New South Wales Supreme Court CITATION : Barry Albert Andrews & 4 Ors v Racken Pty Ltd & 7 Ors [2007] NSWSC 1010 HEARING DATE(S) : 19-21/09/06; 14-16/11/06; 12-14/02/07 JUDGMENT DATE : 11 September 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : White J DECISION : See paragraph 285 of judgment. CATCHWORDS : PRINCIPAL AND AGENT – Authority of agent – Implied grant of authority to deal with execution page where page signed and delivered on its own by principal to fourth defendant. - CONTRACTS – Unconscionability – Unjust contracts – Borrower in position analogous to that of surety – Contract unjust where terms were not explained and borrower did not understand nature of obligations assumed – No steps taken by first defendant to ensure that contract explained to borrower – Relevance of principles of unconscionability at general law – Question of whether enforcement of contract unjust distinguished from question whether entry into contract unconscionable – Held that contract was unjust in circumstances in which it was made within meaning of Contracts Review Act 1980 (NSW) although other party did not act unconscionably – Purpose of remedy under Contracts Review Act to avoid unjust consequence or result – Held that just to hold borrower to substance of transaction as he understood it to be. - PRINCIPAL AND AGENT – Authority of agent – Scope of actual authority – Ostensible authority – Agent signed parents' names - Agent with actual authority to mortgage shares but not to enter into contract imposing personal obligations on principals – No ostensible authority where no express representation by principals as to scope of agent's authority and no usual actual authority of child permitted to negotiate and contract on parents' behalf in relation to shares owned by parents – Agent purported to enter into contract on behalf of parents granting mortgage over shares and imposing personal obligations upon them –Whether principals bound to extent that provisions within agent's authority – Where personal obligations not severable – Held that principals not bound by contract. - ESTOPPEL – By conduct – Where beneficial owner of shares represented that he had authority to deal with shares on behalf of bare trustee – Representation of authority induced first defendant to provide finance– Beneficial owner of shares estopped from denying that his signature effective to deal with shares – Held that bare trustee bound by representations of beneficial owner to extent that beneficial owner had actual authority to deal with shares and representation was within scope of authority as agent. - PRINCIPAL AND AGENT – Liability of agent to third persons – Execution of contract by son in name of parents constituting misleading and deceptive conduct –Fair Trading Act 1987 (NSW) s 42 – No requirement that representation constituting misleading and deceptive conduct be made to party claiming loss – Breach of warranty of authority – Measure of damages. - (NSW) Fair Trading Act 1987, ss 42 and 68 - (NSW) Contracts Review Act 1980, ss 7 and 9 Contracts Review Act 1980 (NSW) Australian Securities and Investments Commission Act 2001 (Cth) LEGISLATION CITED : Trade Practices Act 1974 (Cth) Bankruptcy Act 1966 (Cth) Australian Securities and Investments Commission Regulations 2001 (Cth) Fair Trading Act 1987 (NSW) Masters v Cameron (1954) 91 CLR 353 Wilton v Farnworth (1948) 76 CLR 646 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Mercantile Credit Co Ltd v Hamblin [1965] 2 QB 242 Saunders v Anglia Building Society sub nom Gallie v Lee [1971] AC 1004 Petelin v Cullen (1975) 132 CLR 355 United Dominions Trust Ltd v Western [1976] 1 QB 513 Egan v Ross (1928) 28 SR (NSW) 382 In Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 Bakarich & Ors v Commonwealth Bank of Australia [2007] NSWCA 169 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 Macquarie Bank Limited v National Mutual Life Association of Australasia Limited (Cole J, 15 June 1995, unreported) Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 Barclay's Finance Holdings Ltd v John Robert Sturgess & Ors (Wood J, 29 July 1985, unreported) CASES CITED : Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 McKeand v Thomas (2006) 12 BPR 23,593 Tobin v Broadbent (1947) 75 CLR 378 Shephard v Cartwright [1955] AC 431 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 Brown v Brown (1993) 31 NSWLR 582 Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 ISPT Nominees Pty Ltd v Chief Commissioner of Stamp Revenue [2003] ATC 4,697; (2003) 12 BPR 22,941 Grundt v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641 The Commonwealth v Verwayen (1990) 170 CLR 394 Spencer, Bower & Turner, Estoppel by Representation, 3rd ed (1977) London, Butterworths Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 Hoath v Connect Internet Services Pty Ltd (2006) 229 ALR 566 Gould v Vaggelas (1985) 157 CLR 215 Bowstead & Reynolds on Agency, 18th ed (2006) London, Sweet & Maxwell Barry Albert Andrews & 4 Ors PARTIES : v Racken Pty Ltd & 7 Ors FILE NUMBER(S) : SC 2135/06 Plaintiffs: P E King, F A Sinclair COUNSEL : 1st & 2nd Defendants: R E Dubler SC & S Ivantsoff 4th & 7th Defendants: A J McInerney Plaintiffs: Grahame W Howe & Co SOLICITORS : 1st & 2nd Defendants: Matthews Folbigg Pty Ltd 4th & 7th Defendants: DLA Phillips Fox IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Tuesday, 11 September 2007 2135/06 Barry Albert Andrews & 4 Ors v Racken Pty Ltd & 7 Ors JUDGMENT 1 HIS HONOUR: In these proceedings, the first defendant, Racken Pty Ltd ("Racken") seeks to enforce against the first plaintiff, Mr Barry Andrews, and against the fourth and fifth plaintiffs, Mrs Sophie Khan and Mr Sultan Khan, an agreement for the provision of finance of $250,000 secured by a mortgage of shares held by them in the fifth defendant, Oxyman Pty Ltd (In Liquidation) ("Oxyman") and the sixth defendant, Laserbond Marketing Pty Ltd ("Laserbond Marketing"). Racken claims that the agreement was entered into on 5 August 2005. 2 There are three separate cases. The first concerns Barry Andrews. He did not see the Agreement for Provision of Finance. He signed an execution page and faxed it to Mr Ron Richmond (the fourth defendant). The principal issues in the claims involving Barry Andrews are: (i) whether an oral agreement, on terms different from the document tendered by Racken as containing the Agreement for Provision of Finance, was entered into on 20 June 2005; (ii) whether Barry Andrews became a party to the Agreement for Provision of Finance; (iii) if Barry Andrews became a party to it, whether he is entitled to avoid the Agreement for Provision of Finance, or is entitled to damages, by reason of misrepresentations allegedly made, and misleading and deceptive conduct allegedly engaged in, by Richmond, Mr Terence Kelly (the seventh defendant) for themselves and on behalf of Mr Kenneth McCracken (the second defendant) and Racken; (iv) whether Barry Andrews is entitled to relief under the Contracts Review Act 1980 (NSW) and, if so, on what terms; and (v) whether Barry Andrews is entitled to damages or other relief against Racken, McCracken, Richmond, Kelly, Zanshin Pty Ltd (the third defendant controlled by Richmond) or Hills Ozone Doctor Pty Ltd ("HOD") (the eighth defendant controlled by Kelly), for alleged unconscionable conduct in which he claims they engaged in contravention of s 12CC of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act ") or s 51AC of the Trade Practices Act 1974 (Cth). 3 The second case concerns Sultan Khan and Sophie Khan, who did not sign the Agreement for Provision of Finance. Their son, Shaneel Khan, signed the document in their names and purportedly witnessed their signatures. The principal issues in their case are: (i) Whether an oral agreement, on terms different from the document tendered by Racken as containing the Agreement for Provision of Finance, was entered into on 20 June 2005; (ii) what actual or ostensible authority Shaneel Khan had to sign the Agreement for Provision of Finance on 5 August 2005 in their names; (iii) whether they are bound by the Agreement for Provision of Finance; (iv) whether shares held by Sultan Khan in Laserbond Marketing are held by him on trust for Shaneel Khan; (v) if so, whether Sultan Khan is estopped from denying that the Agreement for Provision of Finance binds him to the extent it contains a mortgage of shares in Laserbond Marketing held by him on trust for Shaneel Khan; and (vi) whether Sultan Khan and Sophie Khan are entitled to relief on the grounds of misrepresentation, misleading and deceptive conduct, or unconscionable conduct, allegedly made and engaged in by McCracken, Richmond, Kelly and the companies for whom they acted. 4 Racken seeks to enforce the terms of the Agreement for Provision of Finance against Barry Andrews, Sophie Khan, Sultan Khan, Richmond, Zanshin, Kelly and HOD. Richmond, Zanshin, Kelly and HOD did not defend the claims made by Racken against them. If Sophie Khan and Sultan Khan are not liable on the Agreement for Provision of Finance because they did not become parties to it, Racken claims damages from Shaneel Khan for misleading and deceptive conduct and breach of warranty of authority. Terms of the Alleged Agreement for Provision of Finance 5 The document tendered by Racken as the Agreement for Provision of Finance bears a handwritten date of 8 August 2005. It is expressed to be a deed. It is expressed to be made between Barry Andrews, Mr Garry Andrews (the second plaintiff), Richmond, Zanshin, Kelly, HOD, Sultan Khan, Sophie Khan, Laserbond Marketing, Oxyman and Racken. 6 The Agreement defines the "Oxyman Shareholders" as Barry Andrews, Zanshin, HOD and Sophie Khan. The "Guarantors" were defined as Richmond, Kelly, Garry Andrews, and each of the "Mortgagors". The "Mortgagors" were defined as Barry Andrews, Zanshin, HOD, Sophie Khan and Sultan Khan. The "Principal Sum" meant $250,000. "HVOF" meant HVOF Australia Pty Ltd. The Agreement recited: " A. At the request of the Oxyman Shareholders and the Guarantors, Racken has agreed to lend to the Oxyman Shareholders the Principal Sum on the terms set out in this Deed. B. The Oxyman Shareholders have agreed to use the Principal Sum to acquire additional shares in Oxyman. C. Steps are currently being taken to list HVOF on the Stock Exchange (and such company shall be known when it is listed as Laserbond Ltd). " 7 Clause 2.1 provided for Racken to pay the Principal Sum to the Oxyman Shareholders. By clauses 3.1 and 3.2, the Oxyman Shareholders agreed to repay the Principal Sum together with interest at 9% per annum compounded monthly on the "Repayment Date". The "Repayment Date" was 18 November 2005. 8 By clause 4, the Oxyman Shareholders agreed to subscribe for the allotment of 350 new shares in Oxyman. Barry Andrews and Sophie Khan were to apply for 87 shares each in Oxyman. 9 By clause 5 the Oxyman Shareholders agreed to do all things necessary to acquire unencumbered title to the "Specified Laserbond Ltd Shares", on Laserbond Ltd being listed on the Stock Exchange. "Specified Laserbond Ltd Shares" were defined as " ... 1.5 million ordinary shares in Laserbond Ltd. For the sake of clarity and the avoidance of any doubt, the 'Specified Laserbond Shares' do not include the shares acquired by Racken in Laserbond Ltd as a result of any action taken by Racken independently of this Deed." 10 By clause 6, the Oxyman shareholders granted to Racken an option to acquire the Specified Laserbond Ltd Shares within 14 days of Laserbond Ltd being listed on the Stock Exchange. Clause 6.4 provided that if Racken exercised the option and if the shares of Laserbond Ltd were less than $0.20 per share on the fourteenth day after listing, the Oxyman shareholders agreed to make up the difference. If Racken exercised this option, and the Oxyman Shareholders complied with their obligation under clause 6.4, then the Oxyman Shareholders would be deemed to have discharged their obligation to repay the advance of $250,000 and to pay interest under clause 3. 11 By clause 7, the Oxyman Shareholders granted to Racken an option to acquire the 350 Oxyman shares to be subscribed for by the Oxyman Shareholders within 14 days of the shares in Laserbond Ltd being listed on the Stock Exchange. If this option were exercised, the Oxyman Shareholders would be deemed to have discharged their obligation under clause 3 to repay the advance of $250,000 and to pay interest. 12 Racken could exercise one share acquisition option but not both. If it exercised neither, the Oxyman Shareholders remained obliged to repay the advance of $250,000 and to pay interest. 13 Each of the Guarantors (which included Barry Andrews, Sophie Khan and Sultan Khan) guaranteed the payment by the Oxyman shareholders of all moneys which the Oxyman Shareholders were liable to pay. Thus each was liable for the repayment of the advance of $250,000 and the payment of interest, if neither of the options was exercised. 14 Clause 9 provided that each of Barry Andrews, HOD, Zanshin, Sultan Khan and Sophie Khan, mortgaged his, its and her shares in Laserbond Marketing and Oxyman to Racken to secure the payment of moneys and the performance of his, its and her obligations under the Deed. Clause 9.12 provided that each of the Mortgagors should deliver a signed transfer of their shares in Laserbond Marketing and Oxyman and share certificates. The Deed conferred on Racken powers of sale in the event of default. By clause 16 each of the other parties to the Deed irrevocably appointed Racken as his, its and her attorney to execute documents in such party's name to give effect to the Agreement. 15 The Agreement consists of sixteen pages of text, followed by execution pages numbered 17, 18 and 19, followed by annexures on pages numbered 20 to 24. None of the pages is initialled. Page 17 consists of execution clauses for the signatures of Barry Andrews, Garry Andrews, Richmond, and Kelly. One copy of page 17 is signed by Garry Andrews, Richmond and Kelly. Another copy of page 17 is a faxed page containing Barry Andrews' signature. Page 18 consists of execution clauses for Sophie Khan, Sultan Khan, Zanshin, HOD and Laserbond Marketing. It bears what appear to be the signatures of Sophie Khan and Sultan Khan witnessed by their son, Shaneel Khan. Kelly and Richmond also signed for Zanshin, HOD and Laserbond Marketing. On page 19, Kelly signed for Oxyman and Mrs Rachel McCracken signed for Racken. 16 Barry Andrews did not see the rest of the agreement. He signed only the execution page numbered 17, against the words "Executed as a Deed". The page had been faxed to him by Richmond. He signed it in the presence of his wife who witnessed his signature and faxed it back. 17 Neither Sophie nor Sultan Khan signed the document. The signatures which purport to be theirs were affixed by their son Shaneel Khan who falsely signed as a witness attesting that they had signed in his presence. The Plaintiffs' Claims 18 Barry Andrews, Sultan Khan and Sophie Khan deny that they became parties to the alleged agreement. Alternatively, they seek to have the agreement set aside on a variety of grounds. They assert that a different agreement was entered into on 20 June 2005, involving the sale of shares. They claim that this contract was repudiated by Racken and discharged. They seek orders for the retransfer to them of shares now registered in Racken's name which were the subject of the alleged mortgage, as well as other relief. 19 Barry Andrews, Sophie Khan and Sultan Khan claim that on 20 June 2005, they made an agreement with McCracken that, through Racken or some other vehicle nominated by him, he would invest $250,000 in Oxyman, the consideration for which would be that at his option he would take up shares in Laserbond Ltd after HVOF (which was then to be known as Laserbond Ltd) was listed at a value of $0.20, but at a discount price to him of $0.17, or alternatively would take up 350 shares in Oxyman. He was to exercise the option within 14 days of the listing of HVOF. His entitlement to the exercise of either option was to be secured by a transfer of shares held by Barry Andrews, Sophie and Sultan Khan, Zanshin and HOD in Laserbond Marketing which conferred rights to the issue of shares to the value of $62,500 in HVOF (that is, to the total value of $250,000, being $62,500 x 4). 20 Although it was not pleaded in this way, the plaintiffs' claim was argued on the basis that the agreement reached on 20 June 2005 was subject to the satisfaction of two conditions. One condition was that McCracken would do due diligence in relation to HVOF to be satisfied with the proposal. The plaintiffs contended that McCracken carried out such due diligence and reached the relevant state of satisfaction by 22 July 2005. The other condition was that the agreement be formalised in writing. It was said that both conditions were satisfied. It was also said that the second condition was not a condition to the existence of a binding agreement. Rather, it was submitted, the case was one falling within the first category of case discussed by the High Court in Masters v Cameron (1954) 91 CLR 353 (at 360), namely, one where the parties had reached finality in arranging all of the terms of their bargain and intended to be immediately bound to the performance of those terms although proposing to have the terms restated in writing in a fuller or more precise way, but not to different effect. 21 Barry Andrews, Sophie Khan and Sultan Khan do not contend that this agreement is still on foot. They claim it was discharged because it was repudiated by McCracken and Racken. They claim to have accepted the repudiation and rescinded the agreement by filing proceedings. They claim damages, but there is no evidence of their having suffered any damage as a result of the breach of the agreement they allege. Any damage they have suffered arises from Racken's claim to have had the right to control the disposition of their shares in Laserbond Marketing pursuant to the mortgage in the Agreement for Provision of Finance. If they are bound by the Agreement for Provision of Finance, then that agreement superseded any agreement of 20 June 2005. If not, Racken has no right to security over their shares in Laserbond Marketing or Oxyman irrespective of whether or not an earlier agreement on different terms had been made. 22 Barry Andrews, Sophie Khan and Sultan Khan allege that their signatures (or in the case of Sophie Khan and Sultan Khan their purported signatures), which are appended to the execution pages of the Agreement for Provision of Finance, were procured by fraud. They allege that Richmond, acting as agent for Racken and McCracken, dishonestly procured signatures of Barry Andrews, and of Shaneel Khan on behalf of Sophie Khan and Sultan Khan, by presenting a single sheet of paper which Barry Andrews and Shaneel Khan signed in the belief that the document was paperwork giving effect to the share sale agreement which they allege was made on 20 June 2005. They allege that Richmond represented to them that the single page presented for signature was an accurate and true reflection of the agreement reached (even though it contained no terms), or was part of, or gave effect to, a share sale transaction that they allege was made between the parties on 20 June 2005. They allege that Richmond made this representation knowing it was false, or not caring whether it was true or false, and intending that they act on it. 23 Barry Andrews, Sophie Khan and Sultan Khan also allege that Racken, McCracken and Zanshin represented that the transaction they were asked to sign was an investment, when in fact it was a loan personally guaranteed by them. They allege that Racken, McCracken, Zanshin, Richmond, Kelly and HOD represented that the value of Oxyman prior to August 2005 was not less than $15,000,000, when in fact the company was insolvent at the time. This representation was alleged to have been made "between February and August 2005" by Kelly on behalf of himself and Racken and McCracken. It is also alleged to have been made by McCracken to Shaneel Khan. 24 They also allege that McCracken, Racken, Zanshin, Richmond, Kelly and HOD represented that: (a) Oxyman was able to pay its debts as and when they fell due prior to August 2005 when in fact the company was insolvent at the time; and (b) that Oxyman intended to use the investment of $250,000 for business development when in fact the money was used to pay outstanding accounts and was gone in a few days. 25 They allege that Zanshin, Richmond, Kelly and HOD represented that the financial accounts of Oxyman were a fair and accurate representation of the state of the company's accounts, when the accounts were inaccurate and did not represent the company's true financial position. There was no evidence of the defendants making the alleged representations referred to in this paragraph, let alone of reliance being placed on such representations by Barry Andrews or Sophie or Sultan Khan, or anyone on their behalf. 26 Barry Andrews, Sophie Khan and Sultan Khan allege that all the defendants engaged in unconscionable conduct in connection with the supply or possible supply of financial services in contravention of ss 12CB or 12CC of the ASIC Act, or s 51AC of the Trade Practices Act. They rely also on the Contracts Review Act to avoid the Agreement for Provision of Finance. The particulars of unconscionable conduct, and the grounds relied on for the claim that the Agreement for Provision of Finance was unjust in the circumstances relating to the contract at the time it was made, were: " (a) Unfair tactics were utilized by the Defendants in that the Plaintiffs were requested to sign a one page document on the assumption that this represented or was part of the agreement referred to at paragraph 3 when that was not the case; (b) Undue pressure was applied to the Third Plaintiff on 5th August 2005 in that he was pressured to sign the one page document in a rushed moment with the Fourth Defendant saying 'Quick we need the money'; (c) The Fourth Defendant sent only a one page fax to the First Plaintiff; (d) The 8 August written agreement was not reasonably necessary for the protection of the legitimate interests of the First Defendant; (e) The First, Fourth and Fifth Plaintiffs were unable to understand the documents they signed or which were signed for them on 5th August 2005; (f) Sharp practice by the First and Second Defendants their servants or agents; (g) Unreasonable failure to disclose the intended conduct of the First and Second Defendants namely to use the signatures of the Plaintiffs to achieve loan transactions and guarantees that the said Defendants well knew the Plaintiffs would not otherwise have entered into. " 27 The second plaintiff, Garry Andrews, is Barry Andrews' son. Garry Andrews was made bankrupt on 12 April 2006, and the proceedings brought by him are stayed pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth). 28 The third plaintiff, Shaneel Khan, is the son of Sophie and Sultan Khan. He was not a party to the agreement with Racken. He brought a claim against McCracken and Kelly alleging that they were directors of Oxyman and allowed Oxyman to incur debts to him when they knew, or should have known, it was insolvent. I was told that the parties had agreed that Shaneel Khan would not proceed with his claims, although no leave to discontinue was then sought. On the first day of the hearing, counsel for the plaintiffs announced that, as no relief was being sought at this hearing on behalf of Shaneel Khan, counsel and the plaintiffs' solicitors would cease to act for him. After much shifting of position, the plaintiffs' counsel ultimately sought and was granted leave to amend to raise the issue of whether Shaneel Khan had authority to cause his parents to enter into the alleged agreement. Racken then cross-claimed against Shaneel Khan for breach of warranty of authority, and misleading and deceptive conduct. Thereafter, Shaneel Khan was represented by counsel and solicitors who acted for the plaintiffs. 29 Mrs Rachel McCracken is the director and shareholder of Racken. She was not a party to the proceedings. All of the negotiations for the entry into an agreement or agreements in which Racken was engaged were conducted by McCracken on its behalf. Racken's Claim 30 Racken filed an interlocutory process in the nature of a cross-claim. It sought a declaration that the Agreement for Provision of Finance was valid and effective, a declaration that it is entitled to exercise its power of sale of the shares that are the subject of the mortgage, judgment for the sum of $250,000 with interest at the rate provided for in the Agreement for Provision of Finance, an order dissolving an interlocutory injunction given by Barrett J on 13 July 2006, and ancillary relief. 