Perre Bros Lock 4 P/L v Molinara - [2013] SADC 116

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PERRE BROS LOCK 4 P/L v MOLINARA
[2013] SADC 116
Judgment of His Honour Judge Soulio
26 August 2013
CONTRACTS
Plaintiff entered into an agreement to loan money to company providing finance - defendant had been a principal of finance company - finance company failed to make interest payments to plaintiff - defendant induced plaintiff to roll the loan over - finance company failed to repay loan amount - plaintiff seeks damages
Australian Securities and Investments Commission Act 2001 (Cth) s 12; Misrepresentation Act 1971 (SA) s 7, referred to.
Marks & Ors v GIO Australia Ltd & Ors (1998) 196 CLR 484; Jones v Dunkel (1959) 101 CLR 298; Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; Henjo Investments Pty Ltd & Ors v Collins-Marrickville Pty Ltd (No.1) (1988) 39 FCR 546; Residues Treatment & Trading Co Ltd & Anor v Southern Resources Ltd & Ors (1989) 52 SASR 54; Enzed Holdings Pty Ltd v Wynthea Pty Ltd (1984) 57 ALR 167; Johnson & Ors v Perez (1988) 166 CLR 351; Sellars v Adelaide Petroleum & Ors (1994) 179 CLR 322, considered.

PERRE BROS LOCK 4 P/L v MOLINARA
[2013] SADC 116
Introduction

In 2003 the plaintiff company loaned $125,000 to a finance company, First Pacific Capital Pty Ltd (‘First Pacific’), for one year, and subsequently rolled the loan over from time to time. The defendant, Mr Molinara, was a director of First Pacific. First Pacific failed to make interest payments on the third such loan.
The plaintiff says it was induced into rolling over into a fourth loan (the final loan) by the defendant’s silence as to certain issues, and positive representations as to the ability of First Pacific to ultimately meet its obligations.
The representations were made during the course of discussions at a meeting in mid to late 2006, at which representatives of the plaintiff, and a Mr Nick Sandercock, another director of First Pacific, were present.
The silence, and the representations, are said by the plaintiff, to constitute an actionable misrepresentation. First Pacific failed to repay the final loan and the plaintiff seeks to recover the amount of the loan from the defendant.
Allegations on the Pleadings
Much of what was alleged by the plaintiff was not disputed by the defendant.
The first loan agreement between the plaintiff and First Pacific was entered into on 12 June 2003 and was for the sum of $125,000, for a period of 12 months at an annual interest rate of 10 per cent. A second loan agreement was entered into on 16 June 2004 at an annual interest rate of 10 per cent. On 16 June 2005 a third loan agreement was entered into, again for 12 months, but at an increased interest rate of 14 per cent.
Representatives of the plaintiff had apparently become concerned, during the period of the third loan, that interest payments were not being paid by First Pacific. At some time after 16 June 2006 representatives of the plaintiff, Mr Giuseppe Perre, and Mrs Giuseppina Perre, together with their son, Mr Frank Perre, met with the defendant and Mr Sandercock.
The plaintiff asserted that the defendant encouraged the plaintiff to enter into the final loan agreement, and at no time informed the plaintiff that the loan principal was at risk, nor that First Pacific was in serious financial difficulties. The defendant, by his defence, denied that First Pacific was in serious financial difficulties. There was no direct evidence led as to the financial status of First Pacific as at 16 June 2006.
The plaintiff asserted, by its pleadings, that at the meeting in 2006 the defendant said words to the effect that, they did not have the funds to pay back to the plaintiff the loan principal in respect of the third loan agreement, because the loan principal was “tied up” in building developments that would take another 12 months to complete. The defendant, it was alleged, drew up on a whiteboard a list of projects which he described as ongoing projects, and said that the plaintiff would be repaid from one of the developments, upon its completion.
The defendant denied making such statements but conceded that the defendant and Mr Sandercock had told the plaintiff’s representatives, amongst other things, that First Pacific was an investor in some real property projects which were in the process of being completed, and that First Pacific expected to receive a return on its investments in those projects.
