Murchison v Silver Force Pty Ltd - [2015] WADC 24

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: MURCHISON -v- SILVER FORCE PTY LTD [2015] WADC 24

CORAM: SWEENEY DCJ

HEARD: 25-28 FEBRUARY, 5-7 MARCH, 29-31 JULY, 1, 2, 5-7 AUGUST & 2-4 & 10 DECEMBER 2013

DELIVERED : 20 MARCH 2015

FILE NO/S: CIV 2422 of 2011

BETWEEN: RODERICK GORDON MURCHISON
Plaintiff
BLIGH & VICKERS INVESTMENTS PTY LTD
Second Plaintiff
AND
SILVER FORCE PTY LTD
First Defendant
STEPHANIE DOUGLAS
Second Defendant
WESLEY DOUGLAS
Third Defendant
AUSSIE E-CASH PTY LTD
Fourth Defendant

Catchwords:

Formulation of contract - Loan agreement - Common mistake - Agency - Registered mortgage debenture - Assignment of charge - Fraudulent misrepresentation - Misleading and deceptive conduct - Representations as to future matters - Representations as to opinion - Accessorial liability - Negligence - Estoppel - Exemplary damages - Turns on own facts

Legislation:

Trade Practices Act 1974 (Cth) s 51A, s 52

Result:

Judgment for the second plaintiff against the first and fourth defendants
Claims against second and third defendants dismissed
Counterclaim dismissed

Representation:

Counsel:

Plaintiff:     Mr C S Gough
Second Plaintiff            :     Mr C S Gough
First Defendant            :     Mr A P Muller
Second Defendant        :     Mr A P Muller
Third Defendant           :     Mr A P Muller
Fourth Defendant         :     Mr A P Muller

Solicitors:

Plaintiff:     Minter Ellison
Second Plaintiff            :     Minter Ellison
First Defendant            :     Angove Law
Second Defendant        :     Angove Law
Third Defendant           :     Angove Law
Fourth Defendant         :     Angove Law

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

Absolute Analogue Inc v Sundance Resources Ltd [No 3] [2014] WASC 283
Argy v Blunts (1990) 26 FCR 112; (1990) 94 ALR 719
Australia Estates Pty Ltd v Cairns City Council [2005] QCA 328
Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co Ltd (1919) 26 CLR 410
Briginshaw v Briginshaw (1938) 60 CLR 336
Brown v Jam Factory Pty Ltd (1981) 35 ALR 79
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Cream v Bushcolt Pty Ltd [2004] WASCA 82
Global Sportsman Pty Ltd v Mirror Newspapers (1984) 55 ALR 25
Gould v Vaggelas (1984) 56 ALR 31
Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] WLR 1617; (2002) 4 All ER 689
Hatt v Magro [2007] WASCA 124
IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) & Ors [2009] FCAFC 9; (2009) 253 ALR 240
Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564
McGrath Coleman, Re; Pan Pharmaceuticals (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2
MGICA (1992) Ltd v Kenny and Good Pty Ltd [1996] FCA 1746; (1996) 140 ALR 313
Middleton v Aon Risk Services Australia Ltd [2008] WASCA 239
Ninelen Pty Ltd v Interim Advance Corporation Pty Ltd [2011] WASC 107
Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175; (2004) ATPR 42-010
RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128
Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419
Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
Uren v John Fairfax & Sons Pty Ltd (1996) 117 CLR 118
Yorke v Lucas (1985) 158 CLR 661

Table of Contents

Introduction
Overview of the pleadings
Formulation of contract - general principles
The witnesses' credibility and the evidence

(a) Rod Murchison

(b) Alan Cobb

(d) Stephanie Douglas

(e) Wesley Douglas

(f) Shayn Krop
The background to Aussie Cash before Murchison arrived on the scene
Preliminary negotiations between the parties
What assets of IAC were there to be purchased?
April – 10 May 2010
11 – 18 May 2010 and the alleged cancellation of the existing agreement by Cobb
The lead-up to settlement with NAB
28 May 2010 - Oliver finally settles with NAB
What was the effect of assigning the NAB registered mortgage debenture to BVI?
The months following payment of the money
The deterioration of the relationship
Who was Oliver Douglas acting as agent for?
Did Wesley or Stephanie personally make any of the representations alleged to be fraudulent or misleading?
Was a legally binding agreement reached between the parties?
AEC's claim for repayment of the interest payments paid to Murchison
The claim for the $25,000 paid for shares in AEC
Was there a loan of $50,000 to BVI from Silver Force?
Fraudulent misrepresentation
Misleading and deceptive conduct

Negligence
Alternative claim under NAB registered mortgage debenture and estoppel
Exemplary damages

Conclusion

SWEENEY DCJ:

