Neale v Sanders

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: NEALE -v- SANDERS & ANOR [2001] WASC 271

CORAM: SCOTT J

HEARD: 6 & 7 SEPTEMBER 2001

DELIVERED : 12 OCTOBER 2001

FILE NO/S: CIV 2629 of 2000

BETWEEN: IAN JAMES NEALE
Plaintiff
AND
ALAN JOHN SANDERS
MARGARET ANNE SANDERS
Defendants

Catchwords:

Contract - Construction and interpretation of contract - Claim for damages for breach of contract - Agreement by defendants to provide funds to investor - Meaning of "advance" - A loan or a joint venture - Dispute as to monies retained by parties - Credibility of parties in issue - Current accounting inadequate and misleading - Receiver appointed to manage fund and verify creditors

Legislation:

Supreme Court Rules O 51 r 1

Result:

Order for appointment of receiver to manage account and verify claims
Defendants' counterclaim dismissed
Adjourned for final orders

Category: B

Representation:

Counsel:

Plaintiff: Mr M J McPhee
Defendants: In person

Solicitors:

Plaintiff: Michell Sillar McPhee
Defendants: In person

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

Bronester Ltd v Priddle [1961] 3 All ER 471
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64
London Financial Association v Kelk [1884] 26 Ch D
Lonrho Plc v Fayed [1992] 1 AC 448
Uren v John Fairfax & Sons (1965-6) 117 CLR 118
XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1984-5) 155 CLR 448

Case(s) also cited:

Gaillard v Mineral Underwriters (1977) WAR 116
Jervois Sulphates (NT Ltd) v Petrocarb & Ors (1974) 5 ALR 4
Lincolnshire Sugar Co Limited v Smart [1937] AC 697
Tripodi v R (1961) 104 CLR
Whitfeld v De Lawet & Co Ltd (1920) 29 CLR 7
Williams v Hursey (1959) 103 CLR 30

SCOTT J: The plaintiff in this action carries on business as "On Top Down Under Promotions".
The plaintiff proposed to run a rodeo in Mandurah on 28 October 2000. The event was to be called the "Mandurah Rodeo". In order to fund the event the plaintiff required an investor to contribute $25,000 so that the expenses of staging the rodeo could be met.
The defendants ("Mr Sanders" and "Mrs Sanders") run a business as pawnbrokers under the name of "Cash City Rockingham". The business operates as pawnbrokers and lends money against goods. Only Alan John Sanders ("Mr Sanders") gave evidence but Margaret Anne Sanders ("Mrs Sanders") did not.
The plaintiff was actively seeking to obtain finance to conduct the rodeo. He met the defendants at a bootscooting function in Singleton on 30 August 2000. The plaintiff showed the defendants a business plan that he had prepared and they were interested in funding the venture.
The following day the plaintiff went to the defendants' shop in Rockingham and again showed them documentation that he had prepared, being his business plan for the event. The plaintiff's evidence, which I accept, was that he explained to the defendants that the investment would be 100 per cent tax deductible if it proved to be unprofitable.
The defendants agreed to fund the event and on that day provided the plaintiff with some funding to enable him to progress the venture. The following day the defendants provided more funding toward the venture and at that stage Mrs Sanders indicated that she wanted to open a joint account so that proper accounting procedures could be put in place and so the defendants could keep track of the funding.
On 2 September 2000 the defendants provided the plaintiff with a draft agreement which, following some marginal amendments, was ultimately signed by the plaintiff and the defendants in the presence of a Justice of the Peace. That agreement is central to the action. It is a one page letter and is produced in full hereunder:

