Surface to Air (Franchising) Pty Limited v Burns

[2010] NSWSC 999

CITATION:	Surface to Air (Franchising) Pty Limited v Burns [2010] NSWSC 999
HEARING DATE(S):	21, 22, 23, 24, 25 June and 17 August, 2010
JUDGMENT DATE :	27 September 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Lindgren AJ
DECISION:	1. The proceeding be dismissed. 2. The plaintiff pay the costs of the third and fourth defendants, except the costs of preparation of submissions. 3. Liberty to the third and fourth defendants to apply for an order that the costs referred to in (2) above be on the indemnity basis. 4. If the third and fourth defendants wish to exercise the liberty to apply, they must do so by filing and serving submissions in support of the order by 4 October 2010. 5. If the third and fourth defendants file and serve submissions in accordance with (4) above, the plaintiff must file and serve any submissions in reply within seven days after being served with those submissions.
CATCHWORDS:	PROPERTY - goodwill - CONTRACT - breach of fiduciary duty - alleged merger of two businesses of A & B - no contract concluded before the two businesses begin to be carried on as one by B with A's consent - agreement never reached as to proportionate interests in the consolidated business - B has discussion with C about selling the consolidated business to C - A warns B and C that no sale must take place without A's consent in the light of A's claim to have an interest in the business - and in view of the dispute between A and B as to the existence and extent of A's interest, C decides not to purchase - however, B, wishing to be relieved of the business, allows C to take over the running of it, provided C assumes liability for rental of all property used in the business - A accuses C of having purchased with knowledge of A's interest - C denies having purchased at all, but in any event offers to hand over the business to A - A does not take up the offer - A sues B who does not appear and whose whereabouts are not known, and C for having participated in B's wrongdoing. - HELD: A's claim not proved - no suffering of loss proved. Proceeding dismissed with costs.
LEGISLATION CITED:	Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth)
CATEGORY:	Principal judgment
TEXTS CITED:	Justinian's Institutes II. 1. 27,28
PARTIES:	Surface to Air (Franchising) Pty Limited (Plaintiff) Anthony Burns (First Defendant) Philomena Burns (Second Defendant) Combined Auto Logistics Pty Ltd (Third Defendant) Erol Ince (Fourth Defendant)
FILE NUMBER(S):	SC 258751 of 2009
COUNSEL:	P Barham (Plaintiff) No Appearance (First and Second Defendants) R Newell (Third and Fourth Defendants)
SOLICITORS:	Somerville & Co (Plaintiff) No Appearance (First and Second Defendants) C Muriniti & Associates (Third and Fourth Defendants)

67

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

LINDGREN AJ

MONDAY 27 SEPTEMBER 2010.

06/258751 SURFACE TO AIR (FRANCHISING) PTY LIMITED V ANTHONY BURNS & ORS

JUDGMENT

Introduction

1 The plaintiff, Surface to Air (Franchising) Pty Limited (STAF) claims to have been part owner with the first defendant Anthony Burns (Mr Burns) and the second defendant Philomena Burns (Mrs Burns) of a business which it alleges Mr and Mrs Burns sold in mid 2006 without STAF’s approval to the third defendant, Combined Auto Logistics Pty Ltd (CAL), a company of which the fourth defendant, Erol Ince (Mr Ince), is the sole member and director.

2 The business was that of an airport shuttle bus service called “Northside Shuttle”.

3 STAF’s case is that its alleged interest in the business arose out of a merger on and from April 2003 of STAF’s then business of “Northern Beaches Airport Shuttle” and Mr and Mrs Burns’s then business of “Northside Shuttle Bus”.

4 STAF claims that when the merger occurred, STAF and Mr and Mrs Burns became 50/50 owners of the merged consolidated business but that from 12 May 2005, and therefore by the time of the alleged sale by Mr and Mrs Burns to CAL, STAF’s interest was 42.5% while that of Mr and Mrs Burns was the remaining 57.5%. There is no written contract between STAF and Mr and Mrs Burns establishing STAF’s claimed interest in the consolidated business, whether the 50% or the 42.5%. Heads of Agreement were drafted but no document was ever concluded, let alone signed.

5 Prior to the alleged sale by Mr and Mrs Burns to CAL, STAF, through its solicitors Somerville & Co (Somervilles), gave notice to Mr Ince and his solicitors, L C Muriniti & Associates (Murinitis) that STAF claimed to be a part owner of the business and that Mr Ince dealt with Mr and Mrs Burns alone at his peril.

6 There is no contract of sale of the business from Mr and Mrs Burns to CAL either. CAL and Mr Ince (for convenience, I will refer simply to Mr Ince) deny there was any “sale”. Mr Ince concedes that from in or about August 2006, CAL carried on a business under the name “Northside Shuttle” from the address where Mr and Mrs Burns had carried on business under that name, namely, Unit 25A, 176 South Creek Road, Dee Why. Mr Ince says that what happened was that Mr and Mrs Burns wished to get out of the business and be relieved of its burdens, including the rental in respect of the premises and buses, and came to an arrangement with him that if he would take over the outgoings, he (or CAL) could carry on the business. Their case was therefore in effect that Mr and Mrs Burns abandoned the business and that at their invitation, Mr Ince had carried it on using the same name and premises.

7 In any event, Mr Ince says, when STAF pressed its claim he offered to hand the business over to STAF just as Mr and Mrs Burns had done to him.

8 Although served and called outside the courtroom, Mr and Mrs Burns did not appear at or participate in the hearing.

9 According to its further amended statement of claim, STAF seeks to recover damages and exemplary damages, apparently without discrimination, against all four defendants.

10 STAF’s causes of action against Mr and Mrs Burns are for breach of contract, engaging in misleading and deceptive conduct in contravention of s 42 of the Fair Trading Act 1987 (NSW) (FT Act), breach of trust, breach of fiduciary obligation, conspiracy with CAL and Mr Ince to injure STAF by unlawful means and to defraud STAF, failure to account for 42.5% of the proceeds of sale, and negligently selling the business for less than its value, said to be $250,000.

11 STAF’s causes of action against CAL and Mr Ince are for engaging in misleading conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (TP Act) (CAL) and s 42 of the FT Act (Mr Ince); s 75B TP Act conduct by Mr Ince; s 61 FT Act conduct by each of the defendants; dishonest assistance in breach of trust and breach of fiduciary duty by Mr and Mrs Burns; and conspiracy to injure STAF by unlawful means and to defraud STAF.

12 STAF pleads that all four defendants are jointly and severally liable in damages for conspiracy “and for unlawful interference with the business of [STAF]” (para 74.13).

13 A particular claim made again CAL and Mr Ince is that by reason of their dishonest assistance to Mr and Mrs Burns in the breach of trust and of fiduciary duty, by continuing with the alleged purchase and conducting the business and failing to account to STAF notwithstanding knowledge of STAF’s claim to be a part owner of the business, CAL and Mr Ince are liable to compensate STAF in equity and/or otherwise liable to pay equitable damages to STAF and are liable as a constructive trustee to account to STAF (para 74.9).

