McLean v. Canning
[2007] QDC 347
•20 December 2007
DISTRICT COURT OF QUEENSLAND
CITATION:
McLean v Canning [2007] QDC 347
PARTIES:
WALTER McLEAN
(Plaintiff)
v
PAUL CANNING
(Defendant)
FILE NO/S:
D1/2003
DIVISION:
Civil
PROCEEDING:
Trial
ORIGINATING COURT:
District Court, Kingaroy
DELIVERED ON:
20 December 2007
DELIVERED AT:
Beenleigh
HEARING DATE:
29 and 30 March 2007
JUDGE:
Dearden DCJ
ORDER:
That the defendant Paul Canning pay the plaintiff Walter McLean the sum of $40,696.27 and interest of $24,839.24, a total of $65,535.51
CATCHWORDS:
CIVIL TRIAL – LAW OF CONTRACT - where the plaintiff claims to have contracted with the defendant to sell a business – where the defendant claims that the only agreement between himself and the plaintiff was an agreement for the defendant to manage the business during the plaintiff’s ill health - where the plaintiff claims specific performance of the contract or alternatively for consideration that has wholly failed
COUNSEL:
Mr K C Kelso for the plaintiff
The defendant appeared on his own behalf
SOLICITORS:
Michael Mason Solicitors for the plaintiff
The defendant appeared on his own behalf
Introduction
The plaintiff Walter McLean claims to have contracted with the defendant Paul Canning to sell the business “Burnett Paint Supplies”, 207-209 Kingaroy Street, Kingaroy to Paul Canning on 18 February 2002 for $54,000. The plaintiff claims specific performance of the contract, or alternatively $54,000 for consideration that has wholly failed, or alternatively for $54,000 damages for breach of contract. The defendant claims that the only agreement between himself and the plaintiff was an agreement for the defendant to manage the business during the plaintiff’s ill health. The plaintiff subsequently received some funds from the sale of a quantity of stock and fittings left in the premises at 207-209 Kingaroy Street when the defendant shifted to new premises at 2/30 Alford Street, Kingaroy.
The Law
In order to ascertain whether or not the parties entered a contract, it is necessary to identify whether there has been offer, acceptance, certainty of terms and performance of the contract.
Plaintiff’s Evidence
The plaintiff set up Burnett Paint Supplies in 1998, operating from leased premises at 207-209 Kingaroy Street, Kingaroy. The plaintiff was the sole owner and operator, but the business was managed by a Mr Clem Clark. The plaintiff went into the shop occasionally but never full time. Mr Clark’s wife Ms Lorraine Clark also worked in the shop[1]. Mr Clark died in August 2000, shortly after the introduction of GST. The plaintiff moved in and took over full management of the shop and Ms Lorraine Clark stayed working there. The plaintiff did not want to work in the shop and sought to sell the business[2]. Ms Lorraine Clark left the business four or five months after the death of her husband, and Mr Brent George commenced working for the plaintiff, having been recommended by Ms Clark[3]. In November/December of 2001, the plaintiff made arrangements with his paint suppliers to send all of his stock back, and had discussions with the real estate agent who managed the leased premises in which the business operated about cancelling the lease and auctioning stock which could not be returned to suppliers, as well as fixtures and fittings[4].
[1]T.16-T.17
[2]T.18
[3]T.19
[4]T.20
During December 2001 and January 2002 the plaintiff had discussions with the defendant. These discussions commenced when the defendant introduced himself to the plaintiff as a painter and indicated that he was interested in buying the shop. The defendant originally offered to purchase the business for $50,000[5]. The defendant undertook a stocktake and spoke to Mr Brent George (who was then working for the plaintiff in the business) and the plaintiff and defendant then agreed upon a sale price of $54,000[6]. Mr Chris Salmon, the defendant’s bank manager from the National Australia Bank, attended at the premises of Burnett Paint Supplies and witnessed two statutory declarations, each signed by the plaintiff and the defendant on 18 February 2002. The statutory declaration signed by the plaintiff relevantly stated:
“I Walter McLean of Kingaroy in the State of Queensland do solemnly and sincerely declare that, re – purchasing of Burnett Paint Supplies of 207-209 Kingaroy Street Kingaroy, I Walter Scott McLean declare all money earned by Burnett Paint Supplies after 7.00 am on the 18-02-02 is the property of Paul Andrew Canning of Kinleymore. All debts outstanding including wages utilities which relate to Burnett Paint Supplies is the responsibility of Walter McLean.”
The statutory declaration was signed twice by the plaintiff and defendant and was witnessed by Mr Salmon who is also a Justice of the Peace[7].
[5]T.21
[6]T.22
[7]Exhibit 3
The defendant also signed a statutory declaration which relevantly stated:
“I Paul Andrew Canning of 121 Middle Road, Kinleymore 4613 in the State of Queensland do solemnly and sincerely declare that all money earned, by Burnett Paint Supplies as of 7 am on the
18th-2-02 is property of Paul Canning on purchasing Burnett Paints. Also any outstanding debts being – wages, utilities and or outstanding accounts are the sole responsibility of Walter Scott McLean.”[8]
This statutory declaration was also signed twice by the defendant and by the plaintiff. The defendant’s statutory declaration was also witnessed by Mr Salmon as Justice of the Peace.
