Supreme Court New South Wales Medium Neutral Citation: Osborne Metal Industries v Bullock (No.4) [2011] NSWSC 674 Hearing dates: 20/06/2011, 21/06/2011, 22/06/2011, 23/06/2011 and 24/06/2011 Decision date: 24 June 2011 Jurisdiction: Equity - Commercial List Before: McDougall J Decision: First plaintiff succeeds against first defendant. Defendants otherwise succeed. Parties to bring in short minutes of order. Costs reserved. Catchwords: TRADE PRACTICES - misleading or deceptive conduct - whether misleading statement in financial records - whether any misrepresentation induced plaintiffs to act - reliance - question of fact. RESTITUTION - money had received - whether agreement for retention of funds - whether estoppel defence by reason of change of position. Cases Cited: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 Category: Principal judgment Parties: Osborne Metal Industries (NSW) Pty Ltd ACN 003 284 928 (First Plaintiff) Brooker Holdings Pty Limited ACN 003 912 258 (Second Plaintiff) Bullock MFG Pty Ltd ACN 001 199 677 (First Defendant) Roy James Jackson (Second Defendant) Rodney John Jackson (Third Defendant) Representation: Counsel: D B Studdy SC / J H Stephenson (Plaintiffs) F C Corsaro SC / J J Young (Defendants) Solicitors: Watson Mangioni Lawyers Pty Limited (Plaintiffs) Bundock / Palmer Laywers (Defendants) File Number(s): 2009/298671 Judgment - (ex tempore) 1. HIS HONOUR: The dispute between the parties relates to an agreement for sale of shares made on 5 July 2004 and completed by transfer on 14 July 2004. The subject shares were held by the first defendant (Bullock) in the capital of the first plaintiff (Osborne). The agreement was made between Bullock and the second plaintiff (Brooker). 2. There are in essence three claims. It is convenient to call the first claim the misrepresentation claim. Brooker complains that, before the agreement was made on 5 July 2004, it received a copy of the financial statements of Osborne for the year ended 30 June 2004. It is convenient to call those financial statements "version 1". Brooker alleges that version 1 was misleading or deceptive because it omitted an amount in excess of $101,000, being a provision for an employee redundancy payment, which had a material impact on the before tax and after tax earnings. 3. It is convenient to call the second claim the net receivables claim. It is common ground that, on and from 1 July 2004, (which I should have said was the effective date of the agreement notwithstanding that it was made and settled later), Bullock continued to collect the receivables of Osborne outstanding as at 30 June 2004, paid Osborne's creditors as at 30 June 2004 from those receivables, and kept the balance of the "net receivables", for itself. 4. It is convenient to call the third claim the employee entitlements claim. The plaintiffs allege that a Mr Chris Thomas had been employed, both before and after 30 June 2004, as Osborne's factory manager. The plaintiffs allege that as at 30 June 2004, a substantial provision, of the order of $38,000, should have been made for Mr Thomas' accrued entitlements for long service leave and the like. The plaintiffs claim that version 1 was misleading or deceptive because it omitted to make such a provision. They say that they reached an agreement with Bullock that if Bullock paid the amount in question, the plaintiffs would take no action over what they said was this misleading or deceptive aspect of version 1. THE REAL ISSUES 1. The parties agreed on the real issues in dispute. I set them out: 1. Whether the First Defendant ("Bullock") provided to the Second Plaintiff ("Brooker") the First Version of the Osborne Financial Statements (as defined) between 1 and 5 July 2004. 2. Whether the First and/or Second Defendants ("Roy Jackson") thereby represented to Brooker that the First Plaintiff ("Osborne")'s operating profit before income tax for the year ended 30 June 204 was $350,740. 3. Whether Brooker relied upon the representation in agreeing to purchase the share capital of Osborne. 4. Whether the representation was false and misleading such that Bullock was in breach of s.52 of the Trade Practices Act 1974 (Cth) ("the TPA") and/or s. 42 of the Fair Trading Act 1987 (NSW) ("the FTA"). 5. Whether Roy Jackson was thereby in breach of s.42 of the FTA. 6. Whether Roy Jackson aided, abetted, counselled or procured or was knowingly concerned in the breaches within the meaning of s.75B(1) of the TPA and/or s.61 of the FTA. 7. If so, whether, Brooker has suffered loss and damage thereby and, if so, the measure of it. The receivables claim 8. The terms of the agreement, if relevant, whereby the shares in Osborne were transferred from Bullock to Brooker, in particular, in relation to the treatment of the receivables of Osborne ("the Osborne Receivables") and whether Bullock was entitled to retain them. 9. Whether Bullock is liable to account to Osborne for the Osborne Receivables as Osborne's agent. 