Wilkey v Wilkey
[2016] QDC 273
•8 November 2016
DISTRICT COURT OF QUEENSLAND
CITATION:
Wilkey v Wilkey [2016] QDC 273
PARTIES:
PERRY ALLEN WILKEY
(plaintiff)
v
PERRY JARED WILKEY
(defendant)
FILE NO/S:
3146/2015
DIVISION:
Civil
PROCEEDING:
Trial
ORIGINATING COURT:
District Court at Brisbane
DELIVERED ON:
8 November 2016
DELIVERED AT:
Brisbane
HEARING DATE:
14-15 July, 9 August 2016
JUDGE:
Reid DCJ
ORDER:
1. The plaintiff’s claim is dismissed.
CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – SALE OF SHARES – oral agreement - where the plaintiff purchased shares on behalf of the defendant – whether the defendant had an obligation to repay capital cost and reimburse expenses - whether the plaintiff gifted those shares to the defendant – where dispute turned on findings of credit – consideration of contemporaneous documents – consideration of oral testimony
COUNSEL:
P.E. O’Brien for the plaintiff
The defendant appeared on his own behalf
SOLICITORS:
Crouch & Lyndon Lawyers for the plaintiff
The defendant appeared on his own behalf
Introduction
The plaintiff has sued his son, the defendant, for $200,000 said to be due and owing pursuant to an agreement whereby the defendant was lent that sum, by the plaintiff and his then wife, Marlene Wilkey (“Mrs Wilkey”), to enable the defendant to acquire two shares in Aware Investment Management Group Pty Ltd (“AIMG”), from a Mr Steer, in about February 2008.
The defendant denies the claim, alleging the shares were paid for by the plaintiff and Mrs Wilkey and were then gifted to him. In evidence he also said that he had paid a nominal sum of $2 to the plaintiff at the time the shares were purchased from Mr Steer in 2008.
The plaintiff also claims interest on the sum said to be owing pursuant to the terms of the agreement.
Background and Factual Findings
The plaintiff and his former business partner, Mr Steer, established AIMG through which they developed a successful financial planning business. In 2007 Mr Steer determined to retire. This retirement coincided with the purchase of an associated management company, Financial Services Partners Pty Ltd (“FSP”), by a publically listed company for some $53M. The plaintiff and Mr Steer were part owners of FSP, and shared almost $2M from that sale equally. The plaintiff agreed with Mr Steer to purchase his 50 per cent interest in AIMG, comprising 10 of 20 shares in the company, for $1M. The plaintiff owned the remaining 10 shares already. These facts were not disputed.
The plaintiff says he received financial advice from his accountants about how to most tax effectively structure the purchase. Under the share purchase agreement the plaintiff and Mrs Wilkey paid to Mr Steer an initial sum of $300,000 and agreed to pay a further sum of $700,000 in December 2010. Again, these matters are not disputed.
The purchase of the 10 shares was structured so that the plaintiff acquired one additional share, Mrs Wilkey six shares, the plaintiff’s step-daughter, Summer Nelson (“Ms Nelson”), acquired one share and the defendant acquired two shares. That arrangement is evidenced by a share purchase agreement with Mr Steer (Exhibit 2). The plaintiff gave evidence that prior to them all signing the share purchase agreement of 5 February 2008, there had been discussions both at home and at work, about the arrangement whereby the defendant and Ms Nelson were to acquire two and one shares respectively in AIMG. It was, the plaintiff said, agreed that their shares would be paid for when the time arose by the plaintiff and Mrs Wilkey borrowing the purchase price from a bank or other institution and that they would be liable to repay interest on the sum borrowed to reflect their share purchase, at the rate charged by the bank. Ultimately they would each be liable to repay the capital sum - $200,000 in the defendant’s case and $100,000 in the case of Ms Nelson. It is this sum that the plaintiff seeks to recover in the action.
The plaintiff alleges in the Further Amended Statement of Claim that the initial payment of $300,000 to Mr Steer in February 2008 was specifically for the purchase of one share on his behalf and two shares on behalf of Mrs Wilkey.
No evidence was led as to why that payment was for those specific shares. Nothing in the share sale agreement (Exhibit 2) indicates any such agreement. Pursuant to the agreement, all 10 shares were acquired in February 2008 and the $1M purchase price was, as I have said, to be paid in two tranches - $300,000 initially and $700,000 on or before 31 December 2010.