Introduction

The first plaintiff, Rod Murchison, is a businessman based in Singapore and has various investments in Australia and elsewhere. The second plaintiff, Bligh and Vickers Investments Pty Ltd (BVI), is essentially a family owned company used as a vehicle for his investments in Australia. Not being resident in Australia, Murchison cannot be a director of BVI, but has and had authority to act on behalf of the company and was used to making decisions in relation to that company. The directors were also used to acting in accordance with his wishes.
One of BVI's investments had been a franchise in the Cash Converters business at Midland, which BVI sold in 2009. BVI's employee Gary Sadler, who had run the personal finance centre within that store, was regarded by Murchison as a good hard working employee who had performed well. Sadler also suffers from multiple sclerosis. When the Midland store was sold by BVI, Murchison was keen to look after Sadler and find him a new spot and it was because of that that Murchison first became interested in the Aussie Cash business. Murchison's initial thought was to look at purchasing a franchise store from Aussie Cash to be run by Sadler. That is how Murchison came to meet Oliver Douglas – and ultimately to part with more than $650,000.
Oliver Douglas and his wife Stephanie, the second defendant, and the various businesses connected to the Douglas family, collectively ran a business called Aussie Cash. Oliver's son Wesley is the third defendant. For ease of the reader, I will generally refer to each of the Douglas family by their first names. Interim Advance Corporation Pty Ltd (IAC), of which Oliver was the sole director, was one of the companies running the Aussie Cash business. National Cash Pty Ltd (NC) was another. Rivergold Pty Ltd (Rivergold) was yet another.
By mid-2009, the Douglas family and most of their companies were in financial difficulty. By the time Murchison came along, Oliver and Stephanie were being pursued by the National Australia Bank Limited (NAB) for personal and company debt of $2.6 million. Their loans were all cross-collateralised over their house and business premises. IAC had its own overdraft, but had also guaranteed their substantial debts, being their loans on the house and business premises, so IAC was also being pursued by NAB. It had multiple other creditors. First NC and then IAC went into voluntary administration.
Oliver explained that, when IAC went into administration, that constituted a breach of NAB's security arrangements and then NAB issued default notices on everything. NAB was in the process of foreclosing on properties and the situation was dire. Murchison came along at a time when an injection of cash provided much-needed light at the end of the tunnel. He was prepared to contribute $500,000 to a new company to be run as a joint venture between his interests and the Douglas interests to enable the Aussie Cash business to survive and continue. That contribution was to be by way of a loan at 11% interest per annum payable monthly.
All of the substantive negotiations took place between Oliver and Murchison. Oliver is not a defendant in these proceedings. He filed for bankruptcy on 15 July 2010 and was declared bankrupt as of 26 August 2010, well prior to these proceedings being commenced. He had also, in 2008, given an undertaking to the Commissioner for Fair Trading that he would not manage a micro‑lending business in this State.
Murchison knew of Oliver's financial troubles, but believed that the micro‑lending business conducted by Aussie Cash was essentially a sound business model and believed that, with his $500,000 loan, coupled with a substantial loan from one of the Douglas family's surviving companies, the first defendant, Silver Force Pty Ltd (Silver Force), the new company would succeed, Oliver would be able to land on his feet and Sadler would also have a job. This new company was Aussie E-Cash Pty Ltd (AEC), the fourth defendant. AEC was incorporated on 5 February 2010, its directors being Stephanie and Wesley and its sole shareholder being Silver Force. Stephanie was the sole director of Silver Force.
Murchison and Oliver between them agreed that Murchison, or whatever business entity he chose to use, and Silver Force, would both have a 50% shareholding in AEC and two directors to represent their interests on a board of four. Ultimately, the business interest Murchison chose to use was BVI, the second plaintiff.
There was much discussion about the need for AEC, the new business, to acquire the assets of IAC and also the method by which that could be achieved. Much of that discussion was motivated by a desire to keep creditors of IAC from baying at the door of AEC. The broad proposition was that assets of IAC could be purchased from NAB, or the controller over IAC appointed by NAB, while simultaneously reducing Oliver and Stephanie's debt to NAB, killing two birds with one stone.
Those particular discussions were protracted and in some respects rather vague. Neither Murchison nor his accountant friend and business associate Alan Cobb, who was a director of BVI, truly understood the complexities of that situation, but were largely content to accept what they were told by Oliver, although they sometimes privately expressed frustration or confusion to each other. But what was clear from an early stage in their negotiations was that Murchison was prepared to contribute $500,000 to the new business to be run as a joint venture.
And so, largely on the strength of a gentleman's handshake, Murchison agreed to part with $500,000 as his contribution to the new joint venture. Written contracts were certainly drafted and discussed, but never actually executed.
For reasons which will become apparent below, in late April – early May 2010, Oliver's need for that $500,000 became urgent, not because AEC urgently needed to acquire any assets of IAC, but because $500,000 was the shortfall he desperately needed to keep NAB from taking his house and, incidentally, seeking his imprisonment and that of his wife and son, for contempt of court in legal proceedings on foot at that time.
Murchison was broadly informed that NAB was pursuing Oliver, though he may not have known all the details. Oliver was in regular correspondence with Murchison and Cobb concerning his negotiations with NAB and the legal advice he was receiving about how best to achieve his objectives and the objectives of AEC. It was always known by Oliver and Murchison that the money to be loaned to AEC was going to be paid to NAB one way or another, whether it was paid to a receiver appointed by NAB, or to NAB itself. Oliver kept Murchison informed about the desired settlement with NAB and its progress.
Ultimately, and before any written contracts encapsulating the parties' agreement were finalised, BVI paid $450,000 into the trust account of Oliver's lawyers at his request and, on 28 May 2010, that $450,000, together with $50,000 from Silver Force, was paid to NAB as part of settlement proceedings between NAB and the Douglas family. As part of the settlement, on Oliver's advice, BVI also took an assignment of $500,000 debt owing to NAB and the registered mortgage debenture that NAB held over the assets of IAC.
The immediate crisis was over. BVI contributed its remaining promised $50,000, to make up the $500,000, soon thereafter, with $25,000 being paid to Silver Force to acquire half of its shares in AEC, representing a 50% interest in AEC as agreed, and the remaining $25,000 being loaned to AEC.
Afterwards, and for some time, the parties conducted their affairs in a manner consistent with the proposition that BVI had contributed its promised $500,000 to the new venture by way of a loan of $475,000 to AEC and a payment of $25,000 for shares. Interest payments of 11% per annum, as agreed, were made on a principal sum of $475,000. The shares representing the 50% interest in AEC were transferred from Silver Force to BVI. Two directors representing Murchison's interests, Sadler and Cobb, were appointed to the board of AEC as promised. Stephanie and Wesley Douglas were already directors representing the Douglas interests. Sadler commenced employment in the business.
And, when NAB claimed further money from Oliver and Stephanie, Murchison loaned them, or Silver Force, a further $150,000 to get them past that hurdle. That loan was supposed to be a short term situation.
In the months that followed, tension arose between Murchison and the Douglas family. Murchison began to worry that AEC was not being run as efficiently as it could be, that the promised injection of cash from the Douglas side either had not occurred or at least could not be substantiated to his satisfaction, and that the short term loan of $150,000 seemed to be dragging on.
By late 2010, that further loan of $150,000 had still not been repaid. AEC also stopped making interest payments on the loan of $475,000. Murchison began to lose patience and also became increasingly suspicious and concerned about his money. By December 2010, the relationship between Murchison and Oliver and Stephanie substantially broke down and Murchison served a Notice of Statutory Demand on Silver Force in relation to the loan of $150,000.
In March 2011, BVI served a notice of default on AEC in relation to the now outstanding interest payments on the $475,000 and other specified defaults. In late March 2011, Stephanie and Wesley, two of the four directors of AEC, purported to remove Cobb and Sadler as the other directors of AEC. Sadler's employment in AEC was also bluntly terminated and BVI's 50% shareholding in AEC was cancelled.
And by way of justification for the above, Wesley Douglas announced that the appointment of Cobb and Sadler as directors of AEC had always been conditional upon BVI loaning $475,000 to AEC which, he said, it had not done. That was the first time any such complaint had been made.
Now BVI, the second plaintiff, sues to recover its $500,000 back. It seeks repayment of the loan, or damages for fraudulent misrepresentation. Murchison, the first plaintiff, also sued to recover his additional $150,000 loan, but that claim was settled prior to the trial before me. Murchison has no further claim, but remains a key witness in BVI's case.
There are quite a number of key issues to resolve: Did the parties ever reach a concluded agreement and, if so, what were the terms of that agreement? Why did BVI end up paying money to NAB instead of AEC and why did BVI end up with an assignment of part of the debt owing to NAB? Was that the fulfilment of the agreement to loan $475,000 to the new venture? Or did BVI choose to purchase an assignment of NAB's registered mortgage debenture over the assets of IAC for $500,000 instead of loaning $475,000 to AEC? Why, if BVI did not in fact loan $475,000 to AEC, did AEC purport to pay interest on the loan as if it had? Should AEC now be entitled to claim those interest payments back? Were both Oliver and Murchison operating under some mutual mistaken belief as to what would be achieved by BVI taking that assignment of debt and the registered mortgage debenture from NAB? Does any such mistake operate to negate their agreement and, if so, what are the consequences of that? Should Oliver and Stephanie have significant personal debt fortuitously paid to NAB by BVI and BVI now have to bear that loss? Is BVI estopped from now pursuing Stephanie for payment of that debt? In securing that payment of money to the NAB by BVI, did Oliver, Stephanie and Wesley deliberately deceive Murchison about certain things? If Stephanie and Wesley made no misrepresentations to Murchison, should they nevertheless be held liable for any misrepresentation made by Oliver because they negligently failed to prevent him making misrepresentations? If Oliver did not deliberately deceive Murchison, did he nevertheless engage in misleading and deceptive conduct entitling BVI to damages as against the defendants? Did Silver Force loan BVI $50,000 as claimed by the defendants in order that BVI could pay $500,000 to NAB? Or is that $50,000 loan a fiction?
To resolve those numerous issues it is necessary to look in detail at both the negotiations between the parties before the money was paid to NAB and the conduct of the parties after that occurred. It is also necessary to consider the position that existed prior to Murchison even becoming involved in discussions with Oliver.

