunedin).
[72]Ringrow (2005) 224 CLR 656, 663 [12] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ); Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, 234–6 [69]–[77] (French CJ, Gummow, Crennan, Kiefel and Bell JJ) (‘Andrews’).
2.The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.
3.The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.
4.To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a)It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.
(b)It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid. This … is truly a corollary to the last test. …
(c)There is a presumption (but no more) that it is penalty when ‘a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage’.
On the other hand:
(d)It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties.[73]
[73]Dunlop [1915] AC 79, 86–8 (citations omitted).
In Paciocco, the High Court held by majority (French CJ, Kiefel, Gageler and Keane JJ) that a late payment fee imposed by the respondent bank on its credit card customers was not a penalty.[74] The following propositions emerge from the case:
(a)The essence of a penalty is that it is a collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach,[75] and thus to compel performance.[76]
(b)One way of testing whether the impugned stipulation is penal — intended to punish — is to inquire whether the sum that it stipulates to be payable on breach is extravagant or out of all proportion to, or unconscionable in comparison with, the maximum amount of damage that might be anticipated to follow from the breach.[77]
(c)‘Damage’ in this sense is not limited to damages recoverable upon breach of contract, but may extend to damage, or losses, caused by the impairment of other legitimate commercial interests that were intended to be protected by the stipulation.[78]
(d)The analysis is to be made at the time, and taking into account the circumstances applicable, when the contract was made, not at the time of breach; the analysis is prospective, not retrospective.[79]
(e)Mere disproportion between the stipulated sum and the possible damage is not enough to indicate a penalty; the disproportion must be such that it is unconscionable for the lender to rely on the stipulation.[80]
(f)The onus of proving that a contractual stipulation amounts to a penalty rests with the person asserting it.[81]
(g)The ‘presumption’ identified by Lord Dunedin in Dunlop at his point 4(c) is ‘a weak one’.[82]
[74]Paciocco (2016) 258 CLR 525, 557 [69] (Kiefel J, French CJ agreeing at 536 [2]), 584 [177] (Gageler J), 616 [285] (Keane J).
[75]The principles extend to non-observation of contractual stipulations other than breach, where a provision for the payment of a sum of money is out of all proportion to the interests of the party intended to be protected by the provision: Andrews (2012) 247 CLR 205, 216–7 [10] (French CJ, Gummow, Crennan, Kiefel and Bell JJ); Paciocco (2016) 258 CLR 525, 547 [29], 547–8 [32] (Kiefel J, French CJ agreeing at 536 [2]), 577–8 [154]–[156] (Gageler J), 607 [256] (Keane J).
[76]Ibid 547 [29] (Kiefel J, French CJ agreeing at 536 [2]), 569 [127], 579 [159], 581 [166] (Gageler J), 606 [254], 607 [259], 613 [273]) (Keane J).
[77]Ibid 547 [29], 553 [54], (Kiefel J, French CJ agreeing at 536 [2]), 578–80 [158]–[162] (Gageler J); 595 [221] (Keane J). The terms ‘exorbitant ‘ and ‘unconscionable’ have also been used in this context: Paciocco (2016) 258 CLR 525, 548 [34] (Kiefel J, French CJ agreeing at 536 [2]), 576 [153] (Gageler J), 612 [270] (Keane J), 633 [338] (Nettle J).
[78]Ibid 548 [33], 550–1 [42]–[47], (Kiefel J, French CJ agreeing at 536 [2]), 574 [145], 579–80 [160]–[162] (Gageler J), 593 [216], 616 [283] (Keane J).
[79]Ibid 556 [62] (Kiefel J, French CJ agreeing at 536 [2]), 582 [169] (Gageler J).
[80]Ibid 553 [54] (Kiefel J, French CJ agreeing at 536 [2]), 580 [164] (Gageler J), 595 [221], 601 [240], 615 [279] (Keane J).
[81]Ibid 581 [167] (Gageler J).
[82]Ibid 610 [265] (Keane J); see also 581–2 [168] (Gageler J).