While little if anything turns on it, I reject the evidence of the plaintiff that the initial $300,000 was specifically for the share acquired by him and for two of the six shares acquired by Mrs Wilkey.
Initially, AIMG’s banker was Macquarie Bank. Perusal of the bank statement of AIMG (Exhibit 3) shows a transfer by the company to Wilkey Investments on 12 February 2008 of $300,000. Wilkey Investments Pty Ltd (“Wilkey”) was the trustee for the P & M Wilkey Family Trust. Wilkey’s banker was the Commonwealth Bank of Australia (“CBA”). Wilkey’s bank statement (Exhibit 4) shows the deposit of $300,000 from AIMG on 12 February 2008 and a payment out of an identical sum on 14 February 2008. The plaintiff said, and I accept, that this was for the shares purchased from Mr Steer and was a payment to him or to his company, Bayan Australia Pty Ltd (“Bayan”).
I note that the plaintiff has in handwriting written: “Perry $100K Marlene $200K” next to this entry in the bank statement.
Whilst the plaintiff said it was his handwriting he did not say when it was written. It may have been recently, after this litigation had been commenced. It does not cause me to conclude that that payment of the $300,000 was, by any agreement between inter alia the plaintiff and the defendant or Mr Steer, specifically for three shares purchased for the plaintiff and Mrs Wilkey.
As the time approached for the payment of the second tranche of $700,000 to Mr Steer, or to Bayan, the plaintiff and Mrs Wilkey applied to the CBA for a $500,000 loan in order to meet their obligations to Mr Steer. A letter of offer of the CBA of 11 October 2010 (Exhibit 5) indicates the borrowers were Marlene Wilkey and Perry Wilkey. The letter indicates the purpose of the loan was for the purchase of shares in AIMG. The loan was to be secured by a guarantee and first charge over the assets of Wilkey and AIMG and a mortgage over the family home, owned jointly by the plaintiff and Mrs Wilkey at Jindalee.
AIMG made two payments, each of $100,000, to Mr Steer, or to Bayan, on 30 and 31 December 2010. Due to a delay in payment of the last tranche of the sum of almost $2m from the publically listed company to Mr Steer and the plaintiff for their share in FSP, the balance of $500,000 owing to Mr Steer was not paid until after the originally agreed date for payment. It was paid early in 2011 after the $500,000 payment pursuant to the loan was made by CBA to the plaintiff and Mrs Wilkey on 4 January 2011. Nothing turns on that delay in such payment.
The loan facility of the plaintiff and Mrs Wilkey with the CBA was refinanced with Macquarie Bank at the end of October 2011. Again, nothing turns on that event.
In the Further Amended Statement of Claim, the plaintiff alleges that in about January 2011, the plaintiff and the defendant agreed the plaintiff would lend the purchase cost for the purchase of the defendant’s two shares in AIMG to the defendant. He alleges in paragraph [14] of the Further Amended Statement of Claim that terms of the loan agreement were:
(a) the Plaintiff would pay $200,000 consideration for the two shares on behalf of the Defendant to Mr Steer; and
(b) the Defendant would pay interest to the Plaintiff on the loan amount of $200,000 at the same rate as charged by the Commonwealth Bank, being a variable rate but about 7% at that time.
The plaintiff in paragraph [17] of the Further Amended Statement of Claim pleads:
The Defendant claimed interest payments to the Plaintiff as allowable deductions from his taxable income.
Particulars
Financial year ending 30 June 2011 - $3, 312
Financial year ending 30 June 2012 - $7, 786
Full particulars will be provided on completion of disclosure.
Despite the plaintiff’s pleading that the agreement referred to above was made in 2011, he said in evidence that it was first so agreed much earlier. The plaintiff says it was agreed that as it would be necessary to borrow money to pay the second payment of $700,000 to Mr Steer that the defendant and Ms Nelson would be responsible for those loans when “we do have to borrow those monies” (T1-39, ll 40-42). He said that “no interest was to be paid until… we have to borrow that money and that the agreement would be that you only had to pay what we had to pay the bank” (T1-40, ll 12-15). He said that agreement was reached in late 2007 (T1-40, l 26), and that all of the family were aware of it because it was openly discussed. He said “they were going to have to start paying interest and that was going to be done via Wilkey Investments and their accountants” (T1-41, ll 35-40).
