Vadarlis v King

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 7530 of 2007

ERIC VADARLIS	Plaintiff
v
ALAN WAYNE KING and ANTHONY RAYMOND WHITE	Defendants

---

JUDGE:	HOLLINGWORTH J
WHERE HELD:	Melbourne
DATE OF HEARING:	25-26 February, 1-2 March 2010
DATE OF JUDGMENT:	23 March 2010
CASE MAY BE CITED AS:	Vadarlis v King
MEDIUM NEUTRAL CITATION:	[2010] VSC 80

---

Contract – Purchase of car dealership by defendants – Defendants engaged plaintiff solicitor to assist with purchase – Terms of retainer – Whether defendants agreed to pay plaintiff a fee of 1% of total value of purchase price

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Nolan SC Mr D B Clough	Vadarlis & Associates
For the Defendants	Mr R M Garratt QC	Maddocks

HER HONOUR:

The issues

For many years, the plaintiff, Eric Vadarlis, acted as the solicitor for the defendants, Anthony (“Tony”) White and Alan King, and various companies and trusts through which the defendants have operated car dealerships and related businesses.

In 2001, the defendants’ companies bought a car dealership in Cairns, together with the land on which the business was conducted (“the Cairns dealership”). There is no dispute that Mr Vadarlis provided certain services in relation to the acquisition of the Cairns dealership.

In this proceeding, Mr Vadarlis seeks to recover approximately $165,000[1] for those services. He claims to be entitled to that sum under an agreement, pursuant to which the defendants agreed to pay him 1% of the total purchase price for the Cairns dealership (“the alleged 1% agreement”).[2] Mr Vadarlis does not seek, in the alternative, to recover his professional fees on a usual solicitor-client basis.
[1]Together with statutory interest.
[2]Mr Vadarlis’ alternative pleaded claims, based on misleading and deceptive conduct and quantum meruit, were abandoned at the start of the trial.

The defendants deny the existence of the alleged 1% agreement; they say that Mr Vadarlis was only ever entitled to recover in respect of his services on an ordinary solicitor-client basis. The defendants also say that the services provided by Mr Vadarlis were “legal services” within the meaning of s 3 of the Legal Practice Act 1996 (“the LPA”); therefore, Mr Vadarlis is precluded from recovering in respect of those services, because he did not render an account prior to commencing the proceeding, as required by s 106 of the LPA. In any event, the defendants say that Mr Vadarlis’ claim is statute-barred.

Mr Vadarlis disputes that most of the services which he provided were “legal services”. He also says that he issued the proceeding one day before the relevant limitation period expired.

The alleged 1% agreement
The pleadings

Mr Vadarlis pleads the existence of a partly oral and partly implied agreement, made on or about 17 January 2001, at a restaurant in St Kilda. He pleads that there were oral terms of the agreement that he would provide the following services to the defendants in relation to the Cairns dealership:

(a) Introduce the defendants to the vendor;

(b) Act on behalf of the defendants in facilitating the purchase;

(c) Assist the defendants in purchase negotiations;

(d) Assist with undertaking due diligence investigations;

(e) Facilitate the obtaining of finance for the purchase;

(f) Advise in relation to the preparation, negotiation and completion of contractual arrangements; and

(g) Liaise with the defendants’ accountant in relation to the purchase.

He pleads that in consideration of him undertaking to provide those services, the defendants agreed to pay him a fee equal to 1% of the total purchase price of the Cairns dealership, including the land, new and used car floorplan, goodwill and assets, such fee to be paid at settlement of the purchase.

Although Mr Vadarlis’ pleadings also assert that the agreement was partly implied, in order to give it business efficacy, no implied terms were identified or relied upon, either in his pleadings or submissions.

Mr Vadarlis does not plead that the defendants agreed to pay him if the Cairns dealership was bought by entities associated with them (which is what in fact occurred), rather than by them personally. Nor does he plead anything about a Darwin dealership, which was for sale and under discussion at the same time. However, the defendants make no criticism of the statement of claim on either account, focussing instead on the question of the fee.

The defendants admit that in or about January 2001, at the Rive restaurant in St Kilda, they retained Mr Vadarlis as their solicitor, to act for them in connection with the purchase of the Cairns and Darwin dealerships. They also admit that Mr Vadarlis agreed to make contact with and obtain information from the vendor, assist with due diligence and negotiations, and advise in relation to the preparation, negotiation and completion of necessary contracts and ancillary documents. Although they agree that Mr Vadarlis said that he wanted to be paid a 1% fee on the purchase price, the defendants plead that they told him they were only prepared to pay his usual fees as a solicitor. In so far as the retainer is to be implied, they plead that the implication arises from the fact that Mr Vadarlis had previously acted as their solicitor in relation to the purchase and sale of dealership businesses.

The evidence

The essence of Mr Vadarlis’ evidence as to the formation of the alleged 1% agreement is contained in the following passages in his evidence-in-chief:

What was said about the business? --- I said to them that I had spoken to Rogers, that Esanda wanted to finance a buyer. I said to them the numbers they were talking about I think were about $23 million plus the floorplan and that I was prepared to help them buy the businesses, I would help them negotiate, I would help them extract information from the vendor, I would help them with the due diligence, I would help them with making offers and stuff, I would do the legal work, except that wherever legal work needed to be done interstate, Queensland or whatever, we would have to get some other lawyer to do it because I can’t practice in Queensland, which they knew anyway, and for all that I would expect to be paid – not expect, I would want to be paid a fee of 1% of the total purchase price, including goodwill, land everything. That of course takes into account all the adjustments and stuff. … what I said to them was I wanted to be paid 1% of the total gross sale price.

Did they say anything to you about that? --- I remember them saying initially, “Well, 1% is a lot of money.”

Do you know who said it? --- Alan. Alan said to me “That’s a lot of money” and I said to them “Well, it’s a lot of work but at the same time you are getting a dealership and starting to negotiate for a dealership which is fully funded basically, you can negotiate having the confidence that the funder, Esanda, wants you in there and I’m prepared to help you in that regard.”

Was there any further conversation about that? --- I kept talking about the 1% because I wanted them … I kept saying to them, “I want 1%, it’s 1% of the gross sale price, you have to understand that” and at some stage I was told to shut up about it.

Who told you to shut up about it? --- Alan.

What were his words? --- His words were “yeah, yeah, all right, shut the F up about it, we understand that’s the deal.”

When you say the “F up” you mean the word was substituted? --- Yes, you know, car dealers ---

HER HONOUR: I understand. I missed the last bit, “Yeah, yeah, all right, shut the F up about it”, and what was the last thing you said? --- “Let’s get on with it”, I think he said, “Let’s do a deal” or “Let’s get on with it.”

How many times do you say the question of the fee was raised in that four hour conversation? --- … Over the course of the dinner, because we kept coming backwards and forwards about other things, I would say at least probably 10 times, but I can’t recall exactly, I don’t know exactly but I kept talking about it.

The matter was explored in Mr Vadarlis’ cross-examination, including in the following exchange:

Mr Vadarlis, why was it in the course of that evening that you had to come back to the 1% fee some 10 times? --- Because I wanted there to be no doubt whatsoever what my figure was going to be that I was proposing.

The truth is there was no doubt at all about what it was that you were proposing, it was being resisted? --- Not at all.

If it wasn’t being resisted, why did you have to keep repeating it? --- Initially it was resisted but I wanted to keep repeating it to make sure there was no doubt.

What was the initial resistance? --- Alan said, “That’s a lot of money”. They were talking at that stage $23 million plus $15 million, that’s a lot of money and he asked the question, “It’s just a lot of money.” That was the resistance.

