New Resource Holdings Pty Ltd v Lunt [No 2]
[2008] WASC 140
•16 JULY 2008
NEW RESOURCE HOLDINGS PTY LTD -v- LUNT [No 2] [2008] WASC 140
| Link to Appeal : | [2010] WASCA 126 [2010] WASCA 169 [2011] WASCA 45 [2011] WASCA 45 |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 140 | |
| Case No: | CIV:1489/2001 | 9 11, 14 APRIL & 7 MAY 2008 | |
| Coram: | TEMPLEMAN J | 16/07/08 | |
| 34 | Judgment Part: | 1 of 1 | |
| Result: | First defendant refund $200 000 to plaintiff | ||
| B | |||
| PDF Version |
| Parties: | NEW RESOURCE HOLDINGS PTY LTD WILLIAM TREVOR LUNT WASTE RECOVERY SYSTEMS LTD |
Catchwords: | Commercial agreement Subordinated loan as part of consideration Payment of part loan by director Whether director authorised to make payment Sale of options by director Whether exercise of options by purchaser in breach of rights of preemption attaching to shares, if so, whether rights waived Company disputes authenticity of signatures for waiver of preemptive rights and undoing of subordination No direct challenge to evidence that waiver not signed by financier Whether document apparently signed by financier genuine Whether signatures genuine in the circumstances Standard of proof Turns on own facts |
Legislation: | Nil |
Case References: | Briginshaw v Briginshaw (1938) 60 CLR 336 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
WILLIAM TREVOR LUNT
First Defendant
WASTE RECOVERY SYSTEMS LTD
Second Defendant
Catchwords:
Commercial agreement - Subordinated loan as part of consideration - Payment of part loan by director - Whether director authorised to make payment - Sale of options by director - Whether exercise of options by purchaser in breach of rights of preemption attaching to shares, if so, whether rights waived - Company disputes authenticity of signatures for waiver of preemptive rights and undoing of subordination - No direct challenge to evidence that waiver not signed by financier - Whether document apparently signed by financier genuine - Whether signatures genuine in the circumstances - Standard of proof - Turns on own facts
(Page 2)
Legislation:
Nil
Result:
First defendant refund $200,000 to plaintiff
Category: B
Representation:
Counsel:
Plaintiff : Mr P G McGowan
First Defendant : Ms C H Thompson
Second Defendant : Ms C H Thompson
Solicitors:
Plaintiff : Vincent Partners
First Defendant : B W Duckham & Co
Second Defendant : B W Duckham & Co
Case(s) referred to in judgment(s):
Briginshaw v Briginshaw (1938) 60 CLR 336
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170
(Page 3)
1 TEMPLEMAN J: The plaintiff claims that on or about 11 April 1995, William Trevor Lunt, the first defendant, who was then a director of the plaintiff, paid the sum of $200,000 'to a third party unknown to the plaintiff … when the plaintiff had no liability to do so'.
2 The plaintiff claims that in so doing, Mr Lunt acted in breach of the statutory, equitable and common law duties he owed to the plaintiff as a director. The plaintiff seeks a declaration that Mr Lunt acted improperly and that judgment be given against him in the sum of $200,000 or that he make restitution of that sum with interest in either case.
3 Mr Lunt admits that he was a director of the plaintiff at the material time and that he made the payment as alleged. He contends that the payee was the second defendant which, at the time, was owed an amount of $325,000 by the plaintiff. As will be seen, the second defendant is a company which at all material times was owned beneficially by Mr Lunt. However, no cause of action is pleaded against the second defendant, and no relief is sought against it.
4 Mr Lunt contends that the payment of $200,000 was made with the plaintiff's full knowledge and approval, as evidenced by a document signed by Peter Briggs with whom, it is alleged, 'ultimate control of the plaintiff rested' (although he was not then a director), and his wife, Robyn Briggs.
5 Mr and Mrs Briggs deny that they signed the document: they claim that it is a forgery. They make similar claims in relation to other material documents which also appear to bear their signatures.
6 Despite the seriousness of the allegations made by the plaintiff, it is required to prove its case only on the balance of probabilities. However, it is necessary to keep in mind the well known passage in the judgment of Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336:
The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of
(Page 4)
- mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency. Thus, Mellish LJ says: 'No doubt the court is bound to see that a case of fraud is clearly proved, but on the question at what time the persons who have been guilty of that fraud commenced it, the court is to draw reasonable inferences from their conduct' (361 - 362).
7 More recently, in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, the majority of the High Court said:
The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct (170 - 171). (footnotes omitted)
8 In applying those principles to the present case, it is relevant to note that although the events in question took place in 1995, the action was not commenced until 2001. The principal witnesses were Mr Briggs for the plaintiff and Mr Lunt. They did not prepare witness statements until July 2007.
9 Counsel for the plaintiff drew my attention to a judgment given in the District Court in which Mr Lunt was found to have concocted (but not forged) documents in support of a claim made against the plaintiff by his wife. This was not relied on as similar fact evidence (nor could it have been). However, counsel submitted that Mr Lunt had been shown to be an untruthful witness.
(Page 5)
10 Counsel for Mr Lunt drew my attention to a judgment in the Mining Warden's Court where similar criticisms had been made against Mr Briggs.
11 It is common in civil trials concerned with events which took place many years earlier, that recollections have faded and that greater weight is often placed on contemporaneous documents than on oral evidence. However, according to Mr Lunt, some 20,000 of the plaintiff's documents, including many he would regard as significant, are in the possession of the New Zealand equivalent of ASIC. It is not clear to me why this is so: and there is no independent evidence to that effect. Further, the authenticity of crucial, apparently contemporaneous documents, is in issue. The documents must therefore be treated with caution.
12 Against that background, I turn to consider the evidence.
1991: The parties make an agreement
13 In 1991, Mr Lunt, who had been acquainted with Mr Briggs for many years, approached him as a potential investor in a joint venture for the manufacture of organic fertiliser from chicken manure.
14 Mr Lunt then owned the exclusive rights to the relevant technology, which were apparently held through a company known as Baywil Pty Ltd by Waste Recovery Systems Ltd (WRSL), the second defendant. At the time, WRSL was incorporated in Liberia, although it operated from an address in Hong Kong.
15 Mr Lunt instructed his accountants to incorporate a further company which was known as WRS Australia Ltd (WRS Australia) for the purpose of exploiting the technology.
16 According to Mr Lunt, WRS Australia employed him, his wife Lois Lunt and Robert Michael John Skidmore. Mr Skidmore, who described himself as a motor engineer by training, was the technical person in the project. He was concerned with the design and installation of the organic fertiliser plants.
17 Mr Lunt's position in 1991 was that he had invested heavily in a joint venture for the manufacture of organic fertiliser in Pakistan. He needed finance to fund further investments. Mr Lunt approached Mr Briggs, who agreed to provide finance through one of his family companies, Essex Properties Pty Ltd (Essex Properties).
(Page 6)
18 On 21 May 1991, Mr Lunt and Mr Briggs, through the various entities to which I have referred, entered into an agreement for the purpose of exploiting the organic fertiliser technology. The vehicle by which it was sought to achieve that objective was the plaintiff company. It was then known as Pacific Platinum NL, but its name has been changed subsequently to:
• WRS Pacific Ltd in July 1991;
• WRS Pacific Pty Ltd in July 1997; and
• New Resource Holdings Pty Ltd in July 2005.
The relevant terms of the agreement
19 The agreement was made between the plaintiff, WRSL, Essex Properties and Baywil (TB 153).
20 The agreement recited that the plaintiff had an authorised capital of $10,000,000 divided into 50,000,000 shares each of 20 cents par value: and that on or before settlement, it would have allotted and issued 10,500,000 shares.
21 The agreement recited also that WRS Australia:
… is an administration and management company that administers and manages the affairs of [WRSL] and in such capacity retained Baywil to consult, advise, provide international business introductions and assist in negotiating and securing licensing agreements and funding for [WRSL].