The plaintiff asserted that the final loan agreement was entered into in reliance upon the statements made by the defendant regarding the funds being tied up in development projects, and the proposed repayment to the plaintiff of the loan principal upon completion of one of the projects, and as a result of the defendant’s silence as to the true financial position of First Pacific.
The defendant admitted, by his defence, that in breach of the final loan agreement First Pacific failed to make any interest payment to the plaintiff, and failed to repay the loan amount of $125,000.
The plaintiff asserted, and the defendant admitted, that the final loan agreement was a “financial service” for the purposes of the Australian Securities and Investments Commission Act 2001 (Cth) (‘the ASIC Act’), and further, that the execution of the final loan agreement by First Pacific was in the course of “trade or commerce” for the purpose of the ASIC Act.
Legislation
Section 12GF of the ASIC Act relevantly provides:
(1) A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
The section provides, in effect, that the loss or damage that may be recovered by action is the amount of the loss or damage suffered “by conduct of” another person. It contains no stated limitation of the kinds of loss or damage that may be recovered and contains no express indication that some kind of loss or damage are to be regarded as too remote to be recovered.[1]
[1] See Marks & Ors v GIO Australia Holdings Ltd & Ors (1998) 196 CLR 494 [34] (discussing s 82 Trade Practices Act (1974) expressed in relevantly similar terms to s 12GF ASIC Act.)
The plaintiff asserted that First Pacific contravened s 12CA(1) and 12DA(1) ASIC Act, and that the defendant was a person involved in the said contravention of s 12CA(1) and 12DA(1) ASIC Act by First Pacific. The sections relevantly provide:
Section 12CA(1) A person must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.
Section 12DA(1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.
Further, the plaintiff asserted that, by accepting the sum of $125,000 from the plaintiff pursuant to the final loan agreement, First Pacific acted in contravention of s 12DI(3) ASIC Act, and the defendant was a person involved in the contravention of s 12DI(3) of the ASIC Act by First Pacific. Section 12DI(3) relevantly provides:
A person contravenes this subsection if:
(a) the person, in trade or commerce, accepts payment or other consideration for financial services; and
(b) at the time of acceptance, there are reasonable grounds for believing that the person will not be able to supply the financial services within the period specified by the person or, if no period is specified, within a reasonable time.
The plaintiff further asserted that the representations made to the plaintiff by the defendant, in respect of the final loan agreement, were misrepresentations within the meaning of s 7 of the Misrepresentation Act 1971 (SA), which relevantly provides:
(1)   Where a contracting party is induced to enter into a contract by a misrepresentation made—
(a)     by another party to the contract; or
(b)     by a person acting for, or on behalf of, another party to the contract; or
(c)     by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract, and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort.
…
(6)In assessing any damages under this section, a court must take into consideration any award of damages under any other provision of this section, or of damages or compensation under any other law, and in assessing damages or compensation in any proceedings under any other law relating to a contract, a court must take into consideration any award of damages under this section.
The plaintiff seeks damages pursuant to s 12GF ASIC Act, or damages pursuant to the Misrepresentation Act 1971, together with interest and costs.
The Evidence
The plaintiff called Mr Giuseppe Perre, Mrs Giuseppina Perre, and Mr Frank Perre, all of whom were present at the 2006 meeting. The defendant gave evidence. Various documents were received into evidence, to which I will refer as necessary.
I accept Mr Frank Perre and Mrs Perre as witnesses who were telling the truth, albeit that their memory of events was not entirely clear. In particular, Mr Frank Perre thought that the crucial meeting took place at a different address than that deposed to by Mrs Perre, and indeed Mr Molinara. I reject the suggestion, put to Mr Frank Perre in cross-examination, that he was not present at the meeting.
I formed the view that Mr Molinara was somewhat evasive, and that he also had a poor memory; poorer when it suited him. I formed the view that he endeavoured to give answers which would exonerate him, but was sometimes misguided in doing so. In any event, for reasons articulated below, I find that even on his own evidence, he engaged in behaviour that was misleading and deceptive.