And they wouldn’t accept it, would they? --- No, after we discussed it they did accept it.

Why did you keep on coming back to it? --- Because I wanted there to be no doubt.

What doubt could there be once you had discussed it and they said it was a lot of money? --- You know, people forget.

Forget? --- I don’t know, I just wanted to make sure there was no doubt what we had discussed and what we had agreed.

The defendants do not deny that they had dinner with Mr Vadarlis at the Rive restaurant, save that they say it was on the 18^th, not the 17^th, of January. Nor do they dispute that, throughout the dinner, Mr Vadarlis repeatedly said he wanted 1% of the total purchase price for acting for them in relation to the two dealerships; he kept going on about it like “a broken record”, according to Mr King. However, the defendants are adamant that they rejected his request and that no agreement as to a fee was reached at the Rive dinner.

It is common ground that, at the dinner, the defendants asked Mr Vadarlis to get some information about the two dealerships. The defendants did not give evidence that they actually discussed paying Mr Vadarlis his “normal fees as a solicitor”[3], for acting for them in relation to these dealerships.
[3]Cf. the particulars to para [1] of the defence.

There is no contemporaneous document evidencing the existence or terms of the alleged 1% agreement. It is therefore necessary to carefully consider the conflicting oral evidence as to what was said at the Rive dinner, and on other relevant occasions.

Mr Vadarlis was the only witness on his side. Both defendants gave evidence, as did Mr White’s long-time accountant, Marino Angelini.

Any contractual cause of action accrued in July 2001. However, for reasons which were not explained to the court, Mr Vadarlis did not issue proceedings until July 2007. It then took several years for interlocutory steps to be completed. That meant that all of the witnesses suffered to some extent, due to the undoubted burden of being examined about conversations and events which had occurred some nine years earlier.

Mr Vadarlis and Mr Angelini were not impressive witnesses. Both intelligent professional men, many of their answers were non-responsive, argumentative or simply implausible, particularly in areas of difficulty for their respective “sides”.

In addition, Mr Angelini’s recollection of dates and some details was clearly deficient. That is hardly surprising, given that he was being asked about events which occurred almost a decade ago, in respect of only two of his many accounting clients. But instead of simply conceding that he could not remember relevant matters, on occasions he engaged in what appeared to be reconstruction.

On several occasions, Mr Vadarlis said things in cross-examination that had not been mentioned in his evidence-in-chief or opened by his counsel. The only explanation he could offer in those cases was that nobody had asked him about the matter before. Given that he is an experienced lawyer, his own firm are the solicitors on the record for him, and he has been represented by senior and junior counsel since the inception of the proceeding, that explanation was not particularly satisfactory.

Although Mr White and Mr King were generally more responsive and less argumentative than Mr Vadarlis and Mr Angelini, there were some aspects of their evidence which were not entirely satisfactory either. In assessing their evidence, I have also borne in mind that (like Mr Vadarlis) they have a motive to be partisan, and had the advantage of sitting in court throughout the evidence of the other witnesses.

There were a number of matters in respect of which the case as opened for Mr Vadarlis differed significantly from his actual evidence. However, that same comment may be made in respect of some aspects of the defendants’ case. There may be various explanations for such discrepancies. In each case, unless the relevant discrepancy was put to the witness, for him to explain, I would be reluctant to draw an adverse inference on credit, just on the basis of the discrepancy.[4]
[4]I have, however, recorded some of the discrepancies in these reasons, for the sake of completeness.

In assessing the credibility of the witnesses, I have also had regard to such surrounding documents as exist, to consistency with other evidence, and to the inherent plausibility or probability of the different accounts.

It must be remembered that, at the end of the day, it is for Mr Vadarlis, as plaintiff, to establish on the balance of probabilities the existence of the alleged 1% agreement.

The parties’ previous dealings

The parties agree that the court may have regard to the bases on which the defendants had previously agreed to retain Mr Vadarlis, in assessing the probability that they entered into the alleged 1% agreement.

It was common ground that Mr Vadarlis had acted for both defendants for many years, and had become their personal friend, particularly with Mr White. Mr Vadarlis produced lists of all the files which his firm had opened for the defendants and their related entities. The lists showed that 54 files had been opened for King-related entities between December 1992 and January 2001, and 68 files for White-related entities between August 1993 and February 2001.

Even though s 86 of the LPA required a legal practitioner to provide to the client, at the start of each retainer, a written statement relating to costs and billing for legal services, it was common ground that Mr Vadarlis had never done so in respect of the defendants or their related entities.[5]
[5]About 20 of the King files, and 25 of the White files, were opened after the introduction of the relevant part of the LPA. Mr Vadarlis should have sent the information required by s 86 on each of those files.

Mr Vadarlis does not assert that he had ever entered into a commission arrangement with Mr White or his related entities, prior to the alleged 1% agreement.

However, Mr Vadarlis claims that he and Mr King had entered into two previous oral agreements, under which he was to be paid a 1% fee or commission, either instead of or in addition to his usual professional fees. Mr King denies the existence of any such prior agreement.

The sale of City Nissan

There is no dispute that in mid-2000, Mr Vadarlis acted in relation to the sale of the City Nissan business, which was owned by Listaglen Pty Ltd, a company of which Mr King and Ron Yates were directors.[6] The business was sold to an unrelated party.
[6]Mr Vadarlis had also acted for City Nissan in relation to a dispute with Nissan, and a dispute with the landlord of the relevant premises, but separate files were opened in respect of those matters.

The City Nissan business was essentially a car servicing business, located in Swanston St, Carlton. Although there were a few cars on display at the premises, which were available for sale to the public, they were on consignment from another King dealership, and did not form part of the stock which was sold.

Mr Vadarlis says that Mr King agreed to pay him his usual legal fees, plus a commission of 1% of the total purchase price, for handling “all aspects of this dealership and its disposal.” Mr Vadarlis’ file contains no note of any such arrangement. However, Mr Vadarlis identified two invoices from his firm, which he says support the existence of such an agreement:

(a) The first invoice, dated 19 February 2001[7], was for professional fees and disbursements totalling $31,607.38 (including GST); attached to it were four pages of particulars of the work done. There is no dispute that the first invoice related to Mr Vadarlis’ ordinary professional fees and disbursements; and

(b) The second invoice, also dated 19 February 2001[8], was for the sum of $22,130.51 (excluding GST), and was described as being for a “retainer” in relation to the sale.

[7]This was actually an amended account, which replaced an earlier account dated 18 September 2000, but nothing turns on that fact.

[8]This was a replacement for an earlier account dated 15 January 2001.

Even though there were no particulars of the work done, or any mention of 1% or “commission”, Mr Vadarlis asserted that the figure in the second invoice was “1% of the eventual sale price” of the City Nissan business. The falsity of Mr Vadarlis’ assertion was simply demonstrated through other evidence. The total purchase price for the business would have had to be around $2.2 million, for the second invoice to reflect a 1% commission; in fact, it is clear that it was in the order of $400,000.

The contract of sale, dated August 2000, provided that the purchase price was the total of:

(a) Goodwill of $300,000;

(b) Plant and equipment, fixtures and furnishings and the like, totalling $60,875;

(c) Stock in trade consumables and the value of the work in progress; and

(d) Any other adjustments under the terms of the agreement.

Mr Vadarlis was shown the contract of sale in cross-examination, and accepted that the purchase price would be in the order of $400,000, according to page 5 of the document. He could not point to any other agreement governing the purchase price. The following exchange then took place with the cross-examiner:

Your evidence about the … [second invoice] being calculated as 1% of the total purchase price is not correct, is it? --- It must have been correct.

