New South Wales Supreme Court CITATION : Terry Donald Hill v David Anthony James & Ors [2004] NSWSC 55 HEARING DATE(S) : 3,4,5,6,10,11,12,13 & 25 November 2003, 5 & 12 February 2004 JUDGMENT DATE : 20 February 2004 JURISDICTION: Equity Division Commercial List JUDGMENT OF : Bergin J DECISION : See paragraphs 287 - 289 CATCHWORDS : [Commercial Contracts]- identification of terms -contract in which defendant, through a corporate vehicle, exchanged contracts for purchase of certain assets (including the wine business) from the liquidator to be owned by the plaintiff, via a shareholding in the corporate vehicle, if the plaintiff able to fund the settlement- obligation on the defendant to provide contract with liquidator to the plaintiff for his approval/whether the plaintiff required to pay purchase price that the defendant paid the liquidator or some other amount [Breach] -falsification of documents provided to the plaintiff for his approval- requiring the plaintiff to pay higher price for purchase than the defendant paid the liquidator for the wine business - [Damages] - whether the plaintiff suffered damage by reason of breaches - whether the plaintiff had the capacity to settle the contract in any event - [Misleading and deceptive conduct] - representation that document provided for approval by the plaintiff contained the true terms of the contract between the liquidator and the defendant - reliance -payment of money based on amounts in false documents - [Agency/Fiduciary] - whether fiduciary obligations imposed by use of the words in the contract that the defendant would purchase the wine business "on behalf of" the plaintiff - [Tort] - deceit - elements- whether exemplary damages available -whether an award of exemplary damages should be made. A.B. & Ors v South West Water Services Ltd [1993] QB 507 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Briginshaw v Briginshaw (1938) 60 CLR 336 Broome Cassell & Co. Ltd [1972] AC 1027 Coghlan v Pyoanee Pty Ltd [2003] QdR 636 Gray v Motor Accident Commission (1998) 196 CLR 1 Hospital Products Limited v United States Surgical Corporation & Ors (1984) 156 CLR 41 Jones v Dunkel (1959) 101 CLR 298 Kuddus v Chief Constable of Leicestershire Constabulary [2001] 2 WLR 1789 CASES CITED : Lamb v Cotogno (1987) 164 CLR 1 Mehmet v Benson (1965) 113 CLR 295 Metall und Rohstoff A.G. v ACLI Metals (London) Ltd [1984] 1 Lloyd's Rep 598 Musca & Ors v Astle Corporation Pty Ltd & Anor (1988) 80 ALR 251 New Zealand and Australian Land Co. v Watson (1881) 7 QBD 374 Romanos v Pentagold Investments Pty Ltd [2003] HCA 58, (2003) 201 ALR 399 Rookes v Barnard [1964] AC 1129 Tanwar Enterprises Pty Ltd v Joseph Cauchi & Ors [2003] HCA 57, (2003) 201 ALR 359 Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 Terry Donald Hill (Plaintiff) David Anthony James (First Defendant) PARTIES : Bearing Traders Pty Ltd (Second Defendant) David George Brooks (Third Defendant) Liquor National Pty Ltd (Fourth Defendant) Wine National Pty Ltd (Fifth Defendant) FILE NUMBER(S) : SC 50149/02 COUNSEL : MR Aldridge SC and RD Glasson (Plaintiff) CR Newlinds SC and DA Allen (Defendants) SOLICITORS : Eddy & Moloney Solicitors (Plaintiff) Catalyst Partners (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST BERGIN J 20 FEBRUARY 2004 50149/02 TERRY DONALD HILL v DAVID ANTHONY JAMES & ORS JUDGMENT 1 This litigation arises out of the liquidation of the Hill Wine Group of companies (the Group) in 2002 and the attempted purchase back of some of the assets of the Group by the plaintiff, Terry Donald Hill in conjunction with the first defendant, David Anthony James. The evidence establishes a level of commercial skulduggery that each of these vignerons pursued as if it were their normal or usual way of doing business. Unfortunately a member of the legal profession, the third defendant, was also involved in this trickery. 2 This matter was heard on 3, 4, 5, 6, 10, 11, 12 and 13 November 2003 when Mr M Aldridge SC leading Mr R Glasson appeared for the plaintiff and Mr CRC Newlinds SC leading Mr D Allen appeared for all defendants. A matter relating to the issue of the terms of the contract between the plaintiff and the first defendant arose after I reserved my judgment and the parties were invited to make further submissions on that matter. Those submissions were made on 5 and 12 February 2004. Background 3 In 1984 the plaintiff purchased a liquor distribution business and began trading as Blue Hills Liquor Distributors Pty. Limited (Blue Hills). Blue Hills expanded its business operations and acted as exclusive distributor for a number of wine companies including Marienberg in South Australia. In 1990 the plaintiff became a director and shareholder of Marienberg Wine Company Ltd (Marienberg) which acquired the Marienberg wines brand intellectual property. In 1991 the plaintiff contracted with the wine maker, Grant Burge, in South Australia to make the Marienberg wines. 4 Between 1992 and 1998 another company of which the plaintiff was a director and shareholder, Lymall Pty Limited (Lymall) traded as Hill International Wines operating a fine wine distribution business selling McGuigan Wines throughout Australia. In 1994 another company within the Group, Saidwick Pty Limited (Saidwick) purchased the Thomas Fernhill Wines and changed the name to Fernhill Estate. In 1996 another company in the Group, Basedow Wines Pty Limited (Basedow) purchased Basedow Wines which had been established in 1896 by Johann Basedow and was later owned by Grant Burge. In October 1998 Hill Wine Group Vineyards Pty Limited (HWG Vineyard) acting as trustee for the Hill Family Trust No. 2 purchased the Douglas Gully Vineyard in McLaren Vale, South Australia. 5 Prior to 11 February 2002 the Group consisted of a number of companies that conducted what has been referred to as the "wine business", the "distribution business" and "the Fernhill Winery" situated in McLaren Flat, South Australia. The wine business was a grape growing and grape production business carried on by Marienberg and Basedow and conducted primarily in McLaren Vale and Tannunda, South Australia. It included the Limeburners Restaurant. This distribution business consisted of the wholesaling of liquor and exclusive agency distribution of wines and alcoholic beverages carried on by BHL Holdings Pty Limited (BHL) and Lymall. The Group also owned a number of residential properties in New South Wales and Queensland. 6 On 11 February 2002 George Georges and Peter McCluskey of Ferrier Hodgson were appointed as joint administrators of BHL, Lymall, HWG Logistics Pty Limited (HWG Logistics) and Docvin Pty Limited (Docvin). On the same day Mr McCluskey and Bruce Carter were appointed as joint administrators of Marienberg, HWG Vineyard, Basedow, Saidwick and another company in the Group, TD and RJ Hill Investments Corporation Pty Ltd. 7 The first defendant, David Anthony James is the sole director and shareholder of each of the second, fourth and fifth defendants, being Bearing Traders Pty Limited (Bearing Traders), Liquor National Pty Limited (Liquor National) and Wine National Pty Limited (Wine National). The third defendant, David George Brooks is a solicitor of Catalyst Partners and was the other defendants' solicitor at the relevant times. I shall refer to David Anthony James as "the defendant". 8 The defendant has had quite a deal of business experience since he purchased Bearing Traders in 1987. In 1990 he acquired a similar business in Queensland from liquidators and it was during this negotiation and transaction that he observed what he thought to be a preference of liquidators for prospective purchasers to bid for all of the assets of the company in liquidation. He noted that in this way a prospective purchaser might be able to negotiate a discount. 9 In December 1997 through a company, Sundara Pty Limited, the defendant acquired the Serenella Estate at Sandy Hollow in the Upper Hunter Valley, New South Wales. This consisted of a small vineyard, a large parcel of land and a small winery. The defendant said he was attracted to this acquisition because it "had all the elements of being an integrated wine manufacturer in that it could grow grapes, make the wine and bottle and label the wine". The defendant also gave evidence that the wine industry appealed to him because it had greater sales opportunities than his other businesses, particularly overseas. 10 In 1998 the defendant changed the name of the vineyard at Sandy Hollow to James Estate and began planting more grapes and increasing the production, bottling and labelling of wine. Late in 1998 the defendant launched the James Estate wine brand through James Estate Wines Pty Limited. In 2000 James Estate opened an office in San Luis Obispo in California, USA and the James Estate label is apparently sold in fourteen states throughout the USA to fine wine shops, wine clubs and a variety of small and large outlets. In 2002 James Estate Wines opened an office in London and sells wines in the United Kingdom and throughout the European Union. Defendant Registers an Interest 11 It was early in February 2002 that the defendant became aware that Blue Hills Liquor in Sydney had gone into administration. Shortly after this he noticed an advertisement in the Australian Financial Review seeking expressions of interest for the business of the Group. He registered his interest with Ferrier Hodgson and received an information memorandum. He also inspected a property at Newington in Sydney from which Blue Hills operated. The defendant then had discussions with the representatives from Ferrier Hodgson relating to the materials required for the due diligence process. He gave evidence that he discovered that the Group had attempted to refinance their debts with GE Capital. He had also dealt with GE Capital and had what he described as a good payment history with them and felt that any possible acquisition might be able to be funded by GE Capital. 12 Prior to February 2002 the defendant had been discussing with Ian Brierley of Access Corporation Pty Limited, the possibility of creating a wine bond for James Estate Wine. He had a meeting with Mr Brierley in early March 2002 when Mr Brierley informed him that he had been asked to assist the plaintiff to help to put finance together to buy the Group back. Mr Brierley asked the defendant whether he would be interested in meeting the plaintiff and seeing if there was any common ground. The defendant informed Mr Brierley that he would prefer not to be involved in ventures with others but that there would be no harm in having a meeting. Defendant Meets with the Plaintiff 13 In early March 2002 the defendant, Mr Brierley, Rick Hodgson, the Financial Controller for the defendant's Group of companies, Trent Hancock, an Accountant of Stockfords, the plaintiff and the plaintiff's solicitor Michael O'Neill of Nash, O'Neill Tomko, met at the offices of Stockfords Accountants in Sydney. The plaintiff provided some background of the Group and informed the meeting that he was looking to refinance the debt of the Group and seek equity investors to effectively buy the Group back. 14 The defendant also gave the meeting a general outline of James Estate Wines and its history. The plaintiff gave evidence that at this meeting the defendant said: James Estate has been operating out of the Upper Hunter in New South Wales since the late 1990's, and although we have a small domestic market for our product around the Newcastle and Northern Rivers area, with some minor sales in Brisbane and the ACT, the bulk of our wine is exported predominately to the USA, where we sell it to the supermarket outlets in some twelve or so states. I am interested in some of the divisions of the Hill Wine Group, particularly the broad range wholesaler, Blue Hills Liquor Distributors, and the agency company, Hill International Wines. I think that these divisions of the Hill Wine Group would compliment our current operations. My own view is that with the anticipated appreciation of our Aussie dollar, compared to the US dollar, my margins are going to get tighter and tighter in the USA supermarkets, meaning that I should aim to have substantially more sales into the Australian market. This is one of the reasons why I'm interested in Blue Hills and Hill International Wines. Liquidators appointed 15 The plaintiff with Trent Hancock and Michael O'Neill prepared a Deed of Company Arrangement Proposal that was forwarded to the administrators. On 15 April 2002 a meeting was held with the administrators in Melbourne, at which the plaintiff was advised that if he improved his proposal by an amount of approximately $3 million - $4 million the administrator would be recommending the Deed proposal to the National Australia Bank and to the creditors. Following the meeting with Ferrier Hodgson, the plaintiff increased the amount payable under the Deed from an aggregate of $21 million to an aggregate of $24.2 million. 16 On 22 April 2002 a meeting of creditors took place chaired by the administrator. Mr O'Neill addressed the meeting, summarising the Deed proposal and explaining to creditors the benefits of the proposal. The proposal failed and the administrators were appointed as liquidators of the companies in the Group of which they had been the administrators. Mr Georges advised Mr O'Neill that he intended to sell the Group's assets as a matter of urgency and that if the plaintiff wished to make an offer for any or all of the assets he should do so by 5:00pm on 24 April 2002. 17 Immediately after the meeting on 22 April 2002 the plaintiff had a discussion with the defendant and advised him that he would certainly be making an offer to the liquidators and asked him whether he was still interested in the distribution business. The defendant advised the plaintiff that he still had an interest and the plaintiff promised to get back to him within a short timeframe as the liquidator had given only forty-eight hours to submit an offer. 18 On 24 April 2002 the plaintiff attended a meeting with Mr O'Neill and Mr Brierley at which meeting they telephoned the defendant on a conference call. During this conversation Mr O'Neill advised the defendant that he and Mr Brierley had been working through the various options available to the plaintiff and that they were interested in having the defendant involved in taking on the distribution business. Mr Brierley advised that the Newington property, from which Blue Hills operated, may be able to be obtained for a good price as part of an overall package. The defendant said that he remained interested in the distribution business and would give consideration to joining with the plaintiff in any deal that might enable him to acquire that business for a good price. He said that he did not have any interest in the wine business or the wine brands. 19 Mr O'Neill advised the defendant that if he was going to be involved the plaintiff would be looking to him taking on the distribution business on an understanding that there would be some ongoing commercial arrangement between the wine business, to be owned by the plaintiff, and the distribution business, to be owned by the defendant. Mr O'Neill advised that he was happy to set those options out in writing on a confidential basis and send it to the defendant. He suggested that they should talk again if the defendant remained interested. Plaintiff seeks funding 20 Between late February and 24 April 2002 the plaintiff had been having discussions with Sigvald Wehrle, a person resident in Switzerland with whom he had been dealing for a number of years and who had acted as a consultant to the company that imported the Group's wines into Switzerland. Mr Wehrle had expressed an interest in an investment in the Australian wine industry, in particular, in Basedow, Marienberg and Fernhill Estate. Mr Wehrle was advised that the plaintiff was preparing a proposal for the Deed of Company Arrangement and in early April the plaintiff forwarded to Mr Wehrle a draft of the business plan of the Group. Mr Wehrle advised that he would review the information that was sent to him but that he expected to commit about "USD 5 to 7 million" (Ex. 1:181). 21 Although the plaintiff's evidence was that his preferred choice of equity investor was Mr Wehrle by reason of the amount of his proposed investment, he also had preliminary discussions with a business acquaintance, Wayne Adsett, an accountant in Auckland, New Zealand. Mr Adsett advised the plaintiff that he had engaged in "firm discussions" with a group of investors in New Zealand who would be interested in an equity investment in the proposed wine company, subject to due diligence. He advised that the equity investment would be up to a level of "AUD 4 million" (Ex. 1:120). After the liquidators were appointed the plaintiff advised Mr Wehrle of the outcome of the creditors' meeting and Mr Wehrle advised he still wished to be involved in a proposal. Chocmalt/Perbold Offer to Liquidators 22 The plaintiff, through Mr O'Neill, submitted an offer to the liquidators on 24 April 2002. That offer was made by nominee companies of which the plaintiff was a director, Chocmalt Pty Limited (Chocmalt) and Perbold Holdings Pty Limited (Perbold). Chocmalt offered to purchase the distribution business for $3 million and Perbold offered to purchase the wine business for $10.9 million. Offers were also made to purchase residential properties and the property at Newington. The offer was supported by letters of commitment from Mr Wehrle's group of companies for US$4 million, from PayNow Pty Limited (PayNow) offering finance of AU$4 million and from Custom Finance Group offering AU$2.5 million. 23 Negotiations commenced but broke down on 29 April 2002. On 1 May 2002 the plaintiff, Chocmalt and Perbold commenced proceedings against the liquidators in the Equity Division of this Court claiming that an agreement had been concluded (Ex. 1: 325-332). An application for interlocutory relief restraining the liquidators from treating with others, heard by Windeyer J on 2 May 2002, was unsuccessful, however the plaintiff instructed Mr O'Neill to proceed to a final hearing as soon as possible. 24 On 3 May 2002 Mr O'Neill wrote by facsimile to the liquidators' solicitors, Clayton Utz, in the following terms: We are instructed to write to you and give your client Liquidators notice that, following a series of briefings with Mr Hill's advisers, the writer is meeting this afternoon with the managing director of a substantial privately owned Australian company (which conducts its banking operations with the NAB), with a view to that company making an unconditional offer to your client Liquidators to acquire all of the assets of the Hill Wine Group (with the possible exception of the residential properties). The precise amount of the purchase price is yet to be determined, however, discussions to date have proceeded on the basis that the purchase price shall be equivalent to, or in the region of, the offers made to the Liquidators in our facsimile transmission dated 24 April 2002. The parties are likely to be working this afternoon and over the weekend, with a view to a written offer being made to the Liquidators by not later than 11.00 am on Monday 6 May 2002. In these circumstances, we urge the Liquidators to delay the execution of contracts for sale of any of the assets of the Hill Wine Group pending their consideration of the foreshadowed offer. (Ex. 1: 262) 25 It is apparent that Clayton Utz responded to Mr O'Neill's fax on 3 May 2002, although that document does not appear to be in evidence. On 6 May 2002 Mr O'Neill wrote once again to the Liquidators by facsimile in the following terms: We refer to your fax dated 3 May 2002, timed at 6.05 pm that day, which was not seen by the writer until he arrived at the office at about 9.45 am this morning, following a meeting with Mr Mark Newham of B H Newham Pty Limited, the representative of the Australian company referred to in our fax to you dated 3 May 2002. We note our fax dated 3 May 2002 was sent at the invitation of your client's Counsel, the morning after the hearing of our clients' application. We further note your Counsel's concession that existing offers were less than the offers by Chocmalt and Perbold, and therefore less than the amount of the offer currently being formulated. This Australian company will decide today whether to submit its offer. Any offer will therefore be submitted by close of business today. We trust your client has taken care not to enter into any binding agreement for the sale of Hill Wine Group assets, pending execution of formal contracts. (Ex. 1: 278) 26 Clayton Utz responded to Mr O'Neill's facsimile by a further facsimile of 6 May 2002 which stated: We refer to your facsimile transmission received this afternoon. The writer has spoken with Mr Newlinds who denies extending any "invitation" to either you or your client regarding this matter. Mr Newlinds has advised the writer that he did say to you words to the effect of "if I was you, mate, I would put in an unconditional offer". That comment was made without instructions from either this office or our client and, in any event, can hardly be construed as an "invitation". We repeat our instructions in our facsimile transmission to you of Friday last, that our client is already committed to the sale of the business assets in question, to other purchasers. Accordingly, there is no need for any offer to be submitted either by close of business today or at any future time. (Ex. 1: 276) 27 The plaintiff was locked in litigation with the liquidators and there appeared to be some tension between the Group's bankers, the National Australia Bank, Ferriers and the plaintiff, at least from the plaintiff's perspective. Mr Brierley suggested to the plaintiff that in the circumstances it may be helpful if the defendant would consider "fronting the deal" for him. Meeting of 6 May 2002 28 On 6 May 2002 the plaintiff attended a meeting held in the boardroom of Nash O'Neill Tomko. Also present were Mr Brierley, Mr O'Neill, the defendant and an employee from Bearing Traders. Mr O'Neill advised the defendant of recent developments, including the rejection of Chocmalt's offer made to the liquidators and the subsequent commencement of legal proceedings against the liquidators. The versions given by the plaintiff and the defendant in respect of the discussions of this meeting differ slightly, but the defendant gave evidence that Mr O'Neill said words to the following effect: Now as you can probably appreciate from what has happened, there would be difficulty in Terry being a party to any joint bid because I suspect that the NAB won't want to be involved in any deal with Terry. However, if you were to acquire all the assets you could then transfer the wine business to Terry via a back to back arrangement. As a sweetener, Terry can pay the deposit for all the assets so you are affectively getting gifted the deposit for the non wine business assets. This will compensate you for the risk of Terry not completing the transaction and you having to complete the acquisition of the wine business as well. 29 There does not seem to be any issue that at this meeting the defendant was informed that the plaintiff believed that the distribution business would be good value at about $2 million and that the wine business would be good value at about $12 million. The defendant gave affidavit evidence that he informed the meeting that he proposed putting in a bid of $14 million if the plaintiff was going to pay $12 million for the wine business. He said that he would do that anyway "just to test the waters" because if there was not much interest from Ferriers at that price he did not think there would be any point in continuing to consider any arrangement with the plaintiff. 30 The defendant was informed of Mr Wehrle's interest and wanted to know how reliable he was. Mr O'Neill informed the defendant that from the telephone calls he had with Mr Wehrle he seemed very well connected. Mr O'Neill also advised the defendant that they would have to reach a formal agreement to ensure that the company purchasing the assets, in particular the wine business, could be easily transferred to the plaintiff. The defendant agreed that in principle it sounded "okay", but he would have to talk to his advisers. 31 On 6 May 2002 Mr O'Neill, on the plaintiff's instructions, wrote to the defendant in the following terms: The deal is as follows: 1. David James makes an offer to the liquidator to acquire the wine business ($12 million) and the distribution business ($2 million) for $14 million. 2. Terry Hill to contract with David James to acquire the wine business at the same price from David James, via "back to back" contracts, to be completed contemporaneously with the sale by liquidators to David James. 3. Terry Hill will pay the deposit on the wine business and the distribution business of $1.4 million. If he does not complete the "back to back" deal, Terry Hill will forfeit this deposit, meaning that David James will be left with the wine business for $10.6 million. 4. Each of Terry Hill and David James takes a 20% interest in each others' businesses. 5. Terry Hill will need administrative support i.e. use of part of Sydney premises (office and warehouse) and sharing admin, credit and IT. 6. Terry Hill proposes Luke Messer as CFO or COO of new businesses, subject to David James' thoughts. (Ex. 1: 264-265) 32 On the same day, Mr O'Neill forwarded to the defendant a copy of the offer that had been made by Chocmalt/Perbold to the liquidators on 24 April 2002. In that letter Mr O'Neill advised that the offer was to "assist the defendant in formulating the offer for the wine and distribution businesses" (Ex. 1: 267). The Defendant makes an offer 33 By letter dated 6 May 2002 the defendant, on behalf of the Bearing Traders Group, wrote to the liquidators in terms which included the following: Following on from our discussion yesterday we would like to propose an alternate offer in case your current negotiations are not proceeding as planned. The Bearing Traders Group of companies would like to put forward a proposal to acquire all the assets that are in the "Hill Group Companies" on a walk in/walk out basis. We intend to continue to operate the business in its current form benefiting current staff, suppliers and customers. The Assets of the group will be purchased by Companies within our group or new entities insuring (sic) a clean start for the new business. (Ex.1 :269) 34 The offer included assumptions as to the approximate level of wine stocks based on previous figures supplied by the liquidators. It also included proposed purchase of real estate assets including the residential properties in New South Wales and Queensland, the Douglas Valley and Fernhill vineyards, the Marienberg cellar door and Limeburners Restaurant and a part-share in the Schoenthal Vineyard. The offer was an inclusive offer for $14 million for all Group assets including any licence fees. A deposit of 10% at $1.4 million was offered to be paid when copies of sale contracts were received and it was assumed the deposit would be non-refundable. The defendant advised Mr O'Neill that he was making the offer to the liquidators in the amount of $14 million for the wine business and the distribution business. Further offers to the Liquidators 35 On 7 May 2002 the plaintiff met with Mr O'Neill and Mr Brierley and had a further conference telephone call with the defendant. The defendant confirmed that he had made the offer to the liquidators who had requested further information and then said: "at least he has not said no". Mr O'Neill said that it sounded encouraging and that, "we should think how we can formalise an agreement between you and Terry". Mr O'Neill informed the defendant that he would give it some thought and get back to him. The defendant said that it sounded "okay" and that Mr O'Neill should fax the agreement to him and that he would have a look at it. 36 There was a further telephone conversation on 7 May 2002 between Mr O'Neill and the defendant. In paragraph 75 of his affidavit the defendant claimed that Mr O'Neill asked him for a copy of his "bid" and that he said to Mr O'Neill: I would rather keep any bid between George and me. Don't take it the wrong way but I would rather not have my bid circulated around since I am concerned about Terry telling everyone that he is going to buy the company back. The last thing I would want is for Terry to destroy my credibility with the liquidator by turning up with a copy of my bid in his hand. 37 The defendant claimed that Mr O'Neill replied that was "fair enough" and that he never again asked him for a copy of the bid. 38 On 8 May 2002 there was a further meeting between the plaintiff, Mr O'Neill and Mr Brierley at which a conference telephone call was made to the defendant. There was discussion about funding in which it appears the need to have funding in place if agreement was reached with the liquidators was mentioned. On the same day the defendant sent an offer of $11.8 million to the liquidators as an inclusive offer for all Group assets. The defendant gave evidence that after this offer was submitted the liquidators advised him that the Douglas Valley and Fernhill vineyards were no longer for sale. The defendant then had a discussion with the plaintiff in which the plaintiff said that he really wanted to keep the Douglas Valley and Fernhill vineyards. The defendant's evidence was that he advised the plaintiff that the liquidator had told him that it was "off the table and that's it". The plaintiff then advised him that if those vineyards were not available he would only be prepared to pay $10.3 million. 39 On 9 May 2002 the defendant made a further offer to the liquidators in the amount of $10.3 million and a proposal for a side agreement in relation to the 10% share in the Schoenthal vineyard for $100,000 together with confirmation that the amount of $1.5 million for the trademark and brand name of Basedow wines was included in the $10.3 million offer. The defendant also confirmed that a deposit of $1.03 million would be paid and the contracts would be settled in 4 weeks. He requested heads of agreement by 5.00pm on 10 May (Ex. 1: 303-307). 40 The liquidators responded to the defendant's further offer of 9 May 2002 advising him that "at this stage" the offer had not been accepted and that they wanted to continue discussions with him and others. Some concern was expressed about the defendant's capacity to fund the offer and/or settle it in four weeks and it was suggested that a 10% deposit "be made available as soon as possible to demonstrate your commitment" (Ex. 1: 321 - 322). 