Lord Dunedin’s ‘presumption’ 4(c) was derived from Elphinstone v Monkland Iron and Coal Co Ltd.[83] It was mentioned later in his speech in Dunlop when he said:
I think Elphinstone’s Case, or rather the dicta in it, do go this length, that if there are various breaches to which one indiscriminate sum to be paid in breach is applied, then the strength of the chain must be taken at its weakest link. If you can clearly see that the loss on one particular breach could never amount to the stipulated sum, then you may come to the conclusion that the sum is penalty. But further than this it does not go …[84]
[83](1886) 11 App Cas 332 (‘Elphinstone’).
[84]Dunlop [1915] AC 79, 89.
The relevant passage in Elphinstone is as follows:
When a single [lump] sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage, the presumption is that the parties intended the sum to be penal, and subject to modification.[85]
[85](1886) 11 App Cas 332, 342 (Lord Watson, Lord Herschell LC agreeing at 344, Lord Blackburn agreeing at 346, Lord FitzGerald agreeing at 346, Lord Halsbury agreeing at 348).
Lord Dunedin described the identification of the purpose of a contractual provision said to be a penalty as a question of construction. It is clear, however, following Paciocco,[86] that Lord Dunedin’s reference to the ‘inherent circumstances’ of the contract permits the admission of extrinsic evidence that might not be admissible according to ordinary rules of construction.[87] As such, the question is really one of characterisation of the terms of the contract, having regard to all of the circumstances bearing on that issue.[88] The question remains to be asked, however, as at the time of entry into the contract rather than at the time of breach.
[86](2016) 258 CLR 525, 547 [31] (Kiefel J, French CJ agreeing at 536 [2]), 574–5 [146] (Gageler J).
[87]JD Heydon, Heydon on Contract (Thomson Reuters, 2019) 981–2 [26.1190].
[88](2016) 258 CLR 525, 602 [243] (Keane J), 626 [317](3) (Nettle J), 574–5 [146] (Gageler J); see also 547 [31] (Kiefel J, French CJ agreeing at 536 [2]).
Notions of shifting evidentiary onus are not especially helpful in that context. The effect of shifting the evidentiary onus in reliance on evidence that a stipulation in the contract is prima facie exorbitant would be to reverse the onus at the outset of the inquiry. The evidentiary and persuasive onus of proving that a contractual provision is a penalty always remains on the party who makes that claim.[89] On the other hand, in an appropriate case, the contract itself may sustain an inference that the stipulation is extravagant or unconscionable, founding a conclusion that it is a penalty. That conclusion might be more readily drawn if the party seeking to enforce the impugned provision fails to call evidence within the knowledge of that party, which evidence would have been admissible on the question of characterisation.[90]
[89]Paciocco (2016) 258 CLR 525, 581 [167] (Gageler J); Bay Bon [2008] NSWSC 1251 [51] (White J); Bellas [2023] NSWSC 1198 [66]–[67] (Robb J); Arab Bank (2016) 93 NSWLR 231, 244 [75] (McDougall J, Gleeson JA agreeing at [1]); B&G Properties Pty Ltd v Fayad [2021] NSWSC 1382 [28] (Ball J), approved in Fayad v B&G Properties Pty Ltd [2022] NSWCA 129 [33] (Leeming JA, Bell CJ agreeing at [1], Basten AJA agreeing at [41]).
[90]Bay Bon [2008] NSWSC 1251 [51] (White J); Bellas [2023] NSWSC 1198 [66]–[67] (Robb J); see also Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 [11] (Chernov JA, Warren CJ agreeing at [1]).
The question, then, is whether the (or a predominant) purpose of the stipulation of interest from the day after the Termination Date (under cl 5.3(a) of the LNSA) or the Expiry Time (under cl 12 of the AAD) is to punish GME for breach, and thus to compel performance.
It is first necessary, this being a question of characterisation of a contractual term, to examine cl 5.3 itself. It does two distinct things. First, cl 5.3(a) applies the Overdue Rate from the day following the Termination Date, on the Principal Outstanding and any money that is due and payable. By implication, confirmed in cl 5.3(b), such interest is payable on such amounts by GME. Secondly, the same rate of interest applies on each day where an Event of Default is subsisting. An Event of Default otherwise does not have automatic effect but gives Jasper the option of declaring the Secured Moneys due and payable, such that they must be immediately repaid: cl 13.2. It is possible, therefore, for an Event of Default to occur but for no moneys to be due and payable.