You can’t see anything on your file which sustains a calculation of $22,130.51 as 1% of a total purchase price, can you? --- No.

Any such calculation is entirely inconsistent with the purchase price clause to which I’ve directed your attention in the agreement itself, isn’t it? --- Yes.

How then do you explain the [second invoice] as 1% of some or other price? --- Because that’s my recollection.

Unsupported by any document? --- Yes.

Your evidence in this is false, isn’t it, Mr Vadarlis, and you know it’s false? --- Not at all.

You’ve given this evidence to attempt to bolster your claim against Mr King and Mr White that they had reached an agreement about the payment of such an amount, haven’t you? --- Not at all.

Mr King subsequently gave evidence that “stock in trade consumables” were things such as oil, nuts and bolts, spray cans and similar things used in the servicing of cars; they would have totalled around $3,000 to $5,000. He said that the “value of the work in progress” referred to any car servicing jobs which had not yet been billed at the time of settlement; he estimated they would have totalled around $500 to $600. There was no evidence of other adjustments under the agreement. Mr King was not challenged on his evidence that the total purchase price was less than $400,000.

It is clear that Mr Vadarlis paid himself in respect of both invoices from monies in his trust account. Mr King says that he was not happy that Mr Vadarlis had done so, and asked his office manageress to pursue repayment of some of that money. He understood that she had done so, but had no personal knowledge of what steps she took. Mr Vadarlis denies that Mr King chased him for such repayment. It is not necessary to resolve the dispute about whether Mr Vadarlis in fact had authority to pay both invoices out of trust, or was asked to repay some monies. Nor is it desirable to do so in the absence of direct evidence from the office manageress.

I am not persuaded on the evidence that Mr Vadarlis and Mr King had in fact entered into any 1% fee or commission arrangement in relation to the sale of the City Nissan business.

As far as Mr Vadarlis’ credit is concerned, Mr Vadarlis was not prepared to make the obvious concession that the second invoice amount could not possibly represent 1% of the total purchase price, choosing to stick to his “recollection”, even in the face of clear evidence to the contrary. This was typical of his apparent unwillingness to make concessions that he perceived to be adverse to his case.

The Harry Moore dealership

During the second half of 2000, Mr King became aware that a Queensland Nissan dealership, owned by Harry Moore, may be available for sale. The following matters are not disputed. Mr Vadarlis travelled to the Gold Coast one weekend, at Mr King’s request, to have a look at the dealership. Mr Vadarlis paid for his own flights, and stayed at Mr King’s house. On the Sunday morning, Mr King and Mr Vadarlis spoke to Mr Moore and his accountant at the dealership premises, and then at a nearby bowling club. The negotiations did not last for long, as it soon became apparent that Mr Moore wanted more than Mr King thought it was worth; the matter went no further. Mr Vadarlis never opened a file in respect of this matter, because it did not go anywhere.

There is a dispute about the basis on which Mr Vadarlis agreed to act in relation to the Harry Moore dealership.

Mr Vadarlis says that Mr King agreed to pay him a fee of 1% of the grossed up purchase price if he ended up buying the business, and nothing if he did not. In either event, Mr Vadarlis was to bear his own expenses. Mr Vadarlis made no note of this alleged agreement.

Mr King denies entering into any such agreement. He says that Mr Vadarlis came and had a social weekend in Queensland, and agreed to have a look at the dealership with him “as a friend”. There is no dispute that Mr Vadarlis had stayed with Mr King at his home in Queensland, on a social basis, on at least one other occasion, and that their relationship was a social one, as well as a professional one.

Mr Vadarlis’ evidence in relation to this alleged agreement is vague and lacking in detail. He does not suggest that, at the time of the alleged agreement, either he or Mr King had financial information about the Harry Moore dealership, including as to its possible value or price. Nor does Mr Vadarlis suggest there was any discussion as to what he would have to do to receive the 1% fee, save that he would “assist [Mr King] in looking at and buying the dealership.”

By the start of 2000, Mr Vadarlis had handled almost 50 files for Mr King or his companies, in respect of all of which he had been paid professional fees on a usual solicitor-client basis. It seems highly improbable that an experienced businessman like Mr King would have suddenly changed the usual arrangement with his solicitor, and agreed to pay a flat 1% fee, in almost total ignorance of the size and details of the possible purchase, and without knowing how much work Mr Vadarlis might have to do to earn the fee.

I am not persuaded that there was any 1% agreement in relation to the possible purchase of the Harry Moore dealership.

When did the Rive dinner occur?

There is no dispute that the Rive dinner lasted about three or four hours, and that it took place when Mr King and Mr White were both visiting Melbourne, to finalise certain transactions involving the King Nissan dealership. Both sides tried to support their evidence as to when the Rive dinner occurred, by reference to the settlement or finalisation of those transactions.

As at 2000, Mr King and Mr Yates were the joint owners of the King Nissan dealership. Mr Yates was responsible for the day to day running of the business, as Mr King was living in Queensland. Things were not working smoothly between them and, after various discussions[9], Mr King agreed to buy Mr Yates’ one half interest. It is not clear precisely when that transaction was completed, save that it occurred prior to the finalisation of the White purchase (discussed below), on an occasion at which Mr Vadarlis was not present.
[9]Including the possibility of Mr Yates buying Mr King’s half interest.

On 28 December 2000, Mr King and Mr White had entered into an agreement, for Mr White to buy one half share of the King Nissan dealership, essentially for the same price that Mr Yates had sold his interest to Mr King (“the White purchase”). They had reached that agreement without the involvement of Mr Vadarlis. In order for the White purchase to be finalised, the balance sheet for the business needed to be reconciled as at 31 December 2000.

There is no dispute that, on 18 January 2001, Mr King (and his accountant, Graham Price), Mr White (and his accountant, Mr Angelini) and Mr Vadarlis met at Mr Vadarlis’ offices, to work through some adjustments to the balance sheet (“the adjustment meeting”). Mr Vadarlis has a file note which shows the adjustment meeting started around 8.30 am (although not everybody was present that early). There is no documentary record of when it ended.

Mr Vadarlis says that the Rive dinner occurred on the 17^th, the night before the adjustment meeting. He says that the adjustment meeting went “all day”, “the whole day”, on the 18^th.. He does not recall going to lunch that day.

In support of his evidence that the adjustment meeting went all day, Mr Vadarlis produced several versions of a one-page document headed “reconciliation”, including a fourth and final version which was signed by Mr White and Mr King. However, there is nothing about the document that is so complex that it must necessarily have taken more than 3 or 4 hours to prepare and agree four versions.

Mr Vadarlis’ counsel also tried to establish that the meeting went longer than the defendants’ witnesses had suggested, by showing Mr Angelini a financial document concerning a King-related entity, which was apparently faxed from Mr Price’s office to Mr Vadarlis’ office at 12.52 pm on the 18^th. Mr Angelini said he had never seen the document before, did not know why it had been faxed on that day, and did not think it was relevant to the finalisation of the balance sheet reconciliation. In the circumstances, I did not allow the document to be tendered through Mr Angelini, and said it ought to be tendered through Mr Vadarlis or somebody who could give evidence about it. Mr Vadarlis’ counsel did not recall Mr Vadarlis for that purpose, even though he had said he might wish to do so; nor did he put the document to either of the defendants.

