Yammine v Lantrak Holdings Pty Ltd (No 2)
[2023] FCA 162
•3 March 2023
FEDERAL COURT OF AUSTRALIA
Yammine v Lantrak Holdings Pty Ltd (No 2) [2023] FCA 162
File number(s): NSD 712 of 2020 Judgment of: RARES J Date of judgment: 3 March 2023 Catchwords: CONTRACTS – collateral contract – where parties entered into written non-binding heads of agreement for sale of interest in business for $35 million – where parties subsequently entered into written agreement for sale of that interest for $13 million containing entire agreement clause – where vendor and purchaser allegedly made oral collateral contract and purchaser affirmed it in conversations before and after entry into sale agreement – oral contract allegedly required that if vendor entered into written sale agreement, purchaser later would pay balance of $22 million – where alleged collateral contract wholly inconsistent with entire agreement clause – where terms of collateral contract uncertain – Held: no collateral contract proved
ESTOPPEL – whether purchaser’s oral ‘promise” to “honour the deal” later by paying balance of difference of unpaid price negotiated in heads of agreement and price in sale agreement – whether purchaser estopped from denying vendor induced to enter into sale agreement in consideration of “promise” – where sale agreement included entire agreement clause – whether vendor would suffer detriment if purchaser could rely on entire agreement clause – where “promise” uncertain – Held: no estoppel
EVIDENCE – tendency evidence – where respondent raised objection in closing written submissions against applicants being able to rely on evidence as tendency evidence – where respondent raised no objection or sought limitation under s 136 of Evidence Act 1995 (Cth) when evidence tendered and admitted – where objection too late and meritless
CONSUMER LAW – whether purchaser engaged in misleading or deceptive conduct in contravention of ss 4 and 18(1) of Australian Consumer Law in Sch 2 of Competition and Consumer Act 2010 (Cth) in “promise” to “honour the deal” to pay difference later between prices in non-binding heads of agreement and sale agreement if vendor entered into sale agreement – whether alleged representation contravened s 18(1) – whether claim was for loss of commercial opportunity or chance to negotiate a higher price – Held: representation made, compensation awarded
Legislation: Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 4, 18(1), 236(1)
Evidence Act 1995 (Cth) ss 57, 60, 97, 100(1), 136
Cases cited: Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd (2013) 297 ALR 406
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622
Berry v CCL Secure Pty (2020) 271 CLR 151
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1
Effem Foods Pty Ltd (t/as Uncle Ben’s of Australia) v Lake Cumbeline Pty Ltd (1999) 161 ALR 599
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Factory 5 Pty Ltd (in liq) v State of Victoria (No 2) [2012] FCAFC 150
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551
Guthrie v Spence (2009) 78 NSWLR 225
Horton v Jones (1935) 53 CLR 475
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51
Jones v Dunkel (1959) 101 CLR 298
Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
Legione v Hateley (1983) 152 CLR 406
Masters v Cameron (1954) 91 CLR 353
Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507
Meehan v Jones (1982) 149 CLR 571
Saleh v Romanous (2010) 79 NSWLR 453
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Watson v Foxman (1995) 49 NSWLR 315
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 278 Date of hearing: 8–11 March 2022, 14 March 2022, 1 June 2022 Counsel for the Applicants: Mr P Crutchfield QC and Mr N Walter Solicitor for the Applicants: Blackstone Waterhouse Zouki Lawyers Counsel for the Respondents: Mr SG Finch SC and Ms Z Hillman Solicitor for the Respondents: Arnold Bloch Leibler ORDERS
NSD 712 of 2020 BETWEEN: NORMAN YAMMINE
First Applicant
NJA PTY LTD ACN 616 524 611
Second Applicant
AND: LANTRAK HOLDINGS PTY LTD ACN 615 969 483
First Respondent
GARY ROBERT LIEMANT
Second Respondent
ORDER MADE BY:
RARES J
DATE OF ORDER:
3 MARCH 2023
THE COURT ORDERS THAT:
1.The respondents pay the applicants $8,730,000 (being $7,250,000 together with prejudgment interest to today).
2.Subject to order 3, the respondents pay the applicants’ costs.
3.If any party files and serves written submissions limited to two pages together with evidence in support on or before 10 March 2023:
(a)order 2 be stayed until further order;
(b)the opposing party file and serve written submissions limited to two pages and any evidence on or before 17 March 2023; and
(c)costs be reserved and, unless the Court otherwise orders, determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
RARES J:
INTRODUCTION
Samuel Goldwyn, the Hollywood movie mogul, is credited with saying that “a verbal contract isn’t worth the paper it’s written on”. This case seeks to test that aphorism. A common experience of negotiations is that an individual on one side believes that he or she has agreed to a deal with the other side that is not reflected in any documentation of the transaction. How that mistaken perception occurs may give rise to a legal, equitable or statutory remedy for the apparently mistaken side. The position becomes more complicated when those involved in the negotiations are in a non-fiduciary, but nonetheless pre-existing, close or trusting business relationship, as in this proceeding.
The two individual principals are the first applicant, Norman Yammine, with the second applicant, his company, NJA Pty Ltd (collectively the Yammine parties), and the second respondent, Gary Liemant (to whom I will refer in these reasons as Mr Liemant to distinguish him from his brother, Mark Liemant, who is not a party to this proceeding) and the first respondent, Lantrak Holdings Pty Ltd (collectively the Liemant parties). Mr Yammine negotiated about three actual or perceived deals personally with Gary Liemant on behalf of his brother and their associated entities.
It is common ground that the first deal occurred without a written contract. Mr Yammine agreed with Gary and Mark Liemant that he and they would become 50% shareholders (through NJA, as trustee of the NJA family trust, and Lantrak Holdings) in a new company, Lantrak NSW Pty Ltd, that was incorporated on 20 December 2016, and that it would acquire and operate Mr Yammine’s transport logistics business that he conducted through Recycling and Transport Solutions Pty Ltd (RTS) in consideration of a payment to Mr Yammine (or an associate) of $5 million.
I will oversimplify the details of the second deal in the summary below. It is the principal focus of this proceeding. It occurred in late 2018 and was, on the Liemant parties’ case, wholly in writing or, on the Yammine parties’ case, partly in writing. Previously, on 13 September 2018, after detailed negotiations with the assistance of professional advisors on both sides, the Yammine parties, the Liemant parties and other associated entities had entered into a written non-binding heads of agreement. The heads of agreement contemplated the sale by the Yammine parties and their associated entities of their 50% interest in the transport solutions business then operated through Lantrak NSW (to which the parties had given the value of $35 million in the negotiations for the heads of agreement) together with other assets, for a total consideration of $47.5 million. However, the second deal did not reflect the heads of agreement. Instead, it involved the Yammine parties transferring their 50% of the shares in Lantrak NSW and certain other assets for a total consideration of $13 million, as provided in the written sale and purchase agreement that the parties and their other associated entities executed on 12 November 2018.
The Liemant parties say that the sale agreement contained all the terms of the second deal and that they performed all their obligations under it and, accordingly, have no further liability to the Yammine parties.
On the other hand, the Yammine parties contend that, in a telephone call on about 9 October 2018 (the 9 October conversation), Mr Liemant informed Mr Yammine that the Liemant parties would not be able to pay $35 million for his 50% interest in the transport solutions business as previously contemplated. The Yammine parties contend that both in the 9 October conversation and after, Mr Liemant made and affirmed a collateral contract, a representation as to a future matter for the purposes of ss 4 and 18(1) of the Australian Consumer Law (ACL) in Sch 2 of the Competition and Consumer Act 2010 (Cth), that he or the Liemant parties would pay the Yammine entities the difference between $10 million clear of taxation liabilities and $35 million if they proceeded on the terms of what later became the sale agreement. In the event, that difference was $22 million.
The third, again disputed, deal involved Mr Yammine’s claim that, on about 11 October 2019, he and Mr Liemant agreed that Mr Yammine would not require Mr Liemant to honour his oral promises to pay the $22 million if Mr Liemant or the Liemant entities paid him $10 million, in consideration of which Mr Yammine and his entities would enter into an agreement for a term of 10 years not to compete with the business of Lantrak NSW (which the Liemant parties by then wholly owned).