[8]Exhibit 4
The purchase price, not referred to in the statutory declarations, was (according to the plaintiff) $54,000 and was to be paid over at 4 o’clock on 18 February 2002[9].
[9]T.26
The plaintiff went back to the shop early on 19 February 2002 (not having received payment for the purchase of the business) only to discover that the locks had been changed. The plaintiff waited at the back of the shop until Mr Brent George arrived at 7.30 am. Mr George asked the plaintiff what he was doing there and told him that it was no longer any concern of his and that the plaintiff should not come into the business. The plaintiff returned to the shop at about 10.00 am and was assured by the defendant that he would get his money[10].
[10]T.27-T.28
Subsequently the plaintiff and the defendant spoke by telephone about the unpaid purchase price and met again at a coffee shop in Kingaroy on the Friday of the following week. At that meeting, the defendant accused the plaintiff of taking tools, paint and other equipment from the shop and told the plaintiff that he should go to the police station. After an exchange of words, the defendant assured the plaintiff that the money was coming once a few things were cleared up[11].
[11]T.30
The plaintiff returned to Kingaroy on a number of occasions to consult with his solicitor. In or about March 2002, the plaintiff noticed that a sign stating “new management” had been handwritten and placed in the window. Towards the end of March, the plaintiff saw a whiteboard in the display section of the shop on which was handwritten the words, “We are moving. Our new shop is 2/30 Alford St, right next door to Dick Smith. Opening – 11-6-02”. Underneath was a mudmap of the location of the “new shop”. The plaintiff tendered photographs of these various signs[12].
[12]Exhibit 5
The plaintiff paid all the money then owing as of 18 February 2002 to his paint suppliers as well as the electricity account, the telephone account and wages due up until that date[13]. After 18 February 2002, the plaintiff only received commissions on paint belonging to Solver and Wattyl (paint suppliers) that he had sold the previous month[14]. The plaintiff wrote letters to all of the sales representatives who called on him, advising that he had closed the business and sold it to Paul Canning and would no longer be purchasing paint[15].
[13]T.36-T.37
[14]T.37
[15]T.37-T.38
The plaintiff recalls on visits to Kingaroy, hearing an advertisement on the local radio station saying that Burnett Paint Supplies was under new management, and then a couple of weeks later, an advertisement stating that the business was under new management and was moving[16].
[16]T.38
Prior to the defendant taking over the business, the plaintiff had allowed the defendant access to all of his files in the business, including documentation in respect of the rent. The plaintiff also forwarded a copy of the lease to the defendant’s financial adviser[17]. The plaintiff paid the rent due on the premises to 28 February 2002, which was the due monthly date for payment of rent[18]. The plaintiff paid the whole month’s rent, rather than the period up to 18 February 2002, to avoid conflict with the real estate agent[19].
[17]T.38
[18]T.39
[19]T.39
There were three stocktakes undertaken prior to 18 February 2002, including one undertaken by the defendant with Mr Brent George. That stocktake took place just before 18 February 2002[20].
[20]T.39
The business shifted to Alford Street, Kingaroy and changed its name to Tombay Paints, but retained the telephone number from Burnett Paint Supplies. The plaintiff received a letter from the defendant’s then solicitors (presumably around the time the business moved) stating that the defendant was moving and advising the plaintiff that he should come and claim goods that the defendant did not think that he wanted. These items were left behind in the store at 207-209 Kingaroy Street and were subsequently auctioned off by Freeman’s Auctions, with the proceeds being retained in a trust account with Argue and Co (real estate agents) until those funds were forwarded to the plaintiff a few months prior to the matter proceeding to trial[21]. The plaintiff received the sum of $13,403.73 as a result of the auction of stock and other items left in the premises at 207-209 Kingaroy Street.
[21]T.40
In cross-examination, the plaintiff accepted that the explanation for the double signatures of both the plaintiff and the defendant on the statutory declarations (Exhibits 3 and 4) was because they were initially signed in the absence of the Justice of the Peace, Mr Salmon, and then subsequently signed again in his presence[22]. The plaintiff states that there were two, three or four meetings with Mr Canning in which the eventual purchase price, $54,000 was discussed[23].
[22] T.53
[23]T.63
Eric Callaghan, a sales representative for some 11 years with Wattyl Paints, gave evidence that he was working for Wattyl Paints as a sales representative with a territory including Kingaroy in 2002 when he had dealings with Burnett Paint Supplies, then situated in Kingaroy Street. Mr Callaghan recalls dealing with Walter McLean, and then dealing with Paul Canning when he took over the business. Mr Callaghan described Paul Canning as “the new owner”[24] and indicated that Mr Canning was doing “ordering”, “ordering stock”, “asking for service for colour cards”, “what most owners would do.”[25] Mr Callaghan had dealings with Mr Canning at the store in Kingaroy Street until it moved into the new store where it traded as Tombay Paints. Mr Callaghan understood that it was the defendant who was the purchaser of paint from Wattyl Paints after the defendant took over the store at Kingaroy Street.