Following the execution of the agreement on 2 September 2000 the plaintiff and Mrs Sanders went to the Police and Nurses Credit Union ("the Credit Union") in Rockingham and opened a joint account in the name of Mrs Sanders and the plaintiff. A cheque from the defendants in the sum of $10,500 was deposited in the new account. Money had been advanced by the defendants to the plaintiff and the remaining balance to make up the total of $25,000 was paid to the plaintiff in cash.
In addition the plaintiff organised some sponsorship being $1,550 in cash as well as some product sponsorship. The money was banked by the plaintiff into his business bank account at Mandurah. His reason for dealing with sponsorship money in that way was because it saved him having to go to Rockingham to deposit the money. The plaintiff has accounted in general terms for the cash that he received as shown in his business ledger. In addition the plaintiff produced a receipt book verifying receipt of the sponsorship money.
The plaintiff organised the rodeo using both the $25,000 advanced by the defendants together with the sponsorship money he had obtained.
Shortly before the rodeo the plaintiff asked the defendants if they could assist with staffing on the day of the rodeo and the defendants agreed to do so. The plaintiff also organised for the cash collected at the rodeo (being the gate takings and takings from the drinks tent) to be collected and taken to the Credit Union for banking into the newly created joint account. There were to be several money runs during the day with the security officers collecting the money, taking it to the Credit Union and banking it.
Because the plaintiff required additional help on the day of the event the defendants organised other people to assist with the bar and gate takings on the day of the rodeo.
So far as the bar takings were concerned, the system was that customers would purchase tickets for drinks which they wished to consume, take those tickets to the bar and exchange them for the drinks. It would appear that after the commencement of the rodeo and for a period of approximately one to two hours, the staff in the drinks tent did not know what to do with the tickets used to purchase drinks. In that respect they received no specific instructions. Evidence was called from Tracey Olwen Ness who worked at the rodeo on 28 October 2000. Miss Ness was in the bar area all day. I accept the evidence of Miss Ness who

