Tafemo Pty Ltd v Acoustica Pty Ltd

[2024] NSWSC 844

Supreme Court

New South Wales

Medium Neutral Citation:

Tafemo Pty Ltd v Acoustica Pty Ltd [2024] NSWSC 844

Hearing dates:

29-30 April, 1, 3 May 2024

Date of orders:

11 July 2024

Decision date:

11 July 2024

Jurisdiction:

Equity

Before:

Meek J

Decision:

Findings for the plaintiffs. Parties to bring in short minutes of order and address costs.

Catchwords:

COMMERCIAL — Claim for monies due arising out of historic commercial arrangements — Between 1997 and April 2001 the parties negotiated a proposed merger of P1’s business into D’s business and employment of P2 (P1’s sole director) — An Income (Non-Capital) Redeemable Preference Share Agreement (“RPS Agreement”) and attached Employment Agreement were prepared by solicitors and arrangements proposed for a settlement and exchange of executed agreements in early April 2001 — D attended by its then sole director — Dispute regarding whether anyone on the part of the plaintiffs attended — P2 subsequently employed in D’s business — Part payments made by D referable to an initial $200,000 Redemption Amount over a 15 year period — Dispute as to whether D liable for non-payment of Redemption Amount in full, dividends during the redemption period and interest on dividend sum under the RPS Agreement — D disputes liability and claims alternative oral arrangements were made in November 2003 (“Oral Agreement”) and the parties conducted their business affairs on the basis of assumptions consistent with the Oral Agreement (“estoppel claim”) — D further asserts that the plaintiffs’ claims are statute barred (“limitation claim”) — Held plaintiffs’ claims succeed and defences rejected

EVIDENCE — Competence to give evidence — Witness in giving evidence exhibits a form of dysphasia — Whether witness competent to continue to be cross-examined

CONTRACTS — Exchange of counterparts — Issue regarding when parties intend to be bound by contractual arrangements

CORPORATIONS — Share capital — Classes of shares — Requirements for issuing redeemable preference shares

CORPORATIONS — Directors — Means of passing and recording of resolutions

ESTOPPEL — Conventional estoppel — No issue of principle

LIMITATION DEFENCES — Whether claim for breach of contract barred as being out of time by operation of s 14(1)(a) Limitation Act1969 (NSW) — Requirements for confirmation of cause of action under s 54 Limitation Act1969 (NSW)

WORDS AND PHRASES — Occam’s razor

Legislation Cited:

Business Names Act 1962 (NSW)

Companies Act 1981 (Cth)

Companies (Application of Laws) Act 1981 (NSW)

Companies (New South Wales) Code

Corporations Act 1989 (Cth)

Corporations Act2001 (Cth)

Corporations (New South Wales) Act 1990 (NSW)

Evidence Act1995 (NSW)

Limitation Act 1969 (NSW)

Cases Cited:

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61

Brown v Tasmania (2017) 261 CLR 328; [2017] HCA 43

Burnside v Harrison Marks Productions Ltd [1968] 1 WLR 782

Cenric Group v TWT Property Group [2018] NSWSC 1570

Churchill v Connolly [2004] NSWCA 212

Clayton v Clayton [2023] NSWSC 399

Eccles v Bryant and Pollock [1948] 1 Ch 93

ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; (2021) 388 ALR 128

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

In the matter of Inmart Investments Pty Ltd; In the matter of Marynen Manufacturing Pty Ltd [2023] NSWSC 1257

Junker v Hepburn [2010] NSWSC 88

Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72

MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119

Nagler v Volski(No 2) [2001] NSWSC 1106

Pet Tech Pty Ltd v Batson [2013] NSWSC 1954

Sheahan v Londish [2010] NSWCA 270

Sindel v Georgiou (1984) 154 CLR 661; [1984] HCA 58

Smith v Rynne [2005] NSWCA 77

Toole v Flexihire Pty Ltd (1991) 6 ACSR 455

Twigg v Twigg [2022] NSWCA 68; (2022) 402 ALR 119

White v Philips Electronics Australia Ltd (t/as Philips Healthcare) [2019] NSWCA 115

Texts Cited:

Ford, Austin & Ramsay’s Principles of Corporations Law (LexisNexis)

Macquarie Dictionary, online ed

Category:

Principal judgment

Parties:

Tafemo Pty Ltd (First Plaintiff)
Bela Takacs (Second Plaintiff)
Acoustica Pty Ltd (Defendant)

Representation:

Counsel:
D C Price (Plaintiffs)
D Hand (Defendant)

Solicitors:
Ian Roche Lawyers (Plaintiffs)
ClarkeKann Lawyers (Defendant)

File Number(s):

2021/240278

JUDGMENT

1. HIS HONOUR: This case bears the classical hallmarks of a simple commercial dispute, however it is complicated by the task of making findings regarding the critical events which occurred over two decades ago.

Introduction

2. The first plaintiff, Tafemo Pty Ltd (Tafemo), and the second plaintiff, Bela Takacs (Mr Takacs), who is the sole director and shareholder of Tafemo, sue the defendant, Acoustica Pty Ltd (Acoustica), to recover monies said to be owing pursuant to a written agreement dated 5 April 2001 (April 2001 Agreement).

3. The April 2001 Agreement is disputed by Acoustica. Acoustica acknowledges that its then sole director, Philippe Pierre Doneux (Mr Doneux), signed a form of the April 2001 Agreement. However, it denies that any form of the April 2001 Agreement was signed by Tafemo. Instead, Acoustica claims that in November 2003 it entered into an agreement on different terms with Tafemo, arising from discussions that it says took place between Mr Doneux and Mr Takacs around that time (November 2003 Agreement).

4. In the alternative, Acoustica claims that, should the Court find that the parties did enter into the April 2001 Agreement, the parties conducted their business affairs on the basis of assumptions consistent with the terms, which I will outline below, of the oral November 2003 Agreement (estoppel claim).

5. Further, Acoustica claims that the plaintiffs’ attempt to recover monies is statute barred.

6. In essence, the April 2001 Agreement has two aspects. First, it provides for a payment by Acoustica in consideration of the acquisition of plant and equipment from Tafemo. Secondly, it provides for the employment of Mr Takacs, and indeed other employees of Tafemo, at Acoustica.

7. The parties are agreed that a sum of $200,000 was to be paid by Acoustica to Tafemo and that that sum was not paid upfront. Rather, it was paid over time. The parties are agreed that there was an employment component to their respective arrangements. They dispute the precise terms of such employment, however there is no claim or counterclaim in the proceedings regarding the employment aspect of their arrangements.

8. In practical terms, the critical difference between the parties’ positions relates to the nature and extent of the obligations arising out of the $200,000 sum.

9. Tafemo alleges that Acoustica’s election not to pay the $200,000 sum upfront had the consequence that, under the terms of the April 2001 Agreement, Acoustica was required to allot and issue a redeemable preference share (RPS) to Tafemo and progressively pay the sum of $200,000 as part of a “redemption amount”. It asserts that, under the April 2001 Agreement, during the “redemption period” it was entitled to dividends (calculated by reference to Acoustica’s net profits) plus interest.

10. Meanwhile, Acoustica contends that, under the November 2003 Agreement, Tafemo agreed simply to accept the $200,000 sum without any rights to dividends and interest. Acoustica claims that it paid a final amount referable to the $200,000 in 2018, and it has no outstanding financial obligation to Tafemo.

11. The monetary difference between the two positions is a sum of approximately $1.4 million, being $1 million referable to the alleged dividend obligation (described in the evidence as the “Tafemo Dividend”) and an amount of interest on the Tafemo Dividend approximating at least $400,000.

12. I have determined that the plaintiffs’ claim is made out.

13. The document constituting the April 2001 Agreement is entitled “Income (Non-Capital) Redeemable Preference Share Agreement” and has 10 annexures. In the way the case was argued, the April 2001 Agreement was essentially divided into two aspects: the body of the agreement together with the first 9 of the 10 annexures (RPS Agreement); and the last annexure (Annexure H), which was a form of employment agreement between Acoustica and Mr Takacs (Employment Agreement). In litigating the matter, the parties distinguished between the RPS Agreement and the Employment Agreement for some purposes.

14. On the hearing, Mr Price of counsel appeared for the plaintiffs and Mr Hand of counsel appeared for Acoustica. Both counsel provided a written outline of submissions prior to the hearing and made oral closing submissions following the completion of evidence. I will cite the evidence in the proceedings by reference to the Court Book (CB), transcript pages and exhibit numbers, and cite the submissions by reference to Mr Price’s opening written submissions dated 24 April 2024 (POS) and closing written submissions dated 3 May 2024 (PCS), Mr Hand’s opening written submissions dated 26 April 2024 (DOS) and closing written submissions dated 3 May 2024 (DCS), and transcript pages.

15. Prior to the morning adjournment on the first day of the hearing, an application was made by Mr Hand on behalf of Acoustica to adjourn the hearing in order to afford it an opportunity to respond to “new evidence”, being the documents annexed to the POS. I refused that application for reasons which are evident from the transcript.

Parties

Mr Takacs and Tafemo

16. Mr Takacs was born in July 1934 in Budapest, Hungary. At the time of the hearing, he was aged 89.

17. In 1975, Mr Takacs appears to have commenced business as a sole trader: CB 100.

18. On 22 May 1985, Tafemo was registered as a company in New South Wales: CB 292.

19. Mr Takacs was appointed as a director on 19 June 1985 and appears to have been the initial sole director of the company: CB 294. As matters presently stand, Mr Takacs is the sole director and shareholder of Tafemo. An ASIC search discloses that there were a number of other shareholders and directors of Tafemo in the 1990s. Relevantly, an accountant, John Crow (Mr Crow), was appointed as a director of Tafemo on 12 August 1994 and continued to hold that position until 6 August 2012: CB 294. He appears to have been a shareholder of Tafemo for some period of time, both through a number of corporate entities and personally: CB 297-298.

20. Contemporaneously with Mr Takacs’ appointment as a director, Mr Crow was appointed as secretary of Tafemo: CB 295. He held that position until 6 August 2012. Mr Crow operated an accounting business, John C Crow Associates, which was appointed as auditor of Tafemo on 6 August 1994: CB 295.

21. Seemingly from March 1992 until July 2015, Tafemo had its principal place of business at a unit in York Road, Penrith: CB 294.

22. On 15 June 1995, Tafemo registered the business name “Polytak Plastic Industries” (Polytak): Exhibit D2. At the relevant times, Tafemo was involved in the manufacturing of plastics: see e.g. CB 38[9].

Acoustica

23. Acoustica is a noise control and acoustics specialist that provides soundproofing products and services to residential, commercial, marine and industrial sectors: CB 37[5].

24. Acoustica was registered as a company in New South Wales on 25 September 1986: CB 281. On 24 October 1986, Mr Doneux was appointed as one of Acoustica’s initial directors and Victor Burley was appointed as its initial secretary: CB 283, 284. Mr Doneux was born in Belgium in April 1948. At the time of the hearing, he was aged 76.

25. On 19 June 1991, Philip Allan Stevens (Mr Stevens) was appointed as a director and secretary of Acoustica for a period of approximately two weeks, ceasing on 1 July 1991. On that date (1 July 1991), Bruce William Robins was appointed as a director and secretary of Acoustica for a period of eight years, with his appointments ceasing on 3 November 1999: CB 283-284. Mr Doneux continued as sole director of Acoustica for the time being: CB 283.

