The Christie Agency v Wiseman Advertising; Wiseman v The Christie Agency

[2004] NSWSC 395

CITATION:	The Christie Agency & Anor v Wiseman Advertising & Ors; Wiseman & Anor v The Christie Agency & Anor [2004] NSWSC 395
HEARING DATE(S):	5/4/04, 6/4/04, 7/4/04, 8/4/04, 13/4/04
JUDGMENT DATE:	14 May 2004
JUDGMENT OF:	McDougall J at 1
DECISION:	See paras [260] to [265] of judgment
CATCHWORDS:	TRADE PRACTICES - ss 51A, 52 Trade Practices Act 1974 - agreement for sale of advertising business - whether first and second defendants made representations as to profitability of business that were misleading or deceptive or likely to mislead or deceive - whether first or second plaintiffs relied upon any such representations in deciding to purchase the business - INDUSTRIAL LAW - ss 105, 106 Industrial Relations Act 1996 - agreement for the sale of business - whether agreement as made and/or as performed was unfair for the purposes of s 106 - whether order for the payment of money to be made against a person who was not a party to the contract - whether second defendant (first applicant in IRC proceedings) was constructively dismissed
LEGISLATION CITED:	Trade Practices Act 1974 Fair Trading Act 1987 Industrial Arbitration Act 1940 Industrial Arbitration Act 1991 Industrial Relations Act 1996
CASES CITED:	Incitec Ltd v Industrial Court of New South Wales (1992) 45 IR 155 BNY Australia Ltd v James (1992) 26 NSWLR 57 Reich v Client Server Professionals of Australia Pty Ltd (2000) 49 NSWLR 551 Colaco v Soul Pattinson (Manufacturing) Pty Ltd (1990) 38 IR 174 Hussmann Australia Pty Ltd v Walker (1993) 48 IR 396 Day v Lumley Life Ltd (1999) 90 IR 70 Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648 Hollingsworth v Commissioner of Police (1999) 47 NSWLR 151 Australian Entre Business Centres Pty Ltd v Smith [1989] AR (NSW) 196 Brown v Rezitis (1970) 127 CLR 157 Swann v Ultratune Australia Pty Ltd (1983) 5 IR 284 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 Radosavljevic v Radin [2003] NSWCA 217 Thomson v Orica Australia Pty Ltd [2002] FCA 939
PARTIES :	50008/03: The Christie Agency Pty Limited (First Plaintiff) Douglas Nicol Christie (Second Plaintiff) Wiseman Advertising Pty Limited (First Defendant) Clive Alistair Wiseman (Second Defendant) Dorothy Moe Wiseman (Third Defendant) IRC 7851/01: Clive Alistair Wiseman (First Applicant) Wiseman Advertising Pty Limited (Second Applicant) The Christie Agency Pty Limited (First Respondent) Douglas Christie (Second Respondent)
FILE NUMBER(S):	SC 50008/03; IRC 7851/01
COUNSEL:	Mr S J Stanton/Mr G Betar, Solicitor (for the Christie parties) Mr J J E Fernon SC/Mr G P McNally (for the Wiseman parties)
SOLICITORS:	Norman Waterhouse (for the Christie parties) Davis Breene Conti (for the Wiseman parties)

THE CHRISTIE AGENCY PTY LIMITED & ANOR v WISEMAN ADVERTISING PTY LIMITED & ORS – 50008/03

CLIVE ALISTAIR WISEMAN & ANOR v THE CHRISTIE AGENCY PTY LIMITED & ANOR - IRC 7851/01

JUDGMENT INDEX

Paragraph

Introduction 1

Background 6

Findings on credibility 11

The events of July and August 2000 46

The events of September 2000 60

The alleged meeting of 13 September 2000 62

The meeting of 19 September 2000 70

The events of October 2003 75

The meeting of 11 October 2000 78

“Due diligence” 83

The agreement is concluded 85

November 2000 to May 2001 95

June and July 2001: the relationship deteriorates 104

August 2000: the relationship breaks down completely 115

August 2001: non payment of retainer and expenses 137

The TPA proceedings 144

Reliance 172

The s 106 proceedings 186

The relevant terms of the agreement 191

The concept of unfairness 200

The s 106 case: analysis 207

Constructive dismissal 230

Relief 233

The position of Mr Christie 244

Conclusions and orders 260

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

14 May 2004

WISEMAN ADVERTISING PTY LIMITED & ORS

AGENCY PTY LIMITED & ANOR

JUDGMENT

HIS HONOUR:

Introduction

1 The first defendant (“Wiseman Advertising”), the first plaintiff (“the Christie Agency”) and the second defendant (“Mr Wiseman”) made a written agreement dated 1 November 2000 whereby, among other things, the Christie Agency agreed to buy the business of Wiseman Advertising and certain specified assets, including the goodwill of that business and the business name “Wiseman Advertising” and variants. That agreement has given rise to two sets of proceedings.

2 In proceedings 50008 of 2003 (“the TPA proceedings”), the Christie Agency claims damages against Wiseman Advertising, Mr Wiseman and his wife, the third defendant (“Mrs Wiseman”), for breach of contract and contravention of s 52 of the Trade Practices Act 1974 (“the TP Act”), or s 42 of the Fair Trading Act 1987 (“the FT Act”). Those proceedings were commenced in the Federal Court of Australia and cross-vested to this Court.

3 In the second proceedings, IRC 7851 of 2001 (“the s 106 proceedings”), Mr Wiseman and Wiseman Advertising claim relief against the Christie Agency and Mr Christie under s 106 of the Industrial Relations Act 1996 (“the Industrial Relations Act”). Those proceedings were commenced in the Industrial Relations Commission of New South Wales and were cross-vested to this Court.

4 The two proceedings were heard together, with evidence in each evidence in the other.

5 The essential issues are:

(1) Whether Wiseman Advertising or Mr Wiseman made representations as to the future profitability of the business of Wiseman Advertising that were misleading or deceptive or likely to mislead or deceive (including by the operation of s 51A of the TP Act).

(2) Whether the Christie Agency or Mr Christie relied on any such representations in deciding to purchase the business of Wiseman Advertising upon the terms set out in the agreement.

(3) Whether the agreement as made and as it was performed was unfair for the purposes of s 106 of the Industrial Relations Act.

Background

6 Prior to the making of the agreement, Wiseman Advertising and the Christie Agency carried on separate businesses as advertising agencies. Mr Christie was the principal of the Christie Agency. (I deal with his position in paras [244] to [248] below.) Mr Wiseman was the principal of Wiseman Advertising, although Mrs Wiseman was a shareholder and officer.

7 Mr Christie wanted to expand the business of the Christie Agency by acquiring the businesses of other advertising agencies. His long term plan was to float the Christie Agency on the Stock Exchange.

8 In early 1999, Mr Wiseman contemplated selling the business of Wiseman Advertising. He spoke to a business broker, Mr Michael Baker, of Michael Baker Consulting Pty Ltd. At that time, Mr Wiseman caused his accountant, Mr Michael Lane of Lane & Associates, to prepare a form of “management accounts”. Those accounts purported to show the income, expenses and profit or loss of the company for the financial years ended 30 June 1997 and 1998 and for the period up to January 1999. They included projected “annualised” figures, based on the figures to January 1999. After the statement of profit or loss (which, in the case of the two complete financial years, I would infer was in accordance with the company’s financial statements and income tax returns), the document referred to “Addback management items” and stated, for each of the periods, a figure for “Total Addback”. As a result, the document derived what it called a “Management Net Profit”. This exercise had the effect of converting a loss of $7,310 for 1997 into a management profit of $202,434; and, for 1998, a loss of $8,711 was converted into a management profit of $341,380. For the period to January 1999, and for the annualised figures based on it, the effect of the “Addbacks” was to increase the recorded or projected net profit substantially.

9 Nothing came of these dealings between Mr Wiseman and Mr Baker. However, Mr Baker (who in mid-1999 had been retained by Mr Christie on behalf of the Christie Agency to find prospective “targets”) did not lose interest. Mr Baker and Mr Wiseman met again, in July 2000, to discuss the possibility of selling the business.

10 There are a number of differences between the parties as to the relevant events from July to November 2000. On reflection, it appears in most cases that the differences have little bearing on the outcome. However, because Counsel for the parties (in particular, Mr S J Stanton, Counsel for the Christie parties) urged me to make specific findings of fact and on credibility, I shall do so. It is appropriate to do so before I set out my findings as to the relevant events.

Findings on credibility

11 The principal witness of fact for the Christie Agency was Mr Christie. The principal witness of fact for Wiseman Advertising was Mr Wiseman. Mr Wiseman was not a particularly satisfactory witness. However, I have come to the conclusion that, whereas Mr Wiseman at least sought to tell the truth, Mr Christie did not do so unless he thought that telling the truth would assist his cause. I shall explain my reasons for this conclusion in more detail. At present, it is sufficient to say that to the extent that there is conflict between the evidence of Mr Wiseman and the evidence of Mr Christie, and where the conflict cannot be resolved either with the assistance of other evidence or by considering the objective probabilities, I prefer the evidence of Mr Wiseman.

12 In written submissions, Mr Stanton referred to a number of matters that, he said, supported the proposition “that Mr Wiseman cannot be believed totally concerning the matters both that he deposed to and was cross-examined on”. Some of the matters referred to support the view that I have expressed in the preceding paragraph that Mr Wiseman was not a particularly satisfactory witness. For example: his evidence relating to his present (including “anticipated”) income compared to his income whilst on retainer to the Christie Agency (T 13-15); his less than complete recollection of certain questions; and his acknowledgment that some of his affidavit evidence was inaccurate (T 39.5-.35). Others of the matters referred to seem either to indicate a total misapprehension of the evidence or to demonstrate no significant unreliability. Others again (for example, Mr Wiseman’s evidence relating to the omission of the “addback” schedule from the agreement – T 18.10-.30) simply demonstrate that Mr Wiseman was not, in all respects, a hard headed and observant businessman. Quite why that reflects adversely on his credit I do not know. It might be noted, also, that if the criticism of Mr Wiseman (and Mrs Wiseman) in relation to their failure to notice that the agreement did not contain the relevant schedule is a matter going to their credibility, it would go equally to the credibility of Mr Christie: he, too, having failed to notice that the agreement as executed did not contain the schedule. The question of profitability, with its impact on the purchase price, was of as much interest to Mr Christie as it was to Mr and Mrs Wiseman.

13 The other witnesses of fact for Wiseman Advertising were Mrs Wiseman and Mr Lane. (Mr Lane also gave expert evidence. It will be necessary to deal with that separately.) Having observed Mrs Wiseman and Mr Lane in the witness box, and having considered the content of their evidence, I am satisfied that each of them sought to tell the truth to the best of her or his ability. I accept them as witnesses of truth upon whose evidence, in general, I could rely. That having been said, there was, I think, one instance where Mrs Wiseman was in error (see para [84] below); but I do not regard this as affecting her overall credibility.

14 The other witnesses of fact for the Christie Agency were Mr Ian Stevenson, Mr Richard Nies, Mr Brian Cooney and Mr Baker.

