Supreme Court New South Wales Medium Neutral Citation: Vasilis Floros Moshos v Kenneth Geoffrey French (No.2) [2014] NSWSC 862 Hearing dates: 5-8 May 2014 Decision date: 27 June 2014 Jurisdiction: Equity Division Before: Darke J Decision: No binding contract entered into, or trust created, as alleged by the plaintiff. Separate questions answered accordingly. Catchwords: CONTRACT - formation - oral agreement said to be partly evidenced in writing - binding agreement not established Legislation Cited: Uniform Civil Procedure Rules r 28.2 Cases Cited: Vasilis Floros Moshos v Kenneth Geoffrey French [2014] NSWSC 549 Category: Principal judgment Parties: Vasilis Floros Moshos (plaintiff) Kenneth Geoffrey French (first defendant) Local Appliance Rentals Pty Ltd (second defendant) Representation: Counsel: Mr T M Jucovic QC (plaintiff) Mr M Cashion SC, Mr J Baird (defendants) Solicitors: Kings Law Group (plaintiff) Kosmin & Associates (defendants) File Number(s): 2013/290093 Publication restriction: Nil Judgment Introduction 1The plaintiff (Mr Moshos), by an Amended Statement of Claim, alleges that in about early November 2007 he entered into a binding contract with the first defendant (Mr French). The agreement alleged is to the effect that Mr French would incorporate a company to operate a household goods rental business, all the shares in which would be held by Mr French pending transfer of 50% of the shares to Mr Moshos upon the company obtaining what is described as a Centrepay facility. 2The agreement is alleged to have been made in the course of discussions held between Mr Moshos and Mr French on 31 October 2007 and 5 November 2007. The agreement is said to be partly evidenced in writing by certain emails passing between them on 1 November 2007. Mr French denies that any binding agreement as alleged was reached in the course of the discussions. 3On 7 November 2007 Mr French in fact incorporated a company, Local Appliance Rentals Pty Ltd, which is the second defendant in the proceedings. Mr French became the sole director and the holder of all of the ten issued shares in the company. He remains the owner of those shares. 4Mr Moshos seeks specific performance of the alleged agreement. In particular, orders are sought compelling Mr French to transfer 50% of the shares in the company to Mr Moshos. In the alternative, Mr Moshos seeks a declaration that Mr French holds half of his shareholding on trust for him. Mr Moshos also claims damages for breach of contract, an account in respect of the shareholding held on trust, and equitable damages. Claims for damages and other relief under the Australian Consumer Law are no longer pursued. 5On 28 February 2014, an order was made pursuant to Uniform Civil Procedure Rules r 28.2 "that there be a separate hearing on liability". During the course of the hearing, I ruled that the separate hearing was to determine the following questions: (1)Did the plaintiff and the first defendant enter into a binding contract as alleged, and if so, on what terms? (2)Is the first defendant in breach of any such contract? (3)Was any trust created in respect of the first defendant's shares in the second defendant as alleged, and if so, on what terms? (4)Is the first defendant in breach of any such trust? Background 6Mr Moshos has a Bachelor's Degree in chemical engineering from the University of Newcastle. He is also a licensed migration agent. In about 2000, he commenced working as a salesperson in the area of security systems. By early 2001, he had acquired his own company, Global Security Systems Pty Limited, which operated a business which involved the sale of ADT alarm systems in the Raymond Terrace and Maitland areas. The business was quite successful. Later in 2001, Mr Moshos expanded his business to New Zealand, where he incorporated Global Security Limited. The business of that company was also successful. In mid-2002, he sold his shareholding in the New Zealand company. 7In about late 2002 or early 2003, the ADT dealer program in Australia ceased, with the consequence that Global Security Systems Pty Limited was no longer able to conduct its business of selling ADT security systems. Its operations ceased. 8Later in 2003, Mr Moshos incorporated Hunter Security Group Pty Ltd. That company had a finance facility with a New Zealand company known as Beverage Rentals Pty Limited, whereby finance would be provided to approved customers who purchased security systems. 9In 2004, Hunter Security Group Pty Ltd expanded its business operations to include rent to buy agreements in respect of household goods. In the course of that business, Mr Moshos became aware of the concept of a Centrepay facility. This facility, which is provided by the Commonwealth agency Centrelink, enables payments to be made directly by Centrelink to providers of goods and services to persons who receive Centrelink benefits. In about mid-2004, Hunter Security Group Pty Ltd obtained a Centrepay facility. In effect, such a facility provided the company with an alternative means of enabling its rental customers to meet their rental obligations. It seems that the business of the company became quite successful until a dispute arose with Beverage Rentals Pty Limited which ultimately led to the voluntary administration and then liquidation of the company in late 2006. The company's Centrepay facility was also cancelled in 2006. 