26. The current directors of Acoustica are Mr Doneux and Daniel Ciric (Mr Ciric): CB 283. Mr Ciric commenced working with Acoustica in September 2009 as a manufacturing manager. In April 2017, he became the general manager and, on 21 November 2019, he was appointed as a director (specifically, the managing director): CB 50[4], 283.

27. According to an ASIC search, Acoustica’s principal place of business has varied over the years and has included locations at Surry Hills, Annandale and Glebe prior to 2001. According to Mr Ciric, Acoustica’s factory was initially located at Penrith, prior to being relocated to St Marys in May 2011: CB 50[10].

Initial relationship between the parties

28. In respect of the initial relationship between the parties, Mr Doneux gave the following evidence: CB 37-38[8]-[12].

1. He and Mr Takacs appear to have known each other since around 1985.

2. At that time, Mr Doneux was the general contracts manager for an Australian public company called “LNC”, which employed around 25,000 people. He was asked to develop an acoustic product and found a nearby plastics company, being Tafemo. Mr Doneux approached Tafemo to manufacture flexible acoustic materials.

3. Upon losing his job in 1986 when LNC sold its business, Mr Doneux set up Acoustica and came up with the idea of Tafemo manufacturing and supplying acoustic membranes to Acoustica. For that purpose, Tafemo had assembled a manufacturing line, which according to Mr Doneux was “primitive and looked like a Meccano set”, but nonetheless “did an okay job” for manufacturing the acoustic membranes.

4. A short time after Mr Doneux says that he was informed by Mr Takacs that Acoustica had become Tafemo’s principal client and represented around 70-75% of Tafemo’s turnover.

29. However, according to Mr Takacs, his first contact with Mr Doneux was in or about 1993 or 1994 via a person named Doug Collins at Central Venture Capital: CB 31[3(a)].

30. The difference between the affidavit evidence of Mr Doneux and Mr Takacs as to when they first met, or were in contact with one another, was not resolved by subsequent evidence in the proceedings. In the early part of Mr Takacs’ cross-examination, Mr Hand put to Mr Takacs, and Mr Takacs agreed, that as at April 2001 he had quite a long association with Mr Doneux: T 24.37-.43. Mr Hand did not at that point seek to identify whether their association dated from 1985-1986 or from 1993-1994. Likewise, in cross-examining Mr Doneux, Mr Price did not seek to resolve the conflict. In those circumstances, whilst acknowledging the conflict on the affidavit evidence, I do not propose to make any specific finding about the matter as I understand that neither counsel suggested that I should need to resolve it.

31. Either directly or through Polytak, Tafemo had been supplying Acoustica with insulating material for several years prior to 2001. At the commencement of his cross-examination, Mr Takacs indicated that as at April 2001 and in the years prior, a company referred to as “Pyrotek” was Tafemo’s most important client, not Acoustica: T 25.4-.8.

32. As at early 2001, Tafemo appears to have had at least three employees, consisting of Mr Takacs, Barry Hillard and Neil Everson: CB 100. At that time, it produced a number of products, including polyclay, tubing and an acoustic barrier: CB 101.

Is Mr Takacs a necessary party to the proceedings?

33. In its defence, Acoustica took issue with the joinder of Mr Takacs as second plaintiff in the proceedings: CB 16[2]. Mr Price addressed the point in the closing submissions, noting (correctly) that Mr Takacs is a party to the RPS Agreement: PCS [2]; see also CB 66. He submitted that joint parties to a contract must be joined to a proceeding for the proceeding to be properly constituted, citing Smith v Rynne [2005] NSWCA 77. However, I note that whether the RPS Agreement ought to be properly considered a joint contract was not the subject of any detailed submissions.

34. Mr Hand did not at any point in his opening or closing submissions specifically contend that Mr Takacs was inappropriately joined to the proceedings. In those circumstances, I do not understand the joinder issue in the defence to be pressed.

35. However, if I be incorrect regarding that, I reject the contention that Mr Takacs was inappropriately joined. The presumption is that a contract made by two or more persons is joint, express words being necessary to make it joint and several: Junker v Hepburn [2010] NSWSC 88 at [52] per Hammerschlag J (as his Honour then was); see also Pet Tech Pty Ltd v Batson [2013] NSWSC 1954 at [9] per Young AJ. While I need not determine whether there was a joint contract in this case, having regard to the fact that Mr Takacs was a party to the RPS Agreement, it was not inappropriate that he was joined as a plaintiff, since all necessary parties ought to be joined and bound by the action: see e.g. Churchill v Connolly [2004] NSWCA 212 at [31]-[33] per Young CJ in Eq (Beazley JA (as her Excellency then was) agreeing); Burnside v Harrison Marks Productions Ltd [1968] 1 WLR 782.

36. In any event, whilst I will await submissions in relation to costs, it is not immediately obvious how the joinder of Mr Takacs caused any significant increase or wastage of costs in the proceedings.

Issues

37. Regrettably, the parties were unable to agree on a list of real issues in dispute (as directed). Acoustica provided a marked up version of the list of issues provided by Tafemo. Subject to the following matters, the competing versions were not substantively different, the difference being one of form.

Substantive issues

38. The substantive issues are as follows.

1. Did the parties sign and exchange counterparts of the April 2001 Agreement on or about 5 April 2001, creating a binding written agreement between them on the terms of the document which is Exhibit P1 (written agreement issue)?

2. Did Mr Takacs and Mr Doneux have discussions in the Blue Mountains in or about November 2003 which created a binding oral agreement between Acoustica and Tafemo on the terms of paragraph 4(c)(i)-(iii) of the defence (oral agreement issue)?

3. In the event that there was no binding oral agreement in either case, did the parties nonetheless adopt a common assumption consistent with the matters set out in paragraph 4(c)(i)-(iii) of the defence so as to create a binding estoppel is between them (estoppel issue)?

4. Is Tafemo’s claim for recovery of money statute barred by s 14 of the Limitation Act 1969 (NSW) (Limitation Act) (limitation issue)?

5. What is the quantum of Tafemo’s loss (loss issue)?

Comment regarding the substantive issues

39. Acoustica listed as an issue: “whether or not Completion occurred on the Completion Date, as alleged in paragraph 6 of the Amended Statement of Claim”. Mr Hand clarified that there was no real issue that the completion date under the Exhibit P1 document was 5 April 2001. Rather, the contention is simply that no agreement was reached on 5 April 2001. That contention can be dealt with under what I have described as the written agreement issue.

40. Acoustica also listed as an issue: “whether or not the defendant allotted and issued a Redeemable Non-Capital Preference Share (with the rights set out in Annexure A to the alleged written agreement) to the first plaintiff, as alleged in paragraphs 5 and 7(b) of the Amended Statement of Claim”. As will be seen below, Mr Hand acknowledged that the plaintiffs sued on the April 2001 Agreement and their loss, if any, flowed from that agreement rather than from the document described as the “Income (Non-capital) Redeemable Preference Share Certificate”, being Exhibit P2 (Share Certificate).

41. Whilst Mr Hand maintained the position that Acoustica did not allot and issue any RPS by reference to the Share Certificate, he acknowledged that it may not, or rather did not, affect Tafemo’s damages claim, because Tafemo sues on the April 2001 Agreement and not on the “share”: T 168.42-.48.

42. Since Acoustica listed this matter as an issue and throughout the hearing Mr Hand made a number of submissions disputing that any such Share Certificate was properly issued, I will address the issue in these reasons.

39. In the parties’ respective proposed lists of issues, the estoppel issue was broken down into the following components: (a) whether the parties adopted an assumption as alleged in paragraph 5 of the defence; (b) whether each party knew or intended that the other would act on the basis of the assumption; and (c) whether the parties conducted their relationship on the basis of the assumption. Ultimately, it is not necessary for me to explore the last two components, as I have found that there was no assumption mutually adopted.

40. Whilst Acoustica disputes that it is liable to the plaintiffs for moneys owing, the calculations of loss and damage performed by Tafemo are not relevantly in dispute.

41. A number of the submissions focused upon the credibility and reliability of the evidence of the respective witnesses. Mr Price submitted that the evidence of Mr Takacs ought to be believed and Mr Hand submitted that the evidence of Mr Doneux ought to be believed.

42. As with most commercial disputes, a proper understanding of the chronology of events, in light of their context, is important: e.g. ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; (2021) 388 ALR 128 (ET-China.com) at [25], [28] per Bell P (as his Honour then was).

43. Given there was strong dispute regarding what occurred on 5 April 2001 and at the alleged meeting in the Blue Mountains in November 2003, each of the parties deployed various submissions on a number of factual issues connected with the 5 April 2001 meeting and subsequently, with a view to establishing that it was more probable than not that the events occurred as they each respectively contended.

44. Counsel accepted that evidence of the parties’ post-contractual conduct is admissible on the question of whether or not a contract was formed: e.g. DOS [10], citing Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25] per Heydon JA (as his Honour then was).

45. Having regard to the way in which the claim was argued, it is appropriate for me to address the particular matters raised as bearing upon the substantive issues. I deal with those below and make factual findings in respect of them.

Preliminary issues

50. The following issues attracted particular comment on the hearing and I will address them accordingly as preliminary issues, namely:

1. who retained Dibbs Barker Gosling?

2. what, if any, inferences should be drawn from the absence of evidence from certain potential witnesses?

51. Prior to dealing with these preliminary issues, it is appropriate to address fact-finding and witness credibility in respect of the three witnesses cross-examined.

Evidence, witness credibility and fact-finding

52. On the hearing of the matter, Tafemo relied upon three affidavits of Mr Takacs sworn respectively on 30 June 2022, 21 November 2022 and 15 April 2024.

53. Acoustica relied upon affidavits from Mr Doneux affirmed on 28 October 2022 and 12 April 2024 and from Mr Ciric affirmed on 12 July 2023 and 12 April 2024.

54. During the hearing, Acoustica also relied upon an affidavit of its solicitor Jimmy Gill, a partner of ClarkeKann, affirmed on 1 May 2024.

55. Having regard to the fact that the relevant agreements alleged by each side took place over two decades ago, establishing a reliable account of what occurred was challenging but nonetheless critical in the proceedings.

56. When the Court is asked to find facts in relation to disputed events which occurred many years ago, contemporaneous documents generally furnish the most reliable source of evidence as to what occurred or, at the very least, provide a generally reliable reference point from which to assess the reliability of witness testimony: ET-China.com at [25]. That statement is particularly significant in this case since, as I will refer to below, an issue arose in relation to Mr Takacs giving evidence and his answers during cross-examination which raised a question as to his then competence as a witness.

57. In the context of commercial disputes, Bell P stated the following in ET-China.com at [26]-[29]:

26. In Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] (Fox v Percy), Gleeson CJ, Gummow and Kirby JJ, having referred to increasing judicial awareness of scientific research that cast doubt on the ability to distinguish between truth and falsity in witness testimony from the mere appearance of the witness in the witness box, said:

“Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.”

27. Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose — though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” (emphasis added)

28. Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.