Mr Sandercock was not called to give evidence. There was no suggestion that he was not available. Indeed the defendant said that he had had discussions with Mr Sandercock as recently as two to three weeks prior to the trial. Whilst it was suggested that there had been some falling out between the defendant and Mr Sandercock, whatever may have been the nature of that falling out, it was not sufficient to prevent the defendant having a discussion with Mr Sandercock about these proceedings, and discussing the documents which were relevant to the proceedings. I infer that the evidence of Mr Sandercock would not have assisted the defendant’s case.[2]
[2] Jones v Dunkel (1959) 101 CLR 298.
Findings
The following narrative constitutes my findings made on the basis of admissions on the pleadings, the oral evidence, and the exhibits.
The Plaintiff
At the date of the first loan agreement, 12 June 2003, the directors of the plaintiff company were various members of the extended Perre family, but not Mr Giuseppe Perre senior, or Frank Perre, both of whom had ceased to be directors by that date, and not Mrs Giuseppina Perre, who had never been a director.
At the time of the meeting in the second half of 2006, neither Mr Perre senior, nor Mrs Perre, nor Frank Perre, were directors or shareholders of the plaintiff. I infer that they were authorised by members of the Perre family, who were directors, to represent the company at the meeting.[3]
First Pacific
[3] There is no general requirement that damage can only be recovered where the applicant himself relies upon the conduct constituting the contravention of the relevant provision – see Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 p 529.
The defendant was appointed as a director of First Pacific on 11 August 1998. Mr Sandercock was appointed as a director on 26 October 2000. The principal place of business of First Pacific was registered as 193 Hutt Street Adelaide, commencing on March 2002, and continuing, according to the historical company extract, until 30 December 2007. The defendant was a shareholder of First Pacific. Mr Sandercock was not.
On 14 September 2005 there was a notification of filing of an application for a winding up order. A further notification of an application to wind up the company was made on 26 June 2006. I will refer to such notifications below.
The defendant ceased to be a director and the secretary of First Pacific on 17 July 2006. He apparently remained a shareholder of First Pacific. I find that the meeting occurred after that date. The defendant did not inform the representatives of the plaintiff in attendance at the meeting, that the defendant had ceased to be a director of First Pacific.[4]
[4] A misrepresentation may be constituted by silence where there is a duty to reveal a matter if it exists, and where the other party is entitled to infer that the matter does not exist from the silence of the representation. Henjo Investments Pty Ltd & Ors v Collins-Marrickville Pty Ltd (No.1) (1988) 39 FCR 546 p 557.
Notification of resolution changing the company name to ACN 083847625 Pty Ltd was made three days later on 29 June 2006.
The company was subsequently deregistered on 30 December 2007.
The defendant gave evidence that the business of First Pacific involved providing funds secured over real property, whether by way of first mortgage, second mortgage or caveat. At the beginning of 2006 First Pacific had borrowed a sum of about $3,000,000 in total, which had in turn been loaned out. He said that his family had loaned First Pacific an amount in the order of $500,000, and that Mr Sandercock’s family had also provided loans to the company.
Mr Frank Perre gave evidence, which I accept, that he had previous dealings with the defendant, that he was impressed with the defendant’s approach to arranging security over loans, and that he relied upon and trusted the defendant.
First Pacific Property Development Pty Ltd
First Pacific had apparently loaned money to First Pacific Property Development Pty Ltd, a company of which Mr Sandercock was a director, and of which the defendant was apparently a shareholder. The defendant did not tell the plaintiff’s representatives the details of that arrangement.
First Pacific Property Development was involved in three developments, including the conversion of a church into apartments at Parkside, the construction of town houses at Marryatville, and the construction of apartments on land in Bentham Street Adelaide.
The defendant gave evidence that he had privately agreed with Mr Sandercock that they would use the profits from First Pacific Property Development to repay monies back into First Pacific. That asserted arrangement, which I am not satisfied was made, was not, in any event, disclosed to the plaintiff’s representatives.
The Meeting in 2006
The meeting occurred at premises in Franklin Street Adelaide. The meeting occurred some time after 16 June 2006. The final loan agreement was backdated to 16 June 2006, being the rollover anniversary. The meeting was called as a result of concerns by representatives of the plaintiff, regarding the failure to make interest payments on the third loan agreement.