10Mr Moshos deposed that he believed that, as a former director of the failed Hunter Security Group Pty Ltd, the prospects of any other company with which he was directly involved obtaining a Centrepay facility would be detrimentally affected. In the course of his cross-examination, he said that applications for Centrepay facilities by companies of which he was a director and shareholder, or shareholder only, had been refused without reasons being given. According to Mr Moshos, from late 2006 to about mid-2007, he had no involvement with any company in the rental goods industry which used a Centrepay facility. He gave evidence that, during that period, he merely operated as a salesperson or consultant for various rental goods companies in different areas of Australia. By November 2007 Mr Moshos was working in such a capacity for companies which included Home Services Group (Qld) Pty Ltd ("Home"), Ben-Rentals (Qld) Pty Ltd ("Ben Rentals"), and a company referred to in evidence only as "Easy Rentals". 11Mr Moshos had by then decided that he wanted to pursue more substantial opportunities in the industry. He believed that the most desirable corporate model would be a rental company which had both a Centrepay facility and the ability to either provide finance itself to rental customers, or obtain finance for such customers through a related entity. Mr Moshos conducted some research concerning finance providers. In the course of that research, he located Mr French, who was then involved with a business known as Direct Lending Group. Mr French also had a business known as Latitude Finance. Mr French operated those businesses with his wife, Ms Megan Perston. She has accounting expertise. By this time Mr French had given some thought to the establishment of a company which would provide finance in relation to a rental business involving the rent of water coolers. Documents adduced in evidence by Mr French suggest that it was envisaged that the clients would enter into rental contracts directly with the company, and the company would then make payments to an outside business or entity that was responsible for the sales work. It was also envisaged that the clients' weekly rental payments would be made to the company through a direct debit system. There is no mention, however, of a Centrepay facility. 12Mr Moshos made contact with Mr French and arrangements were made to meet. Their first meeting took place at Manly, near Brisbane, on 31 October 2007. Discussions between Mr Moshos and Mr French in late October and early November 2007 13Mr Moshos sets out a lengthy account of this meeting in his affidavit sworn on 2 January 2014. According to that account, he told Mr French about the "rent to buy industry" and put forward a suggested business model for a rental business, being a head company with one or two shopfronts and a Centrepay facility, with finance to be provided itself or through a related company. Mr Moshos says that he explained the concept of a Centrepay facility to Mr French who was quite taken with the idea. Mr Moshos says that he told Mr French that there could be difficulties in obtaining a Centrepay facility if Centrelink knew that he was involved with the applicant. 14Mr Moshos' account includes the following: Moshos: "Well, if we do agree on who owns how much of the proposed rental company, we'd set up a company, with you listed as sole director and shareholder initially. When the Centrepay facility comes through, my share of ownership would then be placed as a shareholding on the register. You should still remain as sole director though. Obviously, as a separate issue, there is really no capital injection necessary to start up the business, however, to improve the value of our shares and maybe even receive some wages, we'd both also be working for the company from the outset. Although our efforts would primarily be so we can obtain the Centrepay facility, I would channel customers through the rental company instead of doing consulting and sales for other companies." French: "So, are you suggesting a 50% share each in the rental company?" Moshos: "That's my proposal. I only need to confirm the 50% share issue in the rental company with my brother and cousin, as I'm currently assisting them with consulting and sales with their rental companies and if we do this, their interests would be affected. That's my issue though, anything I agree with them would come out of my share, it wouldn't affect your share." French: "Well Bill, your proposal is a real opportunity. It would give me a 50% share in the rental company with little capital injection needed and I would also receive the flow-on benefits from the finance side. I accept your proposal, however, I do realise that there is nothing binding until you confirm your brother and cousin are fine with the 50% share issue." 