29. Context is critical for at least two reasons. Documents and events take their meaning from their context. The context in which events occurred may not necessarily be apparent to a court many years later when hearing a case. A clear understanding of context, both commercial and cultural, is also important where, as in the present case, some or all of the events under consideration occurred overseas and in settings that may differ from those usually dealt with in domestic litigation.

58. In closing oral submissions, Mr Price also referred to the passage in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 cited by his Honour.

59. In support of the plaintiffs’ version of events at the 5 April 2001 meeting, Mr Price advanced the proposition that in law, as in life, Occam’s razor is often the best approach, quoting Edelman J in Brown v Tasmania (2017) 261 CLR 328; [2017] HCA 43 at [490].

60. Occam’s razor is a problem-solving principle popularised by William of Occam (or “Ockham”) in the 14th century to the effect that, for any given problem, the simplest solution is usually the best. Applied to science (and perhaps more generally), the principle says that if there are competing explanations, the one that makes the fewest assumptions is to be preferred. The principle was described as a razor from the notion that it cuts theories back to their simplest form: see Macquarie Dictionary, online ed.

61. As indicated by Bell P in ET-China.com, in resolving commercial disputes involving events which occurred many years ago, it is helpful to have regard to contemporaneous documents. There were some documents adduced which provided some context to the lead up to the meeting scheduled to occur on 5 April 2001. However, overall there was a paucity of documents adduced which bore directly upon the critical events at the meeting on 5 April 2001 and the alleged meeting on 9 November 2003.

62. Other than the written form of the April 2001 Agreement, the Share Certificate and some creditor’s acknowledgements (which I will refer to below), no notes of the meeting or other documents evidencing the 5 April 2001 meeting were adduced. There were no documents bearing upon or referable to the meeting on 9 November 2003 said by Acoustica to give rise to the November 2003 Agreement.

Mr Takacs

Evidence in chief

63. Mr Takacs attended on the hearing and was confined to a wheelchair. When he was called to give evidence he had to be assisted into the witness box. That took some time and effort. In light of that, prior to the luncheon adjournment I raised for consideration by the legal representatives the possibility of Mr Takacs giving evidence whilst seated at the Bar table. Sensibly, the parties co-operated and upon resumption Mr Takacs continued to give evidence that way (seated at the Bar Table).

64. Mr Price adduced some evidence in chief from Mr Takacs to supplement some of the material that had been rejected from his affidavit evidence.

Cross-examination

65. Mr Hand cross-examined Mr Takacs. I should say immediately that he did so in a fair and appropriate manner, having regard to Mr Takacs’ age. My impression is that Mr Takacs attended to Mr Hand’s questions relatively well for a period of time, namely about 10 to 15 minutes. From that point, it became evident that Mr Takacs had difficulty recalling some material: T 28. The luncheon adjournment was taken and, on resumption, Mr Takacs was permitted to sit at the Bar table: T 30.

Dysphasia episode

66. Mr Takacs’ difficulty with his recollection persisted. He readily volunteered that he had had a couple of strokes and heart attacks and stated “unfortunately, my brain just doesn’t want to work very well, to be honest”: T 31.3-.5.

67. His cross-examination continued for a short period. Ultimately, Mr Hand suggested that Mr Takacs might take a short break. The exchange was as follows (T 36.4-.18):

Q. Then after that, there was a second meeting at the solicitor’s offices. Do you recall that?

A. No, sorry. No, I can’t. If there was, I don’t remember it - what I suppose with my memory, that doesn’t mean very much.

Q. In preparing your evidence in reply to Mr Doneux, you read his affidavit, didn’t you?

A. Yeah, yeah. But, look, I don’t want to be difficult. But with - so I have a bit of a difficulty in talking. I came up with a sort of a sign to my condition is that I say that words go into my brain, but sometimes words just don’t want to come out. So my understanding of the so many things, you know, like you’re saying this and I’m trying to correlate and relate things together. But sometimes I just can’t do it.

HAND: Your Honour, perhaps Mr Takacs might take a short break.

68. For his part, Mr Hand made the observation that Mr Takacs was rather distressed.

69. At that stage, my impression was that Mr Takacs was able to hear questions but had a form of dysphasia: T 39.

Competence issue

70. This episode led to some discussion as to whether Mr Takacs was competent within the meaning of s 13 of the Evidence Act1995 (NSW) (Evidence Act).

71. I raised the possibility of the matter being adjourned to give Mr Takacs an opportunity to be examined by an appropriate medical professional so that everyone, and in particular the Court, would be better informed as to his competence to give evidence within the meaning of s 13: T 39.

72. The hearing was adjourned for the balance of the day.

73. On the resumption of the hearing on the second day, Mr Price informed me that Mr Takacs had attended Sydney Hospital and was examined. Two certificates were ultimately tendered. The first certificate was a report of Dr Mark Roebuck dated 19 April 2024, which became Exhibit P3. It stated in part as follows:

This patient has many chronic medical problems which can impact on his ability to communicate in a stressful situation. Previous strokes have left him with a speech impediment which is exacerbated by stress and tiredness. He is wheelchair bound as a result of these issues too plus severed [sic] arthritis. He has very little endurance these days.

74. The second certificate was a medical letter from Dr Sophie Whiteson-Glass, a medical officer at Sydney Hospital and Sydney Eye Hospital, who had reviewed Mr Takacs the prior evening. That certificate became Exhibit P4. Dr Whiteson-Glass stated as follows:

I reviewed Mr Takacs today in Sydney Hospital Emergency Department, on the request of the court after an episode in court of abnormal symptoms.

Mr Takacs was affected by dizziness, speech impairment, right arm and leg weakness, while undergoing questioning as a witness in a case.

The described symptoms are in keeping with his prior episodes of stress-induced “phantom strokes” (as described by Mr Takacs), and on my review were almost completely resolved, other than a subjective description of reduced speech (not overtly noticable [sic] on my review but noted by the patient).

I have reviewed his GP letter, which seems to corroborate his evaluation of the event, although given the time of day I was unable to talk with his GP or specialists to confirm other prior investigations and events.

Provided Mr Takacs is completely asymptomatic from this event tomorrow, he should be suitable to resume as a witness. If there are any residual symptoms he will require further medical examination.

In addition, given that the symptoms are triggered by stressful events, I cannot guarantee that the symptoms will not return when he does resume as a witness, given the stressful nature of the situation.

75. Mr Price indicated that Mr Takacs wished to resume giving oral evidence. Mr Hand opposed the resumption of Mr Takacs giving evidence on the basis that Mr Takacs was not competent. In particular, Mr Hand sought an adjournment to enable an assessment to be made as to Mr Takacs’ competence by one of three proposed experts.

76. There was some discussion regarding that application, and I briefly adjourned to consider the matter.

77. After a period I was called back to court and informed by Mr Price that he had instructions to accept that Mr Takacs was not competent to continue being cross-examined: T 46.

78. In Clayton v Clayton [2023] NSWSC 399, I addressed competency to give evidence at [156]-[164] as follows:

156. A person is presumed to be competent to give evidence unless the contrary is shown: s 12 Evidence Act; R v Brooks (1998) 44 NSWLR 121.

157. A person is not competent to give evidence about a fact if, for any reason (including a mental, intellectual or physical disability), the person does not have the capacity:

1. to understand a question about the fact; or

2. to give an answer that can be understood to a question about the fact; and

3. that incapacity cannot be overcome: s 13 Evidence Act.

158. A lack of response per se or a nonresponsive answer to a question does not necessarily demonstrate a lack of understanding of the question nor inability to give up a comprehensible answer: The Recyclers (NSW) Pty Ltd v Ayoub [2016] NSWSC 144 (Ayoub) at [17]-[20] per Stevenson J.

159. The law distinguishes between competency to give sworn evidence or unsworn evidence and the provisions of s 13 Evidence Act address that distinction.

160. No party bears the onus of proving competence or lack of competence: R v Medich (No 40) [2018] NSWSC 374 (Medich) at [33] per Bellew J.

161. The issue is one for determination by the Court on the balance of probabilities: Medich at [33] and Ayoub at [24] both citing RA v R [2007] NSWCCA 251; (2007) 175 A Crim R 221 at [11] per Harrison J (McClellan CJ at CL and Howie J agreeing).

162. The fact that a witness suffers from a challenging mental condition may in any given circumstances be relevant or highly relevant to assessing competency. However, the mere fact that a witness has a mental health condition for example bipolar affective disorder or major depressive disorder does not necessarily preclude a finding of competency: Ayoub at [33]-[35].

163. Further, the fact that a person with any of those diagnoses might find answering questions in Court to be stressful or challenging does not per se preclude a finding of competency: Ayoub at [55].

164. Competency to give evidence may need to be monitored during the hearing and at times dealt with on a question-by-question basis: Ayoub at [55].

79. In determining the question of competency, the Court may inform itself as it thinks fit, including by obtaining information from a person who has relevant specialised knowledge based on the person’s training, study or experience: s 13(8) Evidence Act. Whilst a concession by counsel on behalf of a party that that party is not competent to continue to give evidence is a relevant consideration, I do not regard it as being necessarily determinative of the question of competence.

80. I consider that Mr Takacs’ presentation which led to the initial adjournment clearly demonstrated some abnormality in his giving of evidence. At the risk of being overly simplistic, his difficulty appeared to arise in the context of a stress inducement. I hasten to add that whilst it appeared that Mr Takacs was “rather distressed” (to use Mr Hand’s expression at T 36.28) in giving evidence, there was nothing about Mr Hand’s mode or expression of asking questions which I regarded as being in any way inappropriate. Indeed, it was Mr Hand himself who suggested that Mr Takacs be given a break.

81. Applying the provisions of s 13(1) of the Evidence Act, I considered that Mr Takacs’ capacity to understand a question was not so much of an issue. Rather, his capacity to give an answer, which requires some thought about the question followed by the formulation of words and the expression of those words, appeared to be the difficulty, compromised by giving evidence in a courtroom environment. I determined that the process of Mr Takacs actually being asked questions had become sufficiently stress inducing to raise a sufficient doubt as to his capacity to give an answer that could be understood to such questions: T 47. Because the process of Mr Takacs being asked questions was part of the stress inducement, his incapacity to give an understandable answer could not be overcome by allowing Mr Takacs to take a break or a number of breaks. Accordingly, I accepted that Mr Takacs had become incompetent to give further evidence within the meaning of s 13(1) of the Evidence Act.

Assessment of Mr Takacs’ evidence

82. Mr Hand submitted that there were “very significant and irreconcilable inconsistencies” in Mr Takacs’ evidence in respect of the meeting that occurred at the offices of Dibbs Barker Gosling on 5 April 2001: DCS [17]. I will address this meeting below.

83. However, as will be seen, I do not accept Mr Hand’s submission that Mr Takacs’ evidence in respect of the meeting was inconsistent.

84. I consider that Mr Takacs’ supplementary oral evidence in chief (T 19-24) and his initial cross-examination (T 24-27) was not obviously affected by stress and I am prepared to accept that evidence. I am not asserting that in any dogmatic or medically informed way.

85. It was only from about T 27 that Mr Takacs began to display at least some difficulties with recollection on his own admission.

86. Nonetheless, apart from the stress induced difficulty which led to my acceptance that Mr Takacs was no longer competent to give evidence, I am mindful of the caution, to which I have referred above, that ought to be had when relying on evidence as to the recollection of events which occurred several decades ago.