Although failure to pay any of the Secured Moneys when due and payable is itself an Event of Default, the provision for interest upon which Jasper relies is the former one, referable to the Termination Date alone.
As has been shown, a significant part of the argument contending that cl 5.3(a) operates as a penalty sought to apply Lord Dunedin’s presumption 4(c), relying on the range of events which could attract the Overdue Rate. A threshold issue is whether the presumption applies at all in the context of a default interest rate, rather than a ‘single lump sum’. For present purposes, it may be assumed that it does.
Jasper submitted that this was not a case of default interest being payable upon a series of possible breaches, so as to apply indiscriminately. It was said that, as a matter of fact, there was only one breach. In so far as this submission suggests that presumption 4(c) set out by Lord Dunedin in Dunlop operates by reference to the actual breaches that have occurred, rather than those to which the provision might apply, it should be rejected. Such a position would be inconsistent with the fact that the Court is undertaking an exercise in characterisation, in order to identify the purpose of a contractual provision.
But in so far as the submission draws attention to the dual operation of cl 5.3(a), it should be accepted. Counsel for Mr Murdaca submitted, in answer to questions from the Bench on this issue, that it was impermissible to ‘excise’ the parts of a provision which would have a penal operation. Depending on the terms of the contract, that may be so, when a single stipulation has effect in multiple circumstances. But here there are two stipulations. The provision for interest from the day following the Termination Date operates only in one circumstance.
It is far from obvious that, in respect of a stipulation which applies a particular consequence in only one circumstance, Lord Dunedin’s presumption 4(c) has any work to do by reference to one or more other stipulations which apply the same consequence to different circumstances. Taking an extreme case, if the former stipulation may be seen as a genuine pre-estimate of the loss occasioned in the relevant circumstance, it is hard to see why it would be presumed to be penal on the basis of other stipulations, which could be seen to operate in the same way but indiscriminately. As a matter of principle, each stipulation needs to be construed on its own terms (albeit having regard to their context, which in some cases might suggest that the stipulations are not truly independent and should therefore be treated as having the same collective purpose).
On this approach, cl 5.3(a) would be treated as containing two distinct stipulations which operate independently of each other. In its first application, it would operate upon failure to pay the amount due on the Termination Date and presumption 4(c) would have no application to that stipulation. It would not matter that, in that circumstance, cl 5.3(a) also operates in its second application, by virtue of the fact that failure to pay the amount due on the Termination Date (or any other amount of the Secured Moneys, when due and payable) is an Event of Default. Putting the matter at its highest, even if that second application were found to constitute a penalty, the first application would be capable of distinct operation.
It does not matter whether the presumption is inapplicable, as suggested above, or whether it is displaced in such a case. The result is the same. Put differently, even if presumption 4(c) is properly applied in circumstances such as the present, at the very least, the presumption is weakened. In the end, the use of contractual language creating more than one stipulation indicates an intention that they have independent operation, which suffices to displace any presumption that their purpose (penal or otherwise) is to be identified collectively.
The same analysis applies to the AAD, with added force because it does not impose 120 per cent interest on any basis other than failure to pay the Repayment Amount by the Expiry Time. To the extent that such failure might also be treated as an Event of Default by virtue of reading the two documents together, the stipulation for interest upon such an event is even more remote from the stipulation for 120 per cent interest than the position in the LNSA considered above.
It is not necessary to consider two subsidiary issues that were touched upon in argument. The first of those issues, already mentioned, was whether the presumption applies at all in a case where the impugned provision does not mandate payment of a ‘single lump sum’, but a payment of interest. Here there was no such single lump sum. The second issue is whether the penalty question may be addressed, and resolved, by testing the ‘weakest link’ in the ‘chain’ of breaches upon the occurrence of which the ‘same indiscriminate sum’ is to be paid. Here there was no such chain.[91]
[91]See, eg, Grocon Constructors (Qld) Pty Ltd v Juniper Developer No 2 Pty Ltd [2015] QCA 291 [53]–[54] (McMeekin J, Holmes CJ agreeing at [1], Atkinson J agreeing at [2]).