Facts

14 The following is a chronological outline of the main facts.

15 STAF is now a wholly owned subsidiary of Ultimate Media Group Pty Ltd (Ultimate Media Group) which holds all 1,000 shares on issue in STAF. At an earlier time in the company’s history, Dean William Fullbrook, to whom reference will be made below, had held 500 of the 1000 shares. It appears that the remaining 500 were held initially as to 250 by Mr Cope and 250 by Mr Mount, then later as to Mr Cope’s 250 by his wife Narelle Louise Cope (Mrs Cope) and as to Mr Mount’s 250 by his wife Anne Louise Mount (Mrs Mount) (see below).

16 On 22 February 1999 Mr and Mrs Burns registered the business name “Northside Shuttle” in respect of a business of “airport transfers”. The principal place of business was shown as 9 Birinta Street, Narraweena, NSW, 2099. That was the place of residence of Mr and Mrs Burns. Apparently they both began working in that business at that time.

17 STAF was incorporated on 29 June 2001under the name “Emajen Pty Ltd”. It changed its name to “Flightlink Shuttle Pty Ltd” on 26 July 2001, when it was “acquired” by Peter Norman Cope (Mr Cope) and Neil Norman Mount (Mr Mount), who are the driving force behind STAF.

18 Mr Cope and Mr Mount became directors of STAF on 3 July 2001. STAF adopted its present name some five months later on 5 December 2001 in the circumstances related below. Robert Edward Ash, Chartered Accountant (Mr Ash), became a director of STAF on 18 April 2003. All three directors gave evidence.

19 According to Mr Cope, in about July or August 2001, when it was called “Flightlink Shuttle Pty Ltd”, STAF established “from scratch” an airport shuttle bus business operating out of Chatswood to Sydney Airport, and leased buses for that purpose. He said that the name of that business was “Flightlink”. Mr Cope said that this business operated for only three or four months. The evidence relating to it was slender in the extreme. STAF’s income tax returns for the year 1 July 2001 to 30 June 2002, which were not lodged until November 2009, show that STAF suffered an operating loss in that year of $624 based on a gross income of $187,017 and expenses of $187,641.

20 Mr Mount’s version is different from that of Mr Cope. He says that he and Mr Cope or their wives were not in a business alone and that their first venture was a 50/50 arrangement in relation to a business of Dean Fullbrook that was run from the Central Coast that is referred to below. There was no contemporaneous documentary evidence that resolved the difference.

21 On 2 November 2001, Mrs Cope and Mrs Mount contracted in writing to purchase from Peter John Rixon and Janet Fay Rixon a business described as an “airport shuttle bus service” carried on under the name “Northern Beaches Airport Shuttle Bus” for $100,000. (In some places the business name “Northern Beaches Airport Shuttle” appears without the word “Bus”.) Mr Mount described the business as that of “transporting clients to and from Sydney’s Northern Beaches and Sydney Airport”. The price was allocated in the contract as to $80,000 for equipment and as to $20,000 for goodwill. Mrs Cope and Mrs Mount borrowed the purchase price from Bosnjak Investment Group Pty Ltd, a shareholder in Ultimate Media Group. The equipment purchased was described in the contract as a 1992 Toyota Coaster 18-seater van TV 2037; three Toyota Commuter 10-seater buses TV 1208, TV 3093 and TV 3270; and a luggage trailer. As well, a business telephone number 9913 9912 was to be transferred. Apparently the transaction was completed on 15 November 2001 (that was the date stated in the contract as the intended “Completion date”). The contrary was not suggested and I infer that Mrs Cope and Mrs Mount paid the purchase price of $100,000 to the Rixons on or about that date. The evidence concerning the number of buses was unclear. Mr Cope said that at the time of the purchase, the wives had two buses already so that with the four vehicles purchased from the Rixons, the number increased to six. He said that soon afterwards the six buses were “sold” and in their place four Volkswagens were “leased”. It will be noted that the amount paid by Mr Cope and Mrs Mount for goodwill, $20,000, was quite small.

22 A few days after completing the purchase from the Rixons, Mrs Cope and Mrs Mount entered into a written contract on 22 November 200, with Surface to Air (Central Coast) Pty Ltd (STACC) and its principal, Dean Fullbrook (Mr Fullbrook). This agreement recited that STACC carried on a business of transporting passengers by bus from the Central Coast and Newcastle to and from Sydney, Williamtown and Belmont Airports, and that Mrs Cope and Mrs Mount were arranging to acquire the Northern Beaches Airport Shuttle Bus business. The parties agreed to incorporate STAF which was to carry on a business of granting and managing franchises under which the franchisees would acquire the relevant buses. STACC was to operate a “call centre” which would take passenger bookings, plan pick-ups and drop-offs and otherwise manage the franchises. STACC was to transfer know-how and intellectual property to STAF. Mr Fullbrook guaranteed performance by STACC of its obligations.

23 According to the Agreement, the shares in STAF were to be held as to 500 by Mr Fullbrook and 250 by each of Mrs Cope and Mrs Mount. The directors of STAF were to be four in number: two appointed by STACC and two appointed by Mrs Cope and Mrs Mount. The initial directors were to be Mr Cope and Mr Mount representing their wives, and Mr Fullbrook and Donald King representing STACC. Mr Fullbrook was to be the chief executive officer of STAF.

24 The Agreement provided that Mrs Cope and Mrs Mount were to pay $75,000 to STAF as a subscription to share capital which was then to be paid by STAF to STACC as consideration for the transfer of intellectual property by STACC to STAF. STAF was also to pay STACC the first $50,000 of franchise payments received by way of a management fee. Mrs Cope and Mrs Mount were to transfer to STAF as soon as reasonably possible the goodwill (apparently worth $20,000) associated with the Northern Beaches Airport Shuttle Bus business which they had bought from the Rixons (cl 43). It was stated that the goodwill did not include the buses. This suggests that the buses were to continue to be owned by Mrs Cope and Mrs Mount (but see below). Clause 4.3 contemplated a formal transfer of goodwill but there is no evidence that this happened.

25 STACC undertook to manage the call centre 24 hours a day seven days a week, to schedule pick-ups and drop-offs to accord with airport arrival and departure times, to handle income and outgoings, to manage “the fleet of buses used in the … business”, to effect insurance and to carry out sales, marketing and promotional activities. For this work, STACC was to receive “10% of moneys received (excluding franchise fees and administration fees)”. The remaining 90% was to be paid 54% to the bus owner and 36% to STAF. This provision confirms an intention that STAF’s business would be that of a franchisor. STAF was to be entitled to 100% of all franchise and administration fees but there were none because the granting of franchises did not eventuate.

26 It will be recalled that it was on 4 December 2001, that STAF changed its name from Flightlink Shuttle Pty Ltd to its present name. No doubt the inclusion of the word “Franchising” reflected the Agreement with STACC of 22 November 2001.

27 The evidence touching the Agreement of 22 November 2001 between Mrs Cope and Mrs Mount and STACC is unsatisfactory. Some aspects of it were carried into effect. For example, on 4 December 2001, Flightlink Shuttle Pty Ltd was, by the change of name to STAF, appropriated to the Agreement, and Mr Fullbrook did become the chief executive officer of STAF. On the other hand all of the aspects relating to franchising were never realised.

28 The annual return of STAF dated 31 January 2002 showed its shareholders as Mr Fullbrook (500 shares) Mrs Cope (250 shares) and Mrs Mount (250 shares). It showed Mr Fullbrook and Mr Cope as the only two directors, and Mr Mount as the secretary.