41 A further conference call conversation took place between Mr O'Neill and the defendant on 9 May 2002. Although the versions of what was said differ, the defendant's affidavit evidence was that Mr O'Neill said that the way in which the transaction was to be structured would involve the plaintiff acquiring shares in the company that was purchasing the wine business. Mr O'Neill advised the defendant that he would send him a document setting the transaction out. Letter of 9 May 2002 42 On 9 May 2002 Mr O'Neill faxed to the defendant a letter bearing that date, signed by him with provision at the foot of the last page for the signature of the plaintiff and the defendant (the 9 May letter). It was in the following terms: The purpose of this letter is to record, in summary form, the arrangements reached between you and Terry Hill, concerning the proposed acquisition of the Wine Business and the Distribution Business of the HWG. To better understand the arrangement, I believe it would be helpful to set out some of the relevant background facts, namely: 1. Terry Hill wishes to acquire the Wine Business assets from the Liquidators of HWG, however, for reasons unknown, the Liquidators refuse to deal with Terry Hill (we suspect the NAB's view has a lot to do with the Liquidators' attitude); 2. You wish to acquire the Distribution Business of the HWG, but not the Wine Business of the HWG. 3. The Liquidators' preferred option is to sell the Distribution Business, together with the Wine Business (or substantial portions of it), as a package, to the highest bidder, subject to the Liquidators being satisfied as to the financial capacity of the highest bidder to complete the transaction. 4. Terry Hill, in these circumstances, has proposed the arrangement set out below, with a view to each of you achieving your respective business purposes, namely, for you to acquire the Distribution Business and Terry Hill to acquire the Wine Business. 5. You have each determined that the means to achieve your respective aims is for you alone to proceed to negotiate and conclude a deal for the acquisition of the Wine Business and the Distribution Business, on the understanding that the Wine Business is to be bought by you on behalf of Terry Hill. The arrangement between you and Terry Hill shall be as follows:- (a) You shall enter into contracts with the Liquidators of the HWG as follows: (i) Newco No. 1 shall acquire the Distribution Business of the HWG (more particularly described in our faxed offer to the Liquidators dated 24 April 2002) for a total purchase price of $2 million; and (ii) Newco No. 2 shall acquire the Wine Business of the HWG (as more particularly described in the offer of 24 April 2002, however, excluding the Douglas Gully property and the Fernhill Winery/brand) for a total purchase price of $10.3 million. (b) You or your nominee shall be the legal and beneficial owner of all of the issued capital in Newco No. 1. You or your nominees shall be directors of Newco No. 1. (c) The legal and beneficial ownership of the whole of the issued capital in Newco No. 2 shall be held by Newco No. 3. The legal and beneficial ownership of the whole of the issued capital in Newco No. 3 shall be held by Terry Hill or his nominee. The reason for this corporate structure is to minimise stamp duty, as explained below. (d) The Liquidators require a 10% deposit ($1.23 million) to be paid by you at the time of entering into contracts for the acquisition of the Wine Business and the Distribution Business of the HWG. (e) Terry Hill shall pay the deposit of $1.23 million, on behalf of Newco No. 1 and Newco No. 2. These monies will be deposited into your solicitor's trust account, to enable the deposit of $1.23 million to be paid by you at the time of execution of the Asset Sale Contracts. (f) You shall provide Terry Hill with copies of all draft Asset Sale Contracts relating to the acquisition by Newco No. 2 of the Wine Business, for approval by Terry Hill. (g) Newco No. 1 and Newco No. 2 shall thereafter enter into and exchange Asset Sale Contracts for the Distribution Business and the Wine Business respectively. (h) Newco No. 1 shall thereafter complete the Asset Sale Contract for the Distribution Business. You shall provide the balance of the purchase price, namely $1.8 million. Whilst Terry Hill shall have paid the deposit of $200,000 at the time of execution of the Distribution Business Contract, Terry Hill shall not require this deposit to be repaid, and instead seeks from you the transfer of certain surplus plant and equipment (specifically the leased motor vehicles used by his sons Chris and Luke Messer) and a favourable arrangement with you for ongoing administrative support of the Wine Business by the Distribution Business in relation to the balance of the deposit monies paid by Terry Hill in respect of the Distribution Business. (i) Terry Hill shall cause to be paid, on behalf of Newco No. 2, the balance of the purchase price payable by Newco No. 2 for the acquisition of the Wine Business ($9.27 million). Terry Hill shall provide bank cheque or cheques in this amount to you immediately prior to completion by Newco No. 2 of the Asset Sale Contract for the Wine Business, so as to enable Newco No. 2 to complete the acquisition of the Wine Business. (j) Following completion by Newco No. 2 of the acquisition of the Wine Business, you or your nominees shall forthwith resign as directors of Newco No. 2 and Newco No. 3. (k) In the (unlikely) event that Terry Hill or nominee fails to provide the amount of $9.27 million to enable Newco No. 2 to complete the acquisition of the Wine Business, then:- (i) Terry Hill or nominee shall forthwith transfer to you or your nominee the legal and beneficial ownership of the shares in Newco No. 3. Terry Hill, at the time of exchange of contracts, shall execute the share transfers to be held by you in escrow. (ii) You or your nominee shall not be required to resign as directors of Newco No. 3; (iii) Terry Hill shall have no claim against Newco No. 1 for the return or refund of the deposit of $200,000 paid by Terry Hill at the time of execution of the Heads of Agreement document; (iv) Terry Hill shall have no claim against you or Newco No. 2 for the return or refund of the deposit paid by Terry Hill of $1.03 million paid under the Heads of Agreement document. (l) The terms of this Agreement shall remain confidential between the parties. In particular, you and your nominee shall not disclose to the Liquidators of HWG the details of this Agreement, including the identity of the Terry Hill nominee holding the legal and beneficial ownership of all of the issued capital in Newco No. 3. (m) The purpose of incorporating Newco No. 3 and it owning all of the issued capital in Newco No. 2 is to facilitate the transfer of the Wine Business to Terry Hill or nominee, and, at the same time, avoid the need for the Terry Hill nominee to pay stamp duty on the transfer of the business assets (payable by Newco No. 2 on completion) as well as the subsequent stamp duty payable by Newco No. 2 to Terry Hill or nominee of either the shares in Newco No. 2 or the sale of the business assets in Newco No. 2 to Terry Hill. (n) Following the completion of the acquisition by Newco No. 1 of the Distribution Business and the acquisition by Newco No. 2 of the Wine Business (with Terry Hill's funds), the Wine Business and the Distribution Business shall enter into commercial arrangements for the mutual benefit of the respective businesses, upon terms to be agreed between you and Terry Hill. Obviously, this will involve Terry Hill's Wine Business distributing its product through your Distribution Business supporting Terry Hill's brands. Terry Hill will also use his contacts and influences with other winery businesses to support your Distribution Business. (o) Terry Hill's Wine Business, as previously discussed, shall require the ongoing administrative support of the Distribution Business, namely, the use of some of the business premises of the distribution premises (office and warehouse) and the sharing of administrative facilities. (p) The parties acknowledge that these terms are a summary of the arrangement to be entered into between each other and that the parties must at all times act in good faith to ensure the outcome is achieved, namely, Terry Hill or nominee owning and controlling the Wine Business and David James or nominee owning or controlling the Distribution Business. I trust the above summary accurately sets out the arrangement between the parties. If so, each of Terry Hill and David James should sign at the foot of this letter, confirming this agreement. (Ex. 1: 308-312) Another bidder 43 It is apparent that the defendant formed the belief that the liquidators were also treating with Mr Michael Hope of Hope Estate in respect of the sale of the assets of the Group. On 10 May 2002 the plaintiff and Mr O'Neill had a conference call with the defendant in which the defendant advised them that things were "looking ok with George Georges" but that he kept talking about other offers. The defendant warned that if the deposit monies were not available when the liquidator wanted to exchange "we might lose the deal to the next guy and I think that is Michael Hope". 44 The plaintiff's affidavit evidence was that the defendant asked Mr O'Neill if there was any way that he could write a "legal letter to slow things up with Michael Hope". Mr O'Neill responded: "Terry can ask me to write to Michael Hope to tell him that we have taken action against Georges & Co outlining the reasons for the proceedings and advising him that he continues at his own risk. I will have a crack at writing a letter". The defendant then said: "That's good, it will make Hope ask some questions and hopefully will give me a bit more time". 45 Mr O'Neill's affidavit evidence was that his recollection of the conversation was consistent with the plaintiff's recollection but in addition he recalled that the defendant had telephoned him earlier that day or the previous afternoon "with the suggestion that a legal letter be sent to Michael Hope". On 10 May 2002 Mr O'Neill wrote to Mr Hope advising him that on 1 May 2002 Chocmalt, Perbold and the plaintiff had commenced proceedings in the Supreme Court against the liquidators. He enclosed the pleadings and advised that his clients would be seeking declarations and orders at a final hearing including a declaration that a binding agreement existed between his clients and the liquidators for the sale of the distribution business and the wine business (Ex 1: 323-333). 46 The defendant's affidavit evidence was that on 10 May in a telephone call with the plaintiff he informed him that he had spoken with the liquidator who had informed him that the bid was "up there". There was discussion about the need to have the deposit monies organised and the defendant emphasised that he did not want his reputation tarnished because of any delays in obtaining the deposit. He claimed he did not recall any discussion about sending Mr Hope "a threatening letter regarding the Hill proceedings against the liquidators". Liquidator likes the defendant's bid 47 Mr O'Neill gave affidavit evidence that during a meeting later on 10 May 2002 in his boardroom with the plaintiff and Mr Brierley, at which the defendant was present for approximately half an hour, the defendant advised: "I think it is good news. Whilst nothing is certain in this world, I think we have the deal. George Georges is sending me a contract, the lawyers are working on it, and I will let you have a copy". The defendant advised that the liquidator wanted to "do the deal in a big hurry" and that "we have to get this deposit organised". Mr O'Neill's evidence was that after Mr Brierley said that the defendant should not worry because the deposit was organised, the defendant said: Good, but I have got to tell you I am getting nervous. As I have already mentioned, the deposit is one thing, but I do not want to be left with the whole deal, and coming up with a lot, it's a lot of money, we are talking $10 million odd, just for the Wine Business. Have we heard anything from the Swiss investor? 48 There was then some discussion about the proposed trip to Zurich to meet with Mr Wehrle after which Mr O'Neill advised the defendant that he had sent a letter to Mr Hope "as we discussed earlier today". He also advised that the letter "reads well and is a letter that ought to have been sent on behalf of Terry in any event" and that "it does no more than protect Terry's legal rights in the event that he comes first in the case against the liquidators". Mr O'Neill's evidence is that the defendant then said: "Well, hopefully, it causes Hope to have second thoughts about the deal. I reckon his lawyers must be talking to the liquidators by now about it all, wondering what the hell Terry's case is all about". Defendant says 9 May letter is "the deal" 49 Mr O'Neill claimed that in the same meeting on 10 May 2002 the following exchange then took place: O'Neill: You are probably right, but we won't really know. In the meantime as far as I am concerned, it's all systems go. Did you get my 9 May 2002 fax setting out our deal and do you have any problems with it? Defendant: Yes I got the fax, and it looks okay to me. As far as I am concerned that is the deal. My major worry is whether or not Terry can come up with the money needed for the Wine Business, otherwise there are big problems. O'Neill: We are on track with our finance, but I agree, much depends upon our friend in Switzerland, and we will report back to you as soon as we have met with the guy. 50 Although the defendant does not directly deny that he said that as far as he was concerned the 9 May letter was the "deal ", his evidence is otherwise suggestive of such a position. That includes evidence referred to later of him informing Mr Brierley that he had not had a chance to look at what Mr O'Neill had sent him and of the discussion he claimed to have had with his solicitor, Mr Brooks, the third defendant. 51 The defendant's affidavit evidence is that the liquidator rang him on 10 May 2002 and advised, "we like your bid" and informed him that he was going to e-mail a contract to him. The defendant claimed that later that day or on 11 May he rang Mr O'Neill and advised him that "my bid is the frontrunner at the moment". He also claimed that he informed Mr O'Neill that the liquidator was sending through a contract and that: "I will forward that contract and your proposed agreement between me and Terry to my lawyer for him to have a look at". 52 At some stage, either on 10 or 11 May 2002 the defendant advised the plaintiff and/or Mr O'Neill that he would like to have someone represent him on the trip to Zurich to meet Mr Wehrle. A ruse for the liquidators 53 Mr O'Neill gave affidavit evidence that on 11 May 2002, a Saturday, he telephoned the defendant "to check the latest developments". Mr O'Neill claimed that during this conversation the defendant said that things were "looking good", the liquidator was pushing for the contracts to be signed immediately and that: I am doing what I can to delay things, however it is not easy. The one thought that I have had, that might help delay things, to give Terry the time to raise the deposit. Why not get you to send me a letter, similar in terms that you sent to Michael Hope. I can then send it down to George Georges and ask him what the hell is going on. It should buy us some time if nothing else. 54 Mr O'Neill's evidence was that he informed the defendant that he could not see "why not" and that he would "organise things on Monday for you". On 13 May 2002 Mr O'Neill sent a letter to the defendant in identical terms to that which he had sent Mr Hope on 10 May 2002. 55 The defendant's affidavit evidence claimed he could not "recall ever asking Mr O'Neill to send me a threatening letter regarding Mr Hill's claim against the liquidators" but then claimed that the faxed letter from Mr O'Neill did not come to his attention until 15 May 2002 when he contacted Mr Brooks and said: David, I have just received a fax from Terry Hill's solicitor regarding their claim against the liquidator. I am not sure why it has been sent to me given that I have been negotiating with Terry Hill regarding the sale of the wine business to him. Can you have a look at it and see what impact it has. 56 The defendant claimed that Mr Brooks asked him to fax the letter to him and said: "I may need to contact the liquidators about it and see what they say. It must be just a fax Michael O'Neill has sent to you to try and pressure you into concluding a deal with Terry Hill". The defendant then claimed: "At no time prior to receiving that facsimile had I ever had any discussion that I would receive any fax in the terms set out". A request to create false documents 57 The defendant gave affidavit evidence that on 11 May 2002 he had a discussion with Mr Brierley in words to the following effect: Brierley: David, I am putting together a business plan for the Swiss investor, Sigveld Wehrle. I need to have a copy of any draft agreement that you have with the liquidators. Defendant: I will get that agreement to you on Monday. That is when I expect to receive a copy from the liquidator. Brierley: What we are going to show the Swiss Investor is the proposed contract that you have with the liquidators and then the proposed contract that you have with Terry. Michael O'Neill has sent me a copy of the proposed agreement. You will need to make sure that the prices all match up otherwise it won't look good. Defendant: I haven't really looked at what Michael O'Neill has sent me yet and I don't know what prices will be in the contract as my offers have all been for just lump sums but if you want I can put the prices in Michael's letter in the contract from the liquidators. Brierley: Yes, that would be good. 58 Mr Brierley denied the last three exchanges in this conversation in paragraph 12 of his affidavit of 12 May 2003 and continued: 13. At no time did David James, in any of the conversations I had with him in the period March 2002 to June 2002, ever say to me words to the effect that he was proposing to or had, in fact, altered figures contained in the draft Sale Deeds which he had received from Clayton Utz, whether generally or for the specific purpose of forwarding them on to Sigvald Wehrle or ensuring that the figures in those draft Sale Deeds reflected those in the Back to Back Agreement. 59 Mr Brierley was cross-examined and it was not put to him that his denial was either inaccurate or false. What was put to him was that he had prepared a business plan to show to Mr Wehrle and at the time it was prepared it had attached to it a copy of the 9 May letter and a copy of the contract between the liquidator and the defendant (tr. 123-124). Mr Brierley agreed that the letter and the contract were removed from the business plan when it was given to Mr Wehrle and gave evidence that Mr Wehrle did not ask about the price (tr. 125). Although this cross- examination establishes that Mr Wehrle was not given the documents originally destined for him it does not detract at all from Mr Brierley's denial that he requested the defendant to "make sure the prices all match up or it wont look good". The defendant instructs Mr Brooks 60 On 13 May 2002 the defendant received an email from David Landy, solicitor of Clayton Utz, enclosing a draft Sale Deed on instructions from the liquidators. That letter stated that Clayton Utz had been instructed to, inter alia: (c) advise you that the sellers require you to pay a deposit of $1,020,000.00 (initially refundable), by electronic funds transfer direct to the Clayton Utz trust account. (Ex. 1: 552) 61 The draft deed defined deposit as "$1,020,000" and "completion payment" as the "amount of $8,180,000 as adjusted in accordance with clause 8.2(a)". The defendant gave evidence that after receiving these documents he emailed the contract to the third defendant, Mr Brooks. That email advised Mr Brooks that the defendant was coming to see him about the contract on 13 May at 4.30pm (Ex. 1:510). The defendant gave affidavit evidence that he met with Mr Brooks at "around 5pm" on 13 May at which time they "reviewed the contract" and he informed Mr Brooks that he had "an offer" from the plaintiff "to buy back from me the wine business". He informed Mr Brooks that the plaintiff "is supposed to pay me $1.23 million to use as a deposit for the businesses which will be forfeited if he can't complete the deal". The defendant claimed that Mr Brooks asked him if he had "any proposed agreement" with the plaintiff and he advised him that he would fax it to him later that day. The defendant sent Mr Brooks a copy of the 9 May letter later that day (Ex.1: 554). 62 The defendant's evidence in his affidavit of 28 April 2003 was: 90. Later that day I changed the definitions of completion price and the deposit in the contract and the reference to the deposit in the covering letter in accordance with my discussion with Mr Ian Brierley. I then emailed the amended contract and covering page to Mr Ian Brierley at 4:32 pm that afternoon and again at 7:28 pm. 91. Had I not had the discussion referred to in paragraph 89 (where it first appears) I would not have changed the prices but instead would have deleted any reference to the amount of the price or the deposit. I would have done this because at all times I believed that Mr Hill was proposing to purchase the wine business for a fixed price irrespective of what my bid was for that business. 63 The changes made to the contract were that the deposit was changed from $1.02 million to $1.23 million and the completion payment was changed from $8.18 million to $11.07 million (Ex. 1: 516 compared to Ex. 1: 472). The Clayton Utz letter was also changed by deleting therefrom the amount "$1,020,000.00" and inserting in its place "$1, 230,000". 64 On 15 May 2002 Mr Brooks wrote to the liquidators' solicitors Clayton Utz suggesting that certain changes be made to the draft contract sent to the defendant on 13 May 2002 (Ex. 1: 576). By this time the defendant had been informed by Mr Brierley that he was dealing with the "fast track funders" to get "the cash in the bank" for the deposit to be paid to the liquidators. Mr Brierley also informed the defendant that although all stops were being pulled out, the funding would not be available until at least 15 May 2002 (Ex. 1: 561-563). At the end of Mr Brooks' letter to Clayton Utz the following handwritten note appeared: I also note that there are issues relating to litigation by the former directors of the company which will need to be resolved prior to completion. (Ex. 1: 579) 65 It is more probable than not that this handwritten note was able to be added by reason of the letter Mr O'Neill sent to the defendant and it appears to have been used for the very reason for which Mr O'Neill suggested the defendant claimed it would be used – to delay matters. 66 During 16 May 2002 the defendant received many telephone messages to contact Mr Georges. In order to delay the matter further because the deposit monies were not in place, the defendant sent an email to Mr Georges apologising that he had been called away on a personal matter and also advising that Mr Brooks was attending to other matters with Ferriers in Newcastle. The email claimed that the defendant had shown that the deposit was available with funds coming off term deposit that day, but that he believed that the liquidator was keeping him on ice and "playing us against another party to increase the price". The defendant requested the liquidator to advise whether "we are in or out – if we are out that is OK – if we are in please indicate in writing that you will accept our offer on receipt of the deposit – the deposit is a substantial figure which we don't treat lightly" (Ex. 1: 659). The defendant gave evidence in cross- examination that he wrote this email because of his experience with liquidators in issuing a number of contracts and he was not confident "we were in the position we wanted to be in" (tr. 175). 67 On 16 May 2002 Clayton Utz wrote to Mr Brooks responding to his letter of 15 May 2002 in terms which included the following: We are instructed that Hill (referring to the companies in liquidation) agrees to the terms of the Bearings Offer subject to the following conditions: 1. receipt by Hill of a deposit of $1,020,000 from Bearings by midday tomorrow, Friday 17 May,2002: 2. agreement by Bearings and Hill of the commercial and legal terms of the documentation required in order to effect the sale of the assets and business listed above. This documentation will reflect the draft contract sent to you on 13 May 2002. (Ex. 1: 661) The trip to Zurich 68 Between 16 May 2002 and 21 May 2002 the plaintiff, Mr O'Neill, Mr Brierley and Frank Fabrizio, a representative of the defendant, travelled to Zurich and met with Mr Wehrle. There was quite a deal of cross-examination of both the plaintiff and Mr O'Neill relating to the provision to Mr Wehrle of the business plan prepared by Mr Brierley and the removal of the copy of the 9 May letter and the draft contract between the defendant and the liquidator. 69 Both the plaintiff and Mr O'Neill gave evidence consistently with that of Mr Brierley that during the meeting in Zurich, Mr Wehrle did not ask about the price to be paid to the liquidator. The only other person present at that meeting was the defendant's representative, Mr Fabrizio, who was not called as a witness. The conclusion that Mr Wehrle did not ask about the price at that meeting is therefore inescapable. 70 The plaintiff gave evidence that the reason he did not tell Mr Wehrle what he was paying for the wine business was that he thought it was none of his business because Mr Wehrle had indicated he would invest "up to" US$7 million for a 45% shareholding, based on the business plan that was provided to him (tr. 25). The business plan that was given to Mr Wehrle (tr. 4: Ex. A; 169) included figures that suggested net assets of the wine business at $24 million and total shareholders equity at the same amount. The plaintiff gave evidence that he informed Mr Wehrle that what was going to be purchased was worth $24 million (tr. 25). The deposit 71 Mr Brierley was negotiating, on the plaintiff's behalf, with a financier for funds totalling $1,030,000 for the deposit. The defendant was to provide $200,000 directly to Clayton Utz by way of loan to the plaintiff bringing the total amount the plaintiff understood he was required to pay up to $1,230,000. Because there was a delay in the plaintiff providing the deposit, the defendant arranged a loan through a company, Yellik Holdings, a landlord of one of the commercial office spaces occupied by the defendant's companies. That loan had to be guaranteed by the defendant and required a Deed of Indemnity back to the defendant from the plaintiff. Amendment to the 9 May letter 72 Mr Brooks was also advising the defendant in relation to the 9 May letter. In an e-mail dated 15 May 2002 at 9.11am, Mr Brooks wrote to the defendant in the following terms: In relation to the Nash O'Neill Tomko letter, I advise as follows using the same clauses as set out in that letter: 5(a)(i) The clause should be changed so that Newco No. 1 shall enter into a contract for that business for a price to be agreed between the liquidator and James. You should explain this on the basis that there are some items still to be negotiated which will have a bearing on the price but which you don't want to jeopardise the validity of this agreement simply because the price is different. 5(a)(ii) similarly as in (i) – the price will not be known. However we should be putting in a clause that Hill will pay $10.3 million regardless of the prices less any deduction for employee entitlements that may be available. Those monies are to be paid direct to the liquidator. 5(j) this should be subject to any requirement to stay on due to tailing obligations (ie dealing with hire purchase goods for the 2 months afterwards etc). (Ex. 1: 564) 73 This e-mail was sent to the defendant two days after the false documents had been created and sent to Mr Brierley and to Mr O'Neill in which the higher figures were contained (Ex. 1: 464 – 476). 