Singh v Khanna
[2022] VCC 1726
•13 October 2022
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL List
Case No. CI-21-03006
| Gurmeet Singh | Plaintiff |
| v | |
| Deepak Khanna | First Defendant |
| Royale Panels Pty Ltd (ABN 57623576545) | Second Defendant |
| Royal Taxi Club Inc (ABN 80512878899) | Third Defendant |
| Royale Motor Mechanic Pty Ltd (ABN 25625677563) | Fourth Defendant |
| IT Rental Service Pty Ltd (ABN 40632454436) | Fifth Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 – 30 June 2022 | |
DATE OF JUDGMENT: | 13 October 2022 | |
CASE MAY BE CITED AS: | Singh v Khanna & Ors | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1726 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT
Catchwords: Breach of settlement deed – defence alleging settlement deed void because of Amadio type factors – construction of settlement deed – implication of terms as to cooperation and reasonable time – assessment of damages when evidence is deficient – repudiation – whether restraint clause an intermediate term – whether breaches sufficiently serious to justify termination – breaches trivial – unwillingness to render substantial performance not established – whether distributions of profit constituted a loan – existence of loan not established
Cases Cited:Forlyle Pty Ltd v Tiver & Anor [2007] SASC 464; Greenslade v Commissioner of Taxation (1978) 19 SASR 474; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596; Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1; Howe v Teefy (1927) 27 SR (NSW) 301; Fink v Fink (1946) 74 CLR 127; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; Longden v Kenalda Nominees Pty Ltd [2003] VSCA 128; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Ltd [1962] 2 QB 26; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Oaktech Pty Ltd v Legion Heights Pty Ltd [2008] VSCA 145; Eumeralla Estate Pty Ltd v Chen [2022] VSCA 78
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | C Thomson | Goz Chambers Lawyers |
| For the first, second, third and fifth defendants | A Bartzis | Starnet Legal Pty Ltd |
| For the fourth defendant | No appearance |
HIS HONOUR:
Summary and outcome
1The plaintiff, Gurmeet Singh, seeks orders enforcing the terms of a Deed of Settlement and Termination dated 3 June 2021 between Mr Singh and the defendants (“Settlement Deed”). In particular, he seeks damages comprising the $225,000 payable to him under the terms of the Settlement Deed and for the failure by the defendants to transfer vehicles to him and pay rental earned on those vehicles pending the transfer.
2The first, second, third and fifth defendants (“defendants”) deny any breach of the Settlement Deed. They say that Mr Singh repudiated the Settlement Deed by breaching the restraint clause (or evincing an intention to do so), and they validly rescinded the Settlement Deed in early July 2021. They also allege by counterclaim that Mr Singh is liable to repay loans from two of the defendants totalling $200,971.45 and must also return two Toyota Camry motor vehicles belonging to the defendants.
3In my judgment, the defendants are in breach of the Settlement Deed and Mr Singh is entitled to damages and interest for that breach totalling $444,759.86, calculated as follows:
(a) $225,000 now due and owing under the Settlement Deed;
(b) $25,119.86 in interest on that sum calculated as submitted by the plaintiff (except that the plaintiff’s submissions wrongly claim penalty interest at the rate of 8.5%, when the applicable rate is 10%);[1]
(c) $135,000 in damages in respect of the defendants’ breach of clause 1(c) of the Settlement Deed;[2] and
(d) $59,640 in damages in respect of the defendants’ breach of clause 5(2) of the Settlement Deed, calculated at the rate of $840 per week from 3 June 2021 to the date of these reasons (71 weeks).
[1]Interest at 10% from 2 July 2021 to date on the first instalment of $122,500: $14,455.48 (469 days at $33.82 per day). Interest on each further instalment as it fell due, being on $18,500 due on the 2nd days of August, September, October, November, December 2021 and January 2022. For simplicity’s sake, the plaintiff says that the rate should be calculated on the entire balance of $112,500 taken as from the 2 November 2021 to date, being the midpoint of those payments being due, being $10,664.38 for 346 days.
[2]The plaintiff rightly does not claim interest on this sum, given his entitlement to rental on the vehicles as calculated in (d).
4On the question of costs, unless either party has a sustainable basis for seeking something other than the usual order, that order will be that the defendants pay the plaintiff’s costs of and incidental to the proceeding (including reserved costs) on the standard basis, in default of agreement.
5The parties will be invited to agree on the form of orders to give effect to these reasons. In addition to the matters referred to above, the orders should also deal with what should become of the shares in the defendant companies currently held by Mr Singh. Failing agreement, each party will be directed to submit brief written submissions in support of the orders they seek and final orders will then be made on the papers.
Factual background
The business entities
6Mr Singh, and the first defendant, Deepak Khanna, were friends and business associates. Between late 2017 and 2021, Mr Singh and Mr Khanna worked together in varying capacities in the following organisations:
(a) the second defendant, Royale Panels Pty Ltd (“Royale Panels”);
(b) the third defendant, Royal Taxi Club Inc (“Taxi Club”);
(c) the fourth defendant, Royale Motor Mechanic Pty Ltd (“Royale Motor”); and
(d) the fifth defendant, IT Rental Services Pty Ltd (“IT Rental”).
7Royale Motor has not filed an appearance and has taken no active part in the proceeding. At the commencement of trial, the parties consented to the dismissal of the proceeding against Royale Motor and I made orders accordingly.
8No company searches were tendered in evidence by either party. However, the parties agreed, and I accept, that Mr Singh and Mr Khanna are both 50% shareholders of each of the companies. I also accept that at all relevant times, Mr Singh was president of the Taxi Club and Mr Khanna was the sole director of each of the companies.
9The businesses of each of the defendant entities can be summarised as follows:
(a) the Taxi Club was incorporated on about 17 December 2017 and runs a membership for taxi and commercial passenger vehicle owners, who pay an annual membership fee in return for the Taxi Club’s assistance in motor vehicle accidents;
(b) Royale Panels was incorporated on or about 23 December 2017 and conducts a panel beating business (including by providing courtesy or loan cars) at 5 Davies Avenue in Sunshine North, which it purchased in about April 2018;
(c) Royale Motor was incorporated in April 2018 and undertakes mechanical repairs of vehicles belonging to members of the Taxi Club; and
(d) IT Rental was incorporated on about 22 March 2019 and is in the business of renting out vehicles to taxi and rideshare drivers.
10Despite not being a director of any of the company defendants and Mr Khanna’s evidence that Mr Singh was only ever an employee of Royal Panels, I am satisfied that Mr Singh had a significant role in the day to day operation of the businesses. In particular, both Royale Panels and IT Rental operated bank accounts with the Commonwealth Bank of Australia (“CBA”) and Mr Singh had access to these accounts using both his own ATM card and internet banking. Mr Singh was also president of the Taxi Club and signed company documents, including contracts for the purchase by Royale Panels of its panel beating business and a lease of its premises at 5 Davies Street, Sunshine North. The latter was signed by Mr Singh as “tenant”, and witnessed by Mr Khanna.
11Mr Singh’s evidence was to the effect that Mr Khanna was primarily responsible for the administration side of the businesses and Mr Singh worked in operations – arranging repair quotations and ordering parts, for example. He said that in the early days of the business, he and Mr Khanna worked together closely. Although the initial funding for the businesses was provided by a loan from Mr Khanna, he and Mr Khanna agreed that this loan would be repaid in priority to he or Mr Khanna taking any wages or other payments out of the businesses. Mr Singh said the loan was repaid fairly quickly and, from that point on, they would generally put funds in as required, or take funds out (in effect, as a cash distribution) when cash flow permitted, both in equal shares.
12For example, Mr Singh was asked at length both in examination-in-chief and in cross-examination about a print-out generated on 13 June 2022 from the Royal Panels general ledger, in respect of an internal company account titled “3214 – Loan Gurmeet” (“Singh Loan Ledger”). Although, as explained below, attention was generally focussed on the entries in and after July 2020, he identified transactions during 2019 as including:
(a) ATM withdrawals in varying amounts of between $1,000 and $2,000, which Mr Singh said were withdrawals of cash to pay wages – he added that Mr Khanna made similar withdrawals using his ATM card for the same reason;
(b) a credit amount of $3,000, which Mr Singh said was an example of him putting money into the business as required and that Mr Khanna would sometimes put money in as well;
(c) a further credit of $10,872, which Mr Singh recalled was a deposit he arranged to cover a pay-out on a car that had been written-off – he said he could recall this because Mr Khanna contacted him about the payment when Mr Singh was in hospital with his newborn son who was in ICU; and
(d) numerous payments to Mr Singh in late 2019 and early 2020 of $5,000 described as “loan repayment”, which Mr Singh said were transfers to Mr Singh mostly arranged by Mr Khanna, matching payments made by Mr Khanna to himself. Mr Singh said they were described as “loan repayment” because this was a “normal way” of saving tax.
13Mr Khanna’s evidence-in-chief was that he was involved in the taxi industry from 2007 and by 2017 he was operating 17 or 18 taxis and wanted to extend his business, so: “I registered Royale Panels and I hired Gurmeet as the employee because we…were…family friends. So I hired him as an employee in Royale Panels, then we registered Royale Taxi Club and that how it all started”. Mr Khanna said that when he incorporated all the companies, he was the director and shareholder. In February 2020, before Mr Singh was due to go overseas, Mr Khanna transferred 50 shares in Royale Panels to Mr Singh. He said: “That was just the gift to him because he has been employed for a long time and I trusted him”.
14A dispute arose between Mr Singh and Mr Khanna in around mid-2020 and between then and 2021, their relationship deteriorated. How the dispute arose is not entirely clear (and not particularly relevant). According to Mr Khanna, it arose when Mr Singh sought to transfer some of his shares in the companies to his brother, after Mr Singh’s brother “covered” for Mr Singh and completed small jobs in relation to the business while Mr Singh was overseas in India for several months, during the early stages of the pandemic in early 2020.
15Between July 2020 and June 2021, various payments continued to be made from the Royale Panels and IT Rental CBA accounts to Mr Singh and Mr Khanna. The circumstances and nature of those payments are in dispute, and are important in resolving the issues in the proceeding, particularly those arising on Mr Khanna’s counterclaim. There were also eight payments of $10,000 each (totalling $80,000) made by Mr Singh into the Royale Panels CBA Account between 15 and 22 December 2020 (“$80,000 loan”). The nature and circumstances of these payments are also in dispute. It seems that Royale Motor also had a CBA bank account, but no claims are advanced in respect of any payments to and from that account.
Payments to Mr Singh and Mr Khanna after July 2020
Wages and director’s fees
16Based on the oral evidence of Mr Singh and Mr Khanna and CBA bank statements for each of Royale Panels (“RP Bank Statements”) and IT Rental (“IT Bank Statements”), each for the period of July 2020 to June 2021, it seems there are broadly four types of payments made to Mr Singh and Mr Khanna from these accounts during this period. The first is payments of wages, and these are not in dispute or subject to any claim for repayment. It seems that payments described in the RP Bank Statements as “Wages” were generally paid to Mr Singh and Mr Khanna fortnightly, with both being paid the same amount on the same day – being $2,674 per fortnight until late November 2020 and $2,722 per fortnight thereafter.
17For reasons that are not clear and not explained in the oral evidence, from January 2021, Mr Khanna began receiving a second payment each fortnight described in the RP Bank Statements as “deepak wages”, in the sum of $2,674. Mr Singh was not paid an equivalent sum, except once on 7 March 2021, when there was a payment for $2,674 shown in the RP Bank Statements with the description “Gurmeet Wages”. I note that this is claimed in the defendants’ counterclaim as part of the loan to Mr Singh. When Mr Khanna was asked about the payment to him of $2,674 on 7 March, he said in effect that this was a one-off “director’s fee”, not wages, because he could not receive two wages payments at the same time.
18There are two difficulties with this evidence. The first is that Mr Khanna said in evidence that, with one exception, he did not give a lot of thought to the descriptions used in the bank statements, and they were often not accurate. The exception was wages. Mr Khanna stated that anything described as “wages” in the bank statements was always wages. Second, he was not asked about and did not explain the several other occasions from early January 2021 when he had received two payments described as “wages” on the same day – one for $2,674 and one for $2,722. Had he been asked about these, I infer he would have also said these payments were not wages, but director’s fees.