Frank Perre said that his parents had become concerned that they were not receiving payments of interest and so a meeting was arranged with the defendant to discuss the concerns.
As observed earlier, Frank Perre said the meeting was held at First Pacific’s office in Hutt Street. I find, on the basis of all of the evidence, that the meeting took place at an office in Franklin Street Adelaide, as Mrs Perre, and indeed the defendant, said. I find that whilst Frank Perre said the meeting took place at First Pacific’s office in Hutt Street he did attend the meeting, but as he said “Hutt Street was fixed in [his] mind”.
Frank Perre was asked to attend the meeting as his elderly parents relied on him for advice. Frank Perre said that at the meeting the defendant said that “they couldn’t pay any money”, but also said that “we wouldn’t lose any money with him.”
Mrs Perre is the mother of Frank Perre. She came to Australia from Italy in 1958. She did not go to school in Australia. She learned to read and write in English “only just a little bit”, but at the time of trial, and I infer at the time of the transactions with the defendant, had little or no ability to read and write English, and a somewhat limited ability to communicate in English.
Mrs Perre said that she attended a meeting at the defendant’s office, which she described as being “near the bus station.” She said she attended because there were problems regarding repayments on the loan that had been provided to First Pacific. She said she attended the meeting with her son, Frank, and her husband, and the defendant was there with another man. She said that a request was made for repayment of the money, but the defendant said he didn’t have the money. She said Frank Perre had asked for the money.
She said that during the meeting the defendant wrote some things on a whiteboard. She was asked:
QDo you remember what Mr Molinara said at that meeting.
AYes. He done three or four things that line. Then he said “this building is here. This is like that. That is where half done. When we finish this, then we have chance. Give us a chance so we can go ahead building finish, this building.”
QDid Mr Molinara say to you whether you would be able to get your money back or not.
AHe said not to worry, that give him a chance. One day we will get our money back before the year end.
HIS HONOUR
QSorry, what was the last bit of that answer ‘one day’.
ANo, sorry, he said that when he finished the building, year, sorry, when he finish the building that we get our money back because he said some is half done and people, half of them, they already brought on a line on, how do you say, on the plan.
XN
QDid Mr Molinara say to you that your loan money was safe.
AYes, of course.
QDid he use that word.
AYes, completely, yeah, sure.
QDid Mr Molinara say at the meeting at any time that his company lost some loans or lost some money.
ANo.
QDid Mr Molinara say anything at the meeting that there was a risk or a chance that you might not get your money back.
ANo no no. We give him the money to pay each month so we can survive a little bit more.
She was asked:
QFinally, when you had the meeting with Mr Molinara, if Mr Molinara had said to you that First Pacific Capital was in financial trouble and you may not be able to get your money back, if he had said that to you, what would you have done.
AWell, we get a lawyer and send him to court.
When cross-examined Mrs Perre said that at the meeting the defendant said he had a building or land in Queensland. She was adamant that Mr Molinara did not say he had loaned money to people in Queensland or those people hadn’t paid him, and as a result he could not pay back the loan to the plaintiff.
When Mr Perre senior was called to give evidence it quickly emerged that he was profoundly deaf and had a very limited grasp of English. I adjourned to enable the provision of equipment to assist him hearing the questions posed to him. Following a short adjournment counsel for the plaintiff withdrew Mr Perre senior as a witness. Counsel for the defendant did not seek to have any adverse inference drawn. The only inference that I could draw was that it was unlikely that Mr Perre senior participated in any active way in the conversation with the defendant at the Franklin Street meeting.

The defendant said that the meeting was at Franklin Street, and that the move to Franklin Street had taken place on 1 November 2006. First Pacific had been evicted from its Hutt Street offices on 18 September 2006. The defendant did not tell the representatives of the plaintiff that First Pacific had been evicted from its premises. At Franklin Street, First Pacific was merely using office space occupied by another firm operated, according to the defendant, by a Mr Carbone.
The defendant said that at the meeting a conversation, in English, took place in which he explained to the plaintiff’s representatives that he and Mr Sandercock had an alternative strategy in the event that they were not able to recover funds from the two debtors in Queensland and Melbourne, respectively. The strategy involved the completion of projects that were being worked on which, if successful, would enable funds to be repaid for the benefit of the creditors of First Pacific. The defendant said that at the meeting most of the talking was done by Mr Perre senior. For reasons I have already indicated, it would appear that that is unlikely.