[24]T.65
[25]T.65
Warren Leo was a sales representative for Solver Paints from May 2001 and his territory in 2002 included Kingaroy. Mr Leo used to call on Burnett Paint Supplies where “Wally” (i.e. the plaintiff) was the owner. Mr Leo knew Paul Canning when he was a painter and recalls calling on him in that capacity[26].
[26]T.70
Mr Leo recalls his dealings with the plaintiff ceasing early in 2002. Mr Leo was unable to recall whether the defendant’s purchase of paint from Solver Paints was under his own name (because he already had an account with Solver Paints) or whether it was under Tombay Paints, which was later set up in another location[27]. Mr Leo recalls supplying paint to the defendant while he was operating from Kingaroy Street but was uncertain as to what name the account was operated under[28]. Mr Leo was “under the impression [the defendant] was buying the business”[29]. Mr Leo understood that the plaintiff was sick and that this coincided with the defendant trying to buy the business[30].
[27]T.71
[28]T.72
[29]T.72
[30]T.72
Mrs Jennifer Walters, Principal of Argue and Co, real estate agents, gave evidence that she had purchased another real estate agency that had entered into a lease with the plaintiff and as a result her firm had taken over the management of that lease. Mrs Walters did not recall having ever had a fully signed copy of the lease, which related to premises which were part of a building (known as “the Miller Building” owned by a law firm[31]. Mrs Walters did, however, have an unsigned lease for the premises at 207-209 Kingaroy Street indicating the plaintiff as proprietor. Mrs Walters was advised by the plaintiff that the defendant was taking over the tenancy and Mrs Walters met the defendant, although she was unable to recall the date. It was, however, after the defendant had taken over the premises. Mrs Walters wrote to Mr Brock Miller of Quinlan Miller and Treston (the owners of the premises) advising Mr Miller that the plaintiff had approached her and had indicated that a person was intending to take over the lease. Mrs Walters requested all of the defendant’s details so that she could put them to the building’s owners and she assumed (but had no record) that she was provided with those details[32].
[31]T.74
[32]T.77
Mrs Walters gave evidence that monthly cheques for rent were being paid by Burnett Paint Supplies in the amount of $1,320 up to 30 January 2002 (for rent up to 17 January 2002). Mrs Walters next received a cheque from “Canning and Dobrich” (i.e. the defendant and his wife) for the period ending 17 March 2002, deposited on 18 March 2002[33]. Mrs Walters gave evidence that this was the first lease moneys received from the defendant in relation to him taking over the lease. On 24 April 2002, Mrs Walters deposited the sum of $1,320 received from Burnett Paint Supplies (i.e. the plaintiff) paying the outstanding rental period for the month ending 17 February 2002. All rental payments for the premises subsequent to 17 February 2002 were made by cheques in the name of “Canning and Dobrich” (i.e. the plaintiff and his wife) up to a final deposit of $990 on 11 June 2002, which was less than a full month’s rent[34]. Mrs Walters then gave evidence of having received a letter from Tombay Paints dated 14 June 2002 which read:
“Re rental premises 207-209 Kingaroy Street, Kingaroy. Please take in (sic) letter as confirmation that on the 11th of June 2002 Tombay Paints vacated the abovementioned premises. Mr Walter Scott McLean remains the owner of all stock and chattels remaining at the premises. (Signed) Paul Andrew Canning, Tombay Paints.”[35]
[33]T.79
[34]T.80
[35]T.80
Mrs Walters then wrote to the plaintiff on 14 June 2002 in respect of a considerable quantity of stock and fittings in the store which Tombay Paints claimed belonged to the plaintiff, seeking his advice as to whether that was the situation and requesting if it was his property that it be removed[36]. Mrs Walters also gave evidence of receiving a letter from the National Australia Bank dated 25 July 2002 which sought access to the premises to recover an EFTPOS machine left behind by the plaintiff. Mrs Walters, in cross-examination, confirmed that the property left in the premises when it was vacated was auctioned for a total of $13,403.73[37]. That sum was eventually forwarded to the plaintiff[38].
[36]T.80-T.81
[37]T.85
[38]T.86
Defendant’s Evidence
Ms Lorraine Clark gave evidence for the defendant. She had known the plaintiff since 1989[39]. Ms Clark claimed that some of the items remaining in the shop of Burnett Paints (presumably after 17 February 2002) were owned by her, namely a Temptations microwave oven, a Kelvinator refrigerator and two air coolers[40]. Ms Clark said that the defendant was going to pay for those items or else she assumes the items would have been returned upon the business being dissolved[41].