A number of tax returns were admitted into evidence. It was said they were relevant in relation to the issues raised in paragraphs [14] and [17] of the Further Amended Statement of Claim set out previously. Unfortunately, not all returns of all of the family were tendered. The returns admitted into evidence were:
1. The plaintiff’s return of the year ended June 2011 (Exhibit 19);
2. The defendant’s returns for the year ended June 2011, year ended June 2012 and year ended June 2013 (Exhibit 15, 16 and 25);
3. The returns of Summer Nelson of the year ended June 2011 and the year ended June 2012 (Exhibit 31); and
4. The returns of Marlene Wilkey for the year ended June 2009 through to the year ended June 2015 (Exhibit 33).
In Mrs Wilkey’s return for the year ended June 2009, well prior to the CBA loan of January 2011, there is a deduction of $6,859 claimed for interest for “loan for the purchase of shares in Aware Investment Management Group Pty Ltd” from Macquarie Bank (see p 6 of 6 of the return for the year ended June 2009). In the following year, only $1,087 is claimed (see p 2 of 5 for the return for that year). But in the June 2011 year return $6,624 is claimed (see p 6 of 6 for the return of that year) for interest on the CBA Better Business Loan. In the 2012 year, a sum of $23,357 is similarly claimed and in 2013 $20,812 was claimed. When giving evidence, Mrs Wilkey denied ever giving instructions to or meeting the accountants who prepared those returns.
The plaintiff’s only return in evidence (for the year ended June 2011) contains a claim for $1,656 paid for interest to CBA for the loan related to the purchase of the AIMG shares (see p 2 of 5 of Exhibit 19).
The defendant’s returns for the years end of June 2011, 2012 and 2013 showed claimed expenses for interest of $3,312 in 2011 (p 2 of 4, Exhibit 15) and $7,786 in 2012 (p 6 of 6, Exhibit 16). Those returns were, he said, prepared by the accountants for AIMG on instruction from the plaintiff.
The 2013 return of the defendant was not prepared by the accountants for AIMG, Statewide Taxation Services, but by James Accountants who the defendant himself engaged. No claim for interest on the purchase cost of shares was then claimed.
Ms Nelson’s returns (Exhibit 31) were not prepared by Statewide Taxation Services. They show no deductions for interest payments in either the years ending June 2011 or June 2012.
In my view the figures claimed for interest on the purchase of shares in AIMG which appear in the returns of the defendant for 2011 and 2012 but importantly also in the returns of the plaintiff and Mrs Wilkey do not necessarily reflect the agreement the plaintiff spoke of as having been reached in 2007 and affirmed in 2011. Rather I think the deductions are likely to reflect the fact that interest was being paid to CBA and then to Macquarie Bank pursuant to the banks’ loan agreements with the plaintiff and Mrs Wilkey and that, in order for those interest payments to be tax deductable, it was necessary to be claimed as an expense by the person who acquired the shares. Thus the plaintiff claimed 10% of the interest payments, Mrs Wilkey 60% thereof and the defendant 20% to reflect the cost of the shares respectively acquired. This is reflected in the $1,656 claimed by the plaintiff in 2011, the $3,312 claimed by the defendant (double the plaintiff’s claim) and the $6,624 in Mrs Wilkey’s return (six times that of the plaintiff).
Despite the suggestion in the plaintiff’s Further Amended Statement of Claim (paragraphs [14(b)], [16] and [17]) that the claim of interest payments in the plaintiff’s tax returns was supportive of the fact that the defendant had agreed to pay to the plaintiff interest on the cost of acquiring the shares in AIMG from Mr Steer, I do not find that to be so. I find interest payments were claimed as a tax deduction in the returns of each of the plaintiff, Mrs Wilkey and the defendant, prepared by Statewide Taxation Services on instructions from the plaintiff alone. The evidence of the claim for interest in the defendant’s returns do not cause me to conclude the shares were acquired by way of a loan from the plaintiff and that there was any obligation to meet interest payments or repay the capital sum. Rather, I conclude the claim for interest in the returns was merely to ensure the tax effective use of interest payments made by Mr and Mrs Wilkey. The lack of any evidence to demonstrate any actual payments by the defendant of sums to offset interest paid to the CBA or later to Macquarie Bank by the plaintiff is in my view important. The plaintiff’s own evidence was that no such payments were in fact made (see T1-48, l 44 to T1-49, l 2).