29 According to para 6 of its Further Amended Statement of Claim (FASOC) in or about December 2001 STAF purchased a “Northern Beaches Airport Shuttle” business for $100,000. The evidence, however, is that it was Mrs Cope and Mrs Mount who purchased it for that price in November 2001. STAF claims to have acquired the business from Mrs Cope and Mrs Mount. The evidence relating to this alleged acquisition of the business by STAF is unsatisfactory. At that price? When and how was the price paid? What assets were transferred? Unlike the purchase by Mrs Cope and Mrs Mount from the Rixons, there is no written contract between Mrs Cope and Mrs Mount as vendors and STAF as purchaser. Nor is there evidence of an oral contract between them.

30 It may be suggested that it should be inferred from the issue of shares in STAF to Mrs Cope and Mrs Mount (see below) that the issue of those shares was consideration for the acquisition. I disagree. If a sale price had been fixed, it may be appropriate to infer that the issue price was that amount divided by the number of shares (500 in all to Mrs Cope and Mrs Mount). But how would the result be accommodated to the issue of 500 shares to Mr Fullbrook? Moreover, Mr Ash chose (retrospectively) to show the price as owed by STAF to Mrs Cope and Mrs Mount on loan account rather than as satisfied by the issue of shares (see [173] below).

31 In the unsatisfactory state of the evidence, I am not satisfied that title ever passed from Mrs Cope and Mrs Mount to STAF. Notwithstanding this, for convenience I will refer to STAF as if it somehow became the owner of the Northern Beaches Airport Shuttle Bus business, that is, the goodwill. On the evidence before the Court, the buses certainly did not pass from Mrs Cope and Mrs Mount to STAF.

32 Mr Mount asserts that “[f]rom 5 December 2001 STAF used the name, logo and telephone number of Surface to Air in relation to the Northern Beaches Airport Shuttle Bus business and it became part of the Surface to Air Business”. He did not explain what he meant by “became part of the Surface to Air Business”, or identify the name, logo or telephone number.

33 Mr Mount said that board meetings of STAF were attended by himself, Mr Cope and Mr Ash. Mr Cope said that he thought that STAF would have “broken even” financially during the fifteen months from 1 January 2002 to the end of March 2003. That evidence was challenged. STAF submits that the matter has no bearing on the case. I will refer to the matter of the profitability of STAF’s business later.

34 In late 2002 or early 2003 Mr Fullbrook suggested to Messrs Cope and Mount that Tony Burns might be interested in entering into a partnership with them. At that time Mr and Mrs Burns were conducting their airport shuttle business under the name “Northside Shuttle” from the downstairs section of their residence at 9 Birinta Street, Narraweena.

35 By a deed dated 12 January 2003, STACC and Mr Fullbrook transferred to STAF intellectual property, computer software, manuals and telephone numbers associated with the STAF business. They did so pursuant to their undertaking contained in the Agreement dated 22 November 2001 referred to at [22] above.

36 In February 2003, there were several conversations between Mr Mount, Mr Cope and Mr and Mrs Burns. They discussed a merger of the two businesses: the Northside Shuttle business of Mr and Mrs Burns and the Northern Beaches Airport Shuttle Bus business of STAF. Mr and Mrs Burns apparently reacted favourably to the proposal.

37 According to Mr Mount at a meeting on 27 February 2003 Mr Cope proposed that “after the merger both businesses be promoted for the first three to six months so we lose no customers within the initial period.” According to Mr Mount, Mrs Burns’s suggestion that the business be moved out of the Burns’s home in the first 12 months was agreed to. Mrs Burns expressed a preference for continuing to operate under the name of their existing business, “Northside Shuttle”, being a better-known name in the market than “Northern Beaches Airport Shuttle Bus”. At the end of the meeting, Mr Cope said, according to Mr Mount, that he would get Mr Ash “to start drawing up the necessary agreement and the paperwork”, explaining that Mr Ash did a lot of accounting work.

38 Mr Ash drafted a “Heads of Agreement” document between STAF and Mr and Mrs Burns on the instructions of one or other of Mr Cope or Mr Mount. He said that he prepared the draft in late March 2003 and that once there was agreement, STAF’s solicitor was to be instructed to prepare a contract. Mr Ash said that while he was confident that a copy of his draft was given to Mr and Mrs Burns, he could not recall who give it to them. He said that he was not involved in the negotiations with Mr and Mrs Burns. Moreover, he said that he had no discussion with them about the terms of the draft. He was also unaware of any communications between Mr Cope or Mr Mount or Mr and Mrs Burns about signing the document.

39 The first recital in the draft was that STAF operated a “business comprising a shuttle service from the Northern Beaches and North Shore regions of Sydney and regional airports”. CAL and Mr Ince submit, however, that there is no evidence that Mrs Cope and Mrs Mount had ever transferred to STAF the Northern Beaches Airport Shuttle Bus business that they had bought from the Rixons (or any business). I agree (see [29] – [31] above).

40 The second recital was that Mr and Mrs Burns operated a shuttle business from the northern suburbs of Sydney to Sydney and regional airports.

41 The draft Heads of Agreement provided that STAF and Mr and Mrs Burns (Mr and Mrs Burns were called “Northside” in the draft, no doubt because their business was called “Northside Shuttle”) were to transfer their respective businesses to “New Co” in exchange for an issue of shares in New Co, in each case representing 50% of its capital. Any difference in the value of vehicles transferred was to be contributed in cash by the party whose vehicles were less in value to New Co as working capital.

42 New Co was to own all of the assets of the respective businesses but just what these assets were not defined.

43 From the commencement date, which the parties hoped would be 1 April 2003, the revenues and operations of the two businesses were to be combined. Mr and Mrs Burns were to manage the combined business. For doing so they were to be remunerated. Clause 4.1 of the draft provided:

Such remuneration could be a % of the gross revenue from the joint venture operations.

44 The draft provided that STAF and Mr and Mrs Burns were to subscribe $2,000 each as share capital (total $4,000) which was to represent the working capital of New Co and would remain in New Co “during the term of the joint venture agreement”.

45 The parties agreed to enter into shareholders’ agreements which would restrict the terms on which they could “exit” New Co and would provide for a party wishing to leave to offer its shareholding for sale to the continuing party.

46 The draft Heads of Agreement never led to an executed Heads of Agreement document, let alone a contract more formal than a “Heads”. There is no evidence or suggestion that the terms of the Heads of Agreement were ever agreed to by Mr and Mrs Burns.

47 According to Mr Cope and Mr Mount, they met with Mr and Mrs Burns in late March 2003 (apparently on 26 March 2003) when agreement was reached that a “combined salary” of $90,000 should be paid to Mr and Mrs Burns for managing the combined business and that the name “Flightlink” was to be the name of the proposed company.

48 On 27 March 2003, Mr Cope requested Telstra to divert calls made to [phone], which was the business number of the Northern Beaches business, to [phone], which, I assume, was the number of Mr and Mrs Burns’s “Northside Shuttle” business. Telstra advised that the redirection work would be completed by 12.30 pm on 31 March 2003.