The defendant asserted that if the plaintiff had insisted on the loan money being repaid at the time of the meeting, it would not have been possible for First Pacific to have repaid that amount.
The defendant said that at the meeting he had clearly explained to the plaintiff’s representatives that First Pacific was not in a position to pay monthly interest payments. He said that they accepted that proposition. He said that following that meeting a loan agreement was posted to the plaintiff, and, as far as the defendant was concerned, that agreement was signed and returned.
A copy of the loan agreement was in evidence, and contained both the defendant’s signature and Mr Sandercock’s signature. Again, that is despite the fact that the defendant was, on his own evidence, not a director of the defendant at the time of signing the agreement.
There was a dispute between Frank Perre, and Mrs Perre on one hand, and on the part of the defendant on the other hand, as to whether the defendant had made any mention, during the meeting at premises of First Pacific, regarding an allegation that certain of the loans made by First Pacific were not being repaid by the borrowers, who were interstate developers.
The defendant gave evidence as to that conversation, and denied that either he or Mr Sandercock said that “they” did not have the funds to pay back to the plaintiff the loan principal. The defendant says that he and Mr Sandercock together explained to Mr and Mrs Perre that First Pacific was not in a position to make any interest payments, and that First Pacific was not in a position to repay the loan.
The defendant asserted that he and Mr Sandercock told Mr and Mrs Perre that the plaintiff’s loan to First Pacific was unsecured, and that First Pacific’s loans were secured against real property. The defendant said that he and Mr Sandercock told the plaintiff’s directors that some of First Pacific’s loans had gone into default and were the subject of legal recovery proceedings and that First Pacific expected that some of its loans would result in a loss on its original investment when recovered.
According to the defendant, two of the larger loans made by First Pacific to other developers were loans to Cluclor Pty Ltd in Queensland, and Rich Properties Pty Ltd, in Melbourne, secured by second mortgages. The borrowers defaulted causing First Pacific considerable problems, and as the defendant put it:
It completely dried up our liquidity. We found ourselves having to service the investor loans with little or no income coming into the company.
First Pacific was engaged in recovery actions against the two debtors.
Mr Molinara said:
We did our very best to pay the interest on the outstanding loans. Many of those loans – all those interest payments were made. Many were paid. Many we had entered into arrangements to suspend payments for a period of time to allow us time to try to recover the debt. We were also trying to fund our legal costs in the recovery action. So our liquidity was critical at that time.
The defendant asserted that he also explained that First Pacific was an investor in some real property development projects which were in the process of being completed, and that First Pacific expected to receive a return on its investments in those projects. The investments were not liquid, and First Pacific was not in a position to make any interest payments to the plaintiff or to repay the loan to the plaintiff.
That appears to be generally consistent with the assertions of the plaintiff’s witnesses, and the allegations on the pleadings, as to the representations made by the defendant as to the use which had been made, by First Pacific, of monies loaned to it.
I note, however, that the final loan agreement provides for interest to be paid monthly in arrears. That is not consistent with the defendant’s evidence that he told Mr and Mrs Perre that interest would be paid at the end of the loan period. No explanation was offered for that discrepancy.
As I have said, at the time of the meeting in 2006 the defendant was not a director of First Pacific. The defendant was asked why he attended the meeting, given that he was not a director and said:
I had a relationship with the Perres and a long standing relationship with their cousins, and given their Italian background I wanted to be at that meeting to speak to them about the concerns – their concerns and try to make them understand what the situation was at that particular point of time.
By his amended defence, the defendant pleaded that:
The purpose of the meeting, which was Pacific expected to receive a return on its investments in those projects. [sic]
That was put to the defendant in cross-examination, and he said “we had a genuine belief that we would”.
The defendant was asked the question:
QThe investments in projects that you referred to, would I be correct in assuming that, as a matter of technicality, First Pacific Capital in fact did not have any investments in projects, and the true position that First Pacific Capital had loaned funds to another company, a property development company, and it was that property development company that had had investments in projects. Was that the true position.