15 Mr Stevenson is a director and the secretary of the Christie Agency and a partner in the firm of chartered accountants, Eislers & Stevenson. Through that firm, he is the accountant and tax agent for the Christie Agency and Mr Christie. He (together with Mr Cooney) was the person responsible for the “due diligence” carried out on Wiseman Advertising for the Christie Agency. It was not suggested that, by reason of those matters, Mr Stevenson had some interest in the outcome of the proceedings.

16 The only issue as to which Mr Stevenson’s credibility is relevant is the differing versions of what was said at a meeting between Messrs Wiseman and Christie, also attended by Mrs Wiseman and Messrs Lane, Stevenson and Cooney, on 19 September 2000. For reasons that I give in paras [70] to [74] below, I accept the evidence of Mr and Mrs Wiseman and, in particular, Mr Lane in preference to the evidence of Messrs Christie, Stevenson and Cooney. I do so notwithstanding that Mr Stevenson produced a hand written note that, he said, he made during the meeting. It was put to Mr Stevenson that the note was made not during the meeting but at a later time (presumably, when his memory of relevant events might have dimmed, or when his recollection of what was said at one meeting may have become conflated with his recollection of what was said at another and later meeting). Mr Stevenson denied this, and maintained that the note was made in the course of the meeting. It was not put to Mr Stevenson that his note, or his evidence based upon it, was a fabrication: although neither the note nor that evidence could be accepted if the evidence of Mr Wiseman and Mr Lane is to be (as I think it should be) accepted on this point.

17 Accordingly, whilst I refrain from making any specific adverse finding as to Mr Stevenson’s credibility, or in relation to his note of what he said was discussed at the meeting of 19 September 2000, I do not accept that evidence: both because it is inconsistent with other and, in my view, preferable evidence and because (as I say in para [74] below) it is inconsistent with the probabilities having regard to the context in which, and the time at which, the meeting occurred. Further, Mr Stevenson’s evidence is affected by the problem to which I refer in para [51] below. That of itself raises a doubt as to the acceptability of Mr Stevenson’s evidence.

18 Mr Nies was formerly the financial controller of the Christie Agency. He is a chartered accountant. He impressed me as someone who sought to tell the truth to the best of his ability and on whose evidence I could, in general, rely.

19 Mr Baker’s recollection of the relevant events was limited in the extreme. Both for that reason and because his involvement in the relevant events was, at best, peripheral, his evidence is not of great assistance. Further, there was a problem with Mr Baker’s evidence, relating to the one significant conversation where he corroborated Mr Christie. The problem is that there was an eerie coincidence between the words in which Mr Baker (in his affidavit sworn 12 May 2003, para 10) cast the conversation, and the words in which Mr Christie (in his affidavit sworn 21 May 2003, para 8) cast the same conversation. For the reasons that I give in paras [50] and [51] below, I simply do not accept that Mr Baker and Mr Christie would have recalled the conversation in terms that were, word for word, identical. Further, as I point out in para [52] below, Mr Baker’s evidence – even putting to one side the coincidence between his account and Mr Christie’s account – is incapable of belief. I do not accept Mr Baker as a witness on whose evidence I could rely, except where it is corroborated by other, acceptable, evidence or where it coincides with what I regard as the probabilities, objectively viewed.

20 Mr Cooney was Mr Nies’ predecessor as financial controller of the Christie Agency. He too is an accountant. He too impressed me as a witness who sought to tell the truth to the best of his ability. With one qualification (which has nothing to do with his veracity), I formed the view that Mr Cooney was a witness on whose evidence I could, in general, rely. I formed that view notwithstanding that, in one respect, Mr Cooney’s evidence was affected by the problem referred to in para [51] below.

21 The exception relates to the fact that Mr Cooney was, as he said in the witness box and as he demonstrated whilst giving evidence, hard of hearing. Having had the opportunity of observing him, I think that it is likely that, in a meeting where people were not talking directly to him (or, perhaps, where more than one person was talking at the same time) Mr Cooney might not have heard, or heard accurately, what was said. Accordingly, where his account of what was said at a meeting varies from that of other witnesses, it is at least likely that the variance reflects this disability.

22 I should add that the Christie Agency relied on the evidence of a business consultant, Mr Gerald McElney of Linca Consulting Pty Ltd, and of its solicitor at the time, Mr Terence Williams. Both of them swore affidavits. Neither was required for cross-examination on his affidavit. Accordingly, to the extent that their evidence (or so much thereof, in the case of Mr Williams’ affidavit, as was read) is relevant to the issues that I have to decide, I accept it.

23 I return to the topic of Mr Christie’s credibility.

24 Although it cannot be said that Mr Wiseman was a perfect witness, he was a paragon compared to Mr Christie. Mr Christie showed an increasing irritation with the process of cross-examination, and an increasing desire to avoid answering questions (particularly where the question bore on a matter of significance and where a direct and truthful answer might have been unhelpful to his cause), and an increasing tendency to force unresponsive answers on cross-examining counsel. In short, his demeanour in the witness box was unsatisfactory in the extreme. However, it is not for that reason alone that I do not accept him as a witness of truth on all matters.

25 There were a number of occasions when Mr Christie refused to accept the obvious, or would not make concessions that, objectively, should have been made. By way of example of the former category: it was part of Mr Wiseman’s explanation of the performance of the Wiseman Advertising business after its purchase by the Christie Agency that there had been a decline in business in the advertising industry “across the board” after the Olympic Games in September 2000. Mr Christie refused to concede that this was so. Mr Cooney had no problem recalling that there was “a fairly severe downturn” in the advertising industry during the year 2001. More importantly for present purposes, in proceedings brought by a former employee of the Christie Agency in the Industrial Relations Commission, Mr Christie had given evidence in which he sought to justify what he called the “redundancy” of that employee upon the very basis that there had been such a downturn at that time.

26 By way of example of the second category: Mr Christie refused to accept that he had received a letter from Mr Wiseman in July 2001 (relating to the employment of a Mr Steve Hogwood in the Wiseman Advertising Division of the Christie Agency) because the document shown to him had the word “DRAFT LETTER TO DOUG CHRISTIE” at the top. However, he had in fact replied to the “draft” letter in question: see para [108] below.

27 In some respects, Mr Christie’s evidence was inconsistent with that of other witnesses whom I accept as reliable. For example, Mr Christie said that on 13 September 2000 he and Mr Wiseman reached an oral agreement on the principal elements of the proposed sale. According to Mr Christie, he offered to pay $650,000 by three instalments ($250,000 “on signing” and two annual instalments of $200,000 thereafter). This, he said, was subject to the business achieving an annual profit of $250,000 “as you have promised”. He said that Mr Wiseman (whose uncontested evidence was that he wanted $1,000,000 for the business) accepted this. Mr Christie said further that, after that meeting continued and Mr Wiseman walked to the car park, they had a further discussion where Mr Wiseman asked for $200,000 a year by way of retainer. Mr Christie said that he agreed, on the basis that Mr Wiseman could still “deliver me $250,000 a year profit”. Mr Wiseman denied this.

28 There are a number of reasons why this conversation cannot have occurred as Mr Christie said it did. Firstly, the latter part – relating to Mr Wiseman’s retainer – was said by Mr Christie to have arisen in a context where Mr Wiseman said that he and Mrs Wiseman “have been getting money out of the company for years without paying tax” – a figure that he quantified at “about a hundred thousand dollars a year“. There was no evidence to suggest that this was the case; indeed, the evidence was to the contrary. Further, it was not put to Mr Wiseman or Mrs Wiseman that they had been so acting. I think that the background given by Mr Christie is an example of the tendency to which I have referred of seeking to give colour or verisimilitude to an otherwise inaccurate account of events.

29 Secondly, and of greater significance, it is clear that Mr Christie communicated the content of all relevant conversations to Mr Cooney. Mr Cooney needed to know because he was one of those people carrying out what was variously referred to as a “due diligence” or “investigation” of the business of Wiseman Advertising. (Mr Stevenson was the other.) However, Mr Cooney conceded in cross-examination that as at 5 October he had not been given those details. On that date, he sent a “briefing note” to Mr Christie. In that note, Mr Cooney set out the results of his investigations to date and a projected cash flow. The cash flow showed payments by the Christie Agency of a deposit of $250,000 and of two subsequent annual instalments each of $250,000. The investigations that Mr Cooney carried out, on which the note was based, included an analysis of income and expenses which showed a remuneration for Mr Wiseman (after the takeover) of “150 ????”. Mr Cooney said, and I accept, that (as is obvious) he would not have prepared those documents with those figures had Mr Christie informed him, prior to their date (or dates) of preparation, of the alleged oral agreement with Mr Wiseman on 13 September 2000. I deal with this in more detail in paras [62] to [69] below.

30 Mr Christie’s cross-examination on this at T 220-231 is marked by evasion, non-responsive and irrelevant answers, and answers that bear all the hallmarks of invention. It is clear, rereading that cross-examination (as it was clear, listening to Mr Christie at the time) that he realised that the documents on which he was then being cross-examined were inconsistent with his sworn evidence. It is clear that he sought deliberately to evade, as well as he could, questions directed at exploring the inconsistency, and that he was prepared to resort to fabrication otherwise. Indeed, he went so far as to say that he “would have taken the advice of Mr Cooney and Mr Stevenson who I trust and trusted”, that there was $250,000 of profit in the business: T 224.5. Neither of those gentlemen has suggested that he held any such view at the relevant time (13 September 2000), let alone that he had then communicated such a view to Mr Christie. Further, it is clear from their e-mails of 13 and 15 September 2000 (respectively, Mr Cooney to Mr Stevenson and Mr Stevenson to Mr Lane) that they were still seeking the information that they needed to enable them to come to some assessment of the profitability, and therefore the value, of the business of Wiseman Advertising.

31 I should refer to a specific criticism of Mr Christie’s evidence as to the alleged conversation (or two conversations – one in the office and one in the car park) of 13 September 2000. Mr Christie asserted “unconditionally” that they occurred as he swore in his affidavit: T 231.50. However, in his (and the Christie Agency’s) reply to the s 106 summons (verified by the affidavit of Mr Christie), it was asserted that the relevant meeting took place on 23 October 2000. Mr Christie in his evidence-in-chief had corrected what he said was a mistake (see paragraph 18 of his affidavit sworn 21 May 2003). I do not accept the submission put by Mr Fernon SC and Mr McNally of Counsel for the Wiseman parties, that Mr Christie’s evidence in cross-examination that he had made a mistake was “disingenuous”. I do think, however, that (to put the matter neutrally) it indicates that the reliability of Mr Christie’s recollection of relevant events is questionable. (In this context, it may not be insignificant that heads of agreement, apparently having binding contractual effect, and setting out all materials terms of the bargain that was documented in the agreement, were signed on 24 October 2000. By then, the “due diligence” process – upon which, Messrs Christie, Stevenson and Cooney say, Mr Christie depended to make his decision as to whether to buy and at what price – had been completed: a more logical time to strike a verbal bargain as to the essential terms than 13 September 2000, at which time the due diligence process was barely underway.)