In my view the failure of the plaintiff to call anyone from Statewide Taxation Services to explain the arrangement in relation to claims for deductions for interest payments in the tax returns of each of the plaintiff, the defendant and Mrs Wilkey is of some importance. Only they could explain the real situation. I conclude, consistent with the defendant’s evidence that the arrangement in relation to interest in all the returns prepared by Statewide Taxation Services was to ensure that the arrangement was tax effective for the Wilkey family, considered as a group.
The plaintiff also asserted that the arrangement whereby the defendant and Ms Nelson were to pay for the shares they acquired was a necessary part of his retirement plan. The plaintiff has not demonstrated to me that in 2007 and 2008, when he says the agreement was first made, or in 2010 and 2011, when he says it was re-affirmed that the repayment by the defendant and Ms Nelson of the $300,000 cost of the shares to the plaintiff and Mrs Wilkey was critical to his, and his wife’s, retirement plan. The plaintiff and Mrs Wilkey retained 85% of the business. It was a valuable business worth, in 2008, approximately $2,000,000. I do not conclude it was imperative to the plaintiff’s ultimate transition to retirement that his son and step-daughter repay the $300,000 that it cost to acquire those shares from Mr Steer.
The defendant and Ms Nelson both said in evidence that the shares were given to them in recognition of the work they had done within the business as employees of the service company Wilkey Investments. In my view either arrangement was possible – a gift or a loan - and I do not think the determination of the matter is assisted by consideration of the tax returns or by consideration of the assertion of the plaintiff that the repayment of the original cost of the shares was a necessary part of the ultimate transition to retirement of he and his then wife.
It must be remembered that in 2007 and 2008 when the acquisition of the shares was first discussed and agreement reached with Mr Steer and the first payment of $300,000 was made, and indeed in 2010-11 when the $500,000 was borrowed by the plaintiff and Mrs Wilkey from CBA to pay Mr Steer the final $700,000 due, that the family was still united and seemed to be well off. Well enough off, it seems, for the plaintiff to acquire a boat which cost in excess of $1m in about 2011.
Documents
What contemporaneous documents are there which might assist in supporting the version of the plaintiff on the one hand or the defendant and his mother and step-sister on the other?
In submissions the parties referred in particular to Exhibits 12, 24, 28 and 30.
By mid-2013 the marriage of the plaintiff and Mrs Wilkey had broken down. They became involved in a bitter divorce. For whatever reason the defendant seemed to be closely involved in the resolution of the property dispute. Perhaps it was because he was, by then, a director of AIMG and so decisions about the company and its ultimate debt level impacted on that role. It is also important to note his relationship with his father was still strong at that time.
In any case, property proceedings between the plaintiff and Mrs Wilkey resulted in orders being made by his Honour Judge Baumann in the Federal Circuit Court of Australia on 9 April 2014. A copy of those orders became Exhibit 22. The orders made no reference to the alleged indebtedness of the defendant and Ms Nelson to the plaintiff and Mrs Wilkey in the sum of $300,000. There is no mention of Mrs Wilkey transferring her interest in the said debt to the plaintiff, although this appears to be the basis on which the litigation before me was conducted.
Exhibit 30 was a report prepared by Tim Lane, an accountant engaged by the plaintiff’s then solicitors, Speakman Lawyers, in relation to “Financial Matters Relating to Property Settlement Proceedings” between the plaintiff and Mrs Wilkey. Nowhere in that report is there any reference to any alleged asset constituted by the obligation of the defendant and Ms Nelson to pay $300,000 to the plaintiff and Mrs Wilkey.
The plaintiff seeks to explain that by reference to Exhibit 28, which was an email from him to Tim Lane, also sent to his then solicitor and to Mrs Wilkey, on 23 July 2013, prior to the preparation of Exhibit 30.