Messrs White, King and Angelini all categorically stated that the adjustment meeting finished by lunchtime on the 18^th[10], and the three of them and Mr Vadarlis went to lunch at a restaurant near Mr Vadarlis’ office. Messrs White and King say that the Rive dinner occurred that same evening.
[10]Although the defendants’ counsel had cross-examined Mr Vadarlis on the basis that the settlement and the lunch occurred on Friday the 19^th , Mr Vadarlis’ counsel did not cross-examine the defendants as to that discrepancy.

Mr Angelini said that the Cairns and Darwin dealerships were discussed at the lunch, after Mr White mentioned that there was a possibility of them being on the market. He said that there was general discussion about the dealerships and about who might acquire them.

The defendants agree that, at the lunch, Mr White raised the topic of the two dealerships. Mr White said to Mr King that Mr Vadarlis had told him that there were a couple of dealerships which they might be interested in looking at. Mr White said he was “absolutely surprised” by Mr King’s response, which was “OK, let’s have a tentative look.” Mr King agreed in general terms with that evidence.

In closing address, Mr Vadarlis’ counsel sought to make much of a fax sent to Mr Vadarlis on behalf of Roger Harley of Fawkner Capital at 9.27pm on the 18^th. Fawkner Capital were the merchant bankers acting for the vendor of the Cairns and Darwin dealerships. The fax attached a copy of a confidentiality agreement which Mr Vadarlis was required to sign before he would be provided with the vendors’ information memorandum. It also referred to a phone message left by Mr Vadarlis that day, although gave no indication of the time of the message.

Mr Vadarlis’ counsel argued that the fax supported the following findings: the Rive dinner was held on the 17^th, and Mr Vadarlis rang Fawkner Capital on the 18^th, once he had been engaged under the alleged 1% agreement. The fax could indeed support such an account, and Mr Vadarlis did say in his evidence-in-chief that he first contacted Mr Harley the day after the Rive dinner. But the fax is equally consistent with the defendants’ account, namely, that they briefly discussed the Cairns and Darwin dealerships over lunch on the 18^th, and showed an interest in looking into the two businesses. That may have led Mr Vadarlis to request preliminary information from Fawkner Capital that afternoon.[11]
[11]Unfortunately, the alleged significance of this document only became apparent in closing addresses, so the exploration of this issue in evidence was not as thorough as it might otherwise have been.

The parties agree that the dinner occurred because the defendants – who were old friends and had previously been in business together – were both in Melbourne[12], and were celebrating Mr White’s acquisition of an interest in King Nissan. The commercial deal between the defendants had been agreed in late December 2000, and all that needed to be done was the finalisation of the balance sheet and the actual settlement. Given all those matters, I do not accept that there would be no reason for them to have a celebratory dinner on the 17^th (as the defendants’ counsel argued). That is to say, the purpose of the dinner does not make it more likely that the dinner was held on one day than the other.
[12]In January 2001, Mr King was still living in Queensland, where he had lived since the mid 1990s, and Mr White was living in Albury-Wodonga. It seems that Mr King was visiting Melbourne for much of that week. Although Mr King said he believed that Mr White was only in Melbourne for the day of the adjustment meeting, Mr White did not give evidence as to how long he was in town for that week.

The documentary evidence, such as there is[13], is equivocal as to when the Rive dinner occurred. No party produced a diary or credit card slip, or any other document which established the date of the dinner.
[13]Discussed above.

Whether the dinner occurred on the 17^th or the 18^th is not, in itself, determinative of Mr Vadarlis’ claim. By that, I mean that, provided I was satisfied as to Mr Vadarlis’ account of the conversation at the dinner, it would not matter what the actual date of the dinner was. However, the way in which both sides’ evidence was presented means that the question of when the dinner occurred ended up being inextricably tied in with the witnesses’ credit.

For Mr Vadarlis’ version to be accepted, all three of the defendants’ witnesses must have been lying about the duration of the adjustment meeting, and the fact that they went for lunch and dinner on the day of the meeting; the nature and extent of their evidence in this regard does not really leave room for a more benign explanation, namely, that they were simply mistaken in their recollection of the events of the 18^th. In his closing address, counsel for Mr Vadarlis urged the court to infer that the defendants “had agreed to pay the fee while quietly intending to renege once the transaction was safely completed.” However, no such suggestion was ever put to either of the defendants; indeed, although Mr Vadarlis’ account was formally put to the defendants, there was little, if any, direct attack on their honesty through cross-examination.

Knowledge of the Cairns and Darwin dealerships

There is a dispute as to the circumstances in which the parties first learned that the Darwin and Cairns dealerships were on the market. This has particular relevance to the probability that the defendants would have agreed to pay Mr Vadarlis some sort of “spotter’s fee” for bringing the prospective deal to their attention.

There is also a dispute as to what information, particularly financial information, was known to the parties at the Rive dinner (whether held on the 17^th or the 18^th), which is relevant to the likelihood that the parties were in a position to enter into the alleged 1% agreement.

Introduction to the dealerships

Much of the work which Mr Vadarlis says he was engaged to do in respect of the Cairns dealership was of a type which solicitors routinely do when acting for the purchaser or vendor of a business. Indeed, Mr Vadarlis accepted that he had done such work for the defendants in relation to the purchase or sale of other businesses, for which he had been paid his usual professional fees. But Mr Vadarlis argued that what he was retained to do at the Rive dinner differed substantially from what might be called ordinary solicitors’ work, thereby justifying payment on a special basis. One aspect of this allegedly special work related to the concept of a “spotter’s fee”, being some sort of remuneration for introducing the defendants to the business.[14]
[14]Mr Vadarlis also sought to stress that he was engaged to do more commercial negotiating than a solicitor would usually do; although that does not seem to have been borne out by what he in fact did.

In cross-examination and closing address, Mr Vadarlis’ counsel asserted, incorrectly, that Mr Vadarlis had never characterised the 1% as a “spotter’s fee”. In fact, Mr Vadarlis gave evidence that he told the defendants at the Rive dinner that the 1% fee which he wanted included “a spotter’s fee for becoming aware of the business”, although he did qualify that by saying that the spotter’s fee was just “part of the larger conversation”, that the 1% “wasn’t just a spotter’s fee.” Further, in a telephone conversation which he had with Mr White on 31 July 2001 (which will be discussed later in these reasons), Mr Vadarlis said:

What the fee is basically for me finding the business and coming to you and saying there is a business for sale and I reckon I can get it funded and I reckon you can buy it, that’s what the fee’s for, it’s a spotter’s fee. It’s a consultancy fee.

Mr White and Mr King both said that when Mr Vadarlis first raised the fee with them at the Rive dinner, he described it as a “spotter’s fee.”

For the following reasons, it is improbable that the defendants would have agreed to pay a 1% fee based, to any great degree, on Mr Vadarlis’ role in “finding the business” and taking it to them.

Mr Vadarlis said in evidence-in-chief that he became aware around mid-December 2000 that the businesses might be for sale, because he acted for a lot of car dealers and “There’s always talk in the trade and I heard they were for sale, I can’t tell you how or where.” He denied that he had been contacted by someone from Esanda, and said that he found out who the vendor’s financiers were and then he contacted Jeff Rogers, a senior manager at Esanda.[15] In cross-examination, he initially repeated that evidence. Then, later in cross-examination, it was put to Mr Vadarlis that it was not true that he had learned of the businesses from someone in the car trade, to which he responded “Well, maybe, I can’t really recall. That may be right.”
[15] Mr Vadarlis’ case had been opened on the basis that Mr Vadarlis first became aware that the vendor was interested in selling the Darwin and Cairns dealerships in about December 2000. Counsel said that Mr Vadarlis was alerted to that fact by Mr Rogers, the vendor’s financier, who was keen to finance the eventual purchaser. Counsel said that Mr Rogers approached Mr Vadarlis, to see if he could find a purchaser for the dealerships. His evidence – discussed above - was to the opposite effect.