49 At the request of Mr Ash, on 28 March 2003 Mr and Mrs Burns signed an application to “BH Company Formations” to register a company to be called “Flightlink Holdings Pty Ltd”, forms of consent to act as directors of that proposed company, and applications for shares in it (100 shares each).

50 Flightlink Holdings Pty Ltd (Flightlink Holdings) was registered on 28 March 2003 with Messrs Mount, Cope and Burns and Mrs Burns as its four directors, Ultimate Media Group holding 200 shares and each of Mr and Mrs Burns holding 100 shares. It is clear that Flightlink Holdings was to fill the role of “New Co.” referred to in Mr Ash’s draft Heads of Agreement.

51 However, neither business was ever transferred to Flightlink Holdings, which, so far as the evidence reveals, never traded.

52 Notwithstanding this, on the following day, 29 March 2003, there was a breakfast meeting at the Deck 23 Restaurant at Dee Why attended by Mr and Mrs Burns, Mr Cope, Mr Mount and Mr Ash and the drivers of the Northern Beaches Airport Shuttle Bus business and the Northside Shuttle business, at which Mr Cope and Mr Burns explained to drivers how the new merged business would operate.

53 At a meeting on 31 March 2003, Mr Ash advised Mr Mount and Mrs Burns that it would be necessary for valuations of the two businesses to be obtained. This was clearly sound advice. Apart from anything else, there was the cash adjustment provision mentioned earlier. More importantly, the starting point for the merger was identification of the assets that STAF and Mr and Mrs Burns were to transfer to Flightlink Holdings and agreement on whether or not a 50/50 split did indeed reflect the values of those assets.

54 It is clear, however, that Mr Cope and Mr Mount were anxious, at the expense of first reaching agreement with Mr and Mrs Burns, that STAF’s business should be merged into that of Mr and Mrs Burns without delay and that Mr and Mrs Burns should take over the running of what was formerly STAF’s business.

55 Mr Cope and Mr Ash gave evidence of the aspects of the running of the business as from 1 April 2003, which STAF submits shows that there was a partnership or joint venture operating a single business from that date.

56 Following Mr Cope’s request to Telstra referred to above, the telephone calls were in fact redirected from 5.50 pm on 1 April 2003. It is from 1 April 2003 that STAF claims that it and Mr and Mrs Burns carried on the merged businesses known as “Northside Shuttle” as a single consolidated business pursuant to an agreement made in February and March 2003. I accept that on and from that date Mr and Mrs Burns managed, as merged with their own business, the Northern Beaches Airport Shuttle Bus business, from the downstairs part of their residence.

57 There were meetings of Messrs Cope, Mount and Burns and Mrs Burns at which aspects of the business were discussed. The meetings were usually held at the home of Mr and Mrs Burns or at a restaurant.

58 There was much evidence on which STAF relies from which it is submitted I should infer, not only that the two businesses were merged, but also that STAF had a 50% interest in the consolidated business. Although I accept that a merger of the two goodwills occurred because the two businesses were run as one, and that some, at least, of the expenses of the consolidated business were paid by Mr and Mrs Burns, apparently out of a single revenue stream, I do not accept that agreement was reached as to the proportionate interests of the contributors to the merger.

59 An illustration of the lack of clarity concerning the merger relates to the buses and trailers. Mr Mount’s affidavit states (para 28) that “[t]he buses and trailers were owned by Ultimate Outdoor Pty Ltd ACN 093 233 768 as it was known at that time”. He then lists seven vehicles and gives their number plates as follows:

a. XUD076

b. XUD077
c. XUD078
d. XUD079
e. M74442 (Dinkum Van Trailer Van)
f. M92555 (Impril)
g. M92564 (Impril)

Mr Mount states that the buses and trailers were “made available to the Combined Business”. Finally he states that “routine servicing” of the buses was paid for “by the Combined Business” while major repairs were paid for by STAF.

60 In summary, according to this evidence, the buses and trailers were, and continued to be, owned by Ultimate Outdoor Pty Ltd, were used in the consolidated business managed by Mr and Mrs Burns, and the repairs were paid for by the two payers mentioned above, neither of which was the owner of the buses and trailers. It must be recalled that the intended joint venture company, Flightlink Holdings, was never used as the trading entity. The most that can be said in relation to the buses and trailers is that they were made available by their owner, Ultimate Outdoor Pty Ltd, to be used in the consolidated business on the basis that Ultimate Outdoor Pty Ltd did not have to bear the cost of running them.

61 But was Ultimate Outdoor Pty Ltd the owner? At paras 41 to 45 of the same affidavit, Mr Mount stated:

41. I am a director Ultimate Media Group Pty Ltd ACN 121 580 747 (“Ultimate Media”) …
42. I was formerly a director of a company known from 7 June 2000 to 16 March 2004 as Ultimate Outdoor Pty Ltd ACN 093 233 768 and from 17 March 2004 to 3 January 2007 as Ultimate Media Group Pty Ltd ACN 093 233 768 but now known as Eye Study Pty Ltd ACN 093 233 768 (“Ultimate Outdoor”) …
43. Ultimate Outdoor provided vehicles to STAF for use in the Surface to Air Business.
44. In or about late 2006 or early 2007 two of Ultimate Outdoor’s businesses were sold to Ultimate Media. This included the vehicles that had previously been utilised by the Surface to Air Business and later by the Combined Business .
45. At no stage did I, or Ultimate Outdoor, authorise the transfer of the following vehicles to Tony Burns, Northside Shuttle or Errol Ince:
(a) M92564
(b) M92555
(c) M74442 [my emphasis]

The owner of the buses and trailers is now suggested to have become Ultimate Media Group. One thing is clear: on the affidavit evidence, the owner was not STAF, the plaintiff.

62 At a meeting on 6 August 2003, Messrs Cope and Mount agreed to a suggestion by Mr and Mrs Burns that in the forthcoming “Yellow Pages” they should not advertise using the separate business names “Northern Beaches Airport Shuttle” and “Northside Shuttle”, but “Northside Shuttle” alone. The reason that Mr and Mrs Burns gave was that passengers had by then come to realise that the same call centre, buses and drivers were involved, and that the same people were giving the prices.

63 By 14 August 2003 problems in the relationship with Mr and Mrs Burns were emerging. Mr and Mrs Burns apparently rescheduled appointments to see Mr Ash and Mr Burns had failed to keep two appointments with Mr Mount and to return phone calls. A letter of that date from Mr Mount to Mr and Mrs Burns read as follows:

Dear Tony and Phil
I write to advise of our concern re: your three recent rescheduling of appointments with Robert Ash, Tony’s failure to meet with me at two agreed times last week and your non response to our several phone calls this week.
This activity follows many confirmations by yourselves in previous weeks that the only thing to complete was to get your final accounts from your accountant so that we could agree on any adjustments required to reflect the equality of the merger . Then last week we hear innuendo of you being unsettled.
Tony/Phil, in all honesty we are presently fairly miffed by this irrational and questionable behaviour, as the results to date have been most positive, in Tony’s words “great”.
As our activities to date include ….
Agreement on terms (after your legal and accounting people’s advice);
Our meeting with drivers (Northside and STA) and you advising them of our merger and future prospects;
Our handing management over to you including control of all marketing of the merged business;
As part of our terms of agreement you are drawing a 90K per annum salary;
Trading off our name including introduction of Northside to STAF/Northern Beaches customers; and
Managing all moneys and accounts
We cannot allow this situation to continue. Tony/Phil by way of this notice I request that you either:
a) Meet with Robert Ash and fulfil your commitments; or
b) Discuss openly with us your concerns or issues.
Tony/Phil, Peter and I do empathise with your personal situation but we cannot allow this to interfere with your commitments. Hence, should we not hear from you we will, without any further notice take the appropriate legal actions.
Yours faithfully
Neil Mount
P.S. I have put our order x 2 Commuters on hold. [my emphasis]

64 On 20 August 2003, Cara Marasco, solicitors for Mr and Mrs Burns, replied to Mr Mount’s letter requesting numerous particulars of the allegations made in it.