32 Another example of inconsistency relates to the keys and car park card issued to Mr Wiseman after the sale was completed.

33 In August 2001, Mr and Mrs Wiseman were to go on holidays. It is clear that, by that time, the relationship between Mr Wiseman and Mr Christie had broken down. To the extent that Mr Christie sought to suggest that it had not, I do not accept his evidence; (and his attempts to suggest that the relationship had not broken down are among the matters that I have taken into account in forming my assessment of his credibility).

34 Mr Wiseman retained solicitors who wrote to Mr Christie. It is clear that, despite his denial, Mr Christie resented this. (Again, I take into account, in assessing his credibility, his denial of the obvious in this regard.)

35 Immediately after Mr Christie received the first letter from Mr Wiseman’s solicitors, he instructed Mr Nies to demand from Mr Wiseman the return of the “office keys”. This demand was repeated the following day; and Mr Christie told Mr Nies that if the keys were not returned “their non return … will be treated as theft and the North Sydney Police advised that we are suspicious of these keys being used for illegal purposes”.

36 What might seem to be a petty incident was, in truth, significant in the case. Mr Wiseman alleged, among other things, that he had been constructively dismissed. The dealings between the parties in relation to Mr Wiseman’s keys were one of the foundations of this argument. I have no doubt that Mr Christie appreciated that this was so.

37 It was put to Mr Christie that his actions, in directing the return of Mr Wiseman’s keys (and, subsequently, car park card), were an angry reaction to the solicitor’s letter, and an attempt to humiliate Mr Wiseman and “drive him out of the office” (T 193.5-195.25). Mr Christie denied this. Mr Nies, however, agreed that Mr Christie’s demeanour was “upset” and “agitated” on this occasion.

38 Further, in the course of this part of his evidence, Mr Christie said (T 193.45-.50) that the return of the keys had been required because:

“He [Mr Wiseman] was going away on holiday. Quite often we leave our mil keys at the office when we are on holiday and log [sic] them, they are logged [sic] with Mr Nies. Please check it with him.”

39 Mr Christie said further that the return of the office keys was “the normal course of events” (T 194.5). He then sought to explain further (T 195.5):

“Like I said to you before, we lodge our security keys whenever we go away. There must have been something in respect that [sic] around that period of time, I know we had been robbed but I am not sure it was that particular point of time.”

40 This alleged justification for the demand for return of the keys was not raised at the time. It was not mentioned in the e-mails passing between Mr Nies (at the behest of Mr Christie) and Mr Wiseman. It was not referred to in the correspondence between the Wiseman parties’ solicitors and the Christie parties’ solicitors, although the request for return of the keys was.

41 If matters went no further, Mr Christie’s explanation would be unworthy of belief. It would be capable of explanation only as invention. When the episode relating to the keys is set in context (including assertions by Mr Christie that the Wiseman Advertising business was not performing to expectations; threats by Mr Christie not to pay, or to reduce, the instalment due on 1 November 2001; and the withholding of payment of the monthly instalments of Mr Wiseman’s retainer fee), the incident is explicable only as part of a campaign to humiliate Mr Wiseman and to drive him out of the business.

42 But there is another aspect. Mr Nies was asked (as Mr Christie had suggested) about the alleged practice of return of keys held by a person going on holidays. He said (T 348.5-.20) that he held office keys and a car park card while he was employed by the Christie Agency; that from time to time he took leave; that he did not hand in the keys or the card when he took leave; and that he did not know of any practice whereby that was required when an employee took leave.

43 As I have said, I accept Mr Nies as a witness on whose evidence of fact I can, in general, rely. His evidence on this point makes it plain that Mr Christie’s explanation, relating to the alleged practice, was fabricated. Given that it was not referred to in Mr Christie’s affidavits, the only conclusion is that Mr Christie decided to fabricate the explanation in the witness box when he was being pressed on a point that he knew was significant in the litigation.

44 Finally, for present purposes, I regard Mr Christie’s dealings with Mr Wiseman, from about June 2001 on, as dishonourable. In summary, I have come to the conclusion that Mr Christie sought, consciously but unconscientiously, to take advantage of the omission, from the agreement, of the schedule of expenses – the “addback” schedule – and of his own conduct in causing to be charged to the Wiseman Division (as the business of Wiseman Advertising within the Christie Agency was known) expenses well beyond those on which the forecast of profitability was based, as a justification for asserting that Mr Wiseman was in breach of the agreement and that the Christie Agency was entitled to reduce the purchase price accordingly. I do not think that Mr Christie’s actions, in this regard, were the actions of an honest man.

45 The result is that I do not accept Mr Christie as a witness of truth. I do not accept his evidence on disputed issues unless it is corroborated by contemporaneous documents (not prepared by him), or by other, acceptable, evidence.

The events of July and August 2000

46 On 4 July 2000, Messrs Wiseman and Baker met at the offices of Wiseman Advertising. They discussed the possible sale of the business of Wiseman Advertising. (Mr Wiseman says that it was Mr Baker who had called the meeting; Mr Baker says that it was Mr Wiseman. On balance, I think, Mr Baker’s account is to be preferred. The evidence does not indicate any reason for Mr Baker to “cold call” Mr Wiseman. It was more than a year ago, in June 1999, that Mr Christie had retained Mr Baker to find businesses that the Christie Agency could acquire.)

47 Mr Wiseman’s evidence is that, in the course of this meeting, he told Mr Baker that he required $1,000,000 for the business. Mr Baker does not deal specifically with this, although I think it is covered by his general denial of Mr Wiseman’s account of the conversation. On balance, I think it likely that Mr Wiseman did mention the sum of $1,000,000. I think it unlikely that Mr Wiseman would have agreed to allowing Mr Baker to take the matter further (as both of them agree happened) without giving some indication of the expected price.

48 There is a dispute between Messrs Wiseman and Baker as to whether Mr Wiseman gave some financial statements to Mr Baker at the 4 July meeting. Mr Wiseman says that he gave Mr Baker copies of the financial accounts of Wiseman Advertising for the 1997, 1998 and 1999 financial years. On balance, and having regard to Mr Baker’s somewhat uncertain evidence in cross-examination, I think it likely that Mr Wiseman did give Mr Baker those documents. It is clear that, in any event, and as a result of previous dealings, Mr Baker had a copy of the “management accounts” that I have referred to in para [8] above.

49 Mr Baker and Mr Christie say that a meeting took place between them and Mr Wiseman, at the offices of the Christie Agency, on 6 July 2000. They say that, during the course of that meeting, Mr Wiseman produced copies of “the financials for the business of” Wiseman Advertising, and that a discussion took place in the course of which Mr Wiseman said that the business was profitable and that he wanted a million dollars for it. Mr Wiseman denies that such a meeting took place. He says that the first such meeting took place on 23 July 2003.

50 There is a difficulty in accepting the alleged independent recollection of Mr Baker as corroborating Mr Christie on this point. Their accounts of the meeting are, almost word for word, identical: see paragraph 10 of Mr Baker’s affidavit sworn 12 May 2003, and compare paragraph 8 of Mr Christie’s affidavit sworn 21 May 2003. The only changes reflect, first, the change in the identity of the deponent and, second, an interpolation in Mr Christie’s paragraph 8 to identify “the financials” said to have been handed over by Mr Wiseman in the course of the meeting. I simply cannot accept that, almost three years after the meeting had occurred, two of the participants would have had an identical recollection of the words spoken at it, or that they would have chosen to introduce it in relevantly identical words.

51 I interrupt the narrative for a moment to note that similar eerie coincidences affect the affidavit evidence of Mr Christie, Mr Stevenson and Mr Cooney where they deal with the same events. It may be that the fault lies with the person who prepared the affidavits, preferring to use the convenience of word processing to reflect generally common instructions rather than to use the words of the prospective deponent. But even if that is so – and there is no evidence of the instructions actually given, in relation to the relevant meetings, by the deponents to whoever it was that prepared the affidavits – it calls into question, in a very serious way, the reliability of the affidavits as evidence-in-chief. I have no doubt that, if the deponents had been asked to give their evidence-in-chief on the relevant meetings orally, they would not have given such precisely corresponding accounts. Whether their accounts would have corresponded, in substance, or at all, must remain a matter for speculation.

52 On balance, I prefer Mr Wiseman’s evidence on this issue. Accordingly, I find that there was no meeting on 6 July 2000. After the meeting of 4 July 2000, the next meeting (ie, the meeting involving Messrs Wiseman, Christie and Baker) occurred, as Mr Wiseman said, in late July or early August 2000. Apart from anything else, Messrs Baker and Christie assert that Mr Baker had had an opportunity of reviewing the financial statements that were provided and of concluding that, from them, “the business is not worth” what Mr Wiseman wanted because the statements “show an EBIT … of around $200,000” on which basis, “the business is worth around $600,000 … “. Although Mr Baker’s affidavit had him explaining the term “EBIT” as meaning “Earnings Before Interest and Tax” (its normal meaning, as I understand it), his oral evidence was that it meant “expenses before income tax”. I do not think that Mr Baker had the capacity to perform, on the spot, the EBIT analysis that he and Mr Christie would suggest had occurred; and indeed, having regard to his oral evidence, I do not think that he had any understanding of what such an analysis would have required, or shown.

53 I think that the likelihood is, as Mr Wiseman says, that financial statements were provided at the meeting of 4 July and that they were analysed before the following meeting between himself, Mr Christie and Mr Baker. That meeting took place, as Mr Wiseman says, in late July or early August 2000.

54 Relevantly, at the meeting of July/August 2000, Mr Christie discussed his plans for expansion. Mr Wiseman discussed his own plans and stated that he wanted $1,000,000 “for my agency”. Mr Christie, not surprisingly, said that “[w]e will need to do an audit before we can agree on figures” and that “[w]e would also need to see your 2000 figures”.

55 Thereafter, Messrs Wiseman and Christie met for lunch on 7 August 2000. They discussed the proposed sale. Mr Wiseman says that he reinforced “that I want $1,000,000”. Mr Christie denies that this was said at that meeting. I find that it was.

56 Mr Wiseman says further that Mr Christie asked him whether he (Mr Wiseman) thought his business could make an annual profit of $250,000, to which Mr Wiseman says he responded that he thought it could “if you take out certain adjustments. There are certain expenses in the accounts that would not be a continuing expense for you.” Mr Christie denies that this conversation took place on that occasion. I find that it did. It is consistent with the management accounts referred to in para [8] above.

57 Thereafter, Mr Wiseman contacted Mr Lane to tell him of the discussions with Mr Christie and to warn him to expect a call from Mr Stevenson. Mr Wiseman also asked Mr Lane to prepare the accounts of Wiseman Advertising to 30 June 2000.