Mr King and Mr Angelini both agreed that there was general talk around the car dealership industry about the Darwin and Cairns dealerships being for sale. Mr King said that he first learned of the two dealerships from Gary Lechte, another car dealer, who told him about them before he and Mr White “did the deal” (which happened in late December 2000). Mr Angelini also said he had heard of the potential sale from discussions with his client, Gary Lechte, in January 2001, and that it had been mentioned to him by “many people, other clients as well.”

Mr Vadarlis said that he had contacted other car dealers, to ascertain their possible interest in the dealerships, including Gary Lechte (for whom Mr Vadarlis had acted in the past) and Graham Werner. He was not sure if he contacted them before or around the same time as he contacted Mr White. He said: “I was putting feelers out. There was no secret in the fact that the business was for sale and I was prepared to tell anybody who would listen.”

The Cairns and Darwin dealerships were substantial, high-profile dealerships. The sale was being conducted by merchant bankers acting on behalf of the vendor, through a process of initially calling for indicative offers (effectively, expressions of interest). It is hardly surprising that there would have been general industry discussion about the fact that they were on the market. Although it seems that Mr Vadarlis was the person who first mentioned the dealerships to Mr White[16], the information was hardly so commercially valuable that the defendants would have agreed to pay any substantial amount for the introduction.
[16]Mr White says he first heard of the dealerships when Mr Vadarlis called him about them, in mid-January 2001, within a couple of days of the settlement of the White purchase. He says that, even though Mr Vadarlis was acting for Mr King at the time, Mr Vadarlis asked him why he would go ahead and buy half of the King business when these two dealerships were very good businesses and potentially more lucrative; Mr Vadarlis denied that he said this.

Financial information known at the Rive dinner

In December 2000, the vendor of the Darwin and Cairns dealerships published a 31-page information memorandum, which included financial information about the businesses.

Mr Vadarlis said that by the time he telephoned the defendants in December 2000 to tell them about the businesses, he had read and analysed the information memorandum and spoken to Mr Rogers of Esanda “and I related all of this to [the defendants]”, including about the funding and the size of the purchase price ($23 million plus floorplan).

The defendants dispute that Mr Vadarlis had provided them with any such financial information prior to the Rive dinner.

Mr Vadarlis could not recall who first brought up the topic of the Cairns and Darwin businesses at the Rive dinner. Mr Vadarlis said that at the dinner the parties “rehashed” what they had previously discussed about the businesses in the December phone calls. At first, he said he could not recall giving the defendants “any numbers about the businesses,” but later said that he had mentioned a purchase price of about $23 million and about $15 million floorplan.

On the other hand, the defendants say that they knew and were told very little about the Cairns and Darwin dealerships, including their likely price, by the time of the Rive dinner. They say that they certainly did not know enough to agree to the payment of a 1% fee.

In evidence-in-chief, Mr Vadarlis said that he had received a copy of the information memorandum just before Christmas 2000, from Mr Rogers. The cover page was marked “strictly private and confidential”, and the first page of text clearly warned that the document was only to be provided to prospective purchasers who had signed a confidentiality deed. Mr Vadarlis said that, even though he was uncomfortable doing so, because he had not signed a confidentiality deed, he nevertheless read and analysed the information memorandum before the Rive dinner, and communicated its contents to the defendants.

The receipt of this copy of the information memorandum formed an important part of Mr Vadarlis’ case. If he had not received the document in December, his account of his telephone conversations with the defendants, and the Rive dinner, would be seriously undermined, as he would have had little (if any) financial information to give them.

There is no documentary evidence to support Mr Vadarlis’ claim that he received a copy of the information memorandum before Christmas 2000. At some stage, he prepared a one-page document (which he described as a “quick glance spreadsheet”), containing a summary of some of the financial data in the information memorandum, together with notes about what Esanda might be prepared to finance; the document was updated from time to time. At first, Mr Vadarlis said he prepared it in “early January” but, in cross-examination, he said it was prepared after he returned from holidays in mid-January. The earliest version of the document which Mr Vadarlis was able to produce to the court was dated 24 January 2001; even if that is, as Mr Vadarlis asserts, a print date rather than a creation date, it does not prove that Mr Vadarlis had received the information memorandum in 2000.

Mr Vadarlis tried to bolster his evidence that he received the information memorandum from Mr Rogers in December, by identifying that two names written on the back of the document were in Mr Rogers’ handwriting. Accepting that they are in Mr Rogers’ handwriting, there is nothing on the document that indicates when Mr Rogers wrote the names.

Even accepting that Mr Rogers and Esanda were keen to become the financiers for the new purchasers, it is not clear why Mr Rogers would have breached his own obligations of confidentiality so flagrantly – by providing a copy of the information memorandum to Mr Vadarlis – when Mr Vadarlis could so easily obtain his own, legitimate copy by signing a relevant confidentiality agreement himself.

In cross-examination, Mr Vadarlis was taken to correspondence which showed that on the 18^th of January he had made an initial enquiry to Fawkner Capital, and on the 19^th he had signed and returned a confidentiality agreement and been provided with a copy of the information memorandum. Mr Vadarlis denied the cross-examiner’s suggestion that the copy which he obtained from Fawkner Capital on the 19^th was the first and only copy of the information memorandum which he received, which would have meant that he did not have detailed financial information at the Rive dinner (whether it was held on the 17^th or the 18^th). However, he was unable to explain why his affidavit of discovered documents only listed one copy of the information memorandum, not two.[17] Asked why he had not mentioned obtaining two copies of the memorandum until cross-examination, Mr Vadarlis said it was because nobody had asked him.
[17]Even if one of the copies of the document was no longer in his possession, he should have listed it in the relevant part of his affidavit of documents and explained what had become of it.

The information memorandum clearly stated that indicative offers were required to be made by 31 January 2001, with a view to finalising contracts of sale by 14 February 2001. It also noted that a data room would be available in Adelaide from 3 to 12 January 2001, at which further financial information could be inspected by approved prospective purchasers.[18]
[18]The fax from Fawkner Capital to Mr Vadarlis, sent on the evening of 18 January, indicated that the data room would be open until 19 January 2001, but Mr Vadarlis did not know of that extension at the Rive dinner.

If Mr Vadarlis had, as he alleged, received and read a copy of the information memorandum in December 2000, he would have been well aware of that timetable. By the time of the Rive dinner, he would have known that the data room had already closed and there was less than a fortnight before indicative offers were due. In that case, one would have expected him to have taken more active steps to ascertain the defendants’ possible interest in the business, rather than waiting until the Rive dinner.[19] That would particularly be the case if (as Mr Vadarlis alleged) Mr White had already told him in early January that the defendants were interested in buying the dealerships together.[20]
[19]Even though Mr Vadarlis’ offices were closed in early January, he was able to contact the defendants and could easily have taken steps to ascertain their interest and seek an extension of time to access the data room.
[20]Mr Vadarlis said that he spoke to Mr White in early January 2001 about the City Nissan deal. He said that on that occasion, Mr White told him that he and Mr King were interested in looking at the Darwin and Cairns dealerships together. Asked his response, Mr Vadarlis said “It surprised me, I must say.”