This is the context in which the following four issues arise, namely:
(1)did the Liemant parties, or either of them, enter into an oral collateral contract to pay the Yammine parties $22 million in consideration of the Yammine parties agreeing to sell their 50% interest in the transport solutions business and Lantrak NSW (the collateral contract issue);
(2)are the Liemant parties, or either of them, estopped from denying that they, he or it promised to pay the Yammine parties $22 million in consideration of the Yammine parties executing the sale agreement (the estoppel issue);
(3)did the Liemant parties, or either of them, make a representation in trade or commerce to the Yammine parties that was misleading or deceptive or likely to mislead or deceive with respect to a future matter in contravention of ss 4 and 18(1) of the ACL (which I will compendiously refer to as misleading or a misleading representation) that if the Yammine interests entered into the sale agreement, the Liemant parties, or one of them, would pay the Yammine parties $22 million (the misrepresentation issue); and
(4)did the Liemant parties, or one of them, agree with Mr Yammine on about 11 October 2019 that neither he nor any of his entities would compete with the business of Lantrak NSW for a period of 10 years in consideration of the Liemant parties paying him $10 million (the non-compete contract issue)?
THE TWO PRINCIPAL WITNESSES
Mr Yammine grew up in difficult circumstances and at the age of 8 was diagnosed as suffering from epilepsy. As a young man he was convicted of an offence for which he served a substantial jail sentence. He became a devout Christian. Once he was released from prison he began working as a labourer for his cousins in a large excavation company, Moits, in Sydney. He learnt how that business operated and perceived that there was a gap in the market for transport logistics. He noticed that Moits would hire trucks from many different people to cart excavated material away from development sites. After he married in about 2012, he and his wife, Joanne Mikhael, began a logistics business called Nojo, an acronym of their first names, Norman and Joanne. Nojo provided trucks to carry excavated material to landfill sites and its first client was Moits. Nojo attracted other customers in the excavation business and grew. In late 2015, Mr Yammine commenced trading through RTS as a new business providing road haulage of earth waste, soil and other materials.
Mr Liemant and his brother, Mark, conducted the Lantrak group, that operated, prior to 2016, in Victoria and Queensland. The Lantrak group’s predominant business was to dispose of volumes of material for its clients, to act as broker in the civil construction industry for dirt and clean fill materials and to undertake land reclamation projects. Mark Liemant did not give evidence because he was not relevantly involved in the dealings that Gary Liemant had, on behalf of the Lantrak group, including his brother, with Mr Yammine.
Gary Liemant was in his mid-50s when he met Mr Yammine (who was in his 30s). Mr Liemant was an experienced, astute and successful businessman.
As I will explain below, each of Mr Yammine and Mr Liemant gave evidence that, in particular instances, caused me to give close consideration to his credibility and reliability. In evaluating their evidence, and that of the other witnesses, I have acted on the principles that Dowsett, Rares and Logan JJ summarised in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151 at [72]–[74] as follows:
72In order to determine whether conduct was misleading or deceptive for the purposes of s 52 of the Trade Practices Act and its analogues, the Court must engage in a close analysis of all the circumstances of the transaction: Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 84 [99]-[100] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 604-605 [36]-[40] per Gleeson CJ, Hayne and Heydon JJ; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 384 [91] per Heydon, Crennan and Bell JJ. As the Court said in Campomar 202 CLR at 85 [102], in approving what Gibbs CJ had said in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199:
“the legislation did not impose burdens which operated for the benefit of persons ‘who fail[ed] to take reasonable care of their own interests’. In the same case, Mason J concluded that, whilst it was unlikely that an ordinary purchaser would notice the very slight differences in the appearance of the two items of furniture in question, nevertheless such a prospective purchaser reasonably could be expected to attempt to ascertain the brand name of the particular type of furniture on offer [Puxu 149 CLR at 210-211].” (emphasis added)
73Importantly, in this case, the witnesses gave their evidence over five years after the events and alleged representations the subject of the litigation in circumstances where Mrs Stariha had not raised any complaint until bringing the proceedings in 2011. That was a considerable period after each of the two purchases had completed. The assessment of the evidence of witnesses in such a case, ordinarily, will be approached in the manner discussed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 as follows:
“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) [sic] within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) … in the absence of some reliable contemporaneous record or other satisfactory corroboration.” (non-italic bold emphasis added)
74That caution is also reflected in s 140 of the Evidence Act 1995 (Cth) and in what Dixon J said in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-363 about the standard of proof. Dixon J emphasised that, when the law requires proof of any fact, the Court must feel an actual persuasion of its occurrence or existence before it can be found. He said that a mere mechanical comparison of probabilities, independent of any belief in its reality, cannot justify a finding of fact: see too Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 479-482 [29]-[38] per Weinberg, Bennett and Rares JJ. As Dixon J said (60 CLR at 362): “In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences”. But, the nature of the fact to be proved necessarily affects the sufficiency of the evidence by which it can be established.
(underline emphasis added; other emphasis in original)
In assessing the witnesses’ oral evidence, and in particular, whether Mr Yammine and Mr Liemant entered into an oral agreement, or Mr Liemant made a representation, in trade or commerce, that was misleading or deceptive, based in part on oral evidence over three years after the negotiations that occurred, both sides referred to the approach of Tamberlin J, as a trial judge, in dealing with a case involving conversations that occurred seven or eight years before the trial with which Gleeson CJ, Gaudron, Kirby and Hayne JJ found no fault in Effem Foods Pty Ltd (t/as Uncle Ben’s of Australia) v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 at 603 [16]. Their Honours summarised, as an appropriate approach, what Tamberlin J did in forming views as to the credibility of each of the relevant witnesses, namely:
In each case those views were based in part upon observations made, and impressions formed, concerning the demeanour of the witnesses, but they also turned in part upon reasoning as to the plausibility of certain parts of the evidence of the witnesses, considered in the light of what Tamberlin J had referred to as “the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence”. This was an orthodox and sensible approach to the matter (As to the approach to be taken by an appellate court when reviewing a primary judge's findings of fact, see State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1999) 160 ALR 588; 73 ALJR 306).
(emphasis added)
BACKGROUND
The formation of Lantrak NSW
The unaudited financial statements of RTS for the year ended 30 June 2016 showed that it had gross receipts of about $12.65 million and recorded a net profit before tax of about $770,000.
In 2016, Mr Yammine considered that RTS was flourishing. He became aware that Gary and Mark Liemant were seeking to expand their business into the Sydney market and in about October or November 2016 met with them in Sydney. Mr Yammine took them on a tour of places where RTS operated. He understood that the Lantrak group operated a different business model from that of RTS because RTS owned the trucks which it provided to carry out the work for its customers. Mr Yammine said (and I accept) that of the two brothers, Mark Liemant was the “more reserved at the time, but Gary’s more, ‘Look, let us get the numbers, and let’s get down there’”. They arranged that Mr Yammine, his accountant, Fred Kalil, and his associate, would meet Mark and Gary Liemant soon after at a restaurant in the Crown Casino in Melbourne.
At the Melbourne restaurant, the brothers asked Mr Yammine how much he wanted for RTS and he replied that he was seeking $10 million. Mr Liemant told Mr Yammine that they had the Lantrak brand but that it had no presence in Sydney and wanted to keep Mr Yammine involved in the business there. Mr Yammine thought that the combination would help the Sydney business grow. They struck a deal with the elements that, first, RTS’ business would be transferred to a Lantrak branded company (which in the event was Lantrak NSW) and, secondly, Gary and Mark Liemant would pay Mr Yammine $5 million for 50% of his business, $2 million of which was payable immediately and the balance, in his words, “by way of earnout”. However, as Mr Liemant said in evidence, “that agreement never completed. Lantrak [Holdings] actually never purchased the RTS entity”. Moreover, Mr Yammine did not receive $5 million.
As Mr Liemant said in his evidence, he did not want to acquire 100% of the business because Mr Yammine’s continuing involvement was important to the success of the Lantrak group’s venture into the New South Wales market. He was conscious of their previous failed attempt to enter that market at about the time of the Sydney 2000 Olympics.