[39]T.89
[40]T.91
[41]T.92
Ms Clark and her husband Clem Clark had both been employees of the plaintiff. Mr Clem Clark died on 27 February 2001 and Ms Lorraine Clark remained in the employ of the plaintiff for six months after that date[42].
[42]T.92
In cross-examination, Ms Clark agreed that the plaintiff had taken over the running of the business after the sudden death of her husband Clem Clark, and that he had worked full time in the business except for certain times when he was away for cancer treatment. During that period (after the death of her husband and before Ms Clark ceased working for the defendant) the defendant had attended at Burnett Paint Supplies and had opened accounts with Burnett Paint Supplies and Solver Paints.
Ms Clark confirmed that the plaintiff had mentioned that he wanted to sell the business[43] but Ms Clark had had no other conversations with the plaintiff about the sale of the business after she finished working for him in August 2001. Ms Clark recalls speaking in passing to the defendant’s wife Nicky about colour schemes and things like that at the premises at 207-209 Kingaroy Street[44].
[43]T.94
[44]T.96
Mr Brent George gave evidence that he was employed by the plaintiff, selling paint, at a time when the defendant opened an account with Burnett Paint Supplies[45]. Mr George claimed that the plaintiff was welcome at Burnett Paint Supplies at any time after 18 February 2002 and was never told to go away. In particular, Mr George says that the plaintiff came and collected cheques and payments from people who had paid their accounts after 18 February 2002[46]. Mr George claims not to have heard either the plaintiff or the defendant mention a sale of Burnett Paint Supplies prior to 18 February 2002. Mr George gave evidence that the plaintiff had said that he was going for cancer treatment and that the defendant was in the shop to see how the business would run and whether it was viable for the defendant to purchase[47].
[45]T.107
[46]T.101 and T.104
[47]T.99
In cross-examination, Mr George agreed that he had been employed as a staff member for Burnett Paint Supplies and had keys to open and close the shops. Mr George rang off the till, rang off the EFTPOS machine and effectively prepared a daily sales book. He was paid wages with a Burnett Paint Supplies cheque signed by the plaintiff. He had been offered the business by the plaintiff in or around October/November 2001 but could not afford it[48].
[48]T.107-T.109
Mr George agreed that the defendant had come on the scene with a view of purchasing the business, “to see how the business was run and whether it was viable for [the defendant] to take on”[49]. After the plaintiff left the business of Burnett Paint Supplies, Mr George was paid his wages by way of a personal cheque from the defendant, weekly. The plaintiff had no further input into the running of the business after the defendant took it over, and Mr George took his orders from the defendant[50].
[49]T.109
[50]T.110
Mr Garrad confirmed that he had prepared the tax returns for the defendant and his wife for the year ended June 2002, which included a turnover of $58,934.25 in sales and contract painting of $4,660.91. The expenses indicated in the return included an amount of $1,423.64 for advertising and $6,000 for rent[51].
[51]T.185-T.186 and Exhibit 17
Mr George agreed that he was not privy to the signing of any agreements and that as far as he was aware, the only reason that the defendant was in the business was so that he could purchase it[52]. Mr George agreed that anything that he had been told in relation to BAS statements and financial documentation had come from the defendant and that he (Mr George) had no first-hand knowledge of any of these matters. Mr George agreed that a stocktake conducted just before the defendant took over the shop was to enable the defendant to determine exactly what he was getting himself into[53].
[52]T.131
[53]T.131
Mr George denied having told the plaintiff to leave on 19 February 2002 and claimed that the change of locks which did occur, occurred with the assistance of the plaintiff on 18 February 2002. Mr George was unable to recall (until shown the photographs in Exhibit 5) that signs stating “new management” had been placed on the main door of 207-209 Kingaroy Street. Mr George had only a vague recollection of there being a whiteboard in the front window advising that the business was moving to Alford Street on 11 June 2002[54].
[54]T.135-T.136
Mr George recalls that 18 February 2002 was the date that the defendant started operating the business, although he claimed to be under the impression that the defendant was there to see how it was run. After 18 February 2002, income generated by the store was banked to the defendant’s account and money which came in owing to the plaintiff from before 18 February 2002 was either collected by the plaintiff or was physically taken by Mr George to the plaintiff’s solicitors[55]. Mr George indicated that stock ordered by either him or the defendant after 18 February 2002 was, to his knowledge, being paid for by the defendant. Mr George thought that some attempt had been made to write down the sales of stock which was already in the shop as of 18 February 2002[56].
[55]T.141
[56]T.141
Mr George was anxious to stress throughout his cross-examination that the defendant had not entered into a contract to purchase the business from the plaintiff. Mr George’s evidence appeared, in my view, to be consistently partisan and appeared to reflect (in significant part) not what he may have observed, but what he had been told by the defendant.