19On the matter of director’s fees, in general terms, the effect of Mr Khanna’s evidence was that any payment he received that he could not otherwise explain (including, in particular, each of the payments matching those made to Mr Singh discussed further below), was said to be director’s fees to which he was entitled. However, there appears to be only three instances where payments have the description “DIRECTOR FEE”. Each of these is in the RP Bank Statements and are (as follows):
(a) on 4 May 2021, Mr Khanna was paid $7,000 with the description “DIRECTOR FEE”;
(b) on 6 May 2021, Mr Khanna was paid $4,000 with the description “DIRECTOR FEE”; and
(c) on 17 May 2021, a credit from Mr Khanna to the account of $10,000, with the description “RETURN DIRCTOR FEE”.
20Thus it would seem that, of the total of $11,000 paid in “DIRECTOR FEE” to Mr Khanna on 4 and 6 May, $10,000 was repaid by him a short time later. Subject to these anomalies, at least according to Mr Khanna’s evidence, director’s fees would appear to constitute a second type of payment from these accounts.
Sporadic matching payments
21The third type of payments comprise numerous payments made sporadically during the period (indeed, as noted above, these types of payment in fact commenced well before July 2020), in widely varying amounts and with varying descriptions, from both the Royale Panes and IT Rental CBA accounts. In almost all instances, these payments were made to each of Mr Singh and Mr Khanna in identical amounts, and either on the same day or a day or so apart. Many of the payments were in round amounts, but many were not.
22It is difficult to discern any rationale for the timing, amounts or the description applied to each of these payments, and no coherent explanation was given for these matters by either Mr Singh or Mr Khanna. For example, the RP Bank Statements (supplemented by the oral evidence and entries in the Singh Loan Ledger) disclose the following payments:
(a) on 27 July 2020, Mr Khanna was paid $5,000 with the description “Loan Deepak” and on 28 July 2020, Mr Singh was paid $5,000, with the description “Loan Gurmeet”;
(b) on 15 October 2020, Mr Singh and Mr Khanna were each paid $10,000, with the description “GURMEET” and “Deepak”;
(c) on 18 November 2020, Mr Khanna was paid $19,000 with the description “Deepak tax free” and on 23 November 2020, Mr Singh was paid $19,000 with the description “Gurmeet”;
(d) on 25 November 2020, Mr Khanna was paid $20,000 with the description “deepak” and on 27 November 2020, Mr Singh was paid $20,000, with the description “gurmeet”; and
(e) on 29 November 2020, Mr Singh and Mr Khanna were each paid $3,830 respectively, with the description “Gurmeet” and “Deepak”.
23And the following payments are disclosed by the IT Bank Statements:
(a) on 19 November 2020, Mr Khanna was paid $15,000 with the description “DEEPAK TAX FREE”;
(b) on 25 November 2020, Mr Singh was paid a total of $15,000 by two transfers, one for $1,500 and one for $13,500, both with the description “Gurmeet tax free”;
(c) on 23 February 2021, Mr Singh was paid $16,500, with the description “gurmeet”. This appears to be matched by a payment to another account, for the same amount from the following day, with the description “It rental”; and
(d) on 9 March 2021, Mr Khanna and Mr Singh were each paid $2,205.70, with the description “deepak” and “Gurmeet”.
24To the extent that these payments were made to Mr Singh, most (but not all) are the sums that make up the alleged loan to Mr Singh that is the subject of the defendants’ counterclaim. As already observed, the defendants say that the $80,000 loan, was in fact a repayment of part of the loan funds previously advanced to Mr Singh. The defendants also claim that what Mr Singh says were repayments to him of part of the $80,000 loan, were in fact further loan amounts taken by Mr Singh.
The $80,000 loan
25The fourth type of payments are those totalling $60,000 that Mr Singh asserts are repayments to him of the $80,000 loan. Mr Singh’s evidence-in-chief about the $80,000 loan was that this was to “just give a loan to the company”. He said in effect that the business was low on funds and that Mr Khanna put pressure on him to make a loan to the company, because it was Mr Singh’s “turn” (that is, Mr Khanna has provided the start-up funding and it was now Mr Singh’s turn to provide a loan to restore cash flow). Mr Singh added that he agreed to this, but said to Mr Khanna that the loan should be repaid in priority to any wages or other payments, similar to the arrangement with Mr Khanna’s loan when the businesses were first established. However, Mr Khanna said he needed the wages to live. Mr Khanna said in cross-examination that he heard Mr Singh’s evidence about the $80,000 loan, but it is not right.
26It seems that by around March 2021, after Mr Singh and Mr Khanna had both continued to take wages without first ensuring that the $80,000 loan was repaid, Mr Singh decided to begin transferring funds from the Royale Panels CBA account, in purported repayment of the $80,000 loan. He made two payments of $10,000 each on 6 and 7 March 2021 described as “GURMEET LOAN REPAY”. Mr Singh said he noticed on internet banking that the day after each of these payments, Mr Khanna made payments to himself in the same amounts, described as “Deepak Loan Repay”. Mr Singh said he asked Mr Khanna about these payments, saying that Mr Khanna did not then have any outstanding loans to the business. Mr Singh’s evidence was that Mr Khanna did not give Mr Singh any explanation as to why he had taken the payments.
27Mr Singh’s evidence was that he made one further transfer to himself from the Royale Panels CBA account in repayment of the $80,000, being $40,000 on 4 May 2021, with the description “Loan Repay as aged [sic]”. Mr Singh said this left $20,000 still owing to him on the $80,000 loan. Mr Khanna’s evidence was to the effect that this was an unauthorised withdrawal by Mr Singh, which led to his termination as an employee of the business.
The settlement
28From early to mid-2021, Mr Singh and Mr Khanna made various attempts to resolve their dispute. In particular, they participated in meetings with Mr Murali Ghuram, the external accountant for the companies, and exchanged at least one draft deed of settlement in around mid-May. The draft deed of settlement in evidence dated 14 May 2020 proved to be surprisingly controversial. It seemed to be not in dispute that it was given to Mr Singh by Mr Murali for comment, but Mr Khanna denied any knowledge of who prepared it, and denied ever giving instructions about its content.
29Mr Khanna similarly denied knowledge of the circumstances of the preparation of a letter dated 17 May 2020 in his name and addressed to Mr Singh, but unsigned. Each of the draft deed and the letter is important, primarily because they both refer to a loan by Mr Singh to the company of $20,000, which tends to corroborate Mr Singh’s version of the circumstances of the $80,000 loan. I discuss these as part of my analysis below.
30On 1 June 2021, Narelle Ahmet of Kenyon & Ahmet Lawyers (“Kenyons”) offered to mediate the dispute between the parties and on 3 June 2021, a mediation took place at the office of Kenyons in Cremorne. The evidence is that later that day the parties (including Royale Motor) executed the Settlement Deed, terminating the business arrangements between Mr Khanna and Mr Singh.
31The relevant operative provisions of the Settlement Deed are set out below. Importantly, they include provisions to the effect that:
(a) Mr Singh was subject to a restraint on competing with the defendants’ businesses for 12 months within an area of 10 kilometres (clause 2);
(b) the defendants would pay Mr Singh “the gross sum of $225,000” by a payment of $112,500 within 30 days of the Settlement Deed and further payments of “$18,750.00…by monthly instalments thereafter” (clause 4.1).
(c) the parties would “mutually divide the vehicles currently registered to [Royale Panels] and [IT Rental Services]” and “[t]he division will be equal or equivalent value basis and on all current vehicles in the fleet” (clause 1(c)); and
(d) Mr Singh would be paid “rental payments for any vehicles currently out on lease that will be transferred to [Mr Singh]” (clause 5.2).
The parties’ conduct post Settlement Deed
32Late in the afternoon of 3 June 2020, Mr Singh called Ms Ahmet of Kenyons with “a query in relation to family members being named into the agreement”. Ms Ahmet gave evidence that the call lasted for not longer than a few minutes, during which Mr Singh expressed concerns that his brother could not open a panel shop and “he wanted to know what he can do at that point”. Ms Ahmet “assured him his family wasn’t named” and otherwise referred him to his own solicitors.
33Mr Khanna gave evidence that he also telephoned Ms Ahmet that evening and that Ms Ahmet told him that Mr Singh had called her earlier that afternoon and had said to her that signing the Settlement Deed was his biggest mistake, that he did not read the contract properly and could not understand why he could not be an employee of a company. Mr Khanna said that this prompted him to contact the Taxi Club’s members and he further heard that Mr Singh was helping his brother to set up a panel shop. Ms Ahmet said she could recall taking a call from Mr Khanna after Mr Singh had called, either that night (3 June) or another night. She said when Mr Khanna called, she was driving home, which is why she did not have a note of the conversation. She said she had no particular recollection of what they discussed.
34According to Mr Khanna, he did not pay any of the amount owing under clause 4.1 of the Settlement Deed and he has made no effort to divide the vehicles with Mr Singh, because he had knowledge that Mr Singh had breached the restraint of trade clause under the Settlement Deed. On 1 July 2021, Mr Khanna sent Mr Singh an email including the following (errors in original, emphasis added):
“I would like to acknowledge, till date we have not received any reply from you about your plans to pay back the company’s loan… I have come to know through reliable sources that you are not sticking to certain terms of the contract … Until the company receives all the money owed by you and there will not be any breach of contract from your side I have to postpone our agreement.”
35Evidence was given by three witnesses called on behalf of the defendants, who had dealings with Mr Singh after the Settlement Deed was signed. Mr Khanna relies on this evidence as establishing a breach of the Settlement Deed by Mr Singh, entitling the defendants to rescind the Settlement Deed.
36The first of these witnesses was Sohail Nawaz. Mr Nawaz is an accountant for Astro Motors, which is in the business of providing rental cars. Since about August 2020, Astro Motors has arranged its insurance through the Taxi Club and some of its repairs with the other defendants. Mr Nawaz said that in June 2021, Mr Singh attended Mr Nawaz’s office located at 10 Hunter Road, Derrimut in Victoria and informed Mr Nawaz that he “split up” from Mr Khanna. About a week later, at the end of June or start of July 2021, Mr Singh came back to Mr Nawaz’s office and “asked for business”. According to Mr Nawaz, Mr Singh said that he had “set up another business in… Coburg with my friend, my brother” and told Mr Nawaz “you should give me your business… and you should work with me”. Mr Nawaz also said that following this, Mr Singh made “follow up calls” and “four o[r] five months later, he again called… for business”.
37Mr Nawaz’s evidence was that he initially did not tell Mr Khanna about Mr Singh’s visits to his office because he has “a good relation[ship]” with Mr Singh. However, after the second meeting with Mr Singh, Mr Khanna attended Mr Nawaz’s office and “told his side of the story”, after which Mr Nawaz mentioned that Mr Singh had “came to [Astro Motors]”. Mr Nawaz said that he kept his business with the defendants (and thus did not send any business to Mr Singh or his brother) and that Astro Motors’ business with the Taxi Club had increased since that time.
38The second witness was Ashiq Hussain. Mr Hussain lives in St Albans and is a taxi operator and driving instructor with a fleet of three vehicles. Mr Hussain has been a member of and has been insured by the Taxi Club since 2018 or 2019. Mr Hussain gave evidence that at some point in July 2021, Mr Singh called Mr Hussain and told Mr Hussain that he “separate[d]” from the defendants’ businesses and that he or some other had started a business. He did not have any dealings with Mr Singh after this call in July.
39Mr Hussain also gave evidence that on 28 August 2021, Mr Hussain received an email from the Taxi Club which states, among other things, that “[Mr Singh] has been expelled from the [Taxi Club] following a special committee meeting on the 16th of August 2021” and requested that for any future queries, contact be made to phone numbers which appear at the bottom of Mr Khanna’s signature (and presumably belong to Mr Khanna). At some point after the receipt of this email, Mr Hussain had a conversation with Mr Khanna in which Mr Hussain asked Mr Khanna why he and Mr Singh had “separate[d]”. Mr Hussain said that his business remained with the Taxi Club.
40The third witness was Sukjit Basra. In around June 2021 Mr Basra was based in St Albans, but moved to Caroline Springs in July 2021. Mr Basra operates a towing business called Punjab Towing. Punjab Towing tows for taxi depots, private companies, hire cars and Uber and taxi drivers. Mr Basra said that Punjab Towing has been towing for the Taxi Club since 2019, but Mr Basra is not a member of the Taxi Club himself.