31 Racken also sued Shaneel Khan for breach of warranty of authority or misleading and deceptive conduct in the event it is held that Sophie Khan and Sultan Khan are not bound by the Agreement for Provision of Finance. It alleges that Sophie Khan and Sultan Khan held out Shaneel Khan as having authority to act on their behalf, and that Shaneel Khan acted within the scope of his actual or ostensible authority in executing the Agreement for Provision of Finance on their behalf. It also alleges that the shares in Laserbond Marketing registered in the name of Sultan Khan were held by him on trust for Shaneel Khan. It alleges that Sultan Khan, as bare nominee or trustee for Shaneel Khan, cannot dispute the validity of the mortgage of the Laserbond Marketing shares given by Shaneel Khan's execution of the Agreement for Provision of Finance using the names of his parents. 32 Racken pleaded that Sophie Khan and Barry Andrews ratified or affirmed the Agreement for Provision of Finance after they were aware that Racken was asserting and relying on a written agreement and asserting its right to be repaid the sum of $250,000 and interest, by maintaining their entitlement to 87 shares each in Oxyman which were acquired from the funds provided by Racken and by communicating any dispute about the terms of the agreement, or seeking to rescind it, or offering to repay the $250,000. 33 Racken made no restitutionary claim to recover the sums of $62,500 paid to Barry Andrews and Sophie Khan for them to subscribe for shares in Oxyman in the event it were held that there was no contract between them. 34 It is necessary to describe in more detail the businesses of Oxyman and Laserbond Marketing, the shareholdings in those companies, the negotiations for the injection of capital to Oxyman, the negotiations leading to the signing of the execution pages of the Agreement for Provision of Finance, the circumstances relating to their being signed, the compilation of that document, and the alleged misrepresentations. Oxyman and Laserbond Marketing 35 Oxyman held distribution rights to a range of products loosely described as nutritional oxygen supplements. It commenced business in about 2004. Its business consisted of selling such products into the health food and sports drink markets, and in marketing its products to owners or trainers of thoroughbred or other horses. On or about 8 May 2006, a voluntary administrator was appointed to Oxyman. On 5 June 2006, notice was lodged with ASIC that the creditors had resolved that Oxyman be wound up. 36 Kelly was the managing director of Oxyman. As at 2 August 2005, there were twenty-one shareholders and 7,035 issued shares in Oxyman. The largest shareholder was HOD. Zanshin was also a shareholder. Sophie Khan held 705 shares, or just less than 10% of the issued capital. A Mr Terry Griffiths was also a shareholder. On 9 May 2005, Racken had paid $100,000 to subscribe for 210 shares, then about 3% of the issued capital. Following Racken's acquisition of shares in Oxyman, McCracken assumed the role as chairman of the management committee which supervised the management of Oxyman. He acted in that role from May 2005 to December 2005. 37 Some of the shares in Oxyman held by HOD were held on behalf of Garry Andrews. He said, and Kelly did not deny, that he had a beneficial interest in about 29% of the shares issued in Oxyman, although that interest had been diluted to about 23% by January 2006 as further capital was raised. He was the sales and marketing manager, and subsequently , the acting general manager, of Oxyman. 38 Prior to 5 August 2005, neither Barry Andrews nor Sultan Khan held shares in Oxyman, although Sophie Khan did. Racken and McCracken contended that the shares held by Sophie Khan in Oxyman, and those held by Sultan Khan in Laserbond Marketing, were held by them on trust for Shaneel Khan. 39 Oxyman and Laserbond Marketing shared the same offices. They also shared the same computer server. However, there was no formal relationship between the companies. Some persons held shares in both companies. 40 Laserbond Marketing had entered into an agreement on 13 February 2004 with HVOF to distribute the products of HVOF. HVOF carried on a business known as HVOF & Laser Technologies. The marketing agreement of 13 February 2004 recited that HVOF specialised in the reclamation and surface engineering of industrial components operating in severe industrial environments. On 13 February 2004, an agreement was made between HVOF, Laserbond Marketing, and the then current shareholders of HVOF and Laserbond Marketing, for Laserbond Marketing to acquire shares in HVOF. The agreement provided for Laserbond Marketing to acquire 39% of the share capital in HVOF for just over $1,990,000. The evidence did not disclose what shares were acquired by Laserbond Marketing in HVOF. 41 The then current shareholders of Laserbond Marketing were described in the agreement as Zanshin, HOD, Mr Sherjeel Khan, Griffiths and Naidu Australia Pty Ltd. Sherjeel Khan is Shaneel Khan's brother. The agreement also recited that Zanshin and HOD held shares beneficially for Garry Andrews. The agreement was signed by Kelly and Richmond who control HOD and Zanshin respectively. 42 To raise the deposit, Laserbond Marketing entered into a loan agreement with Barry Andrews on 9 March 2004. The agreement recited that Barry Andrews had agreed to lend Laserbond Marketing $200,000 to facilitate the purchase of HVOF's shares. The finance was raised by a loan from the Bank of Adelaide secured over the house of Barry Andrews and his wife. The agreement provided that Laserbond Marketing would service the interest on the loan. It provided that Laserbond Marketing would issue a further 23 shares in Laserbond Marketing to Barry Andrews, and that when Laserbond Marketing was in a position to repay the loan, Barry Andrews could elect either to have the loan repaid with a high rate of interest, or to retain the 23 shares in Laserbond Marketing and continue to pay the interest to the Bank of Adelaide himself. 43 Whilst the agreement of 9 March 2004 between Laserbond Marketing and Barry Andrews provided for the issue of an additional 23 shares to him, contemporaneous minutes and subsequent events show that the parties must have agreed to vary the number of shares so as to reflect an issue to him of shares representing approximately 40% of the issued capital of Laserbond Marketing. 44 Laserbond Marketing had been acquired as a shelf company on 19 December 2003. The share register and the allotment journal show a confused picture in relation to the issue, re-issue and cancellation of shares up to September 2004. Shares were issued to Sherjeel Khan in January 2004, but those shares were cancelled in September 2004. In September 2004, three hundred shares were issued to Sultan Khan. At some time prior to early 2006, Richmond prepared a document from the company's records summarising the shareholding in Laserbond Marketing. There were then 3,100 shares and 172 convertible notes on issue. Barry Andrews was the largest shareholder with 1,254 shares representing 38.33% of the issued capital. 45 The shareholders of HVOF and of Laserbond Marketing proposed that HVOF would be "floated". The details of the proposed float were not in evidence and were unclear. It was proposed that HVOF would be converted to a public company, its name changed to Laserbond Ltd, that shares would be issued to the public, the share issue would be underwritten, and Laserbond Marketing's shareholding in HVOF would be restructured so that the shareholders in Laserbond Marketing would acquire shares and options in the company to be known as Laserbond Ltd. 46 Barry Andrews thought that, on the float of HVOF, the shares in Laserbond Marketing would be converted to shares in Laserbond Ltd and listed at a minimum of twenty cents. 47 The document prepared by Richmond showing the holders of shares and convertible notes in Laserbond Marketing also showed the shares in Laserbond Ltd to which each shareholder of Laserbond Marketing would be entitled on the conversion of HVOF to a public company and the issue of shares. The parties did not dispute the accuracy of the document, but there was no evidence to substantiate the premises on which it was prepared. The document stated that the shareholders in Laserbond Marketing would be entitled to 5,500,000 shares on the float at an assumed value of twenty cents each, with options to take up further shares over the following five years. There was no evidence of any agreement between the shareholders of Laserbond Marketing and the shareholders of HVOF as to how this would work. Be that as it may, if Richmond's calculations as to how shares in Laserbond Ltd would be issued to the shareholders of Laserbond Marketing on the float of Laserbond Ltd were correct, and if the assumed values of those shares were correct, Barry Andrews' shareholding of 1,254 shares in Laserbond Marketing would give him a right to shares in Laserbond Ltd with an assumed value of $421,577 at the time of the float. Sultan Khan's 300 shares in Laserbond Marketing would translate to 504,279 shares in Laserbond Ltd at an assumed value at the date of the float of $100,856. Negotiations for Injection of Further Capital to Oxyman 48 Between late February 2005 and 9 May 2005, McCracken considered making an investment of $100,000 in Oxyman. During that period, he considered various financial statements of Oxyman provided to him, and discussed its financial position and its business with Garry Andrews, Shaneel Khan, Richmond and Kelly. On 5 May 2005, Richmond forwarded to McCracken a copy of a valuation provided by Benwest Investment Services Pty Ltd. Benwest observed that Oxyman had net assets in the range of $600,000 to $650,000, and had effectively only been operating for five months. Benwest opined that Oxyman had a fair market value based on the capitalisation of estimated future earnings of between $15,000,000 to $18,000,000. This was based upon the acceptance at face value of the directors' forecasts of future earnings and the assumptions underlying those forecasts. Both Richmond and Kelly regarded this valuation as over-optimistic. 49 On 9 May 2005, Racken agreed to take up 210 shares in Oxyman for a price of $100,000 which was said to equal 3% of the capital of the company. Racken did so on condition that McCracken was appointed as chair of the management committee of Oxyman commencing from 13 May 2005. Two hundred and ten shares were duly issued to Racken on 9 May 2005. 50 Oxyman continued to experience cash flow difficulties. According to Garry Andrews, he attended a meeting with Richmond, Kelly and Shaneel Khan in early June 2005 and suggested that a proposal be made to McCracken that he invest a further $250,000 in Oxyman on the basis that he could be given shares to that value in Oxyman, or to the same value in HVOF when HVOF listed. If he chose to take shares in HVOF on listing, he could do so at a discount price of seventeen cents instead of the twenty cent listing price. 51 Garry Andrews telephoned McCracken. According to him, he said to McCracken: " I have got an offer for you. I believe it to be a win-win for you and Oxyman. I have spoken to Terry, Ron and Shaneel and we have agreed that if you invest $250,000 in Oxyman we would give you shares to that value in Oxyman and offer you shares in Laserbond at a discount price of 17 cents as opposed to the listing price of 20 cents and you can decide whether you want to take up the Laserbond shares and make a 15% profit, or take up the Oxyman shares. You can hold both as security if you like. You will make a profit out of Laserbond or if Oxyman gets good coverage from A Current Affair, you might want to stick with them. Your call. " 52 McCracken said that he might be interested and asked that the offer be put in writing and that he would do due diligence and speak to Garry Andrews. According to Garry Andrews, he subsequently sent such a proposal to McCracken by email, although the email was not produced. 53 McCracken gave evidence of the telephone call with Garry Andrews on 17 June 2005. According to McCracken, he was asked if he knew of a financier who would be interested in lending Barry Andrews, Shaneel (Khan), Ron (Richmond), and Terry (Kelly) $250,000 to be used to take up new shares in Oxyman so that Oxyman received the $250,000 for working capital. According to McCracken, Garry Andrews said to him that: " We would all provide the financier with security for the loan. The security would be the parties' shares in Oxyman, their shares in Laserbond Marketing with the associated rights to take up shares in Laserbond, and we would all provide the financier with personal guarantees. " 54 According to McCracken, Garry Andrews proposed that the financier would have the option to take up the parties' shares in Oxyman, or to participate in the float of Laserbond by "the allotment of the number of the parties' rights accruing from Laserbond Marketing's entitlement in the float that would result from dividing $250,000 by a discounted price of 17 cents per share. This option, if taken, would have to be within fourteen days of listing". If the option were taken up, its exercise would be in lieu of repayment of the loan. 55 The matter was discussed at a management committee meeting of Oxyman on 20 June 2005. There were conflicting accounts as to what happened at that meeting. I prefer the account recorded in the minutes of that meeting. It is the most closely contemporaneous record of what occurred. The minutes state: " Investment into Oxyman via Laserbond Marketing 1. Chairman [McCracken] informed meeting of telcon from GA inviting investment in LBM at $250,000 to purchase shares at 17 cents held by GA, TK, SK and RR who would in turn re-invest those funds into Oxyman, purchasing shares at $5 million valuation. 2. Investor would be able to hold on to the Oxyman shares purchased by GA, TK, SK and RR as security until the LBM shares are floated and sold for at least 20c. 3. Chairman said the investment of $250,000 is available but he would need a prospectus, his lawyer would put an agreement together, and would have to be satisfied that the float is underwritten at 20c and at the low level of risk. … " 56 The minutes make no mention of the investment of $250,000 being by way of loan. 57 According to Barry Andrews, in June or July 2005, he received a telephone call from his son, Garry. According to Garry Andrews, in early June 2005, he spoke to his father about the proposal. Neither Garry Andrews nor Barry Andrews gave evidence in their affidavits as to what passed between them in relation to the proposal. Barry Andrews deposed that he called Richmond in June or July 2005 and told Richmond that Garry Andrews had told him that McCracken was buying Laserbond shares at a discount price, and that the money was going into Oxyman. He asked how that worked. According to Barry Andrews, Richmond said to him: " That's right. That money will go straight into Oxyman, and further Oxyman shares will be issued. He is putting in $250,000 and you will receive Oxyman shares to the value of $62,500. When the Laserbond float happens, Ken [McCracken] can decide whether he wants to take the Laserbond shares at a discount price of 17 cents per share or take the Oxyman shares. " 58 Barry Andrews said that he told Richmond that that was what Garry had said, and asked what Richmond thought. Richmond replied that "Ken has got a choice. He can take the Oxyman or the Laserbond shares. He can't lose." According to Barry Andrews, he asked "What about me?" and Richmond replied, "You can't lose either. When Laserbond floats Ken gets the shares. It doesn't cost you anything." He asked Richmond what he would have to do and Richmond replied "At the moment, nothing. We'll be in touch." 59 Richmond denied this conversation. I do not accept Barry Andrews' evidence that such a conversation occurred. It would not make sense to say that Barry Andrews could not lose on the deal allegedly explained to him. Barry Andrews stood to lose some of his shares in Laserbond Marketing if McCracken elected to take up the option to acquire those shares, which he would be expected to do if the Laserbond Marketing shares were more valuable than the shares to be issued by Oxyman. Whilst Barry Andrews would retain the newly issued shares in Oxyman in that event, he would lose in the deal unless either McCracken elected to take the Oxyman shares or, if McCracken elected to take the Laserbond Marketing shares, McCracken's judgment as to the relative value of the shares in Laserbond Marketing and Oxyman proved erroneous. 60 Neither Barry Andrews nor Richmond was an impressive witness. Barry Andrews repeatedly failed to answer questions in cross-examination. Richmond's later evidence concerning the compilation of the Agreement for Provision of Finance was confused and inaccurate. The parties' recollections of conversations is coloured, possibly unconsciously, by their perception of where their interest in the litigation lies. Barry Andrews was at pains to emphasise that he knew nothing of any proposal for the moneys to be advanced by McCracken being by way of loan. I accept this part of his evidence. He was also at pains to minimise his reliance on his son Garry to inform him of the proposal, by casting Richmond in the role of adviser. I do not accept that Richmond assumed such a role, or that Barry Andrews was relying on anyone other than his son Garry. 61 It was put to Barry Andrews that, following his telephone conversation with his son Garry, he understood that Garry would discuss with McCracken the things Garry had discussed with his father. Barry Andrews did not accept that. He said he did not know what Garry's intentions would have been and that Garry simply outlined the deal that he was discussing with McCracken. Barry Andrews said that he then telephoned Richmond to confirm what he had been told by Garry. I do not accept his evidence of his conversation with Richmond. Alleged Agreement of 20 June 2005 62 The plaintiffs allege that, at the meeting of 20 June 2005, an agreement was entered into between Barry Andrews and others including Sophie and Sultan Khan, and McCracken and Racken, which was subject to the two conditions subsequent referred to earlier at para [20]. 63 The agreement which it was said was arrived in this way on 20 June 2005 was originally pleaded in the following way: " By an agreement between the Plaintiffs and the Defendants their servants or agents in late July 2005 [McCracken] through his vehicle [Racken] or another entity nominated by him agreed to invest the sum of $250,000 in [Oxyman] in consideration of the purchase of shares by [Racken] or his nominee in HVOF Laser Technology Pty Ltd [sic] to be known as Laserbond Limited when listed at a value of 20 cents at a discount price to him of 17 cents or alternatively at his option to take up 350 shares in [Oxyman] (one or the other) which option was to be exercised by him no later than 14 days of the listing of HVOF Laser Technology Pty Limited [sic] to be known as Laserbond Limited when listed, such entitlement to be secured by the transfer to him of shares belonging to [Barry Andrews] and [Sophie Khan] or [Sultan Khan] and [Zanshin] and [HOD] in [Laserbond Marketing] with rights to the issue of shares to the value of or which would equate to $62,500.00 in HVOF Laser Technology Pty Ltd [sic] to be known as Laserbond Limited when listed namely 224 shares in [Laserbond Marketing] and/or 350 shares of the said parties in [Oxyman] ." 64 Notwithstanding the pleading, Sophie Khan did not hold shares in Laserbond Marketing. I gave leave to the plaintiffs to amend this paragraph to correct the name of the company to be floated. I refused an application for leave to amend in other respects as the allegation in this paragraph formed the basis of a plea of fraudulent misrepresentation and the application to amend was made after cross-examination of the plaintiffs' witnesses. 65 How was this contract allegedly made? Garry Andrews said that at the management committee meeting on 20 June 2005, McCracken said that: " I've had a telephone conversation with Garry asking for investment of $250,000 into Oxyman via Laserbond by purchasing Laserbond shares held by or on behalf of Garry [Andrews], Terry [Kelly], Shaneel [Khan] and Ron [Richmond] at a price of 17 cents per share. The investor will hold onto the Oxyman shares as security until the Laserbond shares are floated. The investment of $250,000 is available but I will need a prospectus and my lawyer will put an agreement together. The lawyer will have to be satisfied that the float is underwritten and at the low level of risk. " McCracken then asked Richmond to talk to a Mr Herkess about the tax implications of the " sale of Laserbond shares to be invested in Oxyman ." 66 This is not the language of contract. Even on the plaintiffs' case, McCracken, whilst indicating that he had secured an investor with money to invest, was still considering the investment. No mention was made of the shares held by Barry Andrews. Garry Andrews did not hold shares in Laserbond Marketing. It was not submitted by any party that Barry Andrews held his shares on trust for his son. 67 Shaneel Khan was not at the meeting of 20 June 2005. It is impossible to see how a contract could have been made with his parents at that meeting. 68 In any event, the details of the proposal were indefinite. Nothing was said as to what would happen if the float did not proceed. There was no clarity as to how many shares in Laserbond Limited would be issued to McCracken or his nominee. 69 It is quite clear that no agreement was made on 20 June 2005. The parties had only started negotiations. Considered objectively, there was no intention of the parties to be bound. 70 Notwithstanding the manifold difficulties facing the argument that an agreement was reached on 20 June 2005, the plaintiffs persisted in that submission to the end of the hearing. The submission necessarily involved an implicit admission that someone at the meeting had acted on behalf of Barry Andrews and Sophie and Sultan Khan in causing them to enter into an agreement with McCracken or Racken. 71 Following the meeting, Garry Andrews dictated a letter to Kelly to send to McCracken. The letter is dated 20 June 2005 and states: " To assist the capital raising for Oxyman Pty Ltd, Barry Andrews, Ron Richmond, Shaneel Khan and myself have agreed to sell to an entity nominated by you $250,000 worth of 20c shares in Laserbond Pty Ltd at the discounted rate of 17c. As additional security for this investment the above persons will personally guarantee the performance of the investment in Laserbond and will make available to hold as security the share certificates in Oxyman. Laserbond Pty Ltd is a company scheduled to be floated on the Australian Stock Exchange in August 2005. The $250,000 raised by this sale will be invested in Oxyman Pty Ltd shares at a fair nominal value of $5,000,000 to be used as working capital. Your entity would retain control of both the Laserbond and Oxyman shares until the Laserbond shares are listed. Then within 14 days of the listing you would elect in writing whether you wish to keep the Laserbond or the Oxyman shares. We understand that you will liaise with your legal representative to prepare a suitable document to formalize this arrangement as soon as possible. On behalf of the team, please accept my sincere thanks for this commitment to us and to Oxyman, and we look forward to achieving a successful future for the Company together. " 72 The letter is obscure. It does not say how many shares in Oxyman would be issued, although it might be inferred that the number of shares to be issued would be such as would represent 5% of the issued capital of Oxyman after issue. The letter suggests that the agreement was to sell 1,470,588 shares in Laserbond Limited to McCracken in return for the payment of $250,000 to be invested in Oxyman (i.e. $250,000 ÷ $0.17). There is no explanation as to what is meant by the offer by Barry Andrews, Richmond, Shaneel Khan and Kelly to personally guarantee the performance of the investment in Laserbond. Nor is there any reference to the term alleged in the statement of claim that the entitlement to shares in the listed company would be secured by a transfer of shares belonging to Barry Andrews, Sophie and Sultan Khan, Zanshin, and HOD, in Laserbond Marketing. 