58 On 31 August 2000, Mr Lane sent Mr Stevenson a copy of the financial statements of Wiseman Advertising for the years ended 30 June 1997 to 1999 and (in draft) 30 June 2000 “as requested”. Mr Stevenson sent those accounts to Mr Christie by facsimile transmission. Mr Cooney says that he received from Mr Christie “[a]t or about the end of August … a copy of a set of accounts for the years 1997, 1998, 1999 and in draft for 2000 for the business of” Wiseman Advertising. I find that the documents given to Mr Cooney by Mr Christie included the documents given by Mr Lane to Mr Stevenson on 31 August 2000 (the accounts for the year ended 30 June 2000 were described as “draft financial statements”). I am satisfied that the document identified by Mr Cooney in his affidavit as having been given to him by Mr Christie at the end of August 2000 was not, in fact, received until about October 2000 (as a facsimile transmission note at its top would indicate).

59 Mr Christie commented to Mr Cooney that “it looks like the business makes a profit of about two hundred odd thousand” and instructed Mr Cooney “to review [the accounts] and work out a reasonable price based on the profit over three years”. This task Mr Cooney undertook.

The events of September 2000

60 Mr Cooney carried out his review of the accounts given to him by Mr Christie. He reworked the accounts so as to allocate expenses to what he regarded as “cost of sales” (or direct costs) and “other expenses” (my paraphrases of his own descriptions). He sent that to Mr Stevenson by facsimile transmission. He and Mr Stevenson then spoke, as a result of which Mr Cooney sent Mr Stevenson a further facsimile transmission. That set out “the questions I [Mr Cooney] would like to put to Wiseman’s accountant”.

61 On 5 September 2000, Mr Stevenson sent an e-mail to Mr Lane passing on, slightly reworded, the majority of Mr Cooney’s questions. Mr Lane in turn sent that to Mr Wiseman and, later the same day, Mrs Wiseman replied to Mr Lane. On 8 September 2000, Mr Lane sent an e-mail to Mr Stevenson (at home; a response was also sent to him the following Monday, 11 September 2000, at his office) setting out the substance of Mrs Wiseman’s answers. Mr Stevenson provided those answers to Mr Cooney.

The alleged meeting of 13 September 2000

62 As I have noted in para [27] above, Mr Christie says that, on 13 September 2000, he had a meeting with Mr Wiseman at which they reached (in two stages) oral agreement as to the purchase and as to Mr Wiseman’s annual retainer. Each of Mr Stevenson and Mr Cooney say that Mr Christie told them of the meeting. Mr Stevenson’s account of this conversation with Mr Christie is word for word identical with Mr Christie’s account. As with the meeting referred to in para [49] above, I do not accept that the two parties to it, after almost three years, could have identical memories of what was said. This makes it difficult to accept Mr Stevenson’s account as corroborating Mr Christie’s evidence on that point. By contrast, Mr Christie’s account of his conversation with Mr Cooney, and Mr Cooney’s account of the same conversation, are so disparate that it is impossible to regard Mr Cooney’s account as corroborating Mr Christie on this point. The difference is not merely a matter of detail or emphasis. On Mr Christie’s version, all that was discussed with Mr Cooney was the increase in Mr Wiseman’s retainer to $200,000 per year. On Mr Cooney’s account, all that was discussed was the purchase price of $650,000. Further, as Mr Cooney acknowledged in cross-examination, he could not have had such a conversation (in whole or in part) with Mr Christie prior to 5 October 2000, for the reasons indicated in para [29] above.

63 I do not accept that Mr Christie had a conversation (or conversations) with Mr Wiseman on 13 September 2000, or that, on or about that day, they reached agreement (as Mr Christie says) on the purchase price, the instalments and the amount of Mr Wiseman’s retainer. There are a number of reasons. They include my views as to the relative credibility of Messrs Wiseman and Christie. I set out others.

64 Mr Christie gave evidence of a number of conversations in which, so he says, he asserted a relationship between the profitability of an advertising business and the purchase price that might be paid for it. Mr Christie sought to propound, as a general rule, that the purchaser of an advertising agency would pay a price equal to three times its annual profit. Mr Christie said further that what was of interest was the profit of the underlying business and not the profit of the corporate vehicle through which it was conducted. For this reason, Mr Christie said, it was necessary to analyse the financial statements for the business and see what its underlying profitability might be. In some cases, he acknowledged, this would involve adding back expenses that were brought to account in the financial statements of the company through which the business was conducted, where those expenses were not necessary or proper expenses of the business and where they would not be expenses incurred by any purchaser. In other words, it was necessary to consider any “addbacks”.

65 Mr Christie said further that the role (in the present circumstances) of Messrs Stevenson and Cooney was to consider the financial performance of Wiseman Advertising, to identify any addbacks or other adjustments that might be necessary to enable an informed assessment to be made of the profitability of the underlying business of Wiseman Advertising, and to advise him as to whether it should be purchased and if so on what terms. Mr Christie made it plain that he did not possess the expertise to do what he had delegated to Messrs Stevenson and Cooney, and that he would rely on their advice.

66 As at 13 September 2000, Mr Cooney (whose specific role it was to analyse the financial statements of Wiseman Advertising) had not completed his task. Neither he nor Mr Stevenson had, by that date, formed a view as to the addbacks that were necessary to ascertain the underlying profitability of the business of Wiseman Advertising, or as to what that underlying profitability might be. Nor had they (alone or together) expressed any view to Mr Christie on whether the business of Wiseman Advertising was worth buying at all, and, if so, at what price.

67 In those circumstances, I do not accept that Mr Christie, as he said he did, would have made an offer to purchase the business of Wiseman Advertising for $650,000. On his own evidence, there was no rational basis upon which he could make such an offer. Nor do I think that the want of rational basis is cured by saying (as he does) that the offer was made (relevantly) “subject to my accountant doing an inspection of your books”. Nor was there any basis upon which Mr Christie could have said, as he swore he did, that the business was only worth $650,000 “as far as your accounts say”, or that “[t]he standard 3 times multiple of averaged profit from your accounts gives that approximate figure”. If by “accounts” Mr Christie was referring to the financial statements that had been sent by Mr Lane to Mr Stevenson on 31 August 2001, and by Mr Stevenson to Mr Christie that day or shortly thereafter, they showed nothing of the sort. They showed that the company, Wiseman Advertising, had made losses of $6,254, $4,985 and $8,711 for the years 2000 (from the draft figures), 1999 and 1998. If, however, Mr Christie was referring to the profitability that was shown on the adjusted figures for those years and 1997 (after taking account of the addbacks), those figures did not become available until 3 October 2000. If Mr Christie was referring to the figures set out in the document to which I have referred in para [8] above, the average “profit” (based on the annualised figure for 1999) was about $335,000; and even on the mistaken figures set out in the document itself (which took the figures to January 1999 as being, apparently, the annual figures), the average was $271,000. Even on this lower figure, Mr Christie’s approach would lead to a value of about $812,000; and on the correct figure, his approach would lead to a value a little in excess of $1,000,000.

68 Nor do I accept that Mr Wiseman would have given up, meekly and without haggling (as Mr Christie’s account would have it), his desire to receive $1,000,000 for the business. Even if Mr Wiseman accepted Mr Christie’s methodology – and Mr Wiseman’s view was that the appropriate multiple to apply to average profits was 4, rather than 3 – he would have realised that Mr Christie was not offering the true figure based on the only adjusted information then available. Further, Mr Wiseman had support for his view that the business was worth $1,000,000: the document referred to in para [8] above applied a multiple of 4 to the average annual profits and reached a value of about $1,075,000. (Even if Mr Wiseman did not realise that this figure was incorrect, and conservative, for the reasons given in the previous paragraph, there is no doubt that it provided the basis for his thinking at the time.)

69 Finally, and contrary to Mr Stanton’s submission, I do not regard the evidence of Messrs Stevenson and Cooney as corroborating Mr Christie on this point. I refer to what I have said in para [62] above.

The meeting of 19 September 2000

70 On 19 September 2000, Mr and Mrs Wiseman and Mr Christie met at the offices of the Christie Agency. Messrs Lane, Stevenson and Cooney also attended the meeting. Mr Christie says that, during the meeting on that day, he rehearsed the terms of the agreement that he said he had made with Mr Wiseman. He set out the terms, which were in substance those referred to in his account of the conversation (or conversations) of 13 September 2000. Mr Christie says that Mr Wiseman responded that this was “how I understand the deal”. There was then discussion of the position of employees and, Mr Christie says, a reference by Mr Stevenson to the need “to come over to your office to do the due diligence on your books …”, to which Mr Wiseman agreed.

71 Mr Stevenson’s account is, word for word, identical to that of Mr Christie. However, Mr Stevenson, unlike Mr Christie, had what he claimed was a contemporaneous note of the meeting. In general, the note supports Mr Stevenson’s account of the conversation, although it refers to him doing “the inspection of records”, rather than “the due diligence on your books”.

72 Mr Cooney’s account of the conversation is in substantially the same terms as Mr Christie’s, with a slight variation in the way that each sets out the way that Mr Christie referred to the interrelationship between profit, price and instalments.

73 Mr and Mrs Wiseman and Mr Lane deny that the terms of the “deal” were set out (indeed, Mr Wiseman denies that there was, at that time, any deal at all). In his oral evidence, Mr Lane went further. He was adamant that the meeting was “a waste of time” because nothing had come out of it – he was “a bit annoyed” because there was no discussion as to price (T 126.25-50); indeed, the meeting was inconsequential to the extent that he could not even charge his client for it (T 146.5).

74 I accept the evidence of Mr and Mrs Wiseman and Mr Lane on this point. I prefer it to the evidence of Messrs Christie, Stevenson and Cooney. I do so notwithstanding what Mr Stevenson said was a contemporaneous note made by him. Firstly, I do not accept that there was an “agreement” or a “deal” reached at that stage. Secondly, because of the coincidences between the accounts given by Messrs Christie, Stevenson and Cooney, I do not regard the last two as providing acceptable corroboration for Mr Christie. Thirdly, given the matters to which I have referred in para [67] above (in particular to the fact that the addbacks had not yet been established), I think it inherently unlikely that such a conversation would have occurred on 19 September 2000. I find that there was discussion of the nature of the savings that might be achievable, but that there was nothing specific discussed, let alone agreed. In summary, I accept Mr Lane’s characterisation of the meeting as, in substance, a waste of time.

The events of October 2003

75 On 3 October 2003, Mr Lane sent Mr Wiseman by e-mail a restatement of the income and expenses of Wiseman Advertising for the four financial years 2000, 1999, 1998 and 1997 that included a schedule of addbacks. The document showed that, after taking account of the addbacks, the “Management Net Profit” for each of those years was, respectively, $257,224, $243,186, $222,923 and $266,306. Mr Wiseman printed out the document and sent it to Mr Stevenson by facsimile transmission the same day. Mr Stevenson sent it to Mr Cooney on 5 October 2000.

76 On 5 October 2000, Mr Cooney prepared a “briefing note on Wiseman” for Mr Christie. That document attached some schedules, but Mr Cooney summarised the effect of them in the briefing note. I have referred to that briefing note, and its supporting analysis, in para [29] above. Significantly, Mr Cooney identified a profit of $395,000 (by inference, annually) after making adjustments and subject to “4 things that require further investigation”. Even on Mr Christie’s methodology, that would support a purchase price of $1,185,000.