41Mr Basra gave evidence that in around mid-June 2021 while he was still based in St Albans, Mr Basra was driving down Mercier Street in Coburg on his way to a job, he saw Mr Singh in the building of a business called KT Smash Repairs, located on the same street. Mr Basra gave evidence to the effect that he and Mr Singh made eye contact, waved at each other and Mr Basra then stopped his truck. He said that he and Mr Singh shook hands and then Mr Singh invited him into an office at the site.
42Mr Basra’s evidence was that he said words to the effect of “I heard that you started a business, here”, to which Mr Singh replied “No it’s my brother’s business, I’m just helping him… set it up”. According to Mr Basra, during this conversation, Mr Singh asked Mr Basra whether he was still getting work from the Taxi Club, to which Mr Basra responded “yes”. Mr Singh then “offered” Mr Basra: “if we call you, can you do time for us too” – to which Mr Basra replied “I can but if I can’t I can organise someone for you”.
43Mr Basra confirmed that he does work for the Taxi Club (among plenty of other taxi companies), not the other way around. Accordingly, he does not pay any money to any of the defendants as part of his association with them. There was no evidence that Mr Basra had any business dealings with Mr Singh at any time. Nor did he have any other relevant conversations with Mr Singh after the conversation in June 2021. He only said that he had seen Mr Singh outside or near the KT Smash Repairs business few times later in 2021
Evidence on the vehicles
44There is only patchy evidence of what vehicles were registered in the name of each of Royale Panels and IT Rental as at 3 June 2021, the value of those vehicles and what rental was paid on them. The documentary evidence comprises only three lists of vehicles of uncertain origin and the RP and IT Bank Statements. The oral evidence was also of limited assistance.
45The three lists of vehicles in evidence give only the vehicle registration number (“VRN”), make, model and year of the car. The effect of Mr Singh’s evidence at first seemed to be that the first two lists were prepared by him and the third was sent by Mr Khanna to the defendants’ external accountant Mr Ghuram, who then sent it to Mr Singh. However, he later said that he did not prepare any of the lists, and he believed they all came by email from Mr Ghuram.
46Mr Singh’s evidence was that all of the cars in the lists belonged to “us” as at the date of the Settlement Deed, except for one Toyota Camry Hybrid which was sold. I understand this to mean that, except for the car that was sold, the cars in the three lists belonged to either IT Rental or Royale Panels. Given that the obligation to divide the vehicles under the Settlement Deed applied to both entities and both are parties to the proceeding and subject to the same ownership and control, it is unnecessary to distinguish between them for the purposes of resolving the issues in the proceeding. I also note that counsel for the defendants Mr Bartzis did not contend otherwise.
47In relation to the rent received by IT Rental and Royale Panels for vehicles rented out by them, the only documentary evidence is the RP and IT Bank Statements for the period 31 December 2020 to 30 June 2021. In particular, the IT Bank Statements include recurring payments to IT Rental with transaction descriptions containing VRNs identified in the three lists. It was not in dispute that these transactions constituted rental payments by renters to IT Rental on vehicles owned by IT Rental. Thus the IT Bank Statements constitute evidence of both the ownership of the vehicles and the rental paid. I note that while clause 1(c) of the Settlement Deed refers to vehicles belonging to IT Rental and Royale Panels, the Royale Panels bank statements do not appear to contain rental payments.
48I set out below what can be gleaned from the lists and the supporting information in the IT Bank Statements.
List one
49The first of the three lists (“list one”) is as set out below.
Registration Make Model Year 1OH8MU Hyundai Accent 2015 1IS4MH Toyota Camry 2015 1RZ1YP Toyota Camry 2016 1RZ1YN Toyota Camry 2015 1RZ1YS Toyota Camry 2016 1SD9NM Toyota Camry 2015 1SD9NO Toyota Camry 2015 1SD9NW Toyota Camry 2015 1SD9NU Toyota Camry 2015 1SD9OS Toyota Camry 2015 50The following is apparent regarding the vehicles in list one from the IT Bank Statements:
(a) The 2015 Hyundai Accent with VRN 1OH8MU was owned by IT Rental at the time of the Settlement Deed, as the latest transaction with the VRN in the description is dated 17 June 2021 – on this date, IT Rental was paid $200 from “Inderbir Singh”. IT Rental was also receiving rental for this vehicle earlier in 2021. For example, on 12 and 20 January 2021, IT Rental was paid $200 by “Inderbir Singh” with the VRN as the description and on 4 and 25 May 2021, IT Rental was paid $220 by “Inderbir Singh” with the same description.
(b) The IT Bank Statements do not provide any further information regarding the 2015 Toyota Camry with VRN 1IS4MH.
(c) The 2016 Toyota Camry with VRN 1RZ1YP is the vehicle sold by IT Rental before the Settlement Deed was executed. IT Rental received several payments of $1,000, with a description including this registration and the “instalment” number from before the date of the Settlement Deed. For example, on 1 June 2021, IT Rental was paid $1,000 by “Arjanpal Singh” with the description “1RZ1YP 9TH INSTALLMENT” and on 1 May 2021, IT Rental was paid $1,000 by “Arjanpal Singh” with the description “1RZ1YP 8TH INSTALLMENT”.
(d) The 2015 Toyota Camry with VRN 1RZ1YN was owned by IT Rental in 2021 and IT Rental was paid $200 weekly rent for this vehicle. For example, on 10, 15 and 22 March 2021, IT Rental was paid $200 by “RI Resources” with the VRN as the description.
(e) The IT Bank Statements do not provide any further information regarding the 2016 Toyota Camry with VRN 1RZ1YS.
(f) It appears that IT Rental received rent for the 2015 Toyota Camry with VRN 1SD9NM in 2020. For example, on 7 October 2020, IT Rental was paid $150 by “Sandeep Singh” with the VRN as the description.
(g) The 2015 Toyota Camry with VRN 1SD9NO was owned by IT Rental in 2021 and IT Rental was paid $200 weekly rent for this car. For example, on 11, 19 and 25 January 2021, IT Rental was paid $200 by “Sumit Mor” with the VRN as the description.
(h) The 2015 Toyota Camry with VRN 1SD9NW was owned by IT Rental in 2021 and IT Rental was paid $150, $200 or $250 weekly rent for this car. For example, on 11, 18 and 25 May 2021, IT Rental was paid $250 by “Mukesh Kumar” with the description “1SD9NW Silver Camry rent”.
(i) The 2015 Toyota Camry with VRN 1SD9NU was owned IT Rental at the time of the Settlement Deed, as the latest transaction with the VRN in the description is dated 18 June 2021 – on this date, $230 was debited to “Navneet Navneet” with the description “BOND REFUND 1SD9NU”. Further, it appears that IT Rental was paid $200 weekly rent for this vehicle. For example, on 6 April 2021, $200 was paid to IT Rental by “Navneet” with the description “1SDN” and on 29 March 2021, $200 was paid to IT Rental with the description “1SD”.
(j) The 2015 Toyota Camry with VRN 1SD9OS was owned by IT Rental in 2021 and IT Rental was paid rent of various amounts irregularly. For example, on 24 May 2021, IT Rental was paid $250 seven times by “SMLK Services Pty Ltd t/as” with the VRN as the description.
List two
51The second of the three lists (“list two”) is as set out below.
Registration Make Model Year 1IT4GE Toyota Camry 2013 1RZ4XM Toyota Camry 2014 1TP4EJ Toyota Camry 2015 1DJ7WA Toyota Camry 2014 1NR7WK Toyota Camry 2012 XPD379 Toyota Camry 2010 1SR70U Toyota Camry 2017 1QK7OT Toyota Corolla 2019 1TD7HP Toyota Camry 2018 1KL5ID Toyota Camry 2015 1LD4MT Toyota Aurion 2012 ZUV212 Toyota Camry 2013 4018M Mercedes Benz 2018 1SH5FE Toyota Camry 2014 1SN1NF Hyundai I30 2012 1SN1RO Toyota Camry 2016 1SX7EW Ford Falcont [sic] 2011 52The following is apparent regarding the vehicles in list two from the IT Bank Statements:
(a) The IT Bank Statements do not provide any further information regarding the 2013 Toyota Camry with VRN 1IT4GE.
(b) It appears that IT Rental received rent for the 2014 Camry with VRN 1RZ4XM in 2020. For example, on 12 October 2020, IT Rental was paid $150 by “Mohammed Siraj Ahmed” with the description “1RZ4XM RENT WEEK 2”.
(c) The IT Bank Statements do not provide any further information regarding the 2015 Toyota Camry with VRN 1TP4EJ.
(d) It appears that IT Rental received rent for the 2014 Toyota Camry with VRN 1DJ7WA in 2020. For example, on 5 October 2020, IT Rental was paid $125 by “Inderbir Singh” with the VRN as the description.
(e) It appears that IT Rental received rent for the 2012 Toyota Camry with VRN 1NR7WK in 2020. For example, on 8 July 2020, IT Rental was paid $125 by “SMLK SERVICE PTY LTD T/AS” with the VRN as the description.
(f) The IT Bank Statements do not provide any further information regarding the 2010 Toyota Camry with VRN XPD379.
(g) The IT Bank Statements do not provide any further information regarding the 2017 Toyota Camry with VRN 1SR70U.
(h) The 2019 Toyota Corolla with VRN 1QK7OT was owned by IT Rental at the time of the Settlement Deed, as the latest transaction with the VRN in the description is dated 21 June 2021 – on this date, IT Rental was paid $150 from “Shahbaj Singh” with the VRN as the description. IT Rental also received weekly rent for this vehicle earlier in 2021. For example, on 1, 8 and 15 June 2021, IT Rental was paid $150 by “Shahbaj Singh” with the VRN as the description and on 17, 24 and 30 March 2021, IT Rental was paid $200 by “Shahbaj Singh” also with the VRN as the description.
(i) The IT Bank Statements do not provide any further information regarding the 2018 Toyota Camry with VRN 1TD7HP.
(j) The 2012 Toyota Aurion with VRN 1LD4MT was owned by IT Rental in 2021 and IT Rental was paid $200 rent for this car, often on a weekly basis. For example, on 29 April, 10 and 19 May 2021, IT Rental was paid $200 by “Balraj Singh” with the VRN as the description.
(k) It appears that IT Rental was receiving rent for the 2013 Toyota Camry with VRN ZUV212 in 2020. For example, on 11 November 2020, IT Rental was paid $150 by “Shahabaj Singh” with the VRN as the description.
(l) The IT Bank Statements do not provide any further information regarding the 2018 Mercedes Benz with the VRN “4018M”.
(m) The 2014 Toyota Camry with VRN 1SH5FE was owned by IT Rental at the time of the Settlement Deed, as the latest transaction with the VRN in the description is dated 24 June 2021 – on this date, IT Rental was paid $150 by “Devinder Singh” with the description “1SH5FE”. IT Rental also received rent for this vehicle earlier in 2021. For example, on 9 and 16 June 2021, IT Rental was paid $150 by “Devinder Singh” with the VRN as the description and on 23 February and 9 March 2021, IT Rental was paid $200 by “Devinder Singh” with same description.
(n) The 2012 Hyundai i30 with VRN 1SN1NF was owned by IT Rental at the date of the Settlement Deed, as the latest registration attributable to this car is dated 30 June 2021 – on this date, IT Rental was paid $150 by “Rajat Sharma” with the description “Car rent”. While the description does not specify the vehicle registration number precisely, on 3 November 2020, IT Rental was paid $150 by “Rajat Sharma” with the description “1sn1nf bond”, and was later paid rent by the same person. For example, on 9, 15 and 21 June 2021, IT Rental was paid $150 by “Rajat Sharma” with the description “Car rent”. Thus, I infer that the payments by Rajat Sharma are for this vehicle.
(o) The 2016 Toyota Camry with VRN 1SN1RO was owned by IT Rental at the time of the Settlement Deed, as the latest transaction with the VRN in the description is dated 27 June 2021 – on this date, IT Rental was paid $150 by “Sachin Sachin”. IT Rental also received rent for this vehicle earlier in 2021. For example, on 11 June 2021, IT Rental was paid $300 by “Sachin Sachin” with the description “ISN1ro”, on 24 May 2021 IT Rental was paid $250 by “Sachin Sachin” with the description “Isn1R0”, and on 17 May 2021 IT Rental was paid $500 by “Sachin Sachin” with the same description.
(p) The IT Bank Statements do not provide any further information regarding the 2011 Ford Falcon with VRN 1SX7EW.
List three
53The third of the three lists (“list three”) is as set out below.