82. Mr Hand did not appear to assert that Mr Takacs had given any deliberately false evidence. Indeed, according to Mr Doneux, Mr Takacs is a trustworthy man. During Mr Doneux’s cross-examination regarding certain payments made to Tafemo and the amounts which were said to still be owing, he highlighted his trust of Mr Takacs in the following evidence (T 82.3-.23, my emphasis):

Q. Why is it that you felt the need that you had to ask Mr Takacs as to how much was owing under the agreement?

A. Because Mr Takacs was running himself all the payments. He was dealing directly with our account department. So he was running the top. So I didn’t know how much we paid, or – it was up to him. When he asked for some money towards the 200,000, I always trust Mr Takacs, and we never had any problem.

Q. Surely you had kept a record of what you were paying him?

A. Yeah, my accountant did, but I – I didn’t look at that, because I – I trust Mr Takacs. We always work together all right. They never had any problem.

Q. So because you received an answer of $34,000 from Mr Takacs, you paid that amount to him without checking, is that right?

A. That is correct because I believed him all along, over 20 years.

Q. So if Mr Takacs had included an interest component, then you would have paid it, correct?

A. I would have trusted him to say how much money he still owed to [sic], and I ask him point-blank, “Okay Bel, calculate how much I still owe you, and I’ll pay” as I always did.

88. Nonetheless, Mr Hand submitted that there were inconsistencies in Mr Takacs’ evidence about matters other than the 5 April 2001 meeting which should lead me to not accept his evidence. In this regard, Mr Hand submitted that he would have explored a number of matters in cross-examination if Mr Takacs had been competent, including: (a) Tafemo’s financial position as at 2000; (b) the terms of Mr Takacs’ employment; (c) the creditors’ acknowledgements; (d) the date on which Acoustica took over the business of Tafemo; (e) whether Acoustica took over the business name registration of Polytak; and (f) Mr Takacs’ failure to make a complaint about non-payment of the Tafemo Dividend.

89. Because Mr Hand did not have the opportunity to develop any cross-examination of Mr Takacs beyond that which I have indicated above, it is not possible for me to know how Mr Takacs would have responded to those matters.

90. However, based on the evidence that has been received, I am not persuaded that there are matters that might inflict any mortally wounding damage to the reliability of Mr Takacs’ evidence. I note the following.

91. First, it is not evident to me that a submission that Tafemo’s financial position was “in disarray” in 2000 necessarily means that Mr Takacs’ assertion that he attended the 5 April 2000 meeting is incorrect or that his evidence is unreliable: cf DCS [22(a)]. On one view, if Tafemo’s financial position was parlous, there would have been incentive for Mr Takacs to finalise an agreement rather than to have Tafemo struggle on in such an alleged parlous state without a finalised agreement.

92. Secondly, Mr Hand submitted there was inconsistency regarding the amount of Mr Takacs’ remuneration package. After referring to the gross salary of $60,000 (including tax and compulsory superannuation) stated item 1 of Sch 2 of the Employment Agreement (CB 124), Mr Hand submitted that the PAYG payment summary for the year ended 30 June 2002 (Exhibit P10 page 61) demonstrates that Mr Takacs’ salary arrangements were otherwise: DCS [22(b)(i)-(ii)]. I am not convinced that the PAYG payment summary for the year ended 30 June 2002, which shows a gross salary of $60,453 with tax withheld of $17,662, demonstrates otherwise. The payment summary does not reflect the tax year in which the April 2001 Agreement was purportedly entered (i.e. the year ended 30 June 2001). If anything, the fact that the gross salary listed on the payment summary for the following financial year is $60,453 seems to me to be broadly (if not precisely) consistent with what was contemplated under the Employment Agreement.

93. In addition, Mr Hand submitted that there was no obligation on the part of Acoustica to increase Mr Takacs’ salary, yet an increase did occur: DCS [22(b)(iii)]. The Employment Agreement contained a clause by which Mr Takacs acknowledged that Acoustica “is under no obligation to increase” his remuneration: CB 105 [cl 4.2]. However, the fact that (according to Acoustica) Mr Takacs’ salary was increased per se does not demonstrate that his evidence is inconsistent. The Employment Agreement did not preclude Acoustica from paying Mr Takacs more money.

94. Thirdly, as to the submissions regarding the creditors’ acknowledgements (DCS [22(c)]), I will address these specifically below as one of the matters said to bear upon the issues.

95. Fourthly, Mr Hand submitted that there were inconsistencies in Mr Takacs’ evidence about the date on which Acoustica took over “the business” of Tafemo, indicating that it was variously stated to be April 2001 and October 2000: DCS [22(d)]. However, I do not regard that evidence as being of great moment. Clearly, the April 2001 date relates to the date of the RPS Agreement. The October 2000 date is possibly explicable by reference to the effective date on which Mr Takacs was to be employed under the Employment Agreement (6 October 2000): CB 104.

96. Fifthly, as to the submissions regarding the taking over and cancellation of the Polytak business name (DCS [22(e)]), I will address these specifically below as one of the matters said to bear upon the issues.

97. Sixthly, Mr Takacs’ affidavit evidence of discussions with Mr Doneux about the payment of money owing under the April 2001 Agreement in October or November 2003 revealed that, according to Mr Takacs, Mr Doneux was the person who lacked money. Mr Takacs deposed that Mr Doneux had promised to pay him as much as he could, and Mr Takacs was seemingly resigned to the fact that “[t]hat is better than nothing”: CB 23[14]. That evidence (which I accept) is rational and it suffices to nullify Mr Hand’s submission that it makes “no sense, as a matter of human experience, that [Mr Takacs] would sit on his hands and not demand a payment of money to which he considered he was entitled for such a period of time”: DCS [24].

98. Overall, Mr Hand submitted that the Court should treat Mr Takacs’ evidence with great caution, such that the Court ought to attach no weight to Mr Takacs’ evidence unless it is corroborated by incontrovertible contemporaneous objective evidence: DCS [21]. I reject that submission.

Mr Doneux

99. Mr Doneux gave evidence via audio-visual link as he was located in Belgium. My assessment of his oral evidence is that there was no obvious indication from his presentation or answers which tended to suggest that he was being dishonest.

100. Even prior to Mr Doneux being called, Mr Price made a pre-emptive submission in his POS regarding Mr Doneux’s evidence. He submitted that, contrary to Mr Doneux’s affidavit evidence that Acoustica did not receive certain documents from Tafemo on or about 5 April 2001, there were certain documents (some of which were annexed to the POS) which had been provided to Acoustica. Those documents included a consent for Mr Takacs to be appointed as a director and three creditor’s acknowledgements. An extract recording Mr Takacs’ wages and a group certificate issued by Acoustica to Mr Takacs were also annexed to the POS. Mr Price submitted that it is inherently improbable that Acoustica would have employed Mr Takacs without entering into an agreement and, in the circumstances, the conclusion to be drawn is that Mr Doneux’s evidence is false: POS [8]-[12].

101. In closing submissions, Mr Price further submitted that Mr Doneux was not an honest witness: PCS [19]. In particular, he submitted as follows (at PCS [20]-[24]):

20. Mr Doneux would not make a concession in cross-examination unless he was faced with a document. In that regard, it was apparent he has placed great significance on the fact that a copy of the Agreement executed by Tafemo and Mr Takacs is not produced in these proceedings. See [T75.30-36]. Mr Doneux gave an equivalent answer in relation to the Employment Agreement [T72.10].

21. Mr Doneux acknowledged that he did not know what the word “counterparts” meant: [T75.38-39]; [T96.5-10]. His explanation of paragraph 51(a) of his affidavit affirmed 28.10.22 [CB 47] in response [T96.38] to the Court’s question at [T96.37] demonstrates that his evidence does not address the correct issue. Alternately, his affidavit was drafted by someone else he did not question what he signed.

22. The evidence given by Mr Doneux in re-examination concerning the documents at [Ex P10, pp 58, 59, 60] needs to be treated carefully. He initially deposed that he had not received an executed creditor’s acknowledgment at the meeting on 5 April 2001: P Doneux, 12.04.24, par 5(d) [CB 56].

23. In cross-examination at [73.44] he stated that he didn’t recall the documents and at [T73.49], Mr Doneux said that “they could have been part of the bundle when had to sign all the paper work. That’s something I’m not 100% sure. But I cannot remember all the pages when I sign the document with Steven” [T74.45-47]. His evidence to suggest that the first time he saw the documents was when they were shown to him by his lawyer, should not be accepted.

24. Mr Doneux was then emphatic that he had been shown the documents by his lawyer “a few weeks ago”: [T74.23], [T74.39], [T74.44]. In re-examination, after speaking to counsel for the defendant, he asserted that the first time he had seen the documents was on 26 April 2024. The affidavit affirmed by Mr Gill on 1 May 2024, demonstrated that Mr Doneux’s evidence at [T74] was wrong. As a consequence, it is apparent that Mr Doneux’s recollections are not reliable.

102. For his part, Mr Hand submitted that although Mr Doneux’s credibility was robustly challenged in cross-examination, he submitted that Mr Doneux was unshaken in his evidence and presented as a reliable witness who was doing his best to recollect the events of more than a quarter of a century ago: DCS [33].

103. For reasons that I articulate more particularly below, I reject Mr Doneux’s evidence on the critical matters of whether there was an exchange of counterparts at the 5 April 2001 meeting and in respect of the alleged November 2003 Agreement.

Mr Ciric

104. Mr Ciric was cross-examined. He had given affidavit evidence that he habitually carried a notebook with him as part of his work at Acoustica and stated that his usual practice was to make notes in the notebook during the meetings that he attended: CB 50[6].

105. Mr Price called for Mr Ciric’s notebook and two notebooks were produced. One was a green folder in which a booklet was held by a clamp, and the other was a smaller book with a blue leather cover: T 108.

106. Mr Ciric was asked a number of questions about those records: T 108. He accepted that the green folder was his original notebook and that he had (at least in part) copied verbatim notes from the green folder into the blue leather covered book. He further accepted that there were other notes in the blue book which he had handwritten which did not appear in the green folder. After a period of time, he had also ceased a practice of handwriting out the notes from the green folder into the blue book and decided to photocopy the notes from the green folder and stick those pages into the blue book. In that respect, Mr Ciric’s intent was that the blue book would become his primary source of notes and records. He ceased using the green folder towards the end of 2019. During 2020, he stopped regularly recording notes in the blue book and from that point onwards he has sporadically recorded notes: T 109.

107. Whilst Mr Ciric accepted the proposition that he endeavoured to ensure the notes which he made gave an accurate reflection of meetings he attended (T 109.9-.13), it was evident that Mr Ciric gave some evidence which was not reflected in his notes. I address this more particularly below in relation to the 29 May 2019 meeting.

108. I consider that Mr Ciric attempted to give evidence honestly and to the best of his recollection. However, there are some aspects of Mr Ciric’s affidavit and oral evidence which were not borne out by contemporaneous documents. This affected my assessment of his evidence, as I note below.

