Miller v Shea [1999] NSWSC 40

New South Wales Supreme Court CITATION : Miller v Shea [1999] NSWSC 40 CURRENT JURISDICTION : Common Law Division FILE NUMBER(S) : 13660/95 HEARING DATE(S) : 24-28 August 1998; 04 November 1998 JUDGMENT DATE : 12 February 1999

David Miller PARTIES : v James Shea JUDGMENT OF : James J

COUNSEL : Plaintiff: R Colquhoun Defendant: R J Weber SOLICITORS : Plaintiff: Lyons & Lyons Defendant: John Cunningham CATCHWORDS : Contract - terms of oral contract - terms of Deed of Release - economic duress DECISION : Verdict for Defendant

1 HIS HONOUR: The plaintiff David Miller, who was formerly called David Hoare, brought these proceedings against the defendant, James Shea, claiming damages for alleged breaches of an oral agreement allegedly made in June or July 1990 between the plaintiff and the defendant or, alternatively, (as a result of a late amendment of the statement of claim which I allowed) between the plaintiff and his wife, Wendy Miller, of the one part and the defendant of the other part. The agreement alleged (regardless of whether Wendy Miller was a party to the agreement) was that the parties would set up a business of providing sanitary services in women's toilets, that is of providing bins for the disposal of used sanitary dressings; that a company to be known as Ladycare Services Pty Limited ("Ladycare Services") would be incorporated to carry on the business; that initially the defendant would own 100 per cent of the shares in the company but that after six months the defendant would transfer to the plaintiff 40 per cent of the shares in the company; that the defendant would provide such financial assistance as was required to make the business operational in its early stages; that the plaintiff, who had previous experience in this type of business, would provide advice; and that the plaintiff's wife Wendy Miller, who is a sister of the defendant, would be paid $5,000 per month as a consultancy fee for the first twelve months, the fee being paid initially by the defendant and then by the company. 2 The company Ladycare Services Pty Limited was incorporated on 4 September 1990 and on 8 October 1990 it commenced carrying on the business of providing sanitary services. The defendant or a company or companies controlled by the defendant became the owner of 100 per cent of the shares in Ladycare Services. The plaintiff alleged in the amended statement of claim that after six months had elapsed, that is after about March 1991, the original agreement was varied, so as to permit the transferring to Wendy Miller of the shares in Ladycare Services which were transferable to the plaintiff. 3 The plaintiff alleged that the defendant had committed the following breaches of the agreement. 1. Although the defendant had on a single occasion in November 1990 paid the sum of $5,000 to the plaintiff's wife, the defendant had subsequently failed to pay the sum of $5,000 each month to the plaintiff's wife. 2. In March 1991, after six months had elapsed, the defendant failed to transfer 40 per cent of the shares in Ladycare Services either to the plaintiff or his wife and the defendant subsequently continued to fail to perform this promise. 4 In his defence the defendant made inter alia the following allegations. The defendant accepted that an agreement had been entered into in about June or July 1990 but said that the agreement was between the defendant and Wendy Miller and that David Miller had not been a party to the agreement. Under the agreement the defendant agreed to provide capital for Ladycare Services, both the capital required for setting up the business and the initial working capital, such capital being referred to in the defendant's defence as "the initial capital injection". Under the agreement Mr Shea or a company associated with him was to remain the owner of all the shares in Ladycare Services, until the business of Ladycare Services had made sufficient profit to be able to repay the initial capital injection to Mr Shea from reserves which in Mr Shea's opinion were not required for the company's purposes (the attaining of such a position by Ladycare Services was described as the attaining of "profit maturity"). Only if Ladycare Services attained profit maturity and repaid Mr Shea the initial capital injection, would Mr Shea be obliged to cause 40 per cent of the shares in Ladycare Services to be transferred and those shares were to be transferred to Mrs Miller and not the plaintiff. Mr Shea agreed to pay Mrs Miller $5,000 on one occasion only and did not agree to make periodical payments of $5,000 a month to Mrs Miller. The defendant then alleged in his defence that the amount of the initial capital injection he had made into Ladycare Services was $136,607. He also said that he had paid Mrs Miller an amount of $5,000 and that he had, without obligation, paid Mrs Miller other sums totalling $23,769. The defendant alleged that in 1991 disputes arose between the plaintiff and Wendy Miller on the one side and the defendant on the other. On 27 June 1991 the plaintiff, with the consent of the defendant, ceased to have any further involvement in the business of Ladycare Services. By August 1991 Ladycare Services had not attained a state of profit maturity. Pursuant to a deed dated 16 August 1991 made between the plaintiff and Mrs Miller on the one side and the defendant on the other side, the defendant paid the sum of $25,000 and David Miller and Wendy Miller released all claims they might have against the defendant. 