73 It is to be inferred from the amended statement of claim that the plaintiffs allege that the agreement was that the number of shares in Laserbond Marketing to be transferred by way of security would be that number of shares which gave each shareholder the right to receive $62,500 worth of Laserbond Limited shares on listing. This was alleged in the statement of claim to be 224 such shares. The letter did not refer to such a term. 74 No agreement was made, whether conditionally or otherwise, on 20 June 2005. Preparation of Agreement for Provision of Finance 75 McCracken deposed that Garry Andrews described the proposal as a loan in both his telephone conversation of 17 June 2005 and at the Oxyman management committee meeting on 20 June 2005. I do not accept that evidence. Neither the minutes, nor the letter of 20 June 2005 make reference to a loan, as distinct from an investment in Laserbond Marketing. 76 Prior to 29 June 2005, McCracken had a meeting with his solicitor, Mr Phillip Brophy of Mathews Folbigg. Brophy sent an email to Garry Andrews on 29 June 2005, asking that it be passed on to McCracken, setting out matters that Brophy needed to know in order to document the proposal as evidently it had been discussed by McCracken with him. Brophy described the proposal as one involving a sale of "Laserbond" shares, a subscription for shares in Oxyman, an option in favour of Racken to either settle the purchase of the shares in Laserbond, or alternatively acquire from "Andrews", Richmond, "Khan" and Kelly their shares in Oxyman, for that option to be exercisable within 14 days of the Laserbond float or, if it did not proceed, by an agreed date, and a mechanism to determine and adjust for any difference in the value of the two shareholdings. It is also clear from the email that McCracken had spoken to Brophy about receiving personal guarantees, which may well have been guarantees for the repayment of the moneys if the float did not proceed. The details at this stage were so unclear that Brophy said he was not sure at which point money would change hands and find its way to Oxyman. 77 On 30 June 2005, there was a further management committee meeting of Oxyman. The minutes record that McCracken was obtaining more details on the prospectus and listing. 78 That negotiations were still in train also appears from a letter written by Garry Andrews on 22 July 2005 to McCracken. The letter commenced by Garry Andrews stating that after long discussions with "the guys" "it became quite confusing and messy when trying to create a fair and mutual percentages vs shares etc.". He then made the following proposal: " Our decision was to keep it simple. Therefore the shareholders in LaserBond Marketing (LBM), Ron Richmond, Barry Andrews, Sophie Khan (sic) and Terry Kelly, have agreed to hand over their LBM share certificates as security. These include the shares in LaserBond Pubco, options in LaserBond Pubco as well as shares in LBM. You are aware that LBM has the right to a 20% commission on sales that it generates, and we intend to hold a shareholders meeting to decide whether we keep the existing company or sell it to LaserBond Pubco at a fair and reasonable price. Obviously you would hold the LBM share certificates, along with $250,000 worth of new shares in Oxyman as agreed until the listing come October. At that time you would decide whether to take up the Oxyman shares or $250,000 worth of LaserBond Pubco shares at the agreed price of 17c. " 79 After outlining the projects for which Oxyman had an urgent need of funds, he concluded by saying that "We are all ready for the completion of the agreement at your earliest convenience. We obviously believe that the deal has become much easier as we, the shareholders, can hand over the share certificates immediately." 80 On the face of it, the offer was to hand over certificates for all of those shareholders' shares in Laserbond Marketing, as well as any shares they held in HVOF, (which must be the company referred to as "Laserbond Pubco"). However, it is not suggested that any of the shareholders in Laserbond Marketing were also the holders of shares in HVOF at that time. 81 On 21 July 2005, McCracken attended a meeting at the premises of HVOF Australia with Messrs Wayne and Greg Hooper, who are the directors of that company. He was taken on a tour of the factory and was impressed by the improvement in the Laserbond products and processes from the time of his previous visit in about 2004. It was only at that stage that McCracken decided to proceed. On 21 July 2005, he gave instructions to Brophy in relation to the proposal. He also had a telephone conversation with Richmond. He told Richmond that he was impressed with his visit to Laserbond, that he had had it confirmed that funds were available and he had instructed Phillip Brophy to proceed with the preparation of an agreement. He told Richmond that "to get this within the time frame that you want, the best course is for you to be the point of contact between all the parties to negotiate and document the deal. We previously discussed you being the point of contact between the parties and Phillip Brophy for the transfer of information back and forth. Are you still OK with that?" Richmond said "Yes, no problem." 82 The plaintiffs contend that McCracken appointed Richmond as his agent to negotiate an agreement with the plaintiffs, although somewhat inconsistently they also contend that a binding agreement had already been made. The defendants say that Richmond being an intermediary or point of contact did not make him anybody's agent. The defendant's submission is correct. McCracken did not give Richmond any authority to act for him or Racken. 83 McCracken understood Garry Andrews' letter of 22 July 2005 to be a proposal that Racken have an option to take up shares in Laserbond Limited directly, together with associated rights, instead of its having an option to take up "rights" in Laserbond Marketing. He asked Garry Andrews how Racken would get its rights to Laserbond shares. 84 A further meeting of the management committee of Oxyman was held on 26 July 2005. It was attended by, amongst other people, McCracken, Kelly, Garry Andrews and Richmond. Shaneel Khan did not attend. The minutes record under the heading "Legal Agreements" the following: ITEM BUSINESS REPORT BY KM 1. Laserbond Marketing/Oxyman/Racken a. Phil Brophy of Matthews Folbigg to call re documents needed, ie LBM shareholdings, Prospectus, etc b. Agreement to be between Racken, Oxyman and LBM c. KM to have option on 1.5 million Laserbond Ltd shares for $250,000 d. KM will hold 4 actual LBM major shareholders certificates over 70% of LBM shares as security 3 e. LBM major shareholders to invest the $250,000 into Oxyman shares (those share certificates also to be held as security by KM) f. Document how Oxyman to utilise the $250,000 g. KM to have option to take Oxyman shares instead of LLtd shares at time of listing h. KM to discuss tax implications of purchase with accountant KM 85 McCracken denied that the matters under paragraphs 1(b), (c), (d) and (e) were discussed at the meeting. However, I think it more likely that the minutes in these respects are accurate. 86 It is clear that the parties were still negotiating. 87 On 27 July 2005, Brophy forwarded to McCracken a "preliminary draft" of a share acquisition deed. In the covering email, Brophy wrote that: "As I indicated to you when we spoke, there are a number of issues in relation to which I need your instructions. I have flagged the issues in the Deed with a double asterisk. The Deed is deliberately vague in certain places for the reasons you and I have discussed. Without covering all of the issues here, I should mention in particular that the details in relation to the 'rights' to acquire shares in Laserbond Pty Ltd have not been provided to me and I have drafted the Deed entirely on the basis of your instructions in this regard. Obviously enough, there could be something in the detail regarding those rights of which I am not currently aware which could have some impact on this Deed. At this stage I note that I have not yet received a copy of the prospectus for Laserbond Ltd and would be grateful if you could get that to me as a matter of urgency." 88 The plaintiffs attributed sinister significance to the statement that the deed was deliberately vague in certain places. However, there is nothing sinister in that statement. As the following sentence makes clear, it refers to the fact that Brophy had to be vague when he did not have enough information properly to draft an agreement. The draft share acquisition deed which followed provided for numerous details to be inserted. These included the date on which Racken would make payment of $250,000, details of a loan to be made between the Laserbond shareholders and Oxyman, the number of shares in Oxyman to be allotted to Racken, and indemnities to be given by Barry Andrews, Richmond, Kelly and Khan. 89 McCracken responded to this email late on the evening of 27 July 2005. He advised that: " Under this new offer, by virtue of the guarantors advice, the need for 'rights' no longer exists. It is a share with all of its attached benefits that is being offered. My advice is that LBM has a 7.92% interest in HVOF represented by 5.5M shares. As consideration for a loan of $250,000 to the guarantors I will (among other things) be entitled to exercise an option, within 14 days of listing HVOF in the name of Laserbond Limited, to convert that to 1.5 million shares in Laserbond Limited or have transferred to me the shares in Oxyman purchased by the guarantors for the $250,000 based on the company value of $5M ." 90 This information was provided by email. The email was sent by McCracken to Brophy again on 28 July 2005. This time, a copy was sent by email to Richmond. On the same day, Richmond copied the email correspondence to Kelly, Garry Andrews and Shaneel Khan. He also sent a copy of it to Mr Terry Griffiths. Griffiths was asked to perform a consulting role in relation to the proposed agreement. 91 McCracken made it clear in this email that the payment of $250,000 would be a loan, repayment of which was to be guaranteed, and which would also entitle him to exercise an option either to take a transfer of shares in Oxyman which would be purchased by "the guarantors" for the $250,000 to be advanced, or to exercise rights attaching to the shares in Laserbond Marketing to take up 1,500,000 shares in Laserbond Limited after listing. 92 Richmond forwarded the email to Kelly, Garry Andrews, Shaneel Khan and Griffiths using headers which stated that the subject was "FW: Oxyman/Laserbond deal" and the importance of the email was "High". 93 Garry Andrews said that he was incompetent with computers. This was not challenged. He said that his practice at the offices of Oxyman was that a Mr Tim Michaels would print out for him headings of the emails he received and he would decide to which emails he wished to reply, and reply using Michaels. In cross-examination, Garry Andrews said that he was given a printout in the morning of the names of the senders of the emails and the person to whom they were sent. He said that if they were not addressed to him personally but only copied to him, and were not his department or realm of business within the company, he would not act on them. He said that he had located the original document that he had received from his personal assistant (whom I take to be Michaels). He produced the document which he said he had found over the weekend. It is a document dated Thursday, 28 July 2005 headed "List of Emails". It was created for him on that day by Michaels. The document he produced set out the text of seven emails, including two emails which were otherwise in evidence from Richmond to McCracken and copied to Garry Andrews at 3.49pm on 27 July 2005, and from Griffiths sent to Richmond, Kelly and Andrews at 6.31pm on 27 July 2005. The document produced set out the text of the emails as well as, in some cases but not all, the heading. 94 This is consistent with Garry Andrews receiving at the beginning of each day the text of emails sent to him the previous day. However, it is not clear that there would have been printed out for him the text of the preceding emails forwarded to him. He was not cross-examined on the text of McCracken's email to Brophy of 27 July 2005 which was forwarded to him as part of a string of emails by Richmond at 10.09am on 28 July 2005. I do not find that Garry Andrews read the email from McCracken to Brophy forwarded to him as part of a string of emails on 28 July 2005. 95 However, Shaneel Khan did not have the same difficulties in dealing with electronic communications. I find that he received, and I infer that he read, the email. 96 A further meeting of the management committee of Oxyman was held early on 2 August 2005. The minutes record "Legal agreement being completed by Phil Brophy of Matthews Folbigg – to liaise with RR for LBM matters." McCracken deposed that at the meeting, Richmond said that the other parties should liaise with him in relation to the agreement and in relation to any Laserbond matters. I accept that evidence. 97 On 2 August 2005, Brophy sent an email to McCracken attaching a document entitled "Summary of Proposed Arrangements" which set out his understanding of the deal. The document provided that the $250,000 would be a loan from Racken to Barry Andrews, Zanshin, Sophie Khan and HOD, repayable within three months and carrying interest of 9% per annum. It provided for Oxyman to issue 350 shares to those persons. It provided for Racken to elect within 14 days of the listing of shares in Laserbond Limited to take either a transfer of 1,500,000 in Laserbond Limited or 350 shares in Oxyman. On the exercise of either of those rights, the loan would be forgiven and the mortgage over shares referred to later in the document would be discharged. 98 The document dealt with what the position would be if the share price of Laserbond fell below twenty cents on the close of business on the fourteenth business day after listing. It provided for Barry Andrews, Zanshin, Sophie Khan and HOD to make up the difference between such a closing price and twenty cents in respect of the 1,500,000 shares. The document also provided for Barry Andrews, Zanshin, Sophie Khan and HOD to mortgage the shares they held in Oxyman, being both the shares they then held and the shares which would be allotted to them, to secure repayment of the loan and to support the guarantee as to the value of the Laserbond shares. The document provided for Garry Andrews to guarantee the performance of Barry Andrews in relation to his obligations concerning the loan and the guarantee as to the value of the Laserbond shares, for Richmond to do the same in respect of Zanshin's obligations, for Sultan Khan to do the same in respect of Sophie Khan's obligations, and for Kelly to do the same in relation to HOD's obligations. 99 On 2 August 2005 at 11.00am, McCracken sent an email to Brophy, copied to Garry Andrews, Richmond and Kelly thanking Brophy for the document and noting that he had made some insertions. At 12.08pm on 2 August 2005, Richmond sent an email to McCracken, Brophy and copied to Garry Andrews and Kelly advising them of some further minor changes, and advising that the last paragraph (that is, the paragraph dealing with the allotment of further shares) was fairly critical. He said that "overall we find the agreement is straightforward and easy to understand." Brophy's summary of the proposed arrangements was an attachment to these emails. The changes included Shaneel Khan rather than Sultan Khan guaranteeing the performance by Sophie Khan of her obligations in relation to the loan and guarantee. It also contained a note as to the intention to invite existing shareholders to take up new shares. 100 Garry Andrews said he did not receive the email. He said that it was possible that if he received the email, he may not have asked Michaels to print, or even open it because "as far as I was concerned, the share sale deal had been concluded." 101 I do not accept that Garry Andrews believed that the share sale deal had been concluded. There was nothing to justify such a belief. Garry Andrews said that there was no discussion between him and Richmond, or between him and his father, regarding the topic in the last paragraph of the document attached to the email, that is the paragraph relating to the dilution of existing shareholdings and compensation for the same. 102 Richmond did not say that he specifically discussed the summary of proposed arrangements with Garry Andrews. Nor did Kelly give such evidence. Richmond did say that between 28 July 2005 and 4 August 2005, on three, four or five occasions, he asked Garry Andrews whether he had any comments on the proposed arrangements for the $250,000 from Racken. He told Garry Andrews that Griffiths and Kelly had emailed their comments on the proposed arrangements. Garry Andrews replied "If it's OK with Terry Griffiths, then it is OK with me." Garry Andrews said to Richmond on 2 August 2005 that he was checking on the progress of the agreement for $250,000 as he needed the money for certain transactions of Oxyman. I accept this evidence. 103 I find that, despite his denial, Garry Andrews was aware of the terms of Brophy's summary of the proposed arrangement. He knew that Brophy had provided a summary of the proposed arrangements and that his comments were sought. The practice of Michaels was to set out the text of important emails of which this was one. The text of the email from Richmond referred to the last paragraph of the summary of arrangements as being fairly critical. The document was important to Garry Andrews as he must have appreciated that it set out the proposed terms on which $250,000 of required working capital would be provided to Oxyman, as well as dealing with his father's shares in Laserbond Marketing. I infer that Garry Andrews read the attached summary of the proposed arrangements. 104 On the evening of 2 August 2005, Garry Andrews made a telephone call on his mobile phone to his parents' number at 8.28pm. The conversation lasted two minutes and thirty seconds. There was no evidence as to what was discussed at that time. Having regard to the shortness of the length of the call, it is unlikely that Garry Andrews raised any significant concern with his father about the document, sent to him by email that day, which described the proposed arrangements and the changes from what had previously been proposed. He had a further telephone call to his parents' home the following morning at 9.23am, but that call lasted only one minute. Of course, that is not to say that there may not have been other telephone conversations between them not initiated by Garry Andrews on his mobile phone. 105 On 4 August 2005 at 12.55pm, Mr David Fullerton of Matthews Folbigg sent a draft deed for the provision of finance by email to McCracken and Richmond. In his email to Richmond, Fullerton stated: " Ron, can you please note that we act solely for Racken Pty Ltd in relation to this transaction. Each of the other parties to this Deed should obtain independent legal advice on the document before they execute it. Please let me know if any changes are required. " 106 This document was forwarded by Richmond at 1.04pm on 4 August 2005 to Kelly, Garry Andrews, and Griffiths. The draft agreement provided in substance all of the important terms which were included in the final agreement, although changes were later made to the number of shares to be issued by Oxyman. Relevant provision included that the advance of $250,000 was by way of loan, which attracted interest at 9% per annum compounded monthly; that the "Oxyman shareholders" (Barry Andrews, Zanshin, HOD and Sophie Khan) agreed to repay the loan on 18 November 2005; that the obligations of the Oxyman shareholders would be guaranteed by the "guarantors" (Barry Andrews, Garry Andrews, Richmond, Zanshin, Kelly, HOD, Sophie Khan and Sultan Khan); that the obligation to repay the loan would be discharged if Racken exercised its option to take up shares in "Laserbond" or the shares to be issued in Oxyman; that Barry Andrews, HOD, Zanshin and Sultan Khan would mortgage all of the shares held by them in Laserbond Marketing as security for their obligations to Racken; and that Sophie Khan would do likewise with respect to her existing shares in Oxyman. 107 This draft deed was forwarded by Richmond to Shaneel Khan at 1.39pm on 4 August 2005. Shaneel Khan said he did not recall receiving the email, but I accept that it was sent to him. Counsel for the plaintiffs submitted that Shaneel Khan gave evidence that he did not receive the 1.39pm email of 4 August 2005. That is not a correct statement of Shaneel Khan's evidence. Shaneel Khan said he did not recall reading the email. Counsel submitted that Shaneel Khan's evidence (wrongly said to be that he did not receive the email) was corroborated by Richmond's own evidence. Counsel referred to para 46.2 of Richmond's affidavit of 7 November 2006 and quoted Richmond as having said: " Annexed hereto and marked RR11 are true copies of three emails which were forwarded by me to ... Shaneel Khan on 4 and 5 August 2005. " 108 Counsel pointed out that the annexure RR11 did not include the 4 August 2005, 1.39pm email. However, counsel again misquoted the evidence. In fact, Richmond's evidence was that annexure RR11 were true copies of three emails he had forwarded to Griffiths, Kelly, Garry Andrews and Shaneel Khan on 4 and 5 August 2005 and that copies of the other emails as sent by him were annexed to his affidavit of 23 May 2006. His affidavit of 23 May 2006 included the email from him to Shaneel Khan of 4 August 2005 at 1.39pm. 109 Counsel for the plaintiffs said of that document that a careful comparison of it with the email forwarded to Kelly, Garry Andrews and Griffiths on 4 August 2005 shows that it could not have been sent as Richmond asserted as the typeface was different and it appeared to have been pasted onto earlier emails in time. I do not accept that the annexure to Richmond's affidavit of 23 May 2006 which included the email of 4 August 2005 at 1.39pm attaching the draft deed for the provision of finance was a fabrication as counsel asserted. I see no difference in the typeface as counsel asserted, and see no significance in the difference in spacing. 110 Despite Shaneel Khan's denials, it is likely that Shaneel Khan opened the email and identified the nature of the attachment (being the draft deed for the provision of finance). Shaneel Khan was a most unimpressive witness who, as appears below, was prepared to forge his parents' signatures. I think it likely that he opened the email and the attachment and read the attachment which had been designated as having had high importance. 111 At 2.36pm on 4 August 2005, Richmond sent an email to Fullerton, McCracken, Griffiths, Kelly, Garry Andrews and Shaneel Khan. Richmond's first comment was to question whether Garry Andrews should be a party to the agreement, as he did not physically own any shares in Laserbond Marketing or in Oxyman. He noted that Barry Andrews was the main shareholder in Laserbond Marketing and would be receiving the shares in Oxyman which would be held by Racken as security. Richmond asked a number of pertinent questions concerning the definitions of Laserbond, Laserbond shareholders and Laserbond Marketing. One of his comments related to clause 15.1 on page 14. He said "I presume the irrevocable Power of Attorney to Racken expires upon the obligations being met and the option being exercised?" The clause referred to provided for each party to the deed (other than Racken) to appoint Racken as its attorney to execute documents in the party's name in order to give effect to the agreement. 112 If the practice of Michaels opening emails for Garry Andrews, as depicted in exhibit U, were followed, and there is no reason to think that it was not, then the forwarding of the draft deed for the provision of finance by Richmond on 4 August 2005 at 1.04pm, and Richmond's email of 2.36pm on 4 August 2005, would have been printed for Garry Andrews and been available to him at the commencement of business on 5 August 2005. It does not follow that the draft deed itself would have been printed for him, but in view of the importance of the subject, and the fact that he and his father were referred to in Richmond's first comment on the draft, it is likely that he opened the attachment and read the draft deed for the provision of finance. 113 At 2.57pm on 4 August 2005, Griffiths sent an email to Richmond also commenting upon the terms of the draft deed. Griffiths' comments were sent by Richmond to McCracken and Fullerton at 4.03pm. Griffiths comments do not take the matter any further. 