65 Somervilles, representing STAF, replied on 28 August 2003 and wrote a follow up letter of 3 September 2003. In the second letter, Somervilles asserted that that firm’s clients had heard it suggested that Mr and Mrs Burns intended to sell the business, and advised them that in the circumstances, Somervilles’s clients opposed any sale.

66 On 23 September 2003, Cara Marasco responded making certain denials but in any event advising that they had advised Mr and Mrs Burns not to proceed with the sale and stating that if they did propose to do so, Cara Marasco would first advise Somervilles so that Somervilles would have the opportunity to protect any rights its clients might have.

67 Throughout this period, Mr and Mrs Burns were continuing to manage the business and to send notes from time to time to Messrs Cope and Mount on operational matters. They may have done so because they thought that Messrs Cope and Mount or persons or an entity or entities associated with them had some sort of proprietorial interest in the single business giving them a right to be consulted or because they thought they were “minding” STAF’s business in contemplation of a merger being concluded.

68 At a meeting on 14 October 2003 at the offices of Somervilles, it was agreed that Mr Ash should value both businesses and that to enable this to be done Mr Burns should furnish him with certain business and financial records, namely, run sheets, banking details, financial details for the preceding 12 months and details of motor vehicles and lease payments.

69 On 17 October 2003, Mr Ash wrote to Mr and Mrs Burns identifying the information that he required of them “in order to come up with the preliminary valuations of the businesses.” Mr Ash’s letter included the paragraph:

When I have completed the preliminary valuation I will arrange to meet with you and your accountant to go through the figures as well as all of the Surface to Air information.

70 On 7 November 2003, Messrs Cope, Mount and Burns signed an application as “Northside Shuttle” to lease new mini buses from Bill Buckle Toyota. In the form’s provision for a statement of the capacity in which they signed the words “Partners”, “Guarantors” and “Sole Trader” were all deleted leaving only the word “Directors” remaining. However, the name of the “Applicant” was left blank while “Northside Shuttle” was inserted against “Trading as:” In summary, in the result the three men signed as directors of an unnamed company that was trading as “Northside Shuttle”. There was no such company: the individuals, Mr and Mrs Burns, were carrying on “the business” under that name.

71 In early 2004 (apparently in January 2004) Mr Burns gave Mr Ash a “Profit and Loss Statement”. According to Mr Ash, he also gave him a Balance Sheet, but unlike the Profit and Loss Statement this is not exhibited to Mr Ash’s affidavit.

72 On 4 March 2004 there were discussions at a meeting attended by Messrs Cope, Mount, Burns, Ash and Mrs Burns of a summary report that Mr Ash had produced.

73 On 23 March 2004 Mr Burns sent to Mr Ash copies of minutes of a meeting of directors of Flightlink Holdings held on 4 March 2004 (perhaps the meeting referred to in the preceding paragraph) and a form of “driver contract”, each bearing annotations made by Mr Burns.

74 In August 2004 Mr Burns faxed to Mr Cope various draft “driver’s agreements” and a draft agreement for the sale of a bus on which he sought Mr Cope’s comments.

75 On 5 November 2004 Mr Ash wrote to Mr and Mrs Burns concerning the unresolved question of valuing the two businesses. Mr Ash referred to areas of difference between himself and the accountant for Mr and Mrs Burns, and expressed the hope that their having appointed a “new accountant” might present an opportunity to resolve the matter.

76 In December 2004 and early 2005 Mr and Mrs Burns were advised by “new accountants”, J D Clayton & Associates, Chartered Accountants, in their dealings with STAF. There was a meeting at Mr Clayton’s offices at Chatswood on 21 December 2004. On 25 February 2005 Mr Clayton wrote to Mr Ash on behalf of Mr and Mrs Burns offering $12,500 as a one-off payment if Mr Ash and those associated with him would “withdraw any claim of a share of this business going forward”. The reference was clearly to a single business and Mr Clayton was careful not to admit that STAF in fact had an interest in it.

77 Mr Ash, as Company Secretary, replied on STAF’s letterhead on 9 March 2005, rejecting the offer as inadequate and in fact offering to buy out Mr and Mrs Burns for the same price. The letter asserted that the parties were 50/50 owners of the combined business; stated that Mr and Mrs Burns had been conducting the business in the name of their own company, although they had signed documents enabling a new “holding company” to be incorporated (clearly a reference to Flightlink Holdings); and asked Mr Clayton to urge his clients to cooperate in completion of the restructuring. Apparently the accusation in relation to Mr and Mrs Burns having been conducting the business in the name of their own “company” was a reference to their having continued to trade under their business name “Northside Shuttle” (see [37] and [62] above).

78 Mr Ash wrote a reminder letter to Mr Clayton on 6 May 2005 and Mr Clayton proposed a meeting the following week.

79 STAF claims in its FASOC that from 12 May 2005 STAF owned a 42.5% beneficial interest in the business, while Mr and Mrs Burns owned the remaining 57.5% beneficial interest. According to Mr Cope, at a meeting attended by himself, Mr Ash and Mr Burns on that date he opened the discussion by stating:

As you know, the idea of today’s meeting is to try and agree the final shareholdings of our merged business. I know you believe your business was worth more than ours despite the similar turnovers before the mergers and I want to see if there isn’t a simple formula we can use to finally put this to bed.

Mr Cope says that he performed some calculations and secured the agreement of Mr Burns to them step by step leading to their final agreement to formalising the shareholding on a 42.5%/57.5% basis. Mr Cope said that this was subject to the agreement of Mr Mount and Mr Bosnjak. (Mr Ash says that Mr Mount also attended the meeting.) According to Mr Cope, Mr Burns said that he and his wife would probably consider the alternative of selling their share of the business to STAF for $100,000. As will appear below, I do not accept that the parties entered into a binding contractual arrangement on 12 May 2005 fixing the parties’ respective interests in the business.

80 On 16 May 2005, Mr Burns wrote to Messrs Cope, Mount and Ash referring to the discussions held on 12 May 2005 “regarding the combining of both businesses” and “the amalgamation and … the possible costs involved of pursuing a legal path to satisfy the amalgamation”. The letter also referred to “our share in the business” which Mr Burns and his wife offered to sell for $110,000 provided he and she were offered a “one-year work contract”. The letter spoke of the desirability of facilitating the sale “to enable us all to meet the new commencement date of 1/7/05”. The letter is ambiguous: the references to amalgamation suggest that amalgamation is yet to occur. The reference to a “share” in the business suggests that Mr and Mrs Burns were not the sole owners but were only part owners of the business. One thing is clear: as early as four days after the meeting on 12 May 2005, Mr Burns did not regard what had happened on that date as having concluded the terms of a merger.