Putting the ‘indiscriminate’ application presumption to one side, therefore, we are left with the LNSA itself. The parties led no evidence to show either the relationship of the Overdue Rate to any market rates for default interest or the anticipated cost to the Financiers of not having use of the outstanding funds after the Termination Date. Nor was there any evidence to support the suggestion that the Overdue Rate of 60 per cent was exorbitant or unconscionable.[92]
[92]In the context of unjust or unconscionable contracts legislation, Wood CJ at CL in Guardian Mortgages v Miller [2004] NSWSC 1236 held that he was not in a position to determine, without evidence, whether interest rates of 174 per cent and 144 per cent per annum were ‘within the range for commercial bridging or short term loans’: at [105]. Although that case was one for statutory relief, the same reasoning applies in the present matter. The respondent also referred to the observation of Young CJ in Eq in Takemura v National Australia Bank Ltd (2003) 11 BPR 21,185, 21,188 [24]; [2003] NSWSC 339, to the effect that a ‘mortgage given by a business person at a very high rate of interest, if that mortgage was freely and voluntarily given, will not be able to be attacked’ (granting specific performance in respect of a mortgage at a compounding rate of 6 per cent per month). This observation was not, however, directed at any question of penalty.
The salient features of the LNSA are as follows:
(a)GME was required to repay each Loan Note (at its Face Value) in full on the Termination Date (cl 6.1).
(b)The rate of interest payable prior to the Termination Date was zero per cent.
(c)The rate of interest payable from the day following the Termination Date was 60 per cent (cl 5.3(a)).
(d)Apart from cl 5.3(a), there was no provision for interest after the Termination Date.
(e)A lump sum amount was paid by GME in return for the use of the discounted sum for nine weeks.
The fact that the lump sum payment for the use of the money could be translated into a high, or very high, interest rate, is relevant in so far as it might be possible to compare that rate with the Overdue Rate. Mr Murdaca and Mr Kairouz did not attempt that exercise, relying instead on the zero interest rate for which the LNSA provided. That approach failed, however, to have regard to the commercial reality of the LNSA, which imposed a cost for the use of the money. As mentioned earlier, Jasper supplied some figures intended to derive an interest rate for the nine week period reflecting the same interest mechanism as is found in cl 5.3(a).[93] There was no evidence to support the figures or explain the underlying calculations. Further, the fact that the default period was, by definition, open-ended, causes the monthly compounding interest to have a rapidly escalating operation. In the circumstances, it may be doubted whether a comparison of rates over nine weeks, as against a period of several months, or years, offers a complete picture of the operation of the impugned provision. This was not a case where a stipulation for interest, said to be a penalty, could be usefully compared with another stipulation for interest under the contract, breach of which gave rise to the putative penalty.
[93]See [114]–[115] above.
Irrespective of any issue of onus, there is no evidence to impugn the rates of interest under the two agreements. If anything, the evidence pointed the other way. The judge found that the loans were ‘extremely high risk’ and that GME was unable to obtain alternative finance; the Financiers were ‘the type of lenders that borrowers seek out when no-one else is prepared to lend them money’.[94] The respondent advanced no evidence, as at the date of the contract, as to what loss the Financiers would suffer if the moneys were not paid on the Termination Date or what benefit they would lose. Nor did Mr Murdaca or Mr Kairouz put forward evidence, again as at the date of the contract, that the rate of interest was exorbitant or unconscionable by reference to any market information or other evidence as to GME’s anticipated ability to borrow at a rate below 60 per cent as at the Termination Date. The Court is therefore left with the terms of the LNSA already mentioned.
[94]Reasons [363].