AYes.
QDid you explain that to the Perres.
AI don’t recall explaining – I don’t recall explaining that particular structure to them, no.
In cross-examination, the defendant said that the arrangement between First Pacific and First Pacific Property Development was a simple structure, namely a loan agreement from one to the other. He was asked “was it a loan on terms with capital and interest payments to be made”, and he said that he did not recall. He was asked:
QI take it, whenever the meeting with the Perres was, given that you were talking about investments in projects, can I assume that the loan agreement between First Pacific Capital and First Pacific Property Investments had already been in place and had already been executed; is that correct.
AI don’t know the answer to that.
The defendant was asked:
QWas the property development company paying interest and/or capital repayments to First Pacific Capital.
AI don’t know the answer to that.
Subsequently the defendant was asked:
QI ask again: do you recall, in relation to First Pacific Capital, was First Pacific Capital receiving interest and repayments from the property development company pursuant to the terms of its loan before the problem in 2007, to your recollection.
AI don’t recall whether there was a loan agreement or not, but I do remember that First Pacific Capital originally advanced the sum of approximately $200,000. Now if I remember correctly, if my memory serves me correctly, the majority of that money came from our own personal resources anyway. So I don’t recall whether there was a loan agreement between two parties or whether it was necessary because we hadn’t used external investors at all.
From that, I would have inferred that First Pacific had little, or no, investment in the property developments of First Pacific Property Development. Indeed, as to the question of an investment by First Pacific in the projects being run by First Pacific Development, the defendant was later asked about the $200,000 loan and said:
I have had time to consider that and my recollection is that originally the funds were advanced from First Pacific Capital to First Pacific Property Development, however over that period of time the Parkside development comprised of a church building and a vacant block adjoining it. Over that period of time I recall now that we subdivided that block and repaid that loan back to First Pacific Capital so there may have been an initial $200,000 but that was extinguished by the sale of the property by the company.
The defendant went on to say that that was in about 2005 or 2006.
That serves to reinforce my view that at the time of the meeting First Pacific had no investment in any development projects.
Any profit which First Pacific Property Development might have made would only be used to repay creditors of First Pacific, at the whim of the defendant and Mr Sandercock.
The representations by the defendant as to First Pacific’s investments in the identified property developments were false, and designed to be misleading.
As I have said, I consider that Mr Frank Perre’s recollection of events was somewhat flawed, as was that of Mrs Perre. I consider however, that they were doing their best to tell the truth. I accept their evidence that the plaintiff would not have entered into the final loan agreement and that they would, on behalf of the plaintiff company, have taken action to endeavour to recover the monies owed by First Pacific to the plaintiff, had they been made aware of the true position in relation to First Pacific, by the time of the meeting, including, as I have said, the fact that the defendant had ceased to be a director and, on the defendant’s own evidence, ceased to play any active part in the company, or had they been informed that First Pacific did not have investments in any property developments.
Damages
The plaintiff seeks damages equivalent to the amount of the principal loaned to First Pacific. The defendant submitted that even were there to be a finding that the defendant engaged in misleading and deceptive conduct there was no evidence of loss – in the sense that even had the plaintiff not entered the final loan agreement, but rather, sought to recover the loan immediately, there was no evidence that the plaintiff would have been able to recover any amount from First Pacific.
Indeed, at the close of the plaintiff’s case, counsel for the defendant invited me to hear a submission, without putting the defendant to an election, that there was no case to answer. The defendant relied on the decision of Perry J in Residues Treatment & Trading Company Ltd & Anor v Southern Resources Ltd & Ors.[5] There, Perry J identified four primary situations in which a submission of no case to answer may be made, as follows:
1. Where no reference at all to the evidence is required.
2.Where a reference to the evidence is required only to establish that there is an evidentiary hiatus or failure to adduce any evidence as to an essential element in the cause of action.
3.Where it is argued that on a consideration of the evidence adduced by the plaintiff taken at its highest from the plaintiff's point of view, the evidence could not support the causes of action pleaded.
4.The situation where it is contended that although there is some evidence to support the plaintiff's claim, it is so weak and unreliable that it should be dismissed without calling upon the defendant.