5 By his reply the plaintiff alleged in relation to the deed of release of 16 August 1991:- 6 (i) That on its true construction it was only the plaintiff's wife Wendy Miller who released claims against the defendant and the plaintiff himself had not by the deed released claims which he had against the defendant. 7 (ii) The deed was vitiated by economic duress and unconscionable conduct on the part of the defendant. Particulars of this allegation were included in the reply. In summary, it was alleged that the plaintiff and his wife were in dire financial straits, that they needed $25,000 to pay immediate debts, that the defendant knew that the plaintiff and his wife were in dire financial straits, that the defendant had not paid all the instalments of $5,000 which he had promised to pay to Mrs Miller, that the plaintiff and his wife had been confronted by the defendant with the deed of release which they had not seen before, that the plaintiff and his wife were presented with an ultimatum by the defendant that they had to sign the deed of release or not receive the sum of $25,000, that the plaintiff and his wife had no opportunity of negotiating or of obtaining legal advice and that the plaintiff had signed the deed of release "under protest". 8 From the above examination of the pleadings in the proceedings, it can be seen that it was not in dispute that an oral agreement was entered into in June or July 1990 for the setting up of a business, that the company Ladycare Services was set up to carry on the agreed type of business and that initially the defendant or a company associated with the defendant owned 100 per cent of the shares in Ladycare Services. Issues arising from the pleadings include the following:- 9 1. Who were the parties to the agreement. It is clear that the party on one side of the agreement was the defendant James Shea. However, the plaintiff alleged that the party or parties of the other part were either himself or himself and his wife Wendy Miller, whereas the defendant alleged that the other party to the agreement was only his sister Wendy Miller. 10 2. To whom were 40 per cent of the shares in Ladycare Services to be transferred. The plaintiff alleged that under the original agreement 40 per cent of the shares in Ladycare Services were to be transferred to him and that under the variation to the agreement 40 per cent of the shares were to be transferred either to him or to his wife. The defendant alleged that the agreement always was that the person who was to receive 40 per cent of the shares was Mrs Miller. 11 3. To whom was the promise made by the defendant to transfer 40 per cent of the shares and could the promise be enforced by the sole plaintiff, Mr Miller. 12 4. What were the conditions which had to be fulfilled before an obligation arose to transfer 40 per cent of the shares in Ladycare Services and had those conditions been fulfilled. The plaintiff alleged that 40 per cent of the shares were to be transferred after the expiration of six months, it being somewhat unclear whether this period of six months was to be reckoned from the date Ladycare Services commenced carrying on business (8 October 1990) or from the date of the termination of the plaintiff's employment by Rentokil Pty Limited (apparently some date in September 1990). However, both of these dates were close together and nothing turns on when the period of six months would have commenced to run. The defendant, on the other hand, alleged that the obligation to transfer 40 per cent of the shares in Ladycare Services did not arise until after Ladycare Services had attained profit maturity and had repaid to the defendant out of reserves the full amount of the initial capital injection. 13 5. On a true construction of the deed of release, did the deed of release bar claims only by Wendy Miller(as alleged by the plaintiff) or claims by both David Miller and Wendy Miller (as alleged by the defendant). 14 6. Was the deed of release "vitiated" by economic duress and unconscionable conduct on the part of the defendant. 15 7. If an obligation on the defendant to transfer 40 per cent of the shares in Ladycare Services had crystallised and had not been performed and damages amounting to the value of 40 per cent of the shares in Ladycare Services were to be assessed, should the value of the shares be determined as at the date of the breach (which on the plaintiff's case was in about April 1991) or as of now and what, at the appropriate time, was the value of 40 per cent of the shares in Ladycare Services. 16 8. Had the defendant promised to make monthly payments of $5,000 for twelve months (as alleged by the plaintiff) or had the defendant promised only to make a single payment of $5,000 and could such a promise be enforced by the sole plaintiff David Miller. 17 As I have already indicated, it was the plaintiff's primary case that the agreement was between himself and the defendant, Wendy Miller not being a party. It was the defendant's case that the agreement was between himself and Wendy Miller, David Miller not being a party. It was in the interests of the plaintiff (and Wendy Miller) to adopt the position that David Miller, and not Wendy Miller, had been the party to the agreement. In the first place, it was a possible construction of the deed of release of 16 August 1991 that it barred claims by Wendy Miller but did not bar claims by David Miller. Secondly, Wendy Miller became bankrupt in 1993 and it was conceded by counsel for the plaintiff that any claim she had against the defendant would, with the rest of her property, have become vested in her trustee in bankruptcy and would have remained vested in her trustee in bankruptcy, notwithstanding her later discharge from bankruptcy. It troubled me throughout the hearing that no notice of the proceedings had been given to the Bankruptcy Administration and eventually a letter giving notice of the proceedings was sent to the Official Receiver. 