The email says, in part:
As per our previous discussions their client will need some discussions as to how the structures work, how the various entities pay for expenses and loans, for example Wilkey Investment loans to the directors currently $100,000 and the personal loans via the Jindalee home loan proportional to the shares purchased (on paper) from Mr Steer – 10% Perry; 60% Marlene, 20% Jared and 5% Summer – interest for the $500,000 loan,
For example the distribution for the 2011/12 financial year needed to be paid to the persons above to make the interest payments on their behalf was done (on paper), and attracted tax refund due to the imputation credits to the respective persons – these in previous years were deposited back into the Wilkey Investments to cover the ongoing expenses, tax and loan repayments – but unfortunately they have been retained by their client – approximately $7,500 – obviously creating cash flow issues – Jared and I will not be using Wilkey Investments as our service company vehicle going forward, but we will need to wind up the loans and other assets with the company and trust as this inequity cannot continue, as soon as these proceedings are finalised. We will establish a new service company entity for the 2013/14 financial year for our consulting services to Aware.
In my view that email is equivocal as to the question I have to determine, namely whether the defendant is obliged to repay $200,000 to the plaintiff or whether the payment of that sum by his parents to acquire the two shares for the defendant was a gift made by generous and then financially secure parents to recognise the contribution of the defendant to the family business. The letter recognises, it seems to me, that payments of interest by the defendant were only “on paper” and not in fact made. It does not advise Mr Lane to include the alleged $300,000 payment as an asset of Mr and Mrs Wilkey, payable by the defendant and Ms Nelson.
The plaintiff also relied on an email from the plaintiff to Ms Nelson of 14 November 2013 (Exhibit 12), her consequential email to the defendant and his response to her, both of the same date (Exhibit 24). The plaintiff wrote to Ms Nelson in the midst of attempts to resolve property issues with Mrs Wilkey. He told Ms Nelson that he and her mother had come to “agreement in principle”. He told Ms Nelson that Mrs Wilkey had “insisted that the shares in (AIMG) were 100% in my control and that the shares to you and Jared had been inappropriately gifted and should be included in the material asset pool at full value and not 85% as I put forward.”
The email continued:
As a consequence I have to pay off the $500,000 mortgage that was used to pay Darrel for his shares - I have to re-structure my affairs which included my business Aware: changing shareholding will require Marlene to relinquish her shares and Macquarie will remove her as guarantor. The process of share restructure and new documentation with Macquarie for the $4.5M in loans will also require you to either:
1. Relinquish your 5% shareholding or
2. become a guarantor (and most likely required to become a director) and accept liability and responsibility of Aware’s loans and business operations which is onerous.
Jared has decided to retain his shares because he is working with Aware to pay off his loan, remain a director and will execute the Macquarie Bank and ASIC documentation as required.
Our accountants are in the process of organising the necessary documentation to affect the changes and your consent either way will be required
The plaintiff’s statement that Mrs Wilkey’s assertion was that the shares had been “inappropriately gifted” and “should be included in the marital asset pool at full value and not 85% as I put forward” is curious. He makes no assertion that the asset pool included the $300,000, being the alleged indebtedness of Ms Nelson and the defendant pursuant to their obligation to re-pay to their parents the purchase price of the shares purchased with monies leant to them by Mr and Mrs Wilkey.
It is curious that, in setting out the options available to Ms Nelson, he did not mention the fact that if she retained the shares, in addition to obligations that might be placed upon her with respect to AIMG’s “loans and business operations”, she would also retain an obligation to the plaintiff to repay the $100,000. He did not mention that if she returned the share to him, she would be relieved of her obligation to repay $100,000.
Instead, the plaintiff told Ms Nelson that because under the matrimonial property settlement he would assume responsibility for the $500,000 bank loan used to purchase Mr Steer’s shares and had to “pay (it) off” (presumably to discharge the debt on the matrimonial home which Mrs Wilkey was to retain as part of the property settlement) he would need to “restructure my affairs”, which includes my business “Aware”. He then set out the options available to her. Not surprisingly, faced with the alternative of becoming a guarantor and accepting liability and responsibility for Aware’s proposed $4.5M loan from Macquarie she decided to relinquish her share.
In my view the letter is not contrary to the view that the shares were a gift made by parents at a time the family was united and financially well off. The decline in that situation after early 2011 precipitated the financial restructure which was required. It was in my view that change in circumstances which caused the plaintiff to effectively demand the return of Ms Nelson’s share. I conclude he felt entitled to do so because, after all, the share had originally been given as a gift. If it had been purchased by way of a loan from the plaintiff and his wife, which Ms Nelson was required to repay, I have little doubt the plaintiff would have said so in his email.