74 On 22 May 2002, the day after Mr O'Neill returned from Zurich, he received a telephone call from the defendant. The defendant informed him that it was difficult to talk because he was outside the Newington premises where he had been looking at matters relating to the due diligence process. He said that he was under a lot of pressure to execute the contracts and that he had made "a few changes to the back to back agreement and signed it" and had arranged for it to be faxed through to him. Mr O'Neill gave evidence that the following conversation then took place: Defendant: The negotiations with the liquidators are just about finalised, there may need to be some minor changes as to how the purchase price is to be apportioned, as a result of discussions I am having with the people from Ferriers about what stock belongs to what company. As well, the Schoenthal joint venture can't be done yet. George says he has to offer the joint venture partners the 10% interest, before he can sell it, which seems to me to be fair enough. George proposes to drop the price for the Wine Business by a hundred grand. O'Neill: That is probably right, as the joint venture partners must have pre-emptive rights. I think Terry puts a bigger number on that asset. You'll have to talk to Terry when he gets back. Just let me know of any of the changes with the stock numbers. … Defendant: We can't muck around any longer with the deposit. I have given up on Ian, who has had plenty of time to raise the deposit money, and is still stuffing around. I've fixed it all up in a few calls, to my solicitor, who has a client who will do one million, on short term finance, which I've had to guarantee. If necessary, I'll lend Terry the $200,000 provided I get it back on the Kremnizer refinance, when it happens. O'Neill: Good, David Evans will look after that deal. Get the Newcastle solicitor to talk to him. 75 Shortly after this conversation on 22 May 2002 Mr O'Neill received a facsimile from the defendant enclosing a copy of the 9 May letter with certain marked-up changes that was signed by the defendant (the amended letter) (Ex. 1: 926-930). There were no changes made to the "relevant background facts" recorded on the first page and part of the second page in which it was recorded that the "Wine Business" was to be bought by the defendant "on behalf of Terry Hill" (Ex 1: 309 and 927). Changes were made to paragraphs (a) (h) and (i) as set out below with the paragraph as it appeared in the 9 May letter first and in the amended letter with italics immediately following: (a) You shall enter into contracts with the Liquidators of the HWG as follows: (i) Newco No. 1 shall acquire the Distribution Business of the HWG (more particularly described in our faxed offer to the Liquidators dated 24 April 2002) for a total purchase price of $2 million; and (ii) Newco No. 2 shall acquire the Wine Business of the HWG (as more particularly described in the offer of 24 April 2002, however, excluding the Douglas Gully property and the Fernhill Winery/brand) for a total purchase price of $10.3 million. (Ex. 1:309) (a) You shall enter into contracts with the Liquidators of the HWG as follows: (i) Newco No. 1 shall acquire the Distribution Business of the HWG (more particularly described in our faxed offer to the Liquidators dated 24 April 2002) for a total purchase price of $2 million or such other price as agreed between the Liquidators and Newco No. 1 (ii) Newco No. 2 shall acquire the Wine Business of the HWG (as more particularly described in the offer of 24 April 2002, however, excluding the Douglas Gully property and the Fernhill Winery/brand) for a total purchase price of $10.3 million or such other price as agreed between the Liquidators and Newco No 2 (Ex. 1: 927) (h) Newco No. 1 shall thereafter complete the Asset Sale Contract for the Distribution Business. You shall provide the balance of the purchase price, namely $1.8 million. Whilst Terry Hill shall have paid the deposit of $200,000 at the time of execution of the Distribution Business Contract, Terry Hill shall not require this deposit to be repaid, and instead seeks from you the transfer of certain surplus plant and equipment (specifically the leased motor vehicles used by his sons Chris and Luke Messer) and a favourable arrangement with you for ongoing administrative support of the Wine Business by the Distribution Business in relation to the balance of the deposit monies paid by Terry Hill in respect of the Distribution Business. (Ex. 1: 310) (h) Newco No. 1 shall thereafter complete the Asset Sale Contract for the Distribution Business. You shall provide the balance of the purchase price, namely $1.8 million or such other varied amount as agreed with the Liquidators . Whilst Terry Hill shall have paid the deposit of $200,000 at the time of execution of the Distribution Business Contract, Terry Hill shall not require this deposit to be repaid, and instead seeks from you the transfer of certain surplus plant and equipment (specifically the leased motor vehicles used by his sons Chris and Luke Messer) and a favourable arrangement with you for ongoing administrative support of the Wine Business by the Distribution Business in relation to the balance of the deposit monies paid by Terry Hill in respect of the Distribution Business. (Ex. 1: 928) (i) Terry Hill shall cause to be paid, on behalf of Newco No. 2, the balance of the purchase price payable by Newco No. 2 for the acquisition of the Wine Business ($9.27 million). Terry Hill shall provide bank cheque or cheques in this amount to you immediately prior to completion by Newco No. 2 of the Asset Sale Contract for the Wine Business, so as to enable Newco No. 2 to complete the acquisition of the Wine Business. (Ex. 1: 310) (i) Terry Hill shall cause to be paid the sum of $9.27 million to allow completion of the Asset Sale Contracts and of the acquisition of the Wine Business. Terry Hill shall provide bank cheque or cheques in this amount to you immediately prior to completion by Newco No. 2 of the Asset Sale Contract for the Wine Business, so as to enable Newco No. 2 to complete the acquisition of the Wine Business. (Ex. 1: 928) 76 The plaintiff returned from overseas on 23 May 2002 and was given a copy of the amended letter. The plaintiff gave evidence that Mr O'Neill advised him: "I got his fax just after I spoke to David. He said he had altered our letter of 9 May 2002 and signed it as altered by him as he wanted to get this fixed prior to signing contracts with Ferriers". More false documents 77 The defendant gave evidence in paragraph 129 of his affidavit of 28 April 2003 that he had a conversation with Mr O'Neill on 22 May 2002 in the following terms: O'Neill: Good. Also, if you can send me a copy of the draft contract so that I can check to make sure that Terry is happy with the terms of the contract. Defendant: I will change the prices like they were in the contract I provided to you for insertion into the Sigvald Wehrle contract since the prices have changed. O'Neill: Sure. 78 The defendant also claimed in this paragraph of his affidavit that Mr O'Neill did not query what price was being paid by Wine National to acquire the liquor business. He claimed he did not consider it "important to inform Mr O'Neill, Mr Hill or Mr Brierley of the prices being paid and their apportionment since Mr Hill, in my view, was always going to be paying, at that stage, the fixed sum of $10.5 million for the wine business". He also claimed that it was a short time after this conversation with Mr O'Neill that he went to Mr Brooks' office and reviewed with him the proposed contract with the plaintiff prior to it being sent to Mr O'Neill. He then gave the following evidence: 132. In accordance with the discussion with Mr O'Neill myself and Mr Brooks went through the contract and changed the prices for the wine and distribution businesses to reflect the figures stated in the agreement between myself and Mr Hill. Exhibit TDH 333 to TDH 378 is a copy of the email sent by Mr Brooks to Mr Evans containing the amended contract. I do not recall which version of the agreement from Clayton Utz had been varied. The Winery Price referred to in the contract sent was $9.5 million, not $10.3 or $10.2 million with the total amount being paid set at $11.5 million, and not $12.3 million or $12.2 million. 133. When reviewing the contract sent by the liquidator and also the one sent to Mr Evans, I noticed that there had been no specific provision for the sale of the real estate in South Australia. I had Mr Brooks send to Mr Evans a further contract with amended prices this time including provisions regarding the acquisition of the South Australia land for $700,000, bringing the total price referred to in the contract sent to Mr Evans for the purchase of the wine business to $10.2 million. Exhibited TDH 379 to 433 of the Hill affidavit is a copy of that email. 79 The email dated 22 May 2002 from Mr Brooks to Mr Evans of Nash O'Neill Tomko enclosing the contract with the false figures stated: "Please find attached a copy of the Clayton Utz contract. We understand that there are to be some further minor changes to the contract which we will advise you of" (Ex. 1: 970). 80 Mr O'Neill denied that he had agreed that the defendant should change the figures in the contract. In cross-examination Mr Newlinds SC suggested to Mr O'Neill that he was a party to the changing of the figures in the contract in a conversation with Mr Brooks: Q. Didn't you say to him that you had spoken to David James about that and you were happy for the price to be changed to be the same as those referred to in the agreement between Terry and David: "Since if we show it to the Swiss guy who is providing Terry funds, there won't be any questions". A. Absolutely not. (tr. 111) 81 This cross-examination occurred during the third day of the trial. By that stage Mr Newlinds SC had informed the Court that he was reading Mr Brooks' affidavit of 28 April 2003 and objections to that affidavit had been ruled upon on the first day of the trial (tr. 14). On the fourth day of the trial Mr Newlinds SC advised that he would not be calling Mr Brooks (tr. 208) and on the seventh day of the trial it was noted that Mr Brooks' affidavit of 28 April 2003 was not relied upon (tr. 244). Mr O'Neill's denial of the suggestion that he had a conversation with Mr Brooks in the terms suggested by Mr Newlinds SC therefore remains unchallenged. Contracts are exchanged with the liquidator 82 During the course of the negotiations just prior to exchange of contracts with the liquidator on 24 May 2002 Mr O'Neill had a number of conversations with Mr Brooks and the defendant. During those conversations Mr O'Neill suggested that clause 12 should be deleted from the contract with the liquidator. There was also confirmation that the Yellick funds were available for the payment of the deposit and Mr O'Neill informed the defendant that the plaintiff was appreciative of the work the defendant had done to organise those funds. Mr O'Neill also sought confirmation that the "deal" was in place to have Newco No. 3 own all of the shares in Wine National. The defendant advised Mr O'Neill that he would organise Mr Fabrizio to sign the necessary documents. It is apparent that Newco No. 3 had not been incorporated and Mr Fabrizio was asked to execute share transfers and hold them in escrow. 83 During 24 May the defendant telephoned the plaintiff and informed him that the liquidator had advised that Fernhill was once again available as the other sale had fallen through. The plaintiff and the defendant then discussed price and the defendant negotiated with the liquidator pursuant to the plaintiff's instructions and secured a sale at $575,000. The defendant advised the plaintiff that he would have to pay a separate deposit of $57,500 to be paid into Bearing Traders' account. 84 A further set of contract documents was sent to Mr O'Neill at about 4.40 pm on 24 May. This contract included different figures again, this time with the deposit listed as $1,150,000 and the completion amount as $10,350,000. The apportionment of the distribution business and the wine business was $2,000,004 and $9,499,996 respectively (Ex. 1: 1684–1696). Mr O'Neill was not sure what was happening with his suggested deletion of clause 12 and when he could not contact Mr Brooks he spoke to the defendant at about 7pm. The defendant informed Mr O'Neill that clause 12 was still included because they had no choice and that the contracts had been exchanged. There was then some discussion about Mr Wehrle and Mr O'Neill expressed the view that he seemed serious and that he had said that he could get the money to them in time for settlement. Mr O'Neill's evidence was that the defendant then said: Yes, I have talked with Frank, but that doesn't mean I am still not nervous. We are talking about big money here, the Wine Business involved a $10 million deal, and I do not want to be the one to have to find the money to pay for it. I suspect, if pushed, I can get the facilities organized, but that is not what I want to do. I will be wearing out my welcome at AMP and PIBA, and at the moment, I have a great relationship with them. 85 Mr O'Neill informed the defendant that the plaintiff had been speaking with Mr Wehrle and that he would keep an eye on things as well. Alternative funding 86 The defendant gave evidence that after exchange he became increasingly nervous that the plaintiff would not come up with the monies for completion. On 31 May 2002 the defendant sent a funding proposal to Primary Industry Bank of Australia Limited (PIBA) that included the following: The current arrangement with this purchase is we have arranged a back to back sale on the shares and assets of Wine National Pty Ltd leaving us with the assets bought by Liquor National and the three residential properties. The sale is being made to an overseas wine wholesaler based in Switzerland who has been distributing the companies three wine brands for the last few years. The price for the wine business sale is equal to what we are paying for the whole business - $10.875 M. Therefore we will own the distribution businesses and the residential properties for no outlay and we will fund off the residential properties to add cash flow funds to go forward in the distributing business. We are very confident that the overseas sale will happen because they have put up a non-refundable deposit of $1.2M. Our export manager Frank Fabrizio has been over to visit them 2 weeks ago and they are very positive about the future potential of their three brands. The investor showed Frank where he had the funds and he only needs to have them released to finalise the sale. … The only possible down side is that the back to back sale doesn't occur or doesn't occur quickly enough. The settlement date is the 14 June which doesn't leave much time so we need to consider some fallback positions. … We may not need all this funding if our Swiss investor gets the balance of his funds in place in time. The way the deal is set up James Estate has no down side except the loss of the "great deal" and credibility with the Administrator if we cant complete. (Ex.1: 1979-1984) Brooks requests execution of the amended letter 87 On 3 June Mr Brooks wrote to Mr O'Neill in the following terms: We note that our client executed and returned a letter dated 9 May 2002 from yourselves setting out the arrangement between your client and our client. Could you please provide by way of return a copy of the letter executed by your client for our client's records. (Ex. 1: 2029) 88 Mr O'Neill gave affidavit evidence that he received this letter but did not give evidence about what if anything he did in respect of that letter. However there is some correspondence in evidence between Mr O'Neill and Mr Brooks dated 14 June 2002 which is dealt with below (14 June 2002 Correspondence). The Creation of "a Document for Mr Wehrle" 89 On 3 June 2002 Mr Wehrle telephoned Mr O'Neill and informed him that he had asked the plaintiff on a number of occasions for a copy of the back to back agreement between the plaintiff and the defendant and had not received it. He asked Mr O'Neill to speak with the plaintiff to make sure that he received a copy of it. The plaintiff requested Mr O'Neill to send Mr Wehrle what he described as "an amended version of the Back to Back Agreement, deleting the details setting out the proposed purchase price and amending the section of the Back to Back Agreement to take into account the absence of "Newco No. 3" and the consequential need for Mr Fabrizio to execute share transfers in relation to the issued capital in Wine National". Mr O'Neill said that "for those reasons", presumably meaning because the plaintiff requested him to do so, he prepared a revised agreement for the purpose of sending to Mr Wehrle. 90 After he had prepared that document, Mr O'Neill sent it by email to Mr Brooks on 5 June 2002 with a covering document that stated that Mr O'Neill had spoken to the defendant who was expecting the "revised document" and that "If ok, please have David sign off. Terry has already signed off. I can then send to Switzerland" (Ex. 1: 2043). The attached document was a fax from Mr O'Neill to the defendant dated 5 June 2002 (the 5 June letter). The background facts as they appeared in the 9 May letter were unchanged except for the inclusion of some words that suggested that the defendant had "agreed" with the arrangement set out in the letter (par 4) (Ex. 1: 2045). There were other substantial changes to the 9 May letter so that the purchase price was deleted. 91 Mr O'Neill gave evidence that on the afternoon of 5 June 2002 he had a telephone conversation with the defendant in terms that included the following: Defendant: Michael, I am just ringing about your document, that you need to send to Sigvald. O'Neill: Yes, as you know, Sigveld has asked for a copy of the Back to Back Agreement. At the time that we met with Sigvald in Switzerland, we removed the Back to Back Agreement because Terry regarded it as none of Sigvald's business to know the prices that we are paying the liquidator. Nevertheless, we have to send Sigvald the Back to Back Agreement, hence my email to David. It does not change the deal between us, it is merely a document to be sent to Sigvald to comply with his request. Defendant: I understand, and I have read it, and I am generally happy with it. At the moment the draft still refers to Newco No. 1 and Newco No. 2. We should insert the names Liquor National and Wine National in it. 92 After this conversation with the defendant, Mr O'Neill made the suggested amendments to change Newco No1 and Newco No 2 to Liquor National and Wine National respectively. The letter did not include a clause equivalent to clause (f) that was in the amended letter requiring the provision of the draft Asset Sale Contracts with the liquidator to the plaintiff for his approval. This is perhaps not surprising, as contracts had already been exchanged. The letter included clauses (f) and (g) in the following terms: (f) Terry Hill shall cause to be paid the balance of the purchase price to allow completion of the Asset Sale Contract by Wine National Pty Ltd for the acquisition of the Wine Business. Terry Hill shall provide bank cheque or cheques in this amount to you immediately prior to completion by Wine National Pty Ltd of the Asset Sale Contract for the Wine Business, so as to enable Wine National Pty Ltd to complete the acquisition of the Wine Business (g) In the event that Terry Hill is unable to comply with his obligations under paragraph (f) above, then he shall give you written notice of same, and you shall then use your best endeavours to negotiate with the Liquidators an extension of time to complete the asset sale contract, to enable Terry Hill the opportunity to comply with his obligations under paragraph (f) above. In the event that you are unable to negotiate such an extension of time, or Terry Hill remains unable to comply with his obligations under paragraph (f) within the agreed extended time for completion, then Terry Hill acknowledges and agrees that you shall be entitled to complete the transaction with your own funds, and the terms of paragraph (i) below shall apply. (Ex.1: 2111) 93 Mr O'Neill forwarded this amended document, by then dated 6 June 2002, to the plaintiff and the defendant by e-mail that stated: "Here is a further revised doc, following my conversation with David James late yesterday. If all are happy, please each sign and fax back to me and I will then fax to Sigvald Wehrle" (Ex.1: 2108-2113). The plaintiff signed a copy of that letter and provided it to Mr O'Neill (Ex. E). Mr O'Neill then faxed a copy of that letter to Mr Wehrle on 6 June 2002 with the plaintiff's signature upon it (Ex.1: 2151). The covering letter that stated: I refer to our telephone discussion earlier this week, and now attach a copy of a facsimile transmission sent to David James of James Estate (Frank Fabrizio's company) recording the nature of the "back to back arrangement" between Terry and David. You will see that Terry has executed his copy. David James has approved its terms, but is currently travelling and will "sign-off" when he gets back to the office either tomorrow or the weekend. You will see that the agreed mechanism involves a transfer from the David James interest to the Terry Hill interests of the underlying shares in the entity formed by David to acquire the Wine Business on behalf of Terry. This mechanism avoids the payment of double stamp duty (a substantial government tax on the transfer of business assets) in the event that a second "back to back contract" was to be executed between David and Terry. … Please note that Monday 10 June 2002 is a public holiday in Australia, which leaves us only 2 business days after the weekend to organise the funds, which would probably require the letter of credit to be organised from your end by close of business Monday (Zurich time). (Ex. 1: 2151) 94 It is apparent that after Mr O'Neill had sent the letter dated 6 June 2002 to Mr Wehrle, Mr Brooks was making some amendments to a letter, athough it is not clear which one, which he sent to Mr O'Neill on 8 June 2002 by e-mail which stated: Please find enclosed a further amended agreement with David James. We apologise in that the agreement we forwarded to you did not cap the liability of Mr Hill to $10.875 million. We note that there has been ongoing discussion with the liquidators regarding the apportionment of the purchase price, in particular, insofar as its concerns what they want to see each company in the group receive for the purposes of dividends etc. Also we note as previously discussed that the purchase price could change depending on plant and equipment etc those being delivered to us after settlement. (Ex.1: 2133) 95 This was not a letter that was sent to Switzerland and it is apparent from what occurred on 14 June 2002 that Mr O'Neill perceived that he and Mr Brooks were at cross-purposes. This correspondence was the subject of the further submissions that were made by the parties in February 2004 as it had not been addressed during submissions and, as can be seen from the cross-examination extracted below, was not taken into account during the trial. 14 June 2002 correspondence 96 Mr O'Neill's letter to Mr Brooks of 14 June 2002 was in the following terms: David James telephoned me at about 7.00 pm yesterday, to discuss various outstanding issues. An outstanding issue that needs to be addressed by the two of us is the finalisation of the agreement between David James and Terry Hill. When it became necessary to rework the Heads of Agreement in a format appropriate to send to the Swiss investor, I sent you a draft document. Before you got back to me I further revised the document, to take into account some suggested changes from David James. I read out the changes to David James, and he was happy with them. I then sent that document, executed by Terry Hill, to the Swiss investor. A copy of that document is attached . I indicated to the Swiss investor that David James had not been able to sign the document due to the fact that he was travelling, but that he agreed to the document in principle. Thereafter you submitted, via the e-mail, an amended document, which you later further amended. It seems to me that you amended my initial draft, and not the later amended draft that was actually sent to the Swiss investor. We have therefore been working at cross-purposes. I mentioned to David James, for the obvious reasons, that I would prefer to stay with the document sent to the Swiss investor, providing that you and David James are happy with it. I would therefore be grateful if you would review the attached document, and urgently let me have any comments that you might have, so that David and Terry can sign-off immediately. (Ex. 1: 2310) 97 Although this letter refers to the document being attached, the copy in evidence during the trial did not have the attachment with it. On 5 February 2004 Mr Aldridge SC re-opened the plaintiff's case by consent and tendered, without objection, what is agreed to have been the copy of the 6 June letter signed by the plaintiff, sent to Mr Wehrle and attached to the 14 June letter sent to Mr Brooks (Ex. E). 98 Mr Brooks replied to Mr O'Neill by letter dated 14 June 2002 in the following terms: We refer to the above matter and your letter of today. We have reviewed the proposed agreement with our client and he is comfortable with the same. However, we note that your client has yet to pay the balance of the deposit, namely the sum of $200,000, together with the sum of $7,131 being the monies paid by our client in respect of the facility with Yellik Holdings Pty Ltd. Our client is prepared to enter into the agreement but only on the basis that the monies referred to in the preceding paragraph are paid from the proceeds of the refinance that apparently is occurring with R L Kremnizers on Monday afternoon. Please advise whether your client is agreeable to the same and if so, the details as to when our client is able to collect the balance of the deposit monies. (Ex. 1: 2311) 99 The affidavit evidence of the plaintiff exhibits these letters and refers to the fact that Mr Brooks' letter requests payment of the deposit and associated monies. The plaintiff's affidavit also refers to the fact that the plaintiff repaid the defendant the amount of $207,131, "being the amount requested by David Brooks on 14 June 2002". Mr O'Neill's affidavit makes no reference to the letter he sent to Mr Brooks on 14 June 2002 and in respect of Mr Brooks' letter to him of the same date, merely states that the letter was received. The defendant does not refer to these letters in his evidence and Mr Brooks was not called to give evidence. 100 On 5 February 2004 Mr Aldridge SC also tendered, without objection, a fax from the defendant to Mr O'Neill with a fax header dated 18 June 2002. The cover sheet simply read "Copy attached" (Ex.F). The second page of the fax is more probably than not the last page of the 6 June letter (Ex. E) that the plaintiff had signed, but this document has the defendant's signature on it as well. 101 The plaintiff agreed in his evidence that the document he signed that was sent to Mr Wehrle did not set out the full detail of the arrangement or contract between the plaintiff and the defendant. It was suggested to him that he had sent this letter for the purpose of misleading and deceiving Mr Wehrle. His evidence on this topic included the following: Q: It was a document that was never intended to represent the true contract between you and Mr James? A: It was a document for Mr Wehrle. Q: It was a document for Mr Wehrle and the reason it was for Mr Wehrle is it was designed to be given to him so that it could be represented to him that it was the true agreement between you and Mr James? A: It was a document for Mr Wehrle. Q: So do you at least agree with me that even though some people would think it was a little bit irregular, that you don't have any problems with providing documents to a person and representing to them that they are something that they are not? A: I can't answer that. Q: Why not? A: It doesn't give a full representation of the reasons for the document being sent to Mr Wehrle. (tr. 65) 102 Mr O'Neill was also cross-examined on this topic and gave the following evidence: Q. … it is a document created by you so Mr Wehrle has no idea at all how much money may be being paid by Mr James or his interests to the liquidator? A. Yes. Q. That was a deliberate decision by you to create that document so that Mr Wehrle would not find out that information? A. It was a decision taken on instructions and in consultation with Mr James. (tr. 80) Q. You see, the heads of agreement document, the actual heads of agreement, which is the 9 May letter I take it, is it? A. Yes. Q. You never had any intention of telling him the truth about what it said, did you? A. Yes, if he had have asked what the contract price was with the liquidators, I would have told him. Q: Come 6 June he did ask for it, didn't he, the heads of agreement document? A: Yes, he asked initially Terry Hill and then myself. Q: And he wasn't told the truth, was he? A: Yes, he was. Q: He wasn't shown the heads of agreement document, was he? A: No, I gave him the document which was the nature of the agreement between the parties but no, it didn't – sorry, yes, it didn't include the price as we discussed yesterday. (tr. 113) 103 Mr O'Neill also gave evidence that the document that he sent to Mr Wehrle was "not substantially" different from the 9 May letter (tr. 80). He agreed that the document was created so that Mr Wehrle would not know the price that the plaintiff had agreed to pay for the purchase of the wine business (tr. 80). He said that Mr Wehrle was "getting a document that sets out the nature of the back-to-back" arrangement between the plaintiff and the defendant rather than the "actual one" (tr. 81-82). 