Conflicts between the evidence of Mr Takacs and Mr Doneux and fact-finding

109. For reasons which I outline below, I reject the evidence of Mr Doneux on a number of critical issues.

110. I am mindful of the particular limitations to assessing Mr Takacs’ evidence that arose consequent upon him becoming incompetent during his cross-examination. Nonetheless, I am satisfied that his initial evidence, in particular in relation to his attendance at the 5 April 2001 meeting, was truthful and, having regard to the matters I outline below, accords with the inherent probabilities of the matter.

Exchange of counterparts

111. Whilst there is dispute as to what occurred on 5 April 2001, the parties litigated the matter on the basis that the case advanced by Tafemo involved a binding agreement by means of an exchange of counterparts.

112. Mr Hand submitted that the parties’ proposed arrangement fell into the third category of Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72, being one in which the intention of the parties was not to make a concluded bargain at all, unless and until they execute a formal contract: DOS [6].

113. The April 2001 Agreement made provision for the contract to be executed by means of counterparts, but did not mandate exchange of counterparts: CB 74 [cl 17.7].

114. Sometimes in corporate deals or conveyancing transactions, the parties all sign a single document which forms the original agreement (of which copies may be made for each party to take away). In other cases, the agreement may be signed in counterparts such that each party signs a version of the final agreement which is then exchanged with the other party, resulting in each party holding a version of the final agreement signed by the other party.

115. When there is a form of physical exchange of agreements signed by each party, customarily the intention of the parties is that they do not contemplate the coming into existence of a binding contract before the exchange takes place. The exchange is said to be “the crucial and vital fact which brings the contract into existence”: Sindel v Georgiou (1984) 154 CLR 661 at 666; [1984] HCA 58 (Sindel), citing Eccles v Bryant and Pollock [1948] 1 Ch 93 at 99 per Lord Greene MR. The ceremony of exchange constitutes a mutual acknowledgement that the bargain has been struck: Sindel at 666.

The competing agreements

The April 2001 Agreement

116. The document constituting the April 2001 Agreement is approximately 50 pages in length. Leaving aside the cover sheet, the body of the agreement is 10 pages in length. There are 10 annexures as follows: A – Terms of Redeemable Non-Capital Preference Share; A1 – Dictionary; B – Tafemo Warrantees; B1 – Acoustica Warranties; C – List of Plant and Equipment Items; D – Accounts; E – (Tafemo) Employee Details; F – Product List; G – Creditor’s Acknowledgement form; and H – Employment Agreement (as between Acoustica and Mr Takacs).

117. The original of the April 2001 Agreement was tendered on the hearing through Mr Takacs and became Exhibit P1. A copy of the April 2001 Agreement appears at CB 65-112.

118. The RPS Agreement (both in Exhibit P1 at page 10 and the copy at CB 75) is signed by Mr Doneux and his signature is witnessed by Steven Maarbani (Mr Maarbani). Mr Maarbani was a solicitor at the firm Dibbs Barker Gosling.

119. The Employment Agreement (specifically, the document forming Annexure H to the RPS Agreement) has not been separately signed by or on behalf of Acoustica: Exhibit P1 at page 35; CB 110. The evidence leaves unexplained why that is the case. Nonetheless, it may be that, because the Employment Agreement is an annexure to the RPS Agreement, those present at the signing considered it sufficient for the RPS Agreement to be signed on behalf of Acoustica.

120. The footers of the April 2001 Agreement and Share Certificate indicate that Mr Maarbani was either the initial author of those documents or at least had some involvement in their preparation.

121. The recitals to the April 2001 Agreement are as follows:

A. Tafemo is the owner of the Business;

B. Tafemo and Acoustica propose to merge their businesses into Acoustica;

C. Acoustica has agreed to acquire from Tafemo its Plant and Equipment;

D. Acoustica may not be able to pay for the Plant and Equipment on completion and until it does so the terms relating to a Redeemable Non Capital Preference Share in Acoustica apply.

122. Relevantly, the “purchase price” provides for two scenarios, requiring Acoustica to either pay a sum of $200,000 for what is described as “the Plant and Equipment” (set out in Annexure C) or allot and issue to Tafemo the RPS: CB 66 [cl 2].

123. The Agreement provided for completion to take place at the offices of Dibbs Barker Gosling: CB 66 [cl 3.1].

124. On completion:

1. Acoustica was obliged to either pay the $200,000 for the plant and equipment or allot and issue to Tafemo the RPS, and appoint Mr Takacs as a director of Acoustica: CB 66-67 [cl 3.2(a)];

2. Tafemo was obliged to deliver certain documents to Acoustica: CB 67 [cl 3.2(b)]; and

3. Mr Takacs was obliged to enter into the Employment Agreement: CB 67 [cl 3.2(c)].

125. Clause 17 of the April 2001 Agreement contains several general provisions which bear upon the matter, namely that:

1. the parties may only amend the Agreement if all parties sign the written amendment: CB 73 [cl 17.2];

2. the parties may execute the Agreement in one or more counterparts and all counterparts together constitute one instrument: CB 74 [cl 17.7]; and

3. the Agreement constitutes the entire agreement of the parties and supersedes all prior discussions, undertakings and agreements: CB 74 [cl 17.11].

126. Although the April 2001 Agreement provides that Acoustica will either pay the sum of $200,000 for the plant and equipment or issue and allot the RPS, the events leading up and subsequent to the agreement are entirely suggestive that none of the parties were expecting that the sum of $200,000 was going to be paid upfront.

November 2003 Agreement

127. Through Mr Doneux, Acoustica claims that the material agreement between the parties was reached at a meeting said to have taken place at Mr Takacs’ house in the Blue Mountains on or about 9 November 2003: CB 43[33].

128. Mr Doneux asserted that he called the meeting and took some pastries or croissants to share with Mr Takacs. He indicated that it was common for him to meet Mr Takacs at his house to have meetings or discuss various things: CB 43[33].

129. Mr Doneux stated that when he arrived, Mr Takacs and he went to sit in the sunroom at the rear of the house, which they often did: CB 43[34]. He said that they had a conversation with words to the following effect (CB 43-44[34]):

Mr Takacs said: Philippe, I’m not going to sign the agreement that the lawyers prepared.

I said: What type of agreement would you like then?

Mr Takacs said: This will create big problems with my taxes. How about you continue to pay me my salary and a further $1,000 a month, on top of my salary, until we reach $200,000. If I need a higher monthly instalment to reach $200,000, I will let you know.

I said: The limit to the additional funds will have to be $10,000 a month as that is what I can afford. Under your proposal, it will take a long time to pay off the $200,000. So, I won’t be paying any Interest on it. Also, this is then a new agreement between us, it has nothing to do with our previous one that is nowt [sic] irrelevant. So, no need to sign and return the agreement that I had signed and posted to you.

Mr Takacs said: Yes, agreed.

I said: Okay.

130. Mr Doneux said that when (as he asserts) Mr Takacs told him the above, he was surprised because in their initial discussions and meetings with the lawyers Mr Takacs never brought up taxes: CB 44[35].

130. Mr Takacs denied that any such meeting or conversation ever occurred: CB 31[3(h)].

Terms of the RPS

132. The terms of the Share Certificate as set out in Annexure A of the April 2001 Agreement correspond with the terms on the back of the signed Share Certificate (Exhibit P2), with the exception that there is a difference in the numbering of the clauses. On the back of Exhibit P2 Share Certificate, the definitions contain no clause number, nor does a sentence stating “During the Redemption Period Tafemo will be entitled to the Tafemo dividend”. Thereafter, the clauses are numbered 1 through 19. Meanwhile, in Annexure A the terms of the Share Certificate contain 21 clauses, with the definitions being marked under cl 1 and the sentence which I have outlined above regarding payment of the Tafemo Dividend during the Redemption Period being marked as cl 2.

133. The terms of the Share Certificate (using the version in Annexure A to the April 2001 Agreement as distinct from the Exhibit P2 version) essentially give rise to the following structure:

1. the Redemption Amount is the sum of $200,000: cl 1;

2. the Redemption Amount is to be paid on the third anniversary of the Issue Date: cl 12;

3. the Issue Date is the date on which Acoustica resolves to issue the RPS: cl 1;

4. the Redemption Date is the date on which the Redemption Amount is paid to Tafemo by Acoustica: cl 1;

5. the period between the Issue Date and the Redemption Date is described as the Redemption Period: cl 1;

6. during the Redemption Period, Tafemo is entitled to the Tafemo Dividend: cl 2;

7. the Tafemo Dividend is defined to mean 50% of the net profit of Acoustica: cl 1;

8. the terms make provision for how the net profit of Acoustica is to be determined and verified, including giving Tafemo a right to verify it by means of appointment of an accountant: cll 3-8;

9. the Tafemo Dividend is payable no later than 30 October each year: cl 9;

10. until the Redemption Amount is paid, on each anniversary of the Issue Date the Redemption Amount will be increased in accordance with a specified formula: cl 11;

11. where Acoustica fails to pay the Tafemo Dividend, interest is payable on the dividend amount accruing at the rate of 7.5% per annum, calculated on a daily basis, until payment of the dividend is made: cl 10;

12. if Acoustica has not paid the Redemption Amount prior to the Redemption Date, Acoustica may give notice to Tafemo that it extends the time for payment of the Redemption Amount for a further period of two years: cl 14;

13. any such notice by Acoustica must be given within a certain period before the Redemption Date (cl 15) and, where such notice is given, the Redemption Period will be extended for a further two-year period: cl 16;

14. in the event that the Redemption Period has been extended by an additional two years and the Redemption Amount plus interest has not been paid at the expiration of those two years, the Redemption Amount will accrue interest at the rate of 8.5% per annum, calculated on a daily basis, until paid: cl 17; and

15. where the Redemption Amount together with any accrued interest is not paid at the expiration of the further two-year period, the Redemption Amount and any accrued interest become a debt immediately due and payable to Tafemo: cl 18.

134. The formula for the increase of the Redemption Amount is as follows (cl 11):

R = (r x N) / n   where in this clause:

R =   Increased Redemption Amount

r =   Redemption Amount not paid during the Year just ended;

n =    Index Number last published before the date of the anniversary of the Issue Date of the Year just ended.

N =   Index Number last published before the expiration of the Year just ended or n, whichever is the greater.

135. “Index Number” is defined by reference to the Consumer Price Index, or alternatively the Average Weekly Earnings or some other cost of living index.

Evidence not in dispute

136. Mr Price submitted and, subject to the exceptions that I will note, Mr Hand accepted, that the following facts were not in dispute (PCS [3(a)-(l)]; T 148.39–149.1):

1. Mr Takacs has been a director of Tafemo since its formation in 1985, and Mr Crow was a director of Tafemo from 1994 until 2012 (CB 294);

2. Mr Doneux has been a director of Acoustica since 1986, and Mr Ciric has been director of Acoustica since November 2019 (CB 283);

3. Mr Stevens, a partner of the firm known as Barker Gosling in 2000 and Dibbs Barker Gosling subsequently, gave advice to Acoustica on 27 June 2000 as to a way in which the Acoustica and Tafemo businesses could be merged (Exhibit P10 at pages 15-16);

4. Mr Stevens prepared a draft of the April 2001 Agreement after giving the advice on 27 June 2000 (T 65.9);

5. the parties requested amendments to the draft agreement (Exhibit P10 at pages 22-51);

6. by 8 February 2001, the form of the agreement had practically been settled (T 67.20; Exhibit P10 at page 52);

7. a meeting was arranged for 11 am on Wednesday, 28 March 2001 for the execution of the RPS Agreement and the Employment Agreement between Acoustica and Mr Takacs (Exhibit P10 at pages 53-54; T 68.14-.18);

8. the meeting on 28 March 2001 did not take place, and was rescheduled for 5 April 2001 (CB 40[22]; Exhibit P10 at page 55);

9. Mr Doneux executed the RPS Agreement (CB 40[23]), the Employment Agreement (T 72.1-.3) and the Share Certificate on 5 April 2001 (T 72.13-.15);

10. Acoustica did not pay $200,000 to Tafemo on 5 April 2001;

11. Acoustica employed Mr Takacs from at least 5 April 2001 (T 77.6-.7; Exhibit P10 at page 61); and

12. Acoustica paid $200,000 to Tafemo in the amounts and on the dates set out by Mr Takacs in his affidavit at CB 23-28[15]-[17].

