Tin-Tagel Majikk Pty Limited v Hockey

[2025] NSWSC 578

Supreme Court

New South Wales

Medium Neutral Citation:

Tin-Tagel Majikk Pty Limited v Hockey [2025] NSWSC 578

Hearing dates:

12 – 15 August and 12 September 2024

Date of orders:

10 June 2025

Decision date:

10 June 2025

Jurisdiction:

Common Law

Before:

Walton J

Decision:

The Court makes the following orders and directions:

(1) Subject to orders 2 to 5, the defendants shall file and serve Short Minutes of Order reflecting this judgment within 21 days of the delivery of the judgment.

(2) In the event that the parties agree as to the calculation of interest with respect to the vendor finance and/or in accordance with the Court’s preliminary view as to interest on the retention amount, then interest shall be calculated on the basis of that agreement and encompassed within the Short Minutes of Order.

(3) In the event that the parties are in dispute as to the calculation of interest with respect to either the vendor finance or the retention amount, then the Short Minutes of Order shall not deal with the disputed question of interest, other than to provide for a timetable for the filing of submissions, in that respect, consistent with the timetable fixed for the receipt of submissions as to costs (if costs are in dispute) or as agreed.

(4) If there is no dispute as to costs, the Short Minutes of Order shall reflect the agreement of the parties as to costs.

(5) If there is a dispute as to costs, the Short Minutes of Order shall incorporate a timetable for the resolution of any issue as to costs which shall include provision for the filing and service of submissions and evidence as to costs and a statement as to whether the question of costs may be determined on the papers.

(6) Subject to orders 4 and 5, costs are reserved.

Catchwords:

CONTRACTS – Breach of contract – Sale of business contract – Whether vendors in breach of contract for failing to adjust the purchase price for tax liabilities and employee entitlements – Where clause did not impose an obligation on the vendors – Where two inconsistent clauses – Application of generalia specialibus non derogant maxim – No breach established

CONTRACTS – Restraint of trade – Sale of business contract – Whether vendor in breach of restraint of trade – Where vendor loaned real estate licence to a competing business during the restraint period – Construction of restraint of trade clause – Meaning of ‘capacity to exercise control’ – Where vendor found to have capacity to exercise control of competing business pursuant to Property and Stock Agents Act 2002 (NSW) – Breach established

CONTRACTS – Breach of contract – Sale of business contract – Where vendor did not discharge registered security interest – Whether vendor failed to comply with conditions precedent – Where vendor failed to satisfy conditions precedent – Classification of a contingency versus a promise – Whether purchaser waived the requirement to satisfy conditions precedent by proceeding with completion of the sale – Waiver of condition precedent established

CONTRACTS – Breach of contract – Sale of business contract – Whether vendor breached warranty – Whether shares were sold free of any security interests – Whether a security interest over the assets of a company is different from a security interest over the shares in a company – Where a company does not own its own shares – Where shares were sold free of any security interests – No breach of warranty established

CONTRACTS – Construction and interpretation – Principles of construction of commercial contracts – Application of principles set out in Electricity Generation

CONSUMER LAW – Misleading or deceptive conduct – Where certain pleaded representations not established on the evidence –Representation made as to intention to retire – Representation made as to future employment – Representation made as to predicted sales figures – Whether representations were misleading or deceptive or likely to mislead or deceive – Where representations as to future matters – Whether reasonable grounds for making representations as to future matters – Where reasonable grounds established – No misleading or deceptive conduct established

CONTRACTS – Remedies – Damages for breach of restraint of trade – Whether loss suffered as a result of relevant breach – Where failure to establish causation – Where failure to quantify damages – Where failure to demonstrate any loss – No entitlement to damages

EQUITY – Equitable remedies – Rescission – Whether restitutio in integrum possible – Where substantial time elapsed and substantially altered circumstances – Rescission not available – Whether partial rescission an available remedy –Partial rescission not available

CONSUMER LAW – Remedies – Remedies for misleading or deceptive conduct – Declaring whole or part of contract void – Whether court’s discretion informed and guided by principles at common law and equity – Where partial rescission not possible – Where no loss established – Partial rescission not available

EVIDENCE – Credibility of witnesses – Where similarities in affidavit evidence calls into question credibility of that evidence – Where no contemporaneous record – Where denial of the account by another witness – Evidence with striking similarity found not to be credible

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Competition and Consumer Act 2010 (Cth)

Corporations Act 2001 (Cth)

Evidence Act1995 (NSW)

Property and Stock Agents Act 2002 (NSW)

Cases Cited:

AH McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506; [1931] HCA 24

Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353

Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64

Aldi Stores (A Limited Partnership) v EFTPOS Payments Australia Limited [2011] FCA 1114

Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38

Amante v R [2020] NSWCCA 34

Andrews Advertising Pty Ltd v Andrews [2014] NSWSC 318; (2014) 99 ACSR 164

Angelina Spina v Permanent Custodians Ltd [2008] NSWSC 561

Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488

Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99; [1973] HCA 36

Australian Competition and Consumer Commissionv Dateline Imports Pty Ltd [2015] FCAFC 114

Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470

Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd [1999] FCA 752

Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915

Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162

Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200

Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319

Barescape Pty Limited as trustee for The V's Family Trust & Anor v Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust & Anor (No 9) [2012] NSWSC 984

Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242

Blatch v Archer (1774) 98 ER 969

Bottomley's Case (1880) 16 Ch D 681

Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95

Ceccon Transport Pty Ltd v Tomazos Group Pty Ltd [2017] NTSC 25

Chint Australasia v Cosmoluce [2008] NSWSC 635

Clarke v Newland [1991] 1 All ER 397

Commsupport Pty Ltd v Mirow [2018] QDC 134

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1

Cummings v Lewis (1993) 41 FCR 559

Dawnay, Day & Co Ltd v D’Alphen [1998] ICR 1068

De Poi Consulting Pty Ltd v Dutton (No 2) [2015] SADC 111

Developments Pty Ltd [2014] NSWCA 158

Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12

Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 167

Gould v Vaggelas (1984) 157 CLR 215; [1984] HCA 68

Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498

Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579; [2011] 1 All ER 190

Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; [1993] HCA 27

Johnston Fear & Kingham & the Offset Printing Co Pty Ltd v The Commonwealth (1943) 67 CLR 314

Just Group Limited v Peck [2016] VSCA 334; (2016) 344 ALR 162

Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49; (1990) ASC 55-990

Liu v Lam [2024] NSWSC 1306

Locke v Dunlop (1888) 39 Ch D 387

McGrath v Aust Naturalcare Products Pty Ltd (2008) 165 FCR 230; [2008] FCAFC 2

McPhillips v Ampol Petroleum (Victoria) Pty Ltd (1990) ATPR 41-014

Mills v Dunham [1891] 1 Ch 576

Minister for Immigration and Border Protection v CQW17 (2018) 264 FCR 249; (2018) 162 ALD 427; [2018] FCAFC 110

MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39

Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co (1894) 11 R 1; [1894] AC 535

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44

Pavlis v Pavlis [2021] NSWSC 1117

Potts v Miller [1940] 64 CLR 282; [1940] HCA 43

Price v Spoor (2021) 270 CLR 450; [2021] HCA 20

Properties Northside Pty Ltd (t/as Raine and Horne Manly/Freshwater) v Pickering [2015] NSWSC 310

PSG Franchising Ltd v Lydia Darby Ltd [2012] EWHC 3707 (QB)

Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (2016) 259 IR 47; [2016] FCA 430

Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13

Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd [2015] FCA 227; (2015) 113 IPR 11

Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40

Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186; [2023] HCA 8

Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50; (2014) 314 ALR 35

Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35

Sykes v Reserve Bank of Australia (1998) 88 FCR 511; [1998] FCA 1405

Ting v Blanche (1993) 118 ALR 543

Tin-Tagel Majikk Pty Ltd v Hockey [2024] NSWSC 1330

Tobin v Melrose [1951] SASR 13

Tomasetti v Brailey [2012] NSWCA 399

Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102; [1995] HCA 14

Watson v Foxman (1995) 49 NSWLR 315

Western Sydney Wanderers FC Pty Ltd v Football Australia Limited [2024] NSWSC 426

Wilkie v Gordian Runoff Limited (2005) 221 CLR 522; [2005] HCA 17

Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65

Young v Chief Executive Officer (Housing) (2023) 278 CLR 208; [2023] HCA 31

Texts Cited:

Alexandra Kamerling and Chris Goodwill, Restrictive Covenants under Common and Competition Law (6th ed, 2010, Sweet & Maxwell)

Colin Lockhart, The Law of Misleading or Deceptive Conduct (6th ed, 2023, Lexis Nexis)

J D Heydon, The Restraint of Trade Doctrine (4th ed, 2018, Lexis Nexis Buttersworth)

J W Carter, Elisabeth Peden, G J Tolhurst, Contract Law in Australia (5th ed, 2007, Lexis Nexis Buttersworth)

Oxford English Dictionary (online ed, accessed February 2025)

Wayne Covell, Keith Lupton and Louise Parsons, Covell & Lupton Principles of Remedies (8th ed, 2022, Lexis Nexis)

Category:

Principal judgment

Parties:

Tin-Tagel Majikk Pty Limited ACN 130 947 009 (First Plaintiff)
Danc Pty Limited ACN 079 357 869 (Second Plaintiff)
Kenneth Roy Folley (Third Plaintiff)
Kathryn Mary Folley (Fourth Plaintiff)
Majikk Pty Limited ACN 115 170 100 (Fifth Plaintiff)
Wayne Craig Hockey (First Defendant)
Susan Noelene Eastway (Second Defendant)
Ashleigh Jane Eastway (Third Defendant)
David Richard Eastway (Fourth Defendant)
Courtney Louise Eastway (Fifth Defendant)

Representation:

Counsel:
S Philips (First, Third, Fourth and Fifth Plaintiffs)
BF Katekar SC with E Hall (First, Second, Third, Fourth, Fifth Defendants)
Solicitors:
PBL Legal (First, Third, Fourth and Fifth Plaintiffs)
Aubrey Brown Lawyers (First, Second, Third, Fourth, Fifth Defendants)

File Number(s):

2020/159228

Publication restriction:

nil

JUDGMENT

1. This proceeding relates to a dispute arising from a transaction pursuant to which the first plaintiff, Tin-Tagel Majikk Pty Limited ACN 130 947 009 (“Tin-Tagel”), purchased from the first to fifth defendants, (“the vendors” or “the Hockey Family” or “the defendants”), the shares in the second plaintiff, Danc Pty Limited ACN 079 357 869 (“Danc”). Danc operated the real estate business known as Ray White Bateau Bay (“Ray White BB”). The first to fifth plaintiffs respectively are Tin-Tagel, Danc, Mr Kenneth Roy Folley (“Mr Folley”), Kathryn Mary Folley (“Mrs Folley”) and Majikk Pty Limited ACN 115 170 100 (“Majikk”), and shall be referred to collectively in this judgment as “the plaintiffs”.

2. Danc was put into receivership by Macquarie Bank Ltd (“Macquarie Bank”) on 2 April 2024, and is no longer actively participating in these proceedings nor seeking any relief.

3. In the period prior to 1 June 2018, the first defendant, Mr Wayne Craig Hockey (“Mr Hockey”), was the sole director and secretary of Danc. Both Mr Hockey and his wife, the second defendant, Mrs Susan Hockey (“Mrs Hockey”) ^[1] , were shareholders of Danc (collectively, “the Hockeys”). The other shareholders of Danc were Mr and Mrs Hockey’s children, Ms Ashleigh Jane Eastway, Mr David Richard Eastway, and Ms Courtney Louise Eastway; they are the third to fifth defendants in these proceedings, although they have not taken an active role on the basis that their interests are represented by the Hockeys. I will further discuss the status of the 6^th to 9^th defendants.