Mr Liemant said that in fact, the initial payment of $2 million due to Mr Yammine was funded out of Lantrak NSW’s cash flow. Mr Liemant agreed that, in economic terms, that meant that, because Lantrak Holdings owned half of the new business, Mr Yammine was paid only $1 million, received no further payment and that “the first deal didn’t complete”. Mr Liemant said that the parties (in the sense of the Lantrak group and Mr Yammine’s interests) had changed from:
the original agreement, [where] it was proposed that we would buy 50 per cent [of the] shares in RTS. What ultimately transpired is we decided to create a new company … for tax purposes [so that] … Lantrak NSW had an element of both entities that combined together. So it brought RTS’ personnel, front-end revenue … and Lantrak’s back-end systems, funding, ability to provide finance.
Mr Liemant agreed that he and Mr Yammine had entered into that substantial transaction without formal documentation. He understood at that time that Mr Yammine had had a limited formal education and that he trusted Mr Liemant. While Mr Liemant did not accept that Mr Yammine saw him as a father figure at the initial stage of their relationship, he agreed that he later understood that was how Mr Yammine regarded him. Mr Liemant gave this evidence that I did not find frank or credible:
when you did the transaction in relation to the purchase of the first 50 per cent of Lantrak, you quickly came to understand that Mr Yammine was a man who was prepared to do business on a handshake and an oral agreement; you would agree with that? --- No, I don’t.
Well, you reached that understanding at some point, didn’t you? --- No, there was a number of attempts to try and document and formalise the agreement.
Well, I suggest to you, you must have known that Mr Yammine was a man who was prepared to do business on a handshake because you had bought into the New South Wales market and paid $5 million for that and hadn’t put it in writing; that’s right, isn’t it? --- We hadn’t put $5 million in at that point, no.
That’s right. And you did that because you knew Mr Yammine was a man who was happy to operate on the basis of oral agreements; that’s correct, isn’t it? Otherwise, you would have got it in writing? --- Not entirely. There was a number of attempts to try and document the agreement.
(emphasis added)
Mr Liemant subsequently said, more credibly:
Yes. But ultimately, you were prepared to proceed on the basis that the Lantrak group, in an economic sense, had 50 per cent of the New South Wales business without there being a written sale agreement? --- Yes, correct.
…
HIS HONOUR: Including a sale agreement that recorded how much money you were going to pay him? --- We agreed on a payment term, yes, at that point.
But it wasn’t in writing? --- No.
…
As you understood it, he was trusting you to honour that? --- Yes.
(emphasis added)
Mr Liemant said that, while Lantrak group performed accounting functions for Lantrak NSW, Mr Yammine’s personal relationships were very important to the success of the latter business and he was responsible for winning it work.
By the time that the parties had reached this stage of their relationship, it was apparent to Mr Liemant (and through him the Lantrak group) that Mr Yammine was very trusting of him (Mr Liemant), both generally and in their business dealings. Mr Liemant knew that Mr Yammine took him at his word because, in Mr Yammine’s phraseology, “we broke bread”. When pressed in cross-examination about the delay in finalising the transaction documents, Mr Yammine said (and I accept):
They couldn’t have been concerned, because we were already three months into it and no transaction had been done. And we already, I was already, knocking millions of numbers up every month in turnover for the group and the brand.
So were you also concerned that no agreement had been finalised? --- We had broke bread.
Well, leaving that aside, were you concerned - - -? --- No, but I’m just saying - - -
- - - that no agreement had been finalised? --- Well, like I said to you is that we had broke bread and I had left the pencil pushing to the pencil pushers, and I will get on with business and keep moving.
(emphasis added)
Thus, because of Mr Yammine’s trust in Mr Liemant’s integrity, Mr Yammine, in effect, had given the Liemant parties half of his business by transferring all of RTS’ operations to Lantrak NSW and then continued to run and expand that business without the Liemant side of the first “deal” actually paying for it. Commercially, from his side of things, Mr Yammine had no protection in writing as to his rights, other than owning 50% of Lantrak NSW and being one of its directors. As Mr Liemant acknowledged in cross-examination, Mr Yammine had been promised $5 million for a half share of RTS’ business and, in economic terms, only ever received $1 million in cash. Yet Mr Yammine continued in the relationship without questioning, or perhaps even understanding, why the Liemant parties had not paid him what, or in accordance with the deal that, they had agreed.
Mr Yammine confirmed that he made no claim in this proceeding that he had not been paid $5 million. He said that, in his understanding, Gary and Mark Liemant had paid him $2 million as the first payment for RTS’ business so that, assisted with finance from Lantrak group’s bank, Westpac Banking Corporation, he could use that money to buy a fleet of trucks from a landscape gardening business. Mr Yammine wanted to buy the trucks to use them, branded as Lantrak NSW, to supply Lantrak NSW’s services, but he knew that the Liemant brothers did not operate the Lantrak group as owners of trucks themselves. When Mr Yammine tried to explain this transaction in cross-examination, his unsophisticated and trusting approach to comprehension of his dealings with Gary and Mark Liemant became manifest. He was asked to explain how the first $2 million payment occurred. He said that “in my understanding, it was never a loan, it was the payment, but it was described as a loan because there was no contract”. He said that this payment occurred in about May 2017 after the formation of Lantrak NSW in December 2016. He said:
it was five months later. I was… they still should have been done in December ‘16. And I had already broke bread with Gary and kept moving. You know? I kept just going to work. I know, sometimes, it might sound, you know how do you do these things? And I respect that. I do respect that. But the thing was I trusted him. It could be irrelevant. And it’s my first round, you know? I’m not a groomed businessman. I was a person who believed in him.
(emphasis added)
Mr Yammine understood that the $2 million payment “was done by way of a loan and then they were going to fix up the paperwork … because … they didn’t buy shares in RTS”. He explained his understanding that the $3 million balance of the purchase price would be paid to him out of the profits of Lantrak NSW in priority and before the time when it would distribute profits equally between the shareholders.
I am not suggesting, and the Yammine parties did not claim, that Mr Liemant or the Lantrak group acted dishonestly or in bad faith in dealing with Mr Yammine in this way. Indeed, the Liemant parties’ lawyer, Andrew Freeman of KNP Solutions, had been corresponding with Mr Yammine’s accountants about drafts of contractual documents to record the first deal. In an email dated 1 March 2017, Mr Freeman wrote “I am yet to hear anything back and am concerned with [the] time this is taking”.
By 20 March 2017, Mr Yammine’s solicitors had become involved and wrote to Mr Freeman with substantive corrections to the draft, proposing a differently expressed transaction that, in the event, remained undocumented.
The evidence of the parties’ relationship and dealing to this point was demonstrative of Mr Yammine having a degree of commercial generosity and a preparedness (of which Mr Liemant, as a savvy, experienced businessman, was fully cognisant) to rely on what he believed was a “deal” that Mr Liemant (and the Lantrak group) would “honour”. In Mr Yammine’s vernacular, they “broke bread” or shook hands and, for him, because of his trust in Mr Liemant, that was all he needed. This mutual approach to the relationship between Mr Yammine and Mr Liemant is a critical component in the evaluation of what occurred subsequently.
The lead up to the heads of agreement
The business of Lantrak NSW grew rapidly, driven by Mr Yammine’s energetic exertions in securing more and more custom. However, from early on in 2017, Mr Liemant expressed concern to Mr Yammine about the new business’ aged trade debtors’ position.
Mr Liemant reiterated this concern throughout 2017. But, as Mr Yammine said, ultimately, he ensured that the trade debtors paid, even though some may have done so outside Lantrak NSW’s trading terms. As the financial statements of Lantrak NSW showed, at all relevant times to this proceeding, it had virtually no substantive bad or doubtful debts. This is not to eschew the Lantrak group’s concern over Mr Yammine’s management of Lantrak NSW’s trade debtors. Mr Yammine appears to have trusted the trade debtors to pay eventually, which they did.
On 17 November 2017, the Lantrak group’s chief financial officer, Georgina Sumanada, sent an email to Errol Pinto, a qualified accountant who was Mr Yammine’s personal assistant. The email attached the then trade debtors’ ledger which showed that there was then owing about $2.8 million over 90 days past due and another about $1.8 million that would become over 60 days past due on 30 November 2017.
Mr Pinto said on several occasions in his evidence that he did not give financial advice to Mr Yammine but that his role was limited to advising on the operation of the business and to act as his personal assistant, including helping by printing and transmitting documents. He said that Mr Yammine told him “to keep out of it because he was dealing direct with Gary”.