testified that when she started work she was serving drinks in exchange for tickets. Initially she did not know what to do with the tickets and so she was throwing them away. Eventually after some discussion with other bar staff the tickets were collected in a box. Miss Ness's evidence was that the period during which the tickets were discarded was between one and two hours. It is also of some significance that Miss Ness had been recruited to work at the rodeo by the defendants and that the defendants paid her for her day's work a week after the event. The significance of Miss Ness's evidence however is that the money collected from the rodeo would not be matched by the value of the tickets collected.
The defendants in addition to organising some staff for the rodeo took over responsibility for the manning of the entrance gate and sold tickets to the patrons who entered the arena. There was evidence to suggest that some of the patrons had free tickets and that other ticket sales had been made before the events via commercial outlets in Mandurah. The significance of that evidence will be discussed later in these reasons.
It is not in dispute that the defendants collected all of the money from both the drinks tent and the entrance gate on the day of the rodeo. Mr Sanders' evidence was that they took the money home and placed the money in a grey plastic box in their business safe. I accept his evidence in that respect as being truthful and accurate.
The day after the rodeo the plaintiff came to see the defendants for the purpose of finalising the accounts. It would seem that the plaintiff brought with him some receipts and what Mr Sanders described as "a couple of scrap bits of papers". Mr Sanders however wanted invoices, accounts, receipts and all the papers verifying the expenditure. At that time, Mr Sanders' evidence was, that all of the money received from the rodeo was still in the box that he had placed in the safe. For reasons I will come to, in my opinion the defendants used the money collected in their business by taking sums from the box from time to time. The defendants have never accounted for the cash that they received and have not produced any documentation verifying the amount of money which was taken away from the rodeo. As I have said, Mr Sanders' evidence was that the cash received was placed in the box in the defendants' safe. In my view, the defendants believe that the plaintiff owed them the $25,000 which had been advanced, and as a consequence, they gradually utilised the cash that they received from the rodeo in their business. Mr Sanders testified in his evidence that he counted the money and I accept that he did so. He also said that he recorded the counting of the money, but no records have been produced. Mr Sanders said that although he recorded the money collected he has no knowledge of where that record now is. In that respect it is to be remembered that the defendants in addition to putting in the $25,000 had also taken money to the rodeo for use in the float. In that respect Mr Sanders' evidence was that he took some $6,800 for use in the float and presumably that was part of the cash taken in the box back to the defendants' safe.
Mr Sanders' evidence was that the cash money received was eventually used in the pawnbroking business. By way of accounting, Mr Sanders at the end of the day, said that he counted the tickets collected on the day of the rodeo and, ultimately after allowing for tickets that had been given away, the sum of $14,105.50 was paid into the joint account at the Credit Union. It is not in dispute that the value of the tickets which the defendants retained totalled $14,105.50. That is however, in my view, of no assistance in determining the amount of cash that was taken by the defendants on the day of the rodeo. As I have said, in my opinion, the defendants were competent business people who understood their obligation to account for monies received. Mr Sanders testified that he did count the money but he said in his evidence that he could not recall the amount of money that was taken.
Mr Sanders' evidence was that he retained the takings from the rodeo in his safe until the sum of $14,105.50 was paid into the joint account on 2 March 2001. I do not accept his evidence that he retained the money for that length of time.
Following the holding of the rodeo and the plaintiff's visit to the defendant for the purpose of settling the accounts the parties shortly thereafter sought legal advice. In a letter of 3 November 2000 the solicitors for the defendants wrote to the plaintiff and in that letter said:
"We are instructed that the takings, an amount of some $16,000, are for the time being in our clients' possession."
In response the plaintiff's solicitors indicated that they had instructions to commence proceedings seeking a full account for monies received.
The defendants' solicitors further wrote to the plaintiff's solicitor on 6 December 2000 and in that letter the defendants' solicitors said:
"Our clients hereby account to your client for the total sum received by them following the rodeo, and which has not to date been paid into the joint account, as follows:
1. Admission Ticket Sales $11,662.00
2. Bar & Drinks Tent $ 3,395.50
$15,057.50"
In that letter of 6 December 2000 the defendants' solicitor also said:
"Further, we confirm that our clients will pay an amount of $15,057.50 into the joint account as soon as possible. As the monies lent to your client formed a significant part of the working capital of our clients' business, our clients have been forced to apply the monies received from the rodeo in the ordinary course of their business. Our clients are therefore arranging to borrow the amount in question from their financial institution, and we confirm that our clients will pay that amount into the joint account as soon as it is received by them."
It is to be borne in mind that Mr Sanders in his evidence testified that the money from the rodeo had been kept in the defendants' safe intact. That is of course contrary to his solicitor's letter of 6 December 2000 to which I have just referred. Mr Sanders testified that his solicitors misunderstood his instructions in that regard, but I do not accept his evidence in that respect.
The course of correspondence between the plaintiff and the defendants indicates that the defendants then commenced correspondence with the plaintiff's solicitors directly. A letter bearing a fax date of 8 December 2000 signed by A J Sanders said:
"…We have no money. We have notified Alison Gibson of our predicament and as from today all correspondence should be directed to us at the above address.
We still maintain that we lent Ian Neale $25,000 and that in no way were we partners, our reward for the loan would have come from the profit after expenses were paid. We have continually asked for a meeting with Ian Neale and all those concerned to divide what money is left in a way that all creditors get a percentage in the dollar of what they are owed.
We are currently trying to get a loan and refinance but we cannot perform miracles as I have tried to explain to Ian Neale.

We have agreed to put the money that we collected at the rodeo into the joint account but we want Ian Neale to do the same.
I hope commonsense will prevail in this matter but I must emphasise that we cannot put the money in the bank when we haven't got it. The money we lent Ian Neale was working capital that is why the clause that it was to be returned in 48 hours.
By sending us to the wall no one will achieve anything. We are in our fifties so that is the end for us."