   1. I note that the second defendant was recorded as “Susan-Noelene Eastway” on the originating documents, which was the second defendant’s maiden name. At the time of the hearing the parties referred to the second defendant as Mrs Hockey and, accordingly, this judgment will refer to the second defendant as Mrs Hockey.

4. In February 2000, Mr Hockey, as Sole Director and Secretary of Danc, executed a Deed of Charge by which Danc granted a charge in favour of Macquarie Bank over all of Danc's assets (“the Charge”).

5. On 17 May 2018, a Share Sale Agreement (“the Agreement”) was entered into under which the Hockey family agreed ^[2] to sell their shares in Danc to Tin-Tagel as trustee for the “KR & KM FOLLEY FAMILY TRUST”. The obligations of Tin-Tagel were guaranteed by the third plaintiff, Mr Folley and Mrs Folley (collectively, “the Folleys”).

   2. Mrs Hockey was also referred to within the Agreement by her maiden name, Susan Noelene Eastway.

6. The fifth plaintiff, Majikk, was not a party to the Agreement. However, under the Agreement, there were obligations resting upon Majikk to grant certain security interests to the vendors.

7. The sale of the shares in Danc, by the vendors to Tin-Tagel, completed on 1 June 2018 (“Completion”).

8. The purchase price under the Agreement was $2.3 million. A deposit of $230,000 was paid on exchange, leaving a balance to be paid of $2,070,000. On Completion, this amount was made up of:

1. $690,000 in vendor finance provided by the Hockeys as set out in cl 6.6(e) of the Agreement (“the vendor finance”). This was payable 2 years after Completion, after which interest of 5% per annum was payable on any unpaid amount, accruing from the date of Completion;

2. $90,000, which when added to the $230,000 deposit became a $320,000 retention amount (“the retention amount”). The parties’ respective entitlements in relation to the retention amount are determined under cl 7.1 of the Agreement;

3. $13,654.99 for the vendor’s legal fees (such that, with the $90,000 referred to in (2) above, $103,654.99 was paid into the Richardson Legal trust account on Completion);

4. $36,942.78 was paid to Macquarie Leasing for one of Danc’s motor vehicles;

5. $800,899.78 to pay out the loan that the Hockeys had obtained for Danc from Macquarie Bank; and

6. $438,502.45 was paid to the Hockeys as the remaining purchase price balance.

9. There was a dispute about the retention amount (which is addressed below). In April 2019, the Folleys agreed to the release $265,084.64 of the retention amount to the Hockeys (which amount was released to them). The balance of $54,915.36 remains in the Hockeys’ solicitor’s trust account and remains in dispute (and is claimed in the Hockeys’ Cross Claim ^[3] ).

   3. I note that there appears to be an administrative error on the First Cross-Claim as Mr and Mrs Hockey’s children appear under the heading cross-defendants. I will treat Ashleigh Jane Eastway, David Richard Eastway, and Courtney Louise Eastway as cross claimants and give leave for any application to rectify that matter if required.

10. The vendor finance was payable on 1 June 2020, on the two-year anniversary of Completion of the Agreement. However, the vendor finance was not paid and instead, on 28 May 2020, the Folleys filed the Statement of Claim in these proceedings. It was served on the Hockeys’ solicitors by email on 1 June 2020.

11. It is common ground that, in broad terms, the Folleys’ claim can be expressed as follows.

12. In their Second Further Amended Statement of Claim (“2FASOC”), the plaintiffs advanced six claims against the defendants. Those claims, and the legal issues they give rise to, were outlined in an Agreed Statement of Issues (“ASOI”). Those claims are (with claims 1A and 1B being combined):

1. The Folleys claimed that the Hockeys breached the Agreement by virtue of the purchase price not being adjusted on settlement to account for Danc’s (a), tax liabilities and (b), employee entitlements. The Folleys sought damages of $164,435.48. The two claimed adjustments are factually distinct and are dealt with separately as claims 1A and 1B respectively.

2. The Folleys claimed that the Hockeys breached the Agreement by virtue of not paying to the Folleys the value of lost Management Agency Agreements (“MAAs”), which they contend amount to $213,844.86. The Folleys seek damages in that sum.

3. The Folleys claimed that Mrs Hockey breached her restraint of trade by being the licensee in charge of Boyle Partners Pty Limited (“Boyle Partners”), who operated Ray White Berkeley Vale. The Folleys sought damages in this respect, however, the amount has not been quantified.

4. The Folleys claimed that the Hockeys failed to comply with the conditions precedent under cl 3 of the Agreement (“the conditions precedent”) and breached the warranties under the Agreement by not disclosing, or causing to be discharged, the Charge over Danc held by Macquarie Bank (“the warranty breach”). While the 2FASOC does not contain any prayers for relief in respect of that alleged breach, what the Folleys sought was damages (whether at law or pursuant to the indemnity contained within the Agreement) and partial rescission of the Agreement.

5. The Folleys claimed that the Hockeys made several representations prior to entering into the Agreement which were misleading and deceptive. They seek damages (the amount of which has not been quantified) and, in effect, rescission of the Agreement and the security agreements relevant to the vendor finance.

13. Albeit in broad terms, under the Cross-Claim (“CC”), the Hockeys sought repayment of the vendor finance (less an offset for employee entitlements required by the Agreement) and the balance of the retention amount, plus interest. The Folleys’ defence relied solely on them succeeding on their five claims summarised above.

OVERVIEW OF THE AGREEMENT

Sale of Shares in Danc and Purchase Price

14. The relevant definitions under the Agreement, set out in cl 1.1, are as follows:

“MAAs means a management agency agreement signed by an owner for each of the properties listed in the rent roll as set out in schedule 8.

…

Security Interest means any third party interest or encumbrance of any nature whatsoever including (without limitation):

(a) a security interest as defined in Section 12 of the Personal Property Securities Act 2009 (Cth);

(b) a mortgage, charge, pledge, lien, hypothecation or title retention arrangement;

(c) a right of set-off or right to withhold payment of a deposit or other money;

(d) a right of any person to purchase, occupy or use an asset (including under an option, agreement to purchase, licence, lease, or hire purchase);

(e) a trust or other third party interest; and

(f) an agreement to create any of the above or to allow any of them to exist.

…

Warranties means the warranties provided by the Vendors set out in Schedule 4.”

15. Clause 2.1(a) of the Agreement states:

“The Vendors agree to sell to the Purchaser and the Purchaser agrees to purchase from the Vendors the Shares for the Purchase Price with any and all accrued or attached rights free from any Security Interest, subject to the satisfaction of the Conditions Precedent and otherwise on the terms of this Agreement.”

16. Clause 4.1 states:

“The Purchase Price shall be $2,300,000.00 less any amounts payable by the Vendors under this Agreement, plus or minus other Adjustments under this Agreement.”

17. Clause 6.4 relevantly states:

“...the Vendors must on Completion:

(a) give the Purchaser absolute ownership of and title to and in all the Shares, free from any Security Interest…”

18. Clause 6.5 relevantly states:

“On Completion the Vendors must:

...

(b) Deliver to the Purchaser;

...

(x) all releases in relation [to] any Security Interest recorded on the Personal Property Securities Register (‘PPSR’) in relation to the Company , duly executed by the grantee to fully release the Security Interest and evidence of recording of that release on the PPSR;

(xi) evidence that all loans to the Company have been satisfied and discharged;

…”

19. Clause 6.6 relevantly states:

“The Purchaser agrees to pay the Purchase Price in the following manner:

(a) Deposit to be paid to the Vendors’ Lawyers trust account on the date of this Agreement. The Deposit will be held by the [Vendors’] lawyers and released on Completion.

(b) Balance of the Purchase Price at Completion: the balance of the Purchase Price paid in accordance with clause 6.6 plus or minus the following adjustments as set out in the Completion Balance Sheet:

(i) Minus Company Liabilities as at the date of Completion (including present and future Liabilities for Taxes in respect of the period up to the date of Completion;

(iii) Minus Employee Entitlements accrued as at the date of Completion in accordance with Schedule 2;

…

shall be paid on Completion.”

20. Clause 6.8 and Sch 2 set out the basis for the adjustment to the Purchase Price for employee entitlements. Clause 6.8(f) states:

“Notwithstanding anything else herein contained the parties acknowledge that the adjustments in accordance with this clause shall be set off against the amount of the Vendors’ finance being provided by Wayne Craig Hockey and Susan Noelene Eastway pursuant to clause 6.6(e), thereby reducing the total amount payable to Wayne Craig Hockey and Susan Noelene Eastway at the end of the 2 year period.”

Conditions Precedent

21. Clause 3.1 states:

“The obligations of the Vendors and the Purchaser to complete the sale and purchase of the Shares are not binding unless the Conditions Precedent set out in clause 3.2 below are satisfied or waived under clause 3.3.”

22. Clause 3.2 provides:

“Completion is subject to and conditional upon:

(a) all loans to the Company being fully satisfied and discharged; and

(b) all loans from the Company to any third party being fully satisfied and discharged; and

(c) the removal of the Company as trustee for any trust which the Company is a trustee; and

(d) the transfer from the Company to the new trustee of any trust which the Company may have been trustee prior to its removal under clause 3.2(c) above, of any property held by the Company as trustee for such trust; and

(e) the consent of the Lessor being obtained to any deemed assignment of the Property Lease; and

(f) the Purchaser entering into a valid and enforceable Franchise Agreement with the Franchisor;

(g) the delivery of an executed release or undertaking that any relevant registration on the PPS Register will be removed or transferred to the Vendors on or after Completion; and

(h) the discharge of any inter-company or shareholder's loan; and

(i) no material adverse change having occurred in relation to the Business and the Company; and

(j) the Vendors have confirmed in writing that all amounts due to Terminating Employees, including any wages, salary, allowances, commissions, remuneration, superannuation contributions, accrued annual leave entitlements or other benefits in respect of their employment up to the Completion Date, and any termination payment in lieu of notice, severance or redundancy payment required to be made by law as a result of such termination, have been paid; and

(k) establishing to the reasonable satisfaction of the Purchaser that any and all loans owing by the Company or the Vendors to any of the Vendors or Associates have been repaid.”

23. Clause 3.3 states:

“The Conditions Precedent are for the benefit of the Purchaser and may only be waived if the Purchaser agrees to waive them in writing or proceeds to Completion. Such waiver is not a waiver of any warranty, indemnity or other obligation under this Agreement and may be conditional if such conditions are stated expressly in writing.”

24. Clause 3.4(a) states:

“The Vendors must:

(a) use their best endeavours to ensure that the Conditions Precedent are satisfied including procuring performance by a third party; and

(b) promptly notify the Purchaser of any circumstances which may result in a Condition Precedent not being satisfied in accordance with its terms.”

25. Clause 3.5 relevantly states:

“If the Conditions Precedent are not satisfied or waived under clause 3.3 on the Completion Date, then all rights and obligations under this Agreement other than clause 1 (Definitions and Interpretation), clause 11 (Costs and Stamp Duty), clause 15 (General), Clause 16 (Notices) and clause 17 (Confidentiality), shall terminate but without limiting, releasing, negating or terminating the liability of a party due to any antecedent breach.”