10. Whether Roy Jackson and/or the Third Defendant ("Rod Jackson") are liable to account for the Osborne Receivables as having "knowingly participated" in Bullock's breach of duty as agent. 11. Whether Bullock is liable to account to Osborne for the Osborne Receivables on the principle of unjust enrichment. 12. Whether Bullock is liable to account to Osborne for the Osborne Receivables on the common money count of money had and received. 13. Whether Roy Jackson breached his duty as a director of Osborne in failing to ensure that Bullock accounted to Osborne for the Osborne Receivables. 14. Whether Rod Jackson breached his duty as a director of Osborne in failing to ensure that Bullock accounted to Osborne for the Osborne Receivables. 15. Whether Osborne is, if otherwise entitled, estopped from asserting an entitlement to the Osborne Receivables. 16. Whether any liability of Roy Jackson and/or Rod Jackson to Osborne should be reduced having regard to the commensurate liability of David Christie and Robert Borsak also as directors of Osborne and Bullock. The contract claim 17. Whether there was an oral contract between Brooker and Bullock in or about July/August 2004 whereby Brooker agreed not to claim against Bullock in respect of non-disclosure of Mr Chris Thomas' employee entitlements in Osborne's accounts in consideration of Bullock paying to Osborne $38,533.37. 1. On the view of the facts and legal issues to which I have come, it is not necessary to deal in detail with each and every one of those issues. Nonetheless, I am grateful to counsel for preparing the statement of agreed issues, because it has guided my consideration and analysis of the three claims. PARTIES AND PERSONNEL 1. Up until 30 June 2004, Osborne was in substance a wholly owned subsidiary of Bullock. (I leave aside the fact that Bullock's holding or ultimate holding company, Jackson International Pty Ltd, held one of the 176,002 shares on issue in the capital of Osborne.) 2. At all relevant times, the directors of Osborne were Messrs Robert Borsak, David Christie, Roy Jackson, and Rod Jackson. Since, from the defendants' perspective, Mr Roy Jackson is the principal actor and witness, I will refer to him in these reasons simply as "Mr Jackson". When it is necessary to refer to Mr Rod Jackson, I shall so call him. 3. Brooker is now controlled by Messrs Borsak and Christie, and interests associated with them. At the time of sale, what might be called the Jackson interests (including Bullock) held about 45 per cent of the issued shares in the capital of Brooker. 4. At all material times, up until about 2007, the directors of Brooker were Messrs Borsak, Christie, Jackson and Rod Jackson; and in addition, Messrs Allen Rennie and Robert Leslie. 5. Bullock is a part of Mr Jackson's empire of companies. At the time the sale agreement was made and settled, its directors were Messrs Borsak, Christie, Jackson and Rod Jackson, together with Mr Michael Hennessey. Mr Hennessey was then employed by Bullock as its accounts manager. CREDIBILITY 1. There were many conflicts in the evidence. To a large extent, resolution of the issues depends on acceptance of the evidence given in relation to the underlying events by one side or the other. I say that because, once the facts are sorted out, there is no difficulty in identifying and applying the relevant legal principles. 2. For the plaintiffs, the principal witnesses of fact were Messrs Borsak and Christie. For the defendants, the principal witness of fact was, as I have indicated, Mr Jackson. 3. In addition, Ms Christina Ralph gave factual evidence for the plaintiffs and Messrs Rod Jackson and Hennessey gave factual evidence for the defendants. 4. There was also expert evidence, including evidence of forensic document analysis performed by a Mr Stephen Dubedat (on which the defendants relied) and accounting evidence. I said at the time when Mr Dubedat's report was tendered (and it was tendered without objection) that it added nothing to the store of human knowledge relevant to this case. I remain of that opinion. 5. In addition, each side called an accountant to give expert evidence. Those accountants substantially agreed on many of the issues, and left a small core of matters to be determined which, they suggested, required the court to make findings of fact. Since, on the view to which I have come, the accounting evidence is irrelevant, it is unnecessary to consider such matters of dispute as remained between them. 6. Returning to the evidence of fact: there was no attack made on the credibility of Ms Ralph, Mr Rod Jackson or Mr Hennessey. I accept each of them as a witness of truth who did her or his best to give honest and accurate evidence. In Mr Rod Jackson's case, it was clear that he had no real recall of relevant events. Thus, accepting him as a witness of truth does little to advance the defendants' case. By contrast, Ms Ralph and Mr Hennessey did appear to have a good recall of the particular events to which their evidence was directed. I accept their evidence as reliable and persuasive. 