114 On 5 August 2005, at 12.19pm, Garry Andrews had a telephone conversation from his mobile phone to his parents' phone lasting four minutes and thirty seconds. At 4.27pm, Fullerton sent an email to McCracken enclosing the final version of the deed for the provision of finance both in marked-up form and "clean copy" form. In his email, Fullerton noted that, in accordance with McCracken's instructions, the deed provided that the Oxyman shareholders were required either to repay the loan, or to transfer to McCracken's trust (i.e. Racken) 1,500,000 shares in Laserbond Limited, or to transfer to McCracken's trust 350 shares in Oxyman. McCracken forwarded the email to Richmond at 4.37pm. According to Richmond, there was attached to the email sent to him at 4.37pm the "clean copy" agreement for the provision of finance. This document consisted of sixteen pages of text, followed by pages numbered 17–19 containing provision for the document to be executed, and pages 20-24 consisting of annexures. 115 In his 4.37pm email, McCracken said to Richmond "Please call to finalise arrangements". McCracken sent another email to Richmond at 4.45pm on 5 August 2005. He said "This is copy notations against final amendments. I've had a quick scan through and looks OK to me. I'm sending it to assist you and would appreciate comment on anything that needs correction." According to Richmond, there was attached to that email a marked-up version of the agreement. This document was marked as "draft" and had changes to a previous draft marked on it. The previous draft must have been a draft prepared by Matthews Folbigg after 4 August 2005. Thus, the document did not show that any changes had been made to clause 4.2 of the deed dealing with the number of shares the Oxyman shareholders were to apply for in Oxyman, notwithstanding that the numbers had changed from those appearing in the same clause in the draft sent on 4 August 2005. I infer that there had been a number of changes to the draft before it was sent on 5 August. The marked-up version of the draft had the same substantive provisions as the clean copy. However, it consisted of seventeen pages of text followed by three pages for the affixing of signatures (pages 18-20) and followed by a further four pages of annexures. 116 The plaintiffs disputed the authenticity of the email correspondence of 5 August 2005. They disputed that the documents which Richmond identified as attachments to the emails of 5 August 2005 were in fact attached. 117 However, I accept Richmond's evidence that he received the emails from McCracken which he exhibited, and that the final drafts of the Agreement for Provision of Finance which he exhibited were attached to those emails. It is clear from Fullerton's email to McCracken of 5 August 2005 at 4.27pm that the deed had reached its final form at that time. The documents were sent by Fullerton to McCracken for the purpose of being forwarded to the parties for signature. There is no reason McCracken would not have forwarded the documents to Richmond and every reason why he would have done so. The emails from Fullerton to McCracken and from McCracken to Richmond do not contain the words "attachment" with a document reference. There was no evidence that, if a document were to be attached to the email, some such identification would necessarily appear. The text of the emails shows that the documents were attached. 118 Richmond deposed that it was probable that he forwarded the email he received at 4.37pm (attaching the "clean" final version of the agreement) to Kelly, Griffiths, Garry Andrews and Shaneel Khan. He no longer had a copy of such a "sent" email. He gave evidence, which I accept, that after Oxyman went into administration (in May 2006) his computer was taken by an auctioneer acting on the instructions of the administrator. Whilst the auctioneer was packing other computers in the office, Richmond saved the "received" emails from his "in-box" but did not manage to save all of the "sent" emails. 119 Richmond had prepared an affidavit originally dated 12 May 2006, although signed on 23 May 2006. He prepared that affidavit before he had legal representation. Some "sent" emails were annexed to that affidavit. They did not include any emails which he sent to Garry Andrews or Shaneel Khan enclosing the final version of the draft deed. Even allowing for the fact that Richmond did not then have legal advice, it would be surprising if he would not have attached such "sent" emails to his May 2006 affidavit if they existed. I therefore do not accept that Richmond sent the final version of the document to Garry Andrews or Shaneel Khan by email on 5 August 2005. 120 Richmond also gave evidence that he printed out a number of copies of the agreement annexed to the email of 4.37pm and handed a whole copy of the agreement to Garry Andrews and another copy of the whole agreement to Shaneel Khan in their office shortly after 4.37pm. At that time, they were both together and he said to them "The final form of the agreement document has arrived. I have had a quick look at it. You guys should also check it and we should arrange signatures". 121 Garry Andrews and Shaneel Khan denied that such a conversation took place, or that they were given copies of the agreement. However, I prefer Richmond's evidence. Both Shaneel Khan and Garry Andrews signed the execution page of the agreement that afternoon, and I think it probable that, if they had not earlier been given the agreement they were asked to sign (or in Shaneel Khan's case on which to obtain his parents signatures), they would have asked to see the document. 122 Richmond deposed that Garry Andrews told him that he would be talking to "Bazza" about the signing and that his father was already expecting the document. Richmond asked Garry Andrews whether he should fax the document to Barry Andrews. Garry Andrews said that "I will speak to Bazza about this but I think he will only need the signature pages". I accept this evidence. 123 Garry Andrews gave evidence that he was working in the office at Rosebery when he was called into Richmond's office and saw a document of several pages on his desk. The document was open on one page where signatures were required. According to Garry Andrews, Richmond pointed to the document and said "This is the share transaction. We have to sign up and then the money will be put into our account straight away. Then I can pay all these bills, they are coming down on me." Garry Andrews said "Is this the paperwork? Is it OK?" Richmond said "Yes, yes, yes it is". Garry Andrews asked "Have you had it checked out?" Richmond said "Yes, I've had it checked out and it's all fine." According to Garry Andrews, he did not read the document, but signed on one page where Richmond indicated and then returned to his office. He said he was not given a copy of the document. He said that he believed that the document would represent the proposal that he had put to McCracken in June. I do not accept this evidence. 124 I do not accept that Garry Andrews signed the document without identifying what it was. It is clear that he also signed the page which is numbered seventeen. No share acquisition deed consisting of at least sixteen pages of text was ever brought into existence. There is no reason from Richmond's perspective as to why he would not have provided the whole of the agreement for the provision of finance to Garry Andrews for his signature. I accept Richmond's evidence that he printed out a whole copy of the agreement received at 4.37pm and gave a copy of it to each of Garry Andrews and Shaneel Khan. 125 Garry Andrews signed the page, which had also been signed by Richmond and Kelly, at Richmond's desk. I am satisfied that Garry Andrews knew that the document he was signing was called an Agreement for Provision of Finance and provided for a loan to be made by Racken on terms set out in the agreement. He probably did not read the document with any care. He said that he assumed that it was the share acquisition deed which he had seen earlier, but I consider he assumed that it was in similar terms to the earlier summary of the proposed arrangement and draft Agreement for Provision of Finance sent to him on 2 August and 4 August 2005. Signing by Barry Andrews 126 It is common ground that, prior to 5.00pm on 5 August 2005, Garry Andrews spoke to his father. Neither Garry, nor Barry Andrews, gave evidence in their affidavits as to what was said in this conversation. In cross-examination, Garry Andrews said that he spoke to his father on 5 August 2005 and notified him that Richmond was going to fax him the documents and that he should turn his fax machine on. 127 At 5.00pm, Richmond sent Barry Andrews by fax a single page, being page 17 of the Agreement for Provision of Finance, which he had received at 4.37pm that afternoon from McCracken. The page was plainly numbered "17". Underneath that number, it stated "EXECUTED as a Deed". 128 Immediately under those words were the words "Signed by BARRY ALBERT ANDREWS in the presence of". There were then spaces for Barry Andrews to sign together with a witness. Below the provision for Barry Andrews' signature, there were provisions for the signatures of Garry Andrews, Richmond and Kelly. 129 The page was unsigned when it was sent to Barry Andrews. He signed it in the space provided and his signature was witnessed by his wife. At 5.04pm, he faxed the page back to Richmond. 130 Barry Andrews said that it was his belief that the document he signed was intended to put into effect the transaction which had been described to him in June or July 2005 by Richmond, namely, that McCracken would put in $250,000, that the money would go straight into Oxyman, that Andrews would receive Oxyman shares to the value of $62,500, and that when the Laserbond float happened, McCracken could decide whether he wished to take Laserbond shares at a discount price of seventeen cents, or take the Oxyman shares. 131 In his affidavit of 18 September 2006, Barry Andrews said: " When I received the faxed one-page document from Ron Richmond on 5 August I assumed that the document was a form of share transfer of the share sale deal to the value of $62,500 for the purpose of putting the deal with Ken McCracken into effect, and that it was the whole of the document I was being asked to sign. " 132 In cross-examination, he said that he believed that the fax would give Richmond permission to transfer $62,500 worth of his shares. He understood that, in return for that, he was to get Oxyman shares to the same value or, depending on McCracken's election, to eventually get his "Laserbond" shares back. 133 I find that Barry Andrews assumed that his signing and returning the execution page was a step towards implementing the proposed transaction with McCracken which had been explained to him by his son Garry Andrews. That is, that in return for the payment of $62,500 to Oxyman from which Barry Andrews would be allotted 87 or 88 shares in Oxyman, McCracken would have the right either to take the Oxyman shares so acquired, or $62,500 worth of shares held by Barry Andrews in Laserbond Marketing, with their attendant rights to receive shares in Laserbond Limited after its shares were listed, at a discount from the listing price of twenty cents. This was how Barry Andrews understood the transaction. He did not understand that the transaction involved a loan of moneys at interest, or that he would be guaranteeing the repayment of moneys advanced to other persons, or that all of his shares in Laserbond Marketing would be security for the loan. I also find that he did not understand that he would be guaranteeing that the share price of Laserbond Limited shares would not have fallen below twenty cents fourteen days after listing. 134 Barry Andrews could not have thought that that transaction was fully documented in the single sheet of paper which he signed which contained no substantive provisions, and which was plainly page seventeen of a longer document. He must have assumed that it was the longer document which gave effect to such a transaction. No representation was made to him by Richmond, whether by words or conduct, that the document which he was asked to sign would give effect to a transaction of the kind which Barry Andrews assumed would be made. 135 As I have said, I do not accept that Barry Andrews had a conversation with Richmond to the effect to which he deposed in early June or July 2005. Even if he had, the conversation which Barry Andrews attributed to Richmond in June or July 2005 was about a proposal, then being discussed, between officers of Oxyman and Laserbond Marketing and McCracken. Richmond reasonably thought that Garry Andrews had kept his father abreast of negotiations in relation to the proposal. Richmond provided Garry Andrews with the documents prepared by Matthews Folbigg and sent by McCracken to Richmond on 2, 4 and 5 August 2005. The proposal was an evolving one. Barry Andrews' understanding of the transaction he thought he was committing himself to was not based upon representations made to him by Richmond, or attributable to any misleading conduct on Richmond's part. His understanding was based upon the earlier description of the proposed transaction provided to him by Garry Andrews, and on his not being told of the changes to what had been earlier proposed. 136 It is common ground that there was no conversation between Richmond and Barry Andrews on 5 August 2005. The only conversation was between Barry Andrews and Garry Andrews. Barry Andrews gave evidence that he thought sending the fax with his signature, witnessed by his wife, to Richmond was his giving permission to Richmond to transfer $62,500 of his shares, that is, his shares in Laserbond Marketing to the value of $62,500. He said he did not give a lot of thought to what Richmond would have to do to transfer his shares. However, he must have expected that someone, either Richmond or Garry Andrews, would attach the page signed by him to the other pages of an agreement to which, by his signature, he was to assent, and which he believed would implement the transaction as he understood it. Shaneel Khan's Authority to act for Sophie Khan and Sultan Khan 137 Sultan Khan gave evidence that, in the middle of 2005, Shaneel Khan had a conversation with him to the following effect: "'Dad, I need authority to sign over $62,500 worth of shares from either Laserbond or Oxyman that belong to you and Mum.' I said 'Why?' Shaneel said 'Oxyman is going to start major advertising programs and it will help drive the business forward.' Shaneel also said 'We cannot lose because in the end we will finish up with either Oxyman or Laserbond shares because the buyer can only pick one or the other. This is what the board has told me.'" 138 Sultan Khan said that he and his wife gave Shaneel permission to sell shares totalling $62,500 only. 139 Sultan Khan annexed to his affidavit a letter which he said Shaneel prepared for both his mother and father to sign. The letter was dated 2 August 2005 and read as follows: " Dear Shaneel, We Mr Sultan Masood Khan and Sophie Khan give you permission to act as our power of attorney regarding the deal with Mr Ken McCrackan (sic) (or chosen company). With the understanding that Ken will purchase shares in Laserbond marketing at a discounted value of 0.17c to the value of $62,500 with the option to take either Laserbond or Oxyman shares at the time of listing. " The letter is signed by Sultan Khan and Sophie Khan. 140 Racken and McCracken say that this letter was brought into existence only after these proceedings began, in order to provide versimilitude to the Khans' defence. 141 Shaneel Khan's evidence was that he signed his parents' names on the execution page which was subsequently attached to the Agreement for Provision of Finance. He said that he understood that the letter signed by his parents gave him authority to sell the shares in Laserbond to McCracken, and that he signed the one page when he was called into Richmond's office and presented with a one-page document and told to sign it so that the money could go into Oxyman's account quickly. He said he signed the one page believing that the document was the share deal whereby McCracken was purchasing shares in "Laserbond". 142 Originally, the plaintiffs pleaded that the page signed by Shaneel Khan was signed by each of the plaintiffs and the document so signed by each of the plaintiffs was attached by Richmond without their knowledge or permission to the 25-page document called the "Agreement for Provision of Finance". In other words, the plaintiffs originally alleged that the purported signatures of Sophie Khan and Sultan Khan on the execution page were in truth their signatures. I gave leave to the plaintiffs to amend and to withdraw this admission. I was satisfied that the plaintiffs' legal representatives did not appreciate the effect of what they had pleaded. 143 After I gave leave to the plaintiffs to amend the statement of claim, and gave leave to Barry Andrews, Sophie Khan and Sultan Khan to amend their response to Racken's interlocutory process, counsel for Racken and McCracken said that they would be seeking an order for the production of the computer on which the letter was prepared. Counsel for the Khans said that he would obtain instructions. Very shortly after that, counsel said, evidently on instructions, that "It appears that the computer is burnt out and was destroyed about a month after the third plaintiff (Shaneel Khan) left Oxyman, which was earlier this year, in about February." 144 Shaneel Khan swore an affidavit on 22 September 2006 to explain why the computer was not available to be inspected. He deposed that he typed the "power of authority letter" in August 2005 on a new LG laptop computer which Richmond gave him to replace his own computer which had been stolen from Oxyman's premises. He says he took that laptop computer with him when he was locked out of Oxyman on 8 February 2006. He says he continued to use it for several months but the laptop was infected with viruses and started to crash frequently. He deposed that after the battery started to leak, he threw it into his garbage bin in late June or early July 2006. 145 This version of events was inconsistent with the version given by counsel, on instructions, when the matter was first raised. 146 On 18 May 2006, the administrators of Oxyman sent an email to Shaneel Khan saying that the books and records of the company suggested that he was in possession of a laptop computer. They asked whether that was the case, and if so, where the laptop computer was. 147 Shaneel Khan replied by saying that the laptop computer (which he called a notebook) was a replacement for his own notebook which had been stolen from the company's premises the previous year. He said that that notebook had been attacked by viruses after Oxyman did not renew its anti-virus protection. He said that by early February (2006), the viruses had caused such damage to the notebook that "I traded it in and upgraded to what I use now." 148 Shaneel Khan's affidavit of 22 September 2006 was also inconsistent with that version of events. 149 In cross-examination, Shaneel Khan said that about one or two months after he had been thrown out of Oxyman, he replaced the hard drive to the laptop computer, but disposed of it in late June 2006. That is not what he told the administrators in May 2006, when he contended that he had traded in the laptop computer and upgraded to what he then used. He did not say that he had upgraded a component. 150 If Shaneel Khan had been given the letter annexed to his affidavit, and to his father's affidavit on or about 2 August 2005, I cannot conceive that he would have signed a single execution page. He had been sent a draft of the Agreement for Provision of Finance on 4 August 2005. I accept Richmond's evidence that he was given a copy of the final version on 5 August 2005. However, even if he had not, it must have been clear to him that the page to which he appended the purported signatures of his parents would be attached to the text of an agreement of at least seventeen pages (the page he signed was numbered 18). Shaneel Khan deposed that "at the time it was presented to me, I believed that it was the whole of the document I had to sign when I signed it. It did not occur to me at the time and I did not believe that it would later be attached to another document which I had not seen and had not agreed to on behalf of my parents." He said that he signed on a busy Friday afternoon. He said that "As to the form of the document which I signed, I believed that it gave authority to Ken McCracken or his company to achieve his share investment in Oxyman [or] LBM when listed by holding my parents shares in Oxyman and LBM to the value of $62,500 until Ken exercised his option." 151 As the page he signed included no text, except for the provision of signatures, it beggars belief that he could have believed that the document could have that effect unless it were attached to other pages which so provided. 152 Had Shaneel Khan been given a letter from his parents giving him authority to act as their attorneys in relation to a deal for the purchase of shares, he would not have appended their purported signatures to a document without seeing what the document contained. I do not accept the authenticity of the letter dated 2 August 2005. 153 Whilst I do not accept the authenticity of the letter of 2 August 2005, it does not follow that Shaneel Khan had unlimited authority from his parents to cause them to enter into a transaction in which they guaranteed the repayment with interest of an advance of $250,000 as well as giving mortgages over their respective shares in Oxyman and Laserbond Marketing as security for that and other obligations. 154 Counsel for Racken submitted that Shaneel Khan's parents were content to let him conduct and conclude a business transaction involving the shares on their behalf, with the terms of the transaction to be left up to him to decide as he saw fit. In support of that submission, counsel referred to the facts that Sophie Khan did not give evidence, that the evidence given by Sultan and Shaneel Khan as to the purported letter of 2 August 2005 should be rejected, and the fact that the shares in Oxyman and Laserbond Marketing, which had been transferred into the names of Sophie and Sultan Khan, had been given to Sophie and Sultan Khan by Shaneel, or were being "warehoused" from potential creditors of Shaneel Khan, or were held on trust by them for Shaneel Khan. 155 Although there is no direct evidence, I think Shaneel Khan was authorised to deal with the shares held in his parents' name as he saw fit. Even on his case, the shares were a gift by him to his parents. The shares in Laserbond Marketing were initially put in the name of his brother, Sherjeel Khan, but Shaneel Khan subsequently caused that registration of shares to be changed so that the shares were registered in the name of Sultan Khan. This was done at a time when other companies of which Shaneel Khan had been a director had been placed into administration. 156 My conclusion that the letter of 2 August 2005 is not authentic has obvious ramifications for my assessment of the credibility of both Shaneel Khan and Sultan Khan. I do not accept Sultan Khan's evidence that Shaneel said to him "Dad, I need authority to sign over $62,500 worth of shares from either Laserbond or Oxyman that belong to you and Mum", or that he agreed to give Shaneel permission to sell shares totalling $62,500 only. Sultan Khan admitted (T346-347) that he did not ask Shaneel to show him any document in relation to the share sale agreement or share transfer. He evaded answering questions as to what he thought he and his wife got in return for selling the shares. He did not ask Shaneel whether he had signed any document. All of this is consistent with Shaneel Khan having authority to deal with the shares in any way he saw fit. 157 I accept Sultan Khan's evidence that when, in January or February 2006, he received an interest notice in relation to a debt, he thought there was a mistake and telephoned the company to tell them they had the wrong person. Substantially for the reasons advanced by counsel for Racken, I conclude that Shaneel Khan did have actual authority from his parents to deal with the shares registered in their names as he saw fit. It is not necessary at this point to decide whether the shares were held on trust for Shaneel Khan or whether, as he and Sultan Khan said, they were a gift from Shaneel Khan to his parents. Whether or not Shaneel Khan is the beneficial owner of the shares, he was authorised to deal with them. But it does not follow that his parents gave him authority to commit them to a personal liability. 