Mr Gregory Garrad, certified practising accountant, gave evidence that for two years prior to February 2002 he had been acting as the defendant’s tax agent, preparing the basic income tax returns for the defendant and his wife. Mr Garrad gave evidence of providing advice to the defendant from early January 2002 in relation to the purchase of Burnett Paint Supplies and of receiving BAS statements and profit and loss statements as to the financial situation of Burnett Paint Supplies[57]. Mr Garrad gave evidence that the Friday before 18 February 2002 the defendant had informed him of a figure of $54,000 “walk in, walk out” for the purchase of Burnett Paint Supplies[58]. Mr Garrad advised the defendant it was not prudent to acquire or enter into any business until a written contract was in place and that due diligence should be completed. Mr Garrad was not privy to any contractual discussions between the plaintiff and the defendant[59].
[57]T.117
[58]T.119
[59]T.122
Mr Garrad, in cross-examination, confirmed that he had prepared the tax returns for the defendant and his wife for the year ended 30 June 2002, which included a turnover of $58,934.25 in sales, and contract painting income of $4,660.91. The expenses indicated in the return included an amount of $1,423.64 for advertising and $6,000 for rent[60].
[60]T.185-T.186 and Exhibit 17
The defendant gave evidence that he had received a phone call from the plaintiff towards the end of December 2001, asking if he was interested in purchasing Burnett Paint Supplies. The defendant at that stage was living at Kinleymore (five kilometres south of Proston) and had been purchasing paint through Burnett Paint Supplies[61].
[61]T.143
The defendant stated that he went to Burnett Paints and spoke with the plaintiff about purchasing the business. The plaintiff assured him that it was a very good business, and was very profitable. The defendant states that the plaintiff told him he was suffering from bowel cancer and had to return to Brisbane to seek treatment, which was the reason for the sale[62]. The defendant discussed the matter with his then fiancé Nicki Dobrich and discussed it also with his accountant, Mr Gerrard[63].
[62]T.143
[63]T.144
The defendant claims to have been advised by his accountant, Mr Garrad, that he had only received three or four BAS statements, a handwritten, unsigned day book and three receipts and that as a result he (the defendant) went to the plaintiff and said that the matter could go no further, pending obtaining further information and proof that everything in the shop was unencumbered[64].
[64]T147
The defendant then states that he had discussions with the plaintiff, indicating that there was nothing sent to his accountant to show what amount of stock there was in the shop, and whether the plaintiff actually owned the stock in the shop. Then the defendant states at Mr Gerard’s suggestion, a stocktake was conducted with the plaintiff and Mr Brent George. After receiving information from Mr George, the defendant claims he confronted the plaintiff about stock missing from the premises. The defendant states that, at that stage, the plaintiff then purchased locks and assisted in installing new locks. The defendant states that Mr Brent George retained the possession of the keys[65].
[65]T.147
The defendant then claimed that he was asked to meet with the plaintiff at the shop on a mid morning shortly before 18 February 2002. The defendant states that the plaintiff told him that all the financial material which the defendant’s accountant said was required, was at his house in Coopers Plains (Brisbane) and that he had to return (to Brisbane) on 18 February 2002 to commence treatment for his cancer and that while he was there he would gather all the information and documents and have them sent or, if he was well enough, return with them to the shop[66].
[66]T.148
The defendant then claims that he was asked by the plaintiff if he (the defendant) was interested in coming into the shop as a manager part time while the plaintiff was away, to get a general idea of the shop and how it run. The defendant claims that he agreed to this proposal on the basis that a statutory declaration was to be signed so that the plaintiff did not encumber the defendant with any outstanding bills, debts or encumbrances to the shop. The defendant claims then to have returned home and discussed the matter with his wife, before ringing the plaintiff to ensure that the plaintiff would provide all of the BAS statements and information requested by the defendant’s accountant to the accountant before his return. The defendant then claims that until all the information was found out, the most that he (the defendant) could offer was $5,000 for those chattels which the plaintiff could prove was his, and stock to the value of $35,000-$40,000 for which the plaintiff could prove was not encumbered and was his to sell. The defendant says that in response to this the plaintiff said that “he would take $54,000” but the defendant claims that he “did not agree to that in any way, shape or form”[67].
[67]T.149
The defendant then says that on the morning of 18 February 2002, he went to Burnett Paint Supplies, that he and the plaintiff spoke in the office and discussed a statutory declaration, that no money was mentioned at that stage and there was no talk of the defendant purchasing the business. The defendant then says that after he and the plaintiff had both signed statutory declarations, they realised that had been done without a witness, so he went to the National Australia Bank and requested Mr Chris Salmon come across and witness the signing of the statutory declarations a second time, which he did. The defendant states that the reason for signing the statutory declarations was so the defendant would not be left with any encumbrances by the plaintiff. The defendant claims that at no time did he mention a price, or that he had purchased the business of Burnett Paint Supplies. The defendant claims that he and the plaintiff then shook hands, that the defendant wished the plaintiff well in his treatment for cancer and his recovery, and the plaintiff then left the business handing possession of the shop “key-wise” to Mr Brent George, whom the defendant claimed continued to open and close the premises after the plaintiff’s departure[68]. The defendant claimed that any stock that he purchased at Solver Paints was under his own account and was marked with green dots, that moneys in cash and cheque for the plaintiff’s stock was put into a small box at the back of the premises, and that the EFTPOS machine was used by customers to purchase stock belonging to the plaintiff[69].