77 Also on 5 October 2000, Mr Cooney sent a facsimile transmission to Mr Stevenson attaching the documents that he had prepared and raising a number of questions.

The meeting of 11 October 2000

78 Mr Wiseman says that he met Mr Christie on 11 October 2000 in the offices of the Christie Agency. He says that Mr Christie said that he was prepared to “give you what you want, but not in the way you want it”: a reference to Mr Wiseman’s requirement of a purchase price of $1,000,000. Mr Wiseman says that Mr Christie offered “to pay you $650,000 in stages and employ you as a consultant for a further two years at $200,000 each year”. He says that there was discussion of the instalments, of “the usual performance criteria given a yearly return of $250,000 profit” and of an incentive scheme. Mr Wiseman says that he replied that the profit of $250,000 would be dependent on the addbacks that had earlier been notified, to which Mr Christie assented.

79 Mr Christie denies that such a conversation took place, repeating his assertion that the relevant discussion (in the terms for which he contends) took place on 19 September 2000.

80 I accept Mr Wiseman’s evidence on this point. I do so in substance for the various reasons that I have given already. In particular, my assessment of Mr Wiseman is that although he would not easily give up on his requirement to be paid $1,000,000, he might well be flexible on the way that the sum could be paid. It is self evident that payment partly by way of capital instalments and partly by way of retainer would be more tax effective for the purchaser than payment entirely by way of capital instalments. (Mr Christie would not recognise this and I regard his failure to recognise the obvious as reflecting adversely on his credibility.)

81 Mr Wiseman says that he told Mr Christie that he would need to discuss the offer with Mrs Wiseman and would “get back to you tomorrow”. He says that, on 12 October 2000, he called Mr Christie and said that the offer sounded acceptable in principle, that he would need to see the heads of agreement, and that “our accountants will need to work out the finer details”.

82 The impact, on Mr Wiseman or Wiseman Advertising, of payment of an overall consideration in the way proposed was not explored. Prima facie, it might be thought to be disadvantageous, because part of the consideration would be received as income and, therefore, taxable. But this is not necessarily so: for example, Wiseman Advertising (to whom the retainer was to be paid) may have had accumulated tax losses; or it may have had in place some legitimate process for income distribution that would have minimised any adverse tax impact. It should also be noted that, even if the retainer is dissected into the notional annual salary for Mr Wiseman of $53,000 (as per the addbacks document of 3 October 2000) and the balance, and if $53,000 were regarded as remuneration rather than as part of an overall consideration for the purchase, the overall consideration would still be in excess of $940,000 (making no allowance for the impact of payment by instalments). In other words, even on this basis (which, again, was not explored) the overall consideration was close to the amount on which, supported by the document that I have referred to in para [8] above, Mr Wiseman had fixed.

“Due diligence”

83 Mr Stevenson went to the offices of Wiseman Advertising on 20 October 2000. He did so to inspect the “financial books” so as “to verify, as far as could be with a limited inspection, the income and expenses relating to the advertising business of [Wiseman Advertising], and that it was producing a profit of $250,000”. He says that he was given MYOB records and that he verified certain adjustments. He says further that he was given a list of clients of Wiseman Advertising with projected billings and other details.

84 Mrs Wiseman, to whom Mr Stevenson spoke on this occasion, says that Mr Cooney was present also. Mr Cooney and Mr Stevenson say that Mr Cooney was not present. On this issue, I prefer the evidence of Messrs Stevenson and Cooney. I think that Mrs Wiseman was mistaken in her recollection. I do not however think that she was seeking knowingly to give dishonest evidence on this point. There was no reason for her to do so. Objectively, it matters not whether the “due diligence” process on 20 October 2000 was attended by Mr Stevenson, Mr Cooney or both of them.

The agreement is concluded

85 Mr Christie sent Mr Wiseman a letter of offer on or shortly after 12 October 2000. Heads of agreement were signed on 24 October 2000; and the sale agreement itself was signed on 1 or 2 November 2000. (As to this last event: nothing seems to turn on the date on which the sale agreement was actually signed. It was expressed to be made on, and effective from, 1 November 2000; but the signatures of Messrs Wiseman and Christie have been dated (in handwriting) 2 November. If it were necessary to resolve the dispute, I would find that the date of signature was 2 November 2000.)

86 Messrs Wiseman and Christie had a meeting on 23 October 2000, before the heads of agreement were signed. On any view, they discussed the overheads of Wiseman Advertising. Mr Wiseman says that Mr Christie said, in substance, that for calculating profit bonus or adjustment of the purchase price “we will use your operating expenses from last year that were provided as adjusted by the addbacks”, and that “[a]ctual salaries for the staff that come over will be used instead of the present salaries”.

87 Mr Christie says that he said that “the overheads of your division once inside the Christie group will be the same as your current expenses, inclusive of your current salaries and of course your retainer”.

88 I prefer, in substance, Mr Wiseman’s account of the conversation. I do not think that it is credible that he could have agreed (as Mr Christie said he did) to overheads being calculated on the basis that they included the retainer of $200,000 per year to be paid to him. On any view, it is clear that if the business of Wiseman Advertising were to make a profit of $250,000 a year (on its turnover for the year 2000), the addbacks, as identified by Mr Lane on 3 October 2000, and investigated by Messrs Cooney and Stevenson thereafter, would need to be added back to the reported loss. The addback items included “wages – in excess” for Mr Wiseman of $55,000. His actual salary for the year was $108,000. The addbacks document made it clear that the “Management NET PROFIT” of $257,000 could only be achieved if, among other things, Mr Wiseman’s annual salary were taken to be $53,000. If the whole of his retainer were to be taken into account, then the immediate effect would be to reduce the management net profit by $147,000 – ie, in round figures, down to $110,000. On the clause 5.5 formula (which was contained in the draft heads of agreement that Mr Wiseman had by 23 October 2000 seen), the consequence would be a reduction of $364,000 in the purchase price.

89 It is simply not credible that Mr Wiseman would have agreed to the whole of his retainer being taken into account, for the purpose of calculating a derived profit of the Wiseman Advertising business, in circumstances where he knew that:

(a) substantial penalties were proposed if the profit of Wiseman Advertising, within the Christie Agency, was less than $250,000 per year (the heads of agreement that he had seen in draft contained exactly the same price reduction formula as was, ultimately, included in the agreement); and

(b) the projected “management net profit” of $257,000 depended entirely on adding back the addback items – and, critically, on imputing to him a salary of only $53,000.

90 It is also unlikely, in these circumstances, that Mr Wiseman would have agreed to the whole of his retainer being taken into account for the purpose of calculating net profit given that, as I have found, he understood that a substantial part of it was, in substance, the consideration for the purchase of his business.

91 There is a difficulty in Mr Wiseman’s account of this conversation, in that he has Mr Christie saying that “Brian [Cooney] and Ian [Stevenson] told me that they have been to your office and done the audit and they are satisfied with what they have seen there”. As I have found, Mr Stevenson only attended the office; Mr Cooney did not . However Mr Cooney was closely involved in the “due diligence” project, and it is likely that the reference to him was in terms of the due diligence or “audit” generally, and not specifically that he had been to the office of Wiseman Advertising.

92 Notwithstanding the difficulty to which I have referred, I accept Mr Wiseman’s account of the conversation of 23 October 2000, insofar as it deals with the question of overheads of the Wiseman Advertising business, in preference to Mr Christie’s account.

93 It may be noted that if Mr Christie’s account of the conversation were correct, then the bargain that was reached was not reflected in either the heads of agreement or the agreement that were prepared and signed soon thereafter. This is because, according to Mr Christie, “the overheads of your Division once inside the Christie Group will be the same as your current expenses, inclusive of your current salaries and of course your retainer”. However, both the heads of agreement and the sale agreement recognised that the operating costs were not to be “current expenses” (which would have resulted in the business making a loss), but those expenses that had been adjusted by adding back certain items, to be specified in an attached schedule. If, as is clearly the case, the schedule was to be, or was to embody the information contained in, the addbacks document sent by Mr Wiseman to Mr Stevenson on 3 October 2000, then the overheads would have been reduced by $253,478; and they would not include Mr Wiseman’s current salary ($108,000), but a notional salary of $53,000. On the other hand, Mr Wiseman’s account of the conversation, which contemplated that expenses would be brought to account on the basis of an agreed schedule, is consistent with the way the bargain was documented in both the heads of agreement and the final agreement. Again, Mr Christie’s description of “your current expenses” as including not only current salaries but also Mr Wiseman’s retainer is clearly inaccurate: there was the retainer paid to Mr Wiseman by Wiseman Advertising. A retainer was only to be paid to him by the Christie Agency, and that only after the takeover had been completed.

94 It was Mr Wiseman’s evidence that he wished the agreement to take effect from 1 December 2000, but that Mr Christie was insistent that it take effect from 1 November 2000. No doubt, this related to the fact that the months leading up to Christmas were profitable months in the advertising industry (or, at least, in Mr Wiseman’s part of it). In any event, it is clear that the agreement was prepared and signed with some degree of rapidity. It was not part of the Wiseman parties’ case that the agreement was unfair, or that they were otherwise entitled to some relief, because the agreement had been prepared rapidly and because they had not had an opportunity of having legal or accounting advice in respect of it. I mention this only because Mr Stanton, both in his cross-examination of Mr Wiseman and in final submissions, made much of the fact that Mr Wiseman had disavowed any such case. I did not understand, at the time of Mr Wiseman’s cross-examination, why this point was significant. I have received no enlightenment on this point from reading and rereading Mr Stanton’s submissions. I do not think that anything, in terms of credit or otherwise, turns on the fact that Mr Wiseman did not receive legal or accounting advice in respect of the agreement.

November 2000 to May 2001

95 Mr Wiseman and some former employees of Wiseman Advertising commenced to work for the Christie Agency from 1 November 2001. (Mrs Wiseman was not one of those who did so.) The Wiseman Advertising business was known, within the Christie Agency, as “the Wiseman Division”. Later again, a distinction was made between “Division 1” – the original, transferred, business of Wiseman Advertising - and “Division 2” – work introduced to the Wiseman Division by Mr Christie or others within the Christie Agency.

96 The Christie Agency was one of a group of companies which together carried on Mr Christie’s advertising business. Another of those companies was known as “Christie Direct”. Christie Direct provided studio services to the Christie Agency (including, from 1 November 2000, its Wiseman Division). Mr Cooney agreed that studio costs form a substantial part of the expenses of an advertising agency: they include production expenses and photography and copywriting costs. They are accounted for as “costs of sale”, or direct costs.

97 Prior to 1 November 2000, the studio costs incurred by Wiseman Advertising had been calculated according to the hourly remuneration rates of the employees involved. At least some of those employees were noted among those who would transfer to the Christie Agency. By contrast, Christie Direct charged out its services at an hourly rate. The hourly rate charged was very much higher than the aggregate of the hourly rates of the relevant employees. After 1 November 2000, the studio costs incurred by the Wiseman Division were charged to it on this basis. This, obviously, had a substantial and negative effect on the profitability of the Wiseman Division.