By 22 January 2018, Ms Sumanada was seeking an indication from Lantrak NSW’s in-house accountant of when it expected to receive payment for over $3.08 million outstanding for over 90 days, and $3.03 million that would become over 90 days past due by 31 January 2018.
On 7 May 2018, Mr Liemant met with Mr Yammine and told him that the Lantrak group needed to extend its Westpac facility for trade debtor finance of Lantrak NSW because of the delays in recovering what was due to it.
As a result of that meeting, Mr Yammine instructed his then solicitor, Christopher Nehme of Fortis Law Group, to write a letter dated 10 May 2018 to Lantrak Holdings. The letter referred to the meeting of 7 May 2018, the need to extend the Westpac facility and NJA’s willingness (as 50% shareholder in Lantrak NSW) to negotiate for the sale of its shares to Lantrak Holdings and Mr Yammine’s resignation as a director. It proposed that there be a term sheet giving Lantrak Holdings an exclusive right, exercisable by no later than 30 June 2018, to agree and execute transaction documents including, but not limited to, a share sale agreement. In contrast to Mr Yammine’s personal approach to negotiations, his then solicitors’ letter stated:
For the avoidance of doubt, this letter represents only the basis for the negotiation of a formal contractual agreement between NJA and Lantrak (or its nominee). It is not intended to be binding on NJA or Lantrak and acceptance or acquiescence hereafter will not create an enforceable contract.
Mr Yammine understood that if the share sale was to proceed, there would need to be formal documentation that, normally, lawyers and accountants would draft.
Mr Liemant had two principal concerns at this time: first, his expectation that the Lantrak group would struggle to fund an acquisition of Mr Yammine’s interest and secondly, as he said in chief, “I felt the business depended on Norm to get the sales, and I was very concerned about … Norm not being in the business. How are we going to get the sales?” (emphasis added). Mr Liemant told Mr Yammine that, if he sold his shares, he wanted him (Mr Yammine) to continue being involved in the business.
Subsequently, negotiations for a share sale commenced in which Nazih Touma, of Lionheart Legal, acted as the Yammine parties’ solicitor and Mr Pinto assisted Mr Yammine. The Yammine parties’ accepted that their failure to call Mr Touma warrants me inferring, as I do, that Mr Touma’s evidence would not have assisted the Yammine parties’ case: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 385 [64] per Heydon, Crennan and Bell JJ; Jones v Dunkel (1959) 101 CLR 298.
Mr Liemant said that, in about mid 2018, Westpac indicated that it was no longer prepared to finance Lantrak NSW. He said this occurred in the context of Mr Yammine saying that he wanted to sell his half share. That led, in late May 2018, to Mr Liemant approaching corporate finance advisors, O’Connell Partners, who suggested that Alpha Group might wish to assist in him and Mark Liemant acquiring 100% of Lantrak NSW resulting in Mr Yammine not having any continuing ownership interest.
Tony Tromboli was an advisor for Alpha Group. In September 2019, Mr Pinto gave Mr Yammine the following documents which he had received (I infer shortly beforehand) from Mr Tromboli (who, however, I infer, had received them much earlier in about late May or early June 2018 to assist in the work Alpha Group was undertaking):
·an unaudited summary of the Lantrak group’s results for the year ended 30 June 2016 (that, of course, excluded Lantrak NSW) showing total receipts of about $237.5 million and a net profit before tax of about $9.8 million;
·a similar unaudited summary of the Lantrak group’s results for the year ended 30 June 2017 showing total receipts of about $335 million, including about $24.9 million for Lantrak NSW, with a net profit before tax of about $21.825 million, including about $1.75 million for Lantrak NSW and no provision for impairment (or bad or doubtful debts);
·a comparable unaudited summary of the Lantrak group’s results for the seven months to 31 January 2018 showing total receipts of about $220 million, including about $33 million for Lantrak NSW, and a net profit before tax of about $10.4 million, including about $995,000 for Lantrak NSW; and
·an internal Lantrak group balance sheet as at 31 March 2018 showing net assets of about $41.86 million.
For completeness, I should also note here that Lantrak NSW’s unaudited financial report for the year ended 30 June 2017 reported similar figures to those included in respect of Lantrak NSW in the Lantrak group’s above summary of that company’s results for that financial year.
The negotiations for the heads of agreement
On 26 July 2018, Mr Yammine, Mr Pinto, Gary and Mark Liemant met at the offices of PricewaterhouseCoopers (PwC) in Sydney with Michael Dean of PwC. This followed an introduction from one of Mr Yammine’s contacts as to who might be able to assist the Liemant brothers in advising on the buyout proposal. They had a high level discussion to explore possibilities. Mr Dean appears to have suggested that, given that they were located there, the Liemant brothers should deal with PwC’s Melbourne office. Mr Liemant took up that suggestion and, after about mid-August 2018, he and others in the Lantrak group had a preliminary meeting with PwC personnel in Melbourne of which he informed Mr Yammine.
On 21 August 2018, Gary and Mark Liemant, together with Sanjiv Jeraj and Greg Diamond of PwC, met at PwC’s Melbourne offices with Mr Yammine, Mr Pinto and Mr Touma. During the discussion, Mr Yammine’s side reiterated his interest in selling his share of the business and the conversation turned to how a value could be ascribed to it. Mr Jeraj led the discussion in which he, Mr Diamond and Mr Pinto agreed that a multiple of five times Lantrak NSW’s earnings before interest and tax (EBIT) was an appropriate means of arriving at a value.
Mr Liemant said in chief that valuation was Mr Jeraj’s area of expertise and that Mr Jeraj told the meeting that businesses of the nature of Lantrak NSW typically sold for a multiple of five times EBIT less debt. He remembered that Mr Yammine said that he did not understand what was involved in the concept of “less debt” and, after Mr Jeraj explained what he meant, Mr Yammine said that he would ensure that there was no debt at the time of sale.
The Lantrak group used a Pronto accounting system to produce management reports. Before the meeting, Mr Yammine had seen the Pronto profit and loss report of Lantrak NSW for the 12 months ended June 2018, that was created on 2 August 2018, which became exhibit B. That report recorded total sales of about $63.1 million, a gross profit of about $7.05 million and a net profit of about $1.727 million. He had looked at them with Mr Pinto before the meeting. Mr Pinto said that exhibit B came from the Lantrak group’s Melbourne office.
Mr Yammine thought that EBIT or earnings before interest, tax, depreciation and amortisation (EBITDA) meant something like net profits, but had never heard of the concepts of EBIT and EBITDA before this meeting. Mr Liemant did not recall Mr Yammine referring to the $7 million as gross profit at the meeting and asserted that “it was quite clear in that meeting that it was 7 million EBIT”. Although Mr Yammine agreed to a leading question in cross-examination that he recollected the multiplicand was EBITDA, I think he was mistaken and accept Mr Pinto’s and Mr Liemant’s evidence that they discussed EBIT as the multiplicand.
Mr Yammine said that, on the basis of either exhibit B or a similar Pronto report for Lantrak NSW used at the meeting, he thought that the business would easily achieve an EBIT of $7 million for the 2019 financial year. Mr Yammine explained his approach:
Did you think that they were talking, when they talked about EBITDA, about something like net profit, or something like that? --- Profits.
Just profits? --- Yes, profits. Profits of the business.
…
And it was your suggestion in that meeting that five times seven to 10 million dollars was about the right number. Wasn’t that right? --- I think the 10 got thrown in. The seven it was five times seven.
Yes. The 10 is really an outlier that was there and then disappeared, wasn’t it? --- I don’t know, I don’t say 10. I say five. So that’s just a - - -
All right. So five times seven is the real number that’s floating around in this discussion? --- That’s right.
And the seven came from you? --- The seven came yes, because it was … the gross profit of the Pronto system, which then, if you add it back from the NP to the GP, nothing was taken. So it was … a brand costing. So all that all that money that was spent was towards the brand. Why should I wear it if it’s going to go on? It was the same logo in Melbourne and Queensland, and New South Wales had the same logo, so all that cost that occurred was from having that brand.