[68]T.149
[69]T.150
The defendant then claimed to have spoken to the plaintiff about a week after 18 February 2002, and that the plaintiff said that he was bringing information for the defendant’s accountant that would be helpful in structuring anything to do with the purchase of the business. The defendant states that “approximately the next day”, the plaintiff came to the shop and shook hands with himself and Mr George and that the two of them then had coffee at the Utopia Café. The defendant then claims that he told the plaintiff that he could not stay very long in the premises because the plaintiff had not proved that he owned any of the stock or the chattels or the possessions, except for a photocopier machine, a fax machine and some other item. The defendant then says that the plaintiff left and the next time he saw him was when the plaintiff came to the shop and collected cheques and cash from the rear of the shop, which he accepted gratefully, stating that he was still very, very sick from his cancer treatment and that he was sorry it had taken so long to get all of the information to the defendant[70].
[70]T.150
The defendant then gave evidence that he had purchased paint and other products through COD accounts which he had opened himself with various companies, including Wattyl Paints and ABC Brushware. The defendant stated that he continued to come in and out of the shop approximately a few hours a day while Mr Brent George was running it. The defendant claims that he had no intention of taking over the shop or of doing anything to do with the purchase of the shop, but continued to come backwards and forward, trying to contact the plaintiff and clarify everything that was wanted by the defendant’s accountant. The defendant then claimed that he was contacted by the plaintiff, who said he was too sick to travel, but asked that cheques and money be delivered to the office of the plaintiff’s solicitor, Mr Michael Mason. The defendant claims that the plaintiff said it might be “weeks, if not months” before he was well enough to return to the business. The defendant claims that he told the plaintiff that he (the defendant) could stay in the business in a caretaker capacity because of the plaintiff’s illness, but that unless all of the information was forthcoming and the plaintiff proved all of the stock was his and saleable, the defendant could not purchase the plaintiff’s business nor take possession of the business. The defendant claimed that at that stage he had no access to the shop by key or other means other than when Mr Brent George opened the shop[71].
[71]T.151
The defendant then stated that he instructed his then solicitor to advise the plaintiff that because the plaintiff had not come back and taken possession of the shop, he (the defendant) would be vacating the premises and leaving everything, all stock, chattels and everything in the shop[72].
[72]T.152 and Exhibit 12
The defendant gave evidence that prior to the forwarding of the letter (Exhibit 12) to the plaintiff, he (the defendant) paid rent to Argue and Co on behalf of the plaintiff through the defendant’s own personal account, as well as wages to Mr Brent George on behalf of the plaintiff, through the defendant’s own personal account. The defendant claimed that he did not want his own business, Tombay Paints, to be associated with Burnett Paint Supplies in any way, shape or form[73]. The defendant claims that it was not until approximately two or three weeks before vacating the premises (at 207-209 Kingaroy Street) that he decided to open his own small business with absolutely nothing to do with Burnett Paint Supplies. The defendant claimed to have instructed “no radio media advertising whatsoever” while he was “in Burnett Paint Supplies”. The defendant claims never to have received any documentation whatsoever to prove that the plaintiff owned a business to sell or that the alleged amount of $54,000 was ever agreed to by the defendant with the plaintiff[74].
[73]T.154
[74]T.154
The defendant gave evidence that he instructed a Justice of the Peace to enter the shop and do a stocktake of everything that was in the shop, and that the defendant then asked Mrs Walters from Argue and Co to come to the shop and for Mr George to present Mrs Walters with the keys, lock the door and leave what remained (a list of approximately 10 A4 paper size pages of stock) on the premises[75].
[75]T.154
The defendant claimed that he had moved on approximately 15 June 2002 and that there was nothing to move except maybe 10 tins of paint[76].
[76]T.154
The defendant claimed that everything in the (new) business he had purchased himself, that nothing at all had come from Burnett Paint Supplies and, further, that he had not seen the plaintiff after the move until the Thursday prior to the matter coming to trial, when the plaintiff had driven past a house that he (the defendant) was painting[77]. The defendant claimed that he left Burnett Paint Supplies ready to walk in and continue trading as Burnett Paint Supplies under the ownership of the plaintiff[78].
[77]T.155
[78]T.155
The defendant claimed in cross-examination to have kept no record of how the shop was going on a day-to-day basis after 18 February 2002. The defendant claims not to have remembered the sign in the shop (stating the shop was under new management)[79]. The defendant claimed only to have considered opening his own business two or three weeks prior to the shift from 207-209 Kingaroy Street to the premises at Alford Street[80]. Despite being shown a Queensland business names extract indicating that the business “Tombay Paints” commenced on 18 February 2002, the defendant claimed not to have commenced business as Tombay Paints on that date from 207-209 Kingaroy Street. The defendant was unable to satisfactorily explain why the nature of the business, which he accepted he provided to the relevant register, included “paint retail”[81].