98 Before November 2000, the ratio of cost of sales (direct costs) to total sales (billings) for Wiseman Advertising was 41.7%. After 1 November 2000, that ratio increased to 69%. A substantial reason for this was the way in which studio costs were charged.

99 On a number of occasions between January and March 2001, Mr Wiseman complained to Mr Nies and to Mr Cooney about the way in which expenses were allocated to the Wiseman Division. One of the matters complained about was the way in which studio expenses were charged. Initially, they were charged at the “retail rate” of $175 per hour; after complaint, that was reduced to $85 per hour. But even the reduced rate was substantially in excess of the actual expenses incurred by Wiseman Advertising for studio costs prior to 1 November 2000.

100 When Mr Wiseman complained to Mr Nies, Mr Nies’ response was that direct costs were being debited in accordance with normal accounting practice.

101 Mr Wiseman was not alone in his concern about the manner in which costs were allocated to the Wiseman Division. After he left the Christie Agency, Mr Wiseman was replaced by Mr Steve Hogwood. Mr Hogwood was responsible for running the Wiseman Division. On 1 November 2001, he sent an e-mail to Mr Nies in which he queried the allocation of overheads, including “the cost of the studio to us … ”.

102 There was a downturn in the advertising industry as a whole during 2001 (see para [25] above). There is no suggestion that the downturn did not affect the Christie Agency or its Wiseman Division. Further, the Wiseman Division suffered specific problems. One of its major clients, FAI Home Loans, collapsed (along with the rest of the HIH Group) in early March 2001. Another major client, Opticom, was delisted by the Australian Stock Exchange. FAI had been responsible for $210,000 revenue in the year 2000 and Opticom had been responsible for $39,000 revenue in the same period.

103 Notwithstanding these setbacks, the monthly turnover of the Wiseman Division after 1 November 2000 was not substantially different to its average monthly turnover for the 2000 financial year. (Mr Wiseman asserted that the post takeover monthly turnover was about $10,000 higher than for the previous financial year; Mr Nies says that it was about $4,000 lower. Neither takes account of the figures from September 2001 on: on the evidence, the months from September to December are the busiest, and highest turnover, months for a business such as Wiseman Advertising. An accurate comparison would require some “seasonal adjustment” to be made to the 2000 figures.)

June and July 2001: the relationship deteriorates

104 Mr Christie became concerned that the Wiseman Division was not making enough profit. He had a meeting with Mr Wiseman on 8 June 2001. Although there is a difference between their accounts of the meeting, it is clear that, on either view, Mr Christie complained of the alleged failure of Wiseman Advertising to make a sufficient profit (or the represented profit) and suggested that Mr Wiseman should take a drop in his retainer.

105 There were further discussions between Mr Wiseman and Mr Christie, in which Mr Wiseman indicated (among other things) that he would not take a drop in his retainer. (I interpose that this is entirely explicable if, as I have found, the retainer was in effect a component of the overall consideration for the acquisition.)

106 Mr Wiseman’s monthly retainer ($16,666) had hitherto been paid by electronic transfer on the 15th of each month. No payment was made on 15 June 2001 (which was after Mr Christie had been informed that Mr Wiseman would not take a cut in his retainer). Mr Wiseman sent an e-mail to Mr Christie raising the non payment. The excuse proffered was (so I find, despite Mr Christie’s denial) that Wiseman Advertising had not accounted to the Christie Agency for certain receipts. That excuse was spurious: the agreement specifically contemplated that, in the case of some clients, it might be necessary for Wiseman Advertising to render invoices, receive payments and account to the Christie Agency for payments; the particular client, Trodat, fell within this category. There is no basis for a suggestion that Wiseman Advertising had not been accounting as required. Nor is there any contractual basis for a suggestion that such accounting was a prerequisite to payment of the retainer instalments.

107 Mr Christie continued to question the financial performance of the Wiseman Division during June and July 2001. On 19 July 2001, he had a discussion with Mr Wiseman in which Mr Christie referred to the possibility of litigation; Mr Wiseman referred to his and Mrs Wiseman’s desire to check the expenses that were being attributed to the Wiseman Division; Mr Christie agreed to this; and Mr Christie said that he would second Mr Hogwood to “help you run the agency … effective from 1 August at a cost of $4,000 per month”.

108 On 23 July 2000, Mr Wiseman wrote to Mr Christie, relating to Mr Hogwood, stating that “it would be unwise to incur further overhead costs until we can determine the reasons for our current lack of profitability”. (The copy of this letter in evidence is headed “draft”; it is the document to which I have referred in para [26] above.) Mr Christie replied by e-mail on 26 July 2001 saying, among other things, that “I do not say that there is a lack of profitability, I do say there is a lack of turnover and new business against your agreed commitment to this agency, which has led to a lack of promised profit”. Mr Christie referred further to the possibility that he might have been “misled as to the business having been there in the first place”. He said that he would do “whatever it takes” to “protect the contract we have”.

109 In the meantime, Mr Wiseman says that he and Mr Christie had a further meeting on about 25 July 2001, in the course of which Mr Christie asserted that “you were supposed to give me a profit of $250,000 by 1 November 2000 [sic: obviously, “2001”]. I am under no obligation to give you anything. If you have a profit of $100,000 then you … will owe me $150,000. [sic: in fact, on the clause 5.5 formula, the reduction would be $260,000.] You and Moe [Mrs Wiseman] will have to work out how you will be paying that money. … You will have to take a cut in salary.”

110 Mr Christie denies the conversation. However, I accept that he said words to the effect of those set out in the preceding paragraph. It is consistent with the probabilities, objectively ascertained. His view of the substance of the contract was as he said; he was soon to assert an entitlement to reduce the instalment due on 1 November 2001 if the profit fell short of $250,000. He had already referred to the possibility of a reduction in Mr Wiseman’s retainer.

111 Mr Wiseman says that Mr Christie said further that he was not afraid of legal issues; that he said “I go all the way in these things”; that he might “have to have people like Tim Bristow or other people involved”; and that if there were a loss “you will be guilty under the Trade Practices Act for misrepresentation”.

112 Again, Mr Christie denies that he said words to that effect. Again, I find that they were said. My assessment of Mr Christie is that he is a person who would “go all the way” where he thought it to his advantage to do so. I have no doubt that he would make threats if he thought that to be in his interests.

113 Within the next week, Mr Christie referred twice to the possibility of having been misled as to the profitability of Wiseman Advertising. The e-mails referred to in para [108] above (sent the day after the meeting of 25 July 2001) and in the following paragraph show that Mr Christie was suggesting that he had been misled.

114 On 31 July 2001, Mr Christie sent an e-mail to Mr Wiseman calling on Mr Wiseman to produce “a report as to why your business has failed to achieve its, [sic] profit goals to date this year” and “why your projections, provided monthly, have not been achieved and why the revenues that have been achieved are so varied from those projected”. Mr Christie confirmed that he was “beginning to wonder if the business was there in the first place”.

August 2000: the relationship breaks down completely

115 There was an exchange of e-mails between Messrs Hogwood, Wiseman and Christie on 1 August 2001. Mr Wiseman’s point to Mr Hogwood was that “you need to sort out with doug [sic] as to how you are paid as we have not agreed for you to be on our payroll at this point”. Mr Christie replied to both, stating “let me be very clear, Steve Hogwood, has been appointed by me to handle your business on behalf of The Christie Agency. Within our agreement there is a facility to reduce overheads and increase them where necessary. In your case it is obviously very necessary. … Clive I am getting fed up with having to keep responding to such petty nonsense. Steve is on the payroll as of August 1st … . You are causing a rift in our mutual working relationships’ [sic] please stop it now … .” (emphasis supplied). The words that I have emphasised in bold were circled by Mr Wiseman on a printout of the e-mail, with a line leading from them to a handwritten note “how can I ever make money”.

116 On 2 August 2001, Mrs Wiseman sent an e-mail to Mr Christie asking for certain financial details. Clearly, this was to enable her to start an assessment of the profitability of the Wiseman Division: the starting point being an analysis of the expenses charged against it. Mr Christie approved the request and authorised Mr Nies or an assistant to prepare urgently the material required by Mrs Wiseman.

117 Mr Wiseman said that he had a conversation with Mr Christie on about 2 August 2001 in the course of which Mr Christie complained about Mrs Wiseman being “rude”. Mr Wiseman says further that there was discussion of ways in which “the issues” could be resolved, but that Mr Christie insisted on his legal rights. Mr Christie denies that such a conversation occurred, but I find, in substance, that it did. Again, I think, it is objectively likely that there were such discussions at that time.

118 On 9 August 2001, there was a meeting between Mr and Mrs Wiseman and Messrs Christie and Hogwood. There is no substantial dispute as to what was said in the meeting; and what I set out hereunder does not appear to be, in terms of its accuracy, a matter of controversy.

119 Mr Wiseman referred to the fact that neither he and Mrs Wiseman nor Mr Lane had a copy of the schedule referred to in clause 5 of the agreement. He asked for a copy. He said that he and Mrs Wiseman had “a different calculation in term [sic] of profitability” (presumably, to the view taken by Mr Christie).

120 Mrs Wiseman tabled a list of calculations. The first item referred to was studio costs. She said that studio time should not be charged “at retail” (see paras [96] to [101] above). She said that the actual cost incurred by Wiseman Advertising had been the salary cost of the relevant employees at $18.30 per hour. She calculated a credit of at least $15,360.

121 Mrs Wiseman’s document also referred to a number of expenses that had been charged against the Wiseman Division. They included accountancy fees of $2,500 for the due diligence process undertaken by the Christie Agency, legal expenses in relation to the acquisition totalling $4,223, amounts of rental payable under chattel leases that in fact had been paid out when the takeover occurred, removalists’ expenses and a number of other items.

122 Mrs Wiseman’s document also referred to a number of other matters. The result, in her view, was that the expenses charged to the Wiseman Division should be reduced by at least $47,022.

123 There was discussion of the issues raised. Mr Nies then produced a copy of the agreement and commented that the schedule was never prepared, but that Mr Stevenson had said “it was agreed verbally”. That could only be a reference to the addbacks document sent by Mr Wiseman to Mr Stevenson on 3 October 2000.

124 There was then further discussion of Mrs Wiseman’s document – again inconclusive. Mr Wiseman made the point that “delivery” of the annual profit depended on expenses being kept to those shown on “the schedule”, (ie, in context, the addbacks document), and that increasing expenses from the schedule was not right. Mr Wiseman further insisted that, in any event, the question of profitability was to be determined at 1 November; Mr Christie said that, in his opinion, it was clear as at 9 August that the annual profit figure would not be achieved by 1 November.

125 Mr Christie expressed his attitude as follows:

“If on November 1 you make a profit of $250,000 then I will give you a cheque for $200,000. That is not going to happen because of the up and down clause in the contract. So if you only deliver $150,000 I will shake your hand and say bad luck and see what we can do next year. … .”