104 On 13 June 2002 Mr Wehrle sent a fax to Mr O'Neill in which he wrote: I do have two fundamental questions: Has Terry made the down payment as stipulated in the Heads of Agreement? Will Terry actually make his payment for the app. 55% of the business by June 14 and/or 17, 2002? (Ex.1: 2175) 105 Mr O'Neill was cross-examined in relation to this letter and gave the following evidence: Q. The question was, it was obvious to you when you read this letter that Mr Wehrle believed that your client had to make a payment on completion of the purchase of an amount in exchange for his 55 percent of the business? A. That's a reasonable interpretation. It does not say what amount, but a payment of some money, yes. Q. It is blindingly obvious, isn't it? A. Yes. Q. That is the assumption? A. Yes, the answer is yes, subject to the qualification I have given. Q. It might only be one dollar? A. Yes. Q. But it might have been tens of millions of dollars? A. I would doubt he is suggesting it would be tens of millions, but possibly yes. Q. In your full and frank dealing with Mr Wehrle, did you ever answer his question? A. This question. Q. That question? A. In a letter the day after, second day after, something like that. (tr. 84-85) 106 Mr O'Neill responded to Mr Wehrle's letter of 13 June 2002 and wrote in part: Terry has made the deposit payments, and will be in a position to meet his obligations relevant to his share subscription by the completion date. (Ex. 1: 2308) 107 It was put to Mr O'Neill that his letter to Mr Wehrle suggested that the plaintiff was putting in some money for his 55% share of the business that was purchased. Mr O'Neill resisted that suggestion and gave evidence that all he suggested in the letter in response was that the plaintiff "would be in a position to meet his obligation relevant to share subscription by the completion date" (tr. 86). This explanation seems to me to be rather lamentable, from a solicitor whose client, the plaintiff, seemed far more realistic about the capacity of the letter to mislead the recipient. The plaintiff agreed that Mr O'Neill's response to Mr Wehrle was written on his instructions and gave the following evidence: Q. You didn't have any obligations relevant to your share subscription that had to be paid by the completion date, did you? A. I was not going to contribute further cash other than the deposit and some working capital. Q. You weren't going to contribute any working capital by the completion date, were you? A. Not by the completion date. Q. And the completion date being referred to in this letter is the same date that Mr Wehrle, in his letter called 14 or 17 June. Correct? A. Yes. Q. So is this the position: Mr O'Neill on your instructions, told Mr Wehrle a lie? A. No. Q. What is the position? A. The position is as I have previously described it. Q. Just run that past me again if you don't mind? A. That we were making a contribution by way of deposits plus some working capital and Mr Wehrle was subscribing –and the balance, or the shares other than the ones that Mr Wehrle was going to take up, would be owned by entities associated with me and what was there would be the value of the business. … Q. I will try to make it plainer, if I can. Look at the last paragraph. It was true wasn't it, that you had paid the deposit monies? A. Correct. Q. But it was not true that you would be in a position to meet your obligations relevant to your share subscription by the completion date because you didn't have any obligations to pay anything to anyone by the completion date. Do you understand the point? A. I hear what you say. Q. Well. Do you understand what I am saying? A. I understand what you're saying. Q. Do you agree with me that the letter therefore is false and contains a completely false impression? A. It could be interpreted that way. (tr. 29-30) Completion 108 Mr Wehrle's funds were not forthcoming in time for settlement. On 19 June 2002 Mr Brooks wrote to Mr O'Neill in terms that included the following: We note that pursuant to the agreement between our respective clients, your client is to provide a letter indicating that Mr Hill is not able to comply with his obligation to provide funds for the purchase of the wine business. We note that no such letter has been presented but that our client has been advised that the settlement funds will not be available for at least 3 weeks. In that regard we note that settlement was to take place at 11 am today. That deadline has now been extended to this afternoon. In the circumstances, unless Mr Hill can provide the funds required before 3 pm, our client is at liberty to complete the purchase of the businesses, if he is able, using funds obtained from other sources. (Ex. 1: 2413) 109 It is apparent that in the first paragraph of this letter Mr Brooks was referring to paragraph (g) of the letter of 6 June 2002. In any event, the defendant completed the purchase on 19 June 2002. On that day the defendant spoke to Mr O'Neill and advised him that the contracts had been settled but that he was not "very pleased". He said: "I now have a wine business, which has cost me plenty, that I never really wanted. I am disappointed, to say the least, with the way things have turned out". Mr O'Neill informed the defendant that he could understand his disappointment but advised him that the plaintiff still wished to complete on the wine business and that Mr Wehrle had indicated that the money would be available in about three to four weeks. Mr O'Neill gave evidence that the following conversation then took place: O'Neill: Did you have a lot of difficulty raising the finance? Defendant: Yes, plenty, I've had to give my personal guarantee supporting it all. Terry might have lost his deposit, but I've still had to come up with the money and I don't need to tell you that we are talking about a $10 million wine business. O'Neill: Yes I know. All I can do is tell you that Terry remains interested and will be pursuing Sigvald for the dollars and we'll keep you informed. False documents discovered 110 On 24 June 2002 Mr O'Neill had an opportunity to look at some discovered documents in the proceedings that were being pursued by the plaintiff, Chocmalt and Perbold against the liquidators. One of the documents was the copy of the contract between the liquidators and the defendant in which Mr O'Neill noticed that the definition of deposit was $820,000 and that the apportionment of the purchase price for the Wine Business was $5,699,996. Post completion conduct 111 After a number of unsuccessful attempts to make contact with Mr Brooks by telephone, Mr O'Neill sent an email to him on 28 June 2002 in the following terms: We keep playing telephone tag so I thought I would email you instead. Terry and I would like a meeting with David James and you sometime next week, to clarify the current position and to sort out the mystery (at least from our end) as to why the contract as executed was so substantially different ($4 million in the purchase price) from the one we understood you to be signing, and why we were not told this information. (Ex. 1: 2509) 112 On 3 July 2002 Mr Brooks sent the following email to Mr O'Neill: I will talk to David James about the current position. I presume that if Terry has a proposal to put then he should put it to David. There were a number of reasons for the price change, primarily relating to the stock and what the liquidators proposed to do, and did do, with the stock in the interim period. Also part of the price was represented by the properties at SA which are in separate contracts at the insistence of the liquidator. There were also some other properties that we asked to be included in the sale which we managed to get and they are also dealt with in separate contracts. We also note that the allocation of prices was ultimately decided by the liquidators (and was the subject of many changes) as we had mentioned in our previous emails to you (where we sought changes to reflect that). With respect to the proposed changes etc, we believed that we satisfied our obligations under the agreement with Terry. Irrespective of what the price turned out to be, it is clear that Terry was not able to complete the contract and we had to negotiate ourselves into a position to complete the contract. Also, we note that Terry was selling half of Wine National to a Swiss investor for a set rate. Our understanding was that this price was not being changed but that these funds would be the funds that would be procured for settlement. (Ex. 1: 2512) 113 Mr O'Neill was cross-examined about his email to Mr Brooks on 28 June 2002 in the following way: Q: By 28 June 2002 you had worked out, had you not, that Mr James had paid less to the liquidator for the wine business than you thought he was going to? A: Yes. Q: And you were horrified by that, weren't you? A: I was astounded, yes. Q: You were angry? A: Yes, I was angry. Mainly at the solicitor. Q: You thought you had been ripped off and misled, didn't you? A: Yes. Q: Is this fair: You're not a person who generally hides your light under a bushel, are you? A: Not sometimes. Q: If you are angry, upset, feel that you have been ripped off you would tend to vigorously assert that position, wouldn't you? A: Not in circumstances where it is in my client's interest to temper my thoughts and just write a legal letter or a legal email. In fact it would have been totally against my client's interests because at that stage we were attempting to negotiate with David James at the actual contract price. The last thing I wanted to do was to write very stern letters to James or his solicitor. Q: Well, you have predicted the next ten questions but the fact is that you didn't assert to Mr James or Mr Brooks what you say was your state of mind. That is, that there had been a serious breach of contract and so on? A: In the lengthy telephone discussion on, I think, 11 July, in temperate language, that's exactly what I suggested. (tr. 103-104) 114 The reference to the conversation of 11 July 2002 is a reference to a conversation between Mr O'Neill and the defendant that occurred after Mr Brooks had advised Mr O'Neill that it was appropriate for him to speak directly to the defendant. Mr O'Neill gave affidavit evidence of this conversation with the defendant, including the following: O'Neill: The reason I am ringing you is to talk about the Back to Back Agreement, and in particular, the discrepancy between the sale contract that we obtained on discovery and the draft sale contract that we were given late on the Friday afternoon, just before you signed. Defendant: Yes, I understand what you want to talk about. I do not know why Clayton Utz gave you that contract. I have already had David Brooks talk to them about that. O'Neill: Well be that as it may, I have the sale contract and we need to talk about it. … Defendant: What happened was that the Wine Business and the Distribution Business were acquired for exactly the same price that we were all talking about, however, there were a few more assets acquired by me, assets that you didn't want. O'Neill: David, if that is the case, are you telling me that what you paid for the wine assets was exactly $10.785 million. Defendant: Yes, and I can't see the relevance of your question, in any event. I own them under the Back to Back Agreement, and if you are going to own them, you have to pay me that amount. O'Neill: David, I don't agree. What I am talking about is the actual price you paid for the Wine Business, because I have in front of me the actual signed contract, discovered by Clayton Utz. Defendant: Michael, if Terry wants the business, he pays me the full amount of the Wine Business under the Back to Back Agreement of $10 million odd. My problems are more to do with bedding down the business then dealing with these issues. 115 Further discussion occurred and then the following was said: O'Neill: David, I hear what you say, but my point is about the actual price paid. Defendant: The total price we paid was $12.875 million. The Distribution price was $2 million and there were some properties over and above that, these were the additional assets we acquired. O'Neill: David, with those sorts of numbers then it seems to me that you are asking Terry to pay $10.875 million for the Wine Business and another $575,000 for Fernhill and the Marienberg properties. Defendant: Yes, the Marienberg property came in at $850,000. O'Neill: David, we still come back to the problem. I have in front of me the sale contract which comes in at a $8.2 million for the two businesses, the total price for the Wine and Distribution Businesses being $8.2 million and I frankly cannot work out how this is the case. Defendant: Michael, there was a side contract for the stock and the Distribution Business. It is all a bit complicated, but I can assure you, the price that we paid for the Wine Business was the price we agreed upon and dealt with the liquidators on that basis. 116 After further discussion the following was said: O'Neill: The real deal says to me that on the numbers referred to on the Clayton Utz contract, the Wine Business came in at $5.6 million and after taking away the deposits, Terry has got to find about $4.5 million. Defendant: I doubt whether Terry would have had that sort of money anyway. O'Neill: David, that is not true, all he had to do was to sell his property and a few other assets and those sorts of dollars could have been raised. Defendant: I don't agree, in any event, the price was $10.875 million, so that just doesn't even matter. Michael, there were some modifications to the agreement and these modifications occurred right up to 19 June, mainly in relation to stock. 117 Mr O'Neill gave evidence that he asked to see the contracts but the defendant said he could not see them and informed him that any "new deal" would be at the price that had always been talked about. 118 On 12 July 2002 Mr O'Neill sent an email to Mr Brooks and in particular referred to clause (f) of both the 9 May letter and the amended letter, and then continued: Terry Hill would therefore have expected you, or your client, to provide him with the Sale Deed dated 24 May 2002 (subsequently provided on discovery by Clayton Utz) and any side-contracts or variations to any of those contracts, for Terry Hill's approval. It is clear from my telephone discussions with David James that he remains interested in proceeding with the "back to back" arrangement, at least on the basis of his understanding of its effect. David James made it clear to me that he is not happy holding onto the wine assets acquired. Before Terry Hill is in a position to place any proposal to David James, he does seek from you, or your client, copies of all the Sale Contracts and associated settlement sheets which disclose the actual purchase price paid for the wine and distribution assets, a request which amounts to David James doing no more than complying with his obligations under the "back to back" agreement, albeit after the event. (Ex. 1: 2708) 119 On 16 July 2002 Mr Brooks wrote by e-mail to Mr O'Neill, with a copy to the defendant, in the following terms: I refer to your email. Dealing with the issues set out therein, it is apparent that we must be operating off two different agreements, Clause (f) of the agreement we hold signed by Mr Hill makes no reference to the provision of a draft contract, probably because by the time the agreement was entered into, contracts had already been signed. The expectation referred to by you, we believe is unfounded. Our client entered into a back to back arrangement on the basis of certain prices being paid. You were advised both by email and in a telephone discussion that the prices in the contract were constantly changing to suit the liquidators' desire to achieve the outcome required by the liquidator for the individual companies. It was not possible for ourselves to argue strenuously against such changes without disclosing the existence of the back to back arrangement. We believe that it was clear that these price changes would not affect the arrangements between our clients. Our clients understanding of the transaction was that your client would obtain the relevant monies from the Swiss Investor which would then be used for settlement. At no stage did your client indicate that monies would be forthcoming from anywhere else. Further, we understood that your client actually would not be putting any money into the transaction as your client's share was to effectively have been paid by the Swiss Investor. It was clear at the time of completion that these monies would not be forthcoming and that there were no prospects of any monies being obtained from anywhere for settlement, and our client was required to borrow very heavily to settle the purchases. In the circumstances, our client does not acknowledge any obligation to your client whatsoever. However, as indicated, it is prepared for your client to acquire the wine business, whether for the same price as discussed between the parties or some other price . (emphasis added) (Ex. 1: 2707) 120 It seems to me that what Mr Brooks was referring to in the first paragraph of the email was the 6 June letter that does not contain a clause requiring provision of the draft contracts to the plaintiff for his approval. The reference to the fact that the letter was "signed by Mr Hill" and the absence of any reference to the signature of the defendant upon it may be explained by the defendant having sent a copy of the last page of the letter direct to Mr O'Neill and may not have provided that signed page to Mr Brooks. As I have said Mr Brooks was not called to give evidence and neither party focused upon this correspondence until after the completion of the trial. In any event it appears that at the time of this e-mail Mr Brooks was focused upon the 6 June letter. 121 On 16 August 2002 Mr O'Neill served Mr Brooks with a draft pleading advising that if the issues between the parties were not resolved by 21 August 2002, the process would be filed. On 19 August 2002, Mr Brooks wrote by email to Mr O'Neill in terms that included the following: The allegations in the Statement of Claim are strongly disputed and insofar as the pleading is concerned, our initial view is that it is largely defective and the various causes of action are not properly pleaded or incomplete. Nevertheless, we reiterate our client's former position that it is prepared, on a without prejudice basis, to sell the Wine National business to your client on just and fair terms. However, we note that there are some issues as to the basis of any sale which, if any negotiations were to progress would require addressing. Our client is concerned that in entering into such discussions, it will expend a considerable amount of time and energy which it could otherwise devote to the defence to the proposed claim. Our client is particularly concerned that such discussions may not prove fruitful even if a resolution is negotiated because your client would not be able to provide any funds to complete any transaction. Accordingly, as a precondition to any discussions, our client would require some form of satisfactory proof that your client would be able to complete any purchase, either by way of production of any formal finance approvals or a statement indicating the cash resources of your client. (Emphasis added) (Ex. 1: 2711) 122 Mr O'Neill responded by email dated 21 August 2002 advising that the plaintiff "has the funding in place necessary to commence sensible negotiations" but that "for reasons that must surely be obvious" he could not disclose his funding sources to Mr Brooks or to the defendant. Mr O'Neill advised that if the defendant was agreeable to an immediate meeting, the plaintiff would need to urgently conduct due diligence of the wine business and estimated that it would take 7 to 10 days. It was suggested there was a need for due diligence because the defendant had been in control of the wine business for two months and prior to that it had been under the control of Ferrier Hodgson for five months (Ex. 1: 2713). Proceedings commenced 123 The plaintiff commenced these proceedings by the filing of a Summons on 29 August 2002. As originally constituted the plaintiff sought relief against the present defendants and in addition Frank Fabrizio, however the action against him was not pursued after October 2002. Mr Wehrle's further involvement 124 On 23 June 2002 the plaintiff wrote to Mr Wehrle advising him that the defendant had settled and was running the wine business whilst he awaited the balance of the monies "pending our settlement". He asked: "Sigvald – time is very important now – what is your best estimate" (Ex. 1: 2508). On 28 June 2002 the plaintiff wrote to Mr Wehrle again asking him to advise him of "our status" because the defendant was required to fund "part of the settlement to the tune of some A$10m and is concerned" (Ex. 1: 2510). 125 It is apparent that the plaintiff and Mr Wehrle had a telephone discussion on 1 July 2002 and Mr O'Neill wrote to Mr Wehrle on 3 July confirming that discussion. The letter stated that Mr Wehrle had: "indicated to Terry that you would set out in a letter the timing arrangements for the transfer of funds to Australia, as per previous communications, so as to enable Terry to finalise arrangements with David James". Mr O'Neill asked for the letter as soon as possible because a meeting with the defendant was to occur shortly (Ex 1: 2514). 126 On 6 July 2002 Mr Wehrle wrote to the plaintiff. That letter included the following: Honestly I do feel left out since I don't hear anything what is going on from your side. I received the other day an article which was not very complimentary. Furthermore you mentioned in your fax to me that David has "funded part of the settlement" which implies that he has covered my share and you have fulfilled your obligations in accordance with the Heads of Agreement. I would appreciate to receive from you and/or Mike proof of such transfer as well as your plan of actions. If you want me to play a role internationally I would equally appreciate and expect to receive copies of all communications that are going out e.g. to the UK. As you expressed in your fax David is "concerned" about settlement of my share of the business, I think it would be more than appropriate for me to contact him directly to explain to him personally the current status. Don't you think so? Again I must tell you that if you expect me to become a part of the business and play an active role in it I would like to be informed of all developments positive as well as negative. Terry I think you must make a decision and let me know how you want to proceed from here. (Ex. 1: 2515) 127 On 7 July 2002 the plaintiff responded referring to the article that apparently appeared in a Sunday newspaper in Sydney on 16 June, 2002. The plaintiff claimed that the journalist had interviewed his ex-wife who took the opportunity to settle "a score or two". In further explanation of the uncomplimentary newspaper article the plaintiff suggested that the liquidators may have briefed contacts in the press on something that was "old news". The plaintiff also advised that he was having a few "tactical wins" in the Supreme Court over production of documents and file notes from the liquidators. He claimed that "several high-profile creditors" had approached him and offered support and assured Mr Wehrle that "we continue to want you to be a very important part of the ongoing and developing business of the Wine Company, as we recognise the enormous support, contacts and opportunities that you have developed over a long period of time". The plaintiff advised that he would make further contact after a meeting he had planned with Mr O'Neill the following day "to update our working group on the current status" (Ex. 1: 2516). 128 On 9 July 2002 the plaintiff wrote to Mr Wehrle again advising him that he had requested a meeting with the defendant later in the week and "on the basis that we can negotiate with David a satisfactory sale of the Wine Business we are seeking bridging finance until your funds are available". The plaintiff also advised that he was confident they would be able to catch up a significant proportion of any loss of revenue caused by the delay (Ex.1: 2518). 129 On 11 July 2002 Mr Wehrle responded to the plaintiff's letters of 7 and 9 July 2002. That letter included the following: On the other hand I am really puzzled by your suggestion that you will be seeking "bridge financing" for my share of the business. In an earlier fax you had stated that David had covered my portion (and is very concerned). Hence I do not see any need for such an undertaking. Furthermore I also assumed that you had paid up your share. Thus your comment surprises me now suggesting that you will negotiate with David a satisfactory sale of the wine business. For my own comfort please let me have some evidence of your purchase as well as of the transaction covering your share of the business. I am somewhat confused! To cover my share I'll talk to Frank with whom - I think - I have established a good relationship while you all were in Zurich. (Ex. 1: 2520) 130 The plaintiff gave affidavit evidence that on 18 July 2002 whilst he was in London he telephoned Mr Wehrle who advised that arrangements were in place to have the funds accessed in South Africa in about one or two weeks. He informed the plaintiff that he was still very interested in taking some equity and would come to Australia to work with him to develop strategies for Europe. The plaintiff claimed that he advised Mr Wehrle that they would have to rework the business plan "once we see what we will be buying". He informed Mr Wehrle that he had asked for an explanation from the defendant of the differences between the two contracts dated 24 May 2002 and that he had not been given an acceptable reply. This is evidence is rather curious having regard to the fact that the plaintiff had spent a great deal of time and effort in keeping from Mr Wehrle the details of the contracts between himself and the defendant. 131 It is apparent that after the plaintiff filed the Summons commencing these proceedings, he issued a media release which on 29 August 2002 he sent to Mr Wehrle under cover of a letter that stated: We want to acquire the wine business, but it will only be purchased once we have done serious due diligence to asses the appropriate purchase price. We will then have to revise our business plan. Are you still interested in having an interest in the Business? I have no idea of the Capital base at this stage but a "ball park" figure is around $A12 million. (Ex. 1: 2722) 132 The plaintiff requested that Mr Wehrle call him and provided his new mobile number. There is no evidence from the plaintiff of any further contact with Mr Wehrle. 133 Mr Wehrle was not called by either party to give evidence and his involvement after the end of July is a little mysterious. This mystery has been added to by the evidence of the defendant who was cross-examined about the letter he wrote to PIBA for funding in May 2002, in which he claimed that the arrangement was with Mr Wehrle. In that cross-examination the following evidence was given: Q: Then the letter continues: "The agreement includes the distribution of the James Estate brand in Switzerland and the Netherlands." What agreement had been reached with the distribution of James Estate in Switzerland with Mr Wehrle? A: Well, Mr Fabrizio had mentioned that during the discussions and it was one of the things he told me that would be possible. Q: So, in addition to going over there to see if Mr Wehrle was good for the money, you tried to negotiate some distribution arrangement? A: No. It was just general discussion. He is a wine distributor. Q: Was there an agreement with Mr Wehrle that included distribution of the James Estate brand in Switzerland or the Netherlands or was there not? A: There was a verbal agreement as he was going to be the shareholder of Wine National. We were to work together with the brands in Australia as the distributor and it would only be obvious that he would be the distributor in Switzerland. … Q: To say that the agreement includes distribution of the James Estate brand in Switzerland is to play fast and free with the truth, isn't it? A: No. There's many an agreement done not formally. Q: I'm sorry. Can you just tell me whether there was a verbal agreement? A: Yes. Q: Who was the agreement with? A: Mr Fabrizio and Mr Wehrle. Q: On your behalf? A: Yes. (tr. 193-194) 134 The defendant also gave evidence that he had a number of discussions directly with Mr Wehrle on the telephone in both May and June 2002 and admitted to having discussions with him in November 2002. He gave the following evidence: Q. In November 2002 did you have occasion again to deal with Mr Smith from PIBA? A. Yes, I deal with him all the time. Q. At that time a security change had been requested by the Commonwealth Bank of Australia in respect to some facilities and PIBA needed to determine whether to approve the loan renewal of $2.4 million? A. Yes. Q. Did you say words to this effect to Mr Smith, as stated in the funding submission in June you have negotiated the sale of 45 per cent of the business for $AU10 million with David receiving a non-refundable deposit of 1.2 million Australian from the Swiss purchaser. Do you remember telling PIBA that? A. I may have, once I became aware of what Mr Hill's deal was going to be. Q. And then did you tell Mr Smith, as indicated previously the Swiss purchaser was waiting on the proceeds from the sale of other businesses before he could complete with David? A. If that's in this report I must have said that. Q. Did you then say to Mr Smith, the Swiss purchaser has indicated he now has the funds to complete and is expected to be in the country within the next two weeks, should the Swiss party not settle while here in Australia, David will rescind the contract. Did you tell Mr Smith? A. Yes. Q: You were still negotiating with Mr Wehrle, weren't you? A: No, Mr Wehrle and I had very little or no contact. We sent him, because he was our distributor then in the Netherlands for the wine brands and also for James Estate, we had sent him wine samples of all the James Estate range, my export manager had visited him three or four times and each time my export manager spoke to him he still indicated that he would like to make an investment in the Australian wine industry. Q: And when was that? A: It is still up to today. Q. Is it true to say you probably did tell Mr Smith in November 2002 that you were hoping to, still hoping to do a deal with a Swiss investor? A. I would have said that is all potential to do that, it wasn't necessarily going to happen if he was going to come out here, there may have been a chance to do that. Q. Did you say that the Swiss purchaser has indicated that he now has the funds to complete and is expected to be in the country within the next two weeks? A. That's what I believed, yes. Q. In November 2002? A. Yes, he did tell me some time that he had money and that he was coming to Australia to acquire some wine assets. Q. And you were going to sell 45 per cent of Wine National to him for 10 million? A. Wine National is a different company, it had incorporated a lot of the James Estate business and assets so it was very different. Q. You had to sell 45 percent of a different business now to him for $14 million. A. Yes, he wanted to buy minority shareholding in an Australian Wine business because he felt he had to have someone competent here to run it and basically he said he had a certain amount of funds and that was a general indication of him buying into Wine National which was James Estate, James Estate Sales, James Estate USA, UK and Basedow, Marienberg, Fernhill and $9 million property in the Upper Hunter Valley, so it is a very different scenario. Q. You had still kept James Estate Wines separate though, you hadn't merged James Estate Wines and Wine National? A. At that time I think we had a Court order that we weren't allowed to blend the stock, change the Marienberg wine list or something, and foods list and so we were very careful about that. Q. Wine National is pretty well the same business in November as it was in June? A. No, it was a very different business. Q. What had changed then if you were under Court orders to keep it the same? A. The distribution of those brands was done by Australian Beverage Distributions and the international distribution was done by my companies. Q: So, the distribution side of it had changed? A: Yes. And if Mr Wehrle had come here and wanted to have an investment it would have been on the basis of the combined company because clearly the assets of the Wine National as purchased from Ferriers are worth $2 million, not the price he was willing to put in. Q: And when did you negotiate the sale of 45% of the business at $10 million with Mr Wehrle? A: It is only a verbal discussion with him on the phone and his discussions with Frank Fabrizio that he had a certain amount of funds and he wants to buy minority shareholding. Q: The request was when? A: Would have been prior to that date, sometime. Q: Sometime between June and November? A: There was no fixed contract to do the business. Q: Time please Mr James? A: Within a month of that. Q. Did you tell Smith that if the Swiss party didn't sell while he was in Australia you would rescind that agreement? A. Yes. Q. And that you would look for another investor, sell down the bulk wine stocks and make a timely application for term funding? A. Yes, because at that stage we had come to realise, and PIBA also, is that the business was worthless and they were concerned about their investment. Q. So, you were still on bridging finance weren't you? A. Yes. Q. Did Mr Wehrle come to Australia? A. No. If he did he didn't see me. … Q. You were pretty confident Mr Wehrle was going to come through with the money in November, weren't you? A, I was hopeful. Q. You told PIBA that you were confident? A. Yes. (tr. 203-207) 135 It is little wonder that Mr Wehrle seems to have faded from the picture in the negotiations with the plaintiff. The defendant had struck some form of contract with Mr Wehrle for the distribution of the James Estate Wines and had apparently negotiated for the sale of what he called a "minority" shareholding in a business, the true nature of which is difficult to define on this evidence. However the defendant informed PIBA that he would "rescind" the contract, whatever its terms were, if Mr Wehrle did not perform. The terms of the Contract 136 The plaintiff's pleading claims that the contract was partly in writing and partly oral and its terms were partly express and partly implied. It alleged that the oral parts of the contract were constituted by the conversations between the plaintiff, Mr O'Neill and the defendant on 6 May 2002. It alleged that to the extent that the contract was written, it was constituted not only by the 9 May letter but also by the amended letter. This was not the case that was run at trial. At trial the plaintiff claimed that the 9 May letter constituted the contract. 