The Parties have agreed that after Settlement WRS Australia Ltd shall continue to administer and manage the affairs of [the plaintiff].
22 The term 'Assets' was defined to include all the intellectual property relating to the processes involved in the production of organic fertiliser, which property was said to be owned legally and beneficially by WRSL.
23 By cl 2.1 of the agreement, WRSL as legal and beneficial owner, agreed to sell the assets to the plaintiff for a price of $3,325,000.
24 Clause 2.3 provided that:
The Purchase Price shall be satisfied as follows:
(a) $3,000,000 by the allotment and issue of 1,485,000 Shares at $2.02 each (ie a premium of $1.8202 per Share) on the Settlement Date; and
(Page 7)
- (b) $325,000 shall be a loan owing by [the plaintiff] to [WRSL] which shall be classified as a Subordinated Loan and be payable in accordance with the terms and conditions of clause 11.
25 Clause 11 provided:
The Subordinated Loans shall be interest free and subordinated to all other creditors and loans and shall only be repaid pro rata on the balance outstanding from time to time as at 1st July out of audited after tax profits. In the event that the Subordinated Loans are not whole or in part repaid from all of the audited after tax profits in any financial year then the Subordinated Loans shall, with the agreement of [WRSL] and [Essex Properties], become repayable on demand.
26 Clause 13 of the agreement contained pre-emption provisions. For present purposes, it is necessary to note only that cl 13 prohibited the parties to the agreement from selling, assigning, transferring or otherwise disposing of any fully paid ordinary share in the plaintiff without the written consent of the other parties.
27 Mr Briggs described the $325,000 'loan' as a 'success fee/performance bond'. Although that is not the way it is described in the agreement, I accept that to be its effect. That is because there was no actual loan. The amount of $325,000 would be paid to WRSL out of after tax profits: that is, only if the project was successful.
28 Although Mr Briggs was the plaintiff's financier, he was not initially a director. As at May 1991, he was disqualified from holding such office.
29 Mr Lunt and Mr Skidmore were appointed as directors on 27 June 1991, and on the same day, Kevin Bond was appointed as the plaintiff's secretary.
30 Mr Bond is a chartered accountant, then practising as a member of the firm known as Barrington Partners. He had known Mr Lunt since the 1980s in a professional capacity (ts 564). On 27 June 1992, Mr Bond was appointed a director of the plaintiff.
The status of WRSL
31 In the agreement, the address of WRSL is said to be 6th Floor, Bank of America Tower, Harcourt Street, Central Hong Kong. However, as at the date of the agreement, the company was registered in Liberia. This appears from a letter dated 21 September 2004 under the hand of Stephen Frey, the Vice President of the Liberian International Ship & Corporate Registry, LLC (TB 791). According to Mr Frey, WRSL 'commenced
(Page 8)
- legal existence on August 13, 1987' and 'was annulled from the Register on February 1, 1994'. However, it was reinstated on payment of fee arrears, which were apparently paid up to 30 June 1996 (TB 197).
32 Mr Lunt said he thought WRSL had been incorporated in Hong Kong on 1 July 1996. He thus contradicted his evidence-in-chief, in which he said he gave instructions to his accountants to incorporate the Hong Kong company in or about 1989: exhibit 22, par 4.
33 Neither assertion accords with the evidence that a representative of the plaintiff had been informed by an officer of the Registrar of Companies in Hong Kong that WRSL was incorporated there on 22 February 1999 with the name Mesca Ltd, and changed its name to WRSL on 18 April 1996. I accept that to be the case.
34 Mr Lunt's evidence in cross-examination was that he was not, and had never been, either a shareholder or director of the Hong Kong WRSL but that it was his company (ts 474). He confirmed this later in his cross-examination (ts 537). He was then asked if he was in a position to direct the company. He said:
I gave instructions as I sought [sic, thought] fit in operational matters to Mr Johnson, Samantha Hong and Gabriel Tam, but not in corporate matters (ts 537).
35 Mr Lunt went on to say that the company had been established for his benefit. As I understood his evidence, he had placed his daughter in some position in the company to ensure that he maintained control, although in fact, his daughter's position was only nominal (ts 537).
36 Contrary to this evidence, Mr Lunt made a statutory declaration on 7 May 1997 (the purpose of which is unclear), where he wrote:
The beneficial owner of Waste Recovery Systems Ltd is Alan Johnson (TB 355).
37 Mr Lunt said he did not think this was a false declaration:
I took advice from Mr Johnson prior to signing this and this is in accordance with his instructions to me. He controlled the business at all material times in a complete legal sense but funds that were recovered by Waste Recovery Systems Ltd were remitted to me and adversely [sic] fees for Waste Recovery Systems Ltd were paid by me (ts 538).
38 Mr Lunt said that Alan Johnson was the Hong Kong managing partner of his accountants Horwath & Horwath, who had acted for him
(Page 9)
- since 1989 and continued to do so. He said he had attempted to contact Mr Johnson to enquire about his availability to give evidence at the trial, but that he had not responded to an e-mail or to two telephone calls. Mr Lunt said he therefore telephoned Mr Johnson's personal assistant and was informed that he was 'out of station' (ts 465).
39 It is not clear when Mr Lunt made these enquiries. However, his evidence was that he visited Mr Johnson in Hong Kong on 14 March 2008 (only four weeks before the trial commenced) and that Mr Johnson confirmed that 'in accordance with his firm's document destruction policies', Horwath & Horwath had no WRSL documents in their possession.
40 The evidence about Mr Johnson's whereabouts and his firm's policies is all inadmissible hearsay. There is no proper evidence about the part played by Mr Johnson or his firm in the management of WRSL.
41 Mr Lunt's evidence was that Samantha Hong and Gabriel Tam assisted Mr Johnson at Horwath & Horwath in Hong Kong. He said that 'at some point in the early 1990's', Mr Johnson gave him a rubber stamp bearing Ms Hong's signature. Mr Lunt said he used it for the purposes of signing documents for WRSL.
42 Mr Lunt gave evidence also, about his unsuccessful attempts to locate Ms Hong. As will be seen, the signature 'Samantha Hong' appears on a number of documents relied on by Mr Lunt. However, in the absence of evidence from Ms Hong, it is not clear whether those documents were created or signed by her (and if so, on what instructions) or signed by the application of her signature stamp by Ms Hong, Mr Lunt, or anyone else.
43 I do not regard as satisfactory the explanation for the absence of any evidence from Mr Johnson. This action was commenced in 2001. A trial commenced in August 2007, but was adjourned. It was re-listed in February 2008. Given that the authenticity of crucial documents apparently produced by WRSL is in issue, Mr Johnson would have been an important witness as to the modus operandi of that company. Even if Mr Johnson was unable to attend the trial, I should have expected that a statement would have been obtained from him, with a view to tendering it under s 79 of the Evidence Act 1906 (WA).
44 I make similar observations in relation to Ms Hong: although her evidence would perhaps have been less significant if she worked under the direction of Mr Johnson.
(Page 10)
45 I accept that WRSL - the Hong Kong company - was incorporated for Mr Lunt's benefit and that he was its beneficial owner. In the absence of evidence from Mr Johnson, I do not accept that he advised Mr Lunt to make a statutory declaration to the contrary. I therefore conclude that Mr Lunt knowingly made a false declaration.
46 I draw the further inference that WRSL was established and operated for the purpose of concealing the fact that Mr Lunt was its alter ego: and that documents created in its name were intended to further that purpose.
47 I draw the same inference in relation to the Liberian company.
48 Consistently with this purpose, the agreement of 21 May 1991 was apparently executed on behalf of WRSL by Mr Johnson and Ms Hong.
Was there an agreement to unsubordinate the $325,000 loan?
49 Although it is not pleaded, Mr Lunt contends that in December 1992, Mr Briggs on behalf of Essex Properties, agreed that the loan of $325,000 created by cl 2.3(b) of the May 1991 agreement would no longer be subordinated.