Ms Nelson’s response to this email was to immediately email the defendant. That email and his reply to her were made Exhibit 24. She wrote: “I don’t understand a thing Perry is saying”. Perry of course is the plaintiff. This is not surprising. Unfortunately the defendant’s response is, like the plaintiff’s own email, also somewhat confusing. He told his step-sister that in the property settlement all of the shares in AIMG were included in the property pool (rather than 85% of AIMG and the $300,000 indebtedness of the defendant and Ms Nelson which would be the case if the plaintiff’s version advanced at trial had then been advanced by him), and that the business “is all that dad got left with”. The defendant told Ms Nelson that there was a totally indebtedness to the Macquarie bank of $4.5M and that the bank is “now saying you and I have to pay off around $400,000 because we have to buy the shares. I am working out a payment plan with dad to keep my shares but you have to think if you want to return yours and pay off the debt as well, or give back the shares.”
Whilst at first glance his response might appear to be an acceptance that the defendant and Ms Nelson had an obligation to repay the cost of the shares, I do not conclude that to be so. The reference to having to “pay off around $400,000” was a reference to the then value of the shares, and not to an earlier agreement to pay $100,000 per share. In my view the defendant’s statement to his sister – made at a time the plaintiff and the defendant were still very much together in running AIMG – is no more than advising her of the plaintiff’s then significant financial distress and telling her that she had to return the shares to the plaintiff or purchase them at their then current value. That is not consistent with the plaintiff’s case. It is consistent with the shares having earlier been gifted to the defendant and his sister but, because of the plaintiff’s dire financial situation following his divorce settlement, accepting that it was appropriate for the defendant and his sister to now purchase the shares at their then current value, to assist the plaintiff or return them to the plaintiff who had originally given the shares to them as a gift.
In my view, that conclusion is reinforced by consideration of Exhibit 13, a share transfer form relating to the transfer by Ms Nelson of her one share in AIMG to the plaintiff. It records that the consideration for the transfer was $1. It makes no mention of his forgiving her the alleged debt of $100,000.
In my view, if the original share purchase arrangement had been as the plaintiff suggests, it would have been appropriate that the consideration for the transfer of the one share from Ms Nelson to the plaintiff in 2014 was that it discharged an existing obligation of Ms Nelson to pay to the plaintiff the sum of $100, 000.
The express consideration of $1, I conclude, is more likely to be reflective of the restructuring of the family arrangement where shares, originally transferred to Ms Nelson as a gift, were transferred back to the plaintiff because of his financial situation following the marital breakup and resolution of the dispute between he and Mrs Wilkey rather than as forgiveness of a significant debt.
In my view, Exhibit 13 is an indication that the original arrangement was not as the plaintiff asserts but was, in fact, a gift.
Oral Testimony
That view of the matter gained from a review of the documents was reinforced by consideration of the oral testimony given before me. Each of the defendant, Ms Nelson and Mrs Wilkey denied any agreement in either 2007/2008 or 2010/2011 for the defendant and Ms Nelson to repay the purchase price of the shares. Whilst the understanding of the financial arrangements by each of Ms Nelson and Mrs Wilkey was limited, I accept their evidence and that of the defendant that no agreement to repay the purchase price was ever made.
Determination of credit issues in this case was made difficult by the obvious hatred of the respective parties by each other. This is related to the acrimonious divorce proceedings between the plaintiff and the defendant’s mother and the subsequent falling out between the plaintiff and the defendant. There may be many reasons for their animosity. The strong dislike was manifest. It is important to understand that this was not always the case. The plaintiff described a very close relationship with his son prior to their later falling out. He described how they used to work closely together and said how it was anticipated that defendant would succeed to the running of the financial services company the plaintiff and Mr Steer had created. So too did the defendant speak of the closeness of his relationship with his father. He said that up until May 2013 the plaintiff was “my hero”. The reason for the falling out was unsaid.