By further letter of 25 January 2001 Gibson Tovey Mills, solicitors for the defendants wrote again to the solicitors for the plaintiff. It would appear from the correspondence that Gibson Tovey Mills had once again been instructed by the defendants. In that letter Gibson Tovey Mills stated:
"With reference to the above matter, we advise that our clients now have in their possession funds equivalent to the amount of the proceeds which were in their possession following the rodeo on 28 October 2000, being $14,105.50.
The amount of takings received by our clients was initially thought to be $15,057.50. However, a review of the admission tickets retained by our clients has indicated that this original figure was inaccurate.
Our clients have instructed us that they are ready, willing and able to deposit an amount of $14,105.50 into the account held at Police and Nurses Credit Society Limited in the joint names of Ian James Neale and Margaret Anne Sanders provided that your client at the same time deposits into that account the sum of $2,481.00, being the amount received by your client on the evening of the event in respect of bar takings …"
The solicitors for the plaintiff replied to Gibson Tovey Mills querying the difference in the amount of the takings referred to in the correspondence. It was not until the 2 March 2001 that the defendants deposited $14,105.50 into the joint account. That, together with the remainder of the funds in the account left a credit balance of $18,205.91. The defendants have rejected all approaches by the plaintiff to utilise the money to pay the creditors of the rodeo.
By letter of 20 April 2001 Gibson Tovey Mills on behalf of the defendant wrote to the plaintiff's solicitors giving a breakdown of the money which the defendants maintain was collected at the rodeo. It is clear from that letter that the breakdown came from a collation of the ticket sales and not the cash received.
In the course of his evidence the plaintiff produced documentation showing the amount of money which he had paid and debts he had incurred in running the rodeo. Those payments were recorded and analysed in the plaintiff's journal and to some extent are supported by invoices and corresponding documentation. There are however in my view, many items in the account which have not been properly verified. Those amounts would require analysis by an accountant to determine which, if any of the accounts, are properly referable to the rodeo. For example, there are items such as the purchase of a battery, a driver's licence payment, a knee brace, clothing, large amounts for fuel and other items of expenditure which may or may not be legitimate expenses of the rodeo.
Subject to any qualification mentioned earlier in these reasons, in my view, the evidence called for the plaintiff, including the plaintiff's own evidence is to be preferred to that of Mr Sanders. Whilst I accept that the plaintiff's accounting evidence was in many respects unsatisfactory, in my view that reflected the plaintiff's lack of sophistication and lack of capacity to prepare accounts in proper form. The defendants on the other hand are business people, who in my view understood their obligations with respect to accounting and I specifically reject the evidence of Mr Sanders that he did not recall the amount of the takings of the rodeo.
Mr Sanders' evidence was that the money received was used in the petty cash float of the defendants' business and it would not be possible for the defendants' accounts to balance unless proper records were kept of the money introduced into the defendants' accounts in that way. Mr Sanders' evidence with respect to accounting for the cash received was in my view evasive and unsatisfactory. In reaching that conclusion, and on the case generally, I have taken into account and made allowance for the fact that the defendants were not represented at trial although as these reasons indicate from time to time during the course of the dispute between the plaintiff and defendants, the defendants retained the services of solicitors.
I would also mention on issues of credibility that by par 10 and 11 of the amended defence and counterclaim the defendants plead:

"10.The Defendants deny paragraph 14 of the amended Statement of Claim insofar as any of the allegations contained therein related to terms of the Agreement pleaded by the Plaintiff. The Defendants admit:
(i)failing to pay the funds into the joint account; and
(ii)appropriating the funds for their own use

but say that they were entitled to do so, by the actions of the Plaintiff. The balance of paragraph 14 is denied.
11.The Defendants deny paragraph 15 of the Amended Statement of Claim. The Defendants:
(i)have accounted in correspondence with the Plaintiff's solicitors in respect of the sum of $15,057.50, which was the sum initially thought by the Defendants to have been taken by them from the rodeo;
(ii)have made all the records from the rodeo, which constitute the remaining tickets which are in their possession, available for the Plaintiff and his solicitors to inspect;
(iii)on re-counting the remaining tickets recalculated the amount taken from the rodeo as being $14,105.50;
(iv)have offered to the Plaintiff to pay the sum of $14,105.50 into a joint account, on payment by the Plaintiff of the sum of $2,481.10 also constituting proceeds from the rodeo which were taken by the Plaintiff."

The amended defence and counterclaim was filed on 1 February 2001 before the sum of $14,105.50 was paid into the joint account.
Finally on the question of credibility I note that by letter faxed by the defendants to the plaintiff's solicitors bearing a fax date of 17 August 2001 the defendants say:

"We say again we never used the money in our business, Gibson & Tovey made a mistake we didn't have to use the money our refinancing of our loan came threw (sic) quicker than expected [January not March] so you see we didn't have to use the funds from the rodeo…"

The correspondence indicates that the defendants did refinance their business. A letter from Camlach Financial Services of 24 January 2001 shows the refinancing of the defendants' business loans.