Rego [sic] 4431M Toyota Camry 2012 1JR7SD RZ 1DW8XP Mazda 3 54It is common ground that the vehicles in list three had been badly damaged and were held at the defendants’ repair shop. Mr Singh suggested in evidence that they would be repaired and then kept in the defendants’ fleet. However, Mr Khanna’s evidence was that these cars are “junk”. In final submissions, counsel for Mr Singh conceded that the “3 vehicles that were damaged and unregistered” should be excluded from any calculation of damages for breach of clause 1(c).
Letter of demand
55On 5 July 2021, the solicitors for Mr Singh sent a letter of demand to Mr Khanna, putting Mr Khanna “on notice” that the defendants had breached the Settlement Deed, and requiring the defendants to “remedy the situation” by 4.00pm on 7 July 2021 (“letter of demand”). The defendants did not do so, and Mr Singh commenced proceedings in this court on 21 July 2021.
The Settlement Deed
56The recitals and key terms of the Settlement Deed are set out below (emphasis and errors in original):
“RECITALS
A.The parties wish to terminate their business arrangement, which primarily related to running the [Taxi Club], [Royale Panels], [Royale Motor] and [IT Rental Services].
B.[The defendants] will continue the running of all businesses without [Mr Singh].
1.TERMS
a) This deed is entered into between all parties by mutual agreement and consent.
b) The parties have agreed to terminate and release [Mr Singh] from any involvement in [the defendants’] businesses.
c) The parties agree to mutually divide the vehicles currently registered to [Royale Panels] and [IT Rental Services]. The division will be equal or equivalent value basis and on all current vehicles in the fleet.
d) The parties have mutually agreed that [Mr Singh] will not attempt to do business with or otherwise solicit any client’s members, suppliers, or contractors of [the defendants] for a period of 12 months.
e) [The defendants] will not attempt to do business with or otherwise solicit any client’s, members, suppliers, or contractors of [Mr Singh] for a period of 12 months.
f) [The defendants] will pay [Mr Singh] the gross sum of $225,000 in full and final settlement.
g) [Mr Singh] has agreed to conform with restraints of trade.
h) [Mr Singh] will unfreeze the [Taxi Club] bank account upon execution of this agreement.
2.Restraint Period and Restraint Area
1) [Mr Singh] agrees that during the restraint period on the restraint area, they are prevented from:
a) Promoting, participating in the operation of a taxi club or panel shop, undertake or enter into (whether on their own account or in a partnership or by a joint venture), the operation of a taxi club or panel shop; or
b) be concerned or interested, directly or indirectly in any capacity including as principal, agent, manager, associate, partner, trustee shareholder, unitholder, director, employee, beneficiary, independent contractor, consultant, adviser or financier in, any taxi club or panel shop.
2) Restraint area and period means the following:
a) Ten kilometres from [Royale Panels], [the Taxi Club] and [Royale Motor];
b) 12 months as from the date of executing this agreement.
3.The Resignation and Dissolution
1)[Mr Singh] do all that is possible to resign as president in [the Taxi Club] following payment of the first installment.
2)The taxi club form a new committee immediately, minutes are prepared and new member list is created.
3)[Mr Singh] resigns as the Director of [Royale Motor] and do all that is possible to ensure that this occurs.
4)[Mr Singh] releases his shares to [the defendants] currently held in [Royale Panels] and [IT Rental Services] and do all that is possible to ensure that this occurs.
5)[The defendants] will send out a formal letter to all members of [the Club] to advise of the termination of [Mr Singh] and the new structure of the club.
4.Payment
1)[The defendants] will pay [Mr Singh] the gross sum of $225,000.00. The agreed amount be paid as follows:
-$112,500.00 be paid within 30 days of the executed agreement;
- $18,750.00 be paid by monthly instalments thereafter;
2)[The defendants] are liable for all debts and expenses that are current and in arears and after taking over the business which includes payments to creditors, suppliers, super fund and the like;
3)[The defendants] will be held responsible for all current and arrears Tax liabilities including GST Quarterly Business Activity Payments and Tax Returns to the Australian Taxation Office;
4)[The defendants] will continue/resume with all existing business Bank Account/s and [Mr Singh] will immediately unfreeze the [Taxi Club] account upon execution of this agreement.
5.Continual Obligations
1)[Mr Singh] agrees to comply with [his] obligations to assist with any existing claims, which may relate to the vehicles in [Mr Singh’s] possession (including making the vehicles available for inspections)
2)[Mr Singh] is to receive rental payments for any vehicles currently out on lease that will be transferred to [Mr Singh].
6.Indemnities
[The defendants] will continue to be liable for all debt, damages or the liability (liability) arising from events which occurred past and present. [The defendants] release and indemnify [Mr Singh] against each liability arising before or after the execution of this agreement.
7.Releases
Upon the settlement sum being paid, [Mr Singh] is released and forever discharged from any and all claims, suits or actions in relation to the business and the subject matter contained in this agreement.
…
9.Assets
The only assets acknowledged and forming part of this agreement are the list of vehicles to be distributed, currently registered to [IT Rental] and [Royale Panels].”
Pleadings
57Mr Singh claims that the defendants breached the Settlement Deed, by failing to:
(a) pay Mr Singh the sum of $225,000 or any part thereof;
(b) transfer ownership of one half of the vehicles owned by and registered to Royale Panels and IT Rental; and
(c) pay Mr Singh the whole or any part of rent received from the defendants from the vehicles to be transferred to Mr Singh as described above.
58On 26 August 2021, the defendants filed a defence and on 13 January 2022, the defendants filed an amended defence and counterclaim. By the counterclaim, the defendants claim that:
(a) Mr Singh made unauthorised transfers totalling $33,705.70 from IT Rental’s bank account;
(b) Mr Singh took a loan of $247,267.75 from Royale Panel’s bank account, of which only $80,000 has been repaid and $167,265.75 is outstanding; and
(c) Mr Singh has taken possession of two motor vehicles registered to IT Rental (Toyota Camrys with the VRNs1TD7HP and 1IT4GE) (“two vehicles”), and has failed and/or refused to return these vehicles to IT Rental.
Issues
59The issues to be determined are:
(a) Is the Settlement Deed enforceable?
(b) If so, did the defendants breach the Settlement Deed?
(i)Did the defendants fail to pay the $225,000?
(ii)Did the defendants breach the Settlement Deed by failing to agree an allocation of vehicles and failing to pay rent?
(c) If so, what is the quantum of the plaintiff’s loss and damage for that breach?
(d) Did the plaintiff evince an intention not to be bound by the restraint clauses in the Settlement Deed and thereby repudiate the Settlement Deed?
(e) Is Mr Singh liable to Royale Panels or IT Rental for loan advances or unauthorised payments and, if so, in what sum?
(f) Is Mr Singh obliged to return the two vehicles to the fifth defendant?
60These issues will be dealt with in turn below.
Is the Settlement Deed enforceable?
61Paragraph 5 of the amended defence and counterclaim dated 11 January 2022 pleaded that the Settlement Deed was “null, void and unenforceable” in substance because:
(a) the defendants were not afforded an opportunity to seek independent legal advice in relation to the Settlement Deed;
(b) the consequences of the Settlement Deed were not explained to the defendants and the defendants could not reasonably understand the consequences of the Settlement Deed; and
(c) the solicitor who drafted the Settlement Deed acted in a conflict of interest, given that she purported to act for and advise both Mr Singh and the defendants.
62At the commencement of trial, I invited submissions from counsel for the defendants Mr Bartzis on this pleading. I observed that the paragraph did not seem to me to raise a defence known to law, and I was concerned to ensure that time was not spent adducing evidence at trial in relation to an issue that lacked a proper basis. For example, the second witness proposed to be called for Mr Singh seemed likely to be giving evidence relevant only to that issue. I said that unless I could be persuaded that the pleading had a proper basis at least in law, I would order that paragraph 5 of the amended defence and counterclaim be struck out.
63In elaborating on my concerns in the course of submissions by Mr Bartzis, I noted that:
(a) there was no suggestion that Mr Khanna was suffering from any disability that might engage a Commonwealth Bank of Australia Ltd v Amadio[3] type defence;
(b) it was not alleged that the Settlement Deed was not signed by Mr Khanna or that the defendants did not otherwise freely enter into the Settlement Deed; and
(c) there was an allegation that the defendants “were not afforded the opportunity to seek independent legal advice”, but in the absence of a special disability, this allegation went nowhere.
[3] (1983) 151 CLR 447
64Mr Bartzis commenced his submissions by referring to case law which shows that it is a policy of the courts to enforce terms of settlement, except where there was impropriety or mala fides. I interrupted counsel at that point to observe that there was no express allegation of impropriety or mala fides in the pleading. The pleading thus fell a long way short of what would be required for an allegation amounting to fraud. In addressing these concerns, Mr Bartzis submitted that:
“[O]ur focus was more on the nullity void[ability and] enforceability of the agreement. We were planning to actually adduce evidence and even probably bring out evidence under cross-examination regarding the true reasons as to why parties had entered into this agreement as to the true reason as to why Mr Singh was prepared to sign this agreement. And… that there was no real consensus ad idem as to the entering of this agreement. Hence, the reason why we were going to raise the possibility of impropriety in that regard and in that context and also mala fides in that context. [That] the party had actually entered into the agreement merely for the purposes of procuring funds and not for actually honouring the contents of the agreement and we feel that on the basis on the evidence that would’ve actually come to light. In bring[ing] that out as evidence in court it would become an issue which we felt the court would be unable to necessarily avoid as an issue especially in terms of whether such an agreement could, in fact, be enforced. … And that would’ve been something that would’ve been organic and would’ve come up during the course of the proceeding whether by evidence-in-chief or cross-examination.”
65Mr Bartzis went on to explain that, in referring to mala fides, he was really going back to the “root definition”, that is, entering into the Settlement Deed in bad faith. He asserted that “there was no good faith on the part of the plaintiff in entering into this Settlement Deed. That it was all an ulterior motive”. I assume the reference to “ulterior motive” was in substance repeating the suggestion that the plaintiff entered into the Settlement Deed merely for the purpose of “procuring funds” and without any intention of honouring the Settlement Deed.
66I asked counsel if he was in a position to take me to any authorities that might assist my understanding of his submissions. He first referred me to Forlyle Pty Ltd v Tiver & Anor[4] (“Forlyle”), a decision of the Full Court of South Australia dealing with the question whether by reason of s42 of Building Work Contractors Act 1995 (SA), a mutual release of claims under a settlement deed was void, in so far as it constituted a settlement of claims in respect of future defects. In that case, the Full Court held that:[5]
“The policy of the courts is to enforce a compromise of an action where it is made bona fide and without impropriety: Greenslade v Commissioner of Taxation (1978) 19 SASR 474 at 477 citing Binder v Alachouzos [1972] 2 QB 151 and Dixon v Evans (1872) LR 5 HL 606. However, a court will not enforce an agreement which is illegal either under statute or under the general law. Equally, a court will not enforce an agreement which is void either under statute or under the general law. The question in this case is whether a compromise of legal proceedings agreed by parties both of whom have been separately advised falls within the ambit of s 42 of the Act.”
[4] [2007] SASC 464
[5] Ibid at [14]
67Counsel also made reference to the decision in Greenslade v Commissioner of Taxation[6] cited in Forlyle where the court held (citations omitted):[7]
“The question for decision is whether the agreement is enforceable so that the appeal must be dismissed and the parties left to their agreed rights. The policy of the courts is to enforce a compromise of an action where it is made bona fide and without any impropriety… Even if it is later established that one of the claims settled by compromise was not well founded in law a compromise will not be set aside provided that the claim was bona fide.”
[6] (1978) 19 SASR 474
[7] Ibid at 477
68Neither of these authorities nor Mr Bartzis’ submissions suggesting alternative grounds were sufficient to satisfy me that paragraph 5 of the amended defence and counterclaim had a proper basis. As I observed in the course of Mr Bartzis’ submissions, there is not even the merest suggestion in the pleading or in submissions that Mr Khanna suffered from any disability or disadvantage that might attract any defence based on principles of unconscionability (either under statute or at common law). This is unsurprising. Mr Khanna is clearly an intelligent, highly qualified and sophisticated business person, and appears to be quite capable of holding his own in negotiations with Mr Singh over the terms of the Settlement Deed, and reading and understanding its content and effect.