Overview of the pleadings

BVI's case is that, pursuant to an agreement partly oral and partly in writing made not later than 28 May 2010 (which is the date Murchison's money was handed to NAB), BVI advanced $475,000 to AEC by way of a loan.
The new company, AEC, was to be operated as a joint venture between the Murchison interests, using BVI as his vehicle, and the Douglas interests, using Silver Force as their vehicle. BVI would loan $475,000 to AEC for a period of five years at an interest rate of 11% per annum, payable monthly. In addition, BVI was to pay $25,000 to Silver Force in return for a 50% stake in AEC by way of a transfer from Silver Force to BVI of 25,000 of the 50,000 shares it held in AEC. Silver Force's contribution to the venture was to be the transfer, also by way of a loan to AEC, of collectable book debts (receivables) of approximately $780,000 together with cash in the amount of $90,000. The loans from BVI and Silver Force to AEC would be secured by way of registered mortgage debenture charges over the assets of AEC to rank equally and, in the event that AEC defaulted on the interest payments due to BVI, then the loan and any outstanding interest and any enforcement costs would, without the need for demand, become immediately repayable. The parties agreed that the board of AEC would comprise two directors appointed to look after Murchison's interests and two directors appointed to look after the Douglas interests.
The vast majority, if not all, of the negotiations between the parties took place between Murchison and Oliver. BVI alleges that at all times Oliver was acting for and on behalf, and with the knowledge of, all four defendants. Silver Force and AEC admit that fact, but Stephanie and Wesley do not. BVI also pleads that Stephanie and Wesley Douglas were personally involved in the negotiations leading up to this agreement.
These negotiations are said to have been made orally and in writing. They are also evidenced by various emails exchanged during December 2009 up to late May 2010, when the money was paid, and beyond. BVI pleads that the negotiations amounted to an offer on the part of AEC, Silver Force, and Stephanie and Wesley Douglas, via their agent Oliver Douglas.
BVI also pleads that, insofar as that offer was made in writing, it was contained in the minutes of directors' meetings of both Silver Force and AEC on 22 April 2010, which were provided to BVI on or about 4 May 2010, and also in certain draft documents, being a shareholders agreement, a charge agreement (incorporating a loan agreement), and a services agreement, all of which were provided by Oliver to Murchison in late April 2010.
BVI says that it accepted the defendants' offer orally in exchanges between Murchison and Oliver on or prior to 11 May 2010 or, if not then, then on 18 May 2010, when it paid $450,000 into the trust account of Oliver's then lawyers, Havilah Legal or, if not then, then at the latest on 28 May 2010, when that $450,000 was paid from the Havilah Legal Trust Account to NAB as part of a $500,000 settlement on that day between NAB and Oliver and Stephanie and IAC, reducing their debts to NAB to that extent. It is common ground that AEC was not indebted to NAB. BVI pleads that the loan to AEC was advanced on 18 May or, alternatively, on 28 May 2010.

BVI also pleads that a further $25,000 was advanced to AEC on 8 June 2010, making up the loan to AEC of $475,000, then a further $25,000 was paid to Silver Force to acquire the 25,000 shares in AEC, on or about 9 June 2010. Those two payments of $25,000 are admitted by the defendants and it is admitted that the $25,000 to AEC was by way of a loan.
It is not suggested that Murchison and BVI did not consent to that $450,000 being paid to NAB, but it is alleged - and this really is at the heart of the case - that the payment of that sum either to Havilah Legal, or to NAB via Havilah Legal, was the means by which $450,000 was advanced to AEC, on the direction of Oliver, for and behalf of AEC. BVI alleges that Oliver represented to Murchison and BVI that payment of the funds to NAB would achieve an assignment of either the assets of IAC themselves, or the right to control the assets in IAC, and that the assets of IAC were necessary to establish and conduct the business of AEC.
BVI's case, then, is that $475,000 was advanced to AEC by way of a loan, $450,000 being paid to NAB and the remaining $25,000 being paid direct to AEC. AEC made several payments of interest due on that $475,000 loan, but then ceased interest payments from November 2010 onwards. It is also alleged that AEC failed to cause certain key documents to be executed and registered which the parties had agreed to execute and register including, most importantly, a registered mortgage debenture over the assets of AEC in favour of BVI.
Following those pleaded breaches of the agreement, on 29 March 2011 BVI sent AEC a default notice demanding both outstanding interest and the execution of a registered mortgage debenture charge over the assets of AEC. The default notice was not complied with and BVI therefore sues AEC for the $475,000, together with interest calculated in accordance with the agreement and all enforcement costs on an indemnity basis. That is BVI's principal claim against AEC. It also seeks the return of the $25,000 paid to Silver Force for shares in AEC, given that AEC subsequently cancelled those shares.
In addition, BVI alleges fraudulent misrepresentation, or misleading and deceptive conduct, on the part of all four defendants, either directly, or through Oliver acting on their behalf. In essence BVI asserts that the defendants never had any intention of honouring their agreement generally, or repaying the money. I will detail those allegations later in the judgment after dealing with the principal argument that there was a loan which should be repaid.
The defendants' position is that, while between late 2009 and leading up to May 2010, Murchison and Oliver, on behalf of Silver Force and AEC, did negotiate a proposed arrangement broadly as claimed by BVI (consistent with the minutes of the meeting of the directors of both Silver Force and AEC on 22 April 2010, and which included an offer to purchase the assets of IAC made to the receiver appointed by NAB over specified assets of IAC) and while various draft documents – a shareholders agreement, loan agreement and a charge agreement – were prepared by Oliver, those draft agreements were never agreed by BVI, the receiver did not accept the offer to purchase the assets of IAC and the overall agreement did not eventuate. In essence they say there was no concluded agreement.
In any event, the defendants say that, if an offer was made in the terms pleaded by BVI, then that offer was always conditional upon the business of Aussie Cash (IAC) and the registered mortgage debenture held by NAB over IAC being transferred to AEC, which did not eventuate.
The defendants plead that any offer that was made during negotiations as pleaded by BVI was rejected by BVI on or about 13 May when Cobb, as director of BVI, and Oliver agreed that BVI would instead hold the registered mortgage debenture assigned to it by NAB in return for the payment of $500,000. The defendants' position is that the $500,000 was paid to NAB by BVI on 28 May 2010 to acquire the benefit of that mortgage debenture, NAB assigned the mortgage debenture to BVI, the mortgage debenture was registered and BVI still holds the benefit of it. The defendants therefore deny that the money paid direct to NAB constituted a loan to AEC.
Alternatively, the defendants plead that, if an agreement was reached as pleaded by BVI, then BVI breached that agreement because it did not ultimately transfer the business of IAC over to AEC.
They do admit that $25,000 was subsequently advanced to AEC as a loan and that $25,000 was also paid to Silver Force for the purchase of shares in AEC. They admit that interest payments were made to BVI on a principal sum of $475,000, but allege that those payments were made mistakenly by AEC in anticipation of both receiving the loan from BVI and BVI transferring the assets of IAC to AEC. The loan never having eventuated, AEC claims to be entitled to the return of those interest payments and says it was under no obligation to execute a mortgage debenture over its assets in favour of BVI.
Further, Silver Force counterclaims that BVI owes it $50,000, because the total sum of $500,000 paid to NAB was made up of the $450,000 from BVI and $50,000 from Silver Force. Silver Force alleges BVI borrowed that $50,000 and demands repayment or, alternatively, says the $50,000 should be set off against any money owing to BVI. BVI denies any such loan.
I will detail the defendants' position in relation to the alleged fraudulent misrepresentations later in the judgment, but essentially, while admitting that Oliver made the various statements pleaded by BVI, fraud is denied on the basis that the representations were genuine statements of belief and intention.
By way of reply to the defendants' claim that it paid $500,000 in order to take an assignment of NAB's registered mortgage debenture over IAC, BVI says that, apart from the debenture itself, it never had possession or control of any of the assets comprising the business of Aussie Cash and has always held the debenture from NAB for and on behalf of AEC and the joint venture participants, at the express request and direction of Oliver. BVI says that, if taking the assignment of NAB's registered mortgage debenture was not consistent with the agreement already reached with the defendants, it was an agreed variation to that agreement.
BVI has a fall-back position, added on the first day of the trial. If I were to find that BVI took the assignment of the NAB debenture and certain debts instead of loaning funds to AEC, then BVI demands repayment from Stephanie of a personal joint debt of Stephanie and Oliver that it says was assigned to it by NAB. That claim is made in the alternative. I detail that argument later in this judgment.