Taking all those matters into account I have reached the conclusion that the defendants utilised the money from the rodeo in their business. The defendants believed they were entitled to repayment of the sum of $25,000 advanced by them as provided for in the agreement of 2 September 2000 and so appropriated the money received from the rodeo against that debt. It is also my view the defendants utilised the money in their business, probably by way of taking amounts intermittently prior to the refinance being finalised. In that respect the intention of the defendants was to reimburse themselves for money outlaid (including the till floats) from the monies which they took from that event. The significance of that finding of fact will become apparent later in these reasons.
In the plaintiff's statement of claim the plaintiff seeks:
"1.A declaration that upon the true construction of the agreement made partly orally and partly in writing made between the Plaintiff and the Defendants on or about 2 September 2000:
(a)The proceeds of the event described in the said agreement should be applied as follows:
(i)all moneys received should be placed in the joint account No. 195752 opened by the parties at the Police & Nurses Credit Union, Rockingham;
(ii)from such funds, all outstanding creditors be paid;
(iii)after payment of such creditors, the Defendants received the return of their
investment of $25,000.00, or so much of it as remained;
(iv)after such payments referred to in (ii) and (iii) herein the balance of funds be divided equally;
(v)the Defendants receive a return of their investment (or part thereof as may herein be mentioned) after settlement of creditors.
(b)Any shortfall in moneys available to creditors from the said joint venture, be paid equally by the Plaintiff, as to one half; and the Defendants as to the other half."
The plaintiff seeks in the alternative rectification of the agreement to replace the word "advance" with "invest" or "investment" and an account of proceeds including payment into the joint account. The plaintiff also seeks damages for breach of contract, damages for conspiracy, exemplary or aggravated damages for conspiracy and further or other relief as the court considers just.
The defendants counterclaim alleging that the plaintiff made false representations to them and they allege such representations were made negligently without caring whether they were true or false. The representations are pleaded in par 6 of the counterclaim. The defendants seek:
"(i)A declaration that upon the true construction of the Agreement between the parties, the Defendants are creditors of the Plaintiff
(ii)An order that the Plaintiff pay them the sum of $25,000 together with interest from 31 October 2000 until the date of payment pursuant to section 32 of the Supreme Court Act 1971.
(iii)An order that the Plaintiff account for all monies received by him from the Defendants and all takings received by him from the rodeo, and pay such takings into the joint account No. 195752-S16 held at Police & Nurses Credit Society Limited in the joint names of the parties.
(iv)An order that the Plaintiff produce all documents and records relating to the rodeo that are of (sic) have been in his possession, custody or control.
(v)Damages for breach of the Agreement made 2 September 2000;
(vi)Damages for misleading and deceptive conduct pursuant to section 79 of the Fair Trading Act 1987 (WA).
(vii)An order that the Plaintiff pay the Defendants' costs of these proceedings, such costs to be taxed."
No evidence was called by the defendants to establish the counterclaim which will be dismissed.
It is necessary to examine the legal principles surrounding the facts as found in these reasons. In my view it is clear on the facts that the defendants have never accounted to the plaintiff for the money received from the rodeo and it is impossible to determine the total of takings in the absence of such accounting. Specifically the accounting for the bar takings and gate takings by way of totalling the ticket sales, in my view is both inadequate and misleading and would not result in a proper account being arrived at.
Dealing first with the plaintiff's claim in conspiracy, in my view it is necessary for a claim for conspiracy by lawful means to be made out for the plaintiff to establish that the defendants intended to cause injury or damage to him. See the Laws of Australia Vol 33 p61 under Part E- Conspiracy. Such an intention is required if lawful means are used to carry out the conspiracy. See Lonrho Plc v Fayed [1992] 1 AC 448 which involved the use of unlawful means to carry out a conspiracy and where it was held that in such a conspiracy it was not necessary to allege that the predominate purpose of the unlawful conduct was to injure the plaintiff. The plaintiff's claim for conspiracy is pleaded in par 17 of the statement of claim in the following way:
"17.Further or alternatively the defendant on or about the 28^th October 2000 conspired to appropriate all funds and records of the rodeo to themselves and in breach of the contract with the plaintiff with intent to injure the plaintiff so that all funds received would be retained by them and all obligations arising out of the rodeo, left with the plaintiff."