158 I do not infer that they conveyed any authority on him to commit them to a personal liability to repay a loan from Racken, or to guarantee the repayment, with interest, of the advance of $250,000, or to indemnify Racken against the share price of shares in Laserbond Limited falling below twenty cents fourteen days after listing. Shaneel Khan's Signing of the Agreement for Provision of Finance 159 Shaneel Khan took some trouble to disguise the fact that his parents had not signed the execution page. The construction of the surname "Khan" and the letter "S" in the signatures of Sophie Khan, Sultan Khan, and Shaneel Khan, are noticeably different. 160 Nonetheless, Richmond was aware that Sultan and Sophie Khan had not signed the document. He said that the relevant page was signed twice. First, it had been signed by Kelly and by him. It was then given to Shaneel Khan. Shaneel Khan brought the document back a few minutes later and Richmond observed that his parents' signatures looked awfully similar. Richmond then gave Shaneel Khan another copy of the page which he took back to his office and a few minutes later returned with signatures of his parents which looked slightly different. Richmond accepted these, and later he and Kelly re-signed those pages. I accept Richmond's evidence on this matter. However, it must have been apparent to him that Shaneel Khan had signed his parents' signatures to the document as if they were their personal signatures. There is no evidence that Richmond told McCracken that Shaneel Khan was the author of the signatures that purport to be those of Sultan Khan and Sophie Khan. It was not suggested that McCracken knew of that. Compilation of the Agreement for Provision of Finance 161 Richmond's evidence was confused on the question of assembling the text of the documents to be attached to the execution pages. No-one initialled any of the pages which were attached to the execution pages. According to Richmond's oral evidence, the marked-up copy of the Agreement for Provision of Finance was initially attached to the execution pages. I find that surprising, as the page numbering of the execution pages are consistent with its being the clean copy, and not the marked-up copy, which was attached to the execution pages. Moreover, the marked up final copy was still marked as "draft". I think Richmond was confused and wrong about this. 162 McCracken's evidence as to when and how he received signed copies of the agreements changed. In his affidavit, he said that on or about 8 August 2005, he received a facsimile from Richmond attaching an executed copy of the Agreement for Provision of Finance, and that upon receipt of that document, he noted that it had been signed by Garry Andrews, Richmond, Kelly, Sophie Khan, Sultan Khan and Barry Andrews and had been executed on behalf of Zanshin, HOD, Laserbond Marketing and Oxyman. He deposed that he subsequently arranged for the payment of $250,000 to Oxyman. 163 This was corrected in his oral evidence. In his oral evidence, McCracken said that on the afternoon of 5 August 2005 at 5.11pm to 5.14pm, he was telephoned by Richmond and told that the execution pages had been faxed to McCracken's home. McCracken was then at his office. His wife was at the bank. When he was told that all of the signature pages had been faxed to his home, he gave instructions to his wife to deposit a bank cheque for $250,000 into Oxyman's account at Westpac. 164 McCracken said that in about the middle of August 2005, he collected the executed pages when he visited Oxyman's offices and assembled the agreement. He did that by creating a double-sided print of the agreement which was in his "sent" email which he had sent to Richmond on 5 August 2005. Those pages, together with the execution pages, were then bound as a single document which became exhibit K. It is this document which Racken contends is the agreement for the provision for finance which binds all of the persons who signed, or purportedly signed, the execution pages. 165 There is a difficulty with this evidence in that it appears from the document stored on a disk produced by the liquidators of Oxyman that the document which is exhibit K was last modified at 12.30pm on 19 January 2006. That modification was only to adjust the alignment of one of the clauses. The computer recorded that there had been fifty-seven revisions to the document from the time it was originally created on 18 July 2005. It was not possible to say when each of the modifications occurred, or what they were, except for the last immaterial modification saved on 19 January 2006, which concerned only the indentation or formatting. It is possible that such formatting changes were made on the documents stored on Oxyman's computer after McCracken obtained the print, but this is unclear. 166 Richmond's evidence in relation to the compilation of exhibit K was unclear. This was because in his oral evidence he said that the version of the agreement which he received at 4.37pm on 5 August 2005 was a marked-up copy and not a clean copy. He was mistaken about this as the evidence of his solicitor confirmed that the attachment to the email of 4.37pm was the clean copy. According to Richmond, he attached the signature pages to the marked up copy of the agreement which was filed in Oxyman's paper files. He said that on or shortly before 19 January 2006, McCracken asked him to print off from the Oxyman computer system the Agreement for Provision of Finance, which became exhibit K. McCracken told Richmond that he, McCracken, was confused by the number of documents that he had received from his solicitors, and he was not sure which one had been signed. Richmond went to the file on his desktop computer and printed the agreement and then emailed it to McCracken. 167 The plaintiffs disputed the authenticity of the attachments to the emails of 5 August 2005. One of the grounds of attack was that the emails of 5 August 2005 had not been exhibited to McCracken's affidavit. However, notwithstanding some of the confusion in the evidence, I think it is quite clear that the version of the agreement sent by email at 4.37pm by McCracken to Richmond on 5 August 2005 was the document which was printed out for Garry Andrews and Shaneel Khan (although they both denied receiving it) and that the same version of the document was printed out again at a later date, probably on or about 19 January 2006, and bound with the execution pages to produce the document which is exhibit K. There is no evidence that any change was made to the text of the document received by Richmond, Kelly, Garry Andrews and Shaneel Khan on 5 August 2005. I conclude there was not, and that the Agreement for Provision of Finance which was tendered as exhibit K incorporated the signature pages and the text of the document sent by McCracken to Richmond at 4.37pm on 5 August 2005, which was shown to and printed out for Garry Andrews and Shaneel Khan. Alleged Misrepresentations 168 I have already dealt with and rejected Barry Andrews' allegation that he was induced to sign the execution page by an earlier representation by Richmond as to the nature of the transaction (at [135]). The allegation that Richmond represented that the single sheet of paper provided to Barry Andrews for his signature was an accurate and true reflection of the agreement reached is absurd. I reject the allegation that Richmond dishonestly procured Barry Andrews' signature to the execution page. 169 Barry Andrews also gave evidence that in late June or early July 2005, Kelly said to him: " Barry, the good news is Oxyman is worth about $15 million and we are moving forward. " He also said that: " I recall that Terry said to me on at least two or three occasions 'The value of Oxyman is about $15 million.' On another occasion at the Rockdale RSL Club in about June 2005 or early July 2005 Terry said to me 'You are only paying $5 million for the Oxyman shares if Ken takes his option in Laserbond.' On another occasion at the cafe at the Oxyman office in about July 2005 Terry said to me: 'Oxyman is really going places. Wait until it hits Channel 9 and A current affair .'" 170 Originally I rejected this evidence because of the late service of the affidavit. Because the proceedings had to be adjourned, I revised that ruling as Kelly then had the opportunity to deal with the evidence over the adjournment. I did so on the basis that Barry Andrews would be required for further cross-examination. On resumption, Barry Andrews was not able to be further cross-examined on medical grounds. He had given oral evidence in answer to questions from counsel for Racken that Kelly gave him two valuations of Oxyman: one of $15,000,000 and the other for a conservative amount (his words) of $5,000,000. He said that Garry told him that Oxyman was travelling well and this was supported by Kelly and others at Oxyman. In re-examination he identified Richmond as one of the "others" who said that. He said that Kelly told him that Oxyman was "going great" and on another occasion said that it would be excellent when Oxyman got television coverage on "A Current Affair". 171 Kelly denied ever speaking to Barry Andrews about the value of Oxyman. 172 A valuation of Oxyman had been obtained by Griffiths from Benwest Investment Services Pty Ltd. The valuation, dated 17 March 2005, said that the net assets of Oxyman as at 28 February 2005 were $614,632 without intangibles. It was in a start-up phase. Benwest used what it said were the directors' forecasts of future sales to 30 June 2008. It opined that based on a capitalisation of future maintainable earnings, the company "may be valued" between $15,000,000 to $18,000,000, and based on the net present value of estimated future cash flows may be valued at between $11,000,000 and $12,000,000. The worth of the valuation was much diminished by the confession that Benwest had not investigated the markets for Oxyman's products. Nonetheless, the authors of the report expressed the opinion that Oxyman was valued in the range of $11,000,000 to $18,000,000. 173 Kelly was sceptical of parts of the report and did not consider Oxyman was worth that. In 2005, he did consider it was worth at least $5,000,000. In May 2005, McCracken invested $100,000 to take a 3% shareholding after having investigated Oxyman's affairs. 174 I do not accept that Kelly made any representation to Barry Andrews about the value of Oxyman. I do not accept that Richmond made any representation to Barry Andrews that Oxyman was travelling well. Whilst Kelly may have made such a general statement to Barry Andrews, I do not accept that Barry Andrews relied on anything said by Kelly or Richmond about Oxyman's prospects. His son Garry Andrews was the sales and marketing manager of Oxyman, and later its general manager. Barry Andrews and Garry Andrews did not give any detailed evidence as to what Garry Andrews told his father about the proposed investment, or the value or prospects of Oxyman or Laserbond Marketing. Barry Andrews did not make inquiries about those matters. Even on his own evidence, which I do not accept, the only information he was given by Kelly was at occasional meetings, where it does not appear that there was anything more than casual conversation. On his own evidence, he did not make it known to Kelly that he would be placing reliance on what he was told in deciding whether to agree to the investment proposal described to him by his son, and nor did he discuss that proposal with anyone else. 175 No representations were made by McCracken, Richmond or Kelly to Sultan Khan or Sophie Khan about the nature of the proposed transaction nor about the financial position or prospects of Oxyman or Laserbond Marketing. They had no dealings with Sultan Khan or Sophie Khan. 176 Shaneel Khan received a draft of the deed for provision of finance on 4 August 2005. It contained the principal terms found in the final agreement. He was given the final agreement on 5 August 2005 before signing it. Shaneel Khan did not give evidence of Richmond or Kelly having misrepresented the nature of the document that he signed on 5 August 2005. He said that he was told to sign a one-page document so that the money would go into Oxyman's account quickly and that in doing so he believed that Richmond and Kelly were acting in the best interests of the shareholders of Oxyman and Laserbond Marketing and that any arrangement with McCracken would be putting into effect the proposal discussed in June 2005. He also deposed that it did not occur to him at the time and he did not believe that the page he signed would later be attached to another document which he had not seen and had not agreed to on behalf of his parents. There is no evidence that he agreed to any document on behalf of his parents apart from such agreement as can be inferred from his signing the agreement on 5 August 2005. 177 Richmond did not represent to Shaneel Khan that the document signed by Shaneel Khan was paperwork to give effect to the share sale proposal or agreement discussed in June 2005. Nor do I accept that Shaneel Khan believed that the document he was signing on 5 August 2005 gave effect to the proposal which was then under discussion. He was aware of the further negotiations after 20 June 2005. He had received, and, I infer, he read, at least the substance of a draft of the Agreement for Provision of Finance shortly before he was asked to sign the final version of the document. 178 Nor were any representations made by Richmond or Kelly to Shaneel Khan about the value of Oxyman. On Shaneel Khan's own evidence he was aware from February and March 2005 that Oxyman was having financial difficulties. 179 Accordingly, the plaintiffs' claims against Racken, McCracken, Richmond and Kelly that the Agreement for Provision of Finance was induced by misrepresentation fails. Events After Execution of the Agreement for Provision of Finance 180 The Laserbond float did not proceed. Pursuant to clause 3 of the Agreement for Provision of Finance the loan of $250,000 became repayable by the Oxyman Shareholders on 18 November 2005. McCracken did not, at that time, press for repayment. The reason he did not press for repayment at that time was because he had been told that HVOF was anticipating listing in late December 2005 or early January 2006. The minutes of a management committee meeting of Oxyman held on 9 December 2005 record McCracken advising the meeting that he still needed signed transfer forms for the Laserbond Marketing Shares from Barry Andrews and Sultan Khan and also noting that interest accrued from mid November, and he would be invoicing the four shareholders for interest. He handed to Shaneel Khan transfer forms for the transfer of Sultan Khan's shares in Laserbond Marketing to Racken and for the transfer of Sophie Khan's shares in Oxyman to Racken. Shaneel Khan made no objection to the documents. 181 On 25 January 2006, Racken sent an invoice to Barry Andrews, Richmond, Zanshin, Kelly, HOD, Sultan Khan and Sophie Khan claiming interest on the advance of $250,000. On about 12 January 2006, McCracken asked Richmond to "process the notification to ASIC for the registration of the transfers of the shares". Pursuant to clause 9.12 of the Agreement for Provision of Finance, each of the Mortgagors was required to deliver to Racken a transfer of the shares mortgaged in favour of Racken and to deliver to Racken the share certificates. By clause 16.1, Racken was irrevocably appointed to execute documents in the other parties' names in order to give full effect to the agreement. Pursuant to those powers, Racken became the holder of the shares formerly held by Barry Andrews and Sultan Khan in Laserbond Marketing and by Sophie Khan in Oxyman. It also became the holder of the further shares in Oxyman issued as a result of its advance of $250,000. Although the original share certificates were not delivered up, new share certificates were issued to Racken. 182 These proceedings were commenced on 31 March 2006. Interlocutory injunctive relief was given to restrain Racken from dealing with the shares. After a contested hearing on 13 July 2006, that relief was confirmed until further order so far as it affected Barry Andrews' shares in Laserbond Marketing. Did Barry Andrews Become a Party to the Agreement for Provision of Finance? 183 How, if at all, is Barry Andrews bound by the terms of the document which was later attached to the execution pages? 184 It was submitted for Racken that, by signing the page which was numbered 17 and which included the text "Executed as a Deed", Barry Andrews must be taken to have known that some other document would be attached to the page he signed and that that document, when sent to Racken, would result in legally binding obligations being imposed upon him. It was submitted that by signing that page he represented that he had either read or approved the contents of the pages to which the execution page was to be attached or, alternatively, represented that he was willing to be bound by its contents. Counsel for Racken relied upon Wilton v Farnworth (1948) 76 CLR 646 where Latham CJ said (at 649): " In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions. " 185 That passage was referred to with approval by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 180 [43]. 186 In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd, the High Court said (at 180-181 [45], 182 [47], and 185 [57]): "[45] It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it. … [47] … Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief. … [57] If there is a claim of misrepresentation, or non est factum, or if there is an issue as to whether a document was intended to affect legal relations or whether, on the other hand, it was tendered as a mere memorandum of a pre-existing contract, or a receipt, or if there is a claim for equitable or statutory relief, then even in the case of a signed document it may be material to know whether a person who has signed it was given sufficient notice of its contents. The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document. …" 187 These cases concern documents which contain the terms of the transaction. The act of Barry Andrews in placing his signature on a page which said "Executed as a Deed" did not convey that he assented to the terms in the document he signed, because there were none. 188 Nonetheless, Barry Andrews' act in signing the execution page and faxing the execution page back to Richmond did confer an implied authority on Richmond to deal with that page. He did not tell Richmond to hold the page until he received further instructions. He did not tell Richmond to attach the page only to a particular kind of share transaction. He did not ask to be provided with a copy of the document to which the execution page would be attached before Richmond dealt with the page. There was no document containing a prior agreement to which Barry Andrews had assented. 189 Contrary to the submissions of counsel for the plaintiffs, this is not a case of non est factum (Mercantile Credit Co Ltd v Hamblin [1965] 2 QB 242 at 280). The plea of non est factum is narrowly confined. Where it applies, a party can deny that he or she is bound by the tenor, or the purport and effect, of the document he or she signed (Saunders v Anglia Building Society sub nom Gallie v Lee [1971] AC 1004 at 1026, 1027). The document signed by Barry Andrews had no tenor or purport or effect. It contained no terms. 190 A plea of non est factum would fail in any event. Barry Andrews would need to show not only that the Agreement for Provision of Finance effected a transaction radically different from that to which he believed he was committing himself. He would also need to show he acted without carelessness and that, through no fault of his own, he was unable to understand the purport of the particular document (Petelin v Cullen (1975) 132 CLR 355 at 359-360). That is not established. 191 The case is close to those cases in which a signatory is liable if, expressly or by implication, he or she has authorised another to fill in blanks to a document. As against an innocent third party who has no notice of limitations on that authority, the signatory will be bound even if the authority is exceeded (United Dominions Trust Ltd v Western [1976] 1 QB 513; Egan v Ross (1928) 28 SR (NSW) 382 at 386; cp Mercantile Credit Co Ltd v Hamblin at 268, 269, 280). 192 In Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317, Gleeson CJ said (at 323): " It is true that in appropriate circumstances it may be open to a court to reach a conclusion that by signing a document containing blanks and handing it over to the other party a person should be regarded as having conferred on that party implied authority to fill up the blanks, and the document will then operate according to its terms with the blanks filled in. That may be so, for example, in a case where the parties have reached express agreement upon the terms of a contract and one party signs it leaving in blank certain aspects of the agreement. If the document is handed over to the other party in that condition it may readily be inferred that there is authority in the other party to fill in the blanks in accordance with the prior agreement: Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238. There may also be cases in which, even though there has been no express agreement between the parties upon the particular matter in respect of which the document remains blank at the time it is signed and handed over, nevertheless it is proper to conclude that the party handing it over had impliedly authorised the other party to fill up the blank. It may be, for example, that the information is unimportant, or that the common intention of the parties is such that the nature of the insertion is something which necessarily flows from that intention. I do not suggest that this account of the possibilities is exhaustive. Ultimately, however, the issue is one of fact, and the question is whether it is proper to infer that the party signing the document with the blanks in it gave the other party authority to fill in the blanks in the document. " 193 It must have been known to Barry Andrews on 5 August 2005 that there was some urgency to complete the transaction with Racken. He must have appreciated this from the fact that he was being asked to turn his fax on to receive the document and to fax it back. He could have asked to be sent the whole document but did not. He impliedly authorised Richmond to deal with the signed page by attaching it to other terms. He had no discussion with Richmond. He did not tell Richmond the type of transaction to which he intended to give his assent. Rather, he either impliedly authorised Richmond to attach the execution page to the terms of the agreement which had been negotiated and agreed on by others with Racken, or he impliedly authorised Richmond to attach the execution page to the terms of such a transaction to which his son Garry had assented. The latter qualification might be inferred from the fact that, to Richmond's knowledge, all communications with Barry Andrews in relation to the transaction were being effected through Garry Andrews. In either case, Richmond was impliedly authorised to attach the signature page to the final terms of the Agreement for Provision of Finance. That is so because Garry Andrews had indicated his assent to those terms by signing them. 194 For these reasons, I conclude that Barry Andrews was a party to the Agreement for Provision of Finance. Relief for Barry Andrews under the Contracts Review Act 195 Even though Barry Andrews was a principal borrower and was to take up shares in Oxyman with the moneys advanced to him, he was in a position analogous to that of a surety. The moneys being raised from Racken were to be used as working capital for Oxyman. Barry Andrews held no shares in Oxyman. He could not use the advance except to take up shares in Oxyman. Under the Agreement for Provision of Finance, Barry Andrews became liable for the repayment of the advance of $250,000 and interest. He mortgaged all his shares in Laserbond Marketing to secure the advance. He did not stand to obtain any benefit from the agreement. If the obligation to repay the loan was satisfied by Racken exercising one of the options, Barry Andrews stood to lose the specified Laserbond Ltd Shares to which otherwise he would be entitled by reason of his shareholding in Laserbond Marketing, but which would be acquired by Racken pursuant to its exercise of the Laserbond Limited call option. Alternatively, he would stand to lose the shares issued to him in Oxyman if Racken exercised the Oxyman call option. In the last case, he would be no worse off than if he had not entered into the agreement. On the other hand, it would be expected that Racken would only exercise the Oxyman call option if the Oxyman shares were worth more than the shares in Laserbond Limited. If the Laserbond Limited shares were worth more than the Oxyman shares, Barry Andrews could expect to lose his proportion of 1,500,000 shares in Laserbond Limited which Racken would acquire, and to which he would otherwise have been entitled, and in return receive shares of lesser value in Oxyman. If neither option were exercised, he would be required to repay the entire advance with interest and receive in exchange only the newly issued shares in Oxyman. In such an event, it could be expected that those shares would be worth less than the loan and interest. Otherwise, Racken would exercise its option. In short, there was no upside for Barry Andrews in the transaction, and there was a risk of substantial downside. 