In our view, those terms fall short of establishing that the (or a predominant) purpose of cl 5.3(a) was to punish GME for failure to pay the amount due on the Termination Date, and thus to compel performance. As the judge held, but for the impugned provision, the LNSA made no provision for GME to pay for the use of the money it retained or failed to repay after the Termination Date. Whether or not it was correct to describe the use of the money as ‘free’ is not to the point. The important feature of the LNSA is that it was otherwise silent as to GME bearing any cost in that circumstance. It would be extraordinary, given the significant amount paid for the nine week LNSA facility, if the parties intended not to impose any such cost after the nine weeks. Doing so emerges as the predominant purpose of cl 5.3(a).
The same analysis applies with respect to the AAD. It is true that the default rate in that case was twice that in the case of the LNSA and it might be argued that this, of itself showed that the default rate was inequitable or unconscionable. On the other hand, the AAD was for a much smaller principal amount, over a much shorter period, and no additional security was provided. Again, there was no evidence of a market range or any financial impact of default. The argument comparing the two rates, without more, assumes that the evidence would not have justified a rate closer to 120 per cent in the case of the LNSA. But that is mere speculation. In the end, the argument that cl 12 of the AAD imposes a penalty is not sustained.
It is not necessary, in the result, to decide whether it was open to the judge to conclude that the terms of the LNSA, or the AAD, represented ‘market rates’. The above characterisation of cl 5.3(a) and cl 12, respectively, does not rely on any such finding.
The proposed ground of appeal advanced on this issue must be rejected. The issues being novel and difficult, however, there should be a grant of leave to appeal in this regard, albeit that the appeal must be dismissed.
Misrepresentations alleged in Mr Kairouz’s counterclaim
It will be recalled that Mr Kairouz alleged that he entered into the LNSA in reliance upon misrepresentations said to have been made by Mr Hopp and Mr Dahan, allegedly as agents for Jasper. He brought a counterclaim against Jasper, Mr Hopp personally and his company Santini and Mr Dahan and his company Hennessey. The counterclaim against Mr Dahan and Hennessey was dismissed by consent. Mr Hopp and Santini are not parties in this Court. It is therefore only necessary to consider the counterclaim against Jasper.
Mr Kairouz alleged two categories of misrepresentation. First, Jasper, through Mr Hopp and Santini, and Mr Dahan and Hennessey, was said to have made four ‘Exit Strategy Representations’, to the general effect that Jasper would be able to procure the refinance of GME’s loan at the end of the term. Secondly, Jasper was, through the same agents, alleged to have made nine ‘Working Capital Representations’ to the general effect that Jasper would not impede GME’s ability to obtain another loan for the purposes of working capital. Those representations were said to have been misleading because Jasper had no reasonable basis for making them, so as to have contravened s 18 of the Australian Consumer Law (the ‘ACL’) as contained in sch 2 to the Competition and Consumer Act 2010 (Cth). Mr Kairouz also alleged that the same conduct amounted to unconscionable conduct in contravention of s 21 of the ACL.
Mr Kairouz sought orders setting aside the guarantee, and damages under s 236 of the ACL.
The counterclaim was dismissed by the trial judge. In particular, the judge found that:
(a)The counterclaim depended on a finding that Mr Hopp and Mr Dahan were both working for Jasper.[95]
(b)The evidence showed that Mr Dahan was working for the borrower group or as an intermediary assisting the borrower group.[96]
(c)Because the counterclaim aggregated the statements made by Mr Dahan with those of Mr Hopp, if Mr Dahan’s conduct was not that of Jasper this affected the proper characterisation of Mr Hopp’s conduct.[97]
(d)Mr Hopp did not make the First Exit Strategy Representation or adopt anything Mr Dahan said by way of the Third and Fourth Exit Strategy Representations.[98]
(e)The case with respect to the making of the Exit Strategy Representations was wholly unsupported by any form of reliable evidence, and was untenable.[99]
(f)The only Working Capital Representations which needed to be considered were the First, Third and Ninth, which were the ones said to have been made by Mr Hopp.[100]
(g)Mr Hopp did not make any of the statements said to have been made by him.[101]
(h)In any event, Mr Hopp’s conduct at the time of the alleged misrepresentations was not undertaken by him on behalf of Jasper.[102]
(i)The case on reliance did not disaggregate the representations, or establish that Mr Kairouz would not have entered into the LNSA if not for the Working Capital Representations alone; the case for reliance on the Exit Strategy Representations was particularly weak.[103]
[95]Ibid [192].