18 The evidence in the proceedings consisted of affidavit evidence, oral evidence and various exhibits. The witnesses for the plaintiff were the plaintiff himself, Wendy Miller and Mr Jugmans, a valuer who gave evidence of the value of shares in Ladycare Services. The witnesses for the defendant were the defendant himself, his wife Mrs Shea, two witnesses Mr Hindmarsh and Mr McGonigal who gave evidence concerning the entering into of the deed of release of 16 August 1991, some other minor witnesses and Mr James a valuer who received and commented on a report by Mr Jugmans and himself gave evidence of the value of shares in Ladycare Services. Without attempting to make an exhaustive summary of the evidence, all of which I have taken into account, I will refer to certain aspects of the evidence of the three principal witnesses. Plaintiff's affidavit 19 In his affidavit the plaintiff said that up to about September 1990 he had been employed by Rentokil, which inter alia carried on the business of providing sanitary services in women's toilets. The plaintiff's wife suggested that he start his own business of providing sanitary services and that her brother the defendant could be interested in such a venture. A meeting took place at the defendant's home, at which the plaintiff, Wendy Miller, the defendant and the defendant's wife were present. At the meeting the plaintiff said to the defendant:- "We do not have the finances to establish the business and Wendy and I would need to have a minimum salary of $5,000 per month initially. I know how to run the business, I know what is needed but we need the input of finance to make it work. If you could put in the capital to get the business going and give us between us a minimum of $5,000.00 per month, we could probably strike a deal". The defendant said that he was interested. 20 In July 1990 a further meeting took place at the defendant's home. At this meeting the plaintiff presented a budget for the new business. There was discussion about various methods of manufacturing bins, of cleaning the dirty bins and of disposing of the waste. The defendant said inter alia:- "I will agree to put in $5,000.00 per month and pay this to Wendy or yourself if you want some as well as a consultancy fee for the first twelve months. After the first twelve months such fee will be paid by the company which I expect will then be self supporting. I suggest however that the fee be paid to Wendy as your contract of employment with Rentokil prohibits you from approaching clients of Rentokil for six months following termination of your employment with Rentokil. I will assist with the establishment of the business". 21 The defendant showed the plaintiff a document. The defendant said he had used the document when forming a partnership with a previous business partner. The defendant said "take the document home, alter or add anything to it relative to the new business and this will constitute our partnership". A copy of the document which it was alleged the defendant had shown the plaintiff was annexed to the plaintiff's affidavit. The document is in the form of an agreement. The typewritten name of one party to the agreement has been crossed out and the name "Wendy Miller Enterprises" (a business name solely owned by Wendy Miller) has been substituted in handwriting. 22 In July 1990 after a meeting with the defendant's solicitor the plaintiff and the defendant went to a Sydney hotel. At the hotel the defendant said to the plaintiff:- "I should receive 60% shareholding in Ladycare Services as I am taking the financial risk. You should not become a shareholder in Ladycare Services until the six month period provided for in the employment contract of Rentokil has expired. I would like you to approach employees of Rentokil, ones that would be good, and persuade them to commence employment with Ladycare Services". 23 According to the plaintiff's evidence, he had been advised by Mr McCormack, the defendant's solicitor, that he (the plaintiff) could not approach clients of Rentokil for six months after he ceased to be employed by Rentokil. The plaintiff approached certain employees of Rentokil, who agreed to leave the employment of Rentokil and work for the new company. 24 On 8 October 1990 the new company Ladycare Services commenced carrying on business. The defendant said to the plaintiff:- "I'm somewhat concerned about your employment contract with Rentokil and I suggest that for the first six months you do not call any clients of any description including non-Rentokil clients and you should adopt an office role". 25 On 2 November 1990 the defendant paid $5,000 to Wendy Miller. In late November 1990 the defendant said that he would not be paying any more money "at the moment". 26 On 12 December 1990 Rentokil brought legal proceedings against the plaintiff, two of the other former employees of Rentokil who had left Rentokil and were working for Ladycare Services, and Ladycare Services itself. Rentokil obtained various interim orders, including an order restraining certain of the defendants from competing with Rentokil for six months after the termination of their contracts of employment with Rentokil. 