Vendor finance

26. Under cl 6.6(e) of the Agreement, the Hockeys agreed to advance to the Folleys $690,000 in vendor finance. This was repayable 2 years from Completion, with interest of 5% per annum accruing on any unpaid balance after that time

27. The vendor finance was secured under the terms of cl 6.6(e)(ii), including:

1. a Personal Property Security Interest (“PPSI”) over all present and after acquired interests and undertaking (including the rent roll) of Danc, in favour of the Hockeys, after Macquarie Bank;

2. a PPSI over all present and after acquired interests and undertaking of Tin-Tagel in favour of the Hockeys;

3. guarantees from the Folleys; and

4. a second registered mortgage over the property at 75 Bobbin Head Road, Turramurra, granted by Majikk in favour of the Hockeys, after Macquarie Bank.

Warranties and indemnities

28. Clause 9.1 provides that the vendors warrant that the Warranties contained in Sch 4 are true and correct and not misleading both at the date of execution and Completion of the Agreement.

29. Relevantly, cl 2.2 of Sch 4 warrants that the vendors were the legal and beneficial owners of the Shares which were free of any Security Interest. Clause 2.2 of Sch 4 is in the following terms:

“The Vendors are the legal and beneficial owners of the Shares which are free of any Security Interests and the Vendors have complete and unrestricted power and right to sell, assign and transfer the same to the Purchaser.”

30. Clause 9.2 relevantly states that the vendors indemnify Tin-Tagel and Danc against liabilities and claims by or brought against them arising from any breach of the Warranties.

31. Clause 9.3 requires that any claim for indemnity under cl 9.2 must be notified to the defendants within 30 days of Tin-Tagel becoming aware of such liability, failing which the vendors “shall not be liable to indemnify” Tin-Tagel.

32. Clause 12(a) provides that the vendors indemnify Tin-Tagel and Danc in respect of any taxation liability of Danc arising in breach of the Warranties. Clause 12(b) states that if Tin-Tagel “fails to notify the Vendors of such taxation liability within 30 days of the Purchaser becoming aware of that taxation liability then the Vendors shall not be liable to indemnify the Purchaser for such liability”.

Retention amount

33. One of the assets of Danc at the time of the Agreement was its rent roll, comprised of the properties of those landlords with whom Danc had a MAA and, therefore, for whom Danc was the managing agent.

34. The Agreement contained a mechanism whereby $320,000 of the purchase price (being the retention amount) would be held on trust by the vendors’ solicitors for a period of six months from Completion, ie until 1 December 2018 (being the “Retention Period”).

35. The retention amount was held on trust to allow for an adjustment to be made between the parties in the event that any of the MAAs on the rent roll which Tin-Tagel purchased from the Hockey family were lost – that is, the landlord’s business was taken away from Danc – within the Retention Period (thereby reducing the value of the rent roll on an ongoing basis). Clauses 7.1(e), (f) and (g) qualify what may amounts to a lost MAA. The amount for any such lost MAAs were to be offset by any gained MAAs over the Retention Period, as allowed for under cl 7.1(h).

36. The procedure for the payment of the retention amount stipulated by cl 7.1(d) was that, within 21 business days of the expiry of the Retention Period, Tin-Tagel was required to provide the vendors with a list of the MAAs which had been terminated during the Retention Period. The Retention Period was 6 months which concluded on 1 December 2018, hence the 21-day period expired on 22 December 2018. The defendants were then to check that list, and the parties to reach agreement regarding the disbursement of the retention amount.

37. Under cl 7.1(d), the value of any given MAA was the annualised management income for the property multiplied by 2.9 (the Agreement erroneously refers to 2.90).

Restraint of trade

38. Clause 8 provided that Mr Hockey would enter into an employment agreement with Danc after Completion in the form contained in Sch 10. Clause 14.4 provided that Mr Hockey would remain in employ with Danc for at least 2 years on and from the completion date.

39. Clause 14 provided for certain restraints on the vendors in respect of real estate business within a minimum of 5 kilometres from Ray White BB for a minimum period of 6 months. In the case of Mr Hockey, that restriction was to commence from the date his employment with Danc ceased: cl 14.4. Relevantly, the restraints provided for under cl 14.2, inter alia, state that the vendors must not (during the restrain period in the restraint area):

1. “be involved in, promote, participate in, finance, operate or engage in (whether on its own account or in partnership or by joint-venture) any Restrained Business” (cl 14.2(a)). The parties substituted “Restrained Business” for: a real estate business or operation which is the same as or similar to, or competitive with, or any component of, the businesses carried on by Danc (per the parties Joint Summary of Factual Background and definition in cl 14.1(e) of the Agreement); or

2. “be concerned or interested (directly or indirectly, or through any interposed body corporate, trust, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant, employee, director or in any other capacity) in any Restrained Business” (cl 14.2(b)). The parties substituted “Restrained Business” for: in a real estate business which is the same as or similar to, or competitive with, or any component of, the businesses carried on by Danc (per the parties Joint Summary of Factual Background and definition in cl 14.1(e) of the Agreement)

40. Clause 14.1(a) relevantly defined “be involved” as “being involved as a sole trader, partner, joint venturer, manager, agent, appointor, assistant, clerk, director, shareholder, employee, consultant or contractor or person with the capacity to exercise control of a corporation directly or indirectly”.

FACTUAL FINDINGS

Facts arising from Joint Summary of Factual Background

41. The parties reached an agreement as to the facts contained in a Joint Summary of Factual Background (“JSFB”). Those were agreed facts for the purposes of s 191 of the Evidence Act1995 (NSW). What appears below derives from part of the JSFB.

Events prior to Completion

42. In or around May 2017, the Hockeys were considering selling Danc, and they spoke to Ms Mindy Powell-Hodges (of the Ray White corporate team) as to whether she knew of anyone who might be interested in purchasing the business.

43. In or around August 2017, Ms Powell-Hodges advised the Hockeys that she had some interested purchasers and would set up a meeting between them and the Hockeys.

44. Those purchasers were the Folleys. Two meetings were held between the Folleys and the Hockeys, with Ms Powell-Hodges in attendance, at the Hockeys’ home. Those meetings took place on 25 August and 17 October 2017.

45. The parties agree that during one or both of those initial meetings, the Hockeys said to the Folleys that they were intending to retire from real estate.

46. On or shortly before 11 December 2017, the Hockeys’ solicitors provided the Folleys’ solicitors with a draft share sale agreement. That draft agreement contained cl 19 titled “Disclosure of Litigation”, which stated that “[t]he purchaser acknowledges that the vendors have disclosed that the [c]ompany has commenced legal proceedings against a former employee Karen Wardle for breach of her employment agreement”.

47. On 11 December 2017, the Folleys’ solicitors sent the Folleys an email providing comments on the draft. Among other things, the email noted that “the [c]ompany has disclosed that they are currently involved in litigation with Karen Wardle for breaching her employment agreement”.

48. Ms Wardle was a former sales agent employed by Danc. She resigned from her employment with Danc on or about 3 July 2017, and she commenced employment with a competitor Ray White franchise at Terrigal on 4 July 2017. Danc commenced proceedings against Ms Wardle on 13 October 2017.

49. Shortly after, on 15 December 2017, the Folleys’ solicitors sent an email to the Hockeys’ solicitors regarding the draft share sale agreement. It noted, among other things:

“We require further information on the pending litigation with Karen Wardle, such as:

○ What was her position;

○ What is the nature of the litigation;

○ Has it commenced? If so, what actions have been taken thus far?;

○ Is she still a risk to the Company?”

50. On 18 December 2017, the Hockeys’ solicitors sent a letter to the Folleys’ solicitors which, among other things, responded to the queries that had been raised on 15 December 2017 regarding the litigation against Karen Wardle as follows:

“In relation to Karen Wardell [sic] we advise:

(a) Fulltime sales person.

(b) In regards to restriction on post-employment activities.

(c) Proceedings have been commenced in the Local Court and the matter has been referred to Arbitration in Sydney some time in February 2018.

(d) Our clients do not believe so other than any costs issues which may arise out of the proceedings.”

51. On 5 January 2018, Mr Folley sent an email to Mr Hockey which stated, among other things (emphasis in original):

“● Loss of your main sales person “Karen Wardle” to a local competitor “Property Central – Long Jetty”:

○ Impossible to quantify impact on cash flow and staff moral – but I have to presume it will be negative.

■ Karen has sold 9 properties in the Bateau Bay local area for “Property Central” since Oct.

● Presume she left Ray White in Aug / Sep.

■ Karen sold 25 properties pa for Ray White over last 3 years.

■ Even if you win your court case her loss will likely have an impact on the business for some time.

○This is a problem I would have preferred not to have before taking over but is not, in itself, a deal breaker for me.”

(the “5 January 2018 email”)

52. The 5 January 2018 email also referred to Danc’s sales. Mr Folley noted that “the valuation was based on you consistently selling 100-110 properties pa”, but that “sales for year ending Dec have dropped to 76”. He also said that “we have re-worked our cash flows based on 75 sales pa”.

53. On 6 January 2018, Mr Hockey sent an email in response to the 5 January 2018 email. Among other things, Mr Hockey stated:

“Karen Wardle:

- The reason this issue was a late edition [sic] to the contract is because we were hoping to have the matter resolved before exchange. However the legal process is taking longer than anticipated. We’ll certainly bring you up to speed when we catch up. It will have no impact on you.

- Staff morale has not been affected by Karen leaving.

- Regarding cash flow, there was minimal profit from Karen’s earnings due to her high commission package. All current sales staff are on the new commission structure, that you have sighted. This new structure offers more profitability to the business.

Number of sales:

We have a strategy in place to regain the lost sales from Karen.”

54. In order to fund the purchase of the shares in Danc, the Folleys obtained financing from Macquarie Bank. On or around 15 March 2018, the Folleys received from Macquarie Bank a suite of documentation in respect of that financing, including a Finance Agreement (“the Finance Agreement”). The suite of documentation did not disclose that Danc and the Hockeys were existing customers of Macquarie Bank or disclose the existence of, or make any reference to, the Charge.

55. Under the Finance Agreement, Macquarie Bank agreed to loan $1,610,000 to Danc. The loan was guaranteed by Tin-Tagel, Majikk, and the Folleys. Clause 5 provided that the loan was to be secured by:

1. guarantees from Tin-Tagel, Majikk, and the Folleys;

2. a registered first ranking security over the present and future assets and undertakings of Danc, including all MAAs under which management fees are received in the course of its business;

3. a registered mortgage granted by Majikk over the property at 75 Bobbin Head Road, Turramurra NSW 2074; and

4. Deeds of Priority.

56. The Finance Agreement also contained an acknowledgment by the client and guarantors, on the execution page under the heading “Acceptance”, that, among other things, they each “agree to grant the Securities and perform the obligations required of a Client or Guarantor under this Finance Agreement”.

57. The Finance Agreement was signed by the Folleys in March 2018, although it was not dated until Completion (at which time the Folleys became directors of Danc).

58. On 4 April 2018, Mr Hockey sent an email to the Folleys regarding Danc’s predicted sales for the next 12 months. That email stated that Mr Hockey’s predicted sales were 55 (and that another three sales agents’ predicted sales were collectively 46).

59. On 6 April 2018, the Folleys received independent legal advice from Jemmeson Fisher in respect of the Macquarie Bank loan documents. Among other things, that legal advice stated that:

1. the Finance Agreement required Danc to grant Macquarie Bank “[a] registered first ranking security over the assets and undertakings (present and future) of Danc Pty Ltd including all Management Agreements under which management fees are received in the course of its business”;

2. in the event of a default under the Finance Agreement, “any security granted in [Macquarie Bank’s] favour is enforceable”, and that Macquarie Bank might “take possession of the Property and/or the assets of Danc”, or “sell the Property and/or the assets of Danc”. (“Property” referred to the Folleys’ residential home at 75 Bobbin Head Road, Turramurra, over which a mortgage was required to be granted as security for the loan); and

3. there was a priority deed, which was required as both Macquarie Bank and Mr Hockey would have “a security interest in the current and any future property of Danc”.