7. Unfortunately, I cannot say the same about Messrs Borsak, Christie and Jackson. In my view, the evidence of each was heavily coloured by perceptions of advantage and self-interest. The evidence of Messrs Borsak and Jackson in particular was replete with self-serving, non-responsive and argumentative answers. Each sought to foist on cross-examining counsel material that, whilst it had no relevance to the question asked, nonetheless was clearly perceived by the witness to be something that would advance his side's case. Each, in my view, acted as an advocate. I have no confidence in the reliability of the evidence given by either of those gentlemen except where it finds support from other, acceptable evidence, or is in accord with what I regard as the probabilities objectively ascertained, or is against interest. 8. It is necessary to note that Mr Jackson was severely ill at the time he gave evidence and I have no doubt that his general temperament, and outlook on life, were adversely affected by his physical condition. But that does not in my view explain the characteristics of his evidence to which I have referred. It seemed to me that Mr Jackson was a man who had been used to getting his own way all his active business life, and who did not see any reason to change his approach simply because he was giving evidence. 9. Mr Christie's evidence too was marked by the qualities that I have just ascribed to the evidence of Messrs Borsak and Jackson. I did not include him in my remarks about those gentlemen simply because those qualities were slightly less manifest in Mr Christie's evidence than they were in the evidence of Messrs Borsak and Jackson. Nonetheless, those aspects of Mr Christie's evidence give me no confidence at all in its overall reliability; and in case it is not clear, I should make it plain that in my view he too gave his evidence with an eye to what he saw to be an advancement to the plaintiffs' case. 10. There is a further problem with the evidence of Messrs Borsak and Christie. As I find in relation to the misrepresentation case, Mr Hennessey's evidence shows clearly that the financial statements of Osborne for the year ended 30 June 2004 had not been prepared until 9 July 2004 at the earliest. Yet each of Messrs Borsak and Christie swore, and maintained in the face of detailed and forceful cross-examination, that he had received and reviewed (Mr Borsak) or annotated (Mr Christie) a copy of version 1 on 1 or 2 July, or 5 July at the latest, 2004. 11. This is not a case where there is some genuine reason to think that both sides of the story could be mistaken, so that there may be some mid-ground between the conflicting evidence, or possibility of honest error. Accepting as I do the evidence of Mr Hennessey (and I note that it was supported by contemporaneous documents, and that Mr Studdy SC, who appeared with Mr Jamie Stephenson of counsel for the plaintiffs, disclaimed any attack on Mr Hennessey's honesty), I am forced to conclude that this aspect of the evidence of Messrs Borsak and Christie was knowingly untrue, and not merely mistaken. I regard this as a most formidable obstacle to acceptance of any other contentious aspect of their evidence. THE MISREPRESENTATION CLAIM: ISSUES 1-7 1. As I have said, the essence of this claim is that version 1 was incorrect, and misleading or deceptive, because it excluded an amount in excess of $101,000 which is said to have been a redundancy provision. Thus the plaintiffs allege, earnings and after tax profit were misstated. 2. Another version of Osborne's accounts for the year ended 30 June 2004, not surprisingly known in the jargon of this case as version 2, did contain the provision to which I have referred, and the flow-on effects of the recording of that provision were obvious in version 2. 3. Somewhat curiously, both version 1 and version 2 were said to have been resolved be the board of Osborne to be correct, and were signed by Mr Jackson accordingly. I did not regard as convincing Mr Jackson's attempts to explain how (as he maintained) both versions could be correct. 4. Mr Christie said that he received a copy of version 1, either from Mr Jackson or from Mr Hennessey, on 1 July 2004, and annotated it accordingly. Each of Messrs Jackson and Hennessey denied having giving version 1 to Mr Christie at that time. 5. Mr Christie said that he discussed version 1 with Mr Borsak on 1 or 2 July, and that Mr Borsak analysed the information contained in version 1. 6. Mr Borsak said in his affidavit that Mr Jackson "provided" him with a copy of version 1 at some time between 1 and 5 July 2004. Mr Jackson denied having done so. In cross-examination, Mr Borsak fastened on 5 July 2004 (a Monday) as the date of provision to him of version 1. 