137 The pleading alleges that it was an express term of the contract that the defendant, or his nominee, would make an offer to the liquidators to acquire the wine business for $10.3 million ("or such other price as agreed" with the liquidators) and the distribution business for $2 million ("or such other price as agreed" with the liquidators) for a total price of $12.3 million ("or lesser price as agreed") (par 15(c)). This allegation is clearly reliant upon the amended letter rather than the 9 May letter. 138 Further express terms alleged are: that the defendant would acquire three shelf companies being Newco No 1 (Liquor National), Newco No 2 (Wine National) and Newco No 3; the share capital of Liquor National was to be owned by the defendant or his nominee and Liquor National was to acquire the distribution business for $2 million or such lesser price as agreed; Newco No 3, in which the plaintiff or his nominee would own all the shares, would own all the shares in Wine National; and Wine National was to acquire the wine business for $10.3 million or such lesser price as agreed (par 15 (d)). Once again this pleading is reliant upon the amended letter rather than the 9 May letter. Both the 9 May letter and the amended letter required the defendant to provide all draft Asset Sale Contracts "relating to the acquisition by Newco No. 2 of the Wine Business" for approval by the plaintiff. 139 Mr Newlinds SC submitted that the plaintiff's evidence does not support the case that the 9 May letter is the contract between the parties. That evidence included the following cross-examination: Q. What I want you to agree with me is, if you can, in your mind you didn't think there was a concluded agreement at the end of those discussions did you? A. Prior to 9 May? Q. And up to and including 9 May A. No, at that stage I believed that Mr James had had preliminary discussions with the liquidator but until such time as that looked to be realistic, it was just discussions. Q. And Mr James wanted to speak to his financial controller and the like? A. I'm sure. Q. But in the meantime you'd given him information about the offers you'd previously made to the liquidator? A. And the reasons why we made those offers. Q. And he was going to go off, as you understood it, and have some negotiations with the liquidators? A. The term "negotiations" – I understand that he was going to put our offer to the liquidators. Q. But you don't suggest for a moment that you thought any time up to and including 9 May before this fax was sent that there was a concluded deal between you and Mr James? A. I believed that we had reached an in principle arrangement? Q. And Mr O'Neill then wrote this letter to record and have the people who were party to that in principle arrangement, correct? A. Yeah, this was Mr O'Neill's summation of the discussions and, as I understand it, outlined it in these terms. Q. And one thing is clear, that it was intended by at least you through Mr O'Neill that the parties would sign off on this document to confirm it was the agreement? A. Provided we agreed. Q. Provided you each agreed that that was the agreement? A. Yes. Q. You don't suggest for a moment that in your mind you thought at the time in Mr O'Neill sending off this facsimile on 9 May that that created some binding arrangement between you and Mr James? A. No, as I have said before, it was a summary of the agreements or arrangements that had been discussed and agreed upon and this was Mr O'Neill's summation of that. Q. And you understood that there would be no agreement until both sides signed off on didn't you? A. Well, that's normally an agreement. (tr. 74-75) 140 Mr Newlinds SC also submitted that, although the plaintiff did not sign the amended letter, his evidence in cross-examination establishes that he accepted the amended letter to be the agreement with the defendant. The part of the cross-examination relied upon for this submission was as follows: Q: Mr Hill, on 23 or 24 May 2002 when the marked-up version of the 9 May letter was received by you with Mr James' signature on it, you accepted that that was the document that recorded the deal between the two of you, didn't you? A: I believe so. Q: I'm sorry? A: I believe so. Q: Just to be clear, look at the document that you are being referred to please. A: Yes. Q: That is the one with Mr James' signature on it? A: That's the document, Q: Did you receive that on 24 May? A: I'm not quite sure when it was actually received but it was received prior to 24 May. Q: Because it was based on the receipt of that document that you actually paid the deposit and went ahead and did what you had to do under the arrangement, wasn't it? A: Yes. (tr. 71-72) 141 The cross-examination also included the following evidence relevant to the amended letter and puts the cross-examination extracted above in context: Q. Now this document came through to you with the alterations marked up in that they are underlined, didn't it? A. Yes. Q. And when it came through to you you actually read it, didn't you? A. I did. Q. Do you agree with me that this is the only version of the agreement that bears Mr James' signature? A. I believe so. Q. Did you understand when you received the marked up document that what Mr James and his lawyer were intending to do was to change the words used in the contract? A. I believe that when this was discussed we reviewed the changes to the original version, yes. Q. And there is no doubt in your mind that you read and understood these changes? A. Yes. Q. And you say in your affidavit that after you read the changes, your belief was that the contract really hadn't changed from what you understood it meant beforehand? A. The intent, no. Q. Is that right, Mr Hill? A. The contract was changed to add words to the effect that "or such other varied amount as agreed with the liquidators". I interpreted that that in the sale where you are – there was allowance for minor adjustments of inventories up and down and there was also adjustments for employees' leave and annual leave and long service leave, et cetera, entitlements to be adjusted. Q. You see, the words "or as such other varied amount as agreed between the liquidators" have been added in relation to the distributions business, have they not? A. Yes. Q. That is in clause a (i) on page 927? A. Yes. Q. They have been added in relation to Mr James' company's obligation to purchase the wine business for either 10.3 million dollars or such other amount that he negotiates? A. Yes. Q. And if you go over the page to 928 to paragraph (h), in relation to the distribution business Mr James' company is going to pay the balance of the purchase price of 1.8 million dollars or such other amount as is varied? A. Yes. Q. But when you come to (i) which is your obligation to pay Mr James money, those words don't appear. My question is did you notice that at the time? A. I don't recall noticing at the time. Q. And I want to suggest to you that whatever else you understood this marked up version of the agreement to do, you understood that Mr James intended it to be an alteration to whatever had been discussed, didn't you? A. It was my understanding that it was an alteration to allow for the variations in the negotiated price, so, in other words, if the price was hypothetically more than 10.3 million dollars because the liquidator had purchased another 2 million dollars worth of inventory, perhaps that between the date of the contract and the settlement, then there would have been negotiations on the higher price. (tr. 70-71) Q: Did you assume that if you had gone to Mr James and said, "Look, the only deal that I am prepared to do with you is that I will pay you whatever you pay the liquidator" and he said to you, "Bad luck, the only deal I am prepared to do with you is that you pay me the money you've agreed to pay and if I can get it for less from the liquidator, that's good for me"? A: I wouldn't have agreed that. (tr. 72) 142 Mr Aldridge SC submitted that the conduct subsequent to the 9 May letter may be taken into account to determine whether the terms of the 9 May letter constituted the agreement between the parties: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153. In this regard reliance was placed upon the defendant sending the revised offer of $10.3 million to the liquidators; the defendant reporting back to Mr O'Neill of the making of that offer; the continued provision to the plaintiff via Mr O'Neill of the draft contracts with the liquidator, albeit with false figures; the requirement for Mr Fabrizio to travel to Zurich to meet with Mr Wehrle alleged to be demonstrative of the defendant's interest in the plaintiff's capacity to finance the purchase of the wine business; the incorporation on 17 May 2002 of Wine National and Liquor National; and, on 21 May 2002, the defendant's approach to Yellik Holdings to arrange the short-term loan for the plaintiff to pay the deposit monies. 143 The 9 May letter and the amended letter concluded with the words: "I trust the above summary accurately sets out the arrangement between the parties. If so, each of Terry Hill and David James should sign at the foot of this letter". The 6 June letter concluded with the words: "I trust the above summary accurately confirms the arrangement between the parties. If so, each of Terry Hill and David James should sign at the foot of this letter, confirming this agreement". There is some evidence that the plaintiff signed the 9 May letter on 10 May 2002 and gave it to Mr O'Neill (tr. 75). Mr O'Neill agreed that the plaintiff had signed a version of the 9 May letter but that he did not think it was necessary to send it to the defendant because "I thought it was exactly the same document that had been sent on 9 May" (tr.106). That document is not in evidence. The defendant did not sign the 9 May letter. The amended letter was signed by the defendant but was not signed by the plaintiff even though Mr Brooks had requested the plaintiff to sign the amended letter in his letter of 3 June 2002 to Mr O'Neill. The plaintiff signed the 6 June letter for the purposes of it being sent to Mr Wehrle in Switzerland. However after the correspondence between Mr O'Neill and Mr Brooks on 14 June 2002 the defendant signed the 6 June letter on the same page on which the plaintiff's signature appeared. 144 Up to February 2004 when I invited further submissions in relation to the 14 June 2002 correspondence, this case was run on the basis that no party suggested that the 6 June letter reflected the agreement between the plaintiff and the defendant. On 12 February 2004 I granted leave, by consent, to the plaintiff to file a Fourth Further Amended Summons in which claims were made that the 6 June letter was confirmation of the arrangement that had already been reached between the parties in the 9 May letter, or alternatively was a variation of the agreement contained in the 9 May letter. The defendants' defence to that Amended Summons was filed on 19 February 2004. 145 The tangled web that was weaved by the commercial trickery perpetrated in this case leaves little wonder that there were suggestions that the parties were at "cross purposes" and that they were working off different agreements. 146 The condition imposed by the defendant in Mr Brooks' letter of 14 June 2002 for his preparedness "to enter into the agreement" contained in the 6 June letter was the repayment of the deposit monies and the Yellik facility fee that the defendant had loaned the plaintiff. That condition was satisfied on 17 June 2002 when the plaintiff repaid $207,131 to the defendant (Bearing Traders). The 6 June letter required the plaintiff to pay the deposit for both the distribution business and the wine business (clause (d)). It required the defendant to provide the balance of the purchase price for the distribution business (clause (e)) and required the plaintiff to cause to be paid "the balance of the purchase price to allow the completion of the Asset Sale Contracts and for the acquisition of the Wine Business" (clause (f)). It required the plaintiff to provide bank cheques to "enable" Wine National to complete the acquisition of the wine business (clause (f)). It did not require the defendant to provide to the plaintiff the draft Asset Sale Contracts for his approval. 147 Although neither party claimed that the letter of 6 May 2002 from Mr O'Neill to the defendant was a document by which the parties were contractually bound, it is in the circumstances instructive of their intentions as at 6 May 2002. That document clearly stated that it was intended that the plaintiff would contract with the defendant to acquire the wine business "at the same price" that the defendant purchased it from the liquidators. 148 The evidence supports a finding that the defendant understood that he had agreed that the plaintiff would be purchasing the wine business at the same price that he purchased it from the liquidators. The efforts to which the defendant went in concealing the true price from the plaintiff are supportive of such a finding. The defendant's case is of course that such changes were made at the behest of Mr Brierley and Mr O'Neill. If I were to accept that as the reason for the changes there would be support for the submission that the plaintiff had agreed to purchase the wine business for $10.3 million irrespective of what the defendant paid for it. 149 The defendant would have the Court believe that the changes were made to the draft contract with the liquidators on the first occasion because Mr Brierley asked him to do so and subsequently because Mr O'Neill agreed that he should do so. The defendant was cross-examined about these claims and gave the following evidence: Q: You are saying, aren't you, that you are prepared to help Mr Brierley deceive Mr Wehrle and possible investors by changing the figures? A: Well, I didn't think of that at the time and I guess I regret that. Q: Why didn't you say to Mr Brierley, "I am not going to do that"? A: Because at that time I was trying to do everything possible to help him, because I thought I was their last chance at this business. Q: So you were prepared to assist in the telling of a lie? A: Not deliberately and I do wish I didn't do that. Q: You didn't accidentally change these figures? A: No, I deliberately did. Q: You deliberately did? A: Yes. Q: You got a version of this contract on the computer screen and changed it? A: I did. Q: In the knowledge that it would be used by Mr Brierley and Mr Hill and others to show the financiers? A: I don't think I really had the knowledge they were definitely going to do that, but I would assume that's what it was for and it was at their request and I shouldn't have done it. (tr. 167) 150 The defendant agreed that Mr Brooks acted on his behalf in negotiating changes to the contracts with the liquidators and gave the following further evidence in cross-examination: Q: As a part of seeking changes you know that Mr Brooks sent versions of these contracts electronically to Mr O'Neill? A: Yes. Q: And you know that before each of those contracts was sent Mr Brooks made changes to those contracts, don't you? A: Yes. Q: You were in fact physically present at times when Mr Brooks made changes to them, weren't you? A: Yes. Q: The two of you sitting around Mr Brooks' computer and you watched him make the change? A: Yes he did them at my request. Q: And what you did was on each occasion, was it, change the completion payment from whatever figure was there to the figure that reflected 10.03 million? A: Yes. Q: 10.3 million? A: Yes. Q: And similarly the deposit was always changed to 1.22 million? A: Yes. Q: The definition of distribution price was changed to just over 2 million? A: Yes. Q: The price for the winery asset was changed wherever it appeared to just under 9.5 million? A: Yes. Q: And the definition of land was altered in the contract, wasn't it, as well? A: Yes. Q: And the purpose of that was to disguise the fact that the residential properties were also being bought by you? A: I would say more so that there was one contract rather than multiple contracts. … Q: But if Mr Hill was buying from you for a fixed price and was never interested in the land why couldn't it just stay there? A: Because the Marienberg property was on a separate contract which was to be owned by Wine National and therefore it was on because it was on a separate contract then we would have to do those couple of contracts and the purpose of them getting the contracts was because they would be obligated with the terms and conditions of that contract after they owned the shares in the company that did the deal with Ferrier Hodgson. Q: Could you say that again for me, please? A: The reason why they had the contracts and we continually gave them the contracts is that once they bought the shares in Wine National they would then be obligated by the terms and conditions of that contract with regard to, intricacies of it. Q: Well, yes, you wanted Mr O'Neill and Mr Hill to approve the terms of the contract? A: I wanted them to have the opportunity to. Q: And you know at one stage very late in the piece Mr O'Neill sent through 29 significant changes? A: Yes. Q: And in fact those changes caused a very angry response from your vendors, didn't they? A: Yes. Q: But nonetheless Mr Brooks simply passed them on as they were, didn't he? A: I believe there was some discussion about clause 12, I don't think they were passed on verbatim. (tr. 181-182) 151 In the scheme of things there was no reason for Mr Brierley to deny falsely that he had requested the defendant to change the contracts. Mr O'Neill's denial of the alleged conversation with Mr Brooks is unchallenged. However the defendant claimed Mr O'Neill agreed that he, the defendant, should make the changes. Mr O'Neill denied that he did so. I have little doubt that Mr O'Neill was doing everything he could to assist his client, the plaintiff. He gave evidence that he considered himself to be a friend of the plaintiff and had agreed to become a director of the proposed companies in the transaction to assist the plaintiff. Evidence was also given that he may have become a shareholder. Although I take a dim view of Mr O'Neill's conduct in writing the letter to Mr Wehrle about the plaintiff's capacity to meet his obligation in relation to the share subscription by the completion date, that does not mean that I reject his denial that he agreed the defendant should change the draft contracts with the liquidators. 152 In any event there is ample evidence to support a finding that the defendant's claim that he was requested to change the contracts should be rejected. When the falsity of the figures in the document was discovered, neither Mr Brooks nor the defendant in any of their communications with the plaintiff or Mr O'Neill suggested that they had been requested by Mr O'Neill, the plaintiff or Mr Brierley to change the documents. If such a request had been made, it is reasonable to expect that there would have been a rapid response by either Mr Brooks or the defendant claiming that there could be no complaint because it was done at the plaintiff's, Mr O'Neill's or Mr Brierley's request. No such response was given. Rather there was a complaint made by the defendant to Mr O'Neill about Clayton Utz providing a copy of the document containing the real figures to Mr O'Neill. There was also an attempt by the defendant and Mr Brooks to explain the figures by reason of an apportionment by the liquidator. 153 I accept Mr Brierley's evidence that he did not request the defendant to change the figures. I also accept Mr O'Neill's denial that he had agreed that the figures should be changed. I do not accept the defendant's evidence that he was requested to change the figures in the contract. 154 Mr Brook's letter of advice to the defendant dated 15 May 2002 provided the defendant with an excuse as to why the 9 May letter should be changed. Mr Brooks wrote: You should explain this on the basis that there are some items still to be negotiated which will have a bearing on the price but which you don't want to jeopardise the validity of this agreement simply because the price is different. 155 That suggested explanation was to be given for the change to paragraph (i) in which the words "at such other price as agreed between the liquidators and Newco 1". Mr Brooks' advice in relation to paragraph (ii) was premised on the statement "the price will not be known". Clearly by this time the defendant had decided that the plaintiff was not to know the price to be paid by the defendant to the liquidator. To suggest that the amendments should be explained by negotiations in relation to "some items" having a "bearing" on the price, rather than stating the true intention that the plaintiff was to pay $10.3 million irrespective of the price paid by the defendant to the liquidator for the wine business, is just another aspect of the trickery that was afoot in this transaction. It is apparent that the defendant took up Mr Brooks' suggestion to give the explanation for the changes to the 9 May letter. The defendant informed Mr O'Neill that he had made "a few changes to the back to back agreement" in the context of a conversation in which he said that: "there may need to be some minor changes as to how the purchase price is to be apportioned". 156 Mr O'Neill gave affidavit evidence that the defendant had informed him on 10 May 2002 that so far as he was concerned the 9 May letter was the "deal". In cross-examination Mr O'Neill gave evidence that the defendant informed him on 10 May 2002 that he was "happy" with the 9 May letter. The evidence in the defendant's case suggesting that this conversation did not happen is indirect. It firstly appears in a conversation the defendant alleges he had with Mr Brierley in which he claimed that he had not really looked at what Mr O'Neill had sent him. Mr Brierley denied this conversation and I accept his denial. The other part of the defendant's evidence is a conversation he alleged he had when Mr Brooks asked him if he had a "proposed" agreement with the plaintiff. Mr Brooks was not called to give evidence in the defendant's case nor did he give evidence in the case against him. 157 One analysis of this evidence is that I should not accept what Mr O'Neill claims the defendant said on 10 May 2002 because Mr O'Neill did not say to the defendant on 22 May 2002 when he suggested he was sending through some changes that the contract had already been agreed to in the conversation with him on 10 May 2002. Mr O'Neill's failure to say something along those lines is not inconsistent with the conversation on 10 May 2002 having occurred. The defendant gave the explanation Mr Brooks suggested he should give for the changes and it was not unreasonable for the plaintiff and Mr O'Neill to give consideration to them on the basis that they were intended to accommodate what the defendant had claimed to be "minor changes". 158 The 14 June 2002 correspondence may also present as inconsistent with the 10 May conversation having occurred. Mr O'Neill's letter to Mr Brooks claimed that an outstanding issue was the "finalisation" of the agreement between the plaintiff and the defendant. The 6 June 2002 letter was, by this stage, not merely a letter to be signed off so that it could be sent to Switzerland. That had already happened and the correspondence with Mr Wehrle had moved on. However in my view this correspondence does not mean that Mr O'Neill's evidence is to be rejected. The correspondence occurred at a time after the contracts with the liquidator had been exchanged, the plaintiff had paid the deposits, albeit with the assistance of the defendant, and the plaintiff knew that Mr Wehrle had not produced any money and that there may be a delay of some weeks in the provision of the money. It was a different environment from that which existed at the time of the 9 May letter and/or the amended letter. That is evidenced by the inclusion in the 6 June letter of clause (g) requiring the defendant, after notice, to use his best endeavours to negotiate an extension of time to complete, with an acknowledgment that if the plaintiff defaulted, the defendant would be entitled to complete the purchase of the wine business using "his own funds". 159 On all the evidence I think it is more probable than not that the defendant did inform Mr O'Neill that he was happy with the 9 May letter. After 9 May 2002 the defendant could see that the plaintiff was making a very good deal if the Swiss money came through. It would have meant that the plaintiff was able to purchase the wine business for no further outlay than the deposits that had been paid and still retain 55% of the business. I have little doubt that the defendant tried to take the opportunity to sweeten the deal for himself without alerting the plaintiff or Mr O'Neill to what he was up to. His own evidence in cross-examination supports such a view of his conduct. He agreed he did not want the plaintiff to "tumble" to his view that the amended letter was a fixed price contract, when he knew or suspected that the plaintiff was of a different view (tr.183-184). I have little doubt that the context in which the amended letter was delivered was part of the defendant's attempt to ensure the plaintiff did not "tumble" to his plan. 160 The defendant's evidence was at times quite extraordinary. Although he had given evidence in his affidavit of discussions with the plaintiff and Mr O'Neill in relation to what he had put or was about to put to the liquidator by way of offer, he sought to suggest in his oral evidence that the offers he put to the liquidator were independent of those discussions. He also tried to suggest that it was coincidental that the figure that he discussed with the plaintiff was the same as the figure that he put to the liquidator. He ultimately agreed that his discussions with the plaintiff were "one of the factors" that were involved in the way in which he put the offers to the liquidator (tr. 155-156). 161 The defendant gave evidence that his view was that until 22 May 2002, the date upon which the amended letter was forwarded to Mr O'Neill, he was not contractually bound to the plaintiff. He said that up until that time there was always a possibility of selling the wine business to a lot of people and that there was also a real possibility that he would keep the wine business himself (tr. 162). However in other evidence he said that he was always intending to sell the wine business to the plaintiff if he had the money (tr. 164). 162 The defendant admitted that he and Mr Brooks changed the amounts in the draft Asset Sale Contracts before they were sent to the plaintiff for his approval. The defendant gave the following evidence: I guess, on reflection, if I was asked to send them that contract knowing now that it was the wrong thing to do, change the price, I would have probably sent them, if they wanted it, without prices. But I didn't do that. (tr. 172) 163 The defendant did not give evidence as to why he "now" thought that what he did was wrong, nor how he was "now" in a position to know what he did was "wrong". Nor did he give evidence as to when it was that it dawned on him that his conduct was "wrong". His case was that it was not wrong because it was at the plaintiff's request, made via Mr Brierley and Mr O'Neill, that the figures were changed in the contract. The defendant's evidence in relation to the changes that he and Mr Brooks made to the contracts sent to the plaintiff included the following: Q: But in any event these contracts were being sent to Mr Hill and Mr O'Neill so they could approve the term[s] and suggest changes? A: Yes. Q: Because it was intended that Mr Hill or his company was going to be the ultimate purchaser? A: No, they were going to be the shareholder of the company that was the purchaser and there were ongoing obligations. Q: If you were just selling them a particular asset the terms on which you bought, it would be entirely irrelevant to them, wouldn't they? A: If we were selling them an asset, yes. Q: That is what you say your contract was, you agreed to sell these assets for a fixed price? A: No, I was selling them the shares of Wine National for a fixed price, Newco 2. Q: Whatever was in it? A: No. Q: So, if the stock was worth $2 million they still have to pay the 10.3, would they? A: Mr Hill was the most informed person about the stock and he was fully aware, more so than anybody, what was there. Q: So, is the answer to my question, yes if the stock had been $2 million Mr Hill would have had to pay 10.3 for it? A: Yes. Q: Why get them to approve the terms of the contract then? A: Because I honestly didn't want them to be burdened with something in those terms and conditions to go forward, I wished them every success with the business. Q: In any event, you knew that was the purpose of sending them these contracts, didn't you? A: That was the sole purpose. Q: And you know it wasn't to show to anybody else, don't you? A: I assume they weren't showing anyone else. Q: The reason you altered the contracts before was to assist Mr Brierley to show some different figures to investors? A: Because he asked me to I did it in the first instance. Q: This reason didn't exist with all those changes, did it? A: Well, basically I had done it once I continued to do it. Q: Why? A: To try and keep everything simple because the matter was very complicated and Mr Hill's team of advisers were, to say the least, incompetent and we didn't believe that if they had any more complications that they could ever complete. Q: You did it because you didn't want Mr Hill to know the true price, didn't you? A: Yes. Q: And you had already formed the view that it was a fixed price contract? A: It was. Q: And you knew, or at least suspected, that Mr Hill was of a different view? A: Yes. Q: And you didn't want him to tumble to what your view was, did you? A: No. Q: Wanted to keep your cards very close to your chest? A: There were two totally independent deals. Q: And if you told him the true price you know that he would have come back and, said that's all I'm going to pay for it, don't you? A: I don't know that because he was so motivated to buy the business and I was the only option that I believe Mr Hill would have bought the business at any price he could have got someone else to pay for it. Q: So there would be absolutely no bar whatsoever in telling him the correct price, would there, absolutely none? A: Only that he would be unhappy about that knowledge. Q: Unhappy but he would pay you if you wanted it? A: Most probably. Q: The reason you didn't disclose the figures was so he never became aware of your true intention? A: I had no obligation to tell him that. (tr. 182-184) 164 I do not accept the defendant's evidence that the reason he continued to change the figures in the documents was to keep things simple because of the plaintiff's incompetent team. I am satisfied that the defendant's motivation was as he said in his subsequent evidence, that it was to conceal the true purchase price from the plaintiff. Neither of these reasons supports the defendant's original claims that it was at the request of Mr Brierley and Mr O'Neill that he changed the figures. If the defendant had wanted to keep things "simple", as he claimed, he could have told the plaintiff the truth. The truth was that during May 2002 the defendant was negotiating with the liquidator and during those negotiations he was able to achieve a better price than $10.3 million for the acquisition of the wine business. That is a simple fact and it was true. However the defendant chose to pretend that he had a contract with the liquidators that he did not in fact have. 165 The consideration of the defendant's conduct in this regard is relevant only to the question of whether a contract was formed on 9 May 2002 (or some later time) and not on the question of what the contract, if formed, means: Brambles Holdings Ltd v Bathurst City Council per Heydon JA at pars [24-27]. If there was no contract between the plaintiff and the defendant prior to the amended letter forwarded on 22 May 2002, there was no requirement on the defendant prior to that time to forward the draft Asset Sale Contracts with the liquidators to the plaintiff for his approval. The defendant commenced forwarding those draft contracts, albeit with the false figures in them, prior to that date. The pretence in which he engaged is in my view indicative of an understanding that the price Newco No. 2 paid the liquidators was the price at which the asset was to be acquired from Newco No. 2 by Newco No 3. 