15Mr French, in his first affidavit sworn on 19 February 2014, denied that the conversation which occurred on that occasion was to the effect as set out by Mr Moshos. Mr French did not, in that affidavit, set out a detailed account of what was said at the meeting. However, Mr French says that Mr Moshos introduced himself as "Ben from Ben Rentals" and that there was a general discussion about the appliance rental industry during which Mr French informed Mr Moshos that he had a good understanding of the industry and had done a substantial amount of modelling for a rent to buy business. Mr French specifically denied that he said words to the effect of "I accept your proposal". Mr French says that he did say words to the effect of "there is nothing binding". Mr French swore a second affidavit on 29 April 2014. This affidavit does not deal further with the meeting of 31 October 2007. 16Mr Moshos says that following his meeting with Mr French, he discussed the issue of the 50% shareholding with his brother, Antonis Moshos, and his cousin, Georgios Emmanouilidis, and they confirmed "that this was suitable". Mr Moshos gave evidence that his brother and his cousin had shareholding interests in Home and Easy Rentals. 17On 1 November 2007, Mr Moshos sent an email to Mr French the subject line of which was "Share holdings all cool" and was in the following terms: "Monday is fine with all of us, thus far ... and as we discussed the shareholdings are fine with all of us too. I will call you on sunday to discuss times and place etc ..." 18Later on 1 November 2007, Mr French replied in the following terms: "Sounds fine. It might be a good idea to get the guys thinking about names for the business ready for Monday. Talk to you on Sunday. If you can't get me leave a message where we are going to meet and I will be there." 19Mr Moshos responded on the following day with "cool no problems". 20Mr Moshos and Mr French did in fact meet on Monday 5 November 2007. Mr Moshos says that he and Mr French discussed various issues at that meeting including the company name, business name, a Centrepay facility, and the possibility of franchising operations later on. Mr Moshos says that he came up with the suggestion of the name "Local Rentals" and that Mr French agreed that the company would be called Local Rentals Pty Ltd and the business name would be "Local Rentals". Mr Moshos further deposed that at that meeting the following was said: French: "Alright I'll arrange to incorporate it immediately. As agreed, I'll be the sole director and shareholder listed on the register until the Centrepay facility is obtained and then your shareholdings will be shown." Moshos: "That's what we agreed. As soon as the company is registered, I'll create an email address for it." 21Mr Moshos also states that he informed Mr French at the meeting that he should contact a Mr Tighe from Centrelink in Brisbane in order to start the process of applying for a Centrepay facility. 22Mr Moshos' account of the meeting does not mention that there was anyone else in attendance. However, it is clear that other persons were in attendance including Mr Moshos' cousin, Mr Emmanouilidis (who was accompanied by his girlfriend), a man named Sandy (with whom, Mr Moshos says, he was discussing a different business opportunity), and possibly another man named either Ajay or Omar. 23Mr Emmanouilidis swore an affidavit in which he denied that he had any involvement with Ben Rentals, denied that there was any discussion at the meeting in relation to Ben Rentals, and set forth a version of the discussion at the meeting which very closely accords with that given by Mr Moshos. He gave no evidence of any discussion with Mr Moshos on about 31 October 2007 concerning Mr Moshos becoming a shareholder in a new company. 24Mr French states that the meeting was attended by several associates of Mr Moshos who were introduced to him as "Mr Moshos' partners", and whom Mr French believed were Mr Moshos' partners in Ben Rentals. Mr Moshos maintains that he had no involvement in Ben Rentals other than as a provider of sales and consulting services to it. A company extract of Ben-Rentals (Qld) Pty Ltd does not indicate that Mr Moshos was ever a shareholder or office holder in that company. 25Again, Mr French does not set out, in his first affidavit, any detailed account of what was said at the meeting. He does, however, deny the conversation as put forward by Mr Moshos, and also claims that it was in fact he who came up with the name "Local Rentals". Mr French also denied that there was any discussion on that occasion about a Centrepay facility, although this is contradicted by his second affidavit. Mr French provides further detail about the meeting in that affidavit. He deposed that following a general discussion, he said words to the following effect: "I will set up a new company that will be the umbrella company. I have done extensive modelling for similar rental businesses and the funding would be provided on a similar basis." 