69Similarly, there is no pleading or sustainable basis for any allegation of bad faith on the part of Mr Singh. Any allegation of this kind must be fully pleaded and properly particularised. It is not. Further, unlike the authorities relied on by Mr Bartzis, this is not a case involving a settlement deed to settle proceedings. I accept that it did seek to resolve a growing dispute between the parties. However, there were no proceedings on foot and thus there can be no suggestion that at the time the Settlement Deed was executed, Mr Singh was pursuing a false claim in order to leverage a result through litigation or that the Settlement Deed is void under statute or under the general law.
70Mr Bartzis’ assertion that there was no “consensus ad idem” is also not pleaded and has no basis. It is clear that the parties negotiated and freely executed a reasonably detailed written Settlement Deed. This is not a case where a negotiation left issues unresolved or where parties concluded negotiations each having a different account of what was agreed, like ships passing in the night. The consensus ad idem between the parties clearly manifested in the Settlement Deed, and neither party is seeking to avoid or vary the Settlement Deed based on frustration or mistake. If the Settlement Deed is lacking in detail on any matter, absent a claim that the Settlement Deed is void for uncertainty (which, again, has not been advanced) this raises issues of construction, not whether the Settlement Deed is “null, void and unenforceable”.
71Finally, the suggestion by Mr Bartzis that the defendants should be permitted to plead a vague and unsubstantiated defence in the hope that evidence would emerge “organically” to support allegations of bad faith, is troubling. Modern litigation is not a treasure hunt. As the Civil Procedure Act 2010 now makes clear beyond argument, if a party wishes to pursue a claim, it must have a proper basis and it must be clearly exposed by the pleadings. And this is particularly the case with claims akin to fraud. Further, in the absence of illegality, fraud or misrepresentation, a party’s purpose or intent in entering into a settlement deed is entirely irrelevant to that party’s right to enforce that settlement deed.
72In any event, the suggestion that Mr Singh was only entering into the Settlement Deed merely for the purpose of “procuring funds” is nonsensical. Clearly he was seeking the payment of funds as provided for in the Settlement Deed. If what is suggested here is that Mr Singh had no intention of complying with his side of the bargain, this may be relevant to the defendants’ repudiation claim (which has been separately pleaded). It is not a basis for the pleading in paragraph 5 of the amended defence and counterclaim.
73It is for these reasons that I ordered at the commencement of the trial that paragraph 5 of the amended defence and counterclaim be struck out. In the circumstances, this issue falls away and I am satisfied that the Settlement Deed is enforceable in accordance with its terms.
Did the defendants breach the Settlement Deed?
Did the defendants fail to pay the $225,000?
74It is not in dispute that the defendants did not pay the $225,000 in accordance with the Settlement Deed, or at all. In particular, they paid no part of the $112,500 due on 2 July 2021 and none of the later instalments. In the circumstances, if the Settlement Deed was still on foot when those payments fell due and has not since been validly rescinded by the defendants, that failure constituted a clear breach of the Settlement Deed by the defendants.
Did the defendants breach the Settlement Deed by failing to agree an allocation of vehicles and failing to pay rent?
75The position in relation to the vehicles is less straightforward. Clause 1(c) governing the arrangement for the allocation of the vehicles is sparse. In my view, it identifies the vehicles themselves and the proposed shares with sufficient certainty. The vehicles are those “currently registered” to Royale Panels and IT Rental. There is no reason to doubt that “currently registered” means as at the date of the Settlement Deed and the fact of registration at a particular point in time can be objectively ascertained from the relevant government vehicle registration agency (presumably VicRoads).
76The provision dealing with the proposed shares is clumsy – “equal or equivalent value basis on all current vehicle in the fleet”. However, it is tolerably clear that, despite the use of “or” in the expression “equal or equivalent”, the two words have essentially the same meaning. Perhaps the use of “equivalent” was intended to make some allowance for the fact that a precise equal sharing in dividing up cars of varying value may not be possible. In any case, I am satisfied that the provision requires that Mr Singh would be allocated half of the cars registered to each of Royale Panels and IT Rental as at 3 June 2021, by reference to value.
77As to the timing and mechanics of the division, the Settlement Deed is silent. On this issue, Mr Bartzis began referring to the evidence of Ms Ahmet “the drafter and author of this agreement” to the effect that the Settlement Deed was incomplete. In relation to the vehicles in particular, he referred to her evidence that “[t]here was no concluded arrangement with the cars, but there were cars that needed to be distributed between the parties” and there was no discussion about the value of the cars but: “There was talk of getting valuations”.
78Mr Bartzis next submitted that, given the evidence of Ms Ahmet, a mere cursory look at the Settlement Deed shows that it is missing a number of fundamental provisions concerning the cars. In particular, he noted there is no end date, no statement of the exact number of cars, no prior valuations and no valuation mechanism, such as provision for an independent valuer and the sharing of the costs of that valuer.
79However, as I observed in the course of Mr Bartzis’ submissions, there was no pleading on behalf of the defendants that clause 1(c) is void for uncertainty or unenforceable as an agreement to agree. Nor has either party alleged mistake or frustration. In the absence of any pleading along those lines, it is incumbent on me to determine the meaning of the clause in the context of the Settlement Deed as a whole. Mr Bartzis’ response was that it was not his intention to say the clause was unenforceable: “We know it’s there and we’d be urging Your Honour to… give it the weight it deserves in terms of… not its unenforceability but its difficulty in being applied for the parties”.
80When I suggested that the implied duty to co-operate might inform the construction issue, Mr Bartzis submitted that the “parties could have co-operated a whole lot more prior to issuing proceedings”. He noted that Mr Singh’s solicitors’ letter demanding compliance was sent on 5 July 2021, and the proceedings commenced on 19 July 2021. He said: “We would have thought… there would have been a little more to and fro between solicitors first in an attempt… to somehow settle and work out this situation” and “did the parties really give each other enough breathing space to deal with this”.
81I am not clear where Mr Bartzis was going with these submissions. They seemed to be introducing a defence based on frustration, but this too had not been pleaded or argued, at least to that point. But Mr Bartzis again emphasised that: “We’re not undermining the agreement as to unenforceability. It is what it is, it’s there, there are signatures on this document and we’re not going to shy away from that”. Mr Bartzis then moved on to the issue of damages in relation to the vehicles, which I deal with below.
82I will treat Mr Bartzis’ submissions discussed above as being in effect an argument that the time for performance under clause 1(c) had not arrived when Mr Singh’s solicitors sent the letter of demand of 5 July 2021 and then commenced these proceedings. I presume the defendants would add that there was therefore no breach by them of clause 1(c) any time before Mr Singh’s purported repudiation of the Settlement Deed.
83I note that Mr Bartzis also argued that the court should not imply a term imposing a timeframe on the division of vehicles, because it does not meet the test for implication of terms under Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales[8] (“Codelfa”).
[8] (1982) 149 CLR 337
84Mr Thomson for the plaintiff submitted that the absence of time for performance in the clause is no bar to enforcement and does not render it uncertain (noting, in any event, that there is no pleading of uncertainty). He referred in his written outline of closing submissions to the principle that, where a contract has not set a date for performance of a term, the law will imply a reasonable time “unless there are indications to the contrary”.[9] He submitted that a reasonable time in this case for the defendants to engage in the process of dividing the vehicles would be 30 days, roughly coinciding with the time for the payment of the first instalment of the $225,000 payable under the Settlement Deed.
[9]Counsel cited Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 at 298-299, City of Wanneroo v Tah Land Pty Ltd [2020] WASC 249 at [296] and Reid v Moreland Timber Pty Ltd (1946) 73 CLR 1 at 13, although I note the first of these cases is more concerned with a contract that has set a time for performance, but this has passed.
85Mr Thomson next submitted that:
“This would be ample time for the parties to settle on a division of the vehicles, transfer registration, and arrange for them to be collected by the plaintiff and transported to Castlemaine for his new taxi business and/or to be sold. A term may be implied if the independent observer, watching the proceedings on 3 June 2021, could say that “of course the parties intended to divide up the cars equally over the coming week or weeks. Such a term satisfies the 5 conditions for implication.” [citing Codelfa, per Mason J at 347]
86In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. As the High Court has made clear:[10]
“That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone… However, sometimes, recourse to events, circumstances and things external to the contract is necessary…
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
…Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience.”
[10]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at 116-117, per French CJ, Nettle and Gordon JJ (citations omitted)
87The first thing to note from the extract above is that (as I observed more than once during the course of the trial), evidence of Ms Ahmet and other witnesses about intentions and expectations is inadmissible and therefore irrelevant to the proper construction of the Settlement Deed. In particular, it is neither necessary nor appropriate for me to consider Ms Ahmet’s evidence to the effect that her understanding was that there was no concluded agreement concerning the division of vehicles. I hasten to say this should not be seen as a criticism of Ms Ahmet. She merely answered the questions she was asked.
88Having put those matters to one side, it is then necessary to consider whether the process of construction in accordance with the principles above is assisted by resort to relevant implied terms. Of the three primary categories of implied terms,[11] no terms implied in fact or by statute are pleaded. However, there are two terms that, in my view, will be implied regardless of the pleadings. First, the duty of co-operation and, second, a requirement that the division of vehicles be completed within a reasonable time.
[11]Terms implied in fact (arising from the need to give business efficacy to the contract), terms implied at common law (from the nature of the contract itself of the obligations it creates) and terms implied by statute.
89There is no doubt that the duty of co-operation is a term implied into the Settlement Deed at common law, and thus the onus rests on the defendants to prove that the term should not be implied.[12] It is one of a small number of terms that a court implies into all classes of contract.[13] It has been authoritatively described as a general rule applicable to every contract. For example, in Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd,[14] Mason J held:[15]
“But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v Dick:
‘as a general rule ... where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.’
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith C.J. said in Butt v McDonald:
‘It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.’"
[12] Heimann v The Commonwealth (1938) 38 SR (NSW) 691 at 695-6
[13]See the discussion at JW Carter, Contract Law in Australia (LexisNexis Australia, 7th ed, 2018) at [11-01], citing Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at [21] per French CJ, Bell and Keane JJ.
[14](1979) 144 CLR 596 (“Secured Income”)
[15]Ibid at 607 per Mason J (citations omitted)
90In this case, I am satisfied that a duty of co-operation is imposed on the defendants in relation to the implementation of clause 1(c) of the Settlement Deed, and the defendants did not suggest otherwise. The process of valuation and division cannot be done unless the defendants concur in doing it – by providing registration information, facilitating access to the vehicles as necessary to allow valuations and then working through a process of division with Mr Singh. If it were necessary to find additional support for the duty based on the intention of the parties as manifested in the Settlement Deed itself,[16] to my mind this is found in the parties’ use of the term “mutually” in clause 1(c).
[16]See Secured Income at 607-8 per Mason J, although to my mind this is unnecessary on the facts of this case.
91In relation to the implied term that the division of vehicles be completed within a reasonable time, the better view is that this too is a term implied at common law, where the defendant will bear the onus of proving that the term is not implied. This follows from Dixon J’s statement in Reid v Moreland Timber Co Pty Ltd:[17]
“An implication of a reasonable time when none is expressly limited is, in general, to be made unless there are indications to the contrary”.
[17] (1946) 73 CLR 1 at 13
92If it were necessary to so find despite my conclusion above, I am also satisfied that the term satisfies the test in Codelfa for implication, and thus agree with Mr Thomson in that regard. I also agree with Mr Thomson that a “reasonable time” in the context of the Settlement Deed would be up to 30 days. In my view, a reasonable businessperson in the position of the parties would expect that they would move with some expedition to complete all the steps necessary to facilitate Mr Singh’s withdrawal from the business, so the defendants were free to conduct the business as they saw fit and without regard to Mr Singh’s interests.
93In the case of the vehicles, it is reasonable to expect that the process of identification, valuation and division of the vehicles could and would be completed by about 2 July 2021, being the due date for the first payment by the defendants to Mr Singh.
94I turn finally to the question whether the time for performance under clause 1(c) had arrived by the time Mr Singh’s solicitors sent the letter of demand and commenced these proceedings. It follows from my findings above that I am satisfied that it had. But even if I am wrong about that, I consider that the defendants were already in breach of the clause. In my view, Mr Khanna’s email of 1 July 2021 purporting to “postpone” the Settlement Deed evinces an unwillingness to take any steps to progress the division of the vehicles within a reasonable time, or at all.
95Accordingly, subject to the defendants’ claim to a right to rescind the Settlement Deed discussed below, I am satisfied that the defendants breached clause 1(c) of the Settlement Deed by failing to co-operate with Mr Singh in the division of the vehicles contemplated by that clause within a reasonable time, or at all.