If Mr Vadarlis’ evidence is accepted, he deliberately read a confidential document which he knew he should not be reading, and passed on some of its contents to the defendants. He then went through the process of obtaining a legitimate copy of the document from Fawkner Capital, without disclosing that he already had a copy of the document. That conduct does not reflect well on his character as a legal practitioner, but I do not agree with the defendants that the conduct necessarily goes to his credit.

I am not satisfied that Mr Vadarlis had received a copy of the information memorandum prior to the copy which he received from Fawkner Capital on 19 January. In that case, the discussion about the Cairns and Darwin dealerships could only have been in the most general terms.

Even if (contrary to the above) Mr Vadarlis’ evidence as to when he first received the information memorandum and what he did with it were to be accepted, there would still have been so many unknown aspects to the possible purchases at the time of the Rive dinner. The defendants had only recently started discussing the possibility of buying the dealerships together. Even on the information which Mr Vadarlis says he provided, there must have been so many unknown financial factors, not the least of which was the size of the floorplan.[21] No contact had been made with the vendor, and nothing was known about other potential purchasers or how much work might be involved in purchasing the dealerships. By this stage, Mr Vadarlis had acted for the defendants in more than 100 matters, all on an ordinary professional fees basis. Mr White and Mr King were both experienced businessmen, keen to do the best deal they could. It seems improbable that they would have agreed to change their usual arrangement with their solicitor, and pay a fee of 1% of the total purchase price, in such a state of financial uncertainty, and at such an early stage of the process.
[21]The floorplan refers to a financing arrangement for new and/or used cars, which remain the property of the financier until the point of sale to the ultimate customer. The amount of stock, and hence the size of the floorplan, can differ substantially from month to month.

Subsequent mention of a 1% fee

There is no dispute that the question of a 1% fee was brought up on a number of occasions after the Rive dinner. Both sides sought to rely on those subsequent discussions as supporting their version of what occurred at the dinner.

The Angelini conversation

Mr Vadarlis says that on 12 February 2001, he and Mr Angelini attended a lunch with Mr Harley and Mr Grimwade from Fawkner Capital. He says that coming back from the lunch, he had the following conversation with Mr Angelini:

What was the conversation? --- He said to me “I hear you’re getting 1% of this deal.”

What did you say to that? --- I said “That’s right, yes.”

Was there any further conversation about that? --- He said “That’s a lot of money”, and I said “It’s a lot of work,” and that was the end of the conversation about that.

Mr Angelini’s evidence in response was not very satisfactory. At first, he clearly said he could not recall going to any such lunch, or coming back from it with Mr Vadarlis. When it was put to him that the lunch was on 12 February, at the Republic Restaurant, he suddenly said he could recall the lunch and walking back with Mr Vadarlis. Asked whether his earlier recollection was faulty, he responded: “I wanted you to prompt me as to which restaurant we went to and I clearly recall that restaurant being a building on a corner, so thank you for prompting me.” However, he denied (in a rather argumentative manner) that there had been any discussion about Mr Vadarlis’ fee.

I am not persuaded that the alleged conversation occurred. I do not come to that conclusion on the basis of Mr Angelini’s evidence, which was unsatisfactory in many respects. Rather, for reasons given elsewhere, I am not satisfied that the alleged 1% agreement had been entered into at the Rive dinner.

Discussions with Mr White

Mr Vadarlis said he mentioned his fee to Mr White on “a number of occasions” after the Rive dinner, only a couple of which he could now recall.

Mr Vadarlis said that when Mr White came to his offices to sign the confidentiality deed in late January, “I reminded him that my fee was 1% and he said ‘Yeah, yeah that’s fine.’”

Mr White had no recollection of the particular occasion on which he undoubtedly signed the confidentiality deed, or of the discussion that Mr Vadarlis said occurred on that occasion. But he was adamant that he never agreed to pay a 1% fee.

Mr Vadarlis says he mentioned his fee again when Mr White was in Melbourne, after the defendants had agreed to buy the Cairns business: “I said ‘Don’t forget my 1% fee’, and he didn’t say anything, he didn’t say yes or no, he just didn’t say anything.”[22]
[22]Mr Vadarlis’ case had been opened on the basis that Mr Angelini was present on this occasion in July, but in his evidence, Mr Vadarlis said he was “pretty sure” he had never spoken about his fee with Mr Angelini and Mr White at the same time. And it was not suggested to Mr Angelini or Mr White that Mr Angelini had been present on that occasion.

Mr White did not recall the specific July meeting. But he agreed that Mr Vadarlis would “continually” say “Don’t forget my 1% commission.” He said that Mr Vadarlis mentioned the 1% fee “a lot of times”, “every time we spoke”.

Mr Vadarlis was asked why he would have mentioned the fee in July, given that it would not be payable until after settlement of the purchase, some months hence; he replied “I don’t know, I can’t explain why I mentioned it.” The following exchange then occurred:

There’s one explanation I can suggest which is, you were wanting to reach agreement about something which hadn’t already been agreed. Can you think of any other explanation? --- I just – I didn’t want there to be any lingering doubts in their mind. I repeated it a couple of time just because I did, I don’t know why. If there was any doubt about my fee, we would have had a blue weeks before, months before.

Mr White and Mr Angelini both said that Mr Vadarlis also raised the fee with them at several breakfast meetings at Caffe e Cucina in Chapel Street. Mr Vadarlis accepted that it is likely that he also mentioned the fee to Mr White on other occasions, which he could no longer recall; yet he strenuously denied (for no apparent reason) that those occasions included the breakfasts which they undoubtedly shared at Caffe e Cucina.

Mr Angelini spoke of two such breakfasts at that café, which he says were attended by himself, Mr Vadarlis and both defendants. He initially said the conversations occurred in November or December 2000[23], then later said they were after the January settlement of the White purchase.[24] He said that Mr Vadarlis would say that his fee was 1%, and the defendants would ask “on many occasions” what the 1% was of, and Mr Vadarlis would say “of everything.” He said that he and the defendants would respond that it could not be 1% of everything. Mr Angelini’s version of those conversations is not particularly plausible. Just as it seems unlikely that Mr Vadarlis would have kept raising the 1% fee, if he thought he already had an agreement to that effect, it seems improbable that the defendants would have kept asking what the 1% was of, when there is no real dispute that at, and ever since, the Rive dinner, Mr Vadarlis was asking for “1% of everything”.
[23]That evidence was clearly wrong, as the defendants’ own counsel conceded.
[24]Mr Angelini could not be more specific than that.

Mr White agreed that breakfasts at Caffe e Cucina were among the many times that Mr Vadarlis brought up his 1% fee. Mr White did not say that the defendants answered in the terms expressed by Mr Angelini, but he said they would answer Mr Vadarlis along the lines of “How can you get 1% commission when we don’t know what the deal is?” Mr White was adamant that they never agreed to pay 1%.

Discussion with Mr King

Mr King had no recollection of attending any breakfast at Caffe e Cucina with Mr Vadarlis.

He only recalled Mr Vadarlis raising his fee with him on one occasion after the Rive dinner. That was at a dinner held at Donnini’s restaurant in Carlton, which he said took place around March 2001, and was attended by their respective spouses and others. Mr King said that Mr Vadarlis had asked “What about this 1%”, to which Mr King responded that there was “no way known” that he would ever agree to pay 1%, it was “unworkable and can’t be done.” This alleged conversation was not put to Mr Vadarlis in cross-examination, so I have had no regard to it in arriving at my decision.

Mr Vadarlis’ explanation for mentioning the fee

Even on Mr Vadarlis’ own account of the Rive dinner, throughout the evening the defendants kept resisting his requests for a 1% fee. His version of the dinner ends with Mr King swearing at him, telling him to “shut the F up” about the fee, and then saying either “We understand that’s the deal” or “Let’s get on with it … let’s do a deal.” Although the former expression (“We understand that’s the deal”) could be understood to be an acceptance of Mr Vadarlis’ fee request, it is not clear that either of the latter expressions would be.