(emphasis added)
The above, less than coherent explanation, revealed Mr Yammine’s obvious lack of financial literacy, including understanding of accounting concepts such as EBIT. Mr Yammine appears to have understood that EBIT and gross profit were commensurable when he referred to the figure of $7 million. I do not think that anyone at the meeting understood Mr Yammine as being capable of making a reliable prediction of Lantrak NSW’s EBIT or EBITDA (as opposed to profitability) for the purposes of the negotiation.
Everyone at the meeting used the same financial information. The Liemant side had experienced accountants, including Mr Jeraj from PwC (who was not called and whose evidence, I infer, would not have assisted the Liemant parties’ case) to assist them, and Mr Yammine had Mr Pinto, who was also an accountant, to assist him. The meeting discussed the potential value of Lantrak NSW as five times the EBIT derived from exhibit B, or a similar Pronto print out, being $35 million, which they all could then use as a basis for the negotiations. Mr Liemant understood at this meeting that Mr Yammine was expecting to receive a price of $35 million for his interest in Lantrak NSW based on what he and his expert advisors from PwC had calculated was an EBIT figure of $7 million. Mr Pinto also understood this, as (I infer), did Mr Touma.
During the meeting, Mr Liemant told Mr Yammine and the others that he (meaning the Liemant side) would need to obtain funding to enable such an acquisition and there would be a need for due diligence to be done because the Liemant side had to raise capital. Mr Jeraj said that the Liemant side would need to conduct due diligence on the business of Lantrak NSW. Mr Yammine was unhappy about this. He said that they already knew what the business’ financial position was because they did the back office work.
The meeting also discussed a possible value of between $12.5 million and $15 million for the trucks owned by Mr Yammine’s interests that Lantrak NSW used in its business. At that point, Mr Liemant said in chief that his side was not then interested in acquiring the trucks.
On 22 August 2018, Messrs Yammine, Touma, Liemant and Jeraj met again to further the discussion.
On 27 August 2018, Mr Touma emailed a first draft heads of agreement to Ms Mikhael, Messrs Liemant, Jeraj, Pinto and Diamond. The draft provided that the price of NJA’s shares in Lantrak NSW was $35 million, the price for the business, inventory and trucks was $15 million and $3 million was the price of the units held by Ari Investments Aust Pty Ltd as trustee for the Ari Investments family trust (named after Mr Yammine’s daughter) in the McGraths Hill property unit trust, which owned the land at McGraths Hill, where Lantrak NSW’s office was. The parties were to exchange finalised transaction documents by 6 September 2018. The total consideration in the first draft was $53 million payable in three instalments, the first of $23 million payable on 8 October 2018, the second of $10 million payable on 1 March 2019, and the third of $20 million payable on 2 December 2019. Mr Yammine was to repay $3 million in loans to Mr Liemant and Mr Yammine would be engaged to provide consultancy services at $10,000 plus GST per week until 2 December 2019. The draft provided that it was not binding and did not create any legal obligations.
Importantly, on 28 August 2018, Ms Sumanada emailed Mr Liemant a draft budget for Lantrak NSW for the year ended 30 June 2019. This projected total income of about $99.7 million, finance expenses of about $890,000 and a net profit before tax of about $6.2 million. If the finance expenses were added back to the net profit before tax to give an EBIT calculation, that would equate to about $7.1 million (or $7,107,099 to be precise). Thus, on Lantrak NSW’s own internal projections, the $7 million EBIT figure, which the participants had discussed at the meeting of 21 August 2018, was at that time realistic. The amount of depreciation and amortisation for the business was minimal given that it did not own any substantive assets to which such provisions could apply. After being taken to this document, which he said he did not recall, Mr Liemant gave this evidence:
If you add back those financing expenses, the EBIT, Mr Liemant, is $7,107,099? --- Correct, yes.
And you had no basis to think that forecast was wrong as at that date, did you? --- I was sceptical due to the fact that they had never actually achieved a six per cent in their profit. It was more like in the circa 1.9, 2 per cent.
(emphasis added)
I do not believe that evidence or that Mr Liemant recalled being, or was, sceptical of the projection. That is because throughout the negotiation of the heads of agreement neither he, nor others on the Liemant side, including their expert in valuation, Mr Jeraj, conveyed any substantive doubt about, or sought to resile from, the use of the $7 million EBIT figure or the $35 million valuation of the shares. Had he really believed at that time that a realistic EBIT was $2 million, he would have equated that with a value of $10 million, being $25 million less than they were discussing. It is difficult to understand why Mr Liemant would not have raised this scepticism at the time, rather than proceeding on what he would have had to regard as a gross overvalue and allowing everyone involved to waste time, and entertain unrealistic expectations, based on a misconception.
On 30 August 2018, Mr Diamond responded to the first draft of the heads of agreement with a second version in mark up. This draft deleted individual pricing for each item, but retained a total price of $53 million payable in three instalments with values for the items to be inserted.
The parties’ representatives exchanged several further drafts of the heads of agreement.
On about 10 September 2018, Lantrak Holdings engaged Simon Peeke, through his company BCQ Holdings Pty Ltd, to provide financial and strategic advice consultancy services.
On 12 September 2018, Tiffany Barton, a solicitor at PwC, sent a further draft which provided for adjustment of the purchase price to between $47.5 million and $53 million depending on variations to be agreed relating to debts associated with certain assets and a loan that Mr Yammine had to repay to Mr Liemant. The price continued to include a value for Lantrak NSW of $35 million based on an EBIT of $7 million. The parties exchanged further drafts on 12 September 2018 until about 9:00pm when Ms Barton emailed the final version.
THE HEADS OF AGREEMENT
The heads of agreement were exchanged on about 13 September 2018 between the purchasing parties (Lantrak Holdings, Earthtrak Pty Ltd, as trustee of the Liemant unit trust (as land purchaser), and Gary and Mark Liemant) and the selling parties (Mr Yammine, Ari, as trustee of the Ari Investments family trust (as the land vendor), NJA, as trustee of the NJA family trust (as share vendor), and Yammine Pty Ltd (as business investor and truck sales vendor)). The prices for the shares in Lantrak NSW, the business operated by Nojo (being the owner of the trucks and other transport solutions inventory used in Lantrak NSW’s operations) and the McGraths Hill land were not specified in total consideration of $47.5 million. That price was proposed in the heads of agreement to be payable in three instalments, the first of $5 million on execution of binding transaction documents on 27 September 2018, the second of $23 million payable on completion of the sale of the trucks and shares on 29 March 2019 and the last of $19.5 million payable on completion of the McGraths Hill property sale on 2 December 2019.
Lantrak Holdings agreed that it or its nominee would purchase NJA’s 50% shareholding in Lantrak NSW (cl 2.1) and would discharge the debt owing on the trucks of up to $5.5 million as well as paying the price for the trucks and, by 31 October 2018, would obtain a release for Mr Yammine and Ms Mikhael from the financier of that debt (cll 3.2–3.3). The Lantrak group agreed that, in addition to Lantrak Holdings paying for the McGraths Hill property, it would discharge all the debts of the McGraths Hill property unit trust on or before completion on or before 2 December 2019 (cll 4.2, 6.3(c)). In addition, Lantrak Holdings or a nominee would engage Mr Yammine or a nominee to provide consulting services in the period to 2 December 2019 at the rate of $10,000.00 plus GST per week (cl 5).
Importantly, cl 6.1 provided that the parties would negotiate in good faith to finalise the transaction documents to give effect to the transaction contemplated in the heads of agreement in preparation for exchange on or before 27 September 2018.
Mr Yammine agreed that he would resign as a director of each of 11 companies, including Lantrak NSW, prior to settlement of a debtor finance facility that Lantrak NSW had with Scottish Pacific Business Finance Pty Ltd (cl 6.2).
The parties agreed that the total consideration payable by Lantrak Holdings was $47.5 million and that they would negotiate in good faith with respect to its allocation between the assets being sold (cl 7.1). They agreed that Mr Yammine would repay $3 million to Mr Liemant out of the second instalment due on 29 March 2019 (cll 7.2, 7.3). The deposit payable on exchange of the transaction documents was to be non-refundable (cll 10.1, 10.2) and the Lantrak group, together with Gary and Mark Liemant, would guarantee and indemnify the sellers in respect of the purchasers’ obligations. The Liemant brothers would also give security over real property (cll 10.3–10.6).