60. The legal advice received by the Folleys from Jemmeson Fisher did not make any reference to the Charge or any other security held by Macquarie Bank with respect to Danc.

61. On 9 April 2018, Mr Folley sent an email to Mr Hockey regarding Danc’s sales figures. The email noted:

“We have spent the week end comparing your office sales performance with other offices in Bateau Bay and the surrounding area. It looks like you have dropped from second place to third place and it has been in a continual decline since July/August last year which coincides with Karen Wardle’s departure.

Will the sales figures you have given us rectify the decline? If not what do we need to do to improve sales?

Karen Wardle is still selling in the area, what was the result of your court case?”

62. On 10 May 2018, Macquarie Bank (via Ms Clark) sent an email to the Hockeys which asked them to sign a Disclosure Authority to enable Macquarie Bank to arrange the release of the Charge over Danc.

63. On 11 May 2018, the Hockeys executed and provided to Macquarie Bank an executed “Discharge Authority”, which authorised Macquarie Bank to discharge a General Security Agreement involving Danc.

64. On 14 May 2018, Macquarie Bank (via Ms Clark) sent an email to the Folleys' solicitor which stated that "[t]he discharging party is a Macquarie client as well so we will handle to [sic] PPSR Release internally".

65. On 17 May 2018, the Agreement was executed.

66. On 23 May 2018, Macquarie Bank (via Ms Clark) sent an email to the Hockeys’ solicitor which stated that “[w]e have received a discharge request to release the charge over the Company [Danc] but nothing in regards to the house”.

67. On 31 May 2018, the Folleys’ solicitors wrote to the Hockeys’ solicitors. Among other things, that email noted the results of a PPSR search conducted by the Folleys’ solicitors that morning, which noted that five interests were still registered against Danc. The Folleys’ solicitors wrote “I note that per our discussion, the Macquarie Bank interests will be discharged on settlement”.

68. On 1 June 2018, Completion of the sale of the shares in Danc pursuant to the Agreement occurred, and the vendors paid out the Macquarie Bank loan facility.

69. On or around Completion, the Folleys executed the following agreements in order to give effect to the security required for the vendor finance:

1. a general security agreement between Danc and the Hockeys;

2. a general security agreement between Tin-Tagel and the Hockeys; and

3. a deed of guarantee between the Folleys and the Hockeys.

70. Additionally, in connection with the vendor finance, on or around Completion the Hockeys executed a deed of priority with Macquarie Bank.

Events subsequent to Completion

Mr Hockey’s employment by Danc

71. On 4 June 2018, the solicitor for the Hockeys forwarded to Macquarie Bank the email dated 31 May 2018 from the solicitors for the Folleys and noted that the debt (owed by Danc to Macquarie Bank) was repaid on settlement and asked Macquarie Bank to arrange for the removal of the security interest (being the Charge) and provide a statement of verification.

72. On 5 June 2018, Danc’s proceedings against its former employee, Ms Wardle, were determined by an arbitrator in Danc’s favour. Danc was awarded damages of $56,170.38 plus $2,199.70 in costs.

73. Also on 5 June 2018, the Folleys’ solicitors wrote to the Folleys in respect of the settlement of the Agreement. That letter confirmed that, on settlement, $800,899.78 of the purchase price paid by the Folleys had been disbursed to Macquarie Bank (described as “Vendors’ Payout Amount”). It also noted that interest at the rate of 5% per annum would accrue if the vendor finance was not repaid by the due date, and that the vendor finance was secured by:

“- After Macquarie Bank, a Personal Property Security (PPS) interest over all present and after acquired interests and undertaking, including the rent roll of Danc Pty Ltd in favour of Wayne Hockey and Susan Eastway;

- After Macquarie Bank, a Personal Property Security (PPS) interest over all present and after acquired interests and undertaking of Tin-Tagel Majikk Pty Ltd in favour of Wayne Hockey and Susan Eastway;

- A Deed of Guarantee for the outstanding debt Interest signed by the both of you; and

- A second registered mortgage over 75 Bobbin Head Road, Turramurra.”

74. On 6 June 2018, the Folleys’ solicitors wrote to the Hockeys’ solicitors regarding a security interest registered against Danc in favour of Macquarie Bank. The email stated “[p]er our recent PPSR search on Danc Pty Limited, I note that the following security is still registered against Danc Pty Ltd. As you are aware, this security was due to be discharged on settlement, please let us have your comments”.

75. Later, on 6 June 2018, the Hockeys’ solicitor sent an email to Macquarie Bank, copying in the Folleys’ solicitors, regarding the removal of a security interest (being the Charge). The email stated, “[w]e note that the debt was repaid on settlement and should be pleased [sic] if you would arrange for removal of the security interest and provide us with a Statement of Verification”.

76. On 15 June 2018, Mrs Hockey’s employment with Danc ceased.

77. On or around 16 August 2018, the Folleys signed a variation to the Finance Agreement which had the effect of the Folleys taking out a bank guarantee in the sum of $46,068, and an overdraft of $25,000. The other relevant operative clauses of the Finance Agreement remained the same as described in paragraphs above.

78. On 1 August 2018, Mr Hockey was injured in a car accident at the Ray White BB office.

79. In December 2018, Mrs Hockey was approached by Mr Ian Boyle (who operated the business known as Ray White Berkeley Vale). Mr Boyle asked if he could use Mrs Hockey’s real estate licence for a short period as there was a temporary issue with the use of his. Mrs Hockey agreed. From 19 December 2018 until 26 July 2019, Mrs Hockey was registered as the licensee in charge of Boyle Partners.

80. On 19 December 2018, Mr Hockey returned to work full time after the car accident. Shortly thereafter, on 21 December 2018, Mr Hockey’s access to Danc’s database was removed. The following day, on 22 December 2018, Mr Hockey went on approved annual leave and did not return from leave until 29 January 2019.

81. On 27 December 2018, Mr Folley sent to Mr Hockey a letter which informed Mr Hockey that Mr Folley was undertaking an investigation into allegations relating to Mr Hockey's conduct relating to his employment by Danc and inviting him to attend a meeting on 29 January 2019.

82. On 30 January 2019, Mr Hockey was stood down from his employment. Mr Hockey’s employment was terminated on 4 February 2019.

Payment of retention amount

83. Under cl 7.1(d) of the Agreement, as explained above, Tin-Tagel was required to deliver to the defendants a list of the lost MAAs by 22 December 2018.

84. On 7 February 2019, the Folleys’ solicitors sent a letter to the Hockeys’ solicitors providing a list of lost MAAs. That list identified lost MAAs totalling $183,965.33 and gained MAAs totalling $12,384.51 (after the application of the $2.9 multiplier), resulting in a net balance claimed, payable to Tin-Tagel, of $171,580.82.

85. On 19 February 2019, the Hockeys’ solicitors sent an email to the Folleys’ solicitors and, among other things, attached an annotated list of the lost MAAs and a list of the gained MAAs. That list identified lost MAAs totalling $68,211.40 and gained MAAs totalling $80,537.03 (after the application of the $2.9 multiplier), resulting in (the Hockeys claimed) nil payable to Tin-Tagel.

86. On 9 April 2019, the Folleys’ solicitors sent an email to the Hockeys’ solicitors, attaching revised lists of lost MAAs and gained MAAs. The email stated, “you will see that on my clients’ calculations there is an amount of net $54,915.36 which needs to be refunded to my clients”. Those revised lists identified lost MAAs totalling $135,452.39 and gained MAAs totalling $80,537.03 (after the application of the $2.9 multiplier).

87. On 10 April 2019, the Hockeys’ solicitors sent an email to the Folleys’ solicitors outlining the basis on which the Folleys’ calculations of 9 April 2019 were disputed by the Hockeys. The email asserted that the true value of the lost MAAs was $94,698.65 and the gained MAAs was $137,928.10. The email continued: “in the event of your client not agreeing with the attached information we would suggest that the sum claimed by your client of $54,915.36 be retained and the balance of $265,084.64 plus interest be released to our clients immediately”.

88. On 18 April 2019, the Folleys agreed to release $265,084.64 of the retention amount to the Hockeys. A further $54,915.36 of the retention amount remained in the Hockeys’ solicitor’s trust account.

89. Furthermore, on or around 18 June 2019, the Folleys signed a further finance agreement which included clauses as described in the paragraphs above.

90. On 1 June 2020, the vendor finance was due to be paid, but the Folleys refused to pay it.

Commencement of these proceedings

91. On 26 May 2020, the Hockeys’ solicitors issued a letter to the Folleys’ solicitors requesting repayment of the vendor finance.

92. On 28 May 2020, these proceedings were commenced by the Folleys by the filing of a Summons and Statement of Claim.

93. The Hockeys filed a cross-claim seeking repayment of the vendor finance and the balance of the retention amount, being $54,915.36.

94. The Folleys were granted leave to file a Second Further Amended Statement of Claim shortly before the hearing, on 18 July 2024. As earlier mentioned, the 2FASOC advanced six claims against the defendants and sought damages and, in effect, rescission of the Agreement.

95. Claims were also made by the plaintiffs against:

1. Mr Ian Boyle and Boyle Partners Pty Limited, formerly the sixth and seventh defendants. Mr Boyle was the licensee of Boyle Partners, which operated the business known as Ray White Berkeley Vale. Those claims were discontinued prior to the filing of the 2FASOC; and

2. Mr Christian Purdue and Ms Mandy King, formerly the eighth and ninth defendant, who were former employees of Danc and subsequently became employed by Ray White Berkeley Vale. Those claims were abandoned at the time the 2FASOC was filed, although those parties then remained joined to the proceeding given there are extant issues as to costs. The proceeding as to costs concerning the eighth and ninth defendants was heard by Davies J. His Honour delivered a judgment in this respect on 12 December 2024: Tin-Tagel Majikk Pty Ltd v Hockey [2024] NSWSC 1330. No order for costs was made with respect to the nineth defendant as no order for costs was sought by that defendant and she did not appear in the proceeding before Davies J. His Honour ordered the plaintiffs to pay the eighth defendant’s costs in the sum of $31,000.

Appointment of receivers and managers to Danc

96. On 11 October 2023, Macquarie Bank issued a notice of reservation of rights to Danc in connection with Danc’s default under the Finance Agreement.

97. On 24 October 2023, Macquarie Bank issued a notice of demand for payment to Danc for the amount of $1,701,834.42, in connection with Danc’s default under the Finance Agreement.

98. On 5 January 2024, Macquarie Bank issued letters to Tin-Tagel, Majikk, and the Folleys noting that Danc continued to be in default under the Finance Agreement.

99. On 2 April 2024, Macquarie Bank appointed receivers to Danc under the Charge.

Credit findings

100. In relation to credibility, I rely upon the statement of principles in Liu v Lam [2024] NSWSC 1306 at [58] – [60] (per Walton J) as follows:

“[58] At the opening of these findings, it is appropriate to deal with some issues of credibility of the witnesses but not exhaustively as the topic will be revisited at the end of the general narrative of facts and in light of further findings made therein. Some issues of principle might be firstly mentioned.