166 If there was no contract formed as at 9 May 2002 there was no need to provide an "explanation" for any changes to the 9 May letter. The amended letter could simply have been put forward as a counter offer. Mr Brooks e-mail of advice to the defendant in which he suggested the explanation to be given for the changes refers to the "validity of this agreement" not being jeopardised. It seems to me that both Mr Brooks and the defendant understood that an agreement had been struck on 9 May and that is why there was a need for the explanation, which the defendant pursued by suggesting that they were merely "minor" changes. 167 The conduct of the parties on and after the discussion on 6 May 2002, the 9 May letter and the defendant's advice to Mr O'Neill that he regarded the letter as "the deal" and/or that he was happy with it, evidences an intention to be bound by the 9 May letter. The defendant conveyed to the liquidator the offers suggested at meetings with the plaintiff and Mr O'Neill. I am not satisfied that the figures that he put to the liquidator were mere coincidences or were independent of the discussions he had with the plaintiff and Mr O'Neill. The irresistible conclusion is that the discussions with the liquidator were as a result of the agreement he had struck with the plaintiff. The defendant's evidence that this was coincidental and independent is, in my view, totally unreliable. 168 Clause (i) of the 9 May letter provided that the plaintiff was to cause to be paid on Newco No. 2's behalf, "the balance of the purchase price payable by Newco No. 2 for the acquisition of the Wine Business ($9.27 million)". Notwithstaanding the figure $9.27 million, this clause obliged the plaintiff to pay the "balance of the purchase price" payable by Newco No. 2 not a fixed amount irrespective of the balance of the purchase price to be paid by Newco No. 2. The words "the balance of the purchase price payable by Newco No. 2" were deleted from the amended letter and in their place the clause provided that the plaintiff was to cause $9.27 million to be paid "to allow completion of the Asset Sale Contracts and for the acquisition of the Wine Business" and that the plaintiff was to provide that amount by way of bank cheque(s) to the defendant "immediately prior to completion by Newco No. 2 of the Asset Sale Contract for the Wine Business so as to enable Newco No. 2 to complete the acquisition of the Wine Business". The amount of $9.27 was not the amount needed to enable Newco No. 2 to complete the acquisition of the Wine Business at all. It was about $3.3 million less than that amount. This clause is consistent with the defendant's pretence that the figures in the draft contracts sent to the plaintiff for his approval were real rather than false. 169 The amended letter provided that Newco No. 3 would be the legal and beneficial owner of the whole of the issued capital in Newco No. 2 and that the legal and beneficial ownership of the whole of the issued capital in Newco No. 3 would be held by the plaintiff or his nominee. It also provided that Newco No. 2 would acquire the wine business "for a total purchase price of $10.3 million or such other price as agreed between the liquidator and Newco No. 2". In my view these terms combined with the requirement to provide the plaintiff with the draft contracts for his approval mean that the plaintiff would only have been required to pay $9.27 million if that was the amount that Newco No. 2 needed to enable it to complete the purchase of the wine business and was the amount disclosed in the draft contracts approved by the plaintiff. 170 The plaintiff's evidence in cross-examination extracted earlier (tr. 74-75), is supportive of a finding that an agreement had been reached prior to 22 May 2002. The plaintiff's evidence was that the 9 May letter was Mr O'Neill's "summary of the agreements or arrangements that had been discussed and agreed upon". The plaintiff's answer to the question "and you understood that there would be no agreement until both sides signed off on it?" that "well, that's normally an agreement" does not mean that there was no agreement reached between the parties in terms of the 9 May letter. 171 Even assuming that the amended letter was the operative agreement between the parties as and from 22 May 2002, I am not satisfied that it required the plaintiff to pay $10.3 million irrespective of the price as agreed between the liquidator and Newco No. 2. He was only required to pay the amount needed to "enable" Newco No. 2 to complete the acquisition of the wine business and if that figure had been disclosed in the draft Asset Sale Contracts approved by the plaintiff. 172 The purpose of the 6 June letter was stated to be to "confirm" the arrangement between the parties. It confirmed the plaintiff's obligation to pay "the balance of the purchase price to allow completion of the Asset Sale Contract by Wine National Pty Ltd for the acquisition of the Wine Business" and the defendant's obligation to pay the "balance of the purchase price for the Distribution business" (clauses (e) and (f)). At the time of settlement on 19 June 2002 the plaintiff was required to pay the balance of the purchase price for the wine business, not $10.3 million less the deposit amounts irrespective of the price actually paid by the defendant. 173 I am satisfied that the parties intended to be bound by the terms of the 9 May letter and conducted themselves pursuant to that agreement on and from that date. I am also satisfied that the parties agreed that the terms of the 6 June letter confirmed the arrangements between them. The absence from this letter of the obligation to provide the draft contracts with the liquidator to the plaintiff is explicable on the basis that by then the draft had already been provided and approved by the plaintiff and the contracts had been exchanged with the liquidator. It does not mean that the obligation was not imposed on the defendant by the 9 May letter, and for that matter, the amended letter. Breach of Agreement/Damages 174 There was a contractual obligation to provide the plaintiff with the draft Asset Sale Contracts for his approval pursuant to the terms of the contract between the parties evidenced in the 9 May letter (and also in the amended letter). The defendant breached that contractual obligation by failing to provide the draft contracts and by providing false contracts to the plaintiff for his "approval". The 9 May Letter (and the amended letter) required the plaintiff to pay the deposit for the acquisition of the wine business at 10% of the price the defendant agreed to pay the liquidator for that business together with 10% of the price paid for the distribution business. The defendant breached the contract by requiring the plaintiff to pay more than 10% of that price. At the time of settlement the terms of the 6 June letter (and the 9 May letter and the amended letter) required the plaintiff to pay only the balance of the purchase moneys the defendant was required to pay the liquidator. The defendant breached that term by requiring the plaintiff to pay a figure different from the balance of the true purchase price. 175 I am satisfied that the defendant breached fundamental terms of the contract by which the plaintiff was firstly entitled to approve the terms of the contract between the defendant and the liquidators and, secondly, was only required to pay the purchase price agreed by the defendant with the liquidator for the acquisition of the wine business plus 10% of the purchase price for which the defendant agreed to purchase the distribution business. 176 The plaintiff's case is that had he known the true price of $6.9 million at the time of the transaction he would have been in a position to complete on 19 June 2002. It is submitted that at that time the plaintiff had put all his energies into trying to obtain the equity funds from Mr Wehrle for the higher false purchase price of $10.3 million and had made no attempts to fund the purchase by debt or a combination of equity and debt. It was not until after the defendant had completed the contract and purchased the wine business with his own funds that the trickery was uncovered. 177 There was debate between the parties as to the appropriate date for assessment of damages. The plaintiff claimed that the appropriate date is 19 June 2002, the date of the breach by the defendant in requiring the plaintiff to settle at the higher price. The defendants claimed that the plaintiff did not plead repudiation by the defendant and kept the contract on foot by the claim for specific performance and did not terminate it until June 2003 when he elected to claim damages. It was submitted that the appropriate date for assessment was June 2003. In this regard the defendants relied upon the following portion of the text The Law of Contract, DW Greig and JLR Davis, The Law Book Company Limited, 1987 at 1436: It has been said on a number of occasions that damages are to be assessed at the time at which the breach was committed (see, for example, Wenham v Ella (1972) 127 C.L.R. 454 at 473 per Gibbs J: Miliangos v George Frank (Textiles) Ltd [1976] A.C. 443 at 468 per Lord Wilberforce; Johnson v Agnew [1980] A.C. 367 at 400-401 per Lord Wilberforce). But in order to give meaning and substance to this principle, attention must be focused on what is meant by "the breach". It is necessary to consider the nature of the breach for which the plaintiff seeks compensation. If that breach is a repudiation of the major obligations under the contract-a refusal or inability either to deliver or to pay for the subject matter of the sale-the plaintiff will be suing for the loss of his bargain. He will seek recompense for the fact that he is no longer able to acquire (or dispose of) the article agreed to be bought and sold. But the defendant's repudiation alone does not cause the plaintiff to lose his bargain. It has been explained above (p. 1253) that a contract comes to an end only when the innocent party accepts the other's repudiatory words or conduct. Hence, the plaintiff suffers his loss of bargain only when he accepts that repudiation. His damages are to be assessed as the difference between the contract price and the market price or true value of the subject matter at the time of the acceptance. (It must be emphasised that this discussion is concerned with repudiation and acceptance at all after the time fixed for performance; an anticipatory breach raises different issues, which have been considered above, p. 1418.) 178 In paragraph 17S of the Fourth Further Amended Summons the plaintiff pleaded that had he or his advisers been aware of the true facts he would have been in a position to complete at the true price. Mr Aldridge SC submitted that the plaintiff accepted that he must establish that he would have been in a position in June 2002 to raise finance of $5,617,496, taking into account the deposits already paid, to complete the purchase of the wine business. It was submitted this question is one of substance not to be resolved in any technical or narrow sense: Mehmet v Benson (1965) 113 CLR 295 at 307-308; Coghlan v Pyoanee Pty Limited [2003] 2 Qd R 636 per McPherson JA at [19]. 179 The plaintiff relied upon a number of witnesses, some of whom were not cross-examined, to establish that he would have been able to fund the completion of the contract for the purchase of the wine business at the lower figure of $6.9 million as at 19 June 2002. I shall deal firstly with the evidence of those witnesses who were not cross-examined. 180 The plaintiff relied upon the affidavit of Wayne Robert Adsett sworn 28 March 2003. Mr Adsett is a chartered accountant with some twenty-six years of experience, having been the principal partner of the chartered accounting firm Adsett & Braddock in Auckland, New Zealand. Mr Adsett has known the plaintiff since the mid-1980s and has from time to time advised him in relation to his business affairs in New Zealand. 181 I have already referred to Mr Adsett's communications with the plaintiff prior to the appointment of the liquidators. That included a letter of 16 April 2002 in which Mr Adsett advised the plaintiff that he had concluded "firm discussions" with clients who were interested in an investment "subject to satisfying themselves as to the viability of the enterprise and due diligence" and that the equity investment would be up to a level of $4 million. On 22 April 2002 Mr Adsett wrote to Mr O'Neill advising that his clients would be interested in such an investment subject to the sanctioning of the Deed of Company Arrangement and also completion of satisfactory due diligence "to the investors' complete satisfaction". An attempt was made to call evidence from Mr Adsett in relation to the possible funding at the lower purchase price and leave was granted to do so, however there was no further evidence called from him. In those circumstances Mr Adsett's evidence does not assist the plaintiff. 182 The next affidavit relied upon by the plaintiff was that of Donald William John Cunnington. Mr Cunnington is the Managing Director of PayNow Pty Limited (PayNow) and the associated companies in the PayNow Group. The PayNow Group provides receivables finance, inventory finance linked to receivable finance facilities and wholesale finance to other facilities. PayNow was involved prior to the appointment of the liquidators in April 2002 in proposing finance that involved the acquisition of debtors of the Wine Business and the Distribution Business of the Group (Ex. 1: 222-224). This was ultimately irrelevant because after liquidation the debtors were not available for purchase. 183 After the plaintiff became aware of the reduction in the purchase price for the wine business, Mr Cunnington was asked to make a number of assumptions which are set out in his affidavit of 31 March 2003, which includes the assumption that the wine business was purchased at the lower price. Based on those assumptions, Mr Cunnington gave evidence that had he been approached by Mr Brierley on behalf of a corporate nominee of the plaintiff in May 2002, PayNow would have been prepared to issue a Finance Proposal involving an advance of $3 million, subject to the standard conditions of the PayNow Group. Those standard conditions included a first-ranking fixed and floating charge over all of the assets and undertakings of the Wine Business company; appropriate reporting mechanisms being in place; PayNow being given the necessary power to receive and manage the revenues associated with the inventory/debtor realisation; financial statements prepared by external accountants; and a due diligence to determine the existence, quality, quantity and title to the inventory the subject of the finance. 184 PayNow Group would also have required assurance that $3 million did not represent more than 60% of the PayNow view of the cost price of the inventory. It would also have required satisfactory distribution agreements/forward orders to be in place to allow the inventory to be reduced and realised over a reasonable period of time. Finally PayNow would have required a related debtor facility to ensure that the proceeds of the sale of the wine inventory were used to reduce the amounts outstanding to PayNow under the initial inventory facility. 185 The plaintiff also relied upon the affidavit of Brian James McGuigan sworn 31 March 2003. Mr McGuigan is the Managing Director of McGuigan Simeon Wines Limited, a public company involved in the business of grape-growing, wine production and domestic and international wine distribution. The unchallenged evidence of Mr McGuigan is that McGuigan Simeon Limited is the third largest publicly listed Australian wine company. 186 Mr McGuigan has been involved in the wine industry for forty-two years. For ten years from 1960 he was the wine-maker with Penfolds Wines and from 1970 until 1991 he was the Managing Director of Wyndham Estate Wines Limited. Subsequently he was the Managing Director of Brian McGuigan Wines Limited, which was listed on the ASX in April 1992. His current position is Managing Director of McGuigan Simoen Limited (McGuigan Simeon), since the merger of McGuigan Wines with Simeon Wines Limited, effective on 21 June 2002. 187 Mr McGuigan has known the plaintiff since the late 1980s. He regards the plaintiff as a close business acquaintance and a good friend. Indeed in April 1992 when Mr McGuigan launched his then new company's wine product, Lymall distributed that new wine product. Since that time the plaintiff and his group of companies and Mr McGuigan and his companies have had a close business association. Mr McGuigan was made aware of the voluntary administration of the Group and in March 2002 at a meeting with the plaintiff, he informed him that he wanted to help him and that his company "could want to be involved with you in an equity sense, if the opportunity arises". Mr McGuigan also informed the plaintiff that alternatively he would personally be able to assist him with a loan. 188 After the merger of McGuigan Wines and Simeon Wines and at the Annual General Meeting of McGuigan Simeon on 20 November 2002 Mr McGuigan had a conversation with the plaintiff in which the plaintiff informed him that he was in litigation with the defendant. Mr McGuigan said: "Remember, I'm here and keen to look at how we might get together. I meant what I said in March. We go back a long way and we have worked well together in the past." A further meeting took place between the plaintiff and Mr McGuigan on 7 March 2003 at which time Mr McGuigan informed the plaintiff: Terry, as I said to you twelve months ago, and at last year's AGM, my company is keen to talk to you about how we can help or how I can help you on a personal basis. Let me know how many dollars you want. I will leave it up to you as to how you structure it. Let me know what the proposal is. My company can look at taking a shareholding in the new Group, or I personally could look at making a loan to you or to your Group. 189 Mr McGuigan was asked to consider a number of assumptions that are contained in paragraph 15 of his affidavit of 31 March 2003 and include reference to the lower purchase price at which the defendant purchased the wine business from the liquidator. Mr McGuigan gave evidence that he would have "given the strongest consideration to either (or both) recommending strongly to the Board of Directors of McGuigan Wines that it take an equity position in the entity proposing to acquire the Wine Business" or him personally providing a commercial loan to the new company. 190 This evidence was given in respect of the period prior to the merger with Simeon Wines. At that time, Mr McGuigan had been working with his fellow board members for a period of approximately ten years and expressed the view that if he had made such a recommendation to the Board of McGuigan Wines it would have had a "good chance of being successful provided that the structure provided for appropriate arrangements for the distribution of our company's on premises (restaurant) brands". Mr McGuigan believed that the Board of McGuigan Wines would have considered the proposal "worthy of the strongest consideration". 191 Mr McGuigan also gave evidence that as the Managing Director of McGuigan Wines he would have attempted to negotiate the best deal possible with the plaintiff, however on the assumptions provided he believed that an equity investment "in the range of $2 million to $4 million in return for a significant shareholding would have been possible". Mr McGuigan's evidence in relation to the personal loan he might have made to the plaintiff was that it would have depended upon the amount requested by the plaintiff and a requirement for him to have appropriate security and for the loan to be on commercial terms. Mr McGuigan also gave evidence that he had the capacity to make "a loan" at that time but he did not descend into the particulars of the amount. He expressed the view that it would have been "likely" that he and the plaintiff could have come to a "deal", assuming the normal due diligence processes were undertaken and proved the underlying issues were satisfactory. This statement was based, as he put it, on his long-standing business and personal relationship with the plaintiff. Depending upon all those matters being satisfied, Mr McGuigan was of the view that "an equity investment in the range of $2 million to $4 million, in return for a significant shareholding would have been possible". 192 Mr McGuigan was very much more reserved in respect of any loan that might be sought from McGuigan Simeon. He gave evidence that although the Board of the merged company would give due consideration to an equity investment, he could not be certain of its decision. However he remained ready, willing and able to give consideration to providing the company to purchase the wine business with a loan from his personal funds subject to the loan being on commercial terms and including appropriate security. This readiness was on the assumption that the business had not deteriorated from the position it was in mid-May 2002 and that all other normal due diligence steps and verification procedures were undertaken. 193 In response to counsel for the defendants' indication that there was nothing before the Court to indicate Mr McGuigan's capacity to make a personal loan, the plaintiff relied on a further affidavit of Mr McGuigan filed in Court on 13 November 2003 to which is annexed a consolidated asset and liability schedule for the McGuigan Family Group for the year ended 30 June 2002, prepared by Mr McGuigan's accountant. No real challenge was made to Mr McGuigan's capacity to provide a loan to the plaintiff. It is obvious that he is a man of financial substance. 194 The plaintiff also relied upon three other witnesses who were cross-examined. They were Mr Brierley, Graham Warren Montgomery, a mortgage broker, and Elena Rose, the plaintiff's wife. 195 Mr Brierley gave affidavit evidence that had he become aware in mid May 2002 that the actual purchase price of the wine business was $6.9 million he would have "restructured the finance proposal to eliminate equity and to focus on debt". He claimed that he would have approached PayNow to obtain a facility of $5.9 million. His oral evidence in chief included the following: Q: In the circumstances that you understood them of Mr Hill's of the proposed wine business, what was the likelihood of the funds of the order of six and half million dollars being … A: Very likely. (tr. 120) 196 In cross-examination Mr Brierley gave the following evidence: Q: You have just been asked some questions on the assumption that you had been told the price was something less than that and you said it was very likely you would have been able to obtain finance by way of a lender in Australia? A: Yes. Q: The question I am asking you is did anyone ask you that hypothetical question in June, July, August, September of 2002? A: Of whether I could raise funds against the purchase price of 6.9? Q: Yes? A: No. Q: When did you first hear that there was a suggestion that the purchase price was less? A: I heard it in a meeting at the offices of, I think, NOT Law. Q: When was that, roughly? A: Around May or June. Q: Of 2002? A: Yes. Q: No one said to you can you raise finance at that level? A: No. Q: Did you do any work or make any enquiries to see if you could raise finance? A: I can't recall. Q: Can't recall? It is unlikely you would have if no-one asked you to. A: That's right. Q: Did you have any discussions with Mr Wehrle in Switzerland about whether he was prepared to go forward with an equity injection at a lower price? A: No. (tr. 122) 197 The next witness relied upon was Graham Warren Montgomery who is a director of Custom Finance Group, a company which specialises in corporate mortgage broking. Mr Montgomery has held that position for the last three years but prior to that he was a broker with Ashe Morgan Winthrop Pty Limited and various other financial institutions providing services in the commercial lending area, including credit assessment and approval. He has had more than twenty years experience in commercial lending and in that regard is very familiar with the lending criteria of many financial institutions. 198 In about April or May 2002 Mr Montgomery was approached by the plaintiff's wife, Ms Rose, on behalf of BDT Holdings Pty Limited (BDT), seeking his assistance to act as a broker to procure a re-finance of BDT's existing mortgage over the property 14 Ferdinand Street, Hunters Hill, the home in which the plaintiff and Ms Rose reside (the Hunters Hill property). The finance sought by BDT at that time was approximately $1.7 million. Mr Montgomery was able to obtain finance approval through RL Kremnizer & Co and Latrobe Capital Mortgage Corporate in the amount sought. Mr Montgomery made the assessment that in about June 2002 BDT would have had "little difficulty" in securing additional finance in an amount up to 75% of the value of the Hunters Hill property. He gave evidence that if further security had been made available by BDT or others, BDT could potentially have borrowed more. The valuation of the Hunters Hill property dated 12 July 2002 (annexed to Mr Montgomery's affidavit sworn 11 November 2003, provided by REAS Australasia Pty Limited, a company of registered valuers and property consultants) valued the property at $3 million, being land value of $2.25 million and improvements at $750,000. 199 Mr Montgomery gave evidence that based on the valuation he was of the view that as at May 2002 BDT could readily have procured finance up to an amount of $2.2 million secured only on the Hunters Hill property. By reason of the fact that the existing loan secured against Hunters Hill was $1.7 million, he was of the view that a further $550,000 could have been raised. That opinion was subject to personal guarantees being provided by Ms Rose, BDT and Theodore Rose Rigs & Associates and was based upon the presumption that the plaintiff had access to a lump sum payment or alternatively an annuity from his superannuation funds and was thereby in a position to assist BDT to service the loan. Although attempts were made to justify that presumption there was no evidence called that could justify it. In those circumstances Mr Montogmery's evidence in this latter respect is of little value to the plaintiff. 200 Mr Montgomery referred to an affidavit of Robert Churi sworn on 6 November 2002, which was also read by the plaintiff and which provided a valuation of a property in Ryde owned by Ms Rose. In this regard, Mr Montgomery said that he would have no difficulty raising finance on that property up to 80% of its value. He said that had he been asked in May/June 2002 he could have raised $444,000 to be secured against that property. Mr Montgomery also referred to the affidavit of Victor Leo Bryan who had valued Ms Rose's property in Northcote in Victoria. Mr Montgomery gave evidence that he would have had no difficulty raising finance on the property up to 80% of its value and had he been asked in May or June 2002 he could have raised $312,000 to be secured against the Northcote property. 201 In cross-examination Mr Montgomery agreed that if he was to raise further loans in respect of the Hunters Hill property it would have been necessary to clearly demonstrate a capacity to repay. This was in contrast to what he described as an "asset lend", which concentrates on the equity in the asset rather than doing a lot of research on capacity to repay (tr. 288). 202 Ms Rose gave evidence that BDT is a private company that acts as trustee for the Terosa Trust and in its capacity as trustee is the registered proprietor of the Hunters Hill property. Ms Rose also gave evidence that the deposit monies were raised by way of first-registered mortgage over the Hunters Hill property in favour of Yellik Holdings Pty Limited in the amount of $1 million. The settlement of the Yellik Holdings finance occurred on 22 May 2002 and Ms Rose directed that from the settlement funds an amount of $992,869 was to be paid into the Clayton Utz trust account. 