27 About the end of December 1990 Wendy Miller, who had been working only part-time for Ladycare Services, started working on a full-time basis as sales director. 28 Annexed to the plaintiff's affidavit is a copy of a letter bearing the date 11 September 1990. This letter purports to be a letter from the plaintiff to the defendant in the following terms:- "Mr Jim Shea 19/16, Wilga Street Bondi 2026 11 September 1990 Dear Jim, Just a short note to confirm what has transpired in respect to the new business. I have tendered my resignation to Rentokil (which they were not too pleased about) and I am free to commence our new venture on 5/10/90. I think they will try and negotiate with me to stay with them, however this opportunity to start our new business is too good to miss. I should also keep you up too date with the outcome of the discussions I have had with the Rentokil staff you asked me to approach. Both Mary-Anne and Kim Blogg have agreed to join our sales team, and Lou Wilbow has agreed to run the service side of the business. My secretary Jan Wise has also agreed to join us. As we agreed, I will organise a lunch so you can meet with them, and confirm the remuneration packages we agreed to offer them They are only required to give Rentokil two weeks notice however Kim and Mary-Anne have requested we source their company cars in time for them to move straight into their new jobs, as obviously they will have to return their current vehicles to Rentokil. As far as Wendy and I are concerned, would you please confirm what day of the month you will be paying us the $5000 per month you agreed upon. The fifteenth of the month would be preferable as we would not then have to change the date of our mortgage repayment. Would you also confirm that the car you have kindly offered me to use as replacement for my company car will be available on the fifth. I've never driven a Mercedes before, so I'm quite looking forward to that. Jim, both Wendy and I are very excited about our pending partnership in business, and I know that with my expertise and that of the people I am bringing with me, together with your financial support, we can look forward to a very successful future. I will be returning from this conference I am on in four days, so I will catch up with you then and discuss things at greater length then. Best Regards, David". 29 I note at this stage that the defendant denied having received such a letter and that the authenticity of the letter as a contemporaneous document written on 11 September 1990 was strongly challenged by the defendant. 30 At about the end of March 1991, after the six months period had expired (regardless of which of the events it was calculated from), the plaintiff asked the defendant to transfer 40 per cent of the shares in Ladycare Services to him. The defendant said that there was continuing trouble with Rentokil, that he did not want shares in Ladycare Services to be transferred to the plaintiff and that he wanted the shares in Ladycare Services to be transferred to the plaintiff's wife, who had had no connection with Rentokil. The plaintiff agreed to 40 per cent of the shares in Ladycare Services being transferred to his wife. No shares in Ladycare Services were in fact transferred either to the plaintiff or his wife. 31 In July 1991 the plaintiff and his wife were in deep financial trouble. The bank to which their home was mortgaged was pressing them to sell the home, because the bank was no longer prepared to defer receiving mortgage payments. The plaintiff and his wife instructed a firm of solicitors, Eddy McCausland & Walker, and those solicitors wrote a letter (which is not in evidence) requesting the transfer of 40 per cent of the shares in Ladycare Services to Wendy Miller. 32 On 19 July 1991 the defendant's solicitor McCormacks wrote a letter to Eddy McCausland & Walker, which was headed "without prejudice" but which was not objected to at the hearing. Part of this letter was in the following terms:- "We note your clients threat to institute proceedings in the Equity Division in relation to the issuing to Mrs Miller of a 40% interest in the company (Ladycare Services) and the appointing of Mrs Miller as a Director of the company. We are instructed in relation to these two (2) matters as follows:- 1. The Directors of Lady Care Services Pty Limited acknowledge that Mrs Miller has an entitlement to 40% of the company. In view of the current state of things between Mr and Mrs Miller and Mr Shea the Directors of Lady Care Services Pty Limited do not wish to issue any shares. The arrangement made was that shares would be issued to a Mr and Mrs Sykes who would grant an option over those shares in favour of Mrs Miller which can be exercised on the happening of certain events. In view of the current situation and the proposal to sell the company the Directors of Lady Care Services Pty Limited do not consider it appropriate nor advisable that the shares now be issued. We are instructed to repeat that our client admits the entitlement of Mrs Miller to 40% of the company. 2. Regarding the appointing of Mrs Miller as a Director this was discussed in more amicable times. The Directors of Lady Care Services Pty Limited are not disposed to appoint Mrs Miller a Director in the present circumstances. Our client has instructed us that he wishes this matter to be disposed of swiftly and amicably. Would you please write to us and advise your instructions and what are your clients proposals in respect of the business conducted by Lady Care Services Pty Limited. We understand your client has a proposal for the sale of the business or is obtaining a proposal for the sale of the business". 