96In relation to rental, the defendants have not advanced any argument that clause 5(2) of the Settlement Deed does not operate in accordance with its terms. Thus, subject again to the rescission issue, the defendants were obliged by that clause to pay any rental earned on vehicles to be transferred and delivered to Mr Singh, pending that delivery. Had the parties co-operated in the division of the vehicles in the manner discussed above, it would have been relatively simple to then determine how much rental had been in fact earned on each those vehicles from 3 June 2021 up to the date of delivery.
97In my view, my findings above in relation to the defendants’ breaches of the duty to co-operate within a reasonable time in relation to the division of the vehicles, apply equally to their obligation to pay rental. They have failed to co-operate and they have failed to pay.
What is the quantum of the Mr Singh’s loss and damage?
98Where a plaintiff succeeds in establishing a breach of contract by the defendant, they are entitled to damages which, so far as money can do it, will place them in the same situation as if the contract had been performed.[18] Under the terms of the Settlement Deed, the $225,000 was payable in instalments, commencing with a payment of $112,500 on 2 July 2021, and then payments of $18,570 on the 2nd of each month thereafter, up to and including January 2022. Thus the full amount of $225,000 is now due and payable and, if he is otherwise successful in the proceeding, Mr Singh is entitled to judgment in that sum.
[18] Robinson v Harman (1848) 1 Ex 850 at 855 per Parke B
99Subject to the same qualification, Mr Singh is also entitled to interest at the rate fixed under s2 of the Penalty Interest Rates Act 1983, pursuant to s58 of the Supreme Court Act 1986, applying in this court by operation of s50 of the County Court Act 1958. The effect of s52 of the Supreme Court Act 1986 is that interest will accrue on each instalment, on and from the date when each was payable.
100The question of loss and damage in relation to the defendants’ breach of clauses 1(c) and 5(2), is much more difficult, essentially because of the paucity of evidence adduced by the plaintiff about:
(a) what vehicles were registered in the name of each of Royale Panels and IT Rental as at 3 June 2021;
(b) the value of those vehicles; and
(c) what rental was paid on those vehicles on and from 3 June 2021.
101As noted above, it seems to me it would have been a reasonably straightforward exercise for Mr Singh to have produced in evidence the VicRoads registration records for vehicles registered in the name of Royale Panels and IT Rental as at 3 June 2021. Indeed, it would be surprising if the parties were not able to have come up with a jointly agreed list of those vehicles. However, this was not done, possibly because the relevant records were not discovered by the defendants.[19] On the other hand, there is no suggestion that Mr Singh’s solicitors pressed for production of these records, and no call was made for them during the trial. Instead, Mr Singh sought to rely on the three lists of vehicles referred to above.
[19] See affidavit of documents of Deepak Khanna sworn 11 January 2022.
102In my view, the lists alone are not sufficient to prove that each of the vehicles listed were owned by Royale Panels or IT Rental. However, when considered with other evidence, there is to my mind a sufficient basis for drawing conclusions on at least a part of the loss suffered by Mr Singh as a result of the defendants’ breaches of clauses 1(c) and 5(2). More particularly, based on the IT Bank Statements showing rental paid on vehicles in or before June 2021 and Mr Singh’s evidence, I am satisfied that, as a minimum, a total of 17 vehicles were owned by Royale Panels or IT Rental as at 3 June 2021, namely:
(a) the Hyundai Accent and six 2015 Toyota Camrys in list one; and
(b) the Hyundai I30, six Toyota Camrys (one of which was a 2016 model), a Toyota Corolla, a Toyota Aurion and the 2018 Mercedes Benz in list two.
103The next matter is the value of those vehicles. In relation to the total of the seven 2015 and 2016 Toyota Camrys in lists one (VRNs 1RZ1YN, 1SD9NM, 1SD9NO, 1SD9NW, 1SD9NU, 1SD9OS) and list two (VRN 1SN1RO), Mr Singh’s evidence was to the effect that:
(a) at some point close to the end of the 2019-20 financial year IT Rental purchased three 2015 or 2016 Toyota Camry Hybrids of equal value, for a total of $60,000; and
(b) a few days later, IT Rental purchased a further six Toyota Camrys without gas conversion kits for a total of $70,000. According to Mr Singh, about $2,200 was paid per gas conversion kit, but he could not remember how much was paid for the labour for installation.
104In relation to the 2018 Mercedes Benz, when Mr Singh was asked in examination-in-chief how much was paid for this vehicle, Mr Singh’s replied: “I don’t 100 per cent remember but I think 60 [thousand]”.
105However, there is no evidence of value of any of the other vehicles that were probably in the possession of Royale Panels and IT Rental in June 2020 (that is, the vehicles with VRN 10H8MU, 1RZ4XM, 1DJ7WA, 1NR7WK, 1QK7O7, 1LD4MT, ZUV212, 1SH5FE and 1SN1NF). While I could infer that these had some value, ascribing a number to that value for the purposes of calculating damages would be pure speculation.
106Mr Khanna’s evidence was that he could not remember the model, make and the amount paid for vehicles purchased, but he did not contradict Mr Singh’s evidence on the price paid. Further, consistently with Mr Singh’s evidence, Mr Khanna agreed that cars were purchased in June 2020.
107On the question of rental, the evidence is similarly incomplete. It again comprises both high level oral evidence and limited documentary support, this time in the form of the IT Rental bank statements. Mr Singh’s oral evidence was as follows:
[27] (1989) 166 CLR 623
[28]Ibid at 647-8, per Brennan J
137It is equally well understood (although debates about terminology persist) that a breach of a term that is properly characterised as a “condition” (or a “fundamental term”) will confer on the promisee a common law right to terminate. Further, that right arises regardless of the seriousness of the breach (although, as discussed further below, often a term will be classified as a condition only if every breach is likely to be serious). Whether a term is a condition depends on the intention of the parties and is therefore a question of construction. A term is a condition if the parties have classified a term as such in the contract.
138Mr Bartzis referred in oral submissions to what he described as the “serious criteria”, but did not really grapple with how this informs the process of assessing a party’s entitlement to terminate for breach, as discussed in the leading authorities of Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Ltd[29] (“Hongkong Fir”) and Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd[30] (“Koompahtoo”). Instead, he discussed cases that were primarily concerned with considering whether a particular breach was a “material breach” within the meaning of an express term of the contract.[31]
[29] [1962] 2 QB 26
[30] (2007) 233 CLR 115
[31]That is, a term providing an express right to terminate for a “material breach”, for example, Elders Ltd v Knight Co Pty Ltd [2009] NSWSC 1462.
139Regardless, Mr Bartzis ultimately submitted in effect that the restraint clause was of central importance (at least to the defendants) and that the plaintiff breached the clause essentially on the day the Settlement Deed was signed, and again later during June 2021. He said that a repudiation discharged the defendants from their obligation to pay, and in this case the defendants terminated the Settlement Deed by Mr Khanna’s email of 1 July 2021, absolving the defendants of the obligation to pay on 2 July 2021. He referred in passing to the fact that there also had been no further performance by Mr Singh of his obligation to transfer his shares or resign his directorship, but does not rely on this as constituting a further breach.
140In his written submissions, Mr Thomson submitted that his client did not breach the restraint clause. He said that Mr Singh:
“[H]ad set his sights on purchasing a taxi business in Castlemaine, and was due to settle on that contract in the week that the first payment under the agreement was due. His brother was establishing his own taxi club and panel repair business in Coburg. The highest the evidence goes against him, if it is accepted, is that the plaintiff was helping out there one day, and may have encouraged Mr Nawaz to give some of his business to the brother.”
141After then making further submissions concerning the timing and effect of the evidence of Mr Nawaz, Mr Hussain and Mr Basra, Mr Thomson submitted that: “No serious breach of this restraint clause enough to warrant repudiation of the contract can be attributed to the plaintiff on this sketchy evidence”. He later added that the evidence of Mr Basra suggesting that Mr Singh may have been helping his brother set up the latter’s business while waiting to commence his own cannot be classed as a fundamental breach: “At most it might have been classed as a minor breach perhaps sounding in damages if any could be shown”.
142In oral submissions, Mr Thomson expanded on his submissions concerning the evidence of breach, focussing in particular on the fact that the conversations relied on by the defendants as evidencing breach largely occurred after the date of the defendants’ purported rescission of the Settlement Deed on 1 July 2021. Mr Thomson submitted that the timing of the conversations was doubtful and that once 2 July 2021 passes, Mr Singh’s conduct “is irrelevant”.
143Most notably, Mr Thomson submitted that, at worst, the evidence established no more than minor or technical breaches that in no way prejudiced the defendants’ businesses. He referred in this regard to Mr Nawaz’s evidence that he had retained the business with Mr Khanna and that this business had increased since last year. He concluded by submitting that there was no evidence that these alleged approaches by the plaintiff, if they did occur, bore any fruit whatsoever. I understood this to be an argument that the defendants suffered no loss as a result of Mr Singh’s conduct – so if the conduct does not amount to repudiation but a breach, the amount of damages that the defendants would be entitled to would be negligible.
144Before Mr Thomson left the issue of repudiation, I referred him to passages from Part VIII, chapter 34 of Carter on Contract[32] (“Carter”) discussing the breach of an intermediate term, as first articulated in Hongkong Fir. I noted that on one view the restraint clause in the agreement was a clause that was not clearly or expressly an essential term and could be breached in various ways, including in minor ways. If so, the focus moves from the construction of the clause to the effect of the breach as a whole and whether the event complained of deprived the defendants who had further undertakings to perform (namely, payment) of substantially the whole of the benefit of the agreement. Mr Thomson agreed that these principles applied and submitted in effect that the evidence in this case fell a long way short of establishing a breach of sufficient seriousness to justify termination.
[32] JW Carter, Contract Law in Australia (LexisNexis Australia, 7th ed, 2018) at [34-140]–[34-180]
145I noted at the conclusion of Mr Thomson’s submissions on this issue that I had read the passages from Carter partly to give Mr Bartzis the opportunity to deal with these matters in his reply submissions. Mr Bartzis later made the following submissions in reply:
(a) Mr Khanna had given evidence that he had experienced a decline in membership of the third defendant and a decline in business during June 2021 (although there are no documents in evidence to corroborate those facts); and
(b) in response to the points raised in Hongkong Fir, every case of this sort requires an analysis of the facts, “it requires an analysis of the consequences and the effects upon parties”, and here there were dropping numbers and Mr Khanna was losing memberships.
146The relevant section of Carter commences as follows (citations omitted):[33]
“Where a term is intermediate in character not every breach of the term will give rise to a right to terminate: the breach must be ‘sufficiently serious’ before the right will accrue to the promisee. Cases such as Cehave NV v Bremer Handelsgesellschaft mbH (The Hansa Nord) justify the general proposition that where an express term is found not to be a condition it will be presumed to be intermediate in character unless the parties have clearly expressed an intention that the term is a warranty. This is particularly true if the term is capable of being breached in various ways. Nevertheless, whether a term is intermediate in character depends on the construction of the contract. In the final analysis this must be decided by reference to the express or implied agreement of the parties.”
[33] Ibid at [34-140]
147The identification of whether a term can be breached in various ways as a key consideration in determining whether that term should be construed as a condition, is most often attributed to the decision in Hongkong Fir. The issue in that case was whether a failure to strictly comply with an obligation to ensure the ship was “in every way fitted for ordinary cargo service”, entitled the charterer to rescind the contract. In that case, Upjohn LJ held:[34]
“Why is this apparently basic and underlying condition of seaworthiness not, in fact, treated as a condition? It is for the simple reason that the seaworthiness clause is breached by the slightest failure to be fitted “in every way” for service… if a nail is missing from one of the timbers of a wooden vessel or if proper medical supplies or two anchors are not on board at the time of sailing, the owners are in breach of the seaworthiness stipulation. It is contrary to common sense to suppose that in such circumstances the parties contemplated that the charterer should at once be entitled to treat the contract at an end for such trifling breaches.”
[34] Hongkong Fir at 62-63
148Hongkong Fir was followed by the High Court in Koompahtoo, endorsing the trial judge’s approach in treating the relevant terms as “intermediate terms” of the kind considered in Hongkong Fir, and deciding that the breach of those terms was sufficiently serious to justify termination of the contract. The majority held that:[35]
“It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and… the commercial purpose it served, that determines whether a term is ‘essential’, so that any breach will justify termination.”