[59] The assessment of credibility of a witness may be based upon whether the accounts of a witness is inherently probable or given against interest. It does not follow that a witness who has been found not to be honest or unreliable about one matter should necessarily be disbelieved about everything else: Cubillo v Commonwealth (No 2) (2000) 103 FCR 1; [2000] FCA 1084 at [118] (O’Loughlin J). Nor does the disbelieving of a witness as to a particular proposition necessarily mean that the proposition has been proven: Steinberg v Commissioner of Taxation (Cth) (1975) 134 CLR 640; [1975] HCA 63 at 694.

[60] Further, as Basten JA observed in Sangha v Baxter [2009] NSWCA 78 (with whom Handley AJA agreed), considerable caution should be exercised in making global credibility findings. His Honour observed:

“[155] There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

[156] Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44].”

101. I have also taken into account the observations of Kunc J in Pavlis v Pavlis [2021] NSWSC 1117 at [158]-[167] with which I broadly agree.

102. In relation to credibility, the plaintiffs made the following submissions:

1. In the broad, each of the four witnesses who gave oral evidence (that is Mr and Mrs Folley and Mr and Mrs Hockey) gave their evidence in a candid and forthright fashion. To the extent that there were any differences between the recollections and respective evidence (both affidavit and oral) of the witnesses (which differences were limited), such that the Court needs to reconcile any such differences or make any credit findings, then the Court should prefer the evidence of Mr and Mrs Folley over that of Mr and Mrs Hockey. It should do so for the following reasons.

2. First, Mr Hockey’s oral evidence was, to some extent, disingenuous and involved a denial by him of propositions which could not reasonably or sensibly be denied. This is demonstrated by the following examples:

1. Mr Hockey initially denied that it was possible that in June 2019 he made a referral for a sale of a property to Ray White Berkeley Vale because (as Mr Hockey volunteered) he was aware that he was under restriction of trade for three years after his employment with Danc ceased (in early 2019). Having then been shown a document and accepted that he had made such a referral and expected to be, and was actually paid, for this referral, Mr Hockey then “repeatedly” refused to accept “the patently obvious propositions” that by making this referral he was working in real estate, and that, in receiving commissions for this referral, he was working with a business which competed with Ray White BB, or was involved in the Ray White Berkeley Vale business; and

2. Mr Hockey went further and explained that he did not class making a referral of a property to be sold by an agency (for which referral he was paid) as working in real estate or involved him working in that agency’s business. He then “disingenuously” likened receiving a commission (possibly involving several hundred or thousands of dollars) for a referral of a property to an agency to receiving a gift from a tradesperson for referring a contact to a tradesperson. This “fanciful and unrealistic” evidence should be rejected by the Court.

3. Secondly, Mrs Hockey’s oral evidence was also, to some extent, evasive, disingenuous, and involved her refusing to accept propositions which were obviously true in the light of contemporaneous documents put to her. This is demonstrated by the following examples:

1. Mrs Hockey refused to accept that by lending her real estate licence to Mr Boyle (in circumstances where Mrs Hockey was aware that if he had not been able to use her licence, Mr Boyle may not have been able to keep his agency going) she was involving herself in Mr Boyle’s business, and instead asserted that she “merely lent my licence to enable him to trade”;

2. in circumstances where Mrs Hockey had accepted that on about 1 April 2019 she had sent an email to Mr Christian Purdue (a former sales agent at Ray White BB who in 2019 was working for Ray White Berkeley Vale) asking him to sign off on a market appraisal of a property, and that it was at least possible that a potential vendor client had contacted her from overseas and asked her to arrange a market appraisal, Mrs Hockey denied that she was involved (in any capacity) in the business of Ray White Berkeley Vale. Mrs Hockey went further and asked the Court to accept that undertaking a market appraisal, and asking Mr Christian Purdue to sign off on that appraisal, would not involve her being involved in the business of Ray White Berkeley Vale. (This fanciful and unrealistic evidence should be rejected by the Court); and

3. having accepted that on 11 July 2019, Mrs Hockey had provided the principal at Ray White Budgewoi (Luke Thompson) with bank details for herself and her husband, and that she had done so in the context of receiving an email from Mr Thompson thanking her for the “opportunity” and offering to take her out for lunch, Mrs Hockey refused to concede that Mr Thompson was referring to a sales opportunity that she had provided him. Instead, Mrs Hockey suggested that she had provided her bank details to him because he put money into her account on a regular basis (quarterly) for marketing over time and that there were occasional deposits from him (as reimbursements). Again, Mrs Hockey went further, and notwithstanding the evidence she had volunteered (to the effect that she and Mr Hockey were being reimbursed for marketing done for Ray White Budgewoi on a regular basis), she refused to concede that, as at 2019 she was involved in the business of Ray White Budgewoi.

4. There is a good reason why Mrs Hockey refused to concede that she was involved in the business of either Ray White Berkeley Vale or Ray White Budgewoi in 2019 (despite clear evidence that she was involved with both agencies at that time). The reason is that accepting this proposition would have undermined her earlier (clear and unequivocal) evidence (both in her affidavit and under cross examination) that she had fully retired from the real estate industry by December 2019, as well as being inconsistent with the vendors’ case, in the proceedings, that they denied breaching the restraint provisions in the Agreement.

5. Thirdly, Mr and Mrs Folley gave their oral evidence in a candid and straightforward fashion, willingly made concessions and accepted reasonable propositions put to them in cross-examination, even where that may have undercut aspects of their case as a whole.

103. In relation to credibility, the defendants made the following submissions:

1. Each of Mr Folley, Mr Hockey and Mrs Hockey presented as candid witnesses. The Court would accept that each of those witnesses gave truthful evidence.

1. Mrs Folley, on the other hand, presented as evasive and obfuscating, even in the face of questions with clear answers based on the contemporaneous documentation. The best example of that is when Mrs Folley was asked if she agreed, having been taken to the Finance Agreement, that it contained an obligation to provide a general security; she said, “I don’t know”. Subsequently, when asked the same question, she said “I borrowed the money but I didn't, I thought that borrowing the money and paying off the loan, that was what the security was”.

2. Further, when pressed on the obligations under the Finance Agreement to provide a general security, Mrs Folley gave unresponsive answers. Mr BF Katekar SC, with whom Ms E Hall appeared, gave the following illustrations, which I accept, in support of that proposition:

1. When Mrs Folley was asked “Did you understand that by signing those documents that you were thereby giving Macquarie that security?”, she responded “They were the loan documents. That's what we were signing. And that was the security that was given to them”.

2. When Mrs Folley was asked “What my question is, that you understood before you entered into these loan agreements in 2018, that if you breached the loan agreements, that Macquarie Bank would be able to enforce its security”, she responded “They told us that if we paid, if we, that we could get a loan again in two years' time. That was the idea”.

4. The Court should treat Mrs Folley’s evidence with caution. In particular, the Court should not accept any evidence of Mrs Folley’s which is not already the subject of agreement between the parties or otherwise which is not corroborated by contemporaneous documents.

Consideration: credit

104. My close observations of Mrs Folley giving evidence, combined with the illustrations provided by Mr Katekar SC, warrant the Court accepting the contentions advanced by senior counsel. Mrs Folley was plainly evasive in her evidence, often non-responsive and, in my view, was intent on advancing her own case rather than giving candid evidence. I will discuss the basis for these conclusions later in this judgment and immediately below. I do not consider that her evidence may be accepted, except to the extent that it is against her interests or is corroborated by contemporaneous documentary evidence.

105. This is in contrast to Mr Folley’s evidence. He was generally an honest and reliable witness who gave answers in a responsive, candid and frank manner, making concessions where properly required. I do, however, have considerable concerns regarding Mr Folley’s evidence as to an alleged conversation between Mrs Folley and Mr Hockey said to have occurred on 19 January 2018 and 4 April 2018 which are set out in his affidavit. An account of the same conversation was given by Mrs Folley in her affidavit and both the Folleys were the subject of cross examination on their evidence in that respect. Mr Hockey denied that the conversation ever took place.

106. Mr Folley’s affidavit of 28 April 2021, was as follows:

“[20] On or about 19 January 2018, Kate and I had a meeting with Hockey and Eastway concerning the decline in sales of the Business. We had a conversation in words to the following effect:

Kate: ‘Sales are dropping. I have done my cash flows based on 75 properties per annum. This is the minimum sales to meet our commitments to you and the bank and I'm concerned they will drop further.’

Hockey: ‘I have no concerns that you will meet your obligations. With my sales, Keryn, Christian, Clayton and Ken, we will easily achieve above 75 sales per annum.’

[21] On 4 April 2018, Kate and I again spoke to Hockey and Eastway about future sales for the Business. We had a conversation in words to the following effect:

Kate: ‘It is important that the business make at least 75 sales a year in order to pay our commitments including to you and the bank.’

Hockey: ‘As I have said before, I have no concerns that you will meet your obligations.’”

107. Mrs Folley’s affidavit evidence of 28 April 2021, was as follows:

“[23] On or about 19 January 2018, Ken and I had a meeting with Hockey and Eastway to further discuss the concerns regarding sales of the Business. We had a conversation in words to the following effect:

Kate: ‘Sales are dropping. I have made a cash flow budget based upon sales of 75 properties per annum. If that's not the case you better tell us now because it looks like your sales are not where they used to be. Look, we are getting $690,000 from you and we have a substantial loan from the bank. Without at least 75 sales per year we will not be able to pay you or the bank.’

Hockey: ‘Look Kate, I have no concerns that you will meet your obligations with my sales with Keryn and Christian and Clayton and Ken.’

[24] On 4 April 2018, Ken and I again spoke to Hockey and Eastway about future sales for the Business. This issue was very important to us because I had prepared a cash flow that required as a minimum, 75 sales per year to enable us to pay back the $690,000 from Hockey and Eastway and to meet our loan commitment to the bank. We had a conversation in words to the following effect:

Kate: ‘As we have said before it is important that the business makes at least 75 sales a year in order to pay our commitments including to you and the bank.’

Hockey: ‘I have no concerns that you will meet your obligations.’”

108. For emphasis, I have bolded those parts of the evidence which are the same or substantially the same between the affidavits of the Folleys. These parts of evidence are particularly significant because they are the passages which are critical to the Folleys making up the representation which they rely on in issue 17(d).

109. Mr Folley was cross-examined on the similarities between the respective pieces of evidence. He gave the following responses:

“Q. My question is whether or not you sat down with Mrs Folley and agreed on the evidence you would give to this Court on those two conversations.

A. Yes. No, and again, no, we didn't. My only explanation may be that - and I'm sorry, I'd have to - we, we had basically diaries or whatever, or notebooks, and notes have been made down after we've had the meetings. We would have used both, that, that information we would have used in making our affidavits. I, it may be that we've, we've, we - we deliberately did not sit down together to prepare our affidavits.

Q. Do you have your notebook?

A. No, I'm afraid not.

Q. Did you use Mrs Foley's notebook?

A. No, it was a - when we went to the meeting it was just a, notes made down right at the end of the meeting. That was it.

Q. Do you say to his Honour that you may have used the notes that you made in that meeting to prepare this affidavit?

A. That is what I’m saying, yes, but, no, for the similarity, yes.

Q. Do you say to his Honour that you don’t have those notes any more?

A. Yes.”

110. In my view, Mr Folley was squarely challenged as to his account of the content of an alleged conversations between Mrs Folley and Mr Hockey on 19 January 2018 and 4 April 2018, which were denied by Mr Hockey.

111. Central to that cross-examination was that the wording used in the respective affidavits of Mr and Mrs Folley concerning those conversations was, with respect to the critical components relating to the representation relied upon by the plaintiffs with respect to issue 17(d) ^[4] , the same or very similar. The proposition put by Mr Katekar SC to Mr Folley in cross-examination was that Mr Folley’s account of the conversations was reached after collusion between himself and Mrs Folley.