26Mr French further deposed that he later said words to the following effect: "I am prepared to provide funding for the purchase of your rental goods and also to fund an agent's fee to the value of $50 for every contract that is completed and presented to me for funding. I will provide funding to your existing Bens Rentals company on a trial basis until Local Rentals has a Centrepay facility in place to take payments from customers." 27Mr French also specifically denies in his second affidavit that there was any discussion at the meeting concerning franchising. 28It is Mr Moshos' case that the binding agreement he alleged had been made by no later than the conclusion of the meeting on 5 November 2007. Further dealings and conduct from November 2007 to May 2008 29Following that meeting, Mr French took steps to incorporate the second defendant. He did so on 7 November 2007. The name of the company at that time was Local Rentals Pty Ltd ("Local Rentals"). Its name was changed to Local Appliance Rentals Pty Ltd in May 2013. 30By 9:21am on 7 November 2007, Mr Moshos had created a new gmail account in the name of "localrental". There is no evidence that, prior to that time, Mr Moshos had been informed that registration of the new company had been effected. Mr French says that there had been no discussion with Mr Moshos about him creating an email address, or indeed any discussion with him about an email account. On 7 November 2007, Ms Perston established a domain name and an email facility for Local Rentals through Domain Central. On 12 November 2007, she established three email addresses in respect of Local Rentals in the names of "ken", "megan", and "hostmaster". 31On 16 November 2007, Mr Tighe of Centrepay Deduction and Confirmation Services (presumably a section within Centrelink) sent a letter to Mr French concerning an application submitted by Mr French for a Centrepay facility. That letter is not in evidence. I infer that Mr French made contact with Mr Tighe shortly after incorporation of the second defendant. 32By 10 December 2007, Latitude Finance had commenced providing finance to Ben Rentals in respect of various rental agreements between Ben Rentals and customers. Between 10 December 2007 and 26 February 2008, almost $65,000 was so provided by Latitude Finance in respect of about twenty such contracts. Ms Perston was involved in the administration of such finance. 33In the meantime, Mr French was pursuing the application for a Centrepay facility. On 18 February 2008, he sent an email to Mr Moshos requesting certain items of information in order to assist Mr French in the preparation of the application. There is a dispute between Mr Moshos and Mr French as to whether any such information was ever provided. It does appear, however, that Mr Moshos suggested an address at Eagleby as a suitable shopfront address to be used in the application. I note that Mr French's email was sent to the "localrental" address established by Mr Moshos. It was not suggested, however, that this was of any significance. 34On 17 March 2008, Mr French sent an email to Mr Moshos which attached an unsigned letter to Mr Tighe and numerous pages containing information about Local Rentals. Mr Moshos says that Mr French had asked him to look at the material and let him know whether it was suitable to be sent to Mr Tighe. Mr French accepts that such a conversation occurred. The material contained a statement that Mr French was the sole director and shareholder of the company and that "it is not envisaged that this will change in the short to medium term". On 18 March 2008, Mr Moshos sent an email to Mr French indicating that the material "sounds good". 35It is apparent that by that time difficulties had emerged in relation to the finance provided to Ben Rentals. There were difficulties in keeping track of where the finance was being applied within Ben Rentals. Mr Moshos became involved in attempts to sort out the difficulties between Ben Rentals and Latitude Finance. He attended meetings with Mr French and Ms Perston, including meetings at their home, about those matters. It is clear that Ms Perston prepared detailed documents dealing with those matters and I accept that she sent two such documents by email to Mr Moshos in March 2008. Mr French and Ms Perston say that, at one meeting, Mr Moshos introduced them to Mr Amit Kaushal who was said to be involved in Ben Rentals. The company extract for Ben-Rentals (Qld) Pty Ltd shows that a Mr Kaushal was a director of the company between 30 January 2008 and 5 June 2008. It seems that Mr Kaushal also became involved in the sorting out of the difficulties between Ben Rentals and Latitude Finance. 36On 8 March 2008, Mr Moshos sent an example of a spreadsheet to Mr French. Mr Moshos claims that the spreadsheet was sent in connection with the business of Local Rentals. Mr French, on the other hand, claims that the spreadsheet concerned Ben Rentals, and was subsequently used by Ms Perston in the work she was doing in relation to the finance provided to Ben Rentals. At least one of the two customers whose details are included in the spreadsheet was a customer of Ben Rentals, and the details so included are of a rental agreement with that company. 