203 On 17 June 2002 the Hunters Hill property was re-financed and pursuant to that re-finance RL Kremnizer & Co provided a loan to BDT in the amount of $1.7 million secured by way of first-registered mortgage over the Hunters Hill property. At this time the loan from Yellik was repaid. Ms Rose directed that from the settlement funds of that loan an amount of $207,131 was paid to the account of Bearing Traders for the balance of the deposit monies that had been provided by Bearing Traders. Ms Rose provided a further amount of $57,500 for the Fernhill property deposit, paid directly into the Bearing Traders account. 204 Ms Rose's evidence was that if in mid-May 2002 the plaintiff had requested further loans, she would have been in a position to provide $500,000 by way of loan raised against the personal properties in Ryde and Northcote and $1.5 million by way of loan from BDT to be raised against the Hunters Hill property. Having regard to Mr Montogomery's evidence it would appear that only the amount of $550,000 could reasonably have been raised in addition to that which was secured by the mortgage over the Hunters Hill property of $1.7 million. This represented 80% of the equity in the property. Ms Rose said that she would have also been in a position to provide personal guarantees from herself, Theodore Rose Riggs and BDT as security for the loans to the plaintiff. There was no evidence given of any willingness to sell the Hunters Hill property to raise finance. 205 In cross-examination Ms Rose confirmed BDT's ability to raise $12,000 per month in repayments (tr. 291). However she gave the following evidence: Q: After 19 June 2002 did your husband ever ask you if you would assist him in raising some money? A: Of course. Q: When did he do that? A: I don't remember exactly. Q: Was it in June/July, middle of 2002? A: We had been discussing it constantly. Q: And you didn't provide any further funding to assist him, did you? A: At what level are we talking about here? Q: In terms of money to assist him to purchase the wine business? A: No because at that time … Q: I didn't ask you … A: No because at that time we believed … Q: I simply asked you whether you provided the funding or not. A: Yes. Q: And you didn't, did you? A: Sorry? Q: You didn't provide any extra funding to assist with the purchase of the wine business, did you? A: No. (tr. 292) 206 It is appropriate at this stage to refer to the expert evidence called by the parties in respect of the valuation of the business or the wine brands. This is relevant to try to ascertain what would have been available by way of security for the purpose of any fundraising by the plaintiff as at 19 June 2002. 207 The plaintiff relied upon the expert evidence of Robert Campbell Paul and Colin Frederick Gaetjens. The defendant relied upon the expert evidence of Wayne Lonergan and Keith Tulloch. The issues as between Mr Paul and Mr Tulloch were settled by the signing of a memorandum of understanding dated 11 November 2003 (Ex. O). That memorandum states that both Mr Paul and Mr Tulloch agree that: 1. The Basedow, Marienberg and Fernhill wines tasted by us on separate occasions appear soundly made; 2. The difference in quality evidenced in different point scores in our respective reports are most likely to be caused from: (a) Differing perspectives of style. This does not mean that we fundamentally disagree on wine quality. (b) The wines age. Several wines have become too developed for commercial acceptability. This is the natural evolution that happens to all wines over different periods of time. 3. It is reasonable to assume that the wines in October 2001 had a greater value than the same wine in June 2002, which in turn had greater value than same wine in October 2003. This is because: (a) Wines were likely to have more relevance the closer to the date of their natural release date, (b) Vintage roll overs have made the wines less desirable to purchasers as later Vintages are released, (c) This is particularly so with wines made in a "young-drinking style" for marketing in the year following the year of Vintage, such as Semillon and lighter-bodied Grenache. 208 Colin Frederick Gaetjens is a registered valuer and principal of Colin Gaetjens & Co Valuers. He is also a partner of Colin Gaetjens and Shaw Winery and Vineyard Brokerage. He has been a wine auctioneer and valuer since 1974. He swore four affidavits in the proceedings: on 21 August 2003, 12 September 2003 and two on 11 November 2003. 209 Mr Gaetjens' evidence included the following: 46. Given the market situation in June 2002, the quality of the assets, the potential for a wine distribution business and other relevant factors, but ignoring the fact that the companies were in administration, it is my view that fair market value of the Wine Business as at 19 June 2002 was $10 million. 47. The market for winery entities and wine industry assets in June 2002 was below that which had ensued for the previous several years. This was largely due to a realization, in my view, that the growth phase experienced by the wine industry in the last decade had slowed considerably and that future opportunities would be more difficult in terms of sale and profitability. There were general concerns by the industry and observers that grapes were in oversupply, that export markets were slowing and that the domestic market was more difficult in terms of packaged wine sales than it had previously been. 48. My valuation takes into account that HWG itself had experienced trading difficulties along with many other wine companies, but I have assumed that the market value would be achieved by sale with HWG in control of the process rather than under the sale circumstances which would have applied had the administrator controlled the process. This is because, in my view, sales by administrators rarely achieve market value, mainly because of the time frame in which a sale needs to occur and because prospective purchasers are taking advantage of the circumstances of an anxious seller. 49. In my view $10 million would have been readily achievable in the market as at 19 June 2002. 210 Mr Gaetjens was challenged in cross-examination on the use of the multiplier to reach his valuation. It was suggested to him that the comparative sales he used to obtain his multiplier were not sales of a brand alone. He was asked: Q: So the sales from which you obtained your multiplier are not direct comparisons with the proposed sale of the Basedow, Marienberg and Fernhill brands with out stock. That's true, isn't it? A: I would have thought that they were pretty much the same. I mean, I'm looking at stock with brands and I valued Basedow, Marienberg and Fernhill as brands with stock. So I don't know how much more comparable I can get. Q: Your basis of evaluation of the brand is really a summation based on your judgment. That's correct isn't it? A: Yeah, pretty much. Q: If the bottled stock was sold as Basedow, Marienberg and Fernhill stock that would devalue the sale price for the Basedow, Marienberg and Fernhill brands, wouldn't it? A: If you were contemplating a circumstance where stock was able to be sold without the brand that would be correct. But that would then mean the trademark holder of the brand would need to release that stock for sale and that just simply wouldn't happen for those very reasons. (tr. 229-230) 211 Mr Paul is a wine consultant. He obtained a Bachelor of Applied Science (Wine Science) from Charles Sturt University in 1985. He also has a Bachelor of Arts from the University of Sydney and a Diploma of Education from the Northern Rivers College of Advanced Education. 212 Mr Paul has been involved in wine-making since 1985. He was the wine-maker at Cortole Winery in McClaren Vale in 1985 and later worked at Montrose Winery. From 1990 to 1999 he was chief wine-maker with Orlando/Wyndham at its Montrose Winery in Mudgee. In 1999 he was chief wine-maker at the Wyndham Estate Winery in the Hunter Valley in New South Wales. He has been a judge or associate judge at a number of wine shows in Australia, including the Cowra Wine Show, the Australian Small Wine-Makers Show, the New South Wales Small Wine-Makers Show and the Adelaide Wine Show. 213 Mr Paul valued the wine on a forced sale basis at $5,107,020 and on a market sale basis at $7,833,076. He also gave evidence that if all of the bulk wine was converted into bottled wine he was of the view that it would have a value of $5,389,850, assuming an orderly but forced sale and a market value, if sold over a longer period at $6,737,312. In cross-examination Mr Paul said that an orderly sale would be one consistent with the way the business is presently conducted with no disruptions and no pressures to sell the wine or to move stock other than in the normal course of business (tr. 248). The difficulties of obtaining access to have wine sold at Woolworths and Coles was highlighted. There are apparently approximately 1,600 vineyards in Australia, many of whom would not agree to the terms and conditions that Woolworths and Coles imposes. Mr Paul gave evidence that many of the vineyards are keen to sell their wine at full retail value, in particular through the cellar door or through their mailing list so that they can achieve their margins, instead of through Woolworths. He said that of the 1600 vineyards it is probably fair to say that a large proportion of them are in the category of having no interest in selling through Woolworths or Coles because it would be negative to their business (tr. 249). 214 Mr Paul did not make any enquiry as to why as at 19 June 2002 the Group had so much stock. He conceded that such a large amount of stock might suggest that there was some difficulty selling it. He also agreed that the amount of stock as at 19 June 2002 was higher than he would expect for a normal wine producer. However he made no enquiries as to whether they were having any difficulties selling but he was informed that there was some export market overtures and some projections as to possible export sales in the wind (tr. 250). 215 Mr Paul described wines in the $12 to $20 range as super premium and wines above the $20 as icon (tr. 251). He agreed that he would not describe himself as a "valuer of wine" but said that he had practical experience to enable him to value wine (tr. 246). He gave the following evidence in cross-examination: Q: Would you agree with this proposition: There really isn't any equation between the amount it costs to make a bottle of wine and its value in terms of what it can be sold to the market for? A: In principle I understand what you're saying and yes. If what you're referring to is that the cost of production for Grange is not vastly different for the cost of production of Basedow Semillon and yet the price in the retail market is extraordinarily different, then yes I would. Q: Would you agree that if the best one could do in selling a bottle of wine into the market was to sell it for $9 then the fact that it had cost, say, $15 to make it is wholly irrelevant to its value? A: In order to conclude a sale then, clearly, I'm not sure that that's a wine-related issue. That's an economic issue. Q: You would accept that's a proposition across the board with any valuation? A: If someone wishes to conclude a sale, if the sale is the imperative, if they're forced to take a price then the cost of production may not be relevant. (tr. 251-252) 216 The defendants relied upon the evidence of Geoff Krieger, the General Manager of the fourth defendant that trades as Blue Hills Liquor Distributors. Mr Krieger has been employed with various companies within the Group since 1992. He gave evidence that in 2001 Basedow was sold to retailers including Coles and Woolworths. Coles ran Liquor Land and Vintage Cellars and purchased Theo's in 2003. Woolworths ran the retail outlets, First Estate, BWS, Mac's Liquor and Dan Murphy's cellars. 217 Mr Krieger said that the main lines sold under the Basedow brand were the Semillon and the Bush Vine Grenache. Those two wines constituted around 70% of sales of that brand with the Semillon the bigger seller of the two. The wines were also sold to Australian Wine Selectors, Australian Wine Consumers/Wine Society, Cellar Masters and Wine-Makers Choice. They were also sold to independent wine and liquor retailers and restaurants. Mr Krieger gave further history of the Group's trading with various outlets and in particular, of the steps taken by Woolworths to "de-list" Basedow Semillon and Bush Vine Grenache. This was apparently caused by a problem of lack of stock. In June 2001 five hundred cases of Basedow Semillon were sold to Kemenys with two hundred and fifty cases of Basedow Bush Vine Grenache being gifted as a marketing exercise. Half a dozen Basedow Grenache was to be given away with a purchase of a dozen Basedow Semillon. This offer was apparently made to all independent retail stores. 218 Mr Krieger said that prior to October 2001 Kemenys ordered stock on a monthly basis from Lymall but between October 2001 and June 2002 it did not order any stock. He also said that prior to September 2001 Lymall sold Basedow brand wines to Theo's on a monthly basis. However in September 2001 Lymall failed to supply Theo's with the wine it had ordered and it did not order any further wine between September 2001 and 19 June 2002. 219 David Crawley also gave evidence for the defendants. He is a General Manager of Australian Beverage Distributors Pty Limited, which has taken over the Distribution Business of Lymall. He was previously employed by Lymall. He also gave evidence of the failure to deliver or supply wines that had been ordered by Liquor Land and Coles. His evidence was that since June 2002 various entities have purchased Basedow, Marienberg and Fernhill wines. It is apparent that Porters stores in New South Wales have been selling Basedow wines since 19 June 2002. 220 The defendants also relied upon the expert evidence of Wayne Lonergan, who is a director of Lonergan Edwards & Associates Limited. Mr Lonergan was a corporate finance partner at Coopers and Lybrand, now PricewaterhouseCoopers, for twenty three years prior to setting up an independent valuation practice on 1 January 2001. He was asked to provide an assessment of the fair market value of the wine business previously operated by the Group as at 19 June 2002. He assumed that the business essentially comprised the Basedow and Marienberg wine brands. 221 Mr Lonergan expressed the view that Mr Gaetjens' report had adopted a rule of thumb methodology and assumed that the value of the brands of wine was separable to the value of the inventory/business and implicitly assumed a level of intangible value in the business which was inconsistent with its trading history. Mr Lonergan summarised the position of the Group at the valuation date, 19 June 2002, set out his methodology and gave the following evidence: 111. In the circumstances of the Wine Business at the valuation date I consider: (a) Any intangible value in the business is likely to have been nominal; (b) It is unlikely that a willing but not anxious buyer would seek to ascribe separate values or separately acquire the brands from the wine inventories. 222 In cross-examination Mr Lonergan said that Mr Gaetjens' mistake was to value the wines separately on a stand-alone basis. He said that one would have to look at the aggregate of the brands and the stock available. However Mr Gaetjens had simply "summed" them. It was suggested to Mr Lonergan that Mr Gaetjens had not used a rule of thumb methodology. His answer to that suggestion was: That is not correct. It is a rule of thumb methodology and indeed in one of his own paragraphs he says that the range, in his paragraph 18, he has a multiple of gross margin of under 1 to over 4. So, his order of accuracy is between one quarter and one hundred or more in his own admission. It is not an accepted methodology for valuing brands. (tr. 263) 223 Mr Lonergan conceded that there would possibly be a value from brand recognition and brand loyalty to a product such as Basedow compared to a start-up winery that would not have such value (tr. 264). However he thought that Mr Gaetjens misunderstood that for any identifiable intangible asset, such as a brand, to have a value, the business that uses it must produce profits over and above the value of the assets employed. He concluded that was not the case in the circumstances of the Group (tr. 265). Mr Lonergan's point was that wine companies do not usually go out and buy brands because they have hundreds, if not thousands, of brands themselves (tr. 265). He conceded that there may be a nominal value in a brand-name, perhaps $10,000 or even $50,000 (tr. 265). 224 Mr Lonergan accepted that there had been sales of brand names in the industry from time to time and that liquidators sometimes sell brand names and intangible assets. However, Mr Lonergan resisted any suggestion that people would pay prices other than on the basis that they would make profits from their purchase (tr. 266). 225 I accept Mr Lonergan's evidence that the wine brands alone would not have had anything more than a nominal value. Those persons or institutions that may have considered providing funds to the plaintiff in June 2002 would have been more interested in the value of the business as a whole for the purpose of securing their loans. The integrity of Mr Gaetjens' evidence of that valuation was in my view diminished by the evidence of Mr Lonergan. It seems to me that the most that could be established from his evidence is a figure somewhere in the vicinity of $5 million. 226 Mr Newlinds SC cautioned against the acceptance of the evidence in the plaintiff's case as establishing that the plaintiff could have raised the funds at 19 June 2002. It was submitted that the plaintiff knew by no later than 24 June 2002 that the real purchase price was approximately $6.9 million. At no stage did the plaintiff request Mr Brierley to pursue the raising of funds for the purpose of being ready, willing and able to complete at the lower price. Additionally Ms Rose gave evidence that her husband did not ask her during the period after 24 June 2002 to provide funds of that order. Another peculiar aspect is the prima facie generous offers made by Mr McGuigan which were simply not taken up. True enough it may have been that the plaintiff did not wish Mr McGuigan to have the considerable equity investment in the business, but here was a man of financial substance on more than one occasion indicating that he was willing to provide funds to the plaintiff and yet the plaintiff did not take those offers up. 227 This needs to be looked at in the light of the plaintiff's capacity to service the possible loans and the probable conditions that would have been imposed on the plaintiff in respect of those loans. There are in evidence a series of letters indicating that the plaintiff was being sued by a number of companies, including Carlton and United Breweries Limited, Southcorp Wines Pty Ltd, Mirvac Funds Limited, Tooheys , Coca-Cola Amatil and Diners Club (Ex. 1: 2764). There is also in evidence an affidavit by the plaintiff in support of an application for payment of a judgment debt by instalments (Ex. 1: 2753-2759). That affidavit sworn on 14 January 2003 discloses a gross weekly income of $6 and a total of property and assets of $407,045, consisting of superannuation of $350,000 and a private wine collection of $50,000. The balance is constituted by $1,100 in St George bank, $1000 in personal effects and $4945 in Telstra and Boral shares. The affidavit also discloses total expenses and debts of $867,985. 228 In considering the evidence in the plaintiff's case it is necessary to apply commercial commonsense as to whether financiers would have been willing to make loans when the person upon whom the burden was cast for repayment had very few assets. Much would depend upon the priority of the securities that the financiers might be able to obtain. It appears from the evidence that Mr McGuigan would have wanted first priority if he was to provide funds between $2 and $4 million. The suggestion in his evidence that he would want a loan on "commercial terms" does not seem to me to allow for a willingness to have anything less than first priority securities. 229 Mr Brooks' email of 16 July 2002 advised that the defendant (Wine National) was prepared for the plaintiff to acquire the wine business "for the same price as discussed between the parties or some other price" (Ex. 1: 2707). Mr Brooks' email of 19 August 2002 advised that the defendant was willing to sell the wine business "on just and fair terms" (Ex.1: 2711). This latter offer was conditional on the plaintiff providing "satisfactory proof" that he would be able to complete "any purchase". 230 The curious position the plaintiff adopted after Mr Brooks' communication to Mr O'Neill indicating that the defendant was ready to treat at a "fair" price, in not doing anything other than approaching Mr Wehrle is explicable when one reviews the plaintiff's financial status. I am cognisant of the fact that the affidavit sworn by the plaintiff in respect of his financial position was sworn in January 2003. However it is clear that he had not been in employment since February 2002, the real property assets were not owned by him and the Hunters Hill property had been heavily mortgaged for the purpose of paying the deposit. The repayment of $12,000 per month for part of the loans funds was to be paid by Ms Rose's company. 231 Mr Newlinds SC submitted that "the proof is in the pudding" and that the plaintiff was never in a position to complete the contract at the lower figure. It was also submitted that prior to the Group going into administration after the National Australia Bank decided to withdraw its funding, the plaintiff had attempted unsuccessfully to find alternative finance to support the Group. Reliance was also placed upon the plaintiff's inability to fund the deposit without the assistance of the defendant. It was submitted that the Court should look to what actually happened when the plaintiff found out that the defendant had purchased the wine business at the lower price to assess the plaintiff's claim in this regard. 232 The plaintiff gave evidence in an affidavit sworn on 3 April 2003 that had he become aware in mid-May 2002 of the lower purchase price he would have done a number of things. He claimed he would have reviewed the offers of finance from PayNow, Custom Finance and Adsett & Braddock that had been made at the time of the Deed of Company Arrangement proposal. He would have revised his options as to the obtaining of finance secured against the Hunters Hill property and from his wife, Ms Rose. He also gave evidence that he would have approached Mr McGuigan to obtain finance, whether by way of equity investment or commercial loan. Finally, he said he would have proposed an altered funding arrangement with Mr Wehrle. Notwithstanding that the plaintiff became aware of the lower figure within days of the defendant completing the purchase of the wine business with the liquidators, he did not do the things that he said he would in his affidavit referred to above. What he did was to go back to Mr Wehrle and continue to press him for the equity investment that had been discussed. 233 As at 24 June 2002, the plaintiff was in the position to make the approaches to the various individuals and corporations for finance. Each of them has given evidence about the conditions that would be imposed on either a commercial loan basis or equity investment. That evidence establishes that the plaintiff's capacity to service or repay any loans would be a significant factor in any decision whether to make the loan. In considering whether the plaintiff would have been a position to raise the funds, this aspect of the matter must also be considered. 234 The evidence establishes that the plaintiff did not have capacity to fund the purchase by way of commercial loan. Realistically, with his lack of independent income and the paucity of evidence as to how he would be able to repay loan funds of $6.9 million, the plaintiff has difficulty in establishing a capacity to fund the purchase on this basis. Mr McGuigan's evidence was that his equity investment would require a significant shareholding. His evidence establishes that he informed the plaintiff that he was willing to assist as early as March 2002. It is apparent from the evidence that the plaintiff did not approach Mr McGuigan for any form of funding at the time the lower figure was discovered. 235 I am satisfied that the reason the plaintiff pursued Mr Wehrle to the exclusion of other options was that it was the only way he could possibly fund the purchase without having further financial burden of repayment of loans imposed on him. The plaintiff was so financially stretched that he had to rely upon the defendant for a prompt loan for the deposit. The funding that he put in place to repay that deposit was not based on the capacity to service or repay the loan. It was an asset based loan with reliance upon the valuation of the Hunters Hill property. 236 On the balance of probabilities and not taking too technical a view of the circumstances, I am not persuaded that the plaintiff was in a position or would have been in a position to purchase the business at $6.9 million. Misleading or deceptive conduct 237 The plaintiff submitted that by altering the figures in the various draft contracts, the defendant misled and deceived the plaintiff both positively and by silence. It is alleged that the third defendant Mr Brooks participated in misleading and deceptive conduct by altering the figures in the draft contracts. By reason of that conduct the plaintiff claims the defendant and Mr Brooks are liable to pay damages to the plaintiff. 238 Mr Newlinds SC submitted that the case as pleaded makes it clear that the plaintiff claims he acted to his detriment based on this alleged conduct, in that he was unable to complete the contract on 19 June 2002 at the price paid by the defendant to the liquidators (TFAS 42B). The point is made that the plaintiff does not plead that he would not have entered into the contract. It is submitted that it is obvious that the plaintiff would have entered into the contract in any event because the plaintiff said he believed that the contract provided for him to pay $9.7 million or such lower price as was negotiated. It is true that the plaintiff admitted that he was very keen to purchase the wine business. However in cross-examination he denied that he would have entered into a contract if the only deal the defendant was willing to do with him was for him to purchase the wine business at $10.3 million irrespective of the amount the defendant paid the liquidators. 239 If Mr Wehrle's funds had been available in June 2002, the plaintiff would have secured the purchase of the wine business at $10.3 million, a figure that he thought was a "good deal", for the payment by him of only $1.23 million. Mr Wehrle would have paid 90% of the purchase price for a 45% shareholding in the wine business. The plaintiff would have secured a 55% shareholding in the wine business for payment of just over 10% of the purchase price. The reason the plaintiff did not wish to disclose the purchase price to Mr Wehrle is fairly obvious from the evidence. If Mr Wehrle became aware that he was paying 90% of the purchase price in return for only 45% shareholding of the business the attraction of the investment would have been diminished. Indeed, the defendant submitted that it is probable that Mr Wehrle realised that the plaintiff was not investing funds into the business, after the very unsatisfactory answers given to his questions in correspondence with the plaintiff and Mr O'Neill. As I have said, neither party called Mr Wehrle and his true motivation for not making the investment is not clear. The fact is that he did not make the investment notwithstanding what seems to me to have been very concerted efforts by the plaintiff to persuade him to do so. 240 It was submitted that there is no evidence that the defendant did anything to prevent the plaintiff from being able to settle the contract in June 2002. Mr Aldridge SC asked the defendant whether in his dealings with Mr Wehrle he had "undercut" the plaintiff and the defendant answered "no" (tr. 196). Although there may be some suspicion surrounding the dealings that the defendant and Mr Fabrizio had with Mr Wehrle the evidence does not establish that their dealings with him cut across or disadvantaged the plaintiff's chances of securing the funding that he was attempting to secure form Mr Wehrle. 241 I am satisfied that the defendant and Mr Brooks intentionally misled the plaintiff into believing that the defendant had purchased the wine business from the liquidator for $10.3 million. The plaintiff relied upon the representation contained in the altered contract that the purchase price was more than it really was and that reliance caused him to pay a deposit that was greater than he should have paid. I have found that the plaintiff would not have been in a position to complete the purchase. The damage that flows from the misleading and deceptive conduct to which the plaintiff is entitled is therefore the difference between the deposit paid by the plaintiff and the deposit on the lower amount. Fiduciary/Agency 242 The 9 May letter, the amended letter and the 6 June letter each contained a reference in the background facts to "the understanding" that the wine business was to be bought by the defendant "on behalf of" the plaintiff (par. 5). The plaintiff submitted that the defendant was acting as the plaintiff's agent during negotiations with the liquidators and owed to the plaintiff fiduciary duties to provide the plaintiff with relevant information as to the actual purchase price of the wine business and not to attempt to obtain a secret benefit for himself. It was also submitted that the defendant breached his fiduciary duties by failing to provide the plaintiff with the actual purchase price and by attempting to obtain for himself a secret benefit of approximately $3.8 million. The defendant submitted that the arrangement between the plaintiff and the defendant could not reasonably be described as one of agency, irrespective of the reference in paragraph 5 of the background facts. 