Even if Mr King said those things (which the defendants deny), Mr Vadarlis should have realised – as a solicitor – that it would be prudent to record the “agreement” in writing.

At no time between the Rive dinner and his letter of demand of 31 July 2001 (which will be discussed below) did Mr Vadarlis send a letter, or make a note, confirming the alleged 1% agreement. He was asked to explain why he had not done so. Mr Vadarlis said several times that he really could not say why he had not put the alleged 1% agreement in writing, other than that “these people were friends, it was a deal amongst friends.” That was not a particularly satisfactory answer in the light of his evidence that the reason why he kept repeating that he wanted a 1% fee, was in case people “forgot” what he said or had “lingering doubts”. Even as a friend, Mr Vadarlis could easily have sent a casual email or note to the defendants, confirming something that important, if he was genuinely concerned that it might otherwise be forgotten.

It is undoubtedly the case that Mr Vadarlis raised the question of a 1% fee on a number of occasions after the Rive dinner. His explanation as to why he did so is unsatisfactory. If agreement as to his fee had been reached that night, there would have been no logical reason to keep raising it again and again. It is more probable that he kept raising the fee because he did not really believe that there was a binding agreement, but was still hopeful of persuading the defendants to agree to such a fee.

What work was done after the Rive dinner?

There is no dispute that, at the Rive dinner, the defendants asked Mr Vadarlis to get them information about the two dealerships. There is little dispute about what work Mr Vadarlis did between the Rive dinner and mid-July 2001.

Mr Vadarlis’ counsel suggested that it was “inherently improbable” that Mr Vadarlis would have done all the work that he did, without there being the alleged 1% agreement. I do not accept that submission. Even without any actual discussion about fees, the parties would reasonably have expected, based on their past practice in more than 100 files, that the defendants would pay Mr Vadarlis his usual professional fees for acting on their behalf.

Mr Vadarlis arranged for Mr White to execute the confidentiality deed necessary for him to be able to access the information memorandum and other confidential information; Mr White did so on 25 January 2001.

Mr Vadarlis drafted an indicative offer to Fawkner Capital (which Mr White approved[25]), and sent it on the last day for indicative offers, namely 31 January 2001. The offer noted that Mr Vadarlis and the defendants had not yet had access to the data room, or sighted any management accounts. The offer was drafted with a view to being rather confusing, but apparently attractive, to try to ensure that the defendants would be in the short-list of prospective purchasers, so they could be present at the final negotiating table.
[25] As between the defendants, Mr White was principally involved in communicating with Mr Vadarlis and others. Although he kept Mr King informed from time to time, Mr White had the primary running of the matter.

During late January or early February, the defendants visited both the Cairns and Darwin dealerships.

Mr Angelini signed the confidentiality deed on 12 February, and subsequently visited the data room in Adelaide.

Mr Vadarlis and Mr Angelini met with and spoke to representatives of Fawkner Capital and the vendor, trying to get more current financial information.

During the second half of February, Mr Vadarlis sent a revised indicative offer to Fawkner Capital, on the instructions of Mr White.

During February, March and April, Mr Vadarlis had further meetings and discussions with Mr Angelini and representatives of Fawkner Capital; in particular, he sought further financial information in relation to some aspects of the Darwin dealership.[26] From time to time, Mr Vadarlis also updated his short financial summary document, as further information came to hand, including from Mr Rogers. However, Mr White’s accountant, Mr Angelini, was the person primarily responsible for conducting the due diligence assessment of the two dealerships. Mr Angelini was engaged by the defendants, not by Mr Vadarlis.
[26]Although the Darwin dealership was the more profitable of the two, there were serious concerns about whether strong sales to the UN forces in East Timor, and to an Avis franchise in Darwin, would continue.

The vendor was interested in selling both dealerships together, and the initial discussions with the defendants proceeded on that basis. However, by mid-May, the defendants’ interest in the Darwin dealership seems to have diminished somewhat, due to doubts about its ongoing profitability. Although the dealership in Cairns had initially seemed like a less attractive proposition than the one in Darwin, Mr King believed it had greater room for improvement, because it was being badly managed.

On 18 May, Mr Vadarlis faxed to the vendor an offer to buy the Cairns dealership. It was cast in very general terms, and essentially offered to buy the land at sworn valuation price, plant and equipment at book value, and stock and spare parts at value. Nothing was offered in respect of goodwill. The vendor did not respond to the 18 May offer.

On 25 May, Mr Vadarlis faxed a revised offer to the vendor. The principal difference between the two offers was that the sum of $1 million was offered for goodwill. The vendor did not respond to this offer either.

Mr Vadarlis said that the vendor “would not talk to us”, that he tried to get a meeting organised and there was just silence. He said that at some stage he had been told by Mr White that Mr Vadarlis had “singed” or “burned” someone at the other end, because he was after too much information. I did not hear evidence from anybody on behalf of the vendor, and am unable to determine why no response was received to either of the May offers. But it is not necessary for me to determine why that was so, because the defendants chose to continue using Mr Vadarlis, even after those alleged criticisms of him.

Mr King and his wife were travelling overseas during much of June. Around the middle of the month, Mr King called Mr White and said he thought they should still try to buy the Cairns dealership. By the time he returned to Australia, the defendants had decided to go and negotiate directly with the vendor, dealer to dealer. They told Mr Vadarlis that they did not want lawyers to be involved in the negotiation, and Mr Vadarlis agreed with that approach.

Around 17 July 2001, the defendants flew to Cairns, where they engaged in direct negotiations with the vendor. They had asked Mr Vadarlis to be present in his offices on 17 July, in case they needed to contact him for advice. During the course of that day, Mr White faxed draft heads of agreement to Mr Vadarlis, who faxed the draft back with his comments. Mr White and Mr Vadarlis also spoke by telephone about the draft. The heads of agreement document was finalised and signed by the parties that day. The purchasers were Messrs King and White “or their nominees”.

Over the next few days, Mr Vadarlis continued to advise and act for the defendants. He liaised with Mr Angelini about possible corporate structures, and with Mr Rogers of Esanda about the finance, for the acquisition.

On Friday 20 July, there was a meeting in Melbourne, attended by Messrs Vadarlis, White and Angelini. This is the meeting at which Mr Vadarlis says that he again raised his 1% fee, to which Mr White said nothing.

On that same day, Mr Vadarlis emailed the defendants and Mr Angelini with an update on his discussions with Mr Rogers. He also sent them an “action list” of tasks to be performed prior to settlement on 30 September; the list anticipated that Mr Vadarlis would continue to act for the defendants right up until settlement.

The breakdown of the relationship

Over the next 10 days, the longstanding relationship between Mr Vadarlis and the defendants fell apart, such that on 31 July Mr Vadarlis sent what was essentially a letter of demand, and announced that he was no longer acting for the defendants. Neither side’s account of what happened during this period in late July 2001 was entirely satisfactory.

The 23 July email

Mr Vadarlis said that late on Monday 23 July, he sent a short email to the defendants and Mr Angelini, dealing with the stamp duty payable on the purchase. The last line of the email said: “This does not allow for GST, other government fees, borrowing stamp duties and my fee.”

Both defendants emphatically denied receiving the 23 July email. They both said that they wished they had received the email, as it might have saved them stamp duty on the purchase. It is not self-evident from an examination of the email why that might be so, but their answers were not really challenged in cross-examination.