Therefore, in terms of the plaintiff's pleading he was required to establish an intent on the part of the defendants to injure him.
It is to be noted that the plaintiff's case was not pleaded in conversion and in his final submissions Mr McPhee made it clear that the plaintiff's case was based upon breach of contract rather than conversion.
In this case, in my view there is no suggestion that the defendants used unlawful means in taking the proceeds of the rodeo. By agreement with the plaintiff the defendants had the responsibility of collecting the proceeds both of the bar takings and the gate and although by placing the money in their safe they acted contrary to the written agreement, it cannot be said they used unlawful means in dealing with the proceeds of the rodeo in that way. The plaintiff has failed to establish an intention on the part of the defendants to injure him. It follows that the plaintiff's claim in conspiracy must fail.
In relation to the general accounting question, in my view this is the case where the defendants have failed to account to the plaintiff for the proceeds of the rodeo. In such circumstances the law presumes that the takings would at least equate to the expenses of the event. In the Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 the High Court dealt with a case where proof of damages could not be established. That case involved a coastal surveillance contract where the contract was terminated before any profits could be established. Mason CJ and Dawson J said at 87:
"In Bowlay Logging Ltd. (1978) 87 DLR (3d) at pp334-335 Berger J. expressed his agreement with the American approach. His Lordship held that the onus rested on the defendant to establish that, even if the contract had been fully performed, the plaintiff would not have even recovered his reasonable expenditure. In C.C.C. Films Ltd [1985] QB at 39-40 Hutchison J adopted the reasoning of Chief Judge Learned Hand in L. Albert & Son v Armstrong Rubber Co in holding that the onus lies on a defendant to establish that a plaintiff is not entitled to reliance damages because the expenditure incurred would not have been recouped, even if the contract had been fully performed. Hutchison J described the fact that the onus in this regard should fall on a defendant as 'eminently fair'.
The placing of the onus of proof on a defendant in the manner described amounts to the erection of a presumption that a party would not enter into a contract in which its costs were not recoverable. Cases such as Bowlay Logging Ltd. illustrate that such a presumption is not irrebuttable but, until that presumption is rebutted, a plaintiff may rely on it to recover his or her reasonable expenses both in the case of a contract which would not have been profitable and in the case of a contract where the outcome of the contract, if it had been fully performed, cannot be demonstrated, whether at all or with any certainty. This last type of contract, … is to be distinguished from a purely aleatory contract where, almost by definition, it would not be appropriate to apply the presumption we have described for the reason that inherent in the entry into such a contract is the contingency that not even the slightest expenditure will be recovered, let alone the securing of any net profit."
In my view such a presumption should apply in this case. The defendants having failed to account for the proceeds taken from the rodeo, the plaintiff is entitled to the presumption that the proceeds would at least equal the expenditure.
It is of course not in dispute that the defendants are unsecured creditors at least to the extent of their contribution of $25,000 to the cost of the rodeo. The appropriate order in that regard is that the defendants should pay into the account at the Credit Union sufficient money to account for both their own investment of $25,000 plus the verified expenditure incurred in running the rodeo. That money should be distributed so that all of the creditors including the defendants are paid out in full. In that respect, a receiver should be appointed to determine the sum which the defendants must pay into that account. The receiver would have the responsibility of verifying all of the accounts including the plaintiff's claim for reimbursement of expenditure and outstanding claims. The defendants of course would be unsecured creditors not only to the extent of their $25,000 but also to the extent of other amounts paid by them towards the expenses of the rodeo. In that respect I accept the evidence called by the defendants from friends employed at the rodeo who said in evidence that the defendants paid them for their work at the rodeo on or shortly after the date upon which it was held.
It is next necessary to determine the basis upon which the defendants contributed the sum of $25,000 to the holding of the rodeo because it is important to determine whether it was by way of joint venture, partnership, or loan. It is to that issue that I now turn.
As can be seen from the terms of the written agreement between the plaintiff and the defendants set out in full earlier in these reasons the $25,000 sum paid by the defendants towards the cost of the rodeo was shown as an "advance" to On Top Down Under Promotions. Also in the written agreement it is provided that:
"In return On Top Down Under Promotions or Ian J Neale will return to Cash City Rockingham or A J and M A Sanders within 48 hours of completion of the event the $25,000 initial advance with the agreed 50% profits from gate takings, bar takings soft drink and chips arena and chute advertising after expenses are taken out to be finalised as soon as possible after completion of the rodeo."
In the written contract the sum of $25,000 is twice referred to as an "advance". The word "advance" is capable of ambiguity and has caused some difficulty in its interpretation. In Bronester Ltd v Priddle [1961] 3 All ER 471 the Court of Appeal had occasion to consider the meaning of the word "advance" in relation to a contract between an employer and an employee in the context of an advance made against commissions to be earned. In that case Holroyd Pearce LJ said at 474:
"In my judgment, this case must be decided on the terms of the actual agreement between the parties. Two cases have been cited before us in which different decisions resulted. In Rivoli Hats, Ltd v Gooch [1953] 2 All ER 823 Hallett J held that a servant must repay sums paid in advance (and, as events showed, overpaid) in respect of commission. He said at 825:
'In my judgment, it is clear on principle that, if an anticipatory payment is made and that which is anticipated does not occur in the future, and, accordingly, that in respect of which the payment made would have been earned never takes place, but the money has been paid over, it cannot be retained by the recipient.'
I agree with that as a general principle subject to the limitation that in each particular contract one has to consider what its effect is in relation to advances made which are never in fact earned."
In London Financial Association v Kelk [1884] 26 Ch D Bacon V‑C had occasion to consider the terms of the Memorandum and Articles of a company and the meaning to be given to the word "advancing" in that Memorandum and Articles. Bacon V-C said at 136:
"The words 'advancing' and 'lending' may each have a different signification; money may be 'advanced' without being 'lent;' the relation of borrower and lender does not exist in a great variety of the transactions which are distinctly authorised. The possession by the association of the various 'articles' or 'symbols' may give them the means of getting back some or all of the money they may have 'advanced' without giving them any title to sue for its repayment, as, among many other instances, the authority to subscribe for or contribute to loans of any Government, British or foreign, and that notwithstanding they are called 'loans'."
It follows in my view that in this case the written agreement falls to be construed in the context in which the agreement was reached. In that respect evidence was given by a defence witness Debra Lee Van Der Zanden, the party who originally introduced the plaintiff to the defendants. Her evidence was that the plaintiff had approached her indicating that he was seeking a loan for the purpose of putting on the rodeo in Mandurah. Ms Van Der Zanden introduced the defendants to the plaintiff so such a proposition could be considered. In any event, in my view, regardless of that aspect of the evidence, the document itself makes it clear that the $25,000 advanced by the defendants to the plaintiff was to be repaid within 48 hours of the completion of the rodeo together with 50 per cent of the profits from that event. In addition I accept the evidence of the plaintiff that he told the defendants that any losses would be 100 per cent tax deductable. The loan was therefore repayable from the proceeds of the event.
A defence witness, Leslie Alan Smythe also testified that the plaintiff said to him that "he had the money for the show; he had borrowed $25,000". Mr Smythe also testified that the plaintiff had sought to borrow from the Pinjarra Rodeo Club $25,000 for the purpose of running the event.
It is also of significance that the responsibility of running the rodeo fell to the plaintiff. The rodeo was his idea and in keeping with his business On Top Down Under Promotions. The defendants took no part in the organisation of the event. As it turns out the defendants assisted the plaintiff in the running of the rodeo by manning the entry gate and assisting in finding staff to run other aspects of the event. In that respect, however in my view the defendants were assisting the plaintiff in his business of running the rodeo. The defendants (or perhaps only Mr Sanders) also proposed to guarantee the payment of an account for liquor purchased by signing a guarantee on an application for a credit account with Australian Liquor Marketers (WA) Pty Ltd. The application was not accepted.
Whilst the agreement provides that the defendants were to receive 50 per cent of the profits of the event and there is no reference to the payment of interest, in my view, properly construed, the agreement was a loan rather than a joint venture. It is, however, common ground that the defendants were not secured creditors in relation to the money advanced. Accordingly they would stand pari passu with the other creditors who have not been paid. It follows that the plaintiff's claim for rectification of the agreement is not made out.