37Ms Perston deposed that during a meeting which took place in about March 2008, there was a conversation between Mr Moshos and Mr French in the following terms: Moshos: "My partners are causing the issues with Bens Rentals. Is there any possibility of working with me only rather than with all the current partners?" French: "Yes, they do seem to be causing the problems. OK, there is a chance perhaps just you and I could do something in the future that does not involve them. But the most important thing now is to try to sort out this mess with Bens Rentals." 38On 7 April 2008, Mr French sent an email to Mr Moshos which included the following: "Thanks for all the work last week. I think you will agree that it was important to know where the business is going and to finally get on top of the database. It was good to meet Ahmit and I think he has a bright future. He seems to have a pretty good grip on the business and had some good ideas to progress the business. As I have been battering into you all week the most critical thing in the business is the cash flow. There are some serious problems here which have to be addressed. Namely the substantial debts and the unfunded liabilities of the deposits. As you and Ahmit have agreed the chasing up of the arrears is the most critical thing that must happen now before any further funding arrangements can be discussed. It is of great concern that the arrears are at 35% of contracts. This level of arrears is unsustainable and the company is missing out on considerable revenue. As I indicated to you and Ahmit last week I think the way forward might be some sort of franchise or license arrangement with Megan and myself providing the funds and doing the administration and you guys each running your own shows but without the headache of doing the books and the paperwork. I think we should have a meeting with you and the guys early next week to discuss the way forward especially now that we should have the Local Rentals facility by then. Obviously with the two defaults that Ben Rentals has will make it virtually useless as an ongoing company because we will not be able to use it for any sort of funding application. ... As I said before I don't want to have any discussions until we have the arrears under control but you have assured me that you and Ahmit will have that under control this week so we should be able to schedule a meeting for next week." 39On 15 April 2008, Mr French sent a further email to Mr Moshos. The email's subject was "Home". The email included the following: "Following on from our discussions the other week I would like to know what is happening with regard to Home. When you left you said you would give me a list of the set-up costs to date so I can pay my half. You haven't mentioned anything more about it so I can only assume you want to keep it for yourself. If you want to just go on by yourself then please let me know so I can plan accordingly. I have kept substantial funds available for you which I could have placed elsewhere and I cannot hold them any longer. I felt we had made progress and reached an agreement, however now I am not so sure. I will therefore make my position clear again in writing just so there are no misunderstandings. I want to have you aboard as a 50-50 partner in Local Rentals but that requires you to bring home into the partnership. If you don't want to do that that's fine but then you would have to revert back to the same deal that I have offered the other guys which means that I will have to just run Local Rentals myself. It's time to get off the fence and make a decision one way or another. I would appreciate it if you would get back to me by the end of today." 40Mr Moshos deposed that this email caused him significant concern. However, it seems that Mr Moshos did not reply to the email. There is no evidence of any response to it whatsoever. 41Mr French states that prior to the sending of the email of 15 April 2008, he had been informed by Mr Kaushal that he was now the sole director of Ben Rentals and that Mr Moshos had his own appliance rental business called "Home". Mr French states that in April 2008 he said words to the following effect to Mr Moshos: "Mr Kaushal has told me that you have an appliance rentals business called "Home". You have not previously divulged the existence of this to me. If we are to have any business relationship with each other, you will have to be prepared to put this business into the mix otherwise you will be operating a business competing with the Local Rentals business." 42Mr French further states that he said words to the following effect: "I am prepared to pay half the costs you have already incurred in the business of "Home". If you are serious about being a partner in the Local Rentals business you need to provide me with a list of set-up costs so that I can pay my share." 43Mr French states that he also had a discussion with Mr Moshos about Home