137. Mr Hand did not accept that items (3) and (11) were not in dispute: T 148.44.

138. In relation to item (3), Mr Hand did not particularly identify what might be disputed about Mr Stevens giving advice to Acoustica on 27 June 2000. Mr Doneux was cross-examined regarding this document. He appeared to accept that advice had been given and did not dispute that the document had been sent: T 63.46-64.19.

139. In relation to item (11), Mr Doneux accepted in cross-examination that Mr Takacs was an employee from at least 5 April 2001: T 77.6-.8.

Preliminary issues

Who retained Dibbs Barker Gosling?

140. The affidavit evidence in the proceedings left somewhat unclear the question of precisely what role Dibbs Barker Gosling played in the arrangements between the parties. The retainer question arose by reason of the failure to call either Mr Stevens or Mr Maarbani as a witness, and thus against whom any inference should be drawn from the failure to call them.

141. Mr Takacs’ evidence in chief gave no detail regarding the lead up to the 5 April 2001 meeting. Rather, his evidence effectively opened with the (purported) entry into the April 2001 Agreement at the time of that meeting: CB 22[2].

142. In his first affidavit, Mr Doneux asserted that, following some initial discussions he had with Mr Takacs in or around 2000, Mr Takacs and he then instructed lawyers at Dibbs Barker Gosling to prepare a document recording “the agreement”: CB 39[13]-[16]. His evidence in this regard was as follows:

16. Mr Takacs and I then instructed Dibbs Barker Gosling Lawyers (the lawyers) to prepare a document recording the agreement. I do not recall how the lawyers were selected or who first contacted them, however Acoustica paid all their legal costs. The lawyers were responsible for preparing the terms of the agreement, including the redeemable preference share arrangement.

143. In a reply affidavit, Mr Takacs did not directly dispute the assertion that he and Mr Doneux had instructed Dibbs Barker Gosling: CB 34. However, he did dispute the location of what was described by Mr Doneux as the first meeting with the lawyers at their office in Sydney (CB 39[17]), asserting instead that the first meeting with a lawyer was at Mr Doneux’s office at Marrickville: CB 34[3].

144. Whilst there are parts of Mr Doneux’s first affidavit which refer to “the lawyers” (CB 40), there is no particular part of his affidavit evidence which expressly suggests that Dibbs Barker Gosling was acting only for Acoustica. Likewise, there is nothing in Mr Takacs’ evidence which expressly indicates that Dibbs Barker Gosling was acting in the interests of Tafemo in respect of the agreement, in addition to acting for Acoustica.

145. I asked Mr Doneux who instructed Mr Stevens to work on the agreement and he gave the following evidence (T 65.40-66.2):

Q. Mr Doneux, do you recall giving instructions to Mr Stevens at this time?

A. We discussed the agreement, we changed--

Q. No, don’t tell me what you discussed with him, but do you recall giving Mr Stevens instructions for the purposes of your negotiations with Tafemo?

A. Instructions about what?

Q. About anything to do with the negotiations?

A. Philip Stevens was working on the agreement, so when he asked me a question, I would have given him a reply. If you take that as a strict instruction‑‑

Q. Well, who instructed Mr Stevens to work on the agreement?

A. Both of us. So it’s Tafemo and Acoustica, Bill, John Crow and myself.

146. Mr Price challenged Mr Doneux on this and he held to this evidence as follows (T 66.7-.11):

Q. I suggest to you, Mr Doneux, that Barker Gosling were retained only by Acoustica. Do you agree with that?

A. No, he was the link between the two parties. I was paying for Barker Gosling, but he was waiting on the agreement to come to an agreement between the two parties.

147. In his submissions, Mr Price referred to a fax from Mr Stevens to Mr Crow dated 23 March 2001, in which Mr Stevens asked Mr Crow to “advise us of the exact amount of our client’s indebtedness to Tafemo Pty Ltd as of the date of this letter…”: Exhibit P10 at page 54. Mr Price said that this suggests Dibbs Barker Gosling was acting for Acoustica only: T 181.40-.45.

148. Whilst I accept that Acoustica instructed Dibbs Barker Gosling and paid its fees, I do not consider that the evidence clearly establishes that Tafemo did not also instruct the firm.

149. The state of the affidavit evidence, particularly having regard to the evidence of Mr Doneux that Mr Takacs and he instructed Dibbs Barker Gosling (CB 39[16]), coupled with the failure of Mr Takacs to reply to or deny that statement, suggests to me that Tafemo had an opportunity prior to the commencement of the hearing to explore and seek to lead evidence regarding whether there was a form of joint retainer with Dibbs Barker Gosling.

150. Ultimately, I am not satisfied that the position regarding the retainer of Dibbs Barker Gosling is so clear as to conclude that the onus was on Acoustica to explain the failure to call either Mr Stevens or Mr Maarbani to give evidence.

What, if any, inferences should be drawn from the absence of evidence from certain potential witnesses?

151. There are a number of persons referred to in the evidence who were connected in some way to events relating to the meeting on 5 April 2001. The absence of some of those witnesses was explained, while for others it was not.

John Crow

152. On the plaintiffs’ side, Mr Crow appears to have been involved in the lead up to the 5 April 2001 meeting and was one of the persons present on the day. However, he died in 2019 and was accordingly unavailable to be called to give evidence: CB 31[3(b)].

Karenne Crow

153. A person named Karenne M Crow had witnessed Mr Crow’s signature on three creditor’s acknowledgements directed to Tafemo, which were respectively signed on behalf of Datalink Pty Ltd (Datalink), Award Consultants Pty Ltd (Award Consultants) and Jonkro Pty Ltd (Jonkro) and all dated 5 April 2001: Exhibit P10 at pages 58-60. Whilst I am prepared to accept that Ms Crow was in some way related to Mr Crow, no further details were provided about her. Her involvement in relation to the matters the subject of these proceedings appears to have been confined to witnessing the three creditor’s acknowledgements. There is no suggestion that she was present at the 5 April 2001 meeting. No submission was made that any Jones v Dunkel inference should be drawn from the failure to call her as a witness, if it be the case that she is still alive and otherwise available.

Philip Stevens

154. Mr Stevens was clearly involved in correspondence between the parties in the period leading up to the 5 April 2001 meeting. The letterhead of Dibbs Barker Gosling as at June 2000 (then called Barker Gosling) reveals that “Philip Stevens” was a partner of the firm at that time: Exhibit P10 at page 15.

155. I raised a query as to whether Mr Stevens was the same person that had been a director and secretary of Acoustica. Mr Hand did not accept that that was the case: T 183. Neither party adduced evidence to clarify the position as to whether the solicitor was the same person as the director and secretary of Acoustica. Although Mr Price commented that it is not necessarily unusual to come across a person with the same name (T 173.25-.27), he suggested that it appeared it was the same person: T 173.

156. There is at least one matter which suggests that the solicitor was one and the same person as the previous director of Acoustica. The solicitor’s reference on correspondence was “PAS”: e.g. Exhibit P10 at page 15. Given the ordinary practice for solicitor matter references to be the relevant solicitor’s initials, this indicates that Mr Stevens’ middle name commenced with an “A”. That is consistent with the director of Acoustica, who had the middle name “Allan”: CB 283. Ultimately, the most likely conclusion is that the Mr Stevens who was a partner at Dibbs Barker Gosling was also the person who had been a director and secretary of Acoustica.

157. Mr Stevens was born in February 1949 and at the time of the hearing would have been aged 75.

158. If alive, it appears that Mr Stevens could have given material evidence regarding the negotiations between the parties in the lead up to the 5 April 2001 meeting and what occurred thereafter. Initially, there was no particular suggestion from Mr Price that any Jones v Dunkel inference ought to be drawn from Mr Stevens’ absence. However, when I raised it during closing submissions, Mr Price did say that a Jones v Dunkel inference should be drawn: T 181. That, in turn, led to some debate regarding for whom Dibbs Barker Gosling was acting and thus who more naturally might have called Mr Stevens as a witness.

159. In light of my finding that I am not able to affirmatively conclude that Dibbs Barker Gosling was not also retained in some way by Tafemo, I do not propose to draw any Jones v Dunkel inference from the absence of Mr Stevens. In any event, as I note below, the position that I accept is that Mr Stevens was not in attendance at the 5 April 2001 meeting.

Steven Maarbani

160. It is undisputed that another solicitor at Dibbs Barker Gosling, Mr Maarbani, was present at the 5 April 2001 meeting and in fact witnessed the signature of Mr Doneux on the April 2001 Agreement: Exhibit P1. There was no explanation from either party regarding the failure to call Mr Maarbani. I simply have no evidence as to whether he is deceased or unavailable. At one stage during Mr Doneux’s cross-examination, he denied the suggestion that Mr Takacs was present at the 5 April 2001 meeting along with himself, Mr Crow, Mr Stevens and Mr Maarbani, stating “No. We can ask Steven Maarbani”: T 75.28.

161. Mr Price essentially left the matter on the basis that Dibbs Barker Gosling was acting for Acoustica. Thus, he submitted that the onus was on Acoustica to explain the absence of Mr Stevens and Mr Maarbani from giving evidence, and that a Jones v Dunkel inference should be drawn that neither of those gentlemen would have assisted Acoustica: T 182.7-.10.

162. As with Mr Stevens, in light of my finding on the issue of Dibbs Barker Gosling’s retainer, I do not propose to draw any Jones v Dunkel inference from the absence of Mr Maarbani.

Matters bearing upon the issues

The lead up to the 5 April 2001 meeting

163. The evidence regarding the lead up to the 5 April 2001 meeting was not greatly disputed. The following details emerge from the documentary evidence.

164. By 22 November 2000, Mr Stevens had provided Mr Doneux with a copy of the amended agreement for his consideration, noting that he had requested certain documentation for the annexures from Mr Crow which were being collated: Exhibit P10 at page 22.

165. On 8 February 2001, Mr Crow sent a fax to Mr Takacs saying that he had had another call from Mr Maarbani, during which Mr Maarbani indicated that “everything is complete and the documents are having a last minute review”: Exhibit P10 at page 52.

166. On 2 March 2001, Mr Takacs and Mr Doneux signed an agreement to have their respective company accountants attend to the adjustments required under the RPS Agreement to be undertaken as soon as possible but no later than Friday, 9 March 2001: CB 64. On the same day, Mr Takacs also signed a consent to act as a director of Acoustica: CB 63.