     4. See the discussion of issues under the heading ‘Issues’ below.

112. Mr Folley’s responses to those challenges in cross-examination were disjointed and, on one view, contradictory. However, I have made allowance for the potential nervousness of Mr Folley, who was otherwise a reliable witness, to conclude that, in substance, he was denying the propositions amounting to a suggestion of collusion that were put to him in cross examination.

113. However, that allowance does not properly result in a conclusion, in my view, that the evidence given by Mr Folley, in this respect, was credible or should, when considering the entirety of the evidence on the question, be accepted.

114. Mr Folley was anxious to provide an explanation for the apparent similarities between his and his wife’s account of the conversations of 19 January 2018 and 4 April 2018, in their respective affidavits.

115. In giving that explanation, Mr Folley did not suggest that the similarities arose as a result of the drafting of the affidavits by a third party, such as his solicitor. This may have provided a relatively straightforward explanation for the form of the affidavits, but no such suggestion was made by Mr Folley or his counsel in submissions.

116. Rather, Mr Folley attempted to explain the similarities between the affidavits by reference to the fact that he and Mrs Folley both had notebooks in which a record of conversations were kept. He acknowledged that those notes were made by both himself and Mrs Folley after the meeting, and it may be inferred that this occurred at the same time when they were together. However, Mr Folley denied that he and Mrs Folley compared notes, prepared them in unison, or that he based his account on the notes prepared by Mrs Folley in preparing his affidavit.

117. In those circumstances, the account given by Mr Folley as to how the similarities between the affidavits occurred strained credulity. In substance, what he wishes the Court to accept was that he and Mrs Folley independently prepared notes of the meetings, and without any comparison of the notes made, prepared the affidavits from those notes in a way that produced identical, or very similar, accounts of the critical aspects of the conversations. In other words, he wished the Court to accept that the notes of the conversations were made independently but nonetheless produced an identical, or a very similar, record of the conversations which had occurred in critical respects.

118. The much greater likelihood is that Mr and Mrs Folley compared notes at the end of the meetings or, in the absence of Mr Folley keeping his notes, he had recourse to Mrs Folley’s notes. However, Mr Folley denied that explanation, and this goes directly to the credibility of his evidence in this respect.

119. I note, before returning briefly to Mrs Folley’s evidence, that unlike many other parts of the transactions between the parties, including conversations, there are no contemporaneous records of the 19 January or 4 April 2018 conversations or representations said to be made.

120. Mrs Folley was cross-examined upon those conversations and denied any collusion between her and her husband regarding the making of the affidavits and, it may be inferred, the taking or recording of notes.

121. However, without any contemporaneous record of the conversations, and in the absence of corroboration (given my conclusions regarding Mr Folley’s evidence), I do not accept her account of the conversations.

122. I will return to this matter in considering issue 17(d), but I note that whilst Mr Hockey accepted that there were meetings on 19 January and 4 April 2018, he denied the content of the conversation of 19 January 2018.

123. Whilst Mr Hockey was asked to affirm the fact that the meetings had occurred, and that Mr and Mrs Folley had given accounts of conversations on those dates in their affidavits, he was never directly challenged, regarding the component of his affidavit in which he denied the content of the conversation of 19 January 2018 recorded in [23] of Mrs Folley’s affidavit of 28 April 2021 and [20] of Mr Folley’s affidavit of 28 April 2021.

124. He specifically denied the accounts given as to the statement that Danc would achieve 75 sales per annum.

125. What Mr Hockey was cross-examined on, was his prediction as to the making of 55 sales by him (as I will find, for the period from 1 April 2018 to 1 April 2019) which was the subject of controversy with respect to issue 17(c) ^[5] . What is significant, in the present context, is that whilst Mr Hockey readily acknowledged the making of a prediction as to sales in that period in the course of negotiations between the parties as to the making of the Agreement and that he corresponded with the Folleys in those terms in an email dated 4 April 2018 (the same day as the second meeting between the parties), nowhere in that email does Mr Hockey refer to the content of the conversation said to have occurred on that day between himself and the Folleys, the content of which is alleged in in [24] of Mrs Folley’s affidavit of 28 April 2021 and [21] of Mr Folley’s affidavit of 28 April 2021. Nor does Mrs Folley’s email response of 9 April 2018 refer to those conversations.

     5. See the discussion of issue 17(c) under the heading ‘Issue 17(c)’ below.

126. Based on my overall assessment of Mrs Hockey’s evidence, which derived, in part, from my close observations of her as a witness, I accept that certain aspects of Mrs Hockey’s evidence were fanciful and unrealistic (see my findings at [286] to [289]). However, I also accept that, in other respects, where Mrs Hockey’s evidence was said to demonstrate a lack of credit by Mr Phillips, Mrs Hockey was (contrary to those submissions) neither evasive nor disingenuous. Rather, her answers needed to be understood in the context of her understanding of the question posed (see my findings at [282] to [283]).

127. Similar to certain aspects of Mrs Hockey’s evidence, I accept that Mr Hockey, on occasions, struggled to accept simple propositions advanced by Mr Phillips, where these propositions were adverse to the defendants’ case.

128. Mr Phillips gave an example of Mr Hockey being disingenuous that involved him denying propositions which could not be reasonably or sensibly denied, being Mr Hockey’s evidence concerning a referral by him to Ray White Berkeley Vale in June 2019 for which Mr Hockey was paid. This was during the operation of a restraint of trade after his employment with Danc ceased in early 2019.

129. I do not consider Mr Hockey’s initial refusal to accept such a referral was made, was disingenuous. He was later frank about the transaction where his memory was refreshed by an email. His reluctance to accept that he had made a referral was, in fact, because he had recalled the restraint operated in the period the subject of the cross examination.

130. Again, I have some doubt that Mr Hockey’s denial that he had “completely retired” from the real estate industry was disingenuous when that expression was vague, and his answer reflected, in my view, his state of mind as to his status at that time.

131. Where the plaintiffs’ criticism did bite, however, was Mr Hockey’s refusal to accept that the referral involved him “actually working in real estate” or “working for a business”. His evidence was also unsatisfactory in that he sought to justify whether his referral involved him working in real estate by reference to whether:

1. the real estate was in “Danc’s database”,

2. he was “physically” doing something by the referral;

3. the Folleys “competed against” Ray White Berkeley Vale; and

4. the money paid for the referral just represented “a little gift”.

132. However, I do not consider that evidence casts a pall over the entirety of Mr Hockey’s evidence which, in most other regards, was confident, frank and expressed with accuracy and clarity. In the later respect, I refer favourably to Mr Hockey’s evidence about the retention amount and prediction of sales figures, which I shall accept for reasons given later in this judgment.

Particular findings of fact sought by the plaintiffs outside of JSFB

133. Notwithstanding the JSFB, the plaintiffs sought that the Court should make additional findings of fact which are mentioned below. The resolution of those factual issues is addressed in the preceding credit findings, later in this judgment and partly below.

134. It was contended by the plaintiffs that, on or about 19 January 2019, during a meeting attended by the Folleys and the Hockeys, the following occurred:

1. Mrs Folley expressed concerns about sales dropping in the business, explained that she had made a cash flow budget based upon sales of 75 properties per annum, referred to the vendor finance and bank loans, and stated that, without at least 75 sales per year the Folleys would not be able to pay the Hockeys or the bank;

2. Mr Hockey said that he had no concerns that the Folleys would meet their obligations with the sales of the five Danc sales agents (including himself).

135. As discussed above, the evidence relied upon in support of the Court making those findings, derived from the affidavits of Mr and Mrs Folley of 28 April 2021. I have rejected that evidence in the previous section of this judgment dealing with credit findings, and again in this judgment.

136. The plaintiffs further submitted that, as at 30 May 2018, the vendors had not provided any completion balance sheet to Tin-Tagel contrary to cl 6.3 of the Agreement.

137. Clause 6.3 provided that two business days before Completion, the vendors must provide to Tin-Tagel the completion balance sheet for the purpose of assessing any adjustments to be made at Completion (with adjustment, as far as practical, to be calculated as at the completion date);

138. Mr Katekar SC was correct to submit that this proposition was not pleaded. The issue concerning the breach of cl 6.3 of the Agreement was raised by the plaintiffs in the context of submissions made with respect to claims 1A and 1B but was not the subject of any issue in the ASOI. In this context, the significance of this issue for those claims remained ill defined.

139. Nonetheless, I will briefly address that contention, advanced by the plaintiffs, albeit later in this judgment. My assessment will be that the plaintiffs’ contention should be rejected because the plaintiffs did not establish the factual premise for the contention that cl 6.3 had been breached by the defendants, namely, that the vendors had not provided the completion balance sheet within the requisite time specified in cl 6.3 of the Agreement.

140. Counsel for the plaintiffs also submitted that the Court should make the following four further findings of fact:

1. Following Completion of the Agreement, Macquarie Bank continued as lender to Danc pursuant to the Finance Agreement dated 1 June 2018 between Macquarie Bank and Danc. There was no reference in the Finance Agreement to the Charge given by Danc to Macquarie Bank in February 2000 or to any pre-existing security interest in place between Danc and Macquarie Bank.

2. On 30 July 2018, the outgoing accountant for Danc, Ms Laura Sorenson, sent some working papers to Mr Hockey under the cover of an email headed “Work papers 2018”. That email stated that Ms Sorenson was attaching “everything the new owners need form your side of the company tax, up to 31.5.18”. Included in the work papers, attached to that email, was a calculation of the balance of (income) tax payable by Danc as at 31 May 2018 which was $9,172.155. While that calculation (undertaken as at 30 July 2018) represented the tax obligations for the Hockeys as at 31 May 2018, the incoming accountant for Danc (Mr Rhys Taylor) needed to reconcile the calculations and make any necessary adjustments.

3. On 21 May 2019, the solicitors for the Folleys sent a letter (the “21 May 2019 letter”) to the solicitors for the Hockeys which challenged the calculations with respect to a list of lost and gained MAAs contained in an email of 10 April 2019 from the Hockeys’ solicitors to the Folleys’ solicitors outlining the basis on which the Folleys’ calculations of 9 April 2019 were disputed by the Hockeys (the “10 April 2019 email”). In the 21 May 2019 letter, the Folleys asserted that, because of inaccuracies in the calculation of MAAs lost and gained undertaken by the Hockeys, an adjustment of $100,796.11, in favour of the Folleys, should be made to the retention amount and that accordingly, the amount being claimed by the Folleys (namely $54,915.36) should be released to them.

1. Thirdly, in circumstances where the misleading and deceptive conduct of the Hockeys caused the Folleys to enter into the Agreement (and thereby committing to re-paying the vendor finance), which otherwise they would not have done, such an outcome would involve the Hockeys compensating the Folleys for the exposure to loss and damage which their conduct caused.

2. Fourthly, such an order would be entirely consistent and consonant with the relief sought by the Folleys with respect to claim 4. In other words, if the Folleys’ claims for breach of contract are upheld, then there would be no need for the Court to have any concerns that there might be overcompensation for the Folleys as the relief sought (and granted) in relation to both major aspects of their claims would be the same. I interpose to note that I have rejected claim 4.

3. The width of discretion under s 243 of the ACL means that there does not have to be a link between the misleading and deceptive conduct and exposure under the vendor finance provisions. If this submission is directed to causation, then I reject it for the reasons discussed below.