Formulation of contract - general principles

The predominant issue in this case is whether or not a concluded agreement was ever reached between the parties and, if so, what the terms of that agreement were. BVI asserts that the contract entered into was partly in writing and partly oral. Minutes of meetings were provided by the defendants to BVI. They are said to be part of the written component of the contract. Various drafts of contractual documents were exchanged. None of them were ever executed, however. It is fair to say that the parties agreed on what they wanted to achieve quite early, but the mechanics of how to achieve it were uncertain and resulted in protracted discussions, largely between Oliver and his lawyers and NAB, and then between Oliver and Murchison.
In RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128, Newnes JA summarised the general legal principles relating to determining whether or not a contract has been formed as follows [63] – [66]:
It is well-established that whether a contract has been formed and the terms of the contract are to be determined objectively. The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon subjective beliefs or intentions …
It is the case, as the primary judge observed, that in the context of determining whether communications between parties amount in law to a binding contract, care must be taken in determining the weight given to the use by the parties of words such as 'agreement'. His Honour referred in that connection to the following oft‑cited passage in the judgment of Gleeson CJ in Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551, 14,552, as follows:
'In a case such as the present, there are two, sometimes related, questions which require to be considered. The first is whether the parties to the putative contract intended to make a concluded agreement.
The second is whether they succeeded in doing so …
As the decision in [Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540] illustrates, the fact that parties to negotiations have agreed upon the major matter under discussion, confidently believing that the remaining matters to be decided will be sorted out later between them or their lawyers, without any difficulty, can sometimes create a misleading appearance of consensus. Such parties may well believe that they have a 'deal' or a 'bargain', and speak and act accordingly, whilst at the same time knowing and intending that further and more detailed agreement is necessary. For that reason, conduct such as shaking hands, or using the language of agreement, can be ambiguous. The resolution of the ambiguity may require more detailed factual and legal analysis.'
…
Evidence of the parties' subsequent communications is admissible for the light it casts on their dealings from which the contract was alleged to have arisen … A statement that there is or is not a concluded contract, if admissible, may carry significant weight or little weight depending on the circumstances, and the weight of any admission will depend upon the source of knowledge of the person making the admission …
And at [92] – [95]:
It is now established that it is not necessary that a contract be found using the 'classical theory of contract formation based upon offer and acceptance': Brambles Holdings Pty Ltd v Bathurst City Council [1]. As Stephen J explained in MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125, 136:
'This doctrine, of the formation of contracts by offer and acceptance, encounters difficulties when sought to be applied, outside the realms of commerce and conveyancing, to the everyday contractual situations which are a feature of life in modern urban communities.'
Thus a contract may be inferred from the acts and conduct of parties as well as, or in the absence of, their words. The question is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract … Not only must the conduct point to the existence of a contract but it must point to the existence of the contract in the terms alleged in the proceedings: Laidlaw v Hillier Elsley Pty Ltd [2009] NSWCA 44 [9].
In Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32, Ormiston J cited with evident approval the following observation of Cooke J in Meates v Attorney-General [1983] NZLR 308, 377:
'The acid test in the case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain (82).'
Also, in the recent case of Absolute Analogue Inc v Sundance Resources Ltd [No 3] [2014] WASC 283, Le Miere J summarised the relevant legal principles as follows:
Protracted or imprecise negotiations will often give rise to doubt whether a final agreement had been made. A court must ascertain from the dealings between the parties whether they intended to make a concluded agreement or not. That intention is tested objectively by reference to what a reasonable person would have concluded. A person will be held to have made a contractual offer if it was reasonable for the alleged offeree to believe that he could conclude a contract simply by indicating assent to the offeror's terms. Similarly, a response to an offer will amount to a binding acceptance, notwithstanding that the offeree did not intend it to be an acceptance, if the offeror reasonably so regarded it. [10]
….
Where the intention of the parties is equivocal, conduct or correspondence subsequent to the time when the alleged agreement was made can be used as evidence to show whether or not a contract was concluded. Where it is asserted that it can be inferred that a contract has arisen from conduct, it is not sufficient that the conduct is consistent with the alleged contract. There needs to be a positive indication that the conduct is evidence of the contract alleged … [12]
…
My task therefore is to determine whether, tested objectively from the point of view of a reasonable person, the parties did both intend to enter into a concluded contract and whether they succeeded. They will be found to have intended to enter a contract if they may be reasonably regarded as having done so. That will be determined by what their words and actions may be reasonably taken to convey, not upon their purely subjective beliefs of what they intended to convey. To succeed, BVI must not only prove that a concluded contract was, objectively, entered into, but that the contract entered into was the contract it asserts was entered into.
The reasonable person will be a person possessed of all the relevant facts. Because there is no one contractual document to construe, but a protracted negotiation conducted orally and via email and via the draft agreements which were provided to the plaintiffs, it will be necessary to analyse those many exchanges and go into considerable details about the factual context.
There was no document executed – prior to the payment to NAB, or after - which recorded any loan from BVI to AEC. BVI can only succeed in its claim that the money was a loan to AEC if a contract to that effect is to be inferred from the acts and conduct of the parties, as well as any verbal exchanges between them. Not only must the conduct of the parties point to a concluded agreement but it must point to an agreement in the terms BVI alleges.
In determining the contractual point, my focus is on the objective view of the facts. This case also involves, however, allegations of fraudulent intent. There are also issues of credibility to be determined. For that reason, it is also necessary to determine what the parties actually intended and believed at the time certain statements were made. That involves considering their subjective intent and knowledge. Hence, even private exchanges between Murchison and Cobb, and between Oliver and his lawyers, not copied to the other parties at the time, are of relevance.