33 Draft minutes were prepared for a meeting of Ladycare Services to be held on 18 July 1991. The draft minutes were not signed but no objection was taken to the adducing of the draft minutes in evidence. Parts of the draft minutes were in the following terms:- "BUSINESS: Mr Shea reported to the meeting that certain problems had arisen in relation to Mr and Mrs Miller. Mr Shea informed the meeting that Mrs Miller was no longer working for the company. Mr Shea further advised the meeting that Mrs Miller had asked the Company to issue to her a 40% interest therein and to appoint her as an additional Director. RESOLVED: The Company acknowledged Mrs Miller's entitlement to a 40% interest in the Company but in view of the conflict having arisen it was advised not to issue the shares at this stage. The Company would however acknowledge that Mrs Miller has a 40% entitlement in the Company. In relation to the appointment of Mrs Miller as an additional Director the Company resolved that in view of present circumstances not to appoint Mrs Miller as an additional Director". 34 By August 1991 the financial position of the plaintiff and his wife had worsened. The bank had commenced proceedings for possession of their home. Their car had been repossessed. American Express threatened to take bankruptcy proceedings against Wendy Miller. In these circumstances Wendy Miller telephoned her brother the defendant. In the telephone conversation she said that she needed $25,000 to pay major debts. The defendant said that he would give Wendy Miller a cheque and that they should meet the following day at a coffee shop at Chippendale. 35 On 16 August a meeting took place at the coffee shop between the plaintiff, his wife and the defendant. The plaintiff gave the following account of the meeting in his affidavit:- "On 16 August 1991 Wendy and I met Shea and he produced a cheque made out to Wendy for $25,000. He also produced a document which he said would release him from any further action that may be taken against him. Shea said words to the effect, 'Unless you both sign the document you will not get the cheque and you will not get another opportunity. You must do it now or not at all'. I refused to sign the document because we were not given the opportunity to get legal advice. Wendy became extremely upset that I would not sign the document. She said words to the effect, 'I am fearful of losing our home and our children will be under threat of being removed from school as we cannot pay the school fees.' Wendy became severely distressed and under protest I signed the document. Shea then gave us the cheque and we left". Wendy Miller's affidavit 36 Wendy Miller's affidavit confirmed some parts of the plaintiff's affidavit. She gave an account of conversations between the plaintiff and the defendant in her presence, which would indicate that the plaintiff was experienced in the business of providing sanitary services, whereas the defendant in 1990 knew nothing about such a business. Mrs Miller gave the following evidence about the payment of $5,000 on 2 November 1990:- "On 2 November 1990, I approached Shea and said to him 'Jimmy, we need the $5,000 monthly payment for October as we need to pay our mortgage and do a shop'. Later that day, Shea came up to me and said 'Wendy here is your monthly $5,000 payment, I have made it out to Wendy Miller Enterprises, as I want to claim it as a consultancy fee'". 37 In late June 1991 Wendy Miller had a conversation with her husband, in which he said inter alia that he needed to do something to make the defendant listen to him and that he had decided to remove customer files from the business's office at Chippendale. The plaintiff proceeded to remove customer files from the office but the files were returned soon afterwards. Further evidence was given about this episode by other witnesses. The plaintiff and Wendy Miller also collected some cheques in favour of Ladycare Services from customers of the business and banked these cheques into the business's bank account. David Miller as a signatory on the bank account then drew a cheque on the bank account for $4,000 in favour of himself. 38 In July 1991 there were communications between Wendy Miller and the defendant, which were only lightly touched on in her affidavit but which were dealt with more fully in other evidence. According to Wendy Miller's affidavit, she made arrangements to meet the defendant at the business's office but when she went to the office the defendant told her that he did not want to see her on the premises again. 39 On 15 August Wendy Miller telephoned the defendant. In her affidavit she said that the conversation was as follows:- "'Jimmy, both David and I have given up good careers to establish this business with you, and now because of your actions, we have no money, the bank is going to sell our house and the boys may have to leave their school because we can't pay their fees'. I said 'Jimmy I don't believe you could do something like this particularly to your own sister'. Then I said to him 'under the circumstances I think you should cough up with some money to help us pay some of our debts.' Shea replied by saying 'How much will you need to cover your immediate debts?' and I said 'about $25,000.' Shea then said 'O.K Wendy, you and David meet me at the coffee shop in Meagher Street at about eleven o'clock tomorrow and I'll have a cheque for you'". 