Critically, cl 11.1 provided:
11.1 Non-binding
Except with respect to confidentiality under clause 12, the parties agree that there is no legal obligation on either party to enter into the transactions proposed by this heads of agreement.
(emphasis added)
WHAT HAPPENED AFTER THE HEADS OF AGREEMENT
On 14 September 2018, Ms Sumanada emailed Mr Peeke a copy of the heads of agreement, details of the Lantrak group’s finance facilities and Mr Pinto’s contact details to enable Mr Peeke to obtain information about financing for the trucks, as he had earlier discussed with Mr Liemant.
On 18 September 2018, Chris Taylor, a director of PwC’s mergers and acquisitions unit, emailed Ms Sumanada with a daily timetable for the forthcoming five weeks, which he told her that he planned to provide to Gary and Mark Liemant. The timetable envisaged that discussions with potential lenders would occur by 5 October 2018 and with potential investors (referred to as “Project Sahara”) by 16 October 2018. It programmed that a decision on whether or not to proceed with the transactions with Mr Yammine would occur on 17 October 2018. Under the heading ‘NSW business acquisition workstreams’, the timetable read:
Mr Liemant said that he did not recall seeing that timetable but accepted that he possibly had. He said that PwC’s comment, “Lantrak to intentionally delay the timetable” for the drafting and negotiation of the transaction documents, “didn’t come from me” and denied that he did delay the timetable intentionally.
I found that evidence problematic. Under cl 6.1 of the heads of agreement, the parties were supposed to negotiate the transaction documents so that an exchange would occur by 27 September 2018, that is, within two weeks of the exchange of those heads. Mr Liemant had engaged Mr Peeke on 10 September 2018 to assist in, among other tasks, raising the money to fund the proposed acquisition. Mr Liemant knew that raising funding for a transaction involving a binding commitment to pay a total of $47.5 million in tranches over about 15 months would take time, and almost certainly longer than two weeks in circumstances where the Liemant interests did not then have the immediate financial capacity of cash or facilities, or a willingness, to commit to such a transaction. Mr Liemant knew that PwC had labelled as “Project Sahara” the task of preparing a prospectus-type document for potential investors to support the proposed purchase and that this task had not been activated at the time of exchange of the heads of agreement.
Despite having negotiated the heads of agreement on the apparent basis that the Liemant side could proceed with the transaction as it contemplated with an exchange by 27 September 2018, Mr Liemant must have realised when executing the heads of agreement that the Liemant side would not be able to exchange by then as cl 6.1 contemplated. Of course, he knew that the heads of agreement were not binding. I found his evidence of not intentionally delaying the timetable for negotiating and exchanging the transaction documents implausible, given that he knew that his side still had to raise finance if it were to proceed to an exchange of contracts. PwC were the Liemant side’s highly qualified advisors in the transaction and, I infer, had communicated to Mr Liemant the need for the Liemant side to raise finance before this. At least by 18 September 2018, it must have become apparent to Mr Liemant that the Liemant parties would need to raise finance or seek investors and that, until this occurred, they could not risk exchanging contracts.
On 25 September 2018, Mr Peeke asked Ms Sumanada for a balance sheet and profit and loss account for Lantrak NSW and she forwarded these to him soon after on that day. Those profit and loss accounts were for the year ended 30 June 2018 and the two months ended 31 August 2018. He said that, on reviewing them, he formed the view that it was unlikely that the business would achieve an EBIT of $7 million. The total revenues for each period were, respectively, about $63.1 million and $18.75 million, and the net profits were about $1.25 million and $850,000.
Also on 25 September 2018, Ms Barton circulated the first draft of the sale agreement. The purchase price remained as $47.5 million but its allocation between the assets was left blank. The sellers were to enter into a restraint of trade for five, three or one years (depending on its enforceability in the usual type of cascading wording used in such restraints (cl 11)). There was an entire agreement clause (cl 14.7) and a clause in which the parties acknowledged the receipt of, or the opportunity to receive, legal advice in respect of the sale agreement (cl 14.12). While Mr Yammine did not read this or any other version of the sale agreement, he accepted that he received legal advice from Mr Touma as to its provisions (including the final version).
As I noted at [38] above, I infer that Mr Touma gave Mr Yammine all relevant legal advice as to the terms of each version of the sale agreement, and in particular the executed sale agreement. That advice included the effect of the entire agreement clause in precluding the ability of any party to assert that the sale agreement was incomplete or that there were other agreements, arrangements or understandings between them (or any of them) that were not contained in its terms.
I do not accept Mr Yammine’s denial that Mr Touma explained to him the effect of the entire agreement clause (which was at cl 11.7 in the sale agreement) before he executed the sale agreement. It is inherently unlikely that a solicitor would fail to explain the effect of such a clause to his client, particularly a person like Mr Yammine who was obviously not a commercially experienced businessman familiar with usual terms of such contracts, albeit he was no doubt very effective in orally negotiating deals. This was a multi-million dollar transaction of great significance to Mr Yammine and his family. A reasonable solicitor in Mr Touma’s position would have been aware that the terms of the proposed agreement for such a significant transaction required careful explanation to a person in Mr Yammine’s position and with his background. Whether, and to what extent, Mr Yammine may have listened to or understood a solicitor’s explanation of the terms of the sale agreement is a different question from whether he received such an explanation. Having observed him carefully in giving evidence, I formed the view that Mr Yammine focused on his personal interactive relationship with individuals with whom he dealt and had little time for paperwork or detail, despite some consciousness of their importance in defining legal rights and obligations.
Mr Yammine resigns as director
Importantly, on 26 September 2018, Mr Yammine resigned as a director of Lantrak NSW and the other companies as the heads of agreement had contemplated. Mr Yammine gave unchallenged evidence that Mr Liemant had asked him to resign “so then that way they can settle the deal, like, get the funds to settle the deal, because if I was a director they wouldn’t get the deal settled. So I followed the heads of agreement and signed off” (emphasis added).
Before the resignation, Mr Liemant had not told Mr Yammine of any difficulties that the Liemant side perceived or was having in raising finance. Mr Liemant understood that, as far as Mr Yammine was concerned, he had resigned on the basis that he expected that the Liemant side would be paying him $35 million for Lantrak NSW. Mr Liemant said in re-examination that “it was a formality to get through that [the later signing of the sale agreement] and we were moving into the consultancy agreement”. Mr Liemant said that, following his resignation, Mr Yammine’s day to day activities in the business changed because he “was no longer active in the business at that point”. This was an example of Mr Liemant, without any contractual basis, using Mr Yammine’s trust in him to move Mr Yammine to a position in negotiations that was advantageous to Mr Liemant’s interests. Mr Liemant admitted that he was not keeping Mr Yammine informed of progress on the “Project Sahara” timetable beyond “some broad discussions”.
The negotiations continue
On 26 September 2018, Mr Touma replied to Ms Barton’s email of 25 September 2018 reminding the Liemant side that the heads of agreement provided for the exchange of the transaction documents on the following day. He noted that it was the Liemant side’s preference that they be responsible for preparing the first draft, yet what Ms Barton had sent was not even a complete draft. He said that he was instructed to ask the Liemant side to arrange payment of the first instalment of $5 million on that or the next day by deposit into his firm’s trust account “[a]s a sign of good-faith and commitment towards this transaction”, which could be released to his client on exchange. He asked when to expect a complete first draft of the transaction documents.
On 26 September 2018, Mr Peeke sent Ms Sumanada his analysis of Lantrak NSW’s net profit for the year ended 30 June 2018 of about $1.25 million.
On 27 September 2018, Mr Touma and Mr Jeraj discussed the Liemant side’s proposal that Lantrak Victoria drawdown $5 million on the Scottish Finance facility to use as the deposit on the sale agreement. They exchanged emails about this and progressing the then-proposed transaction.