[79]T.156-T.157
[80]T.158
[81]T.160
The defendant claimed to have gone into the business (Burnett Paint Supplies) to see if it was viable to purchase[82], but claims that he never formed an intention to purchase that business, although he accepted in cross-examination that he had made an offer of $5,000, plus up to $40,000 in stock[83]. The defendant accepted further in cross-examination that there had been a counter-offer from the plaintiff but still insisted that he had not formed an intent to purchase the business despite making an offer[84].
[82]T.161
[83]T.162
[84]T.162
The defendant accepted that the statutory declarations[85] had been written out by himself and the plaintiff, that they had signed each of them and swapped them and then signed them, and that Mr Salmon had been present to witness the second signature on each of the statutory declarations.
[85]Exhibits 3 and 4
The defendant agreed that he had written the text of the declaration, namely:
“I Paul Andrew Canning … all money earned by Burnett Paint Supplies as of 7.00 am on the 18th of February 2002 was the property of Paul Canning on purchasing Burnett Paints. Also any outstanding debts being wages, utilities and the rest and the responsibility of Walter Scott McLean”.
The defendant accepted that he had signed this statutory declaration approximately mid morning on 18 February 2002, but then attempted to explain his signature by stating:
“I understand I signed [it] hastily and may have used the wrong words but I did not sign this [Exhibit 4] on the intention of purchasing Burnett Paint Supplies”[86].
The defendant acknowledged that he had never said that he did not know what it was that he was signing, but insisted that he did not sign the declaration with the intention of purchasing Burnett Paint Supplies.
[86]T.166
The defendant conceded, on cross-examination, that his own List of Documents provided on 15 November 2005 referred to a long list of documents provided by the plaintiff in respect of the finances of Burnett Paint Supplies, but the defendant claimed that these documents were not “anywhere near the information needed to conduct a purchase of a business”[87]. The defendant conceded that he had spoken with his accountant the weekend before 18 February 2002 about the counter offer of $54,000, and that a cash flow document prepared by his accountant, Mr Garrad, dated 21 February 2002, utilised as the figure for “initial investment” the sum of $54,000. The defendant claimed that the use of this figure in the document was “hypothetical”[88]. The defendant conceded that at no stage had there been any documentation to the effect that the sale was subject to finance, although he claimed he would have needed finance if the purchase proceeded because he did not have the funds[89].
[87]T.168
[88]T.170
[89]T.170
The defendant claimed that he had ended up with the phone number of Burnett Paint Supplies only because he had been offered the phone number by Telstra as a lapsed number. The defendant claimed that he had taken the front counter from Burnett Paint Supplies so that the plaintiff would reimburse him (the defendant) moneys of the defendant’s that had gone through the plaintiff’s EFTPOS account. The defendant claimed not to have purchased any of the chattels from Burnett Paint Supplies[90].
[90]T.172-T.173
The defendant claimed not to have put signs in the window of Burnett Paint Supplies[91] to the effect of “we are moving” and “under new management”. The plaintiff claimed not to have organised any radio advertising or visual advertising for Burnett Paint Supplies[92].
[91]Exhibit 5
[92]T.175
The defendant denied speaking with a representative of Radio 10-71 on 7 March 2002 to organise a series of radio ads and bonus fillers to occur between 8 and 30 March 2002[93]. The defendant, despite being shown the invoices for advertising[94], still denied having organised the advertising, and claimed that his wife and Brent George might have organised that advertising[95].
[93]T.179
[94]Exhibit 16
[95]T.177-T.180
Conclusion
The defendant claims that at no stage did he enter into a contract for the purchase of Burnett Paint Supplies but, rather, that he entered some form of management agreement with the plaintiff in respect of that business on 18 February 2002, and then subsequently commenced Tombay Paints at 2/30 Alford Street, Kingaroy on or about 11 or 15 June 2002.
It is clear that the plaintiff and the defendant in December 2001 and January 2002 undertook negotiations in respect of the proposed sale of Burnett Paint Supplies. The defendant accepts that he made an offer of $5,000 plus $35,000 to $40,000 (for stock) and accepts that the plaintiff made a counter offer of $54,000 “walk-in, walk-out”. Although the defendant accepts that he signed a statutory declaration which (relevantly) declared that “all money earned by Burnett Paint Supplies as of 7.00 am on the 18th-2-02 is property of Paul Canning on purchasing Burnett Paints”, and that this statutory declaration was signed the same time as a statutory declaration signed by the plaintiff which relevantly provided that “re – purchasing of Burnett Paint Supplies of 207-209 Kingaroy Street Kingaroy, I Walter Scott McLean declare all money earned by Burnett Paint Supplies after 7.00 am on the 18-02-02 is the property of Paul Andrew Canning of Kinleymore”, the defendant continued to assert, both in evidence and in submissions, that this was not evidence of a purchase by him of the business of Burnett Paint Supplies from the plaintiff on 18 February 2002.