Mr Angelini, named as a recipient of the email, was not asked whether he had received it.

On the other hand, Mr Vadarlis was adamant that the email had been sent. The bottom right hand side of the email shows the date “12/03/02”. However, Mr Vadarlis was not asked whether that date was a document creation date[27], a document printing date[28], or some other date.
[27]Which would have supported the defendants’ evidence that they were not sent the email in July 2001.
[28]Why would Mr Vadarlis have been printing out a copy of this email in March 2002, long after the transaction and 5 years before he issued the proceeding?

Mr Vadarlis was also adamant that the reference at the end of the email to “my fee” was clearly a reference to his 1% fee. This was a classic example of Mr Vadarlis’ self-serving advocacy as a witness. The email made no mention of the alleged 1% agreement, it simply referred to “my fee”.

Even accepting that the 23 July email was sent, it does not prove the existence of the alleged 1% agreement, merely that Mr Vadarlis was (unsurprisingly) expecting to be paid a fee for his work.

The 27 July phone calls

There is no dispute that on Friday 27 July 2001, Mr Vadarlis spoke by telephone to Mr White and then Mr King.

Mr Vadarlis could not recall who initiated the conversation with Mr White. He said that the following exchange occurred:

Do you know what the conversation was about? --- I can’t exactly recall.

Did Mr White say anything to you in the telephone conversation? --- He said to me, “Alan thinks your fee’s too high.”

What did you say to that? --- I said, “You’ve got to be kidding me”. I said “When did it become too high?” he said “You know, Alan thinks it’s too high”, then I rang Alan.

Mr White had no recollection of speaking to Mr Vadarlis on that occasion.

Mr Vadarlis said that after his conversation with Mr White, he telephoned Mr King and said:

What did you say? --- I said “I’ve just been speaking to Tony”, I can’t remember the exact words but it was along these lines, “and he tells me that you think my fee’s too high”, and I remember Alan saying, “Well, actually you know, I’m okay with the fee but Tony thinks it’s too high.” I said “It’s ridiculous, you know what the fee was, we agreed, from day one you knew what the fee was, I made it explicitly clear, very clear and we were talking about it and then I remember by the end he said “Actually, I think the fee’s too high as well” and I said “Alan, I don’t care, my fee is just not negotiable.”

Mr King remembered having a conversation with Mr Vadarlis on that day about his fee. He disagreed with most of Mr Vadarlis’ account of the conversation, although agreed that it got heated and ended with one of them hanging up. Mr King said that Mr Vadarlis said he had just been speaking to Mr White, who would not pay him a 1% fee. Mr King said he replied “well that was never agreed to. I mean what do you expect.”

I accept that Mr Vadarlis discussed a 1% fee with both defendants on 27 July. What is not clear (from either side’s point of view) is what prompted these conversations to take place.

The events of 31 July

On Tuesday 31 July, Mr White rang Mr Vadarlis. Mr White says that he rang to try to resolve the fee issue, which must mean he was aware that there was some sort of dispute about Mr Vadarlis’ fee, even if he could not (in the witness box) recall the telephone call of the 27^th.

Mr Vadarlis put his dictaphone next to the phone and recorded the conversation, without telling Mr White that he was doing so.

Asked to explain why he taped the conversation, Mr Vadarlis said that he “couldn’t really say. I was incensed by what had happened in the earlier week. I don’t know, I can’t give you a reason why I taped it.” I infer that Mr Vadarlis probably taped the conversation to try to get some proof of the existence of the alleged 1% agreement, because he was concerned that the defendants were, or would be, disputing his entitlement to a 1% fee.

Mr White started the conversation by saying that they never had any intention to “jib” Mr Vadarlis, or to “dud a fee”. He made comments such as “I suppose, rightfully or wrongfully, I didn’t believe that we were expected to give you 1% of this deal”, and “what we’d always had in mind was to sit down with you at the end and say OK, Eric, look ah you know this, this is what, let’s do a deal and give you some money.”

Mr White did agree that Mr Vadarlis had made it perfectly clear at the Rive dinner that he wanted 1% for a fee, as well as wanting 5% of the business, but Mr White said that the defendants treated it as “a bit of a joke”.[29]
[29]Mr King used a similar expression in his evidence.

At various stages, Mr White did say words to the effect that the deal that was being done was a different one to what was originally discussed. In doing so, he appeared to be trying to argue against paying a 1% fee on that basis.

However, there is a danger in minutely scrutinising – as if it were a statute – every word of what was, at times, a very rambling conversation, in which the parties frequently interrupted each other. One of the participants was an experienced lawyer, trying to gather evidence to assist himself; the other was an old friend and client, who was unaware that he was being taped and was trying to get out, as best he could, of what had clearly become an uncomfortable situation. Throughout the conversation, the transcript of which runs for 21 pages, Mr Vadarlis repeatedly tried to get Mr White to admit the existence of the alleged 1% agreement; Mr White never did so in clear and unambiguous terms.

After the phone call, Mr Vadarlis sent a letter to the defendants on the same day. The letter included the following:

I confirm that we have just had a telephone conversation regarding my consultancy fee in respect of the purchase of [the Cairns dealership]. I note that you agree that at the time the consultancy was entered into, it was agreed that my fee was to be 1% of the gross purchase price in respect of any purchase, including the new and used car floorplan. Despite this, you now maintain that the agreed fee is inappropriate in respect of the above purchase. You also stated that you are unsure as to the fee which is payable.

…

I note your assertion that you have withdrawn my consultancy and intend to employ others to complete the purchase. Your conduct in this regard constitutes a repudiation of the consultancy. In the circumstances, the appropriate course is to issue proceedings against you and Alan to compel the payment of the agreed consultancy fee of 1% which equates to $160,000.

The letter was self-serving and inaccurate in several respects. As mentioned earlier, Mr White did not “agree” in the 31 July conversation that the defendants had ever agreed to pay a 1% fee. Nor had Mr White said that the defendants had withdrawn Mr Vadarlis’ retainer, or intended to engage someone else to complete the purchase, simply that they would need to consider their options, as the following exchange illustrates:

White: … what I’ve got to do is ask someone’s advice and I think you know at this stage it’s going to be hard for you to complete the deal when we were bluing about the fee, so we may very well appoint someone else to finish it off.

Vadarlis: Well, I’m prepared to finish the paper work because that is part of my deal, but I, Tony, would hate to think we’re going to end up in Court I really would, but it seems that I have no choice.

There were no further communications between the parties after the 31 July letter.

The defendants subsequently appointed other lawyers to act for them in relation to the purchase. Formal agreements were executed in October, under which companies connected with the defendants became the purchasers of the land and the business comprising the Cairns dealership. Settlement of the purchase occurred at the end of October 2001.

Conclusion

For the reasons given earlier, I am not persuaded that the alleged 1% agreement was entered into. It follows that Mr Vadarlis’ claim must fail on that ground.

It is therefore not necessary to consider the defendants’ pleading that Mr Vadarlis is claiming for legal costs, which he is precluded from recovering by s 106 of the LPA. Nor is it necessary to resolve any issues about limitation periods and interest.[30]
[30]The parties did not make submissions about interest, reserving their right to do so once I determined whether Mr Vadarlis had a right to recover the principal sum. However, the defendants had foreshadowed that they would be resisting the award of penalty interest for much of the period since the cause of action accrued, due to Mr Vadarlis’ lengthy and unexplained delay in commencing the proceeding.

I will hear from the parties in relation to costs.

---

[2010] VSC 80

23 March 2010