126 There was further discussion (including as to the downturn across the whole advertising industry and the loss of clients). The meeting was inconclusive in the sense that Mr and Mrs Wiseman’s attitude was that they needed to see the schedule of expenses before they could take matters further, whereas Mr Christie’s attitude was that there was inevitably going to be a loss, and hence a reduction in or negation of the instalment of purchase price to be paid on 1 November 2001, and that Mr and Mrs Wiseman needed to present a plan to improve the performance of the Wiseman Division and allow him to get the benefit of his investment.

127 On 10 August 2001, there was an incident between Mr Wiseman and Mr Christie relating to Mr Christie’s treatment of an employee. Although there is a dispute as to the precise words used, it is clear that it was an ill-tempered and ill-mannered confrontation. If it were necessary to reach a concluded view, I would find that Mr Christie did speak in substantially the words attributed to him by Mr Wiseman: particularly having regard to an e-mail sent by Mr Christie to Mr Wiseman after the incident took place in which Mr Christie said, among other things, “ I am disgusted with myself at retaliating to your comments. Much can be said in anger that should later be withdrawn and I withdraw all my angry comments to you”.

128 Also on 10 August 2001, Mr Christie sent an e-mail to Mr Wiseman referring to the meeting the previous day. It referred to the failure to attach what Mr Christie called “The Asset schedule” to the agreement: clearly, a reference to the schedule of overheads referred to in clause 5.2. He called for “an amended [sic] offer to me against the shortfall of your projections … by 12 noon Friday 17th August”.

129 On 13 August 2001, a Monday, Mr Wiseman decided to take leave. He applied for leave from 16 August (a Thursday) to 24 August (a Friday) 2001. That came to Mr Christie’s attention and he sent an e-mail to Mr Wiseman asking for Mr Wiseman’s responses (including, presumably, to the e-mail of 10 August 2001) prior to departure. Mr Wiseman replied that “[w]e are currently taking advice on our position & we would expect to respond back to you by the end of the week”.

130 On 16 August 2001, solicitors acting for Mr and Mrs Wiseman and Wiseman Advertising wrote to Mr Christie. They referred to:

(1) The alleged intention of the parties that the calculation of profit under clause 5.2 was not to include the retainer payable to Mr Wiseman;

(2) The two annual retainer payments which, they said, were intended as a different way of “assessing the purchase price of the business”;

(3) The asserted fact that Mr Christie was adding inappropriate costs so as artificially to inflate the overheads of the Wiseman Division; and

(4) The circumstances that (so they said) Wiseman Advertising was entitled to be paid $200,000 on 1 November 2000 “regardless of the operating cost [sic] of the business”. They said “that the purchase price could only be adjusted at the end of the second year”.

131 The solicitors called for acknowledgment that $200,000 would be paid on 1 November 2001.

132 Mr Christie’s reaction was to instruct Mr Nies to demand from Mr Wiseman the return of the office keys held by him. I have dealt with that in paras [32] to [42] above. As I have said in para [41] above, I find that this was an instance of conduct on the part of Mr Christie intended to humiliate Mr Wiseman and to drive him out of the business.

133 On 17 August 2001, the Wiseman parties’ solicitors wrote to Mr Christie again, referring to the request for return of the office keys, and asked:

“Do we take it that that request is an indication that the Christie Agency Pty Limited intends to terminate Mr Wiseman’s employment. Please confirm.”

134 There was a further exchange of e-mails between Messrs Christie and Wiseman on 20 and 24 August 2001. In his e-mail of 24 August 2001 Mr Wiseman asserted, among other things, that “[m]onthly turnover has since 1 November 2000 averaged $115,571.37 compared with a monthly average of $105,530.60 for the previous financial year”. Mr Christie replied to this on 29 August 2001. Although his reply took issue with a number of matters raised by Mr Wiseman, it did not take issue with the statement that I have quoted.

225 In this case, however, it is not a sufficient description of the operation of clause 5 to say that, in the circumstances that happened, “the agreement afterwards prove[d] unprofitable”. It was inherent in the nature of clause 5 that the agreement would be unprofitable in any circumstance where the profit target of $250,000 was not reached in one year unless there were a redressing excess, in the other year, some thirteen times greater than the shortfall (the arithmetical product of the clause 5.1 and clause 5.5 multiples). General notions of fairness would encompass the process often described as “swings and roundabouts”. General notions of fairness would not be offended at the prospect that the outcome of the process of swings and roundabouts might favour one party or the other, depending upon the particular circumstances. That is because there is, inherent in the process (or in the underlying concept), the likelihood that the risk of benefit and burden is evenly distributed. That is not the case with clause 5.

226 Another matter that was debated between the parties, as having some relevance to the question of unfairness, was the construction of clauses 1.3 and 5.5. (The relief sought by the Wiseman parties includes the deletion, from clause 1.3(b)(2), (3) of the words “and less any amount relating to reduced profit of the Business”.)

227 The position of the Christie parties was that clause 1.3 entitled the Christie Agency to reduce the instalment of purchase price due on 1 November 2001 if there were a profit for the 12 months then ending less than $250,000. The position of the Wiseman parties was that clause 5.5(b) meant that any deduction could only be made from the final instalment.

228 Part of the overall circumstances of unfairness on which the Wiseman parties relied was the assertion by the Christie parties of the right that, they said, was given to them by clause 1.3.

229 I do not think that this is a relevant circumstance of unfairness. The agreement is not well drafted (in this and other respects). It is at least an available view of the two clauses that the Christie Agency did in fact enjoy the right asserted, flowing from clause 1.3. But in any event, it is clear from the correspondence between the solicitors that the Christie Agency had been so advised. On balance, I think that the better construction of the two clauses is that clause 1.3 does not authorise a deduction. That is because clause 5.5(b) provides an express stipulation that the reduction is to be deducted from the final instalment, whereas clause 1.3 only authorises the deduction of any amount that may (on the proper construction of the agreement) be deducted. If (on the proper construction of the agreement) no amount can be deducted in the first year, then there is nothing on which clause 1.3(b)(2) can operate. But in any event, it is not necessary to express a concluded view on this. That is because I do not think that the assertion of what is at least an arguable legal right can amount to unfairness where the right (if found to exist) is not itself unfair. If the effect of clauses 1.3 and 5.5 were as the Christie parties submitted – ie, if reductions in purchase price could be deducted from each instalment and not just from the second, that would not of itself be unfair. Unfairness would only arise from that operation of clause 1.3 because (and to the extent that) it gave expression to unfairness flowing from the operation of clause 5.

Constructive dismissal

230 There was no pleaded issue as to whether or not Mr Wiseman was constructively dismissed. However, the parties each addressed submissions to this issue.

231 The concept of constructive dismissal was described by Allsop J in Thomson v Orica Australia Pty Ltd [2002] FCA 939, [141] as follows:

“Constructive dismissal is an unlawful termination of the contract of employment in circumstances where the employee leaves without an express act or enunciation of “dismissal” by the employer. It will be taken to be a dismissal (hence the word “constructive”) if the employer has behaved towards the employee in a way that entitles the employee to treat the employment as at an end. How that behaviour of the employer is to be described is at the heart of the matter … [I]f one is to approach the matter in straightforward contractual terms, there is ample authority for the implication of a term in a contract of employment that the employer will not, without reasonable cause, conduct himself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee; Burazin v Blacktown City Guardian (1996) 142 ALR 144. Breach of that implied term would entitle the employee to treat himself as wrongfully dismissed. “

232 In the present case, it is an understatement to describe the conduct of the Christie parties towards Mr Wiseman as “likely to damage the relationship of confidence and trust between the parties as employer and employee”. It would be more accurate to describe that conduct as intended to force Mr Wiseman out of the business; and as having had that effect. To put the matter in contractual terms, it was as clear an instance of repudiation of obligation as one is likely to find. In those circumstances, I have no doubt that Mr Wiseman was entitled to do as he did, and treat the contract as at an end and himself as wrongfully dismissed. All that was lacking was express words of dismissal; and the conduct of the Christie parties made express words unnecessary.

Relief

233 The Wiseman parties are entitled to declarations in accordance with paragraphs (1) and (2) under the heading “Claims” of their summons in the s 106 proceedings.

234 They are also entitled to relief in respect of clause 5 of the agreement. If the only defect in clause 5 were that it referred to a nonexistent schedule, then the appropriate order might be to vary the agreement by adding a schedule in the form of, or setting out the information contained in, the addbacks document. However, that would not deal with the unfairness referred to in paras [208] and [222] to [225] above. No one suggested that I should try to rewrite clause 5 so as to overcome the inherent imbalance between subclauses 5.1 and 5.5. I think that the only way to redress the overall unfairness of clause 5 (ie, both the aspects just referred to) is to vary the agreement from its commencement, by deleting the whole of clause 5. In a sense that would leave the Christie parties in a stronger position than the Wiseman parties. The Christie parties would retain whatever rights the law gives them for any breach of contract or misrepresentation in relation to profit shortfall; but the Wiseman parties would have no bonus entitlement in the event of overachievement of profit.

235 For the reasons that I have indicated in para [229], I do not think that there is any relevant unfairness in clause 1.3(b) – particularly once the agreement is varied by deleting therefrom clause 5. In any event, even if I were of a different view in relation to clause 1.3, there is no basis, apart from its relationship with clause 5, for the deletion of the words “less any amount relating to reduced profit of the Business” from clause 1.3(b)(3).

236 I do not think it is necessary to insert into the agreement a term as referred to in para 3(c) under the heading “Claims” of the summons for relief. In circumstances, where the contract has come to an end, and where the power to order the payment of money under s 106(5) extends well beyond the power to order an amount due under the terms of the contract, I see no utility in what is proposed.

237 In my judgment, justice requires that the Wiseman parties be put, so far as is possible, in the position that they would have enjoyed had the agreement (varied by the deletion of clause 5) been performed. Wiseman Advertising should therefore receive the instalment of purchase price of $200,000 due on 1 November 2001 and the second instalment, also of $200,000, due on 1 November 2002. Wiseman Advertising, or Mr Wiseman, should also have the unpaid instalments of the annual retainer.

238 The effect of such orders is to transfer to the Christie parties the risk that there would have been a profit shortfall for either or both of the two years following the making of the agreement. However, in circumstances where the Christie parties have made it impossible to say whether or not this was so, I do not think it appropriate to visit the outcome, in financial terms, upon the Wiseman parties. Although this is not, strictly speaking, a case of assessment of damages, I think that it is appropriate to resolve any doubtful questions against the wrongdoer: Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46, 59 (Handley JA); see also Radosavljevic v Radin [2003] NSWCA 217 [54] (Mason P, with whom Handley and McColl JJA agreed).

239 Section 106(6) requires there to be taken into account “whether or not the applicant … took any action to mitigate loss”. There was no submission for the Christie parties that I should take into account, adversely to Wiseman Advertising, any question of mitigation of loss.