[96]Ibid [196].
[97]Ibid [197].
[98]Ibid [207].
[99]Ibid [209].
[100]Ibid [213]; the reference in this paragraph to the Second Working Capital Representation appears to be in error: see Reasons [42(d)], [211].
[101]Ibid [214]–[216].
[102]Ibid [227]–[247].
[103]Ibid [224]–[225].
The judge’s findings rested in part on his evaluation of the witnesses. He found Mr Kairouz’s oral evidence unconvincing and would not accept it unless it was corroborated by contemporaneous evidence. He said much the same of Mr Murdaca’s evidence. He said that he approached Mr Dahan’s evidence with some caution unless it was supported by the documentary evidence. Mr Hopp appeared as a more careful and reliable witness.[104]
[104]Ibid [199]–[201], [203].
The comprehensive rejection of the case on the counterclaim means that, in order to have the judgment dismissing it set aside, Mr Kairouz would need to displace a number of findings. It is striking, therefore (as Jasper submitted) that Mr Kairouz does not directly attack the judge’s findings that none of the representations in issue were made. There are instead a number of indirect attacks which are, presumably, said to have the same overall effect.
Credit of Mr Hopp (ground 1)
Mr Kairouz submits that the judge’s assessment of the credibility of Mr Hopp was contrary to incontrovertible facts or uncontested testimony, was glaringly improbable or contrary to compelling inferences.[105] The argument depends entirely on answers Mr Hopp gave about his remuneration from the transactions, which the judge accepted were inconsistent.
[105]Robinson Helicopter v McDermott (2016) 90 ALJR 679, 687 [43] (French CJ, Bell, Keane, Nettle and Gordon JJ); [2016] HCA 22.
The judge described the evidence as follows:
In cross examination of Mr Hopp by counsel for Mr Kairouz, there was the following exchange:
What was, in relation to Jasper, how were you remunerated in respect of these transactions? Say in respect of this transaction, I’ll ask you about this transaction?---Yeah. In this transaction, my normal remuneration would be a fee of $5,000 per month while the facility was on foot should it be repaid within terms.
…
Is it pursuant to a verbal agreement with Jasper?---Yes … I get paid $5,000 per month but I only get paid if the facility is repaid within terms.
This answer was criticised in closing submissions as being inherently unbelievable and contrary to evidence given by Mr Hopp in answer to later questions from counsel for Mr Kairouz:
Did you state [at the first meeting] that you’d make at least $2 million out of the deal?---On a $25 million to $30 million loan, that would be my expectation.
There was no further follow up question and the asserted inconsistency in the answers given by Mr Hopp was not explored.[106]
[106]Reasons [204]–[205].
The judge said that, ‘at first blush’, these answers were difficult to reconcile. Noting that the inconsistency was not explored, the judge said that it did not persuade him to form a detrimental view of Mr Hopp’s credit. He volunteered both statements and his evidence was ‘far more consistent with the contemporaneous evidence’ than that of other witnesses. The judge added that it was most likely that Mr Hopp’s first answer reflected his remuneration from Jasper, whereas the latter reflected his arrangements with the Financiers.[107]
[107]Ibid [206].
Mr Kairouz submits that the judge should have taken this evidence into account in assessing Mr Hopp’s motives and hence his credibility. It is said that the judge speculated as to the reason for the inconsistency, in a way that was inconsistent with Mr Hopp’s evidence that he was testifying as to his remuneration from the transaction and not only from Jasper.
There is no substance in this ground. The judge’s ‘speculation’ did not inform his conclusion that the evidence did not reflect adversely on Mr Hopp’s credit. It was not a finding about the reason for the inconsistency, but was proffered as an explanation for the evidence after the judge had already stated his conclusion as to Mr Hopp’s credit. In any event, the judge’s observation was consistent with the evidence. In the first of the passages set out, Mr Hopp was asked about his remuneration ‘in relation to Jasper’. In the second, he was asked about his expected remuneration ‘out of the deal’.