7. Mr Hennessey's evidence which as I have said I accept as truthful and reliable, is fatal to the misrepresentation claim. Mr Hennessey was responsible for preparation of Osborne's financial statements for the year ended 30 June 2004. He said that before he could complete the document, he required information as to sales, payments and the like for the month of June, and other information. Mr Hennessey said that he received that information in instalments from Ms Ralph between 1 and 9 July 2004. Ms Ralph confirmed that she provided this material to Mr Hennessey. That is why Mr Hennessey was able to say, and why I accept, that he could not have prepared either version of the financial statements before 9 July 2004 at the earliest. In fact, Mr Hennessey said, and I accept, it was his recollection that version 1 was not produced until 14 July 2004. 8. Mr Studdy strove valiantly to get Mr Hennessey to agree that he might have been given orally details of invoices, payments and the like prior to 9 July, either from Ms Ralph or from Mr Thomas. Mr Hennessey did not accept this, and neither do I. For one thing, although the plaintiffs called Ms Ralph, she gave no evidence of having done so. Mr Studdy did not ask her whether or not she had done so. I draw the obvious inference from that failure to ask the necessary questions. See Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419. 9. Mr Studdy sought to rely on a contrary " Jones v Dunkel " inference based on what he said was the failure of the defendants to call Mr Thomas. He said that Mr Thomas now works for Bullock. But in circumstances where the need to call Mr Thomas became apparent (if it did) only during the cross-examination of Mr Hennessey, I do not propose to draw that inference. It might have been different if, for example, Ms Ralph had said in her affidavit that both she and Mr Thomas provided information orally to Mr Hennessey to enable him to prepare Osborne's financial statements. 10. It follows that the misrepresentation claim fails because I do not accept that Messrs Borsak and Christie had received, studied or relied upon version 1 at any time before they caused Brooker to agree to buy the issued shares in Osborne. On the contrary, accepting as I do Mr Hennessey's evidence, I conclude that they could not have received version 1 until 14 July 2004 (the date of settlement) at the earliest. 11. Since it was not suggested that Messrs Borsak and Christie (or either of them) obtained version 1 after 5 July but before settlement on 14 July, there is no need to speculate on what they might have done in that hypothetical circumstance. 12. There is another reason why the misrepresentation claim must fail even if, contrary to my finding, Messrs Borsak and Christie had received and studied version 1 before making the agreement on 5 July 2004. There is no acceptable evidence that version 1 was incorrect. I accept that Mr Jackson said that version 2 was the "correct" version of Osborne's financial statements for the year in question, and agreed that it was version 2 that had been consolidated into Bullock's accounts as at 30 June 2004. But his reasons for saying so make no sense. On the contrary, as both Messrs Borsak and Christie accepted, there was not, as at 30 June 2004, any proposal for the restructure of Osborne's business whereby any employee would or might become redundant. Nor was there any contemplation that any employee would or might become redundant, nor reason to think that this could be so. To the extent that it matters, there was no redundancy for some period of years after 30 June 2004, although I acknowledge that the relevance of this consideration is limited. At most, it goes to bolster the evidence on this topic to which I have referred. There was thus nothing to justify or require raising the provision and, on the evidence, version 1 was correct as it stood. THE NET RECEIVABLES CLAIMS: ISSUES 8-16 1. The factual genesis of this claim is found in the circumstances to which I have referred, that Osborne was a wholly owned subsidiary of Bullock up until 30 June 2004. Its cash flows were processed through Bullock's bank account. Osborne's receivables were banked into Bullock's bank account, and Osborne's creditors were paid out of it. 2. As at 30 June 2004, there were, in the ordinary way, outstanding receivables and outstanding creditors that had not matured into cash receipts and payments. Such evidence as there is suggests that those outstanding receivables and creditors had been brought to account, as accrued income and liabilities, in the financial statements as at 30 June 2004. The whole reason for Mr Hennessey's requiring the details that he obtained from Ms Ralph was to enable him to accrue those receivables and creditors. 