4. In the alternative, if the Court is not minded to grant rescission as claimed, the quantum of the Folleys’ loss is (at least) the same as the quantum of the amount claimed by the Hockeys’ in their CC. This is because whatever liability the Folleys may have to the Hockeys, under the vendor finance provisions of the Agreement, represents the minimum amount of their loss flowing from the Hockeys’ misleading conduct.

665. In relation to Issue 19, in summary, the defendants made the following submissions as to why the Folleys have not established any entitlement to relief of the kind sought:

1. Even if the Folleys could establish that the Hockeys engaged in misleading and deceptive conduct, they have not proved causation or loss. Despite the Folleys’ submission that they are running a “no transaction” case, there is no evidence that they would not have entered the Agreement but for the alleged misleading and deceptive representations. Damage is an essential element of this cause of action which the Folleys have not attempted to establish.

2. Further, there has been no attempt to quantify the Folleys’ claimed loss. In a “no transaction” case, damages are assessed by reference to the difference between the purchase price paid by the Folleys and the actual value of Danc at the time of Completion (see Potts v Miller [1940] 64 CLR 282; [1940] HCA 43; Gould v Vaggelas (1984) 157 CLR 215; [1984] HCA 68 (“Gould”) at 220). That customarily involves expert valuation evidence, and no such evidence has been proffered by the Folleys.

3. Reliance is placed on the defendants’ submissions under Issue 16, which conclude that it is impossible for the Court to now achieve restitutio in integrum between the parties

4. While orders for rescission under s 243 of the ACL are a form of statutory relief, distinct from the grant of rescission either at common law or in equity, the courts have held that the exercise of the discretion to order rescission under the ACL will be informed and guided by the principles regarding rescission at common law and in equity (see Chint at [130]; Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498 at [76]).

Consideration: Issue 19

666. The relief sought by the plaintiffs in relation to claim 5, Issue 19, was a partial rescission of the Agreement pursuant to s 243 of the ACL, or, in the alternative, damages in the same amount as is claimed by the Hockeys in their CC.

667. The only conduct which the plaintiffs have successfully established as misleading and deceptive, in breach of s 18 of the ACL, is the representation by Mrs Hockey to the Folleys and Tin-Tagel that she intended to retire from the real estate industry (“the misrepresentation”).

668. The consideration of relief and the questions raised by Issue 19, will only be considered to the extent that they relate to the misrepresentation, although, I will make some broad observations about the other representations at the end of my consideration as to this issue.

669. The plaintiffs claim for relief under Issue 19, must fail for the following three reasons (which I will turn to, in sequence, below):

1. the plaintiffs are not entitled to rescission or partial rescission of the Agreement pursuant to s 243 of the ACL;

2. the plaintiffs have not proven any loss suffered by them as a result of the misrepresentation; and

3. the plaintiffs have not adduced evidence of the difference between the purchase price paid by the plaintiffs and the actual value of Danc as at the time of Completion, which is generally the measure of loss in a ‘no transaction’ case.

Are the Folleys entitled to rescission or partial rescission?

670. I accept the defendants’ submission that, while orders for rescission under s 243 of the ACL are a form of statutory relief, distinct from the grant of rescission either at common law or in equity, the courts have nonetheless held that the exercise of the court’s discretion will be informed and guided by the principles regarding rescission at common law and in equity: Chint at [130]; Akron Securities Ltd v Ilife (1997) 41 NSWLR 353 at 367 (per Mason P); Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 at [105] (per Giles J).

671. Hence, the same considerations that affect the availability of rescission in equity, including the requirement to achieve practical justice between the parties and the non-availability of resitutito in integrum, will be matters that I take into account in deciding whether to grant the relief sought by the plaintiffs.

672. The statement of the law, in this regard, is clearly set out by Colin Lockhart in The Law of Misleading or Deceptive Conduct: ^[27]

“The principles applicable to rescission provide ‘safe, if not necessarily exclusive, guidance’ as to whether contracts induced by misleading conduct are to be declared void. Both remedies are directed at the ‘rehabilitation and restoration of the parties … to the position they occupied before the contract was made’, and, hence, a ‘central consideration is that of restitutio in integrum’. If the claimant is unable to return anything of value acquired under the contract in exchange for a refund of the purchase price, avoidance may exceed the compensatory boundaries of the statutory remedy and, on that basis, be refused.” (footnotes omitted)

27. Colin Lockhart, The Law of Misleading or Deceptive Conduct (6th ed, 2023, LexisNexis) at [11.56].

673. Hence, for the same reasons which I set out in the discussion of Issue 16 with respect to partial rescission, and the further reasoning under this issue, the plaintiffs’ claim for partial rescission of the Agreement pursuant to s 243 of the ACL, must fail with respect to the misrepresentation under claim 5.

674. Without repeating my previous findings, I note that the relevant considerations as to why restitutio in integrum is not possible, include the Folleys’ delay in pursuing relief, and the irretrievably altered circumstances surrounding the transaction and the business of Danc.

675. In addition to the reasons set out at Issue 16, with respect to the conclusion that the orders for partial rescission sought by the plaintiffs would not achieve practical justice between the parties, I also note, in the context of this claim, that there is no nexus between the misrepresentation made by Mrs Hockey (that she intended to retire), and the provisions sought to be set aside. In fact, the vendor finance provisions benefitted the Folleys by deferring payment of the vendor finance amount for 2 years, so as to lower the Folleys’ upfront cost.

What is quantum of the Folleys’ loss? (Issues 2 and 3 in [669] above)

676. A plaintiff who suffers loss or damage by reason of conduct which is in breach of s 18 of the ACL, may bring an action for damages and recover the amount of the loss or damage suffered from the person whose conduct constituted the contravention. The object of damages is to compensate the plaintiffs for the loss suffered as a result of misleading or deceptive conduct, and to put the plaintiffs in the position they would have been, had that conduct not been committed.

677. In considering damages, the normal rules on causation and remoteness, including the commonsense test for causation, apply. Hence, it is sufficient if the misleading or deceptive conduct was a cause of the loss or damage suffered. For example, a causal link between the misleading or deceptive conduct and the loss or damage suffered may be established by proof of inducement to enter into a disadvantageous contract: Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488 at 530 (per Wilcox and Lindgren JJ, with whom Lee J agreed).

678. The plaintiffs submitted that the loss and damage suffered by the plaintiffs was the liability to comply with the obligations under the vendor finance provisions of the Agreement, in particular, the obligation to pay the remaining amount of vendor finance (being the amount claimed by the Hockeys in their CC).

679. The first issue with this submission, is the characterisation of the vendor finance provisions as a “loss”. The vendor finance provisions of the Agreement were not disadvantageous to the plaintiffs, but, in fact, were designed to assist the Folleys to purchase Danc by providing a loan from the Hockeys. To characterise this obligation as a “loss” suffered by the plaintiffs is erroneous.

680. Secondly, the relevant question, in examining causation, is to ask: in the absence of the misrepresentation, would the plaintiffs have agreed to the obligations under the vendor finance provisions of the Agreement? When the question is framed in those terms, it is clear that the plaintiffs’ claim, in respect to damages, must fail. There is no causal link between the misrepresentation and the obligations of the plaintiffs under the vendor finance provisions, especially noting that the provisions were in fact designed to assist the plaintiffs. Their evidence does not address, let alone sustain, that causal link.

681. While the evidence of the Folleys was, in summary, that they would not have entered into the Agreement if the Hockeys had not represented that they were retiring, the plaintiffs have not attempted to explain how that position was linked to the vendor finance provisions, or to quantify their loss by reference to the difference between the purchase price paid by the plaintiffs and the actual value of Danc at the time of Completion. This is usually the measure of damages in a no transaction case: Gould at 220 (per Gibbs CJ).

682. The plaintiffs have not adduced any evidence of any quantifiable loss, other than by reference to their obligation to pay the vendor finance. I do not accept that this loss claimed was caused by the misrepresentation. In the absence of any other evidence, the plaintiffs’ claim for damages in these terms, must fail.

683. Whilst I have not dealt with the other representations relied on in relation to Issue 17, and noting further that only some of those representations required attention in relation to Issue 18, as a broad assessment, I consider that many of the conclusions above operate with equal force with respect to those representations and, in any event, I generally prefer the particular submissions advanced by Mr Katekar SC with respect to Issue 19 and the representations referred to in Issue 17(b) to 17(f).

684. In the result, I answer the question raised by Issue 19(a) in the negative. As to the question raised by Issue 19(b), the plaintiffs have not relevantly established loss.

CROSS CLAIM

685. The issues relevant to the resolution of the CC, as set out in the ASOI were as follows:

1. Are the Folleys are liable to pay the Hockeys $631,657.29 (plus interest at 5% per annum from 1 June 2020 onwards)? (“Issue 20”)

2. Are the Hockeys or the Folleys entitled to the balance of the Retention Amount of $54,915.36 plus accrued interest, and if not, how should this balance be distributed? (“Issue 21”)

686. The ASOI records the first issue with the date 1 June 2020, however, I note that the defendants submitted that it should have read 1 June 2018.

Issue 20

Submissions: Issue 20

687. In relation to Issue 20, in summary, the plaintiffs made the following submissions:

1. The Folleys should not be found liable to pay the amount of unpaid vendor finance claimed by the Hockeys in their CC, or any amount.

2. As such, the Hockeys’ CC should be dismissed (with costs).

688. In relation to Issue 20, in summary, the defendants made the following submissions:

1. This agreed issue identified 1 June 2020 as the start date for interest, but the correct date is 1 June 2018 pursuant to cl 6.6(e) of the Agreement.

2. Under cl 6.6(e) of the Agreement, the vendor finance was repayable on 1 June 2020. Under cl 6.6(e)(i) of the Agreement, in the event of non-payment on that date, the Hockeys are entitled to repayment of the vendor finance plus interest at 5% per annum since the completion date (1 June 2018).

3. The only arguments by the Folleys, put against the Hockeys’ entitlement to payment of the vendor finance and balance of the retention amount, were the assertions made by the 2FASOC. As such, if the Folleys fail to establish their claims under the 2FASOC, then the Hockeys are entitled to the relief sought in their CC.

4. The Hockeys accept that, under cl 6.8(f) of the Agreement, the vendor finance must be adjusted to allow for a set off of employee entitlements. The amount of employee entitlements is $58,342.71 and is not in dispute. The net amount of vendor finance that is, therefore, due and payable to the Hockeys is $631,657.29 (plus interest on that amount from 1 June 2018 at 5% per annum).

Consideration: Issue 20

689. While the plaintiffs submitted that the Folleys should not be found liable to pay the amount of unpaid vendor finance, they did not substantiate their reasons or provide any evidence in support of this submission, other than to say “[f]or all the reasons set out above”.

690. The plaintiffs have approached the CC with a level of generality which is of minimal assistance to this Court. However, I agree with the submission of the defendants, that what may be inferred from the plaintiffs’ submission, is that if the claims set out in the 2FASOC are not made out (to which the plaintiffs must refer when they reference “all the reasons set out above”), then the Hockeys must be entitled to the relief sought in the CC.

691. In this regard, I note that the plaintiffs have failed to establish each of the claims set in the 2FASOC (in the case of claim 5, by failing to establish a basis for the grant of relief) and have not otherwise sought to adduce any other evidence as to why they should not be liable to pay the outstanding vendor finance amount, pursuant to cl 6.6(e) of the Agreement.

692. Clause 6.6(e) of the Agreement, as earlier extracted, reads as follows:

“6.6. Payment by the Purchaser

The Purchaser agrees to pay the Purchase Price in the following manner:

…

e) The sum of $690,000.00 as part of the balance of the Purchase Price shall be advanced by Wayne Craig Hockey and Susan Noelene Eastway to the purchaser for a period of two (2) years on the following conditions:

(i) In the event that the Purchaser fails to repay the total sum of $690,000 on the due date, interest at the rate of five per cent per annum will accrue on the sum of $690,000 from the date of completion up to but excluding the date of payment. It will be computed on a daily basis for actual days elapsed.