The judge pointed out that the apparent inconsistency was not explored with Mr Hopp in his evidence. This means that there is an inadequate foundation upon which to challenge the judge’s credibility finding. We are left with a possible inconsistency in the evidence, which the judge considered in the context of evaluating the credibility of the witness. This falls well short of what is required to displace the judge’s finding, informed as it was by having seen and heard Mr Hopp give evidence.
This proposed ground must be rejected.
Conduct of Mr Dahan (ground 2)
Under proposed ground 2, Mr Kairouz submits that the judge ought to have taken account of the conduct of Mr Dahan that occurred in the presence of Mr Hopp, when he was acting as an agent of Jasper, notwithstanding the judge’s conclusion that Mr Dahan was not Jasper’s agent and that Mr Hopp did not say or do anything to convey that he adopted Mr Dahan’s representations or conduct. It is submitted that the effect of Mr Hopp’s statements, actions, silence or inaction must be deduced from the whole course of conduct.[108]
[108]Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, 625 [109] (McHugh J).
Jasper submits that it was not contended at trial that Mr Hopp adopted any statements of Mr Dahan by silence or otherwise. That submission appears to be correct. The case was run instead on the basis that Mr Hopp and Mr Dahan worked together as agents of Jasper. Mr Kairouz also fails to explain how it is said that Mr Dahan was an agent of Mr Hopp (or of Jasper), beyond having submitted at trial that Mr Hopp had authority to appoint agents and that he and Mr Dahan were working together.
On the issue of Mr Dahan’s agency, the judge observed that the evidence was ‘sparse to say the least’, being limited to the facts that they knew each other, had been involved in a previous transaction together and attended meetings jointly, and Mr Hopp referred to Mr Dahan after default as his ‘two dollar bitch’.[109] Not only did these matters ‘fall well short’ of establishing agency, the documentary evidence made the contrary clear.[110]
[109]Reasons [193].
[110]Ibid [194]–[196].
Nothing raised under this ground challenges that reasoning or points to a factual finding that the judge ought to have made, to the effect that Mr Dahan acted as agent of Mr Hopp or Jasper. This ground must be rejected.
Reliance by Mr Kairouz (ground 3)
Mr Kairouz submits that the judge erred in holding that Mr Kairouz did not take any steps in reliance on the Working Capital Representations or the Exit Strategy Representations. It is submitted, without reference to any direct evidence, that an inference of ‘inducement’ should have been drawn. Mr Kairouz refers to his own evidence to the effect that he would not have entered into the transactions if there was no working capital and exit strategy in play, and that he heavily relied on Mr Hopp to have an exit within nine weeks. But this does not gainsay the judge’s observation that the evidence did not show that Mr Kairouz would not have entered into the LNSA if not for the Working Capital Representations alone.[111] Nor does it challenge the judge’s finding that it was ‘obvious’ that Mr Kairouz, Mr Schmidt and Mr Dahan (among others) were working on their own exit strategies rather than relying on anything Mr Hopp said.[112]
[111]See [147(i)] above.
[112]Reasons [224].
There is no merit in this ground.
Alleged agency of Mr Hopp (grounds 4, 7(d), 10(c), 13(d) and 15)
This collection of grounds goes to a purported admission by Mr Hopp that he had been Jasper’s agent in August 2021. The judge found that his agency did not commence until late September 2021.[113]
[113]Ibid [244].
The passage in which Mr Hopp is said to have admitted to being Jasper’s agent is as follows:
I’ll follow that up. Mr Hopp, you say that you’re not the agent of Jasper. That’s correct?---Under the loan note document, I’m not the agent of Jasper.
No. You're not the agent of Jasper. Is that correct? That’s your evidence?---Under the loan note subscription, that’s right.
I’m asking you, were you appointed the agent of Jasper in relation to the Cedar Meats deal?---No.
All right. Now, you’ve appointed receivers to GME, haven’t you, Mr Hopp?---No.
Are you currently vetting their loan accounts in GME?---Yes.