167. There was a suggestion in Mr Doneux’s cross-examination that a meeting had been arranged for 23 March 2001: T 67. Mr Doneux indicated that Mr Stevens was seemingly unable to attend at that meeting (or, if the meeting had commenced, was unable to stay at the meeting) “because his father was very bad [I infer ill] in hospital”: T 67.45-.46.

168. On 23 March 2001, Mr Stevens sent a fax to Mr Crow, to which Mr Doneux was copied, confirming an appointment to meet on 28 March 2001 at 11 am for the purposes of executing the RPS Agreement and the Employment Agreement: Exhibit 10 at pages 53-54. In that communication, Mr Stevens also requested that Mr Crow provide him with certain documentation and information ahead of the meeting.

169. On 3 April 2001, Mr Stevens sent a fax to Mr Crow, copied to Mr Doneux, in the following terms (Exhibit P10 at page 55):

We note that the execution of the documentation in this matter has been schedule [sic] for Thursday, 5 April 2001 at 11:00am.

Given the extent of the previous delay in the settlement of the documentation we would be loathed to delay the matter further.

In order to ensure this matter can be finalised on Thursday we required you to provide us with the information and documentation outlined in our facsimile dated 23 March 2001. A further copy of that facsimile is attached for your reference.

We would be grateful to receive the requested information and documentation today.

170. On 4 April 2001 at 6:12 pm, Mr Crow sent a fax to Mr Maarbani in the following terms (Exhibit P8):

I refer to your letter/fax of 3rd April 2001. In response to your questions I reply as follows:-

Creditors’ Acknowledgements will be brought to the meeting with the exception of Bela Takacs.

Polytak Plastic Industries is the only product or business owned by Tafemo Pty Ltd

Adjustment schedule is enclosed (with comments)

Holiday Pay would only relate to the three (3) mths to March 31 2001. This will be provided later.

Superannuation of all employees up to March 31 2001 is the responsibility of Tafemo. In respect of Year 2000 part of entitlement for Neil Everson is still owing and all entitlement for Bela Takacs has still to be paid.

No entitlement for year 2001 and up to March 31 2001 has as yet been paid. This is the responsibility of Tafemo. The entitlement will be calculated at the rate of 8%.

Neil Everson and Bela Takacs have their contributions paid into Commonwealth Life and Barry Hillard pays into AMP. Account details yet to be obtained.

A copy of the company’s Debtors a/c for Acoustica follows. The listing includes two (2) invoices for March 31 2001 not yet forwarded to Acoustica.

See you at 11am tomorrow

171. At some time (which I infer was proximate to the 5 April 2001 meeting) Mr Doneux indicated that “the lawyers called me and arranged for a meeting for Mr Takacs and me to sign the agreement”: CB 40[21].

The 5 April 2001 meeting

172. Mr Doneux did not recall the exact date of the meeting in which he signed the April 2001 Agreement but, by reference to that document, he believed that the meeting did take place on 5 April 2001: CB 40[22].

Mr Takacs said: You owe me interest in accordance with the agreement.

I said: That was not our agreement. You didn’t want to sign the agreement and you asked me to pay you $1,000 a month plus your salary and car and expenses.

Mr Takacs said: Then I will take you to court.

I said: Send me your copy of the agreement.

Mr Takacs said: Okay.

309. Mr Takacs denied that the conversation was to that effect: CB 32[3(l)].

310. According to Mr Ciric, the following was said during the 29 May 2019 meeting (CB 52[18]):

Mr Takacs said: Acoustica has not paid me interest under the agreement.

Mr Doneux said: No, we had a meeting at your place and we agreed to pay you $1,000 a month plus your salary until we had paid the $200,000 purchase price for the Tafemo business. Paying you interest was not part of the agreement.

Mr Takacs said: That’s not correct. I have a copy of the agreement. I will bring it in to the factory.

311. Mr Ciric said that at no time before the 29 May 2019 meeting did he ever hear Mr Takacs make any demands for payment of the Tafemo Dividend or interest: CB 52[20]. That included a period in or about 2015 and 2016 during which there was a potential sale of Acoustica’s business to Pyrotek: CB 56[1]-57[15]; 60[4]-61[7].

312. In cross-examination, Mr Ciric gave evidence that, during the 29 May 2019 meeting, Mr Doneux had mentioned “that the agreement had changed”: T 112.31. He was challenged on that by Mr Price, but nonetheless asserted that he recalled Mr Doneux saying those words. His evidence was as follows (T 112.30-113.11):

Q. So he wasn’t wanting to pay any interest to Mr Takacs; is that right?

A. He mentioned he - that the agreement had changed.

Q. I suggest to you that he didn’t say that at that meeting. What do you say to that?

A. No, I recall that he mentioned that.

Q. I suggest to you that there was no assertion at that meeting that there had been a change of the agreement or that the agreement wasn’t valid in any way?

A. My recollection of that meeting was the disagreement between the two in the agreement, where Philippe mentioned that it would - it was changed in 2003.

Q. Is it possible that you are confusing this meeting with another meeting?

A. I don’t believe so.

Q. I suggest to you that after Mr Doneux had said that the $200,000 had been paid, that Mr Takacs said that he wanted a satisfactory arrangement in respect of the moneys that were owed to him and his entitlements, et cetera. And that’s the effect of the note that you’ve made in about the middle of the page on 268?

A. That’s correct.

Q. I suggest to you, if Mr Doneux had said anything about the agreement being changed at this meeting you would have recorded it in this file note, wouldn’t you?

A. There was a lot of talking between the two of them, I might have missed it.

Q. So is it the fact that we can’t rely upon these notes as an accurate record of the meetings?

A. I tried to capture the essence of that meeting.

313. There is nothing on Mr Ciric’s handwritten record of the meeting on 29 May 2019 which indicates that there was a dispute between Mr Doneux and Mr Takacs about the terms of an agreement, nor that the April 2001 Agreement (or some other agreement) had changed: CB 268.

314. Further, Mr Ciric accepted that there was no writing on his note which recorded Mr Doneux disputing Mr Takacs’ entitlement to interest: T 114.36-.43.

315. In relation to this (29 May 2019) meeting, I reject the notion that there was any assertion made that the April 2001 Agreement (or some other agreement) had changed. I also reject the notion that there was any dispute by Mr Doneux about interest being owed in accordance with said agreement.

316. However, I think it is likely that Mr Doneux did request a copy of the agreement. That is supported by Mr Ciric’s file note. I think it is highly improbable that, if there had been no attendance by Mr Takacs or exchange of counterparts at the 5 April 2001 meeting, Mr Doneux would have asked him to “send me your copy of the agreement”.

The 10 July 2019 email

317. On 10 July 2019, Mr Ciric sent an email to Mr Doneux attaching a scanned copy of the April 2001 Agreement which Mr Takacs had provided: CB 46[48], 279. In his affidavit, Mr Doneux asserted that Mr Takacs did not provide him with a copy of the April 2001 Agreement signed by him, or signed by both him and Mr Doneux.

318. Further, Mr Doneux asserted that Mr Takacs had never contacted him, or anyone else at Acoustica, claiming or seeking the issuance of the RPS to Tafemo: CB 47[49].

319. I consider that what is likely to have happened is that, on or about 10 July 2019 when Mr Doneux received the email from Mr Ciric attaching the scanned copy of the April 2001 Agreement which Mr Takacs had provided, Mr Doneux observed that, whilst it had been signed by him (apparently binding Acoustica), it was not signed by Tafemo or Mr Takacs. In those circumstances, I think it is likely that Mr Doneux opportunistically devised the notion that he would assert that there had been no exchange of counterparts.

Written agreement issue

320. I am persuaded that there was an exchange of counterpart agreements on 5 April 2001. In this regard, I have considered the totality of the evidence. I refer to my findings above regarding: the 5 April 2001 meeting; whether Mr Doneux signed another counterpart of the April 2001 Agreement and posted such document to Mr Takacs; and subsequent events, in particular the alleged meeting at Mr Takacs’ house in November 2003, the 27 November 2018 meeting, the 29 May 2019 meeting and the 10 July 2019 email.

321. As noted above, I reject Mr Doneux’s claim that no one on behalf of the plaintiffs attended at the 5 April 2001 meeting.

322. Thus, I find that a binding written agreement came into effect between the parties on 5 April 2001 in the form of the April 2001 Agreement that is Exhibit P1.

Oral agreement issue

323. Mr Price submitted that, if the Court found that the parties had entered into the April 2001 Agreement, there could be no oral agreement as asserted by Acoustica. In support of that submission, Mr Price referred to cll 17.2 and 17.3 of the RPS Agreement, which provide that the agreement may only be amended if all parties sign the written amendment and any provision or right under the agreement may not be waived except in writing signed by the party granting the waiver: PCS [29]-[33].

324. In Australia, it has been said that a “no oral modification” clause cannot prevent the parties to a contract containing it from agreeing to vary it: see e.g. Cenric Group v TWT Property Group [2018] NSWSC 1570 at [102]-[103] per McDougall J and the authorities cited therein; cf MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119. Even if not necessarily preclusive of oral modifications, such clauses provide important context in considering whether the requisite contractual intention to modify or vary a written contract, objectively ascertained, exists: White v Philips Electronics Australia Ltd (t/as Philips Healthcare) [2019] NSWCA 115 at [43] per Bell P (as his Honour then was) (Basten and Gleeson JJA agreeing). However, based upon the facts as I have found them, I need not venture into such issues.

325. For the reasons that I have outlined above, I reject the assertion of Mr Doneux that there was a specific meeting at Mr Takacs’ house in November 2003 and that an agreement was reached on that occasion to the effect contended for by Acoustica and Mr Doneux.

Estoppel issue

326. Mr Hand submitted that, if the Court determines that the parties were bound by the terms of the April 2001 Agreement, a conventional estoppel arises from the parties’ conduct at the alleged November 2003 meeting and subsequently.

327. Mr Hand asserted an estoppel in the following terms (DOS [22]):

(a) in November 2003, the parties adopted the assumption that:

(i) the defendant would make regular payments at the direction of Mr Takacs until the sum of $200,000 had been paid;

(ii) the plaintiffs had the right to call for payments up to $10,000 a month; and

(iii) the plaintiffs’ right to call for up to $10,000 a month accrued each month;

(b) the parties conducted their relationship on the basis of the assumption, in that:

(i) the defendant made regular payments to the first plaintiff from December 2003 to November 2018, and made a final payment of $34,000 in December 2018;

(ii) the plaintiffs accepted each of those payments;

(iii) the parties did not refer to the terms of the April 2001 agreement during the period of its currency; and

(iv) the plaintiffs did not seek to invoke any rights under the April 2001 agreement until 2019;

(c) each party knew or intended that the other would act on the basis of the assumption; and

(d) in the circumstances, departure from that assumption now by the plaintiffs would occasion detriment to the defendant co-extensive with the amount claimed by the plaintiffs in these proceedings.

328. In his opening submissions, Mr Price submitted as follows (POS [19]):

19. Second, estoppel by convention requires a finding that the parties had an agreed or mutually assumed state of affairs upon which they acted: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244. There was no agreed or mutually assumed state of affairs and there is no evidence of an agreed or mutually assumed state of affairs.