50 Mr Briggs denies that he made any such agreement.
51 Mr Lunt contends that as at December 1992, neither Mr Briggs nor 'any of his entities', had paid him or his wife for any of the services rendered to the plaintiff since their engagement by the plaintiff. According to Mr Lunt, he instructed his solicitors, A R Mackinlay & Co, to commence an action against the plaintiff and Essex Properties. He said that in December 1992, Mackinlays sent a draft writ to Mr Briggs. However, no such document has been produced: nor was Mr Mackinlay called to give evidence about its preparation.
52 Mr Lunt then said that as a result of (unspecified) discussions between them, Mr Briggs gave him an undertaking that he would be paid from the first income of the plaintiff 'as a priority to all other calls': and that in consideration of his forbearance to sue, the subordinated loan of $325,000 was no longer to be subordinated. Mr Lunt said he caused WRSL to write to Mr Briggs to confirm their oral agreement.
53 The correspondence on which Mr Lunt relies is said to commence with a letter dated 20 September 1991 on WRSL letterhead, addressed to Essex Properties at Mr Briggs' home: not the address of that company as it appears on the 21 May agreement.
(Page 11)
54 The letter is as follows (TB 192):
We are very disappointed that we have not received the balance of monies owed to us in accord with our agreement put in place by your Solicitor Mr Michael Bowen and our legal representation [sic] in Australia Mr Alistair MacKinlay.
We now stress that this matter must be settled within the next 30 days otherwise Mr MacKinlay has instructions to proceed with legal action to recover our debt.
55 The letter bears the signature of Samantha Hong, under the name 'Corporate Directors Limited'. As far as I can tell from the photocopy letter in evidence, it was signed by the application of the stamp to which I have referred above (or a similar stamp). However, Mr Lunt's evidence was that he had nothing to do with the letter: it was 'generated by Samantha', who 'sent this letter down' (ts 476).
56 The next letter is dated 14 November 1999 (TB 193). It is in a similar form to that dated 20 September and appears to have been signed in the same way. It is as follows:
Attention Mr Peter Briggs
Dear Sirs
We refer to our discussion today and now confirm that we have paid Mr MacKinlay $71,000 in settlement of legal costs due to him as a consequence of our agreement dated 21 May 1991 and that this amount plus interest is to be added to your existing debt of $117,000 plus interest to make $188,000 plus interest as now due to us.
We acknowledge that you have an overseas transaction settling in the near future and that we will be paid from those proceeds.
57 There is then a further letter dated 14 November 1991 (TB 194):
We are now proceeding to litigation without further referral to you.
58 Then a letter dated 19 May 1992 (TB 195):
We are extremely concerned that you still have not settled your debt to us.
Your failure to honour your agreement leaves us in no other position but to commence legal proceedings.
(Page 12)
59 A further letter dated 7 September 1992 (TB 196):
We refer to the discussion today in which you have given an unequivocal promise to settle your debt immediately and confirm that no action will be taken pending receipt of your remittance within 28 days.
60 And finally, a letter dated 16 December 1992 (TB 198):
This is to confirm our agreement today to drop proceedings against you on the clear understanding that immediately funds have been generated within WRS Pacific Ltd that Managing Director William T Lunt has instructions from you to pay us in full and with interest.
This undertaking is given by you and with your acknowledgment that we will be paid as a priority to all other calls upon the first income to be earned by the company and which includes staff, consultants, creditors and taxation.
61 Mr Lunt's evidence was that he had not applied the Samantha Hong signature stamp to the letters dated 20 September or 14 November 1991, but he thought he had applied it to the letters of 19 May (possibly) and 7 September 1992 (ts 476 - 478).
62 However, he did not believe he had stamped the letter dated 16 December 1992 'because at this time we were talking serious litigation' (ts 478). I do not understand that explanation.
63 I accept Mr Lunt's evidence to the effect that all of the above letters were prepared at his request. However, in the absence of evidence from Ms Hong (assuming she was the author) it is impossible to say when they were prepared or whether they were ever sent to Mr Briggs. He denies having received them and claims never to have dealt with anyone in Hong Kong. This is consistent with Mr Lunt's evidence, to which I have referred above, that it was he who had the discussions with Mr Briggs, leading to the agreement said to have been made between them.
64 On Mr Lunt's evidence, that agreement is acknowledged in a letter dated 23 December 1992, signed by Mr and Mrs Briggs as directors of Essex Properties. The letter is as follows (TB 199):
Essex Properties Pty Ltd
5 Ocean Court, City Beach 6015
23 December 1992
Waste Recovery Systems Ltd
12 Harcourt Road
HONG KONG
(Page 13)
- We accept the content of your letter dated 16th December 1992. Further, the loan which was previously subordinated of $325,000 to all other creditors now ranks equally.
The debt of $188,000 plus interest stand together with the aforementioned amount so that you are a priority ranking creditor due payment upon the completion and encashment of WRS Pacific Limited's first Letter of Credit from the sale of equipment.
Yours faithfully
- The letter bears signatures which are said to be those of Mr and Mrs Briggs respectively, in each case, above the word 'Director'.
65 The letter in evidence is a poor quality photocopy. Mr and Mrs Briggs deny having signed any such document.
66 There are a number of features of this letter which cause me to doubt its authenticity. First, I would have expected Essex Properties to have a proper letterhead. The heading here is in the same font as the text. It does not contain a full address or include telephone or fax numbers. In any event, the address is that of Mr Briggs' residence. It is not the company's address.
67 Secondly, although the letter purports to be an acceptance of the contents of the letter dated 16 December 1992, it does not do so: the terms are different.
68 Thirdly, and in my view, most significantly, Mr Briggs was not, as at December 1992, a director of Essex Properties. He was disqualified from acting as a company director for five years from December 1987 to November 1994. I therefore think it unlikely he would have signed any document as a director during that period.
69 The handwriting experts to whose evidence I shall refer below, were unable to express an opinion as to the authenticity or otherwise of the signatures of Mr and Mrs Briggs. However, in the absence of any evidence as to the preparation of the letter dated 23 December 1992, or as to the circumstances in which it was signed, I am not persuaded that it is what it purports to be.
70 I accept the evidence of Mr and Mrs Briggs that they did not sign the letter, and that they did not see it until after these proceedings had been commenced.
(Page 14)
71 The audited accounts of the plaintiff for the year ended 30 June 2004 show non-current loans of $325,000 for that year and the previous year. The accounts show also a subordinated loan of $848,734 in the 2004 year. This is said to represent a loan from a related entity which is interest free and not repayable until 30 June 2000.
72 I draw the inference, in the absence of any other explanation, that the non-current loan of $325,000 is the subordinated loan created by cl 2.3 of the 21 May 1991 agreement. I do not understand why it was not referred to specifically as a subordinated loan, but that does not affect my conclusion: which is that there was no agreement between Mr Lunt and Mr Briggs in or about December 1992, to the effect that the $325,000 loan would be unsubordinated. The fact that the loan remained non-current in the 2003 - 2004 financial year is inconsistent with any such agreement as alleged.
1995: The payment of $200,000
73 The circumstances in which the sum of $200,000 was paid by the plaintiff to WRSL are sufficiently clear to enable me to make the following findings of fact, which I set out in narrative form.
74 In early April 1995, Mr Lunt was in Indonesia in connection with the construction of the plaintiff's plant. The Indonesian partner in that venture was Hanafi Latief.
75 Mr Latief wanted to invest in the plaintiff by purchasing shares. Mr Lunt offered 200,000 of the shares he held in a company known as Australian Capital & Technologies Ltd (ACT) at a price of $1 per share. Mr Latief was willing to accept that offer.
76 Before proceeding with such an agreement, Mr Lunt sought advice from Mr Bond, who was in Perth.
77 Mr Bond told Mr Lunt that the proposed sale would result in a capital gain for ACT and would therefore attract capital gains tax. He advised Mr Lunt to consider an alternative transaction.