196 Racken left it to Garry Andrews to obtain Barry Andrews' consent to the transaction. Barry Andrews did not plead a case that the Agreement for Provision of Finance should be set aside because he was induced to enter into it by the misrepresentations or non-disclosure by his son Garry. Nor was that identified as one of the matters upon which relief was sought under the Contracts Review Act. I therefore put that consideration aside. Nonetheless, it is within the plaintiffs' pleaded case that Racken did not disclose to Barry Andrews that the transaction to which his signature was appended provided for a loan and guarantees, and that Barry Andrews did not understand that that would be the effect of his signing and forwarding the execution page. 197 Subsection 7(1) of the Contracts Review Act provides that: "(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument." 198 Section 9 provides as follows: "9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. " 199 I deal with the particular matters to which regard is required to be had under s 9(2). 200 As to paras 9(2)(a)-(c), there was no material inequality in bargaining power between Barry Andrews and Racken. The provisions of the contract were the subject of negotiation. It would have been reasonably practicable for Barry Andrews to have rejected any of the provisions of the contract and to have negotiated for their alteration. He chose to take no part in the negotiation of the terms of the contract. He could have declined to have anything to do with the contract if he so wished. He did not do so because of the way in which the contract was explained to him by his son. That explanation was reasonably sufficient at the time it was given. The problem was that the terms upon which Garry Andrews hoped to obtain investment from Racken in June 2005 did not represent the final transaction, and Garry Andrews did not tell his father of the change. 201 In relation to paras 9(2)(e) and (f), there is no reason to doubt that Barry Andrews was reasonably able to protect his interests. Neither he nor Garry Andrews who, in a sense, represented him, suffered any disability by reason of age or physical or mental incapacity. Nor were the relative economic circumstances, educational background and literacy of the parties to the contract materially unequal. 202 As to para 9(2)(g), the contract is somewhat complex, however this was due to the complexity of the transaction which it documents. In any event, as Barry Andrews never saw the terms of the contract, the form in which it was expressed and the intelligibility of the language used is not relevant. 203 As to para 9(2)(j), I reject the plaintiffs' contention that unfair pressure or unfair tactics were used against Barry Andrews. Even if Richmond was a person acting or appearing or purporting to act on behalf of Racken, he did not use undue influence, unfair pressure or unfair tactics. It was at Barry Andrews' request, as conveyed to Richmond through Garry Andrews, that Richmond forwarded only the execution page, rather than all of the pages of the agreement. Having regard to the way the case was pleaded and argued, I could not find that undue influence, unfair pressure or unfair tactics were exerted by Garry Andrews (who was another party to the contract) against his father. 204 The matter in para 9(2)(k) is not relevant to the circumstances. 205 The matters which are material are those stipulated in paras 9(2)(d), (h), (i), and (l). 206 From Racken's perspective, the provisions of the agreement were reasonably necessary for the protection of its legitimate interests. It was not prepared to advance a further $250,000 merely to obtain additional shares in Oxyman or the chance of acquiring shares on the float of HVOF. It had already advanced $100,000 to Oxyman. It was entitled to insist on security and guarantees for its advance. The interest rate was based on the interest it was paying on its own borrowings. On the other hand, the contract operated harshly from Barry Andrews' perspective for the reasons I have already given (at [59], [133], and [195]). If the provision of working capital to Oxyman had improved Oxyman's fortunes then Racken stood to benefit both through its existing shares increasing in value and because it would have an option to acquire the Oxyman shares issued as a result of its advance. Barry Andrews did not stand to gain. 207 In those circumstances, the facts that Barry Andrews was not given independent legal or other expert advice (s 9(2)(h)), the provisions of the contract were not explained to him, and he did not understand them or their effect (s 9(2)(i)) are highly material. It is true that the contract was a commercial contract. But even in the case of a commercial contract, where, as I must assume, a person in a position analogous to that of a surety is not induced to enter into a guarantee by misrepresentation, a contract may be considered unfair where its terms are not explained and the person does not understand the nature of the obligations assumed. Whilst Racken did not know that the Agreement for Provision of Finance had not been sent to Barry Andrews, it did not know that it had. It did not know that the changes to the intended transaction which had been introduced late in the negotiations had not been explained to Barry Andrews. Nor did it know that such changes had been explained. 208 In Garcia v National Australia Bank Ltd (1998) 194 CLR 395, Gaudron, McHugh, Gummow and Hayne JJ, in dealing with a guarantee given by a wife of debts of her husband, said (at 408, 409 [31]): " [31] The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that: (a) in fact the surety did not understand the purport and effect of the transaction; (b) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed); (c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet (d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her. " 209 Although the present is not a case of wife and husband, the principles for granting relief on the grounds of unconscionability in such a case are relevant to considering whether the Agreement for Provision of Finance, so far as it concerns Barry Andrews, was unjust. The threshold for relief under the Contracts Review Act in such a case is lower than in relation to a claim of unconscionability at general law (Bakarich & Ors v Commonwealth Bank of Australia [2007] NSWCA 169 at [89]). I have explained why Barry Andrews can be regarded, for the purposes of the Contracts Review Act, as being in a position analogous to that of a surety, even though he was a principal borrower. To adapt the language of the majority of the High Court in Garcia, in the present case, there is the combination of circumstances that Barry Andrews did not understand the purport and effect of the transaction; the transaction was in substance a voluntary one in the sense that it was unlikely that he would obtain a benefit from it; he did not participate in any of the discussions in relation to the transaction or negotiations of it, although his son did; Racken may be taken to have understood that he might repose trust and confidence in his son in relation to the transaction as it related to the provision of working capital for Oxyman for which his son was a senior manager and beneficial shareholder; Racken may be taken to have understood that Garry Andrews might not fully and accurately explain the purport and effect of the transaction to Barry Andrews, and yet Racken did not itself take steps to explain the transaction to him or to find out that the transaction had been explained to him. Whether or not such considerations would justify relief at general law, in my view they lead to the conclusion that the transaction was unjust in the circumstances in which it was made within the meaning of ss 7 and 9 of the Contracts Review Act. 210 It follows that the Court has a discretion under s 7(1) as to what order, if any, should be made for the purpose of avoiding as far as practicable an unjust consequence or result. That may include the making of an order declaring the contract, so far as it affects Barry Andrews, void, in whole or in part, or refusing to enforce all or any of the provisions of the contract, or varying, in whole or in part, any provision of it. 211 Barry Andrews seeks an order that the contract be declared wholly void. However, such a remedy would go beyond avoiding the unjust consequence or result. It is not unjust that Barry Andrews be held to the substance of the agreement he thought he was making. He thought that, in return for Oxyman advancing funds, he was providing Racken with an option, either to acquire the shares in Oxyman to be issued in his name through the subscription of the funds advanced by Racken, or to acquire shares in Laserbond Marketing which would entitle Racken to $62,500 worth of shares in HVOF when floated at seventeen cents per share. It appeared to be common ground that the shares in Oxyman are worthless. In any event, that was the plaintiffs' contention. As Racken did not misrepresent Oxyman's financial position to Barry Andrews, it would not be unjust for Barry Andrews to be held to the substance of the transaction into which he thought he was entering by allowing Racken to exercise its control over such number of Laserbond Marketing shares as would equate to 367,647 shares in HVOF (namely, $62,500 divided by seventeen cents). The difficulty is that, in their negotiations for the proposal as Barry Andrews understood it, the parties did not identify how many shares in Laserbond Marketing this would be. Nor did they identify what rights by way of security Racken should have over the shares. There is no evidence of the parties turning their minds, even in the early stages of the negotiations, to what should happen if the listing of HVOF did not proceed. 212 In the statement of claim the plaintiffs alleged that Racken's entitlement to shares to the value of $62,500 in HVOF would be secured by 224 shares in Laserbond Marketing. It is unclear from the pleading whether the plaintiffs intended to allege that 224 shares was the number of shares in Laserbond Marketing to be provided as security by each of Barry Andrews, Sultan Khan, Zanshin and HOD, or whether they intended to allege that 224 shares in Laserbond Marketing was the total number of shares to be provided as security. As the pleading also referred to 350 Oxyman shares being provided as security, it might be inferred from the face of the pleading that the plaintiffs intended to allege that 224 Laserbond Marketing shares in total were to be offered as security. That would be wrong. 213 No submissions were made about how the plaintiffs arrived at the number of 224 Laserbond Marketing shares. I infer that it is the number of shares the plaintiffs say each of Barry Andrews, Sultan Khan, Zanshin and HOD agreed to provide as security for Racken's right to be issued shares in HVOF on its being floated. I infer that from the following. According to an ASIC search dated 12 July 2005, there were then 3,100 issued shares in Laserbond Marketing. According to the schedule prepared by Richmond, referred to at [44] above, there were also 172 convertible notes which, if converted, would have resulted in total share capital of 3,272 shares in Laserbond Marketing. Shareholders in Laserbond Marketing were to be entitled to 5,500,000 shares on the float of HVOF. This equates to 1,681 shares in the listed company for each share in Laserbond Marketing. The shares to be issued to Racken at a discounted value of seventeen cents per share on the float of HVOF, in return for the advance of $250,000, would equal 1,470,588 shares (this was rounded up to 1,500,000 shares). If each Laserbond Marketing share gave its holder the right to 1,681 shares in HVOF on the float, approximately 224 shares in Laserbond Marketing would need to be held to be entitled to 375,000 (one quarter of 1,500,000) shares in HVOF on the float. 214 Therefore, I take the plaintiffs to have admitted that Barry Andrews agreed to provide 224 shares in Laserbond Marketing as security for Racken's entitlement to take up shares in HVOF. 215 That is not to say that 224 Laserbond Marketing shares were treated as having a value of $62,500. There is no evidence that the parties intended that, if the float did not occur, Racken could exercise rights of beneficial ownership over the shares in Laserbond Marketing transferred to it as security. In the early stages of the negotiations, they did not address the question of what would happen if the float did not occur. The shares in Laserbond Marketing could well have been worth substantially more than the value to be attributed to the right referable to those shares to take up shares on the float of HVOF. If Laserbond Marketing had other valuable assets and businesses which were not to be transferred to HVOF, then they would be worth substantially more. 216 Given that Barry Andrews should have expected that, in some undefined way, Racken could exercise security over 224 of his shares in Laserbond Marketing, it would not be an unjust consequence for Racken to be entitled to exercise rights as mortgagee to sell the 224 shares in Laserbond Marketing to recoup $62,500, which was paid for the issue of 88 shares to Barry Andrews in Oxyman, together with interest from 5 October 2005 at the rates and at the rests provided for in the Agreement for Provision of Finance. Nor would it be unjust for Racken to take up rights which may be attached to the Laserbond Marketing shares, to take up shares on the float of HVOF, if the float proceeded. 217 Having found that the contract was unjust, I consider an appropriate exercise of discretion under s 7(1) of the Contracts Review Act is to make orders declaring the Agreement for Provision of Finance to be void insofar as it imposes personal obligations on Barry Andrews, but that it is not appropriate to declare the deed wholly void. There should be an order that Racken re-transfer 1,030 shares in Laserbond Marketing to Barry Andrews and should account for any dividends paid on those shares. There should be a declaration that Racken is entitled to exercise its power as mortgagee to sell 224 shares transferred to it from Barry Andrews pursuant to the Agreement for Provision of Finance and to retain from the proceeds of sale $62,500 plus interest at the rates and on the rests provided for in the Agreement for Provision of Finance from 5 October 2005 and to account for the balance of the proceeds of sale, if any, to Barry Andrews. The orders should provide that Barry Andrews is entitled to redeem the shares on payment of $62,500 plus interest. The orders should also provide that, if Racken exercises its Laserbond Call Option before the shares are sold or redeemed, Racken is entitled to deal with the shares as may be required to take up such number of shares in Laserbond Limited (as defined in the Agreement for Provision of Finance) to which the holder of 224 shares in Laserbond Marketing may be entitled. 218 In summary, whilst Barry Andrews did not understand that the transaction was one of loan, it is not an unjust consequence of the contract for Racken to be able to exercise security over the 224 shares in Laserbond Marketing that Barry Andrews has admitted he was required to provide as security for Racken's rights under the transaction as he understood it. As that transaction has not eventuated, it is not an unjust consequence for those shares to stand as security for the advance of $62,500 and interest. Nor is it an unjust consequence for Racken to be able to enforce any rights in a float of HVOF, should it materialise, as are conferred on the holder of 224 shares in Laserbond Marketing. Barry Andrews' Claim for Misrepresentation and Misleading and Deceptive Conduct 219 For the reasons already given, Barry Andrews' claim against all defendants for misrepresentation fails (see findings at [135], [168] and [174] above). The claim for misleading and deceptive conduct was based upon the alleged misrepresentations. These claims also fail. Barry Andrews' Claims for Unconscionable Conduct 220 The plaintiffs allege that all the defendants engaged in conduct in connection with the supply, or the possible supply, of financial services that was in all the circumstances unconscionable in contravention of ss 12CB or 12CC of the ASIC Act or s 51AC of the Trade Practices Act. They did not allege that the defendants engaged in unconscionable conduct in connection with the acquisition or possible acquisition of financial services. 221 Section 12CB of the ASIC Act is inapplicable. It applies only where a person in trade or commerce engages in conduct that is in all the circumstances unconscionable in connection with the supply, or possible supply, of financial services of a kind ordinarily acquired for personal, domestic or household use (s 12CB(5)). 222 Counsel for the plaintiffs did not elaborate on how the plaintiffs contended that Racken supplied "financial services" as defined in s 12BAB of the ASIC Act. A person provides a financial service if, inter alia, they "deal in a financial product" (s 12BAB(1)(b)). A "financial product" includes both a security (which includes shares) and a credit facility within the meaning of the regulations (s 12BAA(7)). Whilst the loan made by Racken would be a credit facility within the meaning of regulation 2B(1) of the Australian Securities and Investments Commission Regulations 2001 (Cth) ("the ASIC Regulations"), a person is taken not to "deal" in a financial product if the person deals in the product on its own behalf, unless the person is an issuer of financial products and the dealing is in relation to one or more of those products (s 12BAB(9)). I was not assisted by any submissions as to whether Racken was an issuer of financial products within the meaning of s 12BAB(9). It is unnecessary to decide this question, however, because if Racken did not supply financial services within the meaning of s 12CC, it nonetheless supplied services within the meaning of s 51AC of the Trade Practices Act. That section applies in the same terms to a corporation's or a person's supply of goods or services as does s 12CC to a person's supply of financial services. The same remedies are attracted if the provision is contravened. Section 51AC provides: " 51AC Unconscionable conduct in business transactions (1) A corporation must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. ... (3) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation or a person (the supplier ) has contravened subsection (1) or (2) in connection with the supply or possible supply of goods or services to a person or a corporation (the business consumer ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the business consumer; and (b) whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the business consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the business consumer was consistent with the supplier's conduct in similar transactions between the supplier and other like business consumers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the business consumer acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the business consumer: (i) any intended conduct of the supplier that might affect the interests of the business consumer; and (ii) any risks to the business consumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the business consumer); and (j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the business consumer; and (k) the extent to which the supplier and the business consumer acted in good faith. (4) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation or a person (the acquirer ) has contravened subsection (1) or (2) in connection with the acquisition or possible acquisition of goods or services from a person or corporation (the small business supplier ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the small business supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the small business supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and (c) whether the small business supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the small business supplier or a person acting on behalf of the small business supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and (e) the amount for which, and the circumstances in which, the small business supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and (f) the extent to which the acquirer's conduct towards the small business supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like small business suppliers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the small business supplier acted on the reasonable belief that the acquirer would comply with that code; and (i) the extent to which the acquirer unreasonably failed to disclose to the small business supplier: (i) any intended conduct of the acquirer that might affect the interests of the small business supplier; and (ii) any risks to the small business supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the small business supplier); and (j) the extent to which the acquirer was willing to negotiate the terms and conditions of any contract for the acquisition of the goods and services with the small business supplier; and (k) the extent to which the acquirer and the small business supplier acted in good faith. ... (6) For the purpose of determining whether a corporation has contravened subsection (1) or whether a person has contravened subsection (2): (a) the Court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the Court may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement. (7) A reference in this section to the supply or possible supply of goods or services is a reference to the supply or possible supply of goods or services to a person whose acquisition or possible acquisition of the goods or services is or would be for the purpose of trade or commerce. ... (9) A reference in this section to the supply or possible supply of goods or services does not include a reference to the supply or possible supply of goods or services at a price in excess of $3,000,000, or such higher amount as is prescribed. ..." 223 I accept that the service supplied by Racken to Barry Andrews under the Agreement for Provision of Finance, namely the making of a loan, was a service he acquired for the purpose of commerce, namely, the subscription for shares in Oxyman (s 51AC(7)). 224 If Racken contravened s 51AC (or s 12CC of the ASIC Act), Barry Andrews would be entitled to recover damages to compensate him for the loss or damage suffered by that conduct (s 82, Trade Practices Act; s 12GF, ASIC Act). Such contravention would also enliven the power to make orders under s 87 of the Trade Practices Act (or s 12GM of the ASIC Act) to compensate him in whole or in part for loss or damage suffered, or likely to be suffered, by such conduct. The orders which may be made to that end are such orders as the Court thinks appropriate and include orders under s 87(2) (or s 12GM(7)) including orders declaring the whole or any part of the contract to be void or varying the contract. I would not make any wider order under s 87 (or s 12GM) wider than that which would be made under s 7 of the Contracts Review Act. 225 As I have stated, however, if the defendants contravened s 51AC (or s 12CC) Barry Andrews would be entitled to damages under s 82 (or s 12GF) for the loss suffered as a result of his entering into the contract. That would encompass the loss arising from the mortgage of 224 shares in Laserbond Marketing to secure repayment of $62,500 and interest. That is a loss suffered as a result of his entering into the Agreement for Provision of Finance notwithstanding that such a loss is not an unjust consequence or result. 