329. Mr Price further submitted the following in closing (PCS [35]-[39]):

35. As a rejection of Mr Doneux’s evidence concerning the execution of the Agreement on 5 April 2001 requires a rejection of his evidence concerning the alleged conversation in November 2003, it follows that there can be no factual basis for the defendant’s conventional estoppel argument.

36. The rejection of that evidence leaves no basis on which to find that the parties had adopted a common assumption.

37. In any event, to succeed with such a claim, the defendant had to establish that each party knew or intended that the other acted on the common assumption: Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at [200] per Tobias JA (with whom Mason P and Campbell JA each agreed).

38. The fundamental difficulty facing the defendant is that Acoustica did not comply with the common assumption it has pleaded. In paragraph 5(a) of the defence, it is pleaded that the parties adopted an assumption consistent with the matters pleaded in paragraph 4(c): [CB 17]. The pleading in paragraph 4(c) of the defence was that the defendant would pay $1,000 per month from December 2003. The evidence establishes that Acoustica did not commence regular monthly payments of any amount until March 2005 [CB 24]. That is 16 months after the alleged commencement of the assumption. No application has been made by the defendant to amend its defence.

39. In the circumstances, there is no evidence to establish the alleged common assumption.

330. I reject the estoppel claim. The claim fails largely for the reasons submitted by Mr Price. Based on my findings as to the alleged November 2003 meeting and the parties’ subsequent conduct, I reject the notion that any mutual assumption was formed between the parties in November 2003 or that the parties subsequently conducted their relationship on the basis of such an assumption.

Limitation issue

331. In response to the plaintiffs’ pleading of the April 2001 Agreement’s formation, Acoustica claimed in its defence that the plaintiffs’ claim was barred by operation of s 14 of the Limitation Act: CB 18[6].

332. Mr Price submitted that s 14 of the Limitation Act is subject to s 54 of the Limitation Act: POS [21].

333. Relevantly, s 14(1)(a) of the Limitation Act provides as follows:

(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims—

(a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,

…

334. The relevant parts of s 54 of the Limitation Act are as follows:

54   Confirmation

(1)  Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.

(2)  For the purposes of this section—

(a)  a person confirms a cause of action if, but only if, the person—

(i)  acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or

(ii)  makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made,

(b)  a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and

(c)  a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account.

…

(4)  An acknowledgment for the purposes of this section must be in writing and signed by the maker.

(5)  For the purposes of this section a person has the benefit of a confirmation if, but only if, the confirmation is made to the person or to a person through whom the person claims.

(6)  For the purposes of this section a person is bound by a confirmation if, but only if—

(a)  the person is a maker of the confirmation,

…

Claim for recovery of the Redemption Amount

335. Mr Price submitted that the Redemption Amount was to be paid on the third anniversary of the Issue Date. As the Issue Date was 5 April 2001, the Redemption Amount was to be paid on 5 April 2004: T 179. Thus, in the first instance, he submitted that the limitation period required commencement of proceedings within six years of 5 April 2004. However, he then submitted that there were part payments of the Redemption Amount which constituted confirmations, the first of which occurred in November 2003. As the initial part payment was within the limitation period (i.e. within six years of 5 April 2004), that extended the operation of the limitation period for another six years, with each subsequent part payment having a similar effect: T 179.

336. Accordingly, as payments were made commencing in 2003 and indeed in every year other than in 2004, with a final payment being made in December 2018, the consequence was that by operation of the confirmations by part payment, the limitation period would ultimately expire six years after December 2018, being December 2024: T 179.

337. As the proceedings were commenced in 2021, Mr Price submitted that Tafemo was within time to sue in respect of the cause of action to recover the Redemption Amount: T 179.

338. In his DOS, Mr Hand submitted that, on Tafemo’s case, Acoustica’s non-payment of the Redemption Amount on 5 April 2004 was a breach of contract. He submitted that this was the date on which the cause of action accrued to Tafemo, and accordingly submitted that the limitation period had long since expired: DOS [26].

339. However, in the final oral submissions, Mr Hand accepted that in the event the Court found that the payments, which Mr Takacs asserted were made and which Acoustica does not dispute making (being the 84 payments listed as being made between November 2003 and November 2018, together with a final payment of $34,000 in December 2018: CB 24-28), were made pursuant to the April 2001 Agreement, Acoustica would accept that there was confirmation of a claim for recovery of the Redemption Amount: T 180.13-.16.

340. I accept that the claim for recovery of the Redemption Amount is not barred.

Claim for recovery of the Tafemo Dividend

341. In respect of the claim for recovery of the Tafemo Dividend, I note (as I have done earlier) that it is ultimately not necessary to determine whether the RPS was actually issued to Tafemo. That is because Tafemo is claiming the Tafemo Dividend in a form of action for breaches of the April 2001 Agreement (Acoustica’s breaches being the non-payment of the dividend). The Tafemo Dividend is not being claimed by virtue of any purported rights of Tafemo as a shareholder of Acoustica.

342. Mr Price accepted that the position in respect of payment of the Tafemo Dividend was different to the claim for recovery of the Redemption Amount: T 179. As there were no dividends paid, there was no confirmation.

343. In the DOS, Mr Hand raised an issue regarding the proper construction of the April 2001 Agreement: DOS [27]-[32]. The question of construction is not obviously raised by the defence. Nonetheless, it is appropriate to deal with it.

344. The terms of the April 2001 Agreement contemplate that the RPS will be redeemed: CB 76-78.

345. Mr Hand submitted that Tafemo was only entitled to receive the Tafemo Dividend during the initial three-year Redemption Period: DOS [27], [30]. He submitted that any action on a cause of action for breach of contract by Acoustica’s failure to pay the dividend in respect of the financial year ended on 30 June 2004 (being the financial year in which the third anniversary of the Issue Date occurred) first accrued to Tafemo on 30 October 2004 (citing cl 9), and the limitation period for an action on that cause of action had long since expired: DOS [31], [32].

346. I am not persuaded that Mr Hand’s submission regarding the construction of the payment of the Tafemo Dividend is correct. It is correct that Tafemo is entitled to the Tafemo Dividend during the Redemption Period: CB 76 [cl 2]. However, the Redemption Period is defined by reference to the Redemption Date, which is the date on which the Redemption Amount is paid to Tafemo by Acoustica: CB 76 [cl 1] (Definitions). Clause 3, which deals with the determination of Acoustica’s net profit for the purposes of calculating the Tafemo Dividend, provides that “[t]he net profit of Acoustica until the Redemption Date is to be determined using the same or similar methods as used by Acoustica to determine the net profit for the year ending 30 June 2000”: CB 76 [cl 3].

347. I consider that the natural construction of the obligation to pay the Tafemo Dividend is that it is payable during the period from the date of the issue of the RPS until the Redemption Amount is paid. Whilst cl 12 provides an obligation for the Redemption Amount to be paid on the third anniversary of the Issue Date, the Tafemo Dividend is not payable by reference to that obligation. Rather, the Tafemo Dividend is payable by reference to when the Redemption Amount is actually paid to Tafemo by Acoustica.

348. As the Redemption Amount has not ultimately been paid in full by Acoustica, and the plaintiffs commenced these proceedings in August 2021, Tafemo is entitled to recover payment of the Tafemo Dividend from August 2015, which includes the dividends for the 2015 financial year onwards (given that the obligation to pay the dividend falls on 30 October each year).

Loss issue

349. Mr Price made the following submissions regarding the quantum of damages and interest payable on the Tafemo Dividends (PCS [44]-[51]):

The quantum of damages

44. The Redemption Amount using the formula in clause 11 of Annexure A to the Agreement [CB 76-77]:   R = (r x N) / n   

45. The calculation of “R” after 1 year of the Agreement uses the following inputs:

(a) r is $200,000 – the initial Redemption Amount. See cl 1 Definitions [CB 76];

(b) N is 77.0 – see [CB 305, March 2002]

(c) n is 74.8 – see [CB 305, March 2001]

46. The formula produces a result of R = $205,882.35.

47. That exercise for each year since then but replacing “r” with the amount calculated for “R” for the previous year, less any payments made in that year, results in the calculation of “R” as of 5 April 2021 of $61,240.71.

48. The calculation of the Redemption Amount to 5 April 2024 is:

(a) As of 5 April 2022, R = $63,928.07

(b) As of 5 April 2023, R = $68,579.26

(c) As of 5 April 2024, R = $71,163.26

49. The evidence establishes that the defendant made the following profits:

Financial Year Ended	Net Profit	CB Ref	Tafemo Dividend
30 June 2015	$62,017	[CB 163]	$31,008.50
30 June 2016	$401,390	[CB 214]	$200,695.00
30 June 2017	$480,026	[CB 246]	$240,013.00
30 June 2018	$247,011	[CB 255]	$123,505.50
30 June 2019	$384,954	[CB 270]	$192,477.00
30 June 2020	$210,409	Ex P13	$105,204.50
30 June 2021	Loss	Ex P13	$0.00
30 June 2022	$51,224	Ex P13	$25,612.00
30 June 2023	$122,464	Ex P13	$61,232.00
Total		$979,747.50

Interest

50. The plaintiffs are entitled to interest at the rate of 7.5% per annum calculated daily on the amounts outstanding under clause 10 of Annexure A of the Agreement [CB 76].

51. The interest payable on the Tafemo Dividends set out above is calculated to 2 May 2024 in the table below:

Financial Year Ended	Tafemo Dividend	Interest Payable
30 June 2015	$31,008.50	$19,796.59
30 June 2016	$200,695.00	$113,035.27
30 June 2017	$240,013.00	$117,178.95
30 June 2018	$123,505.50	$51,034.84
30 June 2019	$192,477.00	$65,099.41
30 June 2020	$105,204.50	$27,670.22
30 June 2021	$0.00	$0.00
30 June 2022	$25,612.00	$2,894.51
30 June 2023	$61,232.00	$2,327.65
Total		$399,037.44

350. In relation to the calculation of the Tafemo Dividend, Mr Price provided an Excel spreadsheet and summary page which set out his calculations. It was marked as MFI-1. Mr Hand and those instructing him had an opportunity to check those calculations. Whilst disputing liability, Mr Hand did not dispute Mr Price’s calculations of damages and interest (T 171.44-.49) and confirmed as much by email to my Associate.

Conclusion

351. There should be judgment for Tafemo in the sum of $1,050,910.76 (being the total of the Redemption Amount to 5 April 2024 in the sum of $71,163.26 and the outstanding amount due in respect of the Tafemo Dividend of $979,747.50).

352. Although Mr Price has calculated some interest amounts, there should be a recalculation to the date of these reasons for judgment.

353. I direct the parties to bring in short minutes of order to give effect to those findings and calculations.

354. Mr Price submitted that the plaintiffs wish to be heard on costs following delivery of the reasons for judgment. Although submitting that the Court should dismiss the plaintiffs’ claims with costs, Mr Hand did not particularly contend that the Court should not hear Mr Price on the issue of costs. Accordingly, I propose that the parties should, in light of these reasons, seek to agree on the question of costs. In the absence of any agreement, they should provide to my Associate a form of proposed orders in respect of costs and any evidence in support of such orders.

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Decision last updated: 11 July 2024