78 It was then proposed that Mr Latief should acquire 1,499,500 options from ACT for the sum of one dollar, exercise some or all of the options so as to acquire shares and pay the plaintiff $200,000 for that purpose. This amount would then be paid by the plaintiff to WRSL in reduction of the $325,000 'loan'.
(Page 15)
79 Mr Bond sought advice about the proposed transaction from Steven Leigh Pynt, a solicitor who had previously carried out legal work for the plaintiff.
80 Mr Pynt's view was that in order to effect the transaction, it would be necessary to issue new shares in the plaintiff and to obtain the agreement of each of the existing shareholders to the waiver of their pre-emptive rights to purchase such shares. Mr Pynt thought that even if such waiver was not actually necessary, it would be prudent to obtain it.
81 I pause to note that no waiver was required. It will be recalled that the pre-emptive rights provision of the 21 May 1991 agreement applied only to fully paid ordinary shares. However, nothing turns on that for present purposes.
82 The documents necessary to complete the transaction were:
(1) an agreement between ACT and Mr Latief, who was to acquire the shares through a company then known as Kingsgate Nominees Pty Ltd (Kingsgate);
(2) a notice of exercise of options;
(3) a waiver of pre-emptive rights.
83 Mr Bond could not recall who prepared the documents. However, Mr Pynt believed that Mr Bond had prepared the waiver, albeit he (Mr Pynt) either suggested or approved the wording.
84 On Wednesday, 5 April 1995, Mr Bond sent a five-page fax to Mr Lunt in Indonesia from the offices of R B Sharpe & Co in Perth, from which he practised. The fax comprised a one-page covering letter (TB 264) in which Mr Bond said he was sending copies of 'documents drafted by Pynt & Associates'. These were an agreement to transfer options (two pages), a standard form of transfer and a notice to the plaintiff to exercise the options (each of one page).
85 The copy option transfer agreement in evidence is dated 5 April. It appears to bear the signatures of Mr Lunt and Mr Bond as director and secretary of ACT respectively, and the signatures of two directors of Kingsgate: Mr Latief and Mark Pitman.
86 The copy document also bears the seal of ACT (but not of Kingsgate). I find that the seal was applied by Mr Bond (and signed by him) when the document was brought back to Perth. The authenticity of the document is not in issue (TB 265 - 266).
(Page 16)
87 I find that the document was signed by Mr Lunt, Mr Latief and Mr Pitman in Indonesia on or about 5 April. That is the date of a cheque in the sum of AUD$200,000 drawn on the National Australia Bank in Jakarta and made payable to ACT (TB 260).
88 A copy notice of exercise of one million options to acquire 20 cent fully paid ordinary shares in the plaintiff is in evidence. It is dated 5 April and bears the signatures of Mr Latief and Mr Pitman (TB 267). Again, its authenticity is not in issue.
89 Also on 5 April, Mr Bond prepared a form of waiver of pre-emptive rights. This was faxed to Mr Lunt in Indonesia at 7.48 am on the following day, with a covering letter in which Mr Bond said the document was to be signed by Mr Skidmore and WRSL (ts 261 - 263). In fact, the document made provision for execution by Mr Lunt and Essex Properties also. It was in the following terms (TB 262):
I/We, the undersigned hereby waive my pre-emptive rights (if any) in relation to the proposed transfer of 1,499,500 options to acquire ordinary fully paid shares of 20 cents each in the capital of WRS Pacific Limited from Australian Capital & Technologies Pty Ltd ACN 009 275 183 to Kingsgate Nominees Pty Ltd ACN 068 897 549.
I/We further consent to the monies received from the exercise of the options being applied in repayment of monies due to William Trevor Lunt, William T Lunt Holdings Pty Ltd, Professional Administration Pty Ltd, Kevin Bond and Waste Recovery Systems Ltd.
90 Mr Bond had no detailed recollection of the preparation of this draft document. However, he agreed in cross-examination that it was unlikely he would have drafted the second paragraph above without first discussing it with Mr Lunt: Professional Administration Pty Ltd was Mr Bond's company (ts 568 - 569).
91 Mr Lunt's evidence was that he had no such discussion with Mr Bond. He appeared to attribute the proposed distribution of the funds so as to include Mr Bond's interests, to Mr Bond's optimism (ts 519). It is not necessary to resolve this conflict in the evidence.
92 In the event, Mr Lunt did not adopt Mr Bond's draft. The second paragraph of the waiver document that he claims to have been signed by Mr and Mrs Briggs, contains a consent to the application of the $200,000
in repayment of monies due to [WRSL] (TB 280).
(Page 17)
93 I have no doubt that Mr Lunt adopted this form of words because he regarded the whole of the $200,000 as being rightfully his.
94 Having received the bank cheque from Mr Latief, Mr Lunt brought it to Perth. He deposited it in ACT's existing account at the Karrinyup branch of BankWest. He then drew a cheque on that account in the sum of $200,000, which, on 15 April 1995, he deposited in a new account in the plaintiff's name, also at BankWest, Karrinyup (TB 297). I shall refer below to the circumstances in which that account was opened.
95 Mr Lunt was the sole signatory of the plaintiff's new BankWest account. On the basis of that authority, he arranged to have $200,000 transferred telegraphically from the plaintiff's account to someone in Hong Kong. Mr Lunt flew to Hong Kong on 17 April where a cash cheque was drawn by the original payee and was used by Mr Lunt to purchase a bank cheque made payable to himself.
96 On 21 April, Mr Lunt took the cheque to Singapore, where he deposited it in a BankWest branch. The funds (being $197,500 at that stage) were then transferred to his and his wife's personal account at BankWest, Karrinyup (ts 540 - 541, TB 296).
97 The Latief/Kingsgate transaction was completed on 5 July 1995, by the allotment of one million ordinary 20 cent shares in the plaintiff to Latief Australia Pty Ltd (TB 330). The allotment form was signed by Mr Lunt as a director of the plaintiff.
98 It is common ground that as at April 1995, the plaintiff had no after tax profits, audited or otherwise. On the basis of my finding that the loan of $325,000 remained subordinated, it follows that Mr Lunt had no authority to make a payment of $200,000 out of the plaintiff's funds in reduction of that loan.
99 However, as I have noted above, Mr Lunt contends that 'Ultimate control of the plaintiff rested with Peter Briggs' (defence, par 2(b)) and that he knew and approved of the payment.
100 At the time, Mr Briggs had some 10.5 million of the approximately 13 million issued shares in the plaintiff. That being so, I accept that for practical purposes, if Mr Briggs did approve the payment, Mr Lunt would have a complete defence.
101 The plaintiff carries the burden of proving its case. The crucial question, therefore, is whether the plaintiff is able to prove, on the balance
(Page 18)
- of probabilities, but having regard to the principle expressed in Briginshaw v Briginshaw, that Mr Briggs did not know about or approve the payment. Mr Briggs denies any relevant knowledge. However, I do not place any greater weight on his denials than I do on Mr Lunt's assertions to the contrary. That is because neither Mr Briggs nor Mr Lunt was a particularly satisfactory witness. I had the impression that neither had a clear recollection of the events in question and both tended to procrastinate.
102 That being so, it is necessary to consider other evidence from which inferences may be drawn, both favourably and unfavourably to the plaintiff. I deal in turn with each of these matters.
The absence of evidence from Mr Latief
103 Mr Lunt's evidence is that on 5 April 1995, Mr Briggs, in a telephone conversation with him and Mr Latief, agreed that the sum of $200,000 could be paid directly to him. Mr Lunt provided no details about the conversation. Mr Briggs denies that there was any such conversation and says he has never spoken to Mr Latief.
104 In the absence of any evidence from Mr Latief, and no explanation for his silence, I draw the inference that had he given evidence, it would not have supported Mr Lunt's case.