[35] Koompahtoo at [48] per Gleeson CJ, Gummow, Heydon and Crennan JJ
149And (emphasis added):[36]
“The focus of attention should be the contract, and the nature and seriousness of the breaches.”
[36] Hongkong Fir at [68]
150In Oaktech Pty Ltd v Legion Heights Pty Ltd,[37] Pagone AJA (with whom Redlich JA and Mandie AJA agreed), identified the adequacy of damages as another consideration, holding that:[38]
“Whether Oaktech had a right of termination by reason of non-compliance with the safety regulations depends upon the construction of the terms of the contract and whether the term is to be regarded as a fundamental condition. The adequacy of damages may be an indication that a term was not intended by the parties to be a condition. Similarly, the achievement of an unreasonable result by the construction of a term as a condition may point to an intention that the parties did not treat the term as a condition.”
[37] [2008] VSCA 145
[38] Ibid at [20]
151I accept that the restraint in clauses 1(d) and 2 of the Settlement Deed were important terms to the defendants, and that Mr Singh was aware of that importance. However, the Settlement Deed does not confer an express right on the defendants to terminate for any breach of the restraint, and nor is the restraint expressly classified as a condition of the Settlement Deed. Thus, whether the restraint operates as a condition (or a “fundamental term”) is a question of construction of the Settlement Deed as a whole.
152In my view, as a matter of construction, the restraint in clauses 1(d) and 2 of the Settlement Deed is not a condition. I accept that caution is required in relying on the recitals to aid construction.[39] But I am satisfied from my examination of the Settlement Deed as a whole that its recitals do in fact identify the key element of the Settlement Deed, at least from the defendants’ perspective. That key element is Mr Singh’s agreement to withdraw from further involvement in the business, so that the defendants could “continue the running of all businesses without [Mr Singh]”. The restraint is important, but it is ancillary to this element.
[39] See, for example, Avranik Pty Ltd v Lloyd [2013] VSCA 244 at [16(d)] per Osborne J.
153Further:
(a) it is self-evidently a term that was capable of being breached in a variety of ways; some trivial and some more substantive (as the evidence of breach discussed below demonstrates); and
(b) the nature of the breaches do not deprive the defendants of substantially the whole benefit of the contract (namely, the substantial benefit of Mr Singh’s withdrawal from the business, including his ongoing sharing of business earnings), and any loss from alleged competition by Mr Singh is clearly compensable by an award of damages.
154Therefore, I am satisfied that the restraint is properly characterised as an intermediate term. Of course the breach of an intermediate term can be of a degree of seriousness to justify a rescission – but the focus switches from the term to the alleged breaches. There are two potential breaches of the Settlement Deed by Mr Singh, on which the defendants rely to justify their purported recission on 1 July 2021. The first is Mr Singh’s call to Ms Ahmet following the execution of the Settlement Deed. The second is Mr Singh’s conduct with Mr Nawaz, Mr Basra and Mr Hussain.
155In my view, Mr Singh’s call to Ms Ahmet did not constitute a breach of the Settlement Deed – and nor to my mind did it evince an intention to breach. It was no more than an enquiry about the scope of the restraint and the extent to which it may preclude members of Mr Singh’s family from being involved in a competitive business. On one view, it can be argued that Mr Singh was seeking clarification to ensure that he did not breach the Settlement Deed. Regardless, I do not accept that it was in itself a breach or that in making the enquiry of Ms Ahmet, Mr Singh evinced an intention not to honour the restraint clause.
156Moving to the evidence or Mr Nawaz, Mr Hussain and Mr Basra, I accept the evidence of these witnesses in relation to the conversations that took place between them and Mr Singh following the execution of the Settlement Deed. Mr Singh’s evidence of these encounters was evasive and unconvincing.
157For example, in relation to Mr Nawaz, Mr Bartzis put to Mr Singh that he made follow-up calls to Mr Nawaz after he attended Mr Nawaz’s office, to which Mr Singh responded (emphasis added):
“I have called him for some time but not follow-up any conversation or anything. Maybe yes – because the problem is that day when I went to his – because he drive – send me a few messages because he need COC certificate of currency. I am not replying and I said contact office in Sunshine and then I went to his office and then he said Deepak said the like terminate you from there. You working for Deepak. I was very upset that day because I am not working over there. I am the owner of the business. I’m the business partner, so I was very upset, then I have discussion, but I don’t know what discussion I have.”
158In his re-examination, Mr Singh again denied offering Mr Nawaz insurance and requesting that he transfer to a new club, and also denied having any contact with Mr Nawaz after the date of the Settlement Deed. However, Mr Singh then admitted that Mr Nawaz continued to contact Mr Singh after the date of the Settlement Deed for a certificate of currency.
159In relation to conversations with Mr Hussain, when Mr Singh was first asked whether he knew of someone by the name of Ashiq Hussain from St Albans, Mr Singh responded “Yes, yes, sir”. Later, the following exchange took place:
“If we can turn to the third witness we intend to bring, Ashiq Hussain. We’ve established that you do [know] Ashiq Hussain from St Albans? --- Yes, sir, but there is few Ashiq. I don’t know [who] you’re talking about. Which Ashiq.
There’s a taxi owner, a taxi driver? --- Taxi owner then
In any event, I will put you a few facts and you’ll get to see him in person? --- Yes, no problems…
You’ll know who he is? --- Yes, sir.
Now, we put it to you that in July of 2021? --- I don’t know but yes.
July 2021? --- Sorry, you are correct, sir.
Let me complete this. In July 2021 you telephone Ashiq and you told him that you had just broken up with Gurmeet (sic) and that you are starting your own Taxi Club? --- No, sir.
And you told him to join in anytime? --- No, sir. So, you – please clarify. He’s that – who giving driving licence? That guy?
I really can’t say. He’ll be clarifying that for everybody?---Because - - -
But – well, in that case were there any Ashiq Hussains that you spoke to at that time? --- Sir, still there is few - - -
There was one of them and did you say these things to one of them? We’re saying we found one of them. Did you speak to all of them and say the same thing?---But I – no. I never promote any business. I never said anything to join. I don’t have any business.”
160In relation to his conversation with Mr Basra, Mr Singh was asked in cross-examination when the conversation occurred, to which Mr Singh said “July 2021”. When Mr Bartzis put to Mr Singh that Mr Basra “runs as a tower, he drove past the shop… as he does often. Is that right?”, Mr Singh responded: “Yes, he’s – I have discussion with him, yes, but I don’t know – I d[on’t] remember when”.
161Mr Singh was also inconsistent in his evidence regarding his knowledge of his brother’s businesses. In his cross-examination, it was put to Mr Singh that he was promoting his brother’s business to people who lived within the restraint area, Mr Singh responded: “No I don’t know about my brother[‘s] business… I know about my business”. However, in his re-examination, the following evidence was given by Mr Singh:
“So I think we gathered that your brother has opened a taxi club, is that correct? --- Yes, sir.
And have you had any involvement in that club? --- No, sir.
…
And he also apparently operates a, a smash repair business called KT Smash Repairs or something? --- Yes, yes sir.
Mr Bartzis referred to it as Mercier Street, Coburg, I think, is that right? --- Yes sir.
And have you had any, have you been working there or were you working there after 3 June? --- No sir
Or were you promoting that work, that business? --- No sir.”
162My impression of these answers was that Mr Singh knew that it was important to his case that he denied promoting or being part of any business in competition with the defendants. He was probably also aware that it was better for him if controversial conversations took place after 3 July 2021. Thus his answers on peripheral issues (such as whether conversations took place) tended to be more natural, but (understandably) vague and imprecise. However, his flat denials of any conduct that might amount to a breach seemed contrived and too certain.
163While my impressions of Mr Singh’s evidence generally is more equivocal, on these matters (even allowing for obvious language difficulties and the passage of time) I am satisfied that his answers were evasive and dissembling. In particular, I reject Mr Singh’s denials of the versions of events as described by each of Mr Nawaz, Mr Hussain and Mr Basra. In contrast, none of these witnesses appeared to have any motive to embellish or slant their versions of events. Indeed, their evidence suggested they had at least as much loyalty to Mr Singh as they did to Mr Khanna. They each presented as straightforward and truthful.
164Thus it remains for me to determine whether the conduct of Mr Singh as disclosed by the evidence of Mr Nawaz, Mr Hussain and Mr Basra (either singly or in combination) was sufficiently serious to justify the defendants’ termination of the Settlement Deed. In my judgment, it was not.
165Dealing first with Mr Singh’s dealings with Mr Nawaz, this occurred within the 10 kilometre restraint area and the 12 month restraint period. I am satisfied that it was an attempt to do business with and solicit clients of the defendants (clause 1(d)) and amounted to “promoting…a taxi club” (namely Mr Singh’s brother’s taxi club) (clause 2(1)(a)). It was therefore a breach of the restraint in the Settlement Deed. However, the evidence is that Mr Nawaz did not give any business to Mr Singh’s brother and his business with the Taxi Club has increased since that time.
166Although Mr Singh’s conduct as described by Mr Nawaz is troubling, it appears to be only a single instance of direct soliciting of a client of the defendant, and had no effect on the defendants’ business. In this regard, I discount Mr Khanna’s evidence that the defendants’ businesses generally has suffered since June 2021, for two reasons. First because (as discussed further below) Mr Khanna’s evidence generally was unreliable. And, second, because no attempt was made by the defendants to rely on any financial statements or other accounting evidence that might bear this out. Further, had there been any loss of business, this type of loss is routinely the subject of damages awards (which is also a factor reinforcing that the restraint in this case is an intermediate term).
167While a breach of this kind has the potential to deprive the defendants of a significant part of the benefit conferred under the Settlement Deed, I am satisfied that the circumstances of this particular breach was not sufficiently serious to justify termination of the Settlement Deed. Although not relevant to this finding, I note that it is consistent with Mr Khanna’s own instinctive response to the conduct. Assuming for present purposes this conduct informed (in whole or in part) Mr Khanna’s email of 1 July 2021, even he saw it as only leading to “postponement” of the Settlement Deed pending no further breach.
168In relation to Mr Hussain, those dealings also occurred within the restraint area and the restraint period, but I am unable to discern from Mr Hussain’s evidence any conduct that might amount to a breach of the restraint. At its highest, according to Mr Hussain, Mr Singh said no more than he had separated from Mr Khanna, he needed help and that he or some other person had started a business. In my view, none of that amounts to doing business with or otherwise soliciting clients or promoting a taxi club or panel shop.
169Further, the evidence falls a long way short of establishing as a fact that Mr Singh was participating in a competitive business in the restraint area. The reference to he or some other starting a business goes nowhere – Mr Singh could be referring to his own taxi club in Castlemaine or to his brother’s business, neither of which (by themselves) is a breach of the restraint.
170Turning finally to Mr Basra, it is arguable that Mr Singh’s conversation with Mr Basra amounted to an attempt to do business with a “supplier” of the defendants (namely, a business that supplied towing services to the defendants), in breach of clause 1(d). It is also arguable that helping his brother to set up a KT Smash Repairs is “being concerned” in a panel shop in breach of clause 2(1)(b). However, there is no evidence as to whether the nature of the help Mr Singh was giving his brother was sufficient to fall within the categories listed in that clause.
171In my view, any breach of the kind disclosed by the evidence of Mr Basra referred to above, provides a good example of a trivial breach and thus reinforces the finding that the restraint is not a condition or fundamental term of the Settlement Deed. Approaching a towing company that transports vehicles to the defendants’ repair shops (among many other customers) could have no discernible effect on the defendants’ business. It would, at its highest, ground a claim for nominal damages.
172There remains a question as to whether any of the conduct discussed above, or all of it taken together, evinces an unwillingness or inability on the part of Mr Singh to render substantial performance of the Settlement Deed.[40] In my view it does not. There is no discernible pattern in the conduct showing consistent or persistent attempts to take business from the defendants or otherwise undermine the advantages the defendants secured by Mr Singh’s departure.
[40] See, for example, Koompahtoo at [44].
173At most, Mr Singh’s conduct amounted to opportunistic attempts to maintain business relationships with contacts from his time with the defendants and, in one instance, secure some business for his brother. Those dealings were brief, uncoordinated and half-hearted. I am satisfied that they did not evince an unwillingness to render substantial performance of the Settlement Deed.
Is Mr Singh liable to Royale Panels or IT Rental for loans or unauthorised payments and, if so, in what sum?