81 In oral evidence, Mr Cope said he responded to Mr Burns by telephone advising that STAF was not keen to buy out Mr and Mrs Burns at that stage.

82 On 23 June 2005, Mr Burns emailed Messrs Cope and Mount stating “Phil and I are both happy to sell our shares so the previous proposition remains.” The reference to shares (in the plural) may have been a reference to the 200 shares held by Mr and Mrs Burns (100 each) in Flightlink Holdings, but the business had in fact not been transferred to that company. Perhaps, the “s” in “shares” was a mistake, and the intention was to refer in a general way to the Burnses’ share in the business.

83 On 4 July 2005, Mr Cope replied to Mr Burns advising that he and Mr Mount were not keen on the idea of continuing without having Mr and Mrs Burns as shareholders and that they doubted they could find “a manager that would do as good a job as you do”. Mr Cope proposed a sale of the entire business with the proceeds being divided 57.5%/42.5% “based on the calculation I promised to you at our meeting at our office on 12 May.” This email did not speak as if a 57.5%/42.5% split in proprietorial interests had been concluded on 12 May 2005.

84 On 17 July 2005, Mr Burns replied saying “we agree with your suggestions” and advising that he was working on finalising the accounts to the end of June 2005. He advised that once “the accountant” had inserted figures for depreciation, the accounts could be supplied to Mr Ash to facilitate preparation of sale documents.

85 On 18 October 2005 Mr Ash received the financial report for the year ended 30 June 2005 of “Northside Shuttle Services ABN 47 735 901 820” prepared by J D Clayton & Associates.

86 In early November 2005, Mr Cope requested from Mr Burns and received from him details of the amounts required to pay out the leases of the vehicles.

87 In November/December 2005, there was correspondence between Messrs Cope and Burns concerning the mode of sale of the business and the form of the advertisement of the proposed sale.

88 On 23 February 2006, Mr Burns wrote to Cara Marasco, solicitors, providing them with details of telephone numbers for the business, bus registration numbers, employees, and the lease of the office, to enable those solicitors “to complete the contracts for the sale of our business”. The word “our” is ambiguous: it could refer to Mr and Mrs Burns or to them and STAF. For reasons that will appear, it is unimportant which was meant. According to the letter, at that time a particular purchaser was in contemplation, but nothing came of this.

89 On 14 March 2006, there was a “meeting of directors” at which the question of the proposed sale was discussed. Apparently those present were Messrs Cope, Mount, Ash and Burns and Mrs Burns. The notes of the meeting are as follows:

1. Need to get latest turnover and profit figures including an indication of the proprietor’s earnings.

2. Need to prepare the business for sale with a clean structure by transferring the business of Northside Shuttle and Surface to Air to Flightlink Holdings Pty Ltd. The business still to be conduct as “Northside Shuttle”.

3. Transfer of the business name “Northside Shuttle” to Flightlink Holdings.

4. Execution of share issues as follows:

Tony Burns 2,775
Phil Burns 2,775
Ultimate Media 4,050

5. Transfer of accounting to Flightlink using the opening balances as per the financial statements at that date.

6. Commencement of the use of the ABN for Flightlink

ABN 43 104 241 634
TFN 804 034 734

7. Amend other corporate arrangements to reflect Flightlink entity.

8. Create website to improve the profile of the business.

9. Actively advertise the business in SMH and on the internet.

Paragraph 2 accepts that a single business of “Northside Shuttle” and “Surface to Air” was being carried on under the former name. The minutes show that much was yet to occur to complete aspects of the merger, in particular, the transfer to Flightlink Holdings and the issue of shares in that company.

90 On 16 March 2006, Mr Cope emailed Mr Ash asking him to send “the other share certificates and Flightlink information to Tony Burns at Northside”, and asking him to keep a record of his correspondence because “we don’t want him [Mr Burns] to start wandering off again”.

91 According to Mr Ince, he had discussions with Mr Burns in the first half of 2006 about buying the business. He said that relying on representations made by Mr Burns he thought that the business was worth $250,000.

92 On 17 May 2006 Mr Burns faxed to Mr Ince details of the leases from Westpac of six vehicles, identifying the vehicle numbers, lease numbers, expiry dates and monthly rentals. Three of the leases were to expire in December 2008, each with a monthly rental of $795.00, one was to expire in October 2009 with a monthly rental of $836.07 and one was to expire in November 2009 with a monthly rental $833.49. Details of the sixth lease are illegible. Mr Ince raised a complaint that Mr Burns had initially represented to him that all leases were due to expire in December of the current year (2006). It is also clear, however, that following this disclosure on 17 May 2006 of the true position, Mr Ince remained interested in buying the business for $250,000.

93 On 24 May 2006, Mr Burns (or Mr and Mrs Burns – the evidence is not clear), trading as “Northside Shuttle” entered into a contract with CIT Group (Australia) Ltd (CIT) for the rental of computers and telephone handsets. The term of the lease was 60 months and the monthly rental was $330.

94 On 7 June 2006, Mr Ince emailed Bruno Cara of Cara Marasco advising that CAL was buying the business as trustee for the Ince Family Trust, trading as “Northside Shuttle”. Mr Cara prepared a form of Agreement for Sale of Business (on the instructions of Mr and Mrs Burns) and forwarded it to Ultima Media Group. It showed the price as $250,000.00. Cara Marasco’s letter was careful not to admit that the addressee was entitled to approve the documents. On the contrary, the letter asserted that Mr and Mrs Burns no longer wished to run the business and intended to proceed to exchange contracts, and that Cara Marasco were simply inviting comments on the document. I accept that Mr and Mrs Burns were by then in fact anxious to be out of the business (see below).

95 On 7 and 8 June 2006, there was correspondence between Cara Marasco and Ask Australians Pty Ltd (ASK), the lessor of the business premises at Suite 25A, 176 South Creek Road, Dee Why concerning the termination of the lease of the premises to Mr Burns and the granting of a new lease to the purchaser. Cara Marasco forwarded to Mr Ince a copy of ASK’s letter setting out the terms on which a new lease would be available.

96 According to Mr Ince, it was in about mid June 2006 that he took over the running of the business. He was still living in Melbourne at that time working full-time in an accountant’s office there “doing tax returns”. As well, he was trying to complete an Accounting degree, with five subjects remaining to be passed. He said that Vic Mastroianni was his man on the ground at the business in Sydney, and that he (Mr Ince) would come up for visits to check on the business, staying at Mr Mastroianni’s house on those occasions.

97 On or about 13 June 2006 Mr Ince retained L C Muriniti & Co (Murinitis) to act for him and CAL on the purchase of the business and supplied Murinitis with the form of Agreement for Sale of Business that had been prepared by Cara Marasco. He instructed Murinitis that he was “taking over the liabilities” and had arranged for assignment of the lease of the vehicles. He also said that the purchaser would be CAL as trustee for the Ince Family Trust which would continue to trade as “Northside Shuttle”.