243 In Hospital Products Limited v United States Surgical Corporation & Ors (1984) 156 CLR 41 Gibbs CJ referred to the fact that courts had consistently regarded commercial arm's length contracts where parties are on equal footing as indicative of there being no fiduciary duty (at 70.3). Wilson J was reluctant to import a fiduciary obligation where the parties were dealing at arm's length and (at 119.3) adopted as pertinent one hundred years later the observations of Bramwell LJ's in New Zealand and Australian Land Co. v Watson (1881) 7 Q.B.D. 374 at 382, that he would be very sorry to see the intricacies and doctrines connected with trusts introduced into commercial transactions and an agent in a commercial sense turned into a trustee with all the troubles that attend that relation. Dawson J also cited Bramwell LJ's observations with approval (at 149.9) having emphasised that the relationship must be of a kind which of its nature required one party to place reliance upon the other (147.5). His Honour found no special feature that distinguished the contract under consideration from the ordinary commercial arrangement. 244 The plaintiff's reliance upon the words "on behalf of" in the background facts are consistent with the observations made by Mason J in his dissenting judgment in relation to features of the fiduciary relationship at 96-97: The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who was accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of", and "in the interests of" signify that the fiduciary acts in a "representative" character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal. 245 Mason J regarded it as too simplistic to say that commercial transactions stood outside the fiduciary regime and said at 100: The fact that in the great majority of commercial transactions the parties stand at arm's length does not enable us to make a generalisation that is universally true in relation to every commercial transaction. In truth, every such transaction must be examined on its merits with a view to ascertaining whether it manifests the characteristics of fiduciary relationship. 246 It is important therefore to examine the merits of the present transaction or, to put it another way, to analyse the terms of the contract to ascertain whether the plaintiff's reliance on the words "on behalf of" in the background facts portion of the contract justifies the imposition of the fiduciary relationship between the parties. 247 It seems to me that when the whole of the contract is considered, the parties intended the words "on behalf of" in the background facts to indicate that although the defendant would deal directly with the liquidator and purchase both the wine business and the distribution business through Wine National and Liquor National respectively, the purchase of the wine business was for the purpose of making it available to the plaintiff, through his shareholding of Wine National, if he was able to provide the amount "to enable" Wine National to complete the acquisition of the wine business. 248 The scope of the commercial "agency" was limited by the terms of the contract. Clause (f) of the 9 May letter and the amended letter imposed the obligation on the defendant to provide to the plaintiff the draft Asset Sale Contracts with the liquidator for the plaintiff's approval. Far from trusting or relying upon the defendant to purchase the wine business at the figure suggested by the plaintiff, there was imposed on the defendant a contractual obligation to show the plaintiff the contract so that he could approve it. The defendant had a contractual obligation to show the plaintiff the actual contract and in my view was not in a fiduciary relationship with the plaintiff. He was required to act in good faith by reason of the contract but not because of any fiduciary relationship. 249 I am not satisfied that the wording of paragraph 5 or the parties' conduct imposed a fiduciary obligation on the defendant. He was obliged to comply with the terms of the contract, but had no fiduciary obligation to the plaintiff. This aspect of the plaintiff's claim fails. Return of the deposit/relief against forfeiture 250 The 9 May letter, the amended letter and the 6 June letter each provided that if the plaintiff failed to provide the funds to enable the corporate vehicle to complete the contract, amongst other things, the plaintiff would have "no claim" against the relevant entities to which the deposits were paid "for the return or refund of the deposit". 251 The plaintiff submitted that the deposits paid by the plaintiff were calculated at 10% of the price at which the plaintiff believed the defendant was purchasing the wine business, the distribution business and the Fernhill Winery and not the actual purchase price, some $3.4 million less. 252 The plaintiff submitted alternatively that if under the contract he was to forfeit the deposits, he is entitled to equitable relief against forfeiture. It was submitted that equity would provide that relief where unconscionable conduct of one party has caused the default of the other party who risks the forfeiture, including whether forfeiture would result from the insistence on legal rights. 253 The defendant submitted that on no construction of the contract could it be suggested that the plaintiff's obligation to pay the deposit was in any way dependent upon him having the opportunity to see the draft contracts with the liquidators. The plaintiff agreed in cross-examination that the amended letter was the basis upon which he paid the deposit. The amended letter required the defendant to provide the draft contracts for the plaintiff's approval. The draft contracts provided were the documents upon which the deposits were calculated amounting to $10.3 million. The plaintiff entered into a contract believing it to be a contract based upon the contract the defendant had purchased the wine business from the liquidator and on that basis agreed to the forfeiture of the deposit. 254 The defendant with the assistance of his solicitor engaged in conduct that was designed to trick the plaintiff into believing that the contract the defendant had entered into with the liquidators containing the figures upon which the deposit to be paid by the plaintiff was calculated, was the real contract. The defendant induced the payment from the plaintiff by that trickery. 255 The defendant submitted that if under the contract the deposit was non-refundable, as each of the letters provided it was, "there is no jurisdiction of a court of equity to interfere with that contractual arrangement and order the deposit be repaid in any event". I disagree. If it is necessary for a court of equity to intervene to avoid injustice, so long as such intervention is in line with appropriate equitable principles, then there is ample jurisdiction. 256 The relief against forfeiture that the plaintiff pursues is the relief against the forfeiture of the deposit paid pursuant to the contractual obligation, that is, 10% of the lower figure as I have found the contract between the parties to be. The higher amount of the deposit paid was induced by the trickery to which I have referred. The plaintiff's remedy in respect of the difference between the deposit required and the deposit paid is dealt with elsewhere, however equity would find it difficult to allow the defendant to be unjustly enriched and pocket that difference. However on this aspect of the plaintiff's claim I am only dealing with the relief against the forfeiture of the contracted amount. 257 I am satisfied that the appalling trickery engaged in by the defendant would make the insistence on his legal rights in this regard quite unconscientious: Romanos v Pentagold Investments (2003) 201 ALR 399; Tanwar Enterprises Pty Ltd v Joseph Cauchi & Ors (2003) 201 ALR 359. I am satisfied that the plaintiff is entitled to relief against forfeiture of the deposits. Deceit 258 French J in Musca and Ors v Astle Corporation Pty Limited and Anor (1988) 80 ALR 251 said of the tort of deceit, at 264 - 265: The history of the tort is conveniently set out in SF Milsom, Historical Foundations of the Common Law , 2nd ed, 1981 pp 361-6. In local jurisdictions it was treated as a wrong because of its criminal element and the public interest in honest dealing. Although it usually arose in a contractual context "in local jurisdictions the punitive element was sometimes harnessed to the victim's interest, being used to compel restitution, the undoing of the transaction, whenever that was possible": p362. In the Royal Courts, however, the criminal feature that had tied deceit to wrong rather than contract was lost and the common law "hardly ever distinguished the true cheat from his innocent counterpart: p363. Chancery restored restitution and the Star Chamber punished fraud: "Not until 1789 in Pasley v Freeman (1789) 3 Term Rep 51 was a liability for deceit clearly established as an entity in its own right, neither necessarily associated with contract nor excluded by it; and this resurrection of an ancient and elementary liability has been treated by modern writers as an example of the rare 'invention' of a new tort." 259 JG Fleming in The Law of Torts, 9th ed., wrote at page 694-695 (excluding footnotes): "Deceit, as an independent and general cause of action in tort, is of relatively novel origin, although traces of it are encountered as early as the 13th century when a writ of that name became available against misuse of legal procedure for the purpose of swindling others. Later this remedy expanded and played a modest part in developing the insipient law of contract, principally in connection with false warranties. Its scope however remained confined to direct transactions between the parties until in 1789, in Pasley v Freeman , it was freed from this link with contractual relations and held to lie whenever one person, by a knowingly false statement, intentionally induced another to act upon it to his detriment. …. The tort action for deceit requires proof of fraudulent intent, while breach of contractual warranty became independent of any intention to mislead or other fault. Nevertheless the close association of deceit with bargaining transactions has inevitably coloured the elements of the action, which largely reflect the ethical and moral standards of the market place as they relate to permissible methods of obtaining contractual or other economic benefits and of inflicting pecuniary loss through reliance on false statements. Not that the action is inapplicable to personal injuries or harm to tangible property, but such instances are rare, and the typical cases in which the action is enlisted involve pecuniary loss. 260 McGregor on Damages, 15th edition, at par [1718], issues a caution that the tort of deceit needs careful handling as far as damages are concerned. That is so because in the great majority of cases the action induced by the deceit is the entering into a contract by the plaintiff, either with the defendant tortfeasor or with a third party. In the same paragraph the difference between the measure of damages based on tort principles and contract principles is emphasised: Thus the correct measure of damages in the tort of deceit is an award which serves to put the plaintiff into the position he would have been in if the representation had not been made to him, and not, as with breach of condition or warranty in contract, into the position he would have been if the representation had been true. In other words, if the plaintiff has been induced by the deceit to conclude a contract he is not entitled, as he is in contract, to recover in deceit for the loss of his bargain. 261 The plaintiff has to prove the falsity of the representation, the defendants' knowledge of that falsity, the defendant's intention that the plaintiff would rely upon or be induced by the representation, and pecuniary loss so caused. The relief I have granted against forfeiture of the deposit at the true price leaves the plaintiff with pecuniary loss for the difference between the deposit paid and the deposit required. 262 There is ample evidence to establish that the defendant made a representation to the plaintiff in the draft Asset Sale Contracts which was a false representation of fact and that the defendant knew the representation to be false and intended that the plaintiff would rely upon the false figures to pay the deposit. There was no deposit payable at 10% of $10.3 million. The deposit was 10% of $6.9 million and the balance the plaintiff was induced into paying was to be the profit for the deceitful defendant. 263 I do not intend to reiterate the defendant's evidence as to how and why he changed the documents that are referred to earlier in this judgment. The defendant's explanation in evidence that he did it to make it "simple" was quite appalling and I do not believe that evidence. The defendant stumbled closer to the truth when he gave evidence that he had made the changes the first time and therefore continued to do it. His claim that he wished he had not done it and that he regretted it came only in the witness box with what I believe to be a false claim that he "now" understood it was wrong. I am satisfied that at the time he was creating these false documents he knew it was wrong. However the whole charade of claiming that he was asked to make the changes continued even in his oral evidence. His admission that he was hoping the plaintiff would not "tumble" to what he was up to came closer to the truth. He intended the plaintiff to rely upon these false representations and the plaintiff fell for it and paid the deposit at 10% of the false price. 264 The plaintiff has to establish that he was induced to act upon the false representation whereby he suffered pecuniary loss. I am satisfied that the combination of the draft Asset Sale Contracts and the 9 May letter (and the amended letter) contained the false representation and were both relied upon by the plaintiff to induce him to pay the deposit. I am satisfied that the plaintiff has established the essential elements of the tort, including pecuniary loss so that he is able to recover from the defendant the amount paid less the deposit actually required. The case against Mr Brooks 265 Mr Brooks' conduct has had to be assessed in the absence of any evidence from him after his affidavit was withdrawn. Mr Newlinds SC's submission that the Court would find that Mr Brooks only changed the contracts because his client informed him that the plaintiff wanted the contracts changed to that figure, is not supported by the evidence. The defendant's evidence was that Mr Brooks changed the Asset Sale Contracts at the defendant's request (tr. 181). The defendant did not give evidence that he informed Mr Brooks that the plaintiff and/or Mr O'Neill had asked that such changes be made. 266 No objection was taken on behalf of Mr Brooks to the admission into evidence of his e-mail to the defendant or to the defendant's evidence as to how the false contracts were created. I expressed concern about Mr Brooks position during submissions (tr. 322) and Mr Newlinds SC submitted that I should apply the standard in Briginshaw v Briginshaw (1938) 60 CLR 336 in deciding whether there is evidence that Mr Brooks knew the contracts contained the false representation and intended that the plaintiff and Mr O'Neill would rely upon and thus be deceived by those representations. Mr Newlinds SC submitted that in the absence of evidence from Mr Brooks there are two equally competing inferences in relation to these two matters. 267 Before the Court was advised that Mr Brooks was not to give evidence and his affidavit was to be withdrawn, Mr Newlinds SC cross-examined Mr O'Neill and put to him that he had a conversation with Mr Brooks in which the following occurred: Q. Didn't you say to him that you had spoken to David James about that and you were happy for the price to be changed to be the same as those referred to in the agreement between Terry and David: "Since if we show it to the Swiss guy who is providing Terry funds, there won't be any questions". A. Absolutely not. (tr. 111) 268 This evidence was not withdrawn and it is appropriate to find that this question was put on instructions from Mr Brooks. The fact that Mr Brooks did not give evidence in line with that cross-examination is a factor to be taken into account in dealing with this aspect of the plaintiff's claim. At least on the day of this cross-examination there was a case being propounded on Mr Brooks' behalf that the plaintiff, via Mr O'Neill, had requested the changes to the contract. As I have said earlier I accept Mr O'Neill's denial that such a conversation occurred. 269 The evidence establishes that Mr Brooks was receiving requests from the plaintiff through Mr O'Neill for changes to various aspects of the draft Asset Sale Contracts, other than the false provisions, to be negotiated with the liquidators. The evidence also establishes that Mr Brooks received those requests and in the main, sought those changes in negotiations with the liquidators. The irresistible inference is that Mr Brooks knew that the plaintiff and Mr O'Neill believed that the draft contracts were the true negotiated terms reached between the defendant and the liquidators. 270 Without finding that the Briginshaw test must be applied in this instance I will apply it and I am comfortably satisfied that Mr Brooks was well aware of clause (f) of the contract whereby there was a requirement for the plaintiff to approve the draft contract with the liquidators. After the false documents were sent for the plaintiff's approval pursuant to clause (f), Mr Brooks engaged in a process with Mr O'Neill as he requested changes to the contract with the liquidator. The submission that there is no evidence to prove to the Briginshaw standard that Mr Brooks intended the plaintiff to rely on the content of the draft contract as being the real terms of the contract is in my view to ignore the reality of Mr Brooks' role in the matter. Here is a solicitor dealing with the plaintiff's solicitor who is requesting that he negotiate with the liquidator to effect changes to the document that contains the false figures, knowing that the document that the plaintiff's solicitor has, ensures that, as he advised in his e-mail, the "price will not be known". The only way that was achieved was with Mr Brooks' involvement. 271 A further matter about which there was some controversy was whether Mr Brooks actually changed the content of the letter from Clayton Utz in the paragraph in which the true amount of the deposit was contained. The defendant's evidence was that he changed the letter and the draft contract before he sent the original copy across to Mr Brierley. There is no direct evidence that Mr Brooks had a hand in changing the Clayton Utz letter. I do not intend to make a finding that he changed that particular letter. However there were additional documents that the plaintiff submitted that Mr Brooks changed to give the plaintiff the false impression that the purchase price for the wine business was $10.3 million. Having regard to the documents in evidence it is difficult to believe that Mr Brooks did not at least know of the changes to the Clayton Utz letter. 272 On 24 May Mr Brooks wrote a letter to Mr David Landy, solicitor at Clayton Utz in relation to the proposed contracts (Ex. 1: 1243-1248). On the same day Mr Brooks forwarded to Nash, O'Neill, Tomko, what he claimed was a "proposed" letter to Clayton Utz together with copies of the "side agreement" and contract conditions for the sale of land (Ex. 1: 1262-1267 & 1306-1308). A comparison of these documents demonstrates that the letter to Mr O'Neill deleted any reference to one of the purchasers being "Trudy Douglas" and the purchase price of "$700,000" that was contained in the letter to Clayton Utz as well as the deletion of other paragraphs. 273 It was submitted that the deletions from the letter were made for the purpose of concealing from the plaintiff that the defendant was purchasing the residential properties as well as the wine business for no cost greater than $10.3 million. Although the total amount to be paid to the liquidators would be $10.3 million such amount was not the purchase price for only the wine business but included all the assets that the defendant had negotiated to purchase from the liquidators, including the distribution business and the residential properties. This seems to me to be the irresistible inference from this evidence. 274 Mr Brooks could have given evidence that he understood that the plaintiff had wanted the changes made to the draft Asset Sale Contracts and that he gleaned that understanding from his client, the defendant. He could have given evidence that he honestly believed that what he was doing in changing the documents was pursuant to an agreement between the plaintiff and the defendant, irrespective of whether he had gleaned such understanding from his client the defendant. He did not do so. I am satisfied that in the circumstances an inference adverse to Mr Brooks is warranted: Jones v Dunkel (1959) 101 CLR 298. However I should point out that this adverse inference does not play a decisive role in the comfort I have in the finding that the plaintiff has proved its case against Mr Brooks in deceit. 275 I am satisfied that Mr Brooks knew that the representation that the draft Asset Sale Contracts were the real contracts (by the provision of those contracts in the circumstances described above) was false. I am also satisfied that Mr Brooks intended that the plaintiff would rely upon those figures in the contracts as one of the bases upon which the deposit would be and was paid. The plaintiff was deceived by Mr Brooks' conduct into believing that the contracts were real and paid the deposit. The plaintiff is entitled to recover from Mr Brooks the pecuniary loss he suffered by reason of Mr Brooks' deceit – the difference between the deposit he paid and the deposit he was required to pay under the contract. Exemplary damages 276 In Rookes v Barnard [1964] AC 1129, Lord Devlin, in explaining the nature of exemplary and aggravated damages, referred to the categories of cases in which an award of exemplary damages "can serve a useful purpose in vindicating the strength of the law and thus affording a practical justification for admitting into the civil law a principle which ought logically to belong to the criminal" (at 1225). The limitation to those categories was rejected in Australia in 1966: Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118: Australian Consolidated Press Ltd v Uren [1969] 1 AC 590. In Rookes v Barnard Lord Devlin said at 1227: Where a defendant with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity. This category is not confined to money making in the strict sense. It extends to cases in which the defendant is seeking to gain at the expense of the plaintiff some object-perhaps some property which he covets-which either he could not obtain at all or not obtain except at a price greater than he wants to put down. Exemplary damages can properly be awarded whenever it is necessary to teach a wrongdoer that tort does not pay. 277 In answering the question, "Did Rookes v Barnard extend exemplary damages to fresh torts?", in Broome v Cassell & Co Ltd [1972] A.C. 1027, Lord Hailsham of St. Marylebone L.C. said at 1076: It is true, of course, that actions for deceit could well come within the purview of the second category. But I can see no reason for thinking that Lord Devlin intended to extend the category to deceit, and counsel on both sides before us were constrained to say that, though it may be paradoxical, they were unable to find a single case where either exemplary or aggravated damages had been awarded for deceit, despite the fact that contumelious, outrageous, oppressive, or dishonest conduct on the part of the defendant is almost inherently associated with it. The explanation may lie in the close connection that the action has always had with breach of contract. 278 Lord Diplock expressed the rather firm view that Rookes v Barnard had not extended the power to award exemplary damages for the tort of deceit, on the basis that such damages had not been awarded previously for the tort (at 1130-1131). In Metall Und Rohstoff A.G. v ACLI Metals (London) Ltd [1984] 1 Lloyd's LR 598, Purchas LJ accepted that the tort of deceit or fraud had never been considered to fall within the category of cases in respect of which exemplary damages may be awarded (at 612). In 1993 the English position that an award of exemplary damages could only be made where the case fell within the two categories propounded by Lord Devlin in Rookes v Barnard and was founded on a tort for which such damages had been awarded before Rookes v Barnard was endorsed: A.B. & Ors v South West Water Services Ltd [1993] Q.B. 507 per Sir Thomas Bingham MR at 530. 279 In 1988 in Musca v Astle Corporation Pty Limited French J considered whether an award of exemplary damages is available for the tort of deceit in Australia. After referring to the history of the award of exemplary damages in England and Australia and observing that there was then no Australian decision of which he was aware relating to the availability of exemplary damages in cases of deceit, his Honour considered whether an award of such damages for deceit would be an "illogical and anomalous remedy" (at 267). His Honour said that "viewed against its conceptual ancestry, it is difficult to dismiss the remedy as either anomalous or illogical" and, after referring to Brennan J's statement in XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 472 that "it is now beyond argument that, by the law of this country, it is proper to award exemplary damages by way of punishment of the tortfeasor", continued at 268: There are of course trenchant and powerful critics of the remedy and the force of their arguments must be acknowledged. However, in my opinion, there is nothing that is so anomalous or illogical about exemplary damages as to prevent their logical application, to deceit. Indeed that tort is a paradigm case for their application. 280 Essential elements of the tort of deceit include the falsity of the representation, the defendant's knowledge that the representation is false and the defendant's intention that the plaintiff will rely upon or be induced to act upon the false representation. This kind of conduct, essential for the proof of the tort, may fit within the descriptions of the type of conduct that has been found to warrant the award of exemplary damages – "contumelious disregard for the plaintiff's rights", "conscious wrongdoing", "high-handed" and "reprehensible": Gray v Motor Accident Commission (1998) 196 CLR 1; Lamb v Cotogno (1987) 164 CLR 1. 281 Does the fact that the conduct essential to prove the tort may fit within descriptions of conduct that lays the foundation for an award of exemplary damages prevent an award for the tort of deceit? I think not. It will depend upon the circumstances of each case. For instance the defendant may have committed the tort by a solitary act of trickery that may not warrant the award of such damages. However the defendant may commit the tort in a manner demonstrating a level of high handedness and reprehensibility that warrants the disapprobation of the court over and above the finding that the tort of deceit has been committed, as bad as that finding may be for the particular defendant, in any event. Even worse, the trickery may be perpetrated by people with legal authority, such as a solicitor, and perpetrated by a co-defendant using the legal authority of the solicitor, as sadly was the case here. That is conduct of a very reprehensible kind. 282 The position in England has now changed and is more in line with the approach adopted by French J. In Kuddus v Chief Constable of Leicestershire Constabulary [2001] 2 WLR 1789, a case of misfeasance in public officer, the House of Lords finally rejected the pre-1964 rule as too rigid and an inappropriate limitation on the future development of the law and contrary to the normal practice of the courts: per Lord Slynn of Hadley at [22], see also Lord Mackay of Clashfern at [44], Lord Nicholls of Birkenhead at [68], Lord Hutton at [89] and Lord Scott of Foscote at [118]. 283 Lord Mackay referred to the tort of deceit at [43]: The difficulty of adequate reason for distinguishing between torts in respect of which the power to award exemplary damages should exist and those in which it should not is exemplified by Lord Hailsham of St Marlebone LC's treatment in Broome v Cassell & Co Ltd [1972] AC 1027 of the tort of deceit. The reliance on history and the relationship of the tort of deceit to a breach of contract while leading Lord Hailsham to his then opinion does not seem powerfully persuasive and Lord Hailsham appears to have recognised that in the somewhat tentative nature of his conclusion. 284 Lord Scott said at [122]: It will be noticed that I have not included deceit among the nominate torts where, on authority, exemplary damages cannot be claimed. This is because if, which I regret, exemplary damages are to be retained and reformed, rather than abolished, deceit practiced by a government or local authority official, all by a police officer, on a citizen, it seems to me to be allowed in a suitable case to attract them. 285 It seems to me that the facts of this case warrant an award of exemplary damages. The conduct of the defendant and Mr Brooks in deceiving and changing the terms of the draft Asset Sale Contracts was quite appalling. A businessman and a solicitor, both obviously intent upon trickery, changed the contracts not once but numerous times. The conduct of the defendant and Mr Brooks was both high handed and reprehensible such that an award of exemplary damages is warranted against both defendants. The reprehensibility of the conduct of Mr Brooks is increased by reason of his position as a solicitor, an officer of the Court. 286 I award exemplary damages as against the defendant in the amount of $75,000. I award exemplary damages against Mr Brooks in the amount of $125,000. Conclusion 287 The plaintiff's case for damages for breach of contract fails as does his claim for breach of fiduciary duty. The plaintiff is entitled to relief against forfeiture of the deposit required under the contract at the lower figure. The plaintiff is entitled as against the defendant and Mr Brooks to damages for misleading and deceptive conduct and for the tort of deceit in the amount equal to the difference between the deposit paid and the deposit required under the contract at the lower price. Thus the plaintiff is entitled to the whole of the amounts he paid by way of deposit. 288 I have awarded exemplary damages as against the defendant in the amount of $75,000 and as against Mr Brooks in the amount of $125,000. 289 The parties are to prepare Short Minutes of Order to reflect these findings for filing in Court on 26 February 2004 at 9.30 am. That Order should include an agreed order for costs and interest, however if the parties are unable to agree on those orders I will hear argument on 26 February 2004 when the matter is listed for the entry of orders. ******************** Last Modified: 02/27/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.