174In their counterclaim, the defendants advance two claims. First, they allege that between November 2020 and March 2021, Mr Singh transferred a total of $33,705.70 from the IT Rental CBA account to himself in breach of authority. Second, they allege that Mr Singh transferred a total of $247,267.75 from the Royale Panels CBA account to himself by way of a loan, and that he had repaid only $80,000 of this sum. However, in evidence and closing submissions, the defendants appeared to abandon any claim based on lack of authority and instead alleged that the advances from both companies were loans to Mr Singh.
175The defendants’ case on the loans was premised on an allegation that Mr Singh was in need of funds to purchase a property or build a townhouse on an existing property but had been unable to raise bank finance. Mr Bartzis put to Mr Singh in cross-examination that this led him to approach Mr Khanna for a “shareholder loan”, in about August or September 2020, being around the time that IT Rental and Royale Panels had “recovered” about $450,000. Mr Singh denied that he had ever taken a loan from the business.
176Mr Khanna’s evidence about this was that in June or July 2020, “the company recovered some money” and Mr Khanna wanted to take his directors fees. According to Mr Khanna, at about the same time, Mr Singh knew from access to internet banking that there was money in the company and Mr Singh asked Mr Khanna for a loan to build a townhouse. Mr Khanna said that he would not agree to a loan of, say, $100,000 because Mr Khanna wanted to take his directors fees. However, he agreed that Mr Singh could take as a loan an equivalent sum to what Mr Khanna was taking as directors fees and the loan would not bear interest, but Mr Singh had to repay the loan before the end of the financial year (30 June 2021).
177Mr Khanna said that most of the loan funds were forwarded to Mr Singh in small amounts, as he (Mr Khanna) was taking his money, not in a lump sum. That is, when he took his director’s fees, an equivalent sum would be paid to Mr Singh as a loan. He said Mr Singh wanted a lump sum, but Mr Khanna refused. In cross-examination, Mr Khanna accepted that he made some of the payments to Mr Singh which he asserted were loan amounts. In relation to the eight payments of $10,000 made by Mr Singh in December 2020, Mr Khanna said that this was paid because the company needed money at this time, and he put pressure on Mr Singh to return some of the funds Mr Singh had borrowed. Thus, on Mr Khanna’s version of events, the $80,000 paid by Mr Singh in December 2020 was a part repayment of the loan to Mr Singh.
178Mr Singh’s evidence was that at no point did he borrow money from any of the defendants. According to Mr Singh, the payments to him that were said to be loans were in fact distributions of profit to Mr Singh as shareholder of the defendants, which were matched by equivalent payments to Mr Khanna. Further, as discussed above, Mr Singh said that the $80,000 loan was a loan by him to Royale Panels in December, and that the $60,000 later paid by Royale Panels to him were repayments of that loan, leaving $20,000 still owing to him.
179I have referred above to my reservations about aspects of Mr Singh’s evidence, but I have even greater concerns about the evidence of Mr Khanna, particularly in relation to the alleged loans. Mr Khanna and Mr Singh were at one time close friends and no doubt talked freely about their personal plans and how the defendants’ business might support these. However, the notion that Mr Singh would enter into an arrangement involving a loan advanced by the payment of small, piecemeal, varying amounts to fund the purchase of a property or construction of a townhouse, does not withstand scrutiny. Clearly no property purchase or major construction project could be undertaken with such sporadic and uncertain funding, particularly when (on the defendants’ case) Mr Singh was required to start making substantial repayments after less than six months.
180Further, and more importantly, Mr Khanna’s account is at odds with the objective circumstances of the relationship and dealings between Mr Khanna and Mr Singh, and the contemporaneous documents. Turning first to the relationship and dealings, it is clear on the evidence summarised at the commencement of these reasons that Mr Khanna and Mr Singh were in most respects on an equal footing in their role in the businesses of the defendants.
181Most relevantly, they were equal shareholders, and thus had equal rights to any distribution of the profits of the businesses. Having said this, it seems that they paid little regard to the formalities of profit distribution in the form of dividends, and instead made ad hoc but equal payments to themselves whenever sufficient funds where available. Further, they were each engaged full time in the activities of the businesses, were paid “wages” in equal amounts and they each had equal and apparently unfettered access to the defendants’ bank accounts.
182I accept that Mr Khanna being sole director of the three corporate entities supports a contrary view, but I am satisfied that this was more a factor of the history of the establishment of the business than a reflection of the day to day management during the relevant period. It was not in dispute that Mr Khanna formed the companies before Mr Singh became actively involved in the business. Given the friendship and close working relationship between the two at the time Mr Singh became joint owner of the business, it is not surprising that little attention was given to management formalities. I also note that Mr Singh’s appointment as president of the Taxi Club went some way to balancing the ledger in relation to formal management roles.
183Turning to the contemporaneous documents, Mr Khanna relied heavily on the Singh Loan Ledger as evidence of the alleged loans, pointing in particular to the title of the ledger, namely, “3214 - Loan Gurmeet”. However, this was no more than a label given to the ledger, apparently by the accountant Mr Ghuram. There was no evidence that Mr Singh played any role in the creation or maintaining of this ledger. Indeed, there is no evidence that he was even aware it existed. Presumably for this reason, there was no attempt by the defendants to rely on (or even refer to) s1305 of the Corporations Act 2000 (Cth) to provide an evidentiary basis for the Singh Loan Ledger. In particular, no evidence was led to establish that the ledger was (or purported to be) a book kept by Royale Panels under a requirement of that Act.
184Even if such evidence had been led, I would hold that any prima facie evidentiary status enjoyed by the Singh Loan Ledger was undermined by the inconsistencies in the defendants’ case. Notably, the defendants claim that the first loan advance by Royale Panels to Mr Singh was a transfer of $5,000 on 28 July 2020, recorded in the Singh Loan Ledger as “Transfer…Loan Gurmeet”. However, they do not claim numerous other transfers to Mr Singh of $5,000 shown in the Singh Loan Ledger in the preceding six months, which also include descriptions such as “Loan Gurmeet”. The defendants have failed to explain why most of the transfers on and after 28 July 2020 are loans, but the earlier payments are not.
185There are similar anomalies in the entries for the period after 28 July 2020. For example:
(a) the Singh Loan Ledger shows a transfer to Mr Singh on 15 October 2020 for $10,000, but only $5,000 is claimed in the counterclaim as a loan made on that date;
(b) the counterclaim claims a loan advance of $10,000 on 19 October 2020, but there is no entry in the Singh Loan Ledger for a transfer on that date; and
(c) there are several ATM withdrawals, smaller transfers and entry described as “Gurmeet Wages” shown in the Singh Loan Ledger that are not claimed as loan advances to Mr Singh.
186In my view, not only do these anomalies in the Singh Loan Ledger undermine the reliability of that document as evidence of loan advances to Mr Singh, they exemplify the broader incoherence of the defendants’ case on the loans. No real attempt has been made by the defendants (by Mr Khanna’s evidence or otherwise) to differentiate between transfers to Mr Singh that were apparently sums he was entitled to without recourse, and those claimed to constitute loans.
187The most likely explanation for this is that none of the transfers were intended to constitute loans to Mr Singh at the time they were made, in the same way that none of the equivalent payments to Mr Khanna were loans. Rather, in my view, Mr Khanna has seized upon the Singh Loan Ledger as a basis for avoiding the payment due by the defendants to Mr Singh under the Settlement Deed.
188There are two further contemporaneous documents that to my mind constitute even more compelling evidence against the existence of any loans to Mr Singh. The first is the draft deed dated 14 May 2021 and the second is the letter to Mr Singh dated 17 May 2021, both prepared in the weeks before the Settlement Deed was signed. In relation to the draft deed, clause 2 provides:
“[Royale Panels and the Club] will pay [Mr Singh] the gross sum of $220,000.00 for [Mr Singh’s] share in [Royale Panels]. The gross sum is derived from the settled amount following:
(i)$20,000.00 for a loan debt to the Company; and
(ii)$200,000.000, the agreed value for 40% share in the company.”
189Despite the clumsy drafting of this clause, I am satisfied that it accords with Mr Singh’s version of events in relation to the $80,000 loan. Namely, that he lent Royale Panels $80,000 during December 2020, $60,000 of this had been repaid by 4 May 2021, leaving $20,000 outstanding. Similarly, the unsigned letter of 17 May 2021 purporting to terminate Mr Singh’s employment with Royale Panels concludes:
“In consideration of your acknowledgement of receipt of this notice, the return of all property belonging to the Company, and upon execution of the Deed of Settlement, you will be paid your shareholding entitlements for the sum of $200,000 plus the outstanding loan of $20,000.”
190It clear that neither of these documents was prepared by or on behalf of Mr Singh. The draft deed incorporated a broadly worded restraint clause, which Mr Khanna was insisting on, and Mr Singh was resisting. Mr Singh is hardly likely to have given instructions to offer this in what is apparently the first draft of a proposed settlement deed. Further, a letter from Mr Singh’s solicitors to Mr Khanna dated 21 May 2021 commences (emphasis added) “We refer to the proposed Deed of Settlement and Release prepared by you and provided to our client”. Similarly, the letter of 17 May 2021 includes serious allegations about Mr Singh making unauthorised transactions, and unequivocally reads as a document prepared by Mr Khanna or on his instructions.
191It is therefore surprising that Mr Khanna denied all knowledge of the circumstances of the preparation of these documents. At first his answers sought to evade dealing with the direct question of whether he gave instructions for the preparation of the documents by focussing on irrelevant matters. In relation to the draft deed, he said: “So let’s look into it…It says my wife’s name”, harking back to his evidence-in-chief during which he asserted that he would not put his wife’s name in the document as a guarantor. In relation to the letter of 17 May 2021, his initial answers focussed on the fact that he did not give the letter to Mr Singh, not whether he had any part in its preparation. However, when pressed on both documents, he ultimately asserted that he knew nothing about either of them.
192I reject this evidence. It was not in dispute that both documents emanated from the defendants – their solicitors had sent them to the court and Mr Singh’s solicitors as a late addition to the court book. However, Mr Khanna was unable to offer any explanation as to how they came to exist or came to be in the possession of his solicitors. I do not accept that they would have been prepared by the defendants’ solicitors unprompted and without instructions. Further, for the reasons above, I would reject any suggestion that the documents were prepared on behalf of Mr Singh. Finally, Mr Khanna was generally an unimpressive witness, both on the issue of these documents and more generally. On the these documents, his answers were initially evasive and his later outright denials of all knowledge of the documents were overly certain, implausible and unconvincing.
193I accept that Mr Khanna may not have drafted the documents himself and they may not have been the subject of his final approval. However, I am satisfied despite Mr Khanna’s denials that they were at least prepared on his instructions. Most notably, it is clear that in May 2021, the defendants’ camp was proceeding on the basis that $20,000 was still owing to Mr Singh on the $80,000 loan. This is directly at odds with any suggestion that there was a loan of over $200,000 then owing by Mr Singh to the defendants.
194Finally on this issue, it is worth noting that it defies commercial common sense for Mr Khanna to cause the defendants to enter into a Settlement Deed obliging them to pay Mr Singh $225,000, without allowing for (or even referring to) an alleged outstanding debt of Mr Singh to the defendants in a similar amount. On the other hand, I accept that this proposition was not put to Mr Khanna in cross-examination, so he was not given the opportunity of offering any explanation for what would otherwise appear to be a crucial omission from the Settlement Deed.
195Given my doubts about the evidence of both Mr Singh and Mr Khanna on key issues, I have been concerned to avoid the pitfalls where competing versions of events both seem unpersuasive, as discussed by the Court of Appeal in Eumeralla Estate Pty Ltd v Chen.[41] However, that problem does not arise in relation to the alleged loan for two reasons. First, because I am satisfied based on the corroborating evidence and other matters described above that Mr Singh’s version is more plausible, and I accept it. Second, even if this were not so, the defendants bear the onus of proof in establishing the loan. As I have concluded that Mr Khanna’s account of the arrangement is unreliable and I reject it, the defendants have failed to discharge that onus.
[41] [2022] VSCA 78 at [52]-[54]
Is Mr Singh obliged to return vehicles to IT Panels?
196As discussed above, I am satisfied that Mr Singh is entitled to ownership and possession of the two vehicles currently in his possession, in pursuance of his entitlement under the Settlement Deed to half of the vehicles owned by the defendants.
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Certificate
I certify that these 67 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 13 October 2022
Dated: 13 October 2022
Lyn Nguyen
Associate to His Honour Judge Woodward
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