…”

693. I agree with the defendants that the correct start date for the accumulation of interest is from 1 June 2018. This is evident from the words of cl 6.6(e)(i), “from the date of completion”, as well as the JSFB, which reads as follows:

“Under clause 6.6(e) of the Share Sale Agreement, the Hockeys agreed to advance to the Folleys $690,000 in Vendor Finance. This was to be repayable 2 years from completion, with interest of 5% per annum payable on any unpaid balance after, accruing from the date of Completion.” (emphasis added)

694. While Issue 20, as set out in the ASOI, frames the question for this Court in terms of whether the Folleys are liable to pay the Hockeys the unpaid vendor finance amount, I note that pursuant to cl 6.6(e) of the Agreement, it is, in fact, Tin-Tagel, as the purchaser under the Agreement, who has the obligation to repay the vendor finance. I do note, however, that the purchaser is nominated in the Agreement as Tin-Tagel “as trustee for the KR & KM Folley Family Trust” and the Folleys are guarantors.

695. I also note, as was submitted by the defendants, that under cl 6.8(f) of the Agreement, the total sum of $690,000 must be adjusted to allow for a set off of employee entitlements. In answer to Issue 3, earlier in this judgment, I have accepted that cl 6.8(f) applies over cl 6.6(b)(iii) and, therefore, the employee entitlements were a set off against the amount of vendor finance, when that became payable two years after Completion.

696. The defendants submitted that the amount of employee entitlements is not in dispute and is an amount of $58,342.71. In addressing Issue 6, the plaintiffs submitted that “there has been an acceptance by the parties on the pleadings that under the Agreement, an amount of $58,342.71 was to be taken into account by way of employee entitlements.”

697. Hence, I accept that this amount is not in dispute and, therefore, accept that the net amount of vendor finance due to be paid to the Hockeys, pursuant to cl 6.6(e) of the Agreement (after the set off has been applied pursuant to cl 6.8(f) of the Agreement), is $631,657.29 (being $690,000 minus $58,342.71).

698. In the result, I find that that pursuant to cl 6.6(e) of the Agreement, Tin-Tagel is liable to pay the Hockeys the total sum of $631,657.29 plus interest, at a rate of 5% per annum on that amount, accrued on a daily basis from 1 June 2018. Clause 6.6(e)(i) of the Agreement provides that the interest will continue to accrue up to but excluding the date of payment. The CC seeks a relief that the interest would be payable in the amount of $73,808.72 as at 1 October 2020. No party made any submissions about the end date for the calculation of interest. The directions the Court shall make in this matter shall provide for the resolution of that issue.

699. I answer the question raised by Issue 20 in those terms and note that the defendants’ CC, in this respect, must succeed.

Issue 21

Submissions: Issue 21

700. I have referred to the submissions of the parties earlier as to the retention amount with respect to claim 2. I do not repeat that earlier discussion of the parties’ submissions, but for convenience will summarise below the matters that they have brought forward in submissions under this issue for particular attention. These appear below.

701. In relation to Issue 21, in summary, the plaintiffs submitted that the Folleys are entitled to (at least) the balance of the retention amount of $54,915.36 plus accrued interest, and there should be an order made for that amount to be released to the Folleys.

702. In relation to Issue 21, in summary, the defendants made the following submissions:

1. Under cl 7 of the Agreement, the Hockeys were entitled to payment of the retention amount, less any deductions for lost MAAs (as offset by gained MAAs). No basis has been shown on which the Hockeys are not entitled to the balance of $54,915.36.

2. The grounds on which the Hockeys are entitled to the retention amount were set out in a letter from their solicitors to the Folleys’ solicitors dated 10 April 2019 and fell into three categories:

1. first, there were 7 properties which the Folleys had asserted were lost MAAs when in fact they had been lost prior to Completion and were, therefore, not included in the rent roll which the Folleys purchased as part of the Agreement;

2. secondly, there were 6 properties which the Folleys had asserted were lost MAAs which the Hockeys disagreed with, in 5 instances because the property was, in fact, still managed by Danc as at the expiry of the Retention Period (being 1 December 2018), and in one instance, because the property was allegedly lost due to the Folleys’ mismanagement; and

1. thirdly, there were 8 properties which the Hockeys had asserted were gained MAAs which the Folleys did not accept.

3. The list of MAAs, as at the date of Completion (the list was attached as Sch 5 to the Agreement which was generated as at 9 May 2018, prior to Completion, and was superseded by the list generated as at 31 May 2018) showed the following:

1. The 7 properties which the Folleys asserted were lost MAAs do not appear on the list of MAAs as at Completion which indicates that those should not have been counted as lost MAAs.

2. In respect of the 6 properties which the Folleys asserted were lost MAAs but which the Hockeys disagreed with for various reasons, there is no evidence before the Court to make good the Folleys’ assertion that they were lost MAAs. In this respect, the Court would have regard to the principle in Blatch v Archer (1774) 98 ER 969 that evidence is to be weighed according to the capacity of a party to adduce it. The Hockeys do not have access to Danc’s records.

3. The 8 properties which the Hockeys had asserted were gained MAAs do not appear on the list of MAAs as at Completion and appear on the list of vacant properties on Completion which indicates that they were not existing business, as at Completion, and were introduced to Danc by the Hockeys (by virtue of having been listed for rent prior to Completion), and, therefore, should have been counted as gained MAAs.

4. The Court should find that the Hockeys are entitled to the balance of the retention amount of $54,915.36, plus interest as calculated under s 100 of the Civil Procedure Act 2005 (NSW) (there being no contractually specified rate of interest that applies).

Consideration: Issue 21

703. At the outset, I note that Issue 9 and Issue 21 were expressed, in substance, in the same terms, being are the Folleys or the Hockeys entitled to the balance of the retention amount of $54,915.36 plus accrued interest, and if not, how should this balance be distributed?

704. It is therefore understandable, in these circumstances, that the plaintiffs sought to address Issue 21 by reference to “the reasons set out above”.

705. I do not propose to repeat my reasoning as to the determination of this issue but simply note that, for the reasons I have set out in my consideration of issue 9, and to the extent relevant, the ancillary issues in claim 2, the Hockeys are entitled to the balance of the retention amount of $54,915.36 plus accrued interest.

706. In the event, I answer the question raised by Issue 21 in those terms and note that the defendants’ CC, in this respect, must succeed.

707. I note that the defendants’ submission as to Issue 21 raises the question of interest. The defendants submitted that the Hockeys are entitled to interest, to be calculated in accordance with s 100 of the Civil Procedure Act. The plaintiffs did not make any submissions in relation to this matter.

708. In the absence of submissions from the plaintiffs, I propose to express a preliminary view in relation to this issue but will make provision for supplementary submissions in the orders and directions below. In my view, the “accrued interest” referred to in Issue 9 and Issue 21 refers to the interest being earned on the retention amount by virtue of being held in a controlled monies account with the National Australia Bank. In this regard, I refer to cl 7.1(b) of the Agreement:

“The retention amount shall be invested by the Vendors' Solicitor in a controlled monies account with the National Australia Bank and all interest earned on such investment shall be paid to the Vendors.”

709. For completeness, I note that it is common ground that the balance of the retention amount, being the $54,915.36 (plus accrued interest) remains in the Hockeys’ solicitor’s trust account.

CONCLUSION

710. The 2FASOC is based upon 6 claims. The resolution of each claim was predicated upon the disposition of the issues relevant to that claim listed on the ASOI.

711. The Court has determined the issues relevant to claims 1A, 1B, 2, 3 and 4, adversely to the plaintiffs and accordingly has decided to reject those claims. ^[28]

     28. The Court has determined that it was unnecessary, on some occasions, to answer the questions raised by the issues, but, in each such case, the Court has reached that position having determined earlier issues adversely to the plaintiffs.

712. With respect to claim 5, the Court resolved issues 17(d) and 17(f) adversely to the plaintiffs. Issue 17(e) was not pressed by the plaintiffs.

713. The plaintiffs did not establish that the representation referred to in Issue 17(c) was made but nonetheless the Court found that Mr Hockey did make a representation in his email of 4 April 2018 which was a prediction of 55 sales by him in the 12-month period from 1 April 2018 to 1 April 2019.

714. The representation referred to in Issue 17(b) was made, and accordingly, the question raised by Issue 17(b) has been answered in the affirmative although the 2 year period, referred to in the issue, operated from the execution of the Agreement.

715. In answering the questions raised under Issue 18, which corresponded to Issue 17(b) and Issue 17(c), the Court has answered the question adversely to the plaintiff.

716. The plaintiffs obtained a favourable answer with respect to the question raised by Issue 17(a) and the counterpart consideration to Issue 17(a) under Issue 18. In that respect, the Court found that Mrs Hockey had made the representation articulated in Issue 17(a) and that, for the purposes of Issue 18, the representation was misleading or deceptive, or likely to mislead or deceive.

717. However, in the answer to the questions raised by issues 19(a) and 19(b), with respect to the Court’s findings under Issue 17(a) and counterpart findings under Issue 18, the Court has determined that the Folleys are not entitled to an order for rescission of the Agreement (partial or otherwise) or damages by way of relief.

718. In the result, the plaintiffs have failed to establish claim 5.

719. In the circumstances, 2FASOC should be dismissed.

720. As to the CC bought by the Hockeys, the Court has determined as follows:

1. Tin-Tagel is liable to pay the Hockeys the sum of $631,657.29 plus interest at the rate of 5% per annum of the amount accrued on a daily basis from 1 June 2018 to a date to be determined by the Court after receipt of further submissions by the parties.

2. The balance of the retention amount shall be paid by the Folleys to the Hockeys in the amount of $54,915.36 plus accrued interest. The monies shall be paid to the Hockeys out of the Hockeys’ solicitors trust account. My preliminary view is that interest shall be the interest arising under the controlled monies account held in the National Australia Bank, but I shall make provision for further submissions in that respect.

3. It follows that the Hockeys have been successful in prosecuting their CC.

721. The question of costs is reserved with respect to the 2FASOC and the CC, although directions will be made for the disposition of any issue arising in that respect.

ORDERS AND DIRECTIONS

722. The Court makes the following orders and directions:

1. Subject to orders 2 to 5, the defendants shall file and serve Short Minutes of Order reflecting this judgment within 21 days of the delivery of the judgment.

2. In the event that the parties agree as to the calculation of interest with respect to the vendor finance and/or in accordance with the Court’s preliminary view as to interest on the retention amount, then interest shall be calculated on the basis of that agreement and encompassed within the Short Minutes of Order.

3. In the event that the parties are in dispute as to the calculation of interest with respect to either the vendor finance or the retention amount, then the Short Minutes of Order shall not deal with the disputed question of interest, other than to provide for a timetable for the filing of submissions, in that respect, consistent with the timetable fixed for the receipt of submissions as to costs (if costs are in dispute) or as agreed.

4. If there is no dispute as to costs, the Short Minutes of Order shall reflect the agreement of the parties as to costs.

5. If there is a dispute as to costs, the Short Minutes of Order shall incorporate a timetable for the resolution of any issue as to costs, which shall include provision for the filing and service of submissions and evidence as to costs, and a statement as to whether the question of costs may be determined on the papers.

6. Subject to orders 4 and 5, costs are reserved.

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Endnotes

Decision last updated: 10 June 2025