In my view, this evidence (and consequent submission) from and by the defendant is fanciful and insupportable. It is clear, in my view, that subsequent to 18 February 2002, Mr Canning acted consistently in accordance with an inescapable inference that the purchase of Burnett Paint Supplies was concluded on 18 February 2002. In particular, there was the changing of the locks, the subsequent sign in the window stating “under new management”, the radio advertising, the payment of the rent for the premises at 207-209 Kingaroy Street, Kingaroy by the defendant and his wife for the period 18 February-18 June 2002, the payment of Mr Brent George’s wages by the defendant after 18 February 2002, the conduct of a stocktake prior to 18 February 2002 for the purpose of pricing the business, the preparation of a cash flow analysis by the defendant’s accountant, Mr Garrad for the purchase price of $54,000, the completion of tax return for the financial year ended 30 June 2002 showing paint sales of $58,000 in that financial year, and the placing of a sign in the window of 207-209 Kingaroy Street advising the change of premises to Alford Street. All this combines, in my view, to prove on the balance of probabilities that the plaintiff offered to sell the business to the defendant on a “walk-in, walk-out” basis for $54,000, and that that offer was accepted on or about 18 February 2002, as evidenced by the two statutory declarations of the plaintiff and the defendant. In the circumstances, it is my view that the plaintiff has, on the balance of probabilities, proved that the plaintiff and the defendant entered a contract for the sale and purchase of Burnett Paint Supplies for the sum of $54,000 on or about 18 February 2002. I reject any evidence by or on behalf of the defendant to the contrary.
Set-Off
As a result of the defendant moving out of the premises at 207-209 Kingaroy Street, Kingaroy in June 2002, the stock and other items “abandoned” were subsequently auctioned and in late 2006 or early 2007, the sum of $13,403.73 was forwarded to the plaintiff.
The plaintiff submits that the abandoned stock was never part of the stock in trade that was sold to the defendant under the contract. In support of this submission, the plaintiff relies upon his own evidence in which he stated that the valuation undertaken by Megalow Furniture did not include stock in trade[96]; that the valuation undertaken by Megalow Furniture related to office equipment as Mr Canning had stated that he may not want some of the office equipment[97]; that Mr Canning took over all of the equipment when he took over the shop[98]; that there were three stocktakes prior to the sale of the business[99]; that the defendant had compiled a list of items including paint that he did not want[100]; that the list of goods compiled by the defendant related to goods that were not part of the sale of the business[101]; and that the value of these goods was in the order of $13,000 or $14,000[102]. The plaintiff also relies on evidence from Mr Walter Leo who said that there was a lot of distortion with pricing of stock and that some stock remained in the shop that the plaintiff still owned[103]. Ms Walters gave evidence that the stock left behind was not a shop full of stock but that there was still a lot of stock[104] and Mr Brent George stated that the business had been offered to him by the plaintiff in or about late 2001 for a sum of $90,000[105].
[96]T.31
[97]T.31
[98]T.31
[99]T.39
[100]T.40
[101]T.55
[102]T.56
[103]T.73
[104]T.83
[105]T.108-T.109
Ultimately it is submitted on behalf of the plaintiff that the evidence establishes that there was a quantity of stock left behind by the plaintiff in or about February 2002 that was not wanted by the defendant and that as such, those goods were not goods that were contemplated in the terms of the sale agreement.
Although the defendant was invited to provide written submissions in respect to this issue, they were of little assistance in attempting to clarify the issue of “set-off”. Ultimately, in my view, the terms of the contract was for the sale of “Burnett Paint Supplies” on a “walk-in, walk-out” basis. In those circumstances then, the fixtures, fittings and stock left behind by the defendant when shifting from 207-209 Kingaroy Street to the new premises at Alford Street must be considered to have been the property of the defendant, even though they may have been left by him at 207-209 Kingaroy Street on a misapprehension as to the ownership of that property.
Conclusion
Accordingly, I consider that the appropriate order in these circumstances is an order which awards the plaintiff the sum of $54,000 damages for breach of the contract of sale of Burnett Paint Supplies on 18 February 2002, but sets off the sum of $13,403.73 already received by the plaintiff from the sale of stock and other items abandoned by the defendant when he vacated the premises at 207-209 Kingaroy Street in June 2002. I consider the plaintiff is entitled to interest at 10% p.a. on $54,000 from 18 February 2002 until 4 December 2002 in the amount of $4,290.42, and interest at 10% on $40,696.27 up until judgment (20 December 2007) in the amount of $20,548.83, a total of $24,839.24[106].
[106] The date of the sale of the abandoned stock and fittings – see Exhibit 11
Order
I order that the defendant Paul Canning pay the plaintiff Walter McLean the sum of $40,696.27, and interest of $24,839.24, a total of $65,535.51.
Costs
I will hear the parties in respect to the costs.
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