3. The plaintiffs assert that there was an agreement between Messrs Borsak, Christie and Jackson whereby Bullock agreed to continue to collect receivables and pay creditors (in each case up to 30 June 2004), and in due course account to Osborne for the balance. This, the plaintiffs say, Bullock has failed to do, and it is liable accordingly. The plaintiffs say further that Messrs Jackson and Rod Jackson are in breach of their duties as directors of Osborne in failing to cause Bullock so to act; or alternatively are liable as accessories for what the plaintiffs characterise as Bullock's breach of its fiduciary duty as Osborne's agent. 4. At base, the plaintiffs say, the receivables were Osborne's assets. Bullock has collected them and thus holds their value, net of payments. The plaintiffs say that Bullock is liable for the net balance as money had and received to the use of Osborne. They rely on what Gummow J said in Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 at 539 [62] and following. The principle is clear, and there is no need to set out or paraphrase what his Honour said. 5. The defendants too suggest that there was an agreement relating to the collection of receivables. They say that it was made between Bullock and Brooker, and that it was to the effect that Bullock would collect the receivables, pay the creditors, and would be entitled to retain the net balance as its own. Alternatively the defendants rely on an estoppel arising out of an asserted change of position. 6. The amount of the net receivables is agreed to be $574,592. 7. The evidence is confused. Mr Borsak says that the question of receivables was raised during the discussion between him, Mr Christie and Mr Jackson on 5 July 2004, as part of the agreement for purchase of the shares. According to Mr Borsak, this was said on the topic of net receivables (taken from para 21 of Mr Borsak's affidavit of 13 August 2010): Christie: "Okay, we'll pay the $1.4 million. How do you want to handle the receivables?" Jackson: "You can bank the receivables and pay the accounts from July onwards. Most of the old receivables will keep coming into Bullock's account anyway so I'll run off the old debtors and creditors and we can do a reconciliation when they're all in and account to you for the balance." 1. Mr Christie gives a somewhat different account (taken from para 14 of his affidavit of 13 August 2010). 14. At some point later in this conversation, Jackson said words to the following effect: "Bullock will run all the accounts out and collect the cash for the old debtors and pay the old creditors, then there'll be a wash up of the "unders" and "overs" which Mick [Hennessey] will do." 1. Mr Jackson did not set out in his affidavits details of any conversations on the topic. The reason for that became clear in cross-examination. Mr Jackson had no recall of even the substance and effect (far less, the terms) of the relevant conversations. (See generally T172-174 and T178.) Mr Jackson relied on a document purporting to be minutes of a meeting of directors of Bullock held at Rydalmere (in Bullock's premises) on 12 July 2004. Of present relevance, those minutes (using that term "without prejudice") record: ... SHARE SALE: RESOLVED to sell the company's subsidiary, Osborne Metal Industries (NSW) Pty Ltd, to Brooker Holdings Pty Ltd for the sum of $1,400,000.00 secured by the issue of redeemable preference shares of equal value. The sale to take effect as from 30/06/04 but excluded debtors and creditors plus all commercial rights and tooling for the company's air conditioning products. ... 1. There is a real problem in accepting those minutes as reliable. The meeting in question was said to have occurred at Bullock's premises at Rydalmere on 12 July 2004. The minutes record Messrs Jackson, Rod Jackson and Borsak as having attended. But each of those gentlemen agrees that no such meeting took place on that day. Mr Jackson sought to counter this by suggesting that the meeting may in fact have occurred the next day, or "by communication", meaning thereby, I think, a telephone hook-up. Mr Rod Jackson likewise advanced the hypothesis of "by communication". I do not find those suggestions persuasive. They are no more than speculation, not based on any process of actual recollection. Nor can it even be said that they represent some process of restoration of memory based on "known knowns" - facts otherwise established by the evidence. 2. I do not regard the minutes of 12 July 2004 as providing any acceptable evidence of what was agreed, as to the receivables of Osborne, on 5 July 2004 or thereafter. That is partly because of the matters to which I have referred as to its accuracy, and partly because neither Mr Jackson nor Mr Rod Jackson had the slightest trace of recollection of what might have been said, so as to justify what the minutes purport to record. 