[5] Residues Treatment & Trading Co Ltd & Anor v Southern Resources Ltd & Ors (1989) 52 SASR 54 p 68.
Perry J held that consideration of a submission of no case to answer in categories one and two should not involve an election,[6] and further held that submissions of no case to answer in categories in three and four should normally be met by “the general rule that counsel should be called upon to elect.”
[6] Residues Treatment & Trading Co Ltd & Anor v Southern Resources Ltd & Ors (1989) 52 SASR 54 p 69.
Here, counsel for the defendant submitted that the application fell within category two. The application was argued on the basis that it was an essential element of the causes of action pleaded by the plaintiff, that the plaintiff suffered loss. While conceding that the plaintiff had not recovered its money, counsel argued that there was no evidence at all as to whether or not the plaintiff could have recovered its money had it chosen to pursue recovery of the monies from First Pacific. Further, the evidence of the plaintiff’s witnesses was to the effect that they were told at the time of the meeting that First Pacific did not have funds to pay any interest, and it should be inferred that First Pacific did not have funds available to repay the loan. Counsel submitted that the plaintiff’s case alleged only that the plaintiff altered its position by agreeing to “leave the money with First Pacific”, and execute a new agreement. Counsel submitted that the only way in which the plaintiff could establish that there was any loss arising from action taken as a consequence of the defendant’s conduct, would be to adduce evidence from which it could be inferred that, had the plaintiff not so acted, the plaintiff might have recovered money from First Pacific at that time.
Counsel for the plaintiff did not concede that it was incumbent upon the plaintiff to establish that a recovery action against First Pacific at that time would have been successful, but in any event submitted that had a statutory demand been served on First Pacific it should not be inferred that the money could not and would not have been recovered. I dismissed the application for a finding that there was no case to answer.
As I have said, the defendant alleged that the plaintiff’s loss had already been incurred by the time the plaintiff entered the final loan agreement.
As was said of analogous provisions in Marks v GIO Australia Holdings:[7]
It can be seen, therefore, that both ss 82 and 87 require examination of whether a person has suffered (or, in the case of s 87, is likely to suffer) loss or damage "by conduct of another person" that was engaged in the contravention of one of the identified provisions of the Act. That inquiry is one that seeks to identify a causal connection between the loss or damage that it is alleged has been or is likely to be suffered and the contravening conduct. But once that causal connection is established, there is nothing in s 82 or s 87 (or elsewhere in the Act) which suggests either that the amount that may be recovered under s 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies. Indeed, the very fact that ss 82 and 87 may be applied to widely differing contraventions of the Act, some of which can be seen as inviting analogies with torts such as deceit (eg, s 52) or with equity (eg, s 51AA) but others of which find no ready analogies in the common law or equity, shows that it is wrong to limit the apparently clear words of the Act by reference to one or other of these analogies.
[7] Marks & Ors v GIO Australia Holdings Ltd & Ors (1998) 196 CLR 494 [38].
It seems to me that the defendant cannot rely on such an argument. The plaintiff’s case is that as a result of both the representations of the defendant, and his silence on critical issues, the plaintiff agreed to enter into the final loan agreement.
As I have said, I accept the evidence of Frank Perre that had the plaintiff not done so, and had the plaintiff’s representatives suspected there was a risk of losing the loan principal, Frank Perre would have advised that legal action be taken to recover the monies.
Although counsel for the defendant submitted that it could not be accepted that the plaintiff would have taken recovery action against First Pacific, given that, when First Pacific failed to pay, action was taken only against the defendant, I find that had the defendant not misrepresented the situation in 2006, but rather disclosed the true situation, the plaintiff would, on balance, have taken recovery action against First Pacific.
A comparison must be made between the position in which the plaintiff is left in, and the position the plaintiff would have been in had there been no misrepresentations.[8]
[8] See Johnson & Ors v Perez (1988) 166 CLR 351 p 371; Sellars v Adelaide Petroleum & Ors (1994) 179 CLR 322 p 368.
Here, it is was submitted that there was, at best, considerable uncertainty as to what the plaintiff’s position would have been in the absence of the misrepresentations, that is, had the plaintiff not entered the final loan agreement.