On 2 October 2018, Mr Peeke emailed Mr Liemant and Ms Sumanada attaching an estimate that he had made of Lantrak NSW’s results for the first quarter of the 2018-19 financial year. He said that he had had to make estimates because not all of the figures for September 2018 were yet available nor for that year as a whole. Mr Peeke estimated that it would earn about $1.08 million for the quarter and commented in his email that this “clearly ma[de] a $7M target aggressive”. Mr Peeke said that by then he probably had formed a view that the Liemant interests would not be able to “raise finance to do the deal as it was represented in the heads of agreement” and had discussed this with Mr Liemant. Both Mr Liemant and Mr Peeke agreed in evidence that Mr Peeke’s estimate was of profit, not EBIT. Mr Liemant accepted that if financing and fringe benefits tax expenses were added back to produce an EBIT figure, EBIT for the first quarter would have been $1,266,660. They agreed that using Mr Peeke’s methodology would result in an EBIT of $5,066,640 for the whole year.
The Liemant parties contended that there was no evidence that Mr Yammine could have achieved a better price. However, that argument was confounded by Mr Peeke’s suggested price of $15 million (albeit payable by instalments and subject to conditions), as an opening offer that he put forward to Mr Liemant earlier on 9 October 2018 (see [87] above).
As I have explained above, the objective financial information in contemporaneous internal documents of Lantrak Holdings, the mutually known material in exhibit B and the financial records of Lantrak NSW as to August 2018 provided a reasonable basis for the value of $35 million (as five times Lantrak NSW’s EBIT) that the parties agreed in the heads of agreement, with the benefit of the advice of experienced financial advisors, such as Mr Jeraj.
The Liemant parties did not plead any lawful counterfactual which, but for Mr Liemant’s misleading representation, they or the Yammine parties would have pursued: cf Berry v CCL Secure Pty (2020) 271 CLR 151 at 167–168 [27], 170 [29], 171 [32] per Bell, Keane and Nettle JJ. Here, because of Mr Yammine’s reliance on Mr Liemant’s promise “to honour the deal”, the Liemant parties entered into the sale agreement at a total price for what they were selling that was far less than they understood and believed it was worth. That understanding and belief was reinforced by the expert advice as to value that Mr Jeraj and the other experts conveyed to both sides in the negotiations for the non-binding heads of agreement.
The Liemant parties confined their case to supporting the proposition that, as at 9 October 2018 (and thereabouts) they could not raise funds to pay a price of $35 million and that the latest financial results suggested that such a value was at that time more than would have been reached had those results been available for the negotiation of the heads of agreement. They did not plead that the price in the sale agreement reflected either the true value of what the Yammine parties sold or the maximum that they (the Liemant parties) were prepared to pay. As Bell, Keane and Nettle JJ said in Berry 271 CLR at 170 [29] and 171 [32]:
… if a claimant seeks “expectation damages” for the loss of a chance that, had an agreement run to term, it may have been renewed or extended, the onus is on the claimant to establish those facts, although, even then, since the existence and degree of such an hypothetical possibility is, by reason of the wrongful termination of the contract, incapable of proof on the balance of probabilities, it is considered just that the wrongdoer should suffer the resulting uncertainty to the extent that proof to the level of a real (more than negligible) possibility is regarded as enough. The worth of the chance is then valued by a process of informed estimation.
…
By parity of reasoning with Malec [v JC Hutton Pty Ltd] ((1990) 169 CLR 638 at 639-640 per Brennan and Dawson JJ; at 642-643 per Deane, Gaudron and McHugh JJ. See also Badenach v Calvert (2016) 257 CLR 440 at 454 [39]-[40] per French CJ, Kiefel and Keane JJ) and [Commonwealth v] Amann Aviation [Pty Ltd] ((1991) 174 CLR 64 at 92 per Mason CJ and Dawson J; at 102-104 per Brennan J; at 118-119 per Deane J), in Sellars ((1994) 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ; at 368 per Brennan J) it was held that, where a claimant established on the balance of probabilities that misleading or deceptive conduct contrary to s 52 of the TPA caused the claimant the loss of a commercial opportunity of some value (not being a negligible value), the value of that lost opportunity was to be ascertained by reference to hypotheses and possibilities which, though they were speculative and therefore not capable of proof on the balance of probabilities, could be evaluated as a matter of informed estimation.
(emphasis added)
Importantly, the Liemant parties’ case was that they could not raise the finance as at early October 2018 to pay the price of $35 million and that the latest financial results suggested a slightly lower EBIT and correspondingly lower value. The Liemant parties did not plead or suggest that they would not have gone ahead with negotiating a price greater than in the sale agreement had Mr Yammine suggested a higher price than $10 million “clear” in the 9 October conversation. Mr Liemant did not look Mr Yammine’s gift horse in the mouth, based as it was on his promise to “honour the deal”.
I have accepted Mr Peeke’s evidence that, by 9 October 2018, he had formed the view, after approaching potential financiers and others, that “we couldn’t raise finance to do the deal as it was represented in the heads of agreement” (see [214] above). Mr Peeke said, without challenge in cross-examination, that none of the financiers that he and Mr Liemant approached before 9 October 2018 was “interested in funding the New South Wales deal” and that he was concerned that “[w]e had a business that didn’t appear to be on track to achieve the [$7 million] EBIT margin”. Nonetheless, Mr Liemant accepted that a management accounts consolidated Lantrak group balance sheet as at 31 March 2018 disclosed that the group had total current assets of about $70.625 million and net assets, with a corresponding total equity (after deducting liabilities), of about $41.86 million. It had total current labilities of about $42.85 million, including about $19 million due under its Westpac debtors finance facility, that the group used to ensure smoother cashflow. Mr Liemant accepted that in the previous 2016-17 financial year, the Lantrak group generated a net profit before tax of $21.8 million and that, during the period in 2018 in which the 9 October conversation occurred, it was a substantial and profitable business. Yet, he told Mr Yammine in the 9 October conversation that the Lantrak group could not afford to pay him $35 million. He denied that it was untrue to tell Mr Yammine that.
Thus, as at 9 October 2018, the Lantrak group was a substantial, successful business. While it may not have been able at that time to attract funding to pay $35 million for the Lantrak NSW group, including because the latest EBIT projections were closer to $6 million than $7 million, that does not entail that it could not have paid or funded a significantly greater price than $13 million.
Moreover, the EBIT in the management accounts for Lantrak NSW in Mr Peeke’s estimate that he emailed to Mr Liemant and Ms Sumanada on 2 October 2018 was still broadly in line with their performance as indicated in exhibit B, being the version which the parties and their professional advisors used in negotiating the heads of agreement (see [49], [80]). The EBIT in the 2 October 2018 estimate (which it appears Mr Yammine did not then have) (see [82] above) was about $5 million. That would result in a value of $25 million, using the methodology of five times EBIT both sides adopted in negotiating the heads of agreement. That estimate did not include any growth projection for the rest of the financial year. And, as late as 4 October 2018, Mr Jeraj of PwC affirmed to Mr Touma that “[o]ur valuation [of $35 million] is based on the business making circa $7m this year and the run rate to August indicates a level of risk on the earnings” (see [84] above).
Had Mr Yammine not trusted Mr Liemant and kept negotiations for an immediate, but perhaps lesser, price on foot, I am satisfied that there is a real possibility that both men would have arrived at a price substantially in excess of the $13 million in the sale agreement. The Lantrak group had significant financial capacity, even if not enough at that time to enable it immediately to pay $35 million. It follows that the Yammine parties are entitled to compensation under s 236(1) of the ACL for the loss of that chance.
It is not necessary for a representee to identify a precise counterfactual price in order to recover compensation under s 236(1) of the ACL for a contravention of the statutory norm of conduct mandated in s 18(1). There was no expert opinion evidence led in the trial of the value of the Lantrak NSW group or the total consideration passing from the Yammine parties to the Liemant parties (and their associates) in the sale agreement. However, there was evidence of the integers and methodology that the parties used to arrive at the non-binding value of $35 million in the negotiation of the heads of agreement and that formed the foundation of Mr Liemant’s “promise” to “honour the deal”.
In HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 661–662 [47], Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ stated the following principle:
The defendant argued that it was not possible to demonstrate a sufficient loss as at the acquisition date in 1997 to render the trial judge's assessment correct. It pointed to a lack of specific evidence on the subject. However, while it is true that there was no direct evidence placing the “true value” in the vicinity of $130,000 on 28 April 1997, there does not have to be. Barwick CJ said that, provided there was some evidence of damage, in the field of assessing damages for fraud, “as in other fields, a tribunal of fact must do the best it can in assessing damages” (Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 26) . Fry J found no difficulty in assessing the difference between the price paid and “value” in the sense of “real value” or “a fair price to pay … in the real circumstances at the time” of purchase, even though there was no direct evidence on the point (Arkwright v Newbold (1881) 17 Ch D 301 at 312).