40 The meeting took place the following day. Para 16 of Wendy Miller's affidavit was in the following terms:- "We met Shea as arranged and we sat and ordered a coffee. Shea produced a cheque for $25,000 made out to Wendy Miller together with a document. Shea then said to my husband and myself 'I have had this Deed of Release made up to say that you both agree to have nothing to do with the business in the future or make any future claims against me and if you agree to sign this I will give you this cheque'. My husband replied by saying 'You have to be kidding, that is not the arrangement you made with Wendy on the phone and besides I am not going to sign a document like that without getting legal advice first'. Shea then said to us 'This is the last offer I am making if you don't sign this release now, you won't get the cheque'. I became very distressed with the whole situation and said to my husband 'We desperately need this money to keep the kids in school and to pay our mortgage. We don't have money to seek legal advice against Jimmy and I just want to sign this and forget we ever became involved with him'. My husband said 'All right I will sign it under protest.' After we both signed the release my husband said 'Jimmy, I need a copy of this release'. He replied by saying 'I will get it witnessed and have my solicitor Michael McCormack send you a copy'. We then got up to leave and Shea said 'Would you like to have a drink at The Gladstone before you go and my husband replied, 'We don't drink with con men and thieves' and then we both left and went home". Defendant's affidavits 41 The defendant James Shea made three affidavits, a principal affidavit, an affidavit in which he replied to Wendy Miller's affidavit and an affidavit in which he described the business of Ladycare Services, as it has been carried on since 1991. I have taken all of this material into account but I will only refer to some of the more important parts. 42 In his principal affidavit the defendant agreed that in 1990 he had had a conversation with his sister in which his sister had suggested that he might be interested in a business providing sanitary services. 43 A meeting was subsequently held at the defendant's home, which was attended by the plaintiff, Wendy Miller, the defendant, the defendant's wife and the defendant's son James Shea. At this meeting the proposed business was discussed. 44 At a further meeting between the plaintiff and the defendant the plaintiff allegedly said that the company would be profitable within two months. According to the defendant, further conversation was in the following terms:- "'Wendy, since she is my sister and has three children, I agree will receive 40% of this venture. This 40% will be signed over to Wendy when the company reaches profit and has paid back the money invested by me through the Shea Family Companies. When that debt is paid in full, then I will issue the shares to Wendy. The shares would be issued to Wendy after all moneys that have been paid to get it started have been re-paid to the Shea Family companies and the company is in a profit situation'. The Plaintiff then said words to the effect: 'That is agreeable to me. My involvement in this venture is to provide expertise in this type of business'. The Plaintiff then said: 'After the first month the company will generate enough money to cover all our needs. This is because the contracts in this industry are paid twelve months in advance, which is common in this type of business. So for a small capital investment, the company will be profitable and self funding within two months'. The Plaintiff thereafter said: 'So when the capital is paid back to you, Wendy will get 40% shares.' I said: 'Your remuneration will be from Wendy's share. Whatever agreement you have between yourselves is for you'. The Plaintiff said: 'Yes. It will only take two months for the company to be in profit for a capital input of around $50,000.00 and from then on it will be self funding and be able to finance its own growth'. I said: 'When the company can afford it, I will get back the capital, and when the capital is fully re-paid, Wendy will get her 40%.'" 45 The roles to be performed by the plaintiff and the defendant were agreed. The defendant was to provide capital and to exploit business contacts he had which might be useful for the new business. The plaintiff was to provide management skills and expertise. However, after the company commenced carrying on business the defendant found that he was working seven days a week in the company's business. The defendant complained in his affidavit that the plaintiff worked only short hours, that sanitary bins cost more than the plaintiff had predicted, that waste disposal was a greater problem than the plaintiff had represented and that some of the staff who the plaintiff had recruited from Rentokil turned out to be unsuitable. 46 The defendant said that the payment of $5,000 made to Wendy Miller Enterprises in November 1990 was made as a result of a specific request by Wendy Miller (and not pursuant to any standing agreement). 47 On 11 December 1990 Ladycare Services was served with court proceedings by Rentokil. Until these proceedings were served, the defendant had not been aware of any restraint on the legal capacity of the plaintiff to work in Ladycare Services' business. The court proceedings brought by Rentokil were not ultimately disposed of until November 1991, when they were settled. In April 1991 the managing director of Rentokil wrote a letter to the defendant, stating an intention then held by Rentokil to proceed with an action for damages against the plaintiff and calling for a return of Rentokil customer lists and printed material. 