The witnesses' credibility and the evidence

There was a substantial volume of email traffic between Murchison and Oliver, much of it copied to Cobb, and some of it copied to Stephanie and Wesley. While the emails themselves are not pleaded as constituting the written part of the contract in themselves, they are evidence of oral discussions and also provide the context against which discussions took place and draft documents were exchanged. There is some reference in the emails to telephone discussions having been had. There is the occasional reference to a meeting or discussion.
There are also the draft agreements to consider.
Broadly speaking, the initial discussions were had at meetings in a café and various locations involving the two key witnesses, Murchison and Oliver. It is also highly likely some discussions were had between Murchison and Cobb about the situation, and no doubt Sadler as well, just as it is highly likely private discussions were had between Oliver and his wife and son.
Given the delay in time, however, between the conversations and the giving of evidence, I have placed considerable weight upon the objective content of email exchanges, and the evidence was largely led by reference to the emails and documents, although necessarily some evidence was given of discussions outside the emails.
Although some evidence was inevitably given of what a witness understood by an email, that evidence was to explain why certain steps were then taken, or an attitude formed, rather than to detract from the actual text itself. I have generally preferred to place reliance on the text of the contemporaneous emails exchanged, where they exist, which evidence what was said between the parties, rather than a witness's recollection years after the event, but where a witness's recollection of conversations which are not captured in the emails is logical and consistent with the parties' conduct and fills in gaps in understanding the email exchanges, I have placed more weight on such evidence. There are issues which do require findings of credibility to be made. My specific findings about many issues of interpretation are set out in the body of the judgment but I will make some general comments here.

(a) Rod Murchison

The key witness for BVI was Murchison. I found him to be a credible witness overall. His evidence was generally plausible and accorded with common sense. He was not defensive. He was willing to admit his lack of recall on occasions. He was willing to agree with propositions in cross‑examination which did not suit his case. On occasion he showed a trusting willingness to accept a fact merely because it was asserted in cross-examination, which may have made him suggestible on occasion, but certainly not dishonest or biased against the defendants' counsel.
I saw no evidence that Murchison was tailoring his account to advance BVI's position. For example, he gave very minimal evidence about any direct involvement of either Stephanie or Wesley in making any representations to him, notwithstanding that BVI has pleaded they did make those representations.
Of course his memory of specific conversations was not precise. It would have been suspicious had it been so, four years after the event. In addition, his involvement in this entire saga showed a lack of interest in some details at the time the events played out, so it is not surprising that he lacks a precise recollection of what might have been resolved on certain issues. Throughout the events in question, Murchison displayed a lack of patience for legal issues, a lack of interest in the need for contractual documents and a naive willingness to operate on a handshake and mutual desire to make a profit. That attitude and lack of attention at the time to some details translated into evidence which was also somewhat broad brushstroke. As to his reliability, I have tended to approach that task by looking to the emails to see what support they might lend to his recollection. Notwithstanding his broad approach, the many emails do not contradict his recall and generally support his account.

(b) Alan Cobb

The other key witness for BVI was Alan Cobb. I formed the view that he was a generally honest witness, but one who was anxious that none of his evidence should damage BVI's case. He is obviously loyal to Murchison. He has known Murchison for approximately 20 years and has acted as a resident director for some of his companies in Perth, including BVI, of which he was a director from some time in about 2001 until he resigned on 19 July 2010.
Cobb testified that he had 'nothing to do with the negotiations' in relation to the funds provided by BVI and that his role in BVI 'was purely dealing with, as I said, the accounting, management, information, regulatory returns. That was all'. He said in relation to the negotiations between Murchison and Oliver:
That was purely between Mr Murchison and Mr Douglas. I went to a few meetings with Mr Murchison to meet Mr Douglas and at one stage to meet Mrs Douglas as well. But I had no other involvement, apart from the fact that as the arrangement progressed I was asked to see if I could find any basic figures from the previous companies and sort out the starting position that would exist for this new company that was going to be set up to undertake the joint venture between Oliver Douglas and Rod Murchison.

In relation to the deed of assignment of the NAB registered mortgage debenture to BVI, a key event in this trial, Cobb testified that he had executed that document 'basically, because I was asked to'. He said:
This was a document that was required in the arrangements – deal – that they were pursuing with Oliver Douglas and it needed – it had something to do, I think, with the bank. I really don't have many details about it. I – I was – just wasn't involved in any of this side of the arrangement.
He said he was telephoned by Murchison and informed that Oliver would be turning up with the document and he was requested to execute it. He testified that:
Mr Douglas turned up with the document … He came in very quickly, spent very little time there, showed me where to sign, I signed and he left.
One of the key issues in this case is whether Cobb agreed with Oliver that BVI would borrow $50,000 from Silver Force. Cobb explained:
I had no authority, written or verbal, from Mr Murchison to get involved in any negotiations to do with whatever was going on and I didn't. I didn't know the full details of what was being agreed anyway between the gentlemen.
His keenness to announce his lack of involvement in any negotiations made me approach his evidence with caution. I did not regard him as a dishonest witness, but at times as a defensive one. I consider Cobb understated, to a degree, his knowledge of this business deal, as will emerge from some of the emails between him and Murchison. He was a behind-the-scenes adviser to Murchison, whether he liked it or not. Murchison often sought his comments on draft documents or emails. Cobb was at times patently reluctant to give too much advice to Murchison, particularly outside his expertise. At times he subtly fobbed Murchison off - at times not so subtly. At other times he tried to caution Murchison about this deal. He was less enthused about the deal than Murchison but, in the end, it was not Cobb's money on the line and he respected Murchison's decisions. I find Cobb did know more about the deal than his evidence suggests, but what is critical is not what Cobb knew but what he agreed with Oliver.
I have taken into account what the emails indicate about the obvious role of Murchison in BVI. Neither a shareholder nor a director, he was nevertheless patently the man in charge of BVI and I consider the evidence makes it plain that both Cobb and Oliver knew that to be the case. Cobb also knew that $475,000 of the $500,000 came from Murchison personally, using BVI as the vehicle, and only $25,000 from BVI. That renders it less likely that Cobb would be reaching key agreements with Oliver in the absence of confirmation from Murchison and it also renders it less likely that Oliver would reach key agreements without Murchison's input. The key statements said (by the defendants) to have been made by Cobb are generally unsupported by any evidence in the emails.
Cobb's credibility is significant on some issues. Because of my caution about his defensiveness as a witness, I pitted his evidence against the email exchanges and also the dictates of logic and common sense. It is fair to say I have placed considerable weight upon the emails – both for what they say and what they do not say.