240 Mr Wiseman’s evidence was that he had ceased to work in the advertising industry in about January 2003, and that thereafter he was engaged in the business of property development. There was evidence that his gross income for the year ended 30 June 2002 had been about $45,000. On 26 September 2003, Mr Lane produced a letter certifying that “Mr Wiseman’s income for the ensuing period will be approximately $215,000”. As I understand it, that was the income, or profit, that Mr Wiseman expected to make from a property development project at Ettalong. Both on the face of the letter and from Mr Wiseman’s evidence, it is clear that the figure referred to was a projected figure and did not reflect his actual earnings up until the date of the letter.

241 Mr Stanton did not submit that I should take into account, under the rubric of mitigation, Mr Wiseman’s projected income. I would not in any event do so: on the evidence it relates to a period commencing more than two years after the making of the agreement - ie, after all performance under that agreement (including the payment of money) should have been completed.

242 If Wiseman Advertising or Mr Wiseman receives the full amount of the retainer without Mr Wiseman having been required to work in the business of the Christie Agency for the balance of the two year period, then there will be an element of overcompensation. However, in circumstances where it was the behaviour of the Christie parties, amounting to constructive dismissal, that caused Mr Wiseman to leave, and thus deprived the Christie Agency of the benefit of his services, I do not think that this should be taken into account by way of reduction in the amount otherwise payable. There are two supporting reasons why this is so.

243 First, I have concluded that, in substance, the whole amount payable under the agreement was payable by way of consideration for the acquisition. Since the Christie Agency has that which it sought to acquire, it should pay the whole of the consideration. Second, Mr Wiseman made a claim for the payment of money “to compensate him for his anxiety, distress, vexation and humiliation”. I do not propose to make a separate award under that heading. To the extent that the order for payment of his full retainer could be seen as overcompensation because he has not rendered the full services in return, the excess may fairly be treated as compensation for those factors.

The position of Mr Christie

244 In para [6] above, I referred to Mr Christie as the “principal” of the Christie Agency. In his affidavit sworn 21 May 2003, Mr Christie described himself as “the Managing Director and one of the two shareholders in” the Christie Agency. He said, in paragraph 2 of the same affidavit, that he has “been the principal owner of the business” since 1988. He said nothing in his second affidavit, sworn 15 July 2002, to suggest that the position had changed. In his evidence-in-chief, he affirmed the truth and correctness of his affidavits, and said that there was nothing he wished “to add to or detract from” those affidavits.

245 However, at T 169.40, in answer to a question, “you are the Managing Director of the company?”, Mr Christie responded, “I was at that time, yes”. The reference to “that time” is a reference to about August 2001. It is unclear whether Mr Christie was intending to assert that he was no longer the Managing Director of the Christie Agency.

246 In the s 106 summons for relief, under the heading “Summary of Matters of Fact and Law”, the Wiseman parties asserted that Mr Christie “was at all material times Managing Director of, a shareholder in and the controlling mind and will of” the Christie Agency. The Christie parties’ response (verified by Mr Christie’s oath) was that Mr Christie was “a shareholder and director of” the Christie Agency; but they denied that he was its controlling mind and will.

247 Mr Christie said that the other shareholder in the Christie Agency was his wife. It does not appear that she was a director, or otherwise played any part in the affairs of the Christie Agency.

248 What is clear, from all the evidence – not only that of Messrs Stevenson, Cooney and Nies, but also that of Mr Christie himself – is that all relevant decisions of the Christie Agency, relating to the acquisition of the business of Wiseman Advertising, were made by Mr Christie. It is equally clear that all relevant decisions of the Christie Agency, relating to the breakdown and cessation of the relationship and the events that I have found constituted a constructive dismissal of Mr Wiseman, were made by Mr Christie. There is no basis for concluding, so far as is relevant in these proceedings, that anyone other than Mr Christie controlled the operations of the Christie Agency.

249 The parties’ submissions did not disagree as to the principles to be applied in making an order for payment of money in connection with an unjust contract against a person who is not a party to that contract.

250 As I have indicated in para [206] above, the starting point of the analysis is the decision in Brown. At 163-164, Barwick CJ said that even if proceedings for the variation of avoidance of a contract must be initiated by one of the parties to it, the parties to the proceedings are not necessarily limited to the parties to the contract. At 164-165, his Honour said “that the power to order the payment of money is not limited to the making of an order for the payment of money by one of the parties to the contract or arrangement varied or avoided”. At 165, Barwick CJ said that the power to order payment of money “in connection with” a contract etc declared or varied:

“… is at best no more than a power to make such an order as can reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement which has been varied or avoided. It may in truth be limited to a power to make an order for the payment of money which has in fact a real connection with the making, variation, or avoidance of the contract or arrangement. However in either case it will, of course, include power to make an order for payment of money which has been paid or which was payable under the contract arrangements themselves. But, in my opinion, the power will not be limited to the making of such orders. It will extend to ordering the payment of money where the order on the larger view of the jurisdiction given by the sub-section could be considered to be appropriate to effect wholly or partially the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement.”

251 At 166, Barwick CJ said that whether an order against a non party for the payment of money was beyond power “depends on all the circumstances and the terms of the order itself”.

252 At 168, Barwick CJ stated, as a basis for an order for payment of money against non-parties to the contract, “that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation”.

253 At 170, Menzies J posed the question, of what is a payment of money “in connection with” a contract that has been avoided. He said:

“It seems to me, without exhausting the meaning of the phrase [ie: “in connection with”], that a payment of money in respect of (1) work done, or (2) money spent, or (3) obligations incurred, under the avoided contract or arrangement, is probably to be regarded as a payment in connection therewith so long as the person who is ordered to make the payment is a person who is connected in some way with the making of the contract, or the work done, or the expenditure made, or the obligation incurred thereunder. Such persons could, I think, be ordered as it were to recompense the worker for what he has lost. “

254 His Honour continued by giving examples where work had been done for the benefit of a director or a shareholder of a company that was a party to the relevant contract or arrangement.

255 The parties referred me to a large number of decisions of the Industrial Relations Commission and its predecessors, in which the reasoning in Brown was explored and applied. Without being disrespectful, I do not think that it is necessary to go beyond the wording of the section and the analysis that was given in Brown. There must be:

(1) A requirement that the payment of money can be regarded as “just in the circumstances of the case” – ie, that the payment go in some way towards alleviating the injustice that is the foundation of jurisdiction under the section; and

(2) Some relevant connection between the making or performance of the contract and a non party to the contract against whom an order for the payment of money is to be made.

256 In the present case, I conclude that Mr Christie had a sufficient connection with the making and performance of the agreement to justify the making of a money order against him. My findings demonstrate that he had a culpable association with the making or operation of the contract and with the unfairness that I have found. He was, as was put in the written submissions for the Wiseman parties, “the architect of the unfairness”. It was he who was responsible for negotiation of the contract with Mr Wiseman. It was he who was responsible for the actions of the Christie Agency that amounted to a constructive dismissal of Mr Wiseman. It was he who caused the Christie Agency to retain the benefit of the agreement without paying the greater part of the consideration. In those circumstances, to hold that Mr Christie has no personal liability, so that the Wiseman parties should be left to their remedies against the Christie Agency, would be to compound injustice with injustice. I do not propose to take that course.

257 The submissions for the Christie parties on this issue were less than emphatic. I refer to paragraphs 56 to 62 of the written submissions in reply, dated 27 April 2004. In summary, those submissions are as follows:

Paragraph 56: Accepts the test to be applied but disagrees with the factual conclusions drawn.

Paragraph 57: “ … the construction that must apply to the agreement in point is that nothing Christie did created the lack of profitability and more importantly, not until June 2001 did Wiseman contend that the agreement was unfair and more importantly his protestation became more persistent in like terms thereafter. It was only when Christie indicated to him that the agreement may well prove not to have the desired consequences for Wiseman if the profit could not be achieved.”

Paragraph 58: The submission based on Swann (see para [223] above).

Paragraph 59: Mr Wiseman’s acknowledgment “that he was on even terms with Christie, that he was not at a disadvantage and that the absence primarily of advisers directly in execution of the agreement did not worry him or stop him from going forward”. This appears to be a continuation of the “ Swann ” submission.

Paragraph 60: Enquires “whether Christie had such a close connection with the agreement that he was the engine of unfairness it is the litanic-like complaint of Wiseman (Christie was the architect of the unfairness). It cannot be so proved just by repeating it like a mantra which is not only the effect of Wiseman’s evidence but equally the submissions in support”.

Paragraph 61: “Up to the negotiation of the agreement, its execution and thereafter, Christie had little if any involvement, until his enquiry in June 2001. In that regard it is hardly a causal connection or, more importantly, such a connection as to attract s 106 intervention …”.

Paragraph 62: The orders sought against Mr Christie should not be made.

258 There is no analysis of Mr Christie’s role in the events of July and August 2001, leading up to what I have found was the constructive dismissal of Mr Wiseman. There is no submission that Mr Christie was not the direct instigator of all those relevant acts on behalf of the Christie Agency; and if such a submission were made, I would reject it for reasons that will be apparent from what I have said already in relation to those events.

259 It is correct to say that the evidence as to events between November 2000 and June 2001 is relatively sparse. It is correct to say that, on the evidence, Mr Christie did not become involved personally until the end of this period. But what is clear is that, when Mr Christie did become involved, he agreed with everything that had been done relating to the accounting treatment for the Wiseman Division and, in particular, the allocation of expenses to that Division. In those circumstances, to say that Mr Christie had no real connection with the events that followed is, in my view, verging on the unreal. It also overlooks the circumstance that the unfairness began to bite when Mr Christie insisted on the wrong accounting treatment as a basis for his repeated assertions that the Wiseman Division would not make the requisite profit, and that he would be entitled thereby to reduce the instalment of purchase price due on 1 November 2001. I have concluded that the latter half of this argument was reasonably open to him; but not so the former half (which was its foundation).

Conclusions and Orders

260 The TPA proceedings brought by the Christie parties against the Wiseman parties fail. The Wiseman parties are entitled to an order for judgment in their favour with costs.

261 The s 106 proceedings brought by Wiseman Advertising and Mr Wiseman against the Christie parties succeed. Wiseman Advertising and Mr Wiseman are entitled to the declaration that they seek and to an order that the agreement be varied from its commencement by deleting therefrom clause 5. Wiseman Advertising is also entitled to an order for payment of the instalment of purchase price of $200,000 due on 1 November 2001 and the further instalment of purchase price of $200,000 due on 1 November 2002, with interest on each of those sums from its respective due date up until the date of judgment.

262 Wiseman Advertising or Mr Wiseman (or it might be each of them provided that there is no double recovery) is (or are) entitled to an order for the payment of the unpaid instalments of Mr Wiseman’s retainer, in each case with interest from its due date for payment up until the date of judgment.

263 Wiseman Advertising and Mr Wiseman should have their costs of the s 106 proceedings.

264 I direct the parties to bring in short minutes of order to give effect to these reasons. The orders should quantify the amounts, including interest, to which Wiseman Advertising or Mr Wiseman is (or Wiseman Advertising and Mr Wiseman are) entitled.

265 I stand the proceedings over to a date to be arranged with my associate. If the parties cannot agree on the proper costs orders to be made, I will hear argument as to costs on that date.

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Last Modified: 06/07/2004