98 On 14 June 2006, Somervilles wrote to Cara Marasco asserting the interest of Somervilles’s clients in the business and asking for details of the purchaser’s solicitors. Somervilles’s letter included the following:

The draft agreement for sale of business enclosed with your letter is for the sale of a combined business, made up of the businesses operated by our respective clients prior to the merger in 2003.
At our meeting in October 2003, it was agreed that the respective interests of the parties in the combined business would be determined as follows. Mr Robert Ash was to value both businesses. Your clients’ accountant would then be entitled to vet such figures and, if no agreement was then reached, the matter would be determined by an independent valuer. Such valuations were prepared and, at a meeting on 12 May 2005, the parties agreed that their respective interests in the combined business would be 57.5% for your clients, and 42.5% for our client, based on the respective values of the businesses as at the merger date in 2003.
In order to allow the proposed sale to proceed, our client requires either a clear agreement to be made prior to such sale as to how the proceeds of sale are to be divided or, if such agreement cannot be reached prior to such sale, an undertaking to place the proceeds of such sale into trust, pending agreement or determination of the issue of the division of such proceeds.
In any event, our client requires that the only amounts to be paid out of the proceeds (prior to division between the parties) be genuine debts of the business as agreed in writing between the parties. Such debts will include monies paid by our client including payments for the formation of companies for the contract drivers. Such debts must be established upon the basis of proper records, reviewed by our client, with any dispute to be determined by an independent accountant.

99 On 25 or 26 June 2006 Mr Ince came up from Melbourne to confer with his solicitors, Murinitis, concerning the draft agreement for Sale of Business.

100 His visit led to Murinitis, on 27 June 2006, writing a detailed eight-page letter to Cara Marasco making requests for amendments or additions to the document. The letter does not suggest any disagreement with the price of $250,000. In oral evidence Mr Ince said that he intended to borrow from a bank but up to that time had not been able to make a loan application because he had difficulty getting in touch with Mr Burns to tie him down. Counsel for STAF draws attention to the references in the letter to “purchase” and “sale” and makes the valid point that at least as at the date of the letter, Mr Ince was still interested in purchasing. I agree, but nothing is shown to have come of this.

101 On 29 June 2006 Mr Somerville telephoned Mr Ince and told him, in effect, that he acted for someone who claimed to be a silent partner in the business. Cross-examined on whether, in the light of the evidence that he had now seen, he conceded that STAF was indeed a silent partner in the business, Mr Ince said that he did not.

102 On 29 June 2006, Mr Burns, as the Manager of Northside Shuttle, signed an “Order Agreement” with Website Expressions Pty Ltd (Website Expressions) regarding registration of the domain name “Northside Shuttle.com”. The “registrant” was shown as CAL. Four email addresses were given, in all of which “Northside” featured. The tax invoice from Website Expressions dated 29 June 2006 was addressed to Northside Shuttle for attention Erol Ince. It may be, however, that Mr Burns was responsible for the references to CAL and to Mr Ince.

103 At some stage Mr Ince signed a lease to himself from ASK of the business premises at Suite 25A, 176 South Creek Road, Dee Why. The lease ran for two years from 1 July 2006 to 30 June 2008 at a monthly rental of $1,397.98 with an option of renewal for a further term of two years. Mr Ince said he thought he signed the lease about mid-June 2006, and when his attention was drawn to the fact that Peter Schweinsberg of ASK had indicated in his letter of 8 June 2006 to Cara Marasco that he would be overseas from 12 June 2006 to 16 July 2006, Mr Ince firmed up on some date prior to 12 June 2006 as the date of his having signed the lease. Clearly he must have felt confident at that stage that he would be taking over the business on some basis or other.

104 On 3 July 2006, Somervilles wrote to Murinitis advising that STAF claimed to have an interest in the business of “Northside Shuttle” arising out of the merger, and warning against any attempt by CAL to take ownership without STAF’s agreement. Somervilles’s letter did not give details of the extent of STAF’s claimed interest and in fact said that the merger agreement had never been finalised. On the same date, according to Mr Cope, he telephoned Mr Burns who said that he would instruct his solicitor to place the proceeds of sale in a trust account. Mr Cope said that he told Mr Burns that there would have to be a written undertaking from the solicitor. Mr Cope made contemporaneous notes of the conversation which are in evidence.

105 On 5 July 2006, Cara Marasco wrote to Somervilles, again raising questions as to the evidence that STAF had an interest in the business. Cara Marasco asked Somervilles to identify which company (STAF or “Ultimate Outdoor”) was their client. Cara Marasco asked for copies of all documents supporting STAF’s contention. Of course, there were no documents to be produced.

106 On 10 July 2006, Mr Cope again spoke directly to Mr Burns who said he would contact his solicitors immediately to chase up the written undertaking. Again Mr Cope’s contemporaneous notes of the conversation are in evidence.

107 On 11 July 2006, Somervilles wrote to Murinitis advising that they were instructed that negotiations were taking place directly between STAF and Mr Burns “towards reaching agreement on the division of the proceeds of sale” and that in the meanwhile they were to be placed in a trust account. The idea of working towards reaching agreement on a division of the proceeds of sale is inconsistent with STAF’s case that an agreement of that kind had been made on 12 May 2005, let alone an agreement that fixed the parties’ respective interests in the business at those levels. The letter concluded by insisting that no steps be taken regarding the disposition of any interest in the business without notification to Somervilles.

108 On the same day Somervilles wrote to Cara Marasco asserting that it had been agreed directly between the clients (STAF and Mr and Mrs Burns) that the proceeds of sale would be held in trust “and then distributed between the parties based on the agreed values of the original 2 business, after deducting any debts of the business”. As an alternative, Somervilles advised that Somervilles could draft an agreement including “the relative percentage values of the businesses that were agreed last year” if this would help expedite the sale. Somervilles asked Cara Marasco to confirm the arrangement. Again, the letter hardly suggests that the parties’ proprietary interests in the business itself had already been conclusively fixed in the percentages mentioned.

109 On 13 July 2006, Cara Marasco replied to Somervilles advising that Mr Burns denied that there was any agreement as alleged by STAF or at all, and that Mr and Mrs Burns requested that future correspondence between the parties be conducted between their respective solicitors.

110 Notwithstanding this request, on 17 July 2006 Mr Cope telephoned Mr Burns’s mobile telephone number and a person called “Vic” answered and said that he was now the manager of the business. Mr Cope’s contemporaneous notes of the telephone call are in evidence. There seems to be no controversy that this person was Mr Ince’s friend, Hugo Victor Mastroianni. According to Mr Cope, Mr Mastroianni said that he was buying the business and did not know that Mr Burns had a “partner”.

111 On the same date, 17 July 2006, Mr Cope wrote to Mr Burns complaining that the latest letter from Cara Marasco showed that he was misleading either them or Messrs Cope and Mount over the question of an agreement for the division of the proceeds of sale. Mr Cope requested that Mr Burns telephone him to arrange a meeting to sort things out sensibly and to avoid legal proceedings.

112 On 18 July 2006, Murinitis wrote to Somervilles asking for details of the precise nature of STAF’s claimed interest in the business and the arrangements that might be concluded between STAF and Mr and Mrs Burns. Murinitis said that their client did not wish to be drawn into litigation between those parties. They also said that they would advise Mr Ince to proceed with the purchase only in circumstances in which there was no potential for that to occur.