(c) Oliver Douglas

Oliver Douglas was the key witness for the defendants, though he is not a party in these proceedings, being bankrupt. I formed an adverse view of his credibility generally, though he was a well prepared and detailed witness. His demeanour in cross‑examination was often belligerent. His evidence about the various proceedings NAB had commenced against him, his wife and son and companies was calculated to be unhelpful. I have made detailed comments about that later. At times his evidence was contrived, generally when confronted with an email that appeared contradictory to the defendants' position. Again, I have made comments about specific evidence later.
His hostility towards the plaintiffs' counsel, Mr Gough, was plain. That hostility arose prior to these proceedings being commenced, and arose while Mr Gough acted for NAB when NAB pursued Oliver and his family and companies for unpaid debt. Indeed Oliver complained that counsel had previously acted in that capacity. That obvious hostility at times impacted upon Oliver's demeanour and I have made allowance for emotion.
But I have also taken into account that Oliver's hostility towards the plaintiffs' counsel was mimicked by his hostility towards Carter, who purchased the business of IAC prior to its going into administration, towards Douglas‑Brown, who was the administrator and liquidator of IAC, and then towards Murchison towards the end of their business relationship, when Murchison began to complain that Oliver and his wife had not repaid a debt of $150,000, and towards Sadler, a director of AEC appointed by Murchison, when Murchison began to complain. It seems to me that Oliver does tend to become hostile and accusatory when challenged generally, not merely in cross‑examination.
Another issue which I consider reflects adversely on his credibility is that of the undertakings he gave to the Commissioner for Fair Trading. In 2008, long before Murchison began his discussions with Oliver, IAC found itself in a position where, because of a change in consumer law, it did not have the necessary licence to offer consumer loans within this State. Oliver gave an undertaking to the Commissioner for Fair Trading, which he agreed was to the effect that he 'would not be a director or otherwise be a manager of a micro‑lender operation in Western Australia', although he later qualified that answer to: 'My recollection is that I wouldn't be a licensee or apply for a licensee [sic], nor would I be a director of Rivergold Asset, if I recall'. In an affidavit sworn 11 February 2010 he described the undertaking as 'that I would not provide any consumer finance facilities in WA nor would I manage the business of Rivergold Assets Pty Ltd'.
Extraordinarily, he testified that he was 'not sure' whether he was able to manage a micro‑lending business in this State, notwithstanding his intimate involvement in the business of AEC, a micro-lending business. I consider he took that undertaking lightly, given the comments I make shortly about his role in AEC, a micro‑lender providing consumer finance facilities in this State.
Oliver's evidence about his role in the various companies I found lacking in candour. It was put to him in cross-examination that, contrary to his undertaking, he had 'been substantially involved in the management of a micro‑lending business in Western Australia since 2008', a proposition he denied. He was caught in a position whereby, not being a director of AEC, Rivergold or Silver Force, not being a licensed credit provider and not being entitled to provide any consumer finance in this State, he was keen to portray his wife and son as being informed and active directors of the companies they were individually involved in. He agreed that both Rivergold and AEC were managed by his wife and son Wesley, and that the strategic decisions and day‑to‑day operations of those two businesses were the province of his wife and son.
From BVI's point of view, the more informed and active Stephanie and Wesley were in the businesses, the less likely it was that they were not informed and actively concerned in his negotiations with Murchison, contrary to their stated positions. I found Oliver's evidence in this regard, however, to be inconsistent with his conduct throughout the negotiations with Murchison.
AEC admitted by its pleadings that Oliver was at all times acting as its agent. Extraordinarily, however, when asked whether he was acting as an agent for AEC once it was incorporated, Oliver testified that he never received any formal appointment and did not really consider himself to be acting as agent of AEC. He said he did not receive any instructions from his wife Stephanie or Wesley to act as an agent of AEC.
Not only is that contrary to the pleadings (Oliver of course is not a party) but it is contrary to overwhelming evidence that Oliver was the controlling mind of AEC. No doubt he did not receive any formal notice or instructions appointing him to be an agent of AEC. He did not need to. Oliver acted as if he was AEC and then informed his wife and son of the steps they needed to take to formalise his actions. They then followed his instructions, including the resolutions passed on 22 April 2010, the transfer of 25,000 shares to BVI and the cancellation of the same, and both the appointment and later removal of Cobb and Sadler as directors of AEC. At no stage in the evidence was there any hint or suggestion that Oliver needed to check with his principal before he agreed anything. His evidence that he did not really consider himself to be acting as agent of AEC cannot be reconciled at all with his son's testimony. I reject Oliver's testimony in this regard as not only being unreliable, but contrived.
In cross‑examination Oliver agreed that the business the subject of discussions between him and Murchison was the business then predominantly being conducted by Rivergold. He agreed he was, in those discussions, acting as agent for Rivergold, but described himself as a mere agent of Rivergold, stating 'I didn't have stooge directors. Those directors appointed me as their agent to deal with it'. He denied that his negotiations concerning the business of Rivergold amounted to management of Rivergold contrary to his undertaking to the Commissioner for Fair Trading. He said he was merely discussing Murchison's desire to acquire an interest in the Aussie Cash business and at no time did he make any commitments to Murchison for and on behalf of Rivergold.
The fact that Oliver expressed himself in terms 'I didn't have stooge directors' rather betrays who was in fact in charge of Rivergold. Wesley testified that Oliver was responsible for the 'strategic direction' of Rivergold. Oliver did make a huge commitment concerning Rivergold, even if it was made formally on behalf of Silver Force. He committed Silver Force (of which he was not a director) to a loan to AEC which was to be funded by transferring the receivables in Rivergold to AEC. The structure of that arrangement between Silver Force and Rivergold remains unclear, but consistent with an approach that the Douglas family companies could be used interchangeably. While Rivergold is not a party in these proceedings, Oliver's influence over all of these companies clearly went beyond that of mere agent, although he was at least that. I reject his evidence in that regard.
Likewise I consider his evidence concerning NAB having taken possession of the Wanneroo Road premises in January 2010 to be unreliable. I consider the events of 29 January 2010 and his evidence about that event, when contrasted to an affidavit he swore at the time, reflect adversely upon his credibility.
On Friday, 29 January 2010, NAB took possession of the Aussie Cash head office in 87 Wanneroo Road, Tuart Hill, out of which both IAC and Rivergold operated. It changed the locks.
Oliver was cross-examined extensively in this trial about those events. He agreed that NAB had taken possession of the premises and changed the locks. He said that he became aware of that when his employee Shayn Krop had telephoned him and informed him that the premises had been locked and the locks changed, whereupon Oliver called his lawyer Mr Havilah. He agreed that he did understand that NAB was purporting to take possession, but said his lawyer at that time was disputing whether the bank's actions were legal.