The absence of material evidence from Mr Bond
105 According to Mr Lunt, Mr Briggs' approval of the transaction with Mr Latief was given to him and to Mr Bond. However, Mr Bond's evidence contains no reference to his receiving any such approval.
The opening of the plaintiff's BankWest account
106 This account was opened by Mr Lunt and Mr Bond on 10 April 1995 (TB 274). Mr Lunt said in his evidence that:
Prior to this date [the plaintiff] did not have a bank account.
107 As Mr Lunt acknowledged in cross-examination, that statement was incorrect: the plaintiff had an account with Citibank. Mr Lunt accepted also that in January 1995, the directors of the plaintiff had resolved that its bank account was to be operated on the basis that Mr Briggs had to sign all transactions, with a counter-signature by Mr Lunt or Mr Bond (TB 76 and ts 483).
(Page 19)
108 Mr Lunt said also in cross-examination that when he had said that the plaintiff did not have a bank account, he believed it did not have an operating bank account. However, that explanation appears to be implausible. An account reconciliation document prepared by Mr Bond (TB 202) shows that the Citibank account was operating in the period 10 May to 22 June 1995, and that payments were made from it to Mr Lunt or on his behalf, of a kind which must have been made previously from the account.
109 Mr Lunt advanced two other explanations for opening a separate account. The first was that BankWest was putting pressure on him, so he needed to show some good faith by opening an account into which he could deposit funds. However, there is no evidence that Mr Lunt was being pressed by BankWest. Further, even if he was, I do not understand how funds deposited into the plaintiff's account would have assisted him.
110 The second explanation proffered by Mr Lunt was that
given the history of difficulties in being repaid, I wanted to put the funds somewhere they could not be accessed by anyone other than myself.
111 In cross-examination, Mr Lunt said that at the time Mr Briggs was 'under severe pressure from Citibank and I was worried that either Mr Briggs or Citibank would snaffle the money' (ts 483).
112 There is no evidence to suggest that if the sum of $200,000 had been deposited in the Citibank account, it would not have been possible to withdraw it.
113 Further, on Mr Lunt's evidence, Mr Briggs had approved the transaction. That being so, it seems improbable that Mr Briggs would have taken any action to frustrate it. In my view, therefore, the opening of a separate bank account is more consistent with Mr Briggs being unaware of the transaction than having approved it.
114 Mr Lunt made an affidavit in this action on 7 July 2003, in support of his application for summary dismissal of the plaintiff's claim (TB 513). In it, Mr Lunt said that Mr Briggs had countersigned the telegraphic transfer of the amount of $200,000 to WRSL from the plaintiff's bank account: par 27.
115 In cross-examination, Mr Lunt accepted that Mr Briggs had not in fact signed the telegraphic transfer, and had not attended the bank with him. Rather, Mr Lunt said, he and Mr Briggs
(Page 20)
- would have had a conversation and a meeting on the day prior to this, maybe a day or two prior, and I said, 'Pete, this is what I'm doing. Is this okay with you?' 'Yeah, okay', and he'd initial it. That happened all the time (ts 553).
116 That evidence is inconsistent with Mr Lunt's evidence that Mr Briggs had approved the transaction before 5 April 1995. It was not referred to in his witness statements and was not put to Mr Briggs in cross-examination. Mr Lunt explained the absence of the paper bearing Mr Briggs' initials by implying that it was in the possession of the New Zealand regulatory authority and saying that he had not been able to gain access to it (ts 555).
Mr Lunt's letter dated 10 April 1995
117 Mr Lunt produced a letter dated 10 April 1995 addressed to Mr Briggs (TB 273). The letter is as follows:
Dear Pete,
I confirm that Hanafi Latief has agreed to subscribe $200,000.00 to WRS Pacific Ltd to enable WRS Pacific to reduce its debt to Waste Recovery Systems Ltd. The funds are now available for settlement so Kev has prepared the following documents for you [sic] signature.
• Waiver of Pre emptive rights by Essex in respect to Australian Capital and Technologies Pty Ltd (ACN 009 275 183) transferring 1,499,500 options to acquire ordinary fully paid shares of 20 cents each in the capital of WRS Pacific Ltd to Kingsgate Nominees Pty Ltd (ACN 068 897 549)
- (Hanafi's new Co, Waste Recovery Systems has signed as has Rob and I)
• Acknowledgment from Natural Resource Finance Pty Ltd that their debt of $878,734.00 as at 30 June 1994 is unsecured and subordinated to all other creditors of WRS Pacific Ltd (please recall and note that the debt of $325,000.00 due to Waste Recovery Systems was, by written agreement with you, converted to an unsubordinated debt on 23rd December 1992. The purpose of this action is to enable us to pay Waste Recovery Systems in order to avoid litigation from them as previously threatened.)
• Agreement from Essex allowing the balance of debt, after payment of the $200,000.00 to Waste Recovery Systems Ltd to be assigned to me.
Thanks Pete
Yours sincerely
Trev
(Page 21)
118 I have held that there was no agreement to unsubordinate the loan of $325,000 such as that referred to in the penultimate paragraph of the letter. Further, there is no evidence that as at April 1995 there was any need to 'avoid litigation', at the suit of WRSL: in reality, Mr Lunt.
119 Mr Lunt said he left the letter in Mr Briggs' home letterbox. However, the copy in evidence was discovered by Mr Lunt and is presumably his copy. That being so, it is surprising that it is signed 'Trev'.
120 I accept Mr Briggs' evidence that he did not receive the letter.
The waiver of pre-emptive rights document
121 I have referred above to the waiver of pre-emptive rights document prepared by Mr Bond and revised by Mr Lunt, which Mr Lunt claims to have been signed by Mr and Mrs Briggs on 11 April 1995 (TB 280).
122 Mr Lunt's evidence is that at about 6.00 pm on 11 April, he went to the Briggs' home and presented the document to them. He said they both signed it in his presence and applied the company seal.
123 Both Mr and Mrs Briggs deny that Mr Lunt came to their home as he claims: they say their signatures have been forged.
124 Mr Briggs produced his diary for 11 April, showing a dinner engagement at 7.00 pm which he recalled was at the Matilda Bay Restaurant. He said he would have left home at about 6.00 pm in order to be able to have some pre-dinner drinks, that being his 'usual form': and that it was 'not my style' to be doing business just before going out to dinner.
125 Mr Lunt provided no detail of his visit to the Briggs': and nothing was put to Mr Briggs in cross-examination beyond a challenge to the reliability of his diary entries (ts 340 - 341).
126 Mrs Briggs' evidence was not challenged. She was cross-examined only on the basis that she had been Mr Briggs' loyal wife for 46 years and was financially dependent on him; that she had been a director of many companies associated with Mr Briggs, but had no real interest in their business affairs. Mrs Briggs said she would sign documents when requested by Mr Briggs to do so.
127 I accept Mrs Briggs' evidence. However, I do not draw the inference that she made a false witness statement at Mr Briggs' request by saying
(Page 22)
- that she had not signed the document on 11 April 1995, when she had in fact done so.
128 The document was subjected to the scrutiny of two handwriting experts, John Douglas Gregory for Mr Lunt and John Horton for the plaintiff.
129 Both Mr Gregory and Mr Horton are former senior police officers with impeccable qualifications as forensic document examiners. I regard them as equally well-qualified to assist me in determining the authenticity of disputed documents in this case. I put it in that way, because, ultimately, this is a matter for me, pursuant to s 31 of the Evidence Act 1906.
130 Both Mr Gregory and Mr Horton produced reports. They then conferred and produced a minute of conferral setting out points of agreement and disagreement between them (exhibit 26). Mr Gregory and Mr Horton gave evidence together at the trial.
131 Both Mr Gregory and Mr Horton subjected the disputed signatures to microscopic and macroscopic examination.
132 Mr Briggs' signature is highly stylised, being in the nature of a hieroglyphic. That is to say, a person unfamiliar with the signature would not be able to say what name or names it represented.