48 In his affidavit the defendant gave evidence about the taking by the plaintiff of the company records and of the cheques. On the afternoon of 25 June 1991 the defendant was out of his office. The following day he was informed by an employee that all the company's records had disappeared. The defendant ascertained that the company's records were indeed missing and that cheques in favour of the company which had come in the previous day's mail were also missing. The defendant telephoned the plaintiff and demanded that the records and the cheques be returned. On the afternoon of 27 June, at a time when the defendant was not present, the records were returned. The cheques were not returned. The defendant ascertained from banking records that on 27 June three cheques in favour of the company totalling $7,372 had been paid into the company's bank account by the plaintiff and that the plaintiff had drawn a cheque for $4,000 on the company's bank account payable to himself. Later the same day the plaintiff telephoned the defendant. The plaintiff said, "I'm through with your company". The defendant said, "Good. I don't want to see you around here ever again". However, the following day it was agreed that Wendy Miller would continue to work at the company with responsibility for sales. 49 On 29 July 1991 the defendant received two letter from Wendy Miller. It is necessary to set out both letters in full. The first letter was in the following terms:- "Dear Jimmy, Following our telephone conversation this morning please find herewith the points I believe we should agree on if we are to continue the business of Lady Care Services. However because of the circumstances I think the best solution would be to sell the business at a price that will ensure you receive back your initial investment into the business. At this stage we have received two offers for the business that may come within the figure required to do that. You will also be aware that I can only negotiate 40% of the business with interested parties. However we are prepared if necessary to make up your loan account from this 40% to ensure my family does not have to carry on with the heartache, poor health and financial difficulties that we have endured and which we did not suffer from prior to being enticed into the business. I personally do not wish to carry on in this vain. (sic) David and I are both now gainfully employed therefore please do not worry about that aspect. To refresh your memory and I quote your statement 'I will finance the business for 12 months only to get it up and running'. 'I am only doing this for you Wendy' is the reason we agreed to your having 60% of the business. Jimmy please let's do something for each other now by ending this current fiasco, or if we have to continue to run it in a true and ethical business fashion, as it should have been done right from the start. I believe the following points will assist us in doing that and I hope they meet with your approval. On receipt of this letter you can telephone me at home today to arrange a time to settle this matter or alternatively you can arrange for your solicitor to contact our solicitor. Regards Wendy. P.S. I have taken the liberty of sending a copy of this to each of our solicitors as we cannot ask them to act on our behalf unless they are aware of our intentions." The other letter was in the following terms:- "Att: Jim Shea Without Prejudice From: Wendy Miller Re: Lady Care Services Date: 29 July 1991 Following our telephone conversation this morning please find below recommendations to be agreed on should we continue with the business of Lady Care Services:- 1. Shares to be assigned as agreed, to Wendy Miller, equal to 40% of the business. 2. Management fee of $5,000.00 per month to be paid to Wendy Miller, as agreed on by both parties prior to commencement of the business. 3. Interest on loan account to be charged at 14% and not at 17% as interest was not discussed at any time prior or during commencement of business, this is why we agreed for you to have 60% of the business as upon with taking the risk. 4. $1,000.00 per month lease on Mercedes owned by Jim Shea to cease, as this was not discussed or agreed on prior to commencement of business. This vehicle is not required as other company vehicles are available. 5. Rent of premises was not discussed or agreed on prior to commencement of business, we offer $1,000.00 per month for rent should this not be acceptable LCS should move to premises that are cheaper. 6. All fuel accounts including Jim Shea's to come from business LCS and not from the loan account as has been the case. 7. All company cheques to have signatures of Jim Shea and Wendy Miller (both are required). 8. We need where necessary 30 days line of credit to be arranged with suppliers. 9. All correspondence to be seen by both parties and signed and such. 10. The two cars being paid by Walto Pty Limited to be sold as they are not required. Should they retained they are to be paid by LCS and not through the loan account. 11. A copy of all claims of the loan account to be forwarded in detail to either Wendy Miller or her solicitor Mr Nicholas Eddy, and amount of the loan account to be agreed. 