3. The plaintiffs' records are not free of problems. They propounded as accurate a minute of a meeting of directors of Brooker (excluding Messrs Jackson and Rod Jackson), said to have been held on 5 July 2004 to consider the proposed purchase. Those minutes do not mention the alleged oral agreement as to the collection of receivables and payment of creditors, although both Mr Borsak and Mr Christie would have it that this topic was of sufficient importance as to require express mention in their discussions with Mr Jackson on 5 July 2004. 4. Mr Corsaro SC, who appeared with Mr Justin Young of counsel for the defendants, relied on various documents sent to and written by Mr Christie, or to the plaintiffs' solicitors, in later times. He submitted that, properly viewed and in context, those documents (coupled with the cross-examination of Messrs Borsak and Christie on them) showed that Messrs Borsak and Christie had accepted that there was an agreement of the kind alleged by the defendants. Indeed, Mr Corsaro went further, and submitted that if the position were as the plaintiffs contended, there was no reason for any discussion of receivables at all. Thus, he submitted (although I must say that the logic of the submission escapes me), since it was common ground that there were discussions, it is likely that they were to the effect asserted by the defendants. 5. I do not accept that last submission. Some discussion was necessary, if only to ensure the smooth and orderly transition of Osborne's affairs from being a wholly owned subsidiary of Bullock to being a wholly owned subsidiary of Brooker. There was a system in place for collection of receivables and payment of creditors. Obviously, there would have to be a change of that system from 1 July 2004. Obviously, the details or at least substance of the change would need to be discussed. 6. Mr Corsaro did not submit that, because and to the extent that the receivables and payables had been reflected on an accruals basis in the financial statements of Osborne and thus, on consolidation in the earnings and financial statements of Bullock, there was as a result some independent reason why Bullock should be entitled to the net receivables. As I have said already, I think the better view of the evidence is that the financial statements were prepared on an accruals basis. Certainly, this would be in accordance with my understanding of generally accepted accounting principles. (Whether it is open to me to take advantage of that knowledge in these reasons, where those principles have not been proved, is a different matter.) 7. I return to the various documents on which Mr Corsaro relied. I do not propose to examine them in detail. It is sufficient to say that, if there were some acceptable evidence of the agreement alleged by the defendants, those documents could perhaps be construed as not inconsistent with the existence of such an agreement. But in the absence of such acceptable evidence, the documents go nowhere near proving the agreement relied upon. 8. To show this, it is sufficient to point to two of what Mr Corsaro suggested were key documents. They are Jackson International's letter to Brooker of 5 July 2006 and Brooker's response the following day. I set out the relevant portions: From the Jackson International letter: Hard Cash Flow The analysis from Steve advised the Brooker opening balances for receivables and payables did not include Osborne balances of $739,469 and $164,877 respectively which is correct. He further states the Brooker 2005 Balances did include the above which is an incorrect assumption. The receivables were paid to Bullock Mfg, not Brooker Holdings, and the payables were made in the same manner as these amounts were inclusive in the Consolidated Balance sheet of Bullock Mfg. ... From the Brooker reply: Hard Cash Flow At the outset I think there is amount of confusion relating to the use of the term "Hard Cash Flow". The position of the acquisition of the company Osborne Metal Industries (OMI) as at 1 st July 2004 is clearly understood by all parties. At not time did the net debtors and creditors of OMI move through the books of Brooker. In the statement of Cash Flows for the year ended 30 th June 2005, receipts from customers and payments to suppliers and employees, by the nature of the abovementioned purchase arrangement, did not include any amounts for OMI prior to 1 st July 2004. This fact should have been taken into account in any reconciliation process. 1. It is implausible to construe Bullock's response as anything more than a statement of the factual position as it was then perceived by Mr Christie. It does not amount to an admission of the matters alleged in the Jackson International letter, let alone to an admission of the alleged agreement. 