Oliver agreed that, notwithstanding the changing of the locks, he had entered the building and said entry was gained through the back door of the adjoining hairdresser's premises. He adamantly denied that he and staff had smashed a hole through a gyprock wall and thereby gained access to the premises. He further testified that the hole in the wall, which led from the kitchenette into the main part of the building, had been caused by renovations commenced by Carter, prior to NAB taking possession.
Oliver insisted that NAB did not lock all of the doors and, further, that the bank changed some of the locks on the doors, but not others. He testified:
At the time the rear door was open and I was able to go and walk straight into (the) building, which I owned, and which there was no court order preventing me from – from walking into my building. I did not accept that the National Bank had taken possession of anything and nor did my solicitors.
Six days after those events, on 11 February 2010, Oliver swore an affidavit defending himself and his wife and son from contempt proceedings brought by NAB in the Supreme Court (CIV 1159/2010). The basic thrust of the affidavit was to deny that he and others had unlawfully gained entry to 87 Wanneroo Road and had removed various assets of IAC. He deposed:
14.At approx. 8.30 am I went to 87 Wanneroo Rd, Tuart Hill. On arrival I recognised the Bank's solicitor Mr Craig Gough …
19.My solicitor addressed email correspondence to Mr Gough regarding the removal of the assets from the premises by way of email regarding the removal of Rivergold Assets but no satisfactory response was received. The premises remained locked Friday and over the weekend.
20.On my understanding that the Bank permitting access to the premises for the purpose of removing the assets of the premises, I arranged removalist vehicles for Monday morning. Subsequently I was advised by Mr Havilah that the Bank had not yet confirmed access to the premises for me to collect the assets.
…
26.As to paragraph 18, the conduct of the Bank had caused severe disruption and damages to the business operated by Rivergold Asset Pty Ltd and the other active companies by not allowing the staff of those businesses to gain entry and provide services to their respective customers.
…
28.The Bank continued to disallow entry to Rivergold Assets Pty Ltd staff without providing any notices to Rivergold Assets Pty Ltd to explain their position.
…
29.The Bank by keeping the Tuart Hill premises closed and preventing access to collect the business equipment, records and the server has caused substantial damage to the business of Rivergold Assets and Aussie Cash Ltd.
…
33.I inspected the building on 4 February and was able with great difficulty, to peer through the heavily tinted glass and venetian blinds at the front of the building by cupping my hands around my eyes …
The plain intent of Oliver's contemporaneous affidavit was to complain that, by denying all access to the premises for several days, NAB had caused 'severe disruption and damages' to the business of Rivergold. Paragraph 33 makes it plain that Oliver was asserting that he could not gain entry at all and was reduced to pressing his nose against the window to see inside.
Oliver's evidence before me, however, was to the effect that he had simply walked into the offices through an unlocked back door. Both versions cannot be correct. His evidence before me certainly implied a clear and emphatic memory of events. I have considered, but rejected, the possibility that his memory is simply very flawed. I find he has given deliberately misleading evidence, either in evidence before me or in his affidavit from February 2010. It does not matter which is misleading.
As to his assertion in his affidavit that the premises 'remained locked Friday and over the weekend', Oliver said 'Well, it says the premises remained locked Friday and over the weekend. It doesn't say by the National Australia Bank'. Either that answer, or the assertion in the affidavit, was disingenuous.
A photograph of the hole was tendered depicting a large oval shaped hole in a plaster wall, of the right height and size and shape through which a person could conveniently enter. Immediately below the hole is a large quantity of smashed and shattered plasterboard. The other photograph tendered depicts a pile of boxes, files, office signage and office equipment including computer monitors.
There was no evidence before me as to the precise date of those photographs and BVI's counsel chose not to tender a number of other photographs which would have placed those two into better context in terms of timeframe. But, given that Oliver testified the hole in the wall was made prior to NAB taking possession (indeed his affidavit claimed these renovations took place prior to Christmas), staff of Rivergold must have been working in the office in which a great gaping hole had been smashed through a wall, leaving a significant pile of rubble, and no‑one cleaned it up. Shayn Krop, who worked there, did not even recall such a hole in the wall.
Stephanie testified that she did not go to the premises until two days after NAB took possession. She said she gained access through the unlocked back door, being the door which leads in to the kitchenette and said she was able to gain access to their office through the kitchenette because the partitioning had been pulled down a few weeks prior as part of the renovations that Carter had conducted, including removing sheets from the wall.
When shown the photograph of the hole in the wall, she agreed that she had accessed the premises by entering through that hole. She denied knowing anything about persons associated with either Rivergold or IAC smashing through that wall after NAB locked the premises and in effect said that she took it to be part of the renovations done by Carter. The hole hardly fits the description of someone having removed sheets from the wall.
Apart from entering the office herself and obtaining some personal possessions, Stephanie said she did not know whether people had entered the building after the lockout and removed most of the items inside the building. Given that she was director of Rivergold and worked for it, and given that various items turned up at her house afterwards, I find that ignorance very unlikely. In addition the following exchange took place in cross-examination:
And it's true, Mrs Douglas, isn't it, that after the lockout those computers were located in your premises at Eton Street? – Sorry, I don't understand what the question is.
They went from Wanneroo Road to your house at 37 Eton Street? – Yes. We – we had taken them out and put them in Eton Street.
Who is we? – Staff.
Who? – Oliver and myself, Wesley.
So you were involved in taking those computers out and putting them in your house? – We took them out, yes.
You were present at Wanneroo Road when they were taken out? – No, I wasn't. I – I didn't actually pull any cords out or carry anything, no.
But you saw them being removed? – No, I didn't see them being removed.
Who installed them in your house? – Probably Shane, but I'm not sure.
You didn't see them coming into your house? – No.
Have you discussed with Oliver or Wesley how they came to be in your house? – No.
Never? – No.
Her position appeared to shift from admitted personal involvement in shifting items, to one of complete ignorance as to how those items arrived at her house. Krop denied any involvement in, or knowledge of, the computers arriving at the house or being installed.
I am extremely sceptical about the renovation evidence, although Wesley also claimed the hole was pre-existing. I would be sceptical anyway about a claim that such a hole was the result of renovations but, when coupled with the contrast between Oliver's affidavit sworn in February 2010 and his evidence before me, my scepticism increases. There is no need for me to make a finding about the hole, however. It is a peripheral issue in the end. Its significance is the light it casts on Oliver's credibility because his evidence and his contemporaneous affidavit cannot both be true.
I also considered Oliver's evidence about the debt of $249,916 assigned with the NAB registered mortgage debenture to be contrived to avoid the obvious implication that this was a personal debt owed by him and Stephanie (as Trustees for the Great Southern Land Trust). Not only was it contrary to the pleadings (not his pleading of course) but it was contrary to common sense. I have detailed that evidence much later in this judgment.