12. If both parties (Jim Shea and Wendy Miller) agree to the above points in the agreement, I would recommend we commence this agreement back to 1 July 1991." 50 On 15 August 1991 the defendant received a telephone call from Wendy Miller. His account of this conversation was as follows:- Wendy Miller said:- "I don't want to have any further upsets in the Family. I do want to be friends with you. To do this we should separate and not have anything further to do with the company. Will you give me $25,000.00 and David and I will cease to have anything to do with the company'. I said: 'Yes'. We made an appointment to meet with David at a Coffee shop in Meagher Street, Chippendale at approximately 3.00 pm. 51 Following the telephone call from his sister the defendant instructed his solicitors to prepare a deed of release. He also contacted Colin McGonigal and asked him to come to the coffee shop as an independent witness. At the meeting at the coffee shop the deed of release prepared by the defendant's solicitor was signed. Mr McGonigal as a witness initialled each page. The deed of release was in the following terms:- "THIS DEED OF RELEASE is made the 16th day of August 1991 BETWEEN: LADY CARE SERVICES PTY LIMITED A.C.N of 137 Regent Street Chippendale in the State of New South Wales ('the Company') of the one part AND: JAMES FREDERICK SHEA of 137 Regent Street Chippendale in the said State ('Shea') of the second part AND: DAVID MILLER of 6B Bate Avenue Allambie in the said State of the third part AND: WENDY MILLER of 6B Bate Avenue Allambie in the said State of the fourth part WHEREAS A. The Company is in the business of providing and servicing Sanitary Napkin Bins and Air Fresheners ('the Business'). B. Shea is a Director of the company and the Managing Director of the Company and in that capacity is in charge of the day to day running of the Business. C. Wendy Miller consulted to the Company and has from time to time asserted a claim for ownership of shares in the Company. D. David Miller is possessed of certain knowledge of the Business and has from time to time discussed with Shea and the Company the method of conducting the Business and is aware of some facets of the running of the Business. E. The parties to this Deed have agreed to settle all disputes between them on the basis of the payment and releases and covenants hereinafter contained. WITNESSES that in consideration of the sum of twenty five thousand dollars ($25,000.00) paid by the Company to David Miller and Wendy Miller jointly and in consideration of the covenants and release in this Deed - 1. David Miller and Wendy Miller hereby forever release the Company and Shea from all claims actions rights conditions and the like which David Miller and/or Wendy Miller may have against the Company and/or Shea. 2. For a period of two (2) years from the date of this Deed and within the State of New South Wales David Miller will not either directly or indirectly alone or in partnership or in the employment of any person firm or corporation compete for the custom or business of any person firm or corporation who is at the date hereof a customer or client of the Company or Shea in connection with the Business. 3. For a period of (2) years from the date of this Deed and within the State of New South Wales David Miller will not either directly or indirectly alone or in partnership or in the employment of any person firm or corporation compete for the custom or business of any person firm or corporation in connection with the Business conducted by the Company." 52 In his affidavit the defendant said he "observed that all the parties appeared…to be at ease". After the signing of the document the defendant, the plaintiff and Wendy Miller went to the Gladstone Hotel at Chippendale and had a couple of drinks. 53 The defendant asserted that in August 1991 Ladycare Services was operating at a loss. The defendant saw himself as having two options, either to sell the business or to attempt to turn the business around. The defendant decided to "rebuild" Ladycare Services. The defendant changed the method of manufacturing sanitary bins used by the company. He applied himself to familiarising himself with new techniques and technology in the industry. He introduced a computerised operation system. He expanded the range of products Ladycare Services provided. He made a number of innovations in the business, including introducing an air freshener with a light sensor and a special type of washing machine for improving the washing of sanitary bins. Most of the current clients of the business had been introduced to the business by himself or by the current sales staff. The company now has a staff of nineteen or thereabouts. 54 In various parts of his affidavit the defendant denied that he had had conversations with the plaintiff in the terms alleged by the plaintiff in his affidavit. He also denied that he had ever agreed to pay $5,000 per month for the first twelve months the company was operating or for any period, that he had told the plaintiff that the plaintiff could make alterations to a document handed to the plaintiff and that the altered document would constitute the partnership agreement between them. The defendant said that he had never seen the alleged letter of 11 September 1990 (before a copy of it appeared as an annexure to the plaintiff's affidavit). The defendant said that in response to specific requests from Wendy Miller he had between 2 November 1990 and 16 August 1991 made payments to Wendy Miller totalling $53,769.14. These payments were as follows:-