2. There is another piece of evidence that bears on the question of the net receivables. Mr Christie said that he had had a conversation with Mr Hennessey (who was then a director of Bullock) in October 2004. (I interpose that a conversation some months after the transaction might be thought to have more weight than views obscurely expressed in correspondence, at a time when the parties were clearly in dispute, more than 18 months after the transaction). The conversation, Mr Christie said, was to the following effect (taken from para 19 of Mr Christie's affidavit sworn 13 August 2010): 19. In about October 2004, I had a conversation with Michael Hennessey to the following effect: Christie: "What are we doing with the money for the receivables and Chris Thomas' employee entitlements?" Hennessey: "Look, I know the money is due but you know what Roy is like. You'll have to take it up with him. I can't do anything." 1. Mr Hennessey did not deny that he had had such a conversation with Mr Christie. In that circumstance, notwithstanding what I have said as to Mr Christie's credibility (or lack of it) I accept this part of his evidence. It is consistent with the plaintiffs' case, and inconsistent with the defendants' case, on the net receivables claim. 2. Thus, I conclude, Osborne has made good in principle its claim that it is entitled to the net receivables. That leads to the estoppel defence. The detriment relied on is that Bullock paid Osborne's creditors, thus acting to its detriment on the faith of the receipts. But that detriment is remedied, or set at nought, once it is recognised that the claim is limited to the net receivables. 3. There is another, and more basic, reason why the defence fails. The agreement on which Bullock relies is "pleaded" as follows in para 11 of its list response (I omit the prefatory denial): 11. ... The first and second defendants say that: (a) On or about June 2004, Bullock by its directors in accordance with a resolution of its directors, agreed with Brooker to transfer to Brooker its 176,001 ordinary shares in Osborne for valuable consideration ("the Agreement"); (b) It was a term of the Agreement that part of the consideration for the transfer of Osborne shares from Bullock to Brooker referred to in sub-paragraph 11 (a) above was that Bullock would be entitled to take the Receivables payable to Osborne and owing to Osborne as at 30 June 2004; (c) It was a term of the Agreement that Bullock would be liable for payment of creditors payable by Osborne and owing by Osborne as at 30 June 2004, save for any unpaid statutory employment entitlements ("the Creditors"). Particulars to sub-paragraphs 11(a), (b) and (c) above: The Agreement was oral. Conversations to the effect as alleged in sub-paragraphs 11 (a), (b) and (c) above were had in the latter part of the financial year 2003 - 2004, between Mr Roy Jackson, the second defendant, and director of Bullock the first defendant, and each and / or all of Mr Robert Borsak, Mr David Christie, and Mr Peter Elliot who at all material times were each directors of the second plaintiff Brooker as well as being directors of the first defendant Bullock, and in the case of Mr Borsak and Mr Christie, who were at all material times director of the first plaintiff Osborne. Michael Hennessey a director of Bullock, and accountant of Osborne, was aware of the finally agreed terms of the Agreement. (d) Bullock transferred its shares in Osborne to Brooker pursuant to the Agreement by way of written share transfer dated 14 July 2004. (e) Pursuant to the Agreement, Bullock took the Receivables of Osborne, which were paid to it by debtors of Osborne, and paid the creditors of Osborne as at 30 June 2004, accordingly. Some of the Receivables of Osborne may remain unpaid. In the circumstances, the first and second defendants deny that Bullock, on Osborne's behalf, received any monies or receivables from 1 July 2004 as alleged in paragraph 11 of the plaintiff's contentions, and say that the Receivables that Bullock received and took were, at all times, properly payable to, and due to be received by, Bullock. The third defendant does not admit the allegations in paragraph 11. 1. It is not pleaded that Osborne was a party to that agreement. Nor is there any pleading of facts that would show how Osborne might be bound by any such agreement as was pleaded. The evidence falls well short of the pleadings. But even it had made good the pleadings on this point, the problem of want of privity would not disappear. 2. Mr Corsaro sought to counter this problem by submitting that, since the agreement on which the defendants relied was made by Osborne's parent and involved Osborne and its assets, Osborne was somehow bound. He referred to "general principles of corporations law". Mr Corsaro offered no authority in support of this submission: In any event, the submission goes well beyond the pleaded case. I do not accept it. 3. It follows that an agreement of the kind pleaded could offer no defence to Osborne's claim for the net receivables, and that Osborne is entitled to judgment against Bullock in the sum of $574,592 with interest. 