226 It is therefore necessary to determine whether any of the defendants contravened s 51AC of the Trade Practices Act or s 12CC of the ASIC Act. 227 For the reasons given in paras [208]-[209] above, it is arguable that it would be unconscionable within the meaning of the general law for Racken to seek to enforce the Agreement for Provision of Finance against Barry Andrews. However, it is one thing to say that it is (or may be) unconscionable for a lender to enforce a guarantee against a surety if the lender took no steps to explain the purport and effect of the guarantee to the surety and did not reasonably believe that its purport and effect had been explained to the surety by a competent, independent and disinterested stranger, where the surety was a volunteer. It is quite another to say that in such circumstances the lender acted unconscionably in accepting the guarantee. 228 I do not consider that Racken acted unconscionably in entering into the agreement. The agreement was a commercial agreement in which there was no material difference between the parties' bargaining positions. Barry Andrews was free not to enter into the transaction and was under no financial pressure to enter into it. It cannot be said that the conditions insisted on by Racken were not reasonably necessary for the protection of its legitimate interests. It was not obliged to take the risk of subscribing either for more shares in Oxyman or for shares upon the float (if it eventuated) of HVOF. It was entitled to stipulate that the moneys advanced should be repaid if it did not take up either option, and it was entitled to demand security for repayment of the advance. Barry Andrews could have understood the document relating to the loan had he asked for it. It was his decision not to ask for it. No undue influence or pressure was exerted on him. Nor were unfair tactics used against him. It was not unfair for McCracken to rely on all of the other parties to the transaction (that is, Richmond, Kelly, Garry Andrews, Barry Andrews and the Khans and their respective companies) to satisfy themselves as to the terms of the transaction. McCracken did not suspect that Barry Andrews had been kept in the dark as to the final form the transaction took, even though he should have understood that that might be the case. 229 Nor did Richmond or Kelly engage in unfair tactics or apply unfair pressure. They reasonably expected that Barry Andrews would obtain such information as he desired about the transaction from his son. Garry Andrews was provided with the email correspondence which showed the changes to the commercial terms from those which had been earlier discussed. I do not accept that Richmond or Kelly knew or should have known that Garry Andrews would not take the trouble to acquaint himself with the contents of those documents. In any event, I do not accept Garry Andrews' evidence that he did not acquaint himself with the content of those documents. 230 There is no evidence that the transaction could have been done on better terms with a different supplier of finance. There is no evidence as to the extent to which Racken's conduct towards Barry Andrews (and towards the other parties to the Agreement for Provision of Finance) was consistent with its conduct in similar transactions, if indeed, there were any such similar transactions. No party pointed to the requirements of any applicable industry code as bearing on the conscionability of the transaction. I do not consider that Racken unreasonably failed to disclose to Barry Andrews the risks of the transaction. The terms of the contract were negotiated and the parties acted in good faith. In my view, Racken did not, in connection with the supply of services, engage in conduct that was in all the circumstances unconscionable. 231 A contract may be unjust in the circumstances in which it is made, notwithstanding that the parties seeking to enforce the contract did not behave unconscionably when the contract was entered into (Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 per Basten JA at [115]). There is no inconsistency between my finding that the contract was unjust and my finding that Racken did not engage in conduct that was unconscionable when it negotiated and entered into the Agreement for Provision of Finance and made the advance of $250,000. Whether it would be unconscionable to enforce the contract against Barry Andrews is a different question. Having regard to my conclusions under the heading "Relief for Barry Andrews under the Contracts Review Act", it is unnecessary to decide that question. 232 There are two reasons it is unnecessary to decide whether Barry Andrews would be entitled to relief in equity from the Agreement for Provision of Finance. The first is that such a claim was not pleaded. The second is that if he were entitled to such relief, it would be on terms that he do equity. He would not be entitled to any greater relief than he obtains under the Contracts Review Act. 233 The claim against other defendants for contravention of s 51AC of the Trade Practices Act and s 12CC of the ASIC Act was misconceived as they were not relevantly the suppliers of services to Barry Andrews. In any event, I do not consider that any other defendant acted unconscionably. 234 It follows that these claims also fail. Conclusion in Relation to Barry Andrews' Claim 235 For these reasons I conclude that: 1. No oral agreement was made on 20 July 2005 or later as pleaded in the amended statement of claim (see [69] and [74]); 2. Barry Andrews was a party to the Agreement for Provision of Finance (see [193] and [194]); 3. Barry Andrews' entry into the agreement was not induced by any misrepresentation, misleading or deceptive conduct or unconscionable conduct on the part of any of the defendants, and he is not entitled to avoid the agreement, or to damages or other relief, on those grounds (see [135], [165] and [174]); 4. So far as it binds Barry Andrews, the Agreement for the Provision of Finance is an unjust contract in the circumstances in which it was made within the meaning of ss 7 and 9 of the Contracts Review Act (see [209]-[218]); 5. To avoid an unjust consequence or result, Barry Andrews is entitled to orders declaring the agreement void in so far as it imposes personal obligations on him, and is entitled to a retransfer of 1,030 of the 1,254 shares in Laserbond Marketing which have been transferred to Racken pursuant to the power of attorney given to Racken under the agreement. Racken is to be entitled to enforce its security over 224 of Barry Andrews' shares in Laserbond Marketing and to exercise such rights as the holder of those shares would have to participate in a float of HVOF, if such a float were to occur before the shares are sold or redeemed (see [217]). 236 Barry Andrews is entitled to relief under s 7 of the Contracts Review Act as indicated in para [217] above. All of his other claims should be dismissed. Claim of Sultan Khan and Sophie Khan 237 For the reasons in paras [156]-[157], Shaneel Khan's authority from his parents was limited to dealing with the shares held by them in Oxyman and Laserbond Marketing. He did not have authority to commit them to the numerous personal obligations contained in the Agreement for Provision of Finance. In other words, he did not have actual authority to sign the Agreement for Provision of Finance on their behalf. 238 Had he had such authority, signing what appeared to be their names might not have been forgery (Macquarie Bank Limited v National Mutual Life Association of Australasia Limited (Cole J, 15 June 1995, unreported) (BC9402643 at [50])), although the purported witnessing of their signatures might have been. However, as Shaneel Khan did not have their authority to sign the Agreement for Provision of Finance, his signing what appear to be their signatures, and then witnessing the signatures, is a forgery. Generally, a forgery is a nullity unless the person purportedly made a party to the transaction by the forged signature is estopped from denying the authority of the person who propounds the document as being a genuine document (Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 199; Barclay's Finance Holdings Ltd v John Robert Sturgess & Ors (Wood J, 29 July 1985, unreported)). 239 Racken submitted that Shaneel Khan had ostensible authority to commit his parents to the transaction. Such authority must be conveyed by the principals, not by the agent (Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503; McKeand v Thomas (2006) 12 BPR 23,593 at 23,604 [76]). Sultan Khan and Sophie Khan had no dealings with any of the other parties. It was submitted for Racken that they impliedly held out Shaneel Khan as having authority to act for them by allowing him to represent them, without conveying to Racken, or any other party, any limits on his authority. Counsel for Racken submitted that on any view of the evidence Shaneel Khan had at least a limited authority to act on their behalf, to negotiate with Racken, and to execute an agreement on their behalf in relation to the shares. Counsel submitted that, as Sultan Khan and Sophie Khan failed to take any steps to inform Racken of any limits on Shaneel Khan's authority, Shaneel Khan had ostensible authority to enter into the Agreement for Provision of Finance on their behalf. 240 Counsel also submitted that the share certificate for the 338 shares in Laserbond Marketing held by Sultan Khan was delivered by Shaneel Khan to Richmond and provided to Racken pursuant to the Agreement for Provision of Finance. Counsel submitted that, as Sultan Khan permitted Shaneel Khan to deal with his share certificate in that way, he could not take advantage of any limitation which he had placed upon the authority of Shaneel Khan, of which Racken had no notice. It was submitted that thereby the mortgage over the 338 shares formerly held by Sultan Khan was valid, even though he would not be bound by the personal covenants contained in the Agreement for Provision of Finance. 241 The latter argument does not take the matter further in view of my finding that Shaneel Khan had actual authority to deal with the shares as he saw fit. However, I should determine the factual issue on which the submission is based. I do not accept that Sultan Khan entrusted the share certificate in Laserbond Marketing to Shaneel Khan and that Shaneel Khan provided it to Richmond. Sultan Khan kept possession of the share certificate for 300 shares in Laserbond Marketing issued in September 2004. He produced it during the hearing. In August 2005, Richmond gave McCracken an original share certificate for 338 shares in the name of Sultan Khan in Laserbond Marketing. Shaneel Khan denied giving the certificate for 338 shares to Richmond. Having regard to the way in which new original share certificates in the name of Barry Andrews were created, I think it is more likely that the new share certificate was prepared by Richmond and Kelly and given to McCracken than that a certificate was given by Sultan Khan to Shaneel Khan and by Shaneel Khan to Richmond. 242 I do not accept the submission that Shaneel Khan had ostensible authority to bind his parents to the Agreement for Provision of Finance. The existence and scope of an agent's ostensible authority depends upon what representation is made by the principal, either by words or conduct, as to the agent's authority. In Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, Diplock LJ said (at 503-504): " The representation which creates 'apparent' authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal's business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal's business has usually 'actual' authority to enter into. " 243 There is no usual actual authority of a child permitted to negotiate and contract on his parents' behalf in relation to shares owned by his parents. A child in the position of Shaneel Khan who is permitted to deal with shares owned by his parents on their behalf does not have usual authority to commit them to contracts of loan, guarantee or indemnity. There being no express representation by Sultan and Sophie Khan as to the scope of Shaneel Khan's authority, he did not have ostensible authority to enter into the Agreement for Provision of Finance on his parents' behalf. 244 The question then is whether the Agreement for Provision of Finance is binding on Sultan Khan and Sophie Khan to the extent it deals with their shares, but so as not to impose a personal obligation on them. I was not referred to any authority in which it has been held that, where an agent with limited authority enters into a transaction on his principal's behalf which exceeds his actual authority, and is not within any ostensible authority, the principal is bound by the transaction to the extent it was within the agent's authority. As a matter of principle, it seems to me that a principal ought to be so bound if the transaction within the agent's authority is a distinct and severable transaction from that which was outside it (Tobin v Broadbent (1947) 75 CLR 378 at 400-401 per Dixon J). 245 I do not think it is possible to sever from the agreement those provisions to which Shaneel Khan would have had authority to commit his parents had they stood alone. Clause 9.8 provided that Sultan Khan: " (a) mortgages all of the shares held by him in LBM, and (b) as beneficial owner transfers the legal title to all of the shares held by him in LBM and all benefits and advantages now or later arising out of the holding of such shares to Racken to secure payment of the moneys owed to Racken and the performance by him of the other obligations imposed upon him pursuant to the terms of this Deed. " 246 Sophie Khan gave a like covenant in relation to her shares in Oxyman (clause 9.10). Clause 9.11 provided that: " Racken shall at the request of the Mortgagors discharge the mortgage created by this Deed and cause legal title in the shares in question to be transferred to the party who granted the mortgage if: (a) all monies payable to Racken pursuant to this Deed have been paid in full, (b) in Racken's opinion no payment received by Racken pursuant to the terms of this Deed is likely to be voidable under any law, and (c) all of the obligations imposed by each party to this Deed (other than Racken) have been discharged in full. " Clause 9 then provided further provisions incidental to the grant of the mortgage. 247 The consideration for the grant of the mortgages was Racken's agreement to make a loan. The loan was made by Racken to Barry Andrews, Zanshin, HOD and Sophie Khan. Sophie Khan purportedly promised to repay the loan and both Sophie Khan and Sultan Khan purportedly guaranteed the repayment of the loan. Other obligations purportedly assumed by them included the giving of warranties in relation to title to shares, a promise by Sophie Khan (guaranteed by Sultan Khan) to do all things necessary to acquire unencumbered title to 1,500,000 shares in Laserbond Limited on its being listed and to grant the call option over those shares to Racken, an indemnity to Racken as to the share price fourteen days after listing, and a promise by Sophie Khan, guaranteed by Sultan Khan, to cause unencumbered title to 350 Oxyman shares to be vested in Racken if Racken exercised the Oxyman call option. 248 The mortgage purportedly agreed to by Sultan Khan and Sophie Khan over all of their shares in Laserbond Marketing and Oxyman respectively was to secure not only repayment of the loan, but the payment of all moneys which might become payable to Racken under the deed, such as the promise by Sophie Khan and the other Oxyman Shareholders to indemnify Racken if the share price of Laserbond Limited shares fourteen days after listing was less than twenty cents. The mortgage was also to secure the performance by Sultan Khan and Sophie Khan of all of their obligations under the deed. Those obligations included guarantees by them of all of the obligations imposed on Barry Andrews, Zanshin, HOD and Sophie Khan. 249 There was no severable consideration for the grant of the mortgage. It is not possible, without altering the nature of the contract, to strike out words from the agreement to preserve a covenant by Sultan Khan and Sophie Khan to mortgage their shares in Laserbond Marketing and Oxyman to secure payment of moneys owed by others to Racken and the performance by others of their obligations under the deed, and excluding any personal liability on their part. 250 I therefore conclude that, subject to arguments based on ratification and estoppel, because the agreement Shaneel Khan signed was beyond the authority conferred on him by his parents, because he had no ostensible authority to enter into the agreement on their behalf, and because the transaction within his authority was not a distinct and severable transaction from the transactions outside his authority, the agreement is not binding on them. Ratification 251 Racken pleaded that Sophie Khan affirmed the Agreement for Provision of Finance because, after having received a letter of 25 January 2006 from Racken in which Racken made a claim for the payment of interest pursuant to the agreement, she maintained in her dealings with Racken an entitlement to the Oxyman shares issued to her pursuant to the advance made by Racken, without communicating any dispute as to the terms of the agreement and without disputing Racken's right to interest under the agreement. Racken alleges that she asserted such an entitlement by signing a proxy form in her capacity as a member of Oxyman appointing Shaneel Khan as her proxy to attend and vote at a meeting of shareholders in Oxyman on 10 March 2006. Racken alleges that this conduct was only consistent with her keeping the agreement on foot or ratifying and affirming it. It also pleads that Sultan and Sophie Khan ratified the agreement by acquiescence or by inactivity by delaying taking any steps to assert that Shaneel's execution of the agreement was beyond his authority. 252 The ratification claim was not pressed in final submissions. There were only incidental references in the evidence to the meeting of 10 March 2006. Sophie Khan held shares in Oxyman prior to 88 shares being issued to her following the advance of $250,000 from Racken. Her appointment of Shaneel Khan as her proxy at the meeting was not an affirmation of the Agreement for Provision of Finance. To the contrary, as Racken had transferred all her Oxyman Shares into its name in reliance on the purported power of attorney in the Agreement for the Provision of Finance, Sophie Khan's appointment of Shaneel Khan as her proxy was inconsistent with her acknowledging the validity of what had been done. The proxy form did not specify the number of shares over which she asserted voting rights. In any event, I do not accept that, at that stage, she had full knowledge of all of the material circumstances in which the Agreement for Provision of Finance had been entered into by Shaneel Khan. A demand had been made by McCracken for interest, but that demand had been rejected by Sultan Khan by his ringing Racken and advising that a mistake had been made. There is no evidence that, prior to 10 March 2006, a copy of the agreement signed by Shaneel Khan had been provided to Sophie Khan or to Sultan Khan. 253 At some time, which is unclear on the evidence, but after January 2006, Shaneel Khan was given a copy of the Agreement for Provision of Finance by Richmond. That prompted Sultan Khan to obtain legal advice as conveyed by a series of questions which Shaneel Khan posed to Richmond on 26 March 2006. These proceedings were commenced on 31 March 2006. I do not accept that there was ratification by delay. Estoppel if Shares are Beneficially Owned by Shaneel Khan 254 Counsel for Racken submitted that Sultan Khan was not the holder of 338 shares in Laserbond Marketing, but only 300 shares, and in any event, the shares were beneficially owned by Shaneel Khan and not by Sultan Khan. It was submitted that Shaneel Khan was absolutely entitled as beneficial owner of the shares to call on Sultan Khan to transfer the shares to him and thereby terminate the trust. It was submitted that Sultan Khan has no standing to dispute the validity of the disposition or mortgage over the 338 shares. It was submitted that Shaneel Khan could not be heard to challenge the validity of the transaction by which he executed a mortgage over the shares which he beneficially owns, and that Sultan Khan can be in no better position as he is a bare trustee for Shaneel Khan. Accordingly, it is submitted, Racken is entitled to exercise its rights as mortgagee of the shares. 255 The submissions based on estoppel were confined to the 338 shares in Laserbond Marketing. 256 On 20 January 2004, the directors of Laserbond Marketing resolved to issue shares to Zanshin, HOD, Sherjeel Khan, Griffiths and Naidu Australia Pty Ltd. They resolved to issue 66 shares to Sherjeel Khan. They noted that Shaneel Khan had nominated his brother to receive the shares. On 19 July 2004, the directors resolved that additional shares would be offered to various persons including Sultan Khan. The minutes note that "Shaneel Khan now prefers his shares to be held by his father Sultan Khan rather than his brother Sherjeel Khan." The directors resolved to issue 300 shares to Sultan Khan. The company's allotment journal records that the 66 shares issued to Sherjeel Khan on 20 January 2004 were cancelled on 1 September 2004. A share certificate was issued to Sultan Khan for 300 shares. The share certificate is dated 1 September 2004. 257 The minutes of the meeting of the directors of Laserbond Marketing of 20 February 2005 record that the directors resolved to call an extraordinary general meeting of the company to move a resolution that shares be issued to Richmond, Kelly, Garry Andrews, Griffiths, Shaneel Khan or their nominees in lieu of salary and consulting fee sacrificed. The proposed resolution was that 38 shares be issued to Shaneel Khan or his nominee. The constitution of Laserbond Marketing vested the power to issue unissued shares in the directors, rather than the shareholders in general meeting. There was no minute of any meeting of shareholders at which the proposed resolution was passed. The allotment journal records that on 11 May 2005, 38 shares were issued to Sultan Khan. The register of members also records him as being the holder of 338 shares prior to their transfer to Racken on 26 January 2006. 258 Richmond produced a schedule of shareholders in Laserbond Marketing and the number of shares and options in HVOF to which each such shareholder in Laserbond Marketing would be entitled on the float. One of the shareholders listed was "Global 02". Shaneel Khan deposed that that was a business name which belonged to him. I do not accept the submission for Racken that in cross-examination Shaneel Khan accepted that the shares were in fact issued to him. Rather, he said that that was what the document produced by Richmond showed. It appears to me that I should act on the basis of the register of members of the company which records Sultan Khan as being the member holding 338 shares. 259 There was no dispute that the shares were issued as a result of Shaneel Khan's work for Laserbond Marketing and that, prior to their issue, Shaneel Khan was entitled to direct to whom the shares would be issued. He said that he directed that the shares be issued to his father as a repayment for free ongoing board that his parents had provided him in 2003 and 2004, for loans that they had made to him, and for ongoing support which they had given him in relation to a number of unsuccessful business ventures. Sultan Khan gave evidence to like effect. He said that the shares were provided to him as a gift (T341). 260 Richmond gave evidence that in January 2004, Shaneel Khan asked him and Kelly to "please issue my shares in the name of my brother Sherjeel Khan as I am concerned that investors, licensees or franchisees in previous companies I was involved with may try and bankrupt me." Richmond says that Shaneel Khan later told the board "I would prefer my shares to be in my father's name than my brother's. Please transfer them." The fact that Shaneel Khan felt able to direct the transfer of shares of which his brother was the legal owner, and that his brother apparently made no objection to that course, is consistent with Shaneel Khan's being the beneficial owner of the 66 shares registered in Sherjeel Khan's name prior to their "transfer" (or their being cancelled and reissued) to Sultan Khan. 261 There is no direct evidence contradicting that of Shaneel Khan and Sultan Khan that the shares were issued in the name of Sultan Khan as a gift. However, neither was a witness of credit. There are strong inferences that Sultan Khan held the shares for Shaneel Khan. 262 At first blush, Racken's contention that Shaneel Khan wanted to keep the shares out of the reach of creditors would suggest that Shaneel Khan intended to make a gift of the shares to his father. Otherwise the transfer of shares into his father's name would not be effective. However, that is too simplistic an approach. It could equally be said that Shaneel Khan intended only to present to creditors the appearance that the shares were owned by his father when that was not the fact. I can more readily draw that inference from the fact that Shaneel Khan retained the power to dispose of the 66 shares issued to his brother. 