113 Also on 18 July 2006, Somervilles sought from Cara Marasco an undertaking by Mr and Mrs Burns not to sell the business without STAF’s consent, and warned that if the undertaking was not given STAF would seek injunctive relief. Somervilles sent a copy of the letter to Murinitis. The letter to Murinitis stated:

We respectfully suggest that you provide careful advice to your client as to the consequences of entering into a purported purchase of the business, in view of our client’s entitlements to that business. We also respectfully suggest that you give careful consideration to the role of your firm in such transaction.

114 On the same date Murinitis advised Cara Marasco that Murinitis would recommend that Mr Ince not proceed with the purchase unless they were satisfied that he would not end up in litigation between STAF and Mr and Mrs Burns.

115 On the same date, Murinitis sent to Mr Ince a copy of Somervilles’s letter of 18 July to Murinitis and its enclosure and copies of Murinitis’s own letters of 18 July to Somervilles and Cara Marasco.

116 Finally, and still on 18 July 2006, Cara Marasco wrote to Somervilles advising that Mr and Mrs Burns undertook not to exchange contracts without giving STAF at least 24 hours’ notice. Apparently this undertaking was not breached because, according to the evidence, there never was an exchange of contracts between Mr and Mrs Burns and Mr Ince or CAL. My finding is that I am not satisfied on the evidence that Mr Ince or CAL purchased the business from Mr and Mrs Burns.

117 On 19 July 2006, Somervilles wrote to Cara Marasco advising that Somervilles would seek an injunction in the Supreme Court that afternoon. Cara Marasco replied on the same day proffering an undertaking that the business would not be sold without STAF’s consent.

118 On 20 July 2006, Cara Marasco wrote to Somervilles enclosing a copy of Murinitis’s letter to Cara Marasco dated 18 July 2006 and advised that in the light of that letter it appeared that the “sale” would not be proceeding. The letter stated that it followed that there were a number of issues requiring immediate attention “as regards the continued operation of the business.” No doubt this was a reference, inter alia, to the operation of the business without Mr and Mrs Burns. Cara Marasco suggested an urgent meeting between the parties and their lawyers. On the same date Cara Marasco forwarded copies of six letters covering the period 19 July 2006 to 20 July 2006 to Mr and Mrs Burns.

119 On 21 July 2006, Somervilles wrote to Cara Marasco suggesting an early meeting of the parties “to resolve outstanding issues”. The letter said that it was important to prepare a legally binding agreement to be signed by the parties at the meeting, covering the questions whether the sale was to proceed and if so how disputes as to the division of the proceeds should be resolved and what was to be done with the proceeds pending such resolution.

120 On 24 July 2006, Snap Printing invoiced Northside Shuttle for the printing of Northside Shuttle business cards bearing the names “Errol Ince” and “Vic Mastroianni”. The invoice was paid on that date. This shows that either CAL or Mr Ince was by then conducting the business or that Mr Ince was confident that that they soon would be.

121 A New South Wales Business Names Extract reveals that on 27 July 2006, “Anthony Burns” ceased carrying on the business of “Northside Shuttle” at 25A/176 South Creek Road, Dee Why, and that CAL of 64 Haldane Road, Niddrie, Victoria 3042 commenced to carry it on then at the same address. The same search shows that previously Mr Burns had carried on the business from 22 February 1999 to 27 July 2006 and that from 22 February 1999 to 25 October 2004, he had carried it on at 9 Birinta Street, Narraweena, NSW 2099 (the residential address of Mr and Mrs Burns). STAF claims that the date 27 July 2006 represents the date at which Mr and Mrs Burns ceased to carry on the consolidated business.

(b) Breach of fiduciary duty by Mr and Mrs Burns .

In submissions STAF complains that it was a breach of fiduciary duty for Mr and Mrs Burns to part with possession of the business. The reference to fiduciary duty is superfluous: see [226] above.

(c) Knowing assistance by CAL and Mr Ince in a dishonest and fraudulent design .

For the reasons given above, this claim fails. Mr Ince knew of STAF’s claim but to this day does not know whether STAF in fact had a proprietorial interest in the business. In any event neither he nor CAL is shown to have purchased the business.

(d) Unconscionable conduct .

STAF submits that both Mr and Mrs Burns and CAL and Mr Ince were in a position of strength or influence in relation to STAF. STAF’s submissions point to various facts such as that Mr and Mrs Burns were in possession of the business and that they and CAL and Mr Ince had solicitors representing them. As to the former, this is not the kind of special disability or disadvantage to which the doctrine of unconscionable conduct refers. In any event STAF did not attempt to re-take possession from Mr and Mrs Burns or even to enter the office to inspect records. Somervilles represented STAF. There are other problems with the claim of unconscionable conduct which I need not discuss.


(e) Section 52 of the Trade Practices Act 1974 / s 42 of the Fair Trading Act 1987

STAF’s submissions (paras 57 and 58) are unhelpful. In any event, the pleaded claims of misleading or deceptive conduct are subsumed in the claim of selling STAF’s proprietary interest without its consent and contrary to its warning.

(f) Accessorial liability: Section 75B of the Trade Practices Act 1974 / s 61 of the Fair Trading Act 1987 .

STAF’s strongest case is that Mr and Mrs Burns delivered up possession of (not “sold”) the business and therefore its proprietary interest in it, to CAL and Mr Ince who accepted that possession. I am not satisfied, however, that this caused loss to STAF. On the contrary, by keeping the business “alive” and offering to hand it back, CAL and Mr Ince enabled STAF to avoid any loss it might otherwise have suffered including the loss of any opportunity for future gain it might have foregone.

(g) Intentional and unjustifiable interference with trade or business: inducement of breach contract

CAL and Mr Ince did not have the required level of knowledge of the contractual relationship between STAF and Mr and Mrs Burns to support a finding of an intention to interfere with it.

(h) Intentional and unjustifiable interference with trade and commerce: unlawful means conspiracy

The required intention to injure is absent. CAL and Mr Ince did not accept and still do not accept that STAF was a “silent partner” with an interest in the business. They are not shown to have bought the business: they are shown to have taken over the running of it and the bearing of its outgoings.

(i) Passing off

STAF did not press this claim.

231 Reasons why all of the claims fail are that:

• it is not proved that the Northern Beaches Airport Shuttle Bus business bought by Mrs Cope and Mrs Mount from the Rixons ever passed to STAF;

• it is not shown what proportionate interest STAF had in the composite business; and

• the offer by Mr Ince to hand over the business to STAF means that STAF is not shown to have suffered any loss.

CONCLUSION

232 The proceeding should be dismissed and there should be an order that STAF pay the costs of CAL and Mr Ince, except the costs of the preparation of their written submissions.

233 In correspondence Murinitis threatened that that firm’s clients would seek indemnity costs. For this reason and only for this reason, I direct that if indemnity costs are to be sought, CAL and Mr Ince must file and serve submissions in support within seven days and STAF must file and serve submissions in response within seven days after they have received the written submissions of CAL and Mr Ince. I say nothing as to the likely prospects of success of any application for indemnity costs that may be made. If an application for indemnity costs is made but fails, the ordinary order would be that the unsuccessful party on that application must pay the costs of the other party of resisting the application.

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