133 The disputed signature appears to have been written using an ink pen. Both experts compared it with a number of signatures which were known to have been made by Mr Briggs.
134 It is a feature of Mr Briggs' genuine signatures that three downward strokes which they contain, terminate with a feathered or tapering end. It is clear, however, from the photographic enlargement of Mr Briggs' disputed signature that no such feathering or tapering appears in those downward strokes (exhibit 27).
135 Mr Horton's opinion was that there was a darkening of the terminal strokes in two cases. He attributed this to hesitation on the part of the writer.
136 Mr Horton supported his opinion by reference to a book by a Wilson Harrison who Mr Horton said was a recognised document examiner. Under the heading 'Hesitations', the author wrote:
(Page 23)
- A hesitation is the term applied to the irregular thickening which is formed when the writing slows down or stops whilst the penman takes stock of the position. Hesitations are found, not only in forgeries, but in the handwriting of the illiterate. In a forgery, they are found, not only at the ends of strokes, where they leave the line with a club-shaped instead of the tapered appearance found when the pen travels fairly fast as it comes on to or leaves the paper, but also in the middle of curves.
137 Against that, Mr Gregory's opinion was that the signature was written in a fluent manner, inconsistent with a forgery, and that the heavier ink deposits on the termination of the strokes were the result of capillary action of the ink flowing back along the stroke, as the pen slowed at the end of each stroke.
138 Mrs Briggs' signature is written in what Mr Gregory described as a conventional cursive style. That is to say, in a clearly legible script.
139 Mr Gregory compared Mrs Briggs' disputed signature with a number of signatures he understood to have been genuine. These included three signatures in a clearly different and more upright style, which Mr Gregory ignored for the purpose of his examination.
140 Mrs Briggs denied that the three upright style signatures were in fact hers. Her evidence to that effect was not challenged, leading to the inference that someone has forged Mrs Briggs' signature on more than one occasion.
141 Again, the point of difference between the experts was as to the fluency of the disputed signature. Mr Gregory's opinion was that the signature was written in a fluent manner which revealed no evidence of hesitation or patching, which are said to be common features of forged signatures.
142 Although Mr Gregory had only one comparison signature initially, he viewed sample original signatures which had been provided to Mr Horton. Mr Gregory's opinion that Mrs Briggs' signature was genuine was strengthened by his examination of the specimen signatures shown to him by Mr Horton.
143 Mr Horton's view was that Mrs Briggs' disputed signature lacked the smoothness and continuity of movement of the sample signatures, particularly in the lower parts of the capital letter 'B' and the other section of the letter 's' of the word Briggs.
(Page 24)
144 Mr Horton noted also that there was an unusual formation in the upper part of the final letter 'g' of the word Briggs, which was inconsistent with the sample signatures. Finally, Mr Horton noted a 'distinct pen lift' in the final downstroke of the capital letter 'R' with which Mrs Briggs commenced her signature.
145 Mr Horton's overall conclusion was that the disputed signatures of both Mr and Mrs Briggs had been made by copying or tracing a genuine signature by the use of a transmitted light or similar commonly employed technique. This involved placing the document which was to be created, on top of a document bearing genuine signatures, which could then be copied on to it.
146 It is clear that there are variations in the genuine signatures of both Mr and Mrs Briggs: perhaps more so, in Mr Briggs' case. Further, Mr Briggs' specimen signatures appear to have been made using a ballpoint pen, whereas, as I have noted above, his disputed signature appears to have been made with an ink pen.
147 Mr Gregory considered one example of Mr Briggs' signature apparently written in an ink pen, on a letter dated 28 November 1996 to a Mr Bill Cairns. That signature did not exhibit the feathering on the three downward strokes which is a characteristic of Mr Briggs' ballpoint pen signatures. However, even though the specimen was supplied to Mr Gregory by the plaintiff's solicitor, Mr Briggs denied that it was his signature and his evidence was not challenged. The signature is quite different from Mr Briggs' normal style. Mr Horton described it as 'quite bizarre' (ts 497).
148 In providing their respective opinions, Mr Gregory and Mr Horton are necessarily confined to a comparison of signatures. However, it is open to me to take a broader view which involves a consideration of other evidence.
149 Given the unsatisfactory nature of Mr Lunt's evidence, the lack of any direct challenge to the evidence of Mr and Mrs Briggs that they did not sign the waiver of rights document and my finding that a document apparently signed by Mr and Mrs Briggs on 23 December 1992 was not a genuine document, I think it probable that the features of Mr and Mrs Briggs' disputed signatures identified by Mr Horton as distinguishing them from genuine signatures are explicable on the basis that the disputed signatures are not genuine.
(Page 25)
150 In reaching that conclusion, I have had regard to Mr Bond's evidence that he had seen the document 'in real time back in 1995', although he could not recall the exact date (ts 574). That is not, of course, evidence that the document is genuine.
151 I therefore place no weight on the waiver of rights document.
Essex Properties' letter dated 12 April 1995
152 Mr Lunt relies further on a letter dated 12 April 1995, which he said was prepared by Mr Bond, Mr Pynt and himself to record the circumstances surrounding the payment of the $200,000 and the fact that the balance of $125,000 of the original loan of $325,000 was to be assigned to him personally. The letter is as follows (TB 283):
ESSEX PROPERTIES PTY LTD
ACN 009 088 751
LEVEL 1
216 ST GEORGES TERRACE
PERTH WA 6000
The Directors
Waste Recovery Systems Ltd
1502 Fook Lee Commercial Centre
33 Lockhart Road
Wanchal
Hong Kong
Dear Sirs,
By letter dated 23 December 1992 we acknowledged our indebtness [sic] to you in the amount of $A325,000.00.
We have not been able to settle the debt but William Trevor Lunt has now secured a fresh injection of capital into WRS Pacific Ltd that will allow WRS Pacific Ltd to remit the sum of A$200,000.00 to you leaving a balance of A$125,000.00 as due to you.
We are advised that you wish to assign that balance to Mr Lunt.
This is to confirm that upon receipt by you of A$200,000.00 from WRS Pacific Ltd that you may assign over to Mr Lunt, the balance of A$125,000.00, giving him all right, title and interest in the amount of A$125,000.00 with our full consent and without objection from us.
We acknowledge that the original debt attracts interest up until the amount of A$200,000.00 is received and thereafter the balance of A$125,000.00 until satisfied and that this interest accrues to the favour of Mr Lunt under the proposed assignment.
(Page 26)
- Our agreement to all of the foregoing is given on the understanding that the amount of A$125,000.00 plus accrued interest will not become due until July 1, 2000 when the settlement sum will then become due and payable.
153 The letter appears to bear the signatures of Mr and Mrs Briggs and the seal of Essex Properties.
154 Mr Lunt's evidence is that on 12 April 1995, at about 6.00 pm, he went again to the home of Mr and Mrs Briggs, and presented the letter to them. Mr Lunt said he saw them sign it and apply the company seal.
155 Again, Mr Lunt gave no details of the meeting. Mr and Mrs Briggs deny that it took place. They both point to diary entries which suggest that they would not have seen Mr Lunt at 6.00 pm on that day: they would have been preparing to go out to dinner with friends, who they were due to meet at 6.30 pm in Nedlands.
156 Neither Mr nor Mrs Briggs' evidence was challenged directly in cross-examination.
157 Mr Horton and Mr Gregory were agreed that the photocopy of the document which they had seen was of a poor quality which did not permit the authenticity of the signatures to be determined.
158 Mr Pynt's evidence was that he was sure he had not prepared the document, although the address given for Essex Properties was the address at which he was then practising. Mr Pynt said that he had never acted for Essex Properties and did not recall his premises being its registered office.
159 Accepting Mr Pynt's evidence as I do, I do not accept that he was involved in the preparation of the document, as Mr Lunt asserts.
160 I can see no basis for the statement in the document that 'the original debt' attracted interest until the amount of $200,000 had been received, and thereafter on the balance of $125,000. On the contrary, cl 11 of the 21 May 1991 agreement provided that the subordinated loan (of $325,000) was to be interest-free.