If the relationship between the plaintiff and defendants was a joint venture then the takings from the rodeo belonged to the joint venture. If, on the other hand, the relationship was that of borrower and lender (as in my view it was) then the funds from the rodeo belonged to the plaintiff. However, pursuant to the contract all proceeds from the event were to be paid into the joint account from which expenses were to be paid before the profits were divided. Both the plaintiff and the defendant therefore had the obligation of placing the proceeds from the event into that account. The loan was repayable from those proceeds.
It would therefore be appropriate for the defendants to pay into the joint account the balance of funding sufficient to enable all creditors including themselves (if the receiver so determines) to be paid in full. A receiver should be appointed to manage the account and to verify such claims as are made against it. That as I have said would include claims made by the plaintiff and the defendants. Whether the receiver determines that the defendants should pay the whole of the money into the account or offset the defendants' claim against the amount to be contributed, will be a matter for the receiver to determine after the accounts have been taken and verified. The power to make such an order is to be found in O 51 r1 of the Rules of the Supreme Court and see Seaman's Commentary O 51 r1 in the Red Book.
I then turn to the question of the plaintiff's claim for exemplary or aggravated damages. In that respect I have already indicated the plaintiff's claim for such damage arises out of the claim for conspiracy. I have already concluded that in my view that cause of action is not made out. However if I am wrong as to that, then in any event in my opinion, the plaintiff's claim either for aggravated or exemplary damages is not made out because the defendants' conduct was not of the type that would attract such an award of damages. In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1984-5) 155 CLR 448 the High Court had occasion to consider a case where a defendant had employed an industrial plumber to spike the fuel tank of a competitor. That case involved an extremely serious case of tortious misconduct. Brennan J said at 471:
"As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v Harvey (1814) 5 Taunt 442 [128ER 761] substantial exemplary damages were awarded for a trespass of a high-handed kind which occasioned minimal damage, Gibbs CJ saying:
'I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him except large damages?'
The social purpose to be served by an award of exemplary damages is, as Lord Diplock said in Broome v Cassell & Co [1972) AC at 1130 'to teach a wrong-doer that tort does not pay'. The purpose of restraint looms large in the present case."
In my view, however, in this case as I have said, the defendants were not motivated by an intention to damage the plaintiff but rather to preserve the financial integrity of their own business. In saying that I make it plain that the defendants had no entitlement to appropriate to their own use, the monies received from the rodeo.
Having reached the conclusion that the money advanced by the defendants to the plaintiff was by way of loan, the defendants should have paid the money into the joint account as they were contractually obliged to do. It was wrong of them to appropriate the money for use in their business even although on my construction of the agreement they were entitled to repayment of the money advanced to the plaintiff. However, in my view the conduct of the defendants was not such as to attract an award either of aggravated or exemplary damages in all the circumstances of the case. The conduct was not such as to come within the principles relating to such damages as set out in the XL Petroleum case; see also Uren v John Fairfax & Sons (1965-6) 117 CLR 118 per Taylor J at 130-137 and Windeyer J at 149.

I should also make it clear that I accept the evidence of the defence witness Leslie Alan Smyth ("Mr Smyth") that the plaintiff's reputation in the rodeo industry has been damaged. Mr Smyth also testified that if the plaintiff settles the debts in full his reputation will be restored.
I will invite counsel for the plaintiff to prepare a minute which gives effect to these reasons. The plaintiff has filed a consent by an accountant to act as receiver. In my view that receiver should be appointed. The receiver should take control of the account and verify claims made by creditors of the rodeo including claims made by the plaintiff and the defendants. The receiver will be authorised to certify to the Court the sum to be remitted by the defendants in order to meet all claims plus his costs. Whether the defendants claim should be offset against the amount that they are obliged to pay will be a matter for the receiver.
Once the receiver reports back to the Court final orders can then be made disposing of this action.

[2001] WASC 271

12/10/01