4. There was some, although sparse, evidence that it might take 90 to 120 days to run off the receivables and creditors. In those circumstances, interest should run from 1 November 2004. 5. I do not think that the claim against Messrs Jackson and Rod Jackson succeeds. It is fanciful to assert that there was a relationship of agency between Bullock and Osborne. There was an administrative arrangement of the kind that I have described. If there were no agency, there is no other basis shown for any fiduciary relationship. There is thus no breach of fiduciary duty to which Messrs Jackson and Rod Jackson could be accessory. The claim for breach of directors duties was barely articulated and in my view ignores the obvious realities of the situation. The claim that succeeds is, as I have said, one for money had and received. That claim was made against Bullock. Mr Jackson's part, and to the extent that he had any part Mr Rod Jackson's, was no more than acting as the human agency whereby Bullock acted as it did, and failed to act as it should. THE EMPLOYEE ENTITLEMENTS CLAIM: ISSUE 17 1. As I have said the claim is that provision should have been made in Osborne's accounts as at 30 June 2004 for the accrued entitlements of Mr Thomas. Although a provision for employee entitlements was made in Osborne's financial statements (both version 1 and version 2) it seems to be common ground that it did not include any provision for Mr Thomas' entitlements. 2. The plaintiffs asserted that they had agreed with Bullock that if the plaintiffs did not sue in respect of what they alleged was a misleading or deceptive aspect of the financial statements in question, Bullock would pay an amount of about $38,000 on account of those entitlements. 3. A finding that such an agreement was made requires that I accept Mr Borsak's evidence that he had a conversation with Mr Jackson in which the agreement alleged was made. Mr Jackson denied that he had reached any such agreement with Mr Borsak, although he agreed in cross-examination that he now had any recollection of the terms of the conversation. 4. I am not prepared to accept this uncorroborated evidence of Mr Borsak. Further, I regard it as inherently unlikely that Mr Jackson would have agreed to pay the entitlements. His position was that Mr Thomas was as at 30 June 2004, and had been for some time previously, an employee of Bullock Group Pty Ltd (I assume, a company related to Bullock; and for present purposes the two need not be differentiated). Wage and other records were tendered which proved that this was so. Further, Mr Jackson said, Mr Thomas' services were provided by Bullock to Osborne and Osborne was charged an amount to recoup the cost to Bullock of those services. Again, records were tendered which proved that this was so. In those circumstances it is inherently implausible that Mr Jackson would have accepted that Osborne had any liability for Mr Thomas' accrued entitlements as at 30 June 2004, and thus that Bullock had some liability to indemnify Osborne for the failure to make provision for those entitlements in either version 1 or version 2. 5. The records to which I have referred showed that Mr Thomas remained employed by Bullock Group until 31 October 2004 and that Bullock continued to invoice the cost of his services to Osborne up until that date. Thereafter, until his resignation, Mr Thomas was employed by Osborne. 6. I have not overlooked that the plaintiffs suggest that Mr Thomas had been employed by Osborne from about 1981. The evidence of this is sparse, but in any event the evidence is clear that as at 30 June 2004, and indeed for the four preceding financial years at least, Mr Thomas had been employed by Bullock Group. Thus, even if Mr Thomas had transferred employment from Osborne to Bullock Group at some time prior to 1 July 1999, any provision required at that date should have been made then. 7. This claim fails. CONCLUSIONS AND ORDERS 1. There should be judgment for Osborne against Bullock in the sum of $574,592.00 together with interest thereon from 1 November 2004 until the date the judgment takes effect. 2. There should be judgment for Messrs Jackson and Rod Jackson on the plaintiffs' claims. 3. There should be judgment for Bullock on Brooker's claim. 4. I direct the parties to bring in short minutes of order to give effect to these reasons at 10am on 28 June 2011. I will then hear the parties on costs. ********** Subsequent to judgment being delivered, the matter was referred to the Director of Public Prosecutions who commenced a prosecution of Mr Borsak & Mr Christie for perjury but then, in light of evidence not before the trial judge, withdrew that prosecution. Amendments 21 July 2017 - Amendment at the end of judgment. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 July 2017