161 In all the circumstances, I accept the evidence of Mr and Mrs Briggs that they had not seen and did not sign the letter of 12 April 1995.
(Page 27)
Mr Lunt's fax dated 23 April 1995
162 Mr Lunt produced an invoice from the Shangri-La Hotel, Singapore, which shows that he was a guest at the hotel from 21 to 24 April 1995. The invoice shows that at 22:09 hours on 23 April, Mr Lunt sent a fax to Australia.
163 Mr Lunt produced also a fax transmission verification report showing that four pages were faxed satisfactorily at 22:09 hours on 23 April to what is accepted to be Mr Briggs' home fax number.
164 Mr Lunt produced a handwritten facsimile transmission on the plaintiff's letterhead addressed to Mr Briggs at his home fax number and dated 23 April 1995. The text is as follows (TB 291):
HI PETE
$200K HAS CLEARED OK. I'M ON MY WAY HOME TO SETTLE WITH BANKS. THANKS FOR ALL YOUR HELP IN ARRANGING & AGREEING PAYMENT TO LOIS & ME. SEE YOU BEFORE ANZAC DAY.
BEST REGARDS
TREV
COPY DOCUMENTS ATTACHED
DEED OF ASSIGNMENT DATED 18/4/95 2 PAGES
CHEQUE
165 The deed of assignment referred to as an attachment is said to be a deed dated 18 April and made between WRSL and Mr Lunt (TB 288).
166 The deed contains the following recitals:
1. By purchase agreement dated 21st day of May 1991 [WRSL] became entitled to receive A$325,000.00, being part of the purchase consideration to be paid by the purchaser, [the plaintiff] to the sellers including [WRSL], a copy of the agreement is annexed hereto as Annexure 1.
2. [WRSL] has been unsuccessful in receiving payment and settlement from [the plaintiff].
3. [The plaintiff] has acknowledged it's [sic] indebtness [sic] to [WRSL] by letter dated 23rd day of December 1992 a copy of which is annexed hereto as Annexure 2.
(Page 28)
- 4. The Assignee has facilitated a payment to [WRSL] in the sum of A$200,000.00 the receipt of which is herein acknowledged.
5. [WRSL] wishes to assign all right title and interest in the balance sum of A$125,000.00 plus the interest that has accrued to the sum of A$325,000.00 and the balance sum of A$125,000.00 to the Assignee.
6. The major and controlling shareholder in [the plaintiff], Essex Properties … has consented to the assignment by agreement dated 12th day of April 1995, a copy of the agreement is annexed hereto as Annexure 3.
167 The operative part of the deed contained an assignment of the balance of $125,000 to Mr Lunt.
168 The deed appears to have been executed on behalf of WRSL by Mr Tam, said to be acting under a power of attorney granted on 14 October 1994, and by Mr Lunt.
169 The deed (excluding the annexures referred to in the recitals) is a document of two pages.
170 According to Mr Lunt, the cheque to which he referred was the cheque he banked into BankWest (ts 547). That, I assume, is the cheque deposited at the Singapore branch of BankWest.
171 Mr Lunt's evidence was that on 22 April, he telephoned Mr Briggs at his home and told him he had successfully cashed and banked the $200,000 and transferred the balance of the debt, being $125,000 to him. Mr Lunt said Mr Briggs asked him to send him copies of the document and cheque. According to Mr Lunt, Mr Briggs said 'he was happy for me'.
172 The Shangri-La Hotel invoice shows that a call was made from Mr Lunt's room to Mr Briggs' home telephone number at 12.21 pm on 22 April.
173 Mr Briggs denies receiving the fax on 23 April or the telephone call on 22 April.
174 Mr Briggs' evidence was that on 22 April, at the time the telephone call was made to his residence, he was at the Royal Perth Yacht Club. Mr Briggs' evidence was that he was at the Yacht Club again on 23 April (a Sunday) preparing his yacht for the departure on the following day for Antigua where he would be racing in the Antigua yacht race week.
(Page 29)
175 I accept Mr Briggs' evidence that he was not at home on 22 April to take a call from Mr Lunt. It follows that I do not accept Mr Lunt's evidence about the conversation he said he had with Mr Briggs on that occasion.
176 While I accept that a fax was sent to Mr Briggs' home on 23 April, I do not accept that it comprised the 'Hi Pete' note and accompanying documents as Mr Lunt claims. Had Mr Briggs received such a fax, including a copy of the deed of assignment, I have no doubt that he would have questioned the reference in it to the letter dated 23 December 1992, which I have found was not a genuine document.
Mr Skidmore's evidence
177 I accept Mr Skidmore's evidence that he was concerned primarily with technical matters relating to the plaintiff's activities. He lived and worked abroad. Although he was a director of the plaintiff, he was not involved in its management. I accept his evidence that he did not attend directors' meetings.
178 The waiver of pre-emptive rights document contains provision for Mr Skidmore's signature. However, no such document has been produced which bears his signature: and he denies any knowledge of the document. Mr Lunt disputes this.
179 Mr Lunt's evidence was that on 5 April 1995, when he received the draft document from Mr Bond, he telephoned Mr Skidmore at his home in Los Angeles. Mr Lunt said he could not recall the precise words of the conversation, but that he had said words to the effect that he was trying to raise some funds to reduce his financial pressure by selling options in the plaintiff that were held by ACT. Mr Lunt said he told Mr Skidmore that Mr Latief would be exercising the options and taking shares. According to Mr Lunt, he then said words to the effect that the deal could not go through if the shareholders did not agree, because of the pre-emptive rights. Mr Lunt said Mr Skidmore asked what Mr Briggs said about the matter: and Mr Lunt said he told Mr Skidmore words to the effect 'I have raised it and he is fine'.
180 Mr Lunt said he then sent a facsimile to Mr Skidmore, comprising the two pages of the unsigned waiver document. He said he sent this through the business centre at the Grand Hyatt Hotel in Jakarta. Mr Lunt said when he returned to his room later that evening, a fax was under his door. That fax was the first page of the waiver of rights document signed by Mr Skidmore. He said the document was on thermal fax paper.
(Page 30)
181 Mr Lunt said that he had brought the fax back from Jakarta. He said he imagined that it was now among the documents in the possession of 'the regulatory authorities who are proceeding with the criminal charges' (ts 525). I assume that to be a reference to the New Zealand authority.
182 While admitting the possibility that Mr Lunt had sent him the facsimile as he claimed, Mr Skidmore said he had no recollection of receiving it. As I understood his evidence, Mr Skidmore said that if he had signed the document, he would have remembered (ts 407).
183 Mr Skidmore said also that in late 2003, at the coffee shop of a hotel in Perth, Mr Lunt asked him to sign a waiver of pre-emptive rights but he refused to do so. According to Mr Skidmore, Mr Lunt told him that signing the document was 'just a formality', as the fully executed original of the waiver was on the court file and he could not gain access to it.
184 Mr Lunt denied that he had asked Mr Skidmore to sign the waiver of rights document in 2003. However, I found his denial unconvincing.
185 There is an issue about Mr Skidmore's credibility. On 23 April 2003, Mr Skidmore swore an affidavit in these proceedings in support of Mr Lunt's application for summary dismissal of the claim. In par 8 of the affidavit, Mr Skidmore said he had no knowledge of the plaintiff's claim and would have expected to have known of it. He went on:
Furthermore, I was advised by Briggs that the claims against the Defendants herein were simply to frustrate and complicate the litigation.
186 In the course of his cross-examination, Mr Skidmore said that the statement set out above was untrue. He said:
I am totally embarrassed and regret what happened (ts 427).