So on what authority have you gone into GME to vet their loan accounts?---Ah, Rebecca [Loh]’s authority.
All right. So when did she give you that authority?---Maybe August.
Of what year?---21.
So from August 2021, Ms [Loh] gave you authority to act on behalf of Jasper. Is that correct? For her?---Yes.
So you’re the agent of Jasper from August 2021. Isn’t that correct, Mr Hopp?
---In regards to aspects of the transactions, yes. In regards to the loan notes subscription agreement, I would say probably no.It is abundantly clear that Mr Hopp agreed he had been appointed as Jasper’s agent to vet its loan accounts and not in respect of the LNSA. The purported admission goes nowhere and it is unsurprising that the judge did not address it in terms in his reasons.
Proposed grounds 4, 7(d), 10(c) and 13(d) are devoid of merit.
In respect of ground 15, Mr Kairouz submitted that the judge should have held that Mr Dahan was Mr Hopp’s agent, and that Jasper was therefore liable for Mr Dahan’s conduct. Oral argument was addressed to this subject under cover of ground 2. Ground 15 fails for the reasons set out in respect of ground 2 above.
Jones v Dunkel and Rebecca Loh (grounds 7(e), 10(d), 13(e) and 14)
The final collection of proposed grounds concerns a suggested Jones v Dunkel inference which it is said the judge should have drawn, based on the fact that Jasper did not call Rebecca Loh to give evidence. Ms Loh was the sole director of Jasper and the Financiers.
Mr Kairouz does not specify what evidence Ms Loh could have given or, therefore, what specific inference should have been drawn. It is suggested that a Jones v Dunkel inference would have enabled the judge more readily to accept Mr Kairouz’s evidence and reject that led on behalf of Jasper.
Such a generalised submission cannot be accepted. In the first place, the judge gave a range of reasons for not accepting Mr Kairouz as a credible witness. He gave ‘robotic’ evidence of the matters discussed at meetings which ‘amounted to a fairly clear recitation of scripted lines’. There was ‘a large body of contemporaneous documentary evidence [that was] either directly contrary to or, as a matter of logical probability, inconsistent with his account’.[114] It is speculative, if not fanciful, to suppose that Ms Loh could have given evidence to displace these findings.
[114]Reasons [199].
In any event, the inference recognised in Jones v Dunkel concerns evidence that could have been given about a specific issue.[115] The inference is that the absent witness, who could have been called, could not have assisted the case of the party who could have called the witness, in respect of that issue. As a result, the opposing evidence may more readily be accepted. Without descending into the detail of the matters about which it is said Ms Loh could have given evidence, these grounds must fail.
[115]Payne v Parker [1976] 1 NSWLR 191, 201–2 (6) and (8) (Glass JA); Australian Securities and Investment Commission v Hellicar (2012) 247 CLR 345, 413 [169] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).
The only indication of the evidence Ms Loh is said to have been able to give is that, at trial, it was submitted that she could have given evidence as to the penalty issue. Even then, however, the point about which she could have given evidence is not specified. The short answer to that contention, in any case, is that the penalty issue has been resolved without resort to evidence. Application of Jones v Dunkel would not have changed the position, because the inference does not supply any evidence.[116] It would only have supported a conclusion that the evidence of Ms Loh would not have assisted Jasper’s case.
[116]O’Donnell v Reichard [1975] VR 916, 929 (Newton and Norris JJ).
The onus on the penalty question lay on Mr Kairouz. To conclude that Ms Loh’s evidence would not have assisted Jasper in relation to that issue would not have served to discharge that onus.
Leave to rely on these grounds is refused.
Conclusion as to Mr Kairouz’s counterclaim
None of the grounds advanced for challenging the dismissal of Mr Kairouz’s counterclaim have any prospect of success. Leave must be refused in respect of all of them.
Conclusion
In Mr Murdaca’s case, leave to appeal is granted on proposed grounds 2 and 3 but is otherwise refused.
In Mr Kairouz’s case, leave to appeal is granted on proposed grounds 8, 9, 11 and 12 but is otherwise refused.
Both appeals are dismissed. We will hear the parties as to costs.
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