263 There is no presumption of advancement. The presumption of resulting trust is not lightly rebutted (Shephard v Cartwright [1955] AC 431 at 445; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; Brown v Brown (1993) 31 NSWLR 582 at 596). 264 The decisive consideration is the way in which Sultan Khan permitted Shaneel Khan to deal with the shares in August 2005. I have already explained (at [154]-[157] why I have concluded that Sultan Khan authorised Shaneel Khan to deal with the shares as he saw fit. Those considerations are more consistent with Sultan and Shaneel Khan regarding Shaneel Khan as being the owner of the shares, than they are with Sultan Khan regarding himself as being the owner. If Sultan and Shaneel Khan understood that the shares indeed belonged to Sultan Khan, one would expect that something more would occur than Sultan Khan simply being told that the deal to sell the shares had been done. Sultan Khan refused to give a responsive answer to the question of what he thought he had got for selling his shares, except to say that if the shares were sold then the money would go to the company to pick up the business. He said that he did not get anything in return (T346). It appears to me that that is consistent with his not regarding himself as being the beneficial owner of the shares. He was not looking to derive any benefit for himself. He did not ask to see any share sale agreement or share transfer. Nor did he sign any such document (T346-347). Shaneel Khan did not tell him that he, Shaneel, had signed any document (T347). Although he did not directly answer the question about it, Sultan Khan did not ask whether there was such a document. 265 I do not accept Shaneel Khan's and Sultan Khan's evidence that the Laserbond Marketing shares were issued in the name of Sultan Khan as a gift. I conclude that the presumption of a resulting trust is not rebutted and that the shares were held by Sultan Khan on trust for Shaneel Khan. Sultan Khan had no active duties as holder of the shares. The trust was a bare trust (Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 281 and see also Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 650-652; ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] ATC 4,697 at 4,751-4,755 [275]-[295]; (2003) 12 BPR 22,941 at 22,951-22,954 [275]-[295]). 266 Shaneel Khan is estopped from denying that his signature (albeit a signature in the name of his father) is effective to deal with the shares in Laserbond Marketing which he beneficially owns. By signing the Agreement for the Provision of Finance in his parents' names, Shaneel Khan induced Richmond to tell McCracken that the agreement had been signed. Hence, he induced McCracken to assume that Sultan Khan and Sophie Khan were bound by the agreement, including by having given mortgages over their shares. By reason of that assumption, Racken acted to its detriment by paying $250,000 into Oxyman's account. Having induced that assumption, it would be unconscientious for Shaneel Khan to depart from it, by denying the validity of the mortgage over the Laserbond Marketing shares of which Sultan Khan is the legal owner (Grundt v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641 at 674-676; The Commonwealth v Verwayen (1990) 170 CLR 394 at 444-445). 267 There is nothing in Racken's conduct which would prevent such an estoppel arising. Whilst Shaneel Khan denied that he understood the terms of the Agreement for Provision of Finance, I have not accepted that denial. In any event, Racken did not contribute to any lack of understanding of the substance of the agreement which Shaneel Khan may have had. 268 Although I was referred to no authority on the point, it seems to me that Sultan Khan is bound by the estoppel which binds Shaneel Khan, having regard to my findings that: (a) Shaneel Khan had actual authority to deal with the shares on his father's behalf; (b) the estoppel is as to a matter within the scope of the agency; and (c) to the extent it is relevant, the shares are held by Sultan Khan on a bare trust for Shaneel Khan. 269 Even though I have concluded that the Agreement for Provision of Finance is not binding on Sultan Khan and Sophie Khan because it was beyond the authority of Shaneel Khan to sign it, and because it contained no distinct and severable transaction within the scope of his authority, it does not follow that an estoppel arising from the representation made by Shaneel Khan through his act of signing may not be binding on them to the extent that Shaneel Khan induced an assumption by Racken on a matter about which he had authority to make representations. A principal is bound by an estoppel arising from a representation made by his agent in the course of the agency (Spencer, Bower & Turner, Estoppel by Representation, 3rd ed (1977) London, Butterworths at [125]). Shaneel Khan's act of signing the agreement was a representation to Richmond, amongst other things, that he could bind his parents to the mortgage over the shares contained in the agreement. Such a representation was within the scope of his authority to deal with the shares. Sultan Khan has no interest in the shares which might permit him conscientiously to deny that the agreement is effective to create a mortgage over the shares, as Racken assumed it did. Sultan Khan's only interest is as a bare trustee required to hold the shares for Shaneel Khan. Although Shaneel Khan went further than his authority allowed, I consider that his implied representation that he could mortgage the shares on behalf of his father was as to a matter within the scope of his authority and the estoppel arising from it precludes Sultan Khan from denying the validity of the mortgage. 270 That does not make Sultan Khan or Sophie Khan personally liable under the Agreement for Provision of Finance. The mortgage Sultan Khan is precluded from denying only secures such debts and liabilities as are owed to Racken under the Agreement for Provision of Finance. It does not extend anyone's personal liability to Racken. There is no inconsistency between the conclusion that Sultan Khan is not a party to the Agreement for Provision of Finance because in signing the agreement Shaneel Khan acted beyond his authority, and my conclusion that Sultan Khan is estopped from denying that the shares held by him in Laserbond Marketing secure debts and liabilities of those who are liable under the agreement. The plea of estoppel acknowledges that the contract is not binding, but precludes Sultan Khan from taking that point in this particular respect. 271 No wider estoppel in relation to Sultan Khan's 338 shares in Laserbond Marketing was pleaded or argued. Unjust Contracts and Unconscionable Conduct 272 No claim arises under the Contracts Review Act as neither Sultan Khan nor Sophie Khan is a party to the Agreement for Provision of Finance. That position is not affected by my conclusion that Sultan Khan is estopped from denying that the shares in Laserbond Marketing are mortgaged to Racken to secure payment of moneys owed to Racken under the Agreement for Provision of Finance. In any event, he would not be entitled to relief under that Act in relation to the mortgage as there is nothing unjust in that mortgage in the circumstances in which it was made. 273 For the reasons earlier given (at [228]-[230]), none of the defendants engaged in unconscionable conduct in respect of which Sultan Khan or Sophie Khan (or, for that matter, Shaneel Khan, although he was not an active plaintiff) would be entitled to any relief. Conclusion in Relation to the Claim by Sultan Khan and Sophie Khan 274 For these reasons, I conclude that Sultan Khan and Sophie Khan are not bound by the terms of the Agreement for Provision of Finance, except that Sultan Khan is estopped from denying that the 338 shares in Laserbond Marketing held by him prior to their transfer to Racken are mortgaged to Racken to secure payment of moneys owed to Racken under the agreement. There should be declarations to that effect. Recoupment of $62,500 Advanced 275 In final submissions, counsel for Racken submitted that if it were held that the Agreement for Provision of Finance was not binding on Sophie and Sultan Khan, they, or at least Sophie Khan, should be required to repay the sum of $62,500 which was applied in the subscription of shares in Sophie Khan's name in Oxyman, which were then mortgaged to Racken. There was no pleaded claim to this effect. Whilst, prima facie, such a restitutionary claim might well be available as moneys paid for a consideration which wholly failed, prima facie Sophie Khan would have a defence based upon change of position which would defeat a claim for restitution. This would arise from the fact that Oxyman subsequently went into voluntary administration and then liquidation. There was no evidence before me as to the value of the shares in Oxyman and they may well be worthless. As the claim was not pleaded it should not be entertained. Racken's Cross-Claim Against Shaneel Khan 276 Racken pleads that Shaneel Khan represented to it that Sultan and Sophie Khan had executed the agreement or that he had authority to sign the agreement in their names and on their behalf as their agent. That representation is alleged to have been made by his having signed the agreement in their names. It is alleged that it was implicit from the fact that he signed the agreement in their names that he had authority to sign it on their behalf. Racken pleads that it was induced by that representation to enter into the Agreement for Provision of Finance. It is also alleged that Shaneel Khan gave a warranty that he was authorised to enter into the Agreement for Provision of Finance on behalf of Sultan and Sophie Khan and, if it be found that Shaneel Khan was not authorised to sign the agreement on their behalf or to enter into it on their behalf, he breached the warranty of authority. Racken alleges that, in making the implied representation that he had authority to sign the agreement in the names of Sultan and Sophie Khan on their behalf as their agent, Shaneel Khan engaged in conduct in trade or commerce that was misleading or deceptive in contravention of s 42 of the Fair Trading Act 1987 (NSW). 277 McCracken gave evidence in his affidavit that he arranged for the payment of $250,000 to Oxyman after receiving the executed copy of the Agreement for Provision of Finance and noting that it had been signed by Sophie Khan and Sultan Khan, amongst others. However, the position was different. McCracken arranged for the payment of $250,000 to Oxyman on being told by Richmond that the agreement had been signed. Richmond was aware that the agreement had not been signed by Sultan and Sophie Khan but that Shaneel Khan had signed their names. The presentation of the document by Shaneel Khan to Richmond impliedly conveyed a representation by Shaneel Khan that he had his parents' authority to commit them to the transaction. Although Richmond was not Racken's agent, there was a direct causal connection between Shaneel Khan's implied representation that he had authority to commit his parents to the terms of the agreement which he signed and Racken's payment of $250,000. 278 There was no dispute that such conduct was in trade or commerce. It was also misleading because Shaneel Khan did not have his parents' authority to enter into the agreement on their behalf. He only had authority to deal with the shares in Oxyman and Laserbond Marketing of which they were the holders. Had Shaneel Khan not signed the Agreement for Provision of Finance, Racken would not have made the advance of $250,000 on 5 August 2005. Had Shaneel Khan disclosed the true limits of his authority, the advance would not have been made unless and until Sultan and Sophie Khan signed the agreement. McCracken deposed that, had he known that Sultan Khan and Sophie Khan had not signed the agreement, he would have taken steps to ensure that Racken did not advance any funds pursuant to the agreement unless and until they signed it. I accept that evidence. Notwithstanding that Richmond was not acting as Racken's agent, there is a sufficient causal connection between Shaneel Khan's implied representation to Richmond that he had authority of his parents to sign on their behalf, and Racken's advance of $250,000, to satisfy the requirement of s 68(1) of the Fair Trading Act that Racken's loss or damage be suffered "by" conduct of Shaneel Khan that was in contravention of s 42 (Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 at 538 [115]-[116], 539 [123]; Hoath v Connect Internet Services Pty Ltd (2006) 229 ALR 566 at 591-592 [109]). What is the Measure of Damages? 279 The damage suffered by the representation is not the $250,000 advanced. In return for the advance of $250,000, Racken received promises from Richmond, Kelly, Zanshin and HOD about whose enforceability there is no dispute. It also received security for the performance of those promises including repayment of the advance if the options were not exercised. The value of the rights which Racken obtained from the other parties to the agreement including its securities can be determined in the light of subsequent events (Gould v Vaggelas (1985) 157 CLR 215 at 226, 254-255, 265-266). 280 Racken did not attempt to value its securities or the personal covenants. It was not in a position to do so as it has been restrained from enforcing the securities provided by Barry Andrews and the security provided by Sultan Khan was also in dispute. Its cross-claim against Shaneel Khan only arose following the plaintiffs being given leave to withdraw their admission that the Agreement for Provision of Finance had been signed by Sultan and Sophie Khan. It would be unfair for Racken to fail in its damages claim against Shaneel Khan because it had not adduced evidence as to the amount of its loss. The appropriate remedy for the claim for misleading and deceptive conduct against Shaneel Khan is a declaration that Shaneel Khan engaged in conduct in trade or commerce that was misleading or deceptive by representing that he had his parents' authority to sign the Agreement for Provision of Finance so as to bind them, and to stand over the assessment of damages. 281 I do not consider that any different measure of damages applies in respect of the claim for damages for breach of warranty of authority. The prima facie measure of damages against an agent who breaches his warranty of authority is the amount that could have been recovered by way of debt or damages from the principal, had the agent had the authority of his principal to enter into the contract, together with the costs and expenses incurred in respect of legal proceedings reasonably taken against the purported principal to enforce the contract (Bowstead & Reynolds on Agency, 18th ed (2006) London, Sweet & Maxwell at [9-074]). The prima facie measure of damages for breach of warranty of authority is inapplicable in the present case where Racken obtained the benefit of choses in action against third parties which may be valuable, notwithstanding the absence of authority for Shaneel Khan to bind his parents. The prima facie measure can also be displaced if it is shown that the purported principal is in any event insolvent, so that the plaintiff would not have recovered under the contract with the purported principal (Bowstead & Reynolds at [9-076]). That may be the position in this case because Sultan Khan deposed that neither he nor his wife were able to pay back $250,000 and interest. No submissions were made about this. If the measure of damages is tortious, it is arguable that Racken would be entitled to more than nominal damages if it fails to recover its advance and interest, even if Sultan Khan and Sophie Khan are insolvent. Those questions can be determined, if necessary, on an application to assess damages. Outcome of Proceedings 282 In summary, all of the claims of Barry Andrews should be dismissed save for the relief to be provided under the Contracts Review Act referred to at paras [217] above. 283 A declaration should be made that Sultan Khan is estopped from denying the validity of the mortgage created by clause 9.8 of the Agreement for Provision of Finance, and clauses 9.12–9.21 and 16.1, insofar as those clauses apply to the mortgage created by clause 9.8, but only insofar as the mortgage secures payment of moneys owed to Racken by parties who are personally liable to Racken under the agreement. A declaration should be made that the Agreement for Provision of Finance is not binding on Sultan Khan or Sophie Khan. The other claims of Sultan Khan and Sophie Khan should be dismissed. 284 Racken is entitled to judgment against Richmond, Kelly, Zanshin and HOD. They did not contest their liability to Racken. Racken is not entitled to judgment for the claimed debt from Barry Andrews, Sophie Khan or Sultan Khan. It is entitled to a declaration that Shaneel Khan engaged in trade or commerce in misleading and deceptive conduct by misrepresenting his authority to sign the Agreement for Provision of Finance in the names of Sophie Khan and Sultan Khan. It is entitled to such damages as it may prove for Shaneel Khan's breach of s 42 of the Fair Trading Act and for breach of warranty of authority. The assessment of damages should stand over. Orders 285 I propose the following orders to give effect to these reasons. Claim of First Plaintiff 1. Declare pursuant to subs 7(1)(b) of the Contracts Review Act that the Agreement for Provision of Finance entered into by the first and second plaintiffs, and by the first and third to eighth defendants, and purportedly entered into by the fourth and fifth plaintiffs, on 5 August 2005, being exhibit K in these proceedings ("the Agreement for Provision of Finance") is void as against the first plaintiff in so far as it imposes personal obligations on him, and is binding on the first plaintiff only in so far as order 4 below gives effect to its terms. 2. Order pursuant to s 8 of the Contracts Review Act that the first defendant (Racken Pty Ltd) re-transfer 1,030 shares in the sixth defendant (Laserbond Marketing Pty Ltd) to the first plaintiff. 3. Order that the first defendant account to the first plaintiff for any dividends paid on the shares re-transferred pursuant to order 2. 4. Order pursuant to subs 7(1)(c) of the Contracts Review Act varying the Agreement for Provision of Finance as from the time when it was made to provide that: (a) in the event of default of parties owing personal obligations to the first defendant, the first defendant may exercise its power of sale as mortgagee of 224 shares in the sixth defendant transferred by the first plaintiff to it to secure repayment of moneys owing to it under the agreement; (b) if the first defendant exercises its power of sale over the said 224 shares, it may retain from the proceeds of sale $62,500 plus interest calculated in accordance with the Agreement for Provision of Finance on that sum, and shall account to the first plaintiff for the balance, if any, of such proceeds; (c) the first plaintiff may redeem the said 224 shares on payment to the first defendant of $62,500 plus interest on that sum calculated in accordance with the Agreement for Provision of Finance; (d) if the first defendant exercises the Laserbond Call Option (as defined in the Agreement for Provision of Finance) before the said 224 shares are sold in the exercise of the first defendant's power of sale, or before such shares are redeemed, the first defendant is entitled to exercise any rights which may be attached to the said 224 shares, or otherwise to deal with the said shares, as may be required to take up such number of shares in Laserbond Ltd (as defined in the Agreement for Provision of Finance) to which the holder of 224 shares in the sixth defendant may be entitled; and (e) if the first defendant exercises its Laserbond Call Option and deals with the said 224 shares in the sixth defendant pursuant to the preceding sub-paragraph, then, upon the completion of its exercise of such option, the first defendant shall re-transfer the said 224 shares in the sixth defendant to the first plaintiff, unless to do so would be inconsistent with the terms on which it was entitled to take up shares in Laserbond Ltd following exercise of the option. 5. Order that the claims of the first plaintiff against the first defendant be otherwise dismissed. 6. Order that the claims of the first defendant against the first plaintiff pursuant to the first defendant's further amended interlocutory process be otherwise dismissed. 7. Judgment for the second to eighth defendants on the first plaintiff's claims. Claim of Third Plaintiff (Shaneel Khan) 8. Grant leave to the third plaintiff to discontinue his proceedings with no order as to costs. Claim of Fourth and Fifth Plaintiffs (Sophie Khan and Sultan Khan) 9. Declare that the fourth and fifth plaintiffs are not bound by the Agreement for Provision of Finance. 10. Declare that the fifth plaintiff is estopped from denying that the 338 shares held by him in the sixth defendant prior to their transfer to the first defendant are mortgaged to the first defendant to secure payment of moneys owed to the first defendant under the Agreement for Provision of Finance by parties having personal obligations to the first defendant thereunder, and otherwise on the terms of the Agreement for Provision of Finance insofar as they regulate the said mortgage. 11. Declare that the first defendant is entitled to exercise its power of sale of the 338 shares held by the fifth plaintiff in the sixth defendant and purportedly mortgaged by him to the first defendant. 12. Order that the claims of the fourth and fifth plaintiffs against the first defendant be otherwise dismissed. 13. Order that the claims of the first defendant against the fourth and fifth plaintiffs in the first defendant's further amended interlocutory process be otherwise dismissed. 14. Judgment for the second to eighth defendants on the claims of the fourth and fifth plaintiffs. Claims of First Defendant (Racken Pty Ltd) Against the Third, Fourth, Seventh and Eighth Defendants 15. Declaration in accordance with paragraph 1 of the further amended interlocutory process that as between the first defendant and the third, fourth, seventh and eighth defendants, the Agreement for Provision of Finance is valid and effective. 16. Verdict and judgment for the first defendant against the third, fourth, seventh and eighth defendants for: (a) $250,000; and (b) Interest at the rate of 9% per annum, calculated daily from 8 August 2005 until the date on which the Principal Sum is repaid in full (and compounded monthly), in accordance with clause 3.2 of the Agreement for Provision of Finance. First Defendant's Claim Against the Third Plaintiff (Shaneel Khan) 17. Declare that the third plaintiff engaged in trade or commerce in misleading or deceptive conduct by misrepresenting his authority to sign the Agreement for Provision of Finance in the names of the fourth and fifth plaintiffs, in contravention of s 42 of the Fair Trading Act 1987 (NSW). 18. Declare that the third plaintiff is liable to the first defendant for loss suffered by the first defendant by conduct of the third plaintiff in contravention of s 42 of the Fair Trading Act and in breach of the third plaintiff's warranty of authority. 19. Order that the assessment of damages against the third plaintiff be determined separately and after the determination of the other issues in the proceedings. 20. Reserve liberty to the first defendant to apply in respect of the assessment of damages against the third plaintiff. Proceedings Generally 21. In relation to the orders under the Contracts Review Act, reserve proceedings for further consideration and grant liberty to apply. 286 I will stand over the proceedings to a convenient time to allow counsel to consider the form of these proposed declarations and orders and to make submissions as to whether any other declarations or orders should be made consistently with these reasons. I have not proposed any declarations or orders in relation to shares in Oxyman as the parties do not appear to regard these as having any value. However, if counsel propose orders in relation to the Oxyman shares, I will hear submissions on that. 287 At that time, I will also deal with questions of costs. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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