187 Mr Skidmore went on to say that the affidavit had been prepared by Mr Lunt and brought to Jakarta for him to sign. He said he was under a certain amount of stress and should not have made the affidavit in those terms. He corrected the statement in a further affidavit sworn on 24 October 2003 (TB 665). He there said that he had refused to sign the affidavits initially and had requested that incorrect passages be removed. He said he returned the affidavits to Mr Lunt so that he could make the appropriate amendments. Mr Skidmore said that either later that day or on the next day, he and Mr Lunt drove around searching for a notary to witness his affidavit. He said he presumed Mr Lunt had made the amendments and that he did not re-read it before signing it.
(Page 31)
188 In cross-examination, Mr Skidmore gave a different explanation:
[Mr Lunt] was offering me a carrot (ts 431).
- Mr Skidmore explained that the 'carrot' was work in China involved in building organic fertiliser plants.
189 Despite the inconsistency in Mr Skidmore's evidence, my impression was that he was genuinely embarrassed by his previous conduct and that he was ultimately telling the truth.
190 I therefore accept his evidence that he did not sign the waiver of pre-emptive rights document in 1995; and that he was asked by Mr Lunt to do so in 2003, but refused.
Mr Briggs' apology to Mr Lunt
191 Mr Briggs' evidence is that he first became aware of the April 1995 transaction in 1997.
192 Mr Briggs became a director of the plaintiff on 29 November 1996: the day on which Mr Bond ceased to be a director.
193 Mr Lunt and Mr Skidmore ceased their directorships on 31 December 1996 and Mrs Briggs and Edmund Czechowski were appointed in their places. Mr Czechowski is a certified practising accountant who was employed by Mr Briggs' group of companies as the group accountant in 1987. I had the impression that Mr Czechowski was a careful and conscientious witness. I accept his evidence generally.
194 Mr Czechowski prepared the plaintiff's financial statements for the years 1995 to 2002. However, he did not finalise the 1995 accounts until early 1997. I accept his evidence that when he commenced the task, he did not have all of the plaintiff's records. Mr Bond, as the outgoing secretary, provided him with documents which did not include correspondence or administration records.
195 When Mr Czechowski pressed Mr Bond for further records, Mr Bond said he had no more documents in his possession and that Mr Czechowski should speak to Mr Lunt.
196 Mr Lunt told Mr Czechowski that the plaintiff's records had been seized by ASIC, the Australian Federal Police or the Australian Tax Office. Mr Czechowski wrote to each of those entities on behalf of the plaintiff, but was informed that they had no such records.
(Page 32)
197 The 1995 annual return for the plaintiff is in the form of a document prepared by ASIC and amended by Mr Czechowski to bring it up to date. Mr Briggs, then a director of the plaintiff, signed it on 19 June 1997, thereby declaring that the information contained in the return was complete and correct.
198 The list of shareholders shown in the annual return included Latief Australia Pty Ltd as the holder of one million ordinary shares. This information was set out in Mr Czechowski's handwriting. He also amended the total number of issued shares by one million and the total amount paid for those shares by $200,000 (STB 187 - 190). This represents the amount of $200,000 paid by Mr Latief or his company on the exercise of the options he acquired from ACT.
199 Mr Czechowski's evidence, which I accept, is that it was not until 1999 that he became aware of the existence of the BankWest account opened by Mr Lunt and Mr Bond in 1995. Documents relating to that account were discovered in an action brought by Mrs Lunt against the plaintiff for allegedly unpaid wages.
200 Mrs Lunt's action was commenced under District Court file number CIV 1131 of 2001. It follows that discovery in the action would not have been given until some time in 2001, at the earliest.
201 Mr Briggs' evidence was that as at 4 September 1997 he was aware of the April 1995 transaction, although he said he did not know 'how the total deal happened, until 2000'. He said that he did not get details of the BankWest bank account until that year (ts 345). However, for the reasons given above, I think the year was 2001, not 2000.
202 The significance of 4 September 1997, is that Mr Briggs had a telephone conversation with Mr Bond on that day. Mr Bond claimed that he was then owed money, either personally or through his company, Professional Administration Pty Ltd, by the plaintiff. Mr Bond sent letters to the plaintiff stating his intention to issue statutory demands if amounts of approximately $82,000 owed to him and $67,000 owed to Professional Administration Pty Ltd were not paid.
203 Shortly after the letters were sent, Mr Bond returned a telephone call to Mr Briggs. Mr Bond said Mr Briggs told him he had received his letters of demand and that it would be very unwise for him to pursue action because if he did, an action would be brought against Mr Lunt and himself 'for shifting $200,000 up to Hong Kong, effectively stealing the money' (ts 572).
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204 Mr Briggs agreed that he had the conversation with Mr Bond, although he said he was rather more aggressive than Mr Bond's evidence suggested. In any event, Mr Briggs accepted that as at 4 September 1997, he was aware of the $200,000 transaction although he did not know how it had been effected (ts 345).
205 In these circumstances, it is surprising that on 22 May 2000, Mr Briggs wrote to Mr Lunt in the following terms (STB 223):
Dear Trevor
I am writing to apologise for the unfortunate way I have treated you since March 1998.
I regret the manner and circumstances in which your employment contract was terminated with Max Resources Limited.
We have known each other for more than thirty years during which time I have had no cause to complain about you in any shape or form.
Please accept this apology in the spirit of our reconciliation as I am looking forward to a new future together.
206 In cross-examination, Mr Briggs said he wrote the letter at Mr Lunt's request, albeit in the knowledge that, as it was put to him, 'there was a $200,000 discrepancy' in the plaintiff's accounts. Mr Briggs said:
Well, we knew that it was a deal done, but we didn't know how it was done. We didn't have the records … (ts 374).
207 Mr Bond said also that at the time, 'we were working on reconciling everything'.
208 This letter is, I think, the only piece of evidence that suggests that Mr Briggs might have known and approved of the April 1995 transaction. However, had that been the case, it is unlikely he would have had the conversation with Mr Bond on 4 September 1997 to which I have referred above. I therefore accept Mr Briggs' explanation that he wrote the letter, at Mr Lunt's request, and in ignorance of the full circumstances of the April 1995 transaction.
Conclusion
209 Having regard to all of the evidence to which I have referred, and having regard to the principles set out in Briginshaw v Briginshaw, I find, on the balance of probabilities, that Mr Briggs did not know of the April 1995 transaction at the time, and did not approve it. That being so, I
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- conclude that Mr Lunt acted improperly in transferring $200,000 of the plaintiff's funds out of the BankWest account to WRSL and ultimately, to himself and his wife.
210 I think the reason Mr Lunt did not disclose the transaction to Mr Briggs was that he believed the $200,000 was his money. That would have been the case if the transaction had proceeded as envisaged originally, by Mr Latief purchasing shares in the plaintiff held by ACT. Mr Lunt appears not to have appreciated that by effecting the transaction as he did, the amount of $200,000 belonged to the plaintiff.
211 Mr Lunt's view that the money was his, emerges clearly in his evidence. For example, Mr Lunt said that the $200,000 'were my funds', he having sold 'my assets to receive them' (ts 483 - 484). When asked whether he had used the plaintiff as a vehicle for his personal purposes, he said:
I suppose in the strictest sense I would have to agree.
- Mr Lunt said further:
I was selling my assets to Mr Latief.
He went on to agree with the proposition that Mr Latief had given him the $200,000 cheque on that basis (ts 540).
212 The cheque was payable to ACT, Mr Lunt's company. Mr Lunt said:
If I'd had my way, I'd have just brought the $200,000 back and banked it (ts 521).
213 Then, on 10 October 2000, Mr Lunt wrote to the plaintiff requiring payment of $325,000, with interest at 6.5% per annum from 23 December 1992 (STB 224).
214 In cross-examination, Mr Lunt justified this letter by saying:
Of course, in my mind Mr Briggs still owes me $325,000 because I only reduced his debt with the sale of my assets (ts 550).
- However, having regard to the way in which the transaction was structured, Mr Lunt was not entitled to take that view. He must therefore refund the sum of $200,000 to the plaintiff, together with interest, since 15 April 1995.
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