(emphasis added)
Their Honours also held (at 666 [62]) that the wide language of the analogue of s 236(1) of the ACL “is compatible with a legislative desire to broaden the scope of recovery, not to keep it within the bounds of some comparison with the common law (Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 407 [44])”.
By relying on Mr Liemant’s misleading “promise” that he would “honour the deal”, Mr Yammine (and NJA) lost the commercial opportunity or chance that he may have been able to hold Mr Liemant to the original price of $35 million or struck a greater price than the $13 million. That commercial opportunity or chance had a value that is insusceptible of precise calculation. The time for valuing that loss was 12 November 2018, being when the Yammine parties entered into the sale agreement in reliance on Mr Liemant’s promise. That is when their economic interests suffered damage: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 532–533 per Mason CJ, Dawson, Gaudron and McHugh JJ.
Of course, Mr Yammine retained his ability to compete, being his “security”, for the honouring of Mr Liemant’s “promise”. However, in the circumstances, there is no reason to discount the compensation to which the Yammine parties are entitled in respect of this. First, no party made a submission that such a discount ought to be made. Secondly, the statutory remedy is directed to compensating the Yammine parties for the loss of a chance to achieve a better price because of the Liemant parties’ contravention of the norm of conduct in s 18(1) of the ACL. Ordinarily, it is not necessary to break up the value of such a loss by reference to other causative or like elements. The issue is whether the Liemant parties’ contravention of s 18(1) of the ACL was a cause of the Yammine parties’ loss of the opportunity to negotiate a different, more financially favourable, transaction than that in the sale agreement: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 121–122 [33] per Gleeson CJ, 128–130 [57]–[58], [60]–[62] per Gaudron, Gummow and Hayne JJ, 135–138 [84]–[93] per McHugh J, 175–176 [210]–[211] per Callinan J.
Mr Liemant wanted the Lantrak group to have full control of the Lantrak NSW group, and the benefits of its significant revenues and earning capacity. He achieved that for the Liemant parties by contravening s 18(1) of the ACL.
Doing the best I can, I consider that the Yammine parties had a 50% chance of negotiating a price of $25 million to $30 million in lieu of the $13 million in the sale agreement. The average of $27.5 million produces a price $14.5 million greater than $13 million, 50% of which equates to $7.25 million. I am satisfied that this is an appropriate amount of compensation.
Accordingly, I find that the Yammine parties are entitled to an award of $7.25 million as compensation under s 236(1) of the ACL, with interest from 12 November 2018. Interest on that sum at the prejudgment interest rates is approximately $1,480,000. In my opinion, it is appropriate to enter judgment for $8,730,000 inclusive of prejudgment interest.
THE NON-COMPETE CONTRACTUAL ISSUE
The parties’ submissions
The Yammine parties argued that, as an alternative to their claim for $22 million, Mr Yammine and Mr Liemant agreed on 11 October 2019 in the Docklands meeting, that the Liemant parties would pay Mr Yammine $10 million in consideration of him agreeing that neither he nor any entity in which he was interested would compete with the business of the Lantrak NSW group for 10 years and that, subsequently, this agreement would be formally documented. The Yammine parties contended that this “agreement” fell within what McLelland J described in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628 as the fourth class in Masters v Cameron (1954) 91 CLR 353.
They submitted that when Mr Peeke sent his first draft to Mr Touma on 23 October 2019 he expressed the nature of the attachment as “draft thoughts on the agreement with Norm” (emphasis added) in the sense of acknowledging that an oral agreement already existed and the draft wording was how he proposed it be documented. They asserted that, so far as that document went beyond the existing oral agreement, it reflected no more than a proposal to add further or varied terms if Mr Yammine agreed. The Yammine parties argued that Mr Pinto’s and Mr Maroun’s evidence corroborated that Mr Yammine and Mr Liemant had made a non-compete agreement orally. They referred to, first, Mr Pinto’s evidence that he overheard Mr Liemant say that he was working through some transactions with big companies in Queensland “to raise the $10 million that he was going to pay Norm” (see [166] above), and, secondly, Mr Maroun’s evidence that, in March 2020, he had asked Mr Liemant about whether the $10 million owing to Mr Yammine would be paid at the end of the month, to which Mr Liemant replied that he was working on it (see [195]).
In addition, the Yammine parties relied on Mr Morris’ evidence that, when they met in December 2019, Mr Liemant had said that he wanted to raise $10 million in debt to pay Mr Yammine (see [174] above).
Consideration
I reject the Yammine parties’ argument that, at the Docklands meeting, Mr Yammine and Mr Liemant entered into a binding contract for the payment of $10 million in consideration of Mr Yammine, and entities in which he was interested, promising not to compete with the Lantrak NSW group’s business and giving up any claim to the $22 million.
While I have found that Mr Yammine and Mr Liemant discussed the broad commercial outlines of such an arrangement, I am not satisfied that the Yammine parties have established that the discussion resulted in a sufficiently certain consensus so as to create an enforceable contract.
First, as the subsequent events showed, Mr Liemant did not have, or was unwilling to commit, the funds to make a payment of $10 million immediately or in the ensuing months so, given his past conduct, it is unlikely that he committed to do so regardless. Secondly, Mr Yammine did not have Mr Touma respond to Mr Peeke’s emails of 23 and 24 October 2019 or draw up a proposed documentary version of what he said was the deal. Thirdly, Mr Yammine’s and Mr Liemant’s conduct after 11 October 2019 was consistent with both men believing that Mr Liemant needed to find a source of the funds to pay Mr Yammine and, if and when he did so, then there would need to be documentation prepared to reflect the arrangement they had discussed, in light of the availability of the money to fund the payment. Fourthly, the non-compete provision of any contract would be likely to need the input of lawyers as to the precise ambit of what the restraint would consist (e.g. the usual scenarios in such contracts as to area, scope of businesses, persons and entities to be bound and the cascading areas and durations if the initially wide ones were struck down by a court as an unlawful restraint of trade). While a draft of such a contract appeared in the draft sale agreement documents prepared before 9 October 2018, the terms were still not agreed. Fifthly, as time dragged on, Mr Yammine did not complain that Mr Liemant was in breach. While I accept that Mr Yammine still had a degree of faith and trust in Mr Liemant, by then he knew that Mr Liemant was not as reliable in their dealings as he had believed and had formed the view that Mr Liemant had lied to him in the 9 October conversation and thereafter. Yet, after the Docklands meeting, Mr Yammine sought to assist Mr Liemant to raise money through the introduction of Mr Morris and Mr Maroun. Sixthly, one element of Mr Yammine’s account of their conversation on 11 October 2019 was that “I was going to get him some work … to keep the relationship together open” ([153] above), which appeared to be part of the discussion, but the details of which he left hanging fire.
In the end, while I infer that Mr Liemant was content to string Mr Yammine along, once again, in the belief or expectation that they had agreed on a “deal”, the evidence did not bear out a conclusion that, in fact, they had made a certain, concluded contract.
CONCLUSION
For these reasons, I am not satisfied that the Yammine parties proved clear contractual terms for payment of either $22 million or $10 million or that the Liemant parties were estopped from denying that there was a contract for the payment of the $22 million. However, I am satisfied that the Liemant parties engaged in conduct, in trade or commerce, that misled the Yammine parties in contravention of s 18(1) of the ACL causing the Yammine parties to lose a commercial opportunity to negotiate a better payment than the $13 million provided in the sale agreement.
Accordingly, I will order the Liemant parties to pay the Yammine parties $7.25 million as compensation for the contravention of s 18(1) under s 236(1) of the ACL together with interest from 12 November 2018, which makes a total judgment sum of $8,730,000.
On the basis of my findings above, I see no reason why the Yammine parties should not have an order for costs, but I will postpone the entry of such an order in case there is a matter, not now evident, that requires further consideration.
I certify that the preceding two hundred and seventy-eight (278) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares. Associate:
Dated: 3 March 2023