As was observed in Enzed Holdings Ltd v Wynthea Pty Ltd:[9]
If the court finds that damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved … We emphasise, however, that the principle applies only when the court finds that loss or damage has occurred. It is not enough for a plaintiff merely to show wrongful conduct by the defendant.
[9] Enzed Holdings Pty Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 p 183.
Insofar as it is therefore necessary, to make a finding as to the plaintiff’s prospect of recovering the loan principal from First Pacific, I note that First Pacific received two statutory demands before the meeting. The defendant said he did not recall the exact details of the statutory demands, nor the amounts claimed. The defendant said, however, that First Pacific did satisfy the statutory demands. Subsequently the defendant said that he did not remember that the amounts were significant, and that one of the statutory demands was personally paid by him. He thought that Mr Sandercock paid the other one. He thought that he, the defendant, had paid about $20,000.
I find that had the plaintiff taken recovery action against First Pacific, in the second half of 2006, there were reasonable prospects that such action would have been successful.
Repayments by the Defendant
Under cover of a letter dated 5 June 2007 signed by the defendant’s wife, the plaintiff received a cheque in the sum of $2,500.
On 2 April 2009 the defendant sent an email to the principal of the plaintiff’s company, in respect of the final loan agreement, which relevantly stated:
The FIRST PACIFIC LOAN is no longer, the company has gone under … LEGALLY I am not required to do anything … I WAS A DIRECTOR of a company that went DEFUNCT …
MORALLY, I have taken a different view … I am trying my heart out to repay the PRINCIPAL back …
I will be giving your father about $20,000 in 60 days time … I will be giving you an amount of $500-1000 each month as well as chunks of money when my deals go through …
I AM TRYING TO DO THE RIGHT THING …
On 9 July 2009 the plaintiff received a Suncorp Bank cheque in the sum of $10,000, from the defendant.
No further payment was made to the plaintiff, pursuant to the final loan agreement, by or on behalf of First Pacific or the defendant.
There was countervailing evidence as to what might be called informal debt recovery communications between Frank Perre and the defendant. I am unable to decide the truth in relation to the defendant’s allegations in that regard, and do not consider it necessary to do so to resolve the issues in this action.
Conclusion
I find that the defendant’s silence about the fact that he had ceased to be a director of First Pacific, that First Pacific had been evicted from its offices, and had changed its name; and his representation, that First Pacific had investments in the projects said to have been developed by First Pacific Property Development, were misleading, and to the extent that they constituted positive assertions, were false.

They were designed to induce the plaintiff into entering into a new loan agreement, to prevent action being taken which might result in First Pacific being involved in litigation, or being the subject of winding up proceedings.
At best, there was a hope on the part of the defendant that profits might be made by the property development company, which could be used to pay debts, but as I say, that is at best.
Frank Perre gave evidence, which I accept, that, had he been informed of the true situation, he would have instructed solicitors to take action to recover the monies owed to the plaintiff by First Pacific. Mrs Perre gave evidence to similar effect.
As I have found, the defendant engaged in misleading and deceptive conduct in relation to financial services. The defendant was a person involved in the contravention of s 12CA(1) and s 12DA(1) ASIC Act.
The defendant sought to argue that there was no proof of loss, on the basis that, had the plaintiff sought to recover the amount of the loan from First Pacific in mid 2006, it would not have been able to do so as First Pacific was unable to meet its obligations.
I find that that is not so. There was limited evidence about the financial position of First Pacific. However, there was evidence that on each of the two occasions a statutory demand had been made against First Pacific, that statutory demand was met. The defendant said that that was met from the funds of the defendant, and Mr Sandercock, personally. I have no information about the financial position of either of the two, but I infer that there was a reasonable prospect that, had a statutory demand been made by the plaintiff at around the time of the meeting, then such a demand would have been met.
The plaintiff is entitled to be compensated, pursuant to s 12GF ASIC Act, for its loss in the sum of $125,000, less the amounts of $2,500 and $10,000 repaid by the defendant.
There will be judgment for the plaintiff in the sum of $112,500. I will hear from the parties as to consequential orders.