Ultimately, in December 2014 the plaintiff resigned from his position as a director of AIMG. He discontinued working in the business where he had worked since leaving school. He established his own financial services company in competition with AIMG. Part of the anger between the plaintiff and the defendant concerns the plaintiff’s allegation that the defendant was using confidential information the property of AIMG and had not returned property of the company. The defendant, in turn, alleges the plaintiff has conducted the affairs of AIMG contrary to his interests as a minority shareholder of that company
The unfortunate fact is that matters have not been conducted in a civilised or mature way. The plaintiff has written emails to the defendant and to others of which he should be, and perhaps is, ashamed. He has placed advertisements in a financial services newsletter which are equally shameful. The defendant for his part bears obvious anger towards his father. The plaintiff alleges the defendant’s conduct of the litigation is itself deceitful and based on a lie as he alleges the defendant well knows.
I mention that background because it is an important feature of the case, which is my view bears strongly on the parties’ conduct of the proceedings and makes my determination of issues of credit unusually difficult.
The defendant and his step-sister both worked in the business from a young age. His step-sister’s involvement in the company appears to be done at a secretarial level. She worked, she said, for about 10 years before moving to Mt Isa with her partner.
The defendant commenced working for the company after he left school. He was born in 1985 and so I assume this would have been in about 2003. He studied to obtain a Diploma in Financial Services. It seems he, his father and perhaps his mother had discussions about him eventually succeeding his father in running what was seen as the family business.
I accept that evidence of the defendant that the plaintiff kept financial details of the business – as contrasted with information about clients and sales – very much to himself. Only he spoke to and received advice from the accountants. I accept the evidence of the defendant that he, indeed, has never spoken to the accountants about such matters.
I am influenced in concluding as I have by the very poor impression the plaintiff made upon me when giving his evidence. For a successful businessman, his response to questions about the business arrangement was surprising. He was evasive and belligerent. On occasions his answers were non-responsive. He was unable to recall detail of the conversations with the defendant or with anyone else which he said constituted the agreement. The plaintiff said he had numerous discussions with the defendant about the purchase of shares from Mr Steer (for example T1-29, l 46 and following especially T1-30, ll 15-23). He said the discussions they had were “on going” during and after 2007 (T1-30, ll 34-5 and T1-31, ll 44-5). He was however able to give little detail of any such conversation. There was no evidence the defendant or Ms Nelson ever paid to the plaintiff or his wife anything by way of reimbursement of interest payments as he said had been agreed.
On a number of occasions he answered questions by saying “you’ll have to ask the accountants that”. He did not, however, call the accountants to explain the transaction despite saying it was done on their advice (T1-31, l 45; T1-32, l 6). I do not accept his evidence about that role of the accountants in preparing the tax returns of the various parties, preferring that of the defendant and Mrs Wilkey that they had no contact with the accountants at all.
The plaintiff’s counsel suggested the evidence of the defendant and Ms Nelson that they had paid $2 to the plaintiff in about 2008, at the time the shares were purchased, to bind the agreement or make it legal, was clearly fabricated and did not accord with what they said the agreement was. I do not think any agreement involving the payment of $2 or such similar sum is of importance. It may well have occurred, as both the defendant and Ms Nelson said, because the plaintiff, perhaps mistakenly, believed that it was some sort of token to mark the gifting of the shares. What was important is that the plaintiff, I find, told the defendant and his sister that they were being given the shares because of their past work in the family company. The gift was seen as in the nature of an employee benefit. There was no agreement they would ever be required to pay the purchase price.
Conclusion
I do not accept the evidence of the plaintiff. I do not think it is supported by the contemporaneous documentary evidence and for the reasons I have stated I prefer the oral evidence of the defendant, despite its limitations, and that of Ms Nelson and Mrs Wilkey to that of the plaintiff. I conclude on the balance of probabilities that the shares were given as a gift to the defendant. Until the change in the plaintiff’s familial and financial circumstances in about 2013 the plaintiff did nothing to enforce the agreement on which he relies. The change in his financial circumstances caused him, I conclude, to effectively demand the return of the shares, from Ms Nelson, and to demand from the defendant that he enter into some payment arrangement to acquire those shares. That change of heart did not arise because of any earlier agreement as the plaintiff alleged, but because it represented what he saw as a practical step to release him of some financial distress. Although in his email to Ms Nelson (Exhibit 24) the defendant indicated that he was entering into a financial arrangement to purchase those shares, the case was not conducted on the basis that any such plan was ever agreed upon and the defendant was not sued on the basis of breach of any such plan.
In the circumstances the plaintiff’s claim is dismissed.
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