As to the case against Stephanie and Wesley, I intend to deal with this very briefly. Liability for misleading and deceptive conduct is determined by the legislation which does not provide for liability by way of negligence. On that basis I find there is no claim to determine.
But if I am wrong in that, the claim for negligence comes down to a claim that they were negligent in failing to prevent Oliver from engaging in misleading and deceptive conduct in relation to the issue of the assets purchase. I have already found that Oliver was not acting as an agent for Stephanie or Wesley in the negotiations. There is no evidence that Wesley was aware that Oliver was making any such representations as to the assets purchase.
No authority has been cited to me to establish a duty of care to discover what representations a person might be making on behalf of someone else, in order to then ensure any such representations do not amount to fraud or misleading and deceptive conduct. In any event, even if BVI overcame the considerable hurdles in its way as to establishing a duty of care and reasonable foreseeability, Oliver was dealing with his lawyers in conducting these negotiations and the settlement with NAB. It is not suggested just what steps a reasonable person should have taken in those circumstances to ensure that Oliver did not engage in misleading and deceptive conduct in his negotiations with Murchison.
I reject the claim against Stephanie and Wesley based in negligence.

Alternative claim under NAB registered mortgage debenture and estoppel

On the first day of the trial, I granted leave (over objection) to BVI to add an alternative claim, namely that, if paying $450,000 to NAB and receiving an assignment of its registered mortgage debenture is found by this court to be inconsistent with BVI's primary position that BVI loaned $450,000 to AEC by paying it to NAB, then BVI demands payment of a particular debt which it says was assigned by NAB to it, namely a debt of $280,486 owed by Oliver and Stephanie Douglas to NAB at the time of the assignment. In evidence that figure became $249, 916.00.
BVI accepts that, if its primary position be correct and the registered mortgage debenture was in fact assigned to BVI for the benefit of AEC, then any enforcement of the registered mortgage debenture, or an assigned debt, would be for the benefit of AEC. Hence, this is an alternative claim.
The NAB bank account of Oliver and Stephanie Douglas as trustees for the Great Southern Land discretionary trust was $1,707,861.00 in debit on 10 May 2013, until a miscellaneous credit of $249,916.00 reduced the debt to $1,457,945.00 on 28 May 2013, the day of the settlement with NAB. The Deed of Assignment indicates that one of the debts assigned was a debt of $249,916.00 relating to that same account number. Plainly then Murchison's $450,000 was used in part to reduce the debt in the account.
Stephanie admits that amount was owing to NAB by her and her husband, but denies it is owing to BVI.
Although the defendants objected to BVI pleading in its reply that BVI held the NAB registered mortgage debenture for and on behalf of the defendants at the request and direction of Oliver (on the basis that such a pleading is inconsistent with their primary position that the $475,000 was a loan to AEC, a submission I reject), Stephanie pleads that, if BVI now holds the assignment of that debt in its own right, then it is estopped from now pursuing that debt against her because BVI told the defendants that it held the assignment of debt from NAB 'on trust' for AEC and 'implied that it would not pursue the debt' as against her. She claims to have changed her position to her detriment in reliance upon that representation.
In other words, her pleaded position is that BVI paid $500,000, $50,000 of which it borrowed from and owes her company Silver Force, in order to take an assignment of debt from NAB, the benefit of which security it agreed it would hold entirely on trust for AEC and never enforce. No wonder she informed Murchison in an email that she was very grateful for what he had done.
She gave no evidence to support the estoppel and nor did Oliver. In cross‑examination Stephanie maintained that she was still unaware that some of the debt assigned to BVI under the deed of assignment was her personal debt and said she had always understood it to be debts owed by IAC.
As to her pleaded assertion that BVI is estopped from claiming under the NAB registered mortgage debenture on the grounds of estoppel, she was squarely asked in cross‑examination:
Do you assert – or you do assert do you not, that Mr Murchison told you that he held those funds on trust for AEC?
to which she replied, 'He didn't tell me anything'.
After a preamble explaining to Stephanie that part of the debt that was assigned included personal debt of hers in the name of her and her husband as trustee for a trust she was asked, 'And why do you say they're not payable?', to which her sole response was, 'Because I have never known about it'.
I have already found that BVI did loan $475,000 to AEC and the means by which it did that was to pay $450,000 directly to NAB, whereupon it was assigned the NAB registered mortgage debenture over the assets of IAC and $500,000 of debts to be held on behalf of the joint venture. BVI's claim against Stephanie therefore falls away as it is their clear position that it is an alternative claim.
In case I am wrong in my conclusion just stated, however, I will deal with the alternative claim.
It follows that, had I not concluded that the money paid to NAB on 28 May 2010 was paid by way of a loan to AEC, and had I not found that BVI took the assignment of the debt and the NAB registered mortgage debenture on behalf of AEC, I would have given judgment against Stephanie in relation to that part of the debt assigned to BVI which was owed by her jointly with Oliver.

Exemplary damages

Finally, BVI claims exemplary damages against all four defendants. This is barely pleaded, as a remedy sought. No facts are pleaded to justify the claim, but in submissions it became clear that the claim is based upon the allegations of fraudulent misrepresentation.
Exemplary damages are awarded over and above damages, not by way of compensation for loss suffered, but by way of punishment for behaviour which is malicious, wilful, reprehensible and in contumelious disregard for the rights of the plaintiff: Uren v John Fairfax & Sons Pty Ltd (1996) 117 CLR 118.
Had I made a finding that the negotiations conducted by Oliver with Murchison were a sham from the outset, BVI would have had an arguable case for exemplary damages. Absent such a finding, however, and absent any finding of fraudulent misrepresentation, there is no arguable basis for exemplary damages to be awarded.

Conclusion

A.BVI is entitled to judgment against AEC for repayment of the loan of $475,000, consisting of the $450,000 paid to NAB and the balance of $25,000 subsequently paid to AEC, together with interest outstanding as at the date of the notice of default, which was $22,045.20, together with interest calculated on the principal at the contractual rate of 11% per annum calculated from 1 November 2010 until judgment.
B.BVI is entitled to judgment against both AEC and Silver Force for damages for misleading and deceptive conduct pursuant to s 82 TPA, being $500,000 together with interest at the rate of 6% from 28 May 2010 until judgment, less the amount of $21,902.05 already paid in interest. AEC is liable for that sum concurrently with its liability for the $475,000 and interest as specified above.
C.BVI is entitled to judgment against Silver Force for the return of the $25,000 paid to Silver Force for the 25,000 shares in AEC, later cancelled. Silver Force is liable for that sum concurrently with its liability to pay the $500,000 together with interest as specified.
D.Silver Force's counterclaim for $50,000 based on the alleged loan of that sum to BVI is dismissed.
E.The claims against Stephanie and Wesley Douglas for fraudulent misrepresentation, misleading and deceptive conduct, and negligence are dismissed.

To the extent to which both AEC and Silver Force are liable to pay the sum of $500,000 together with interest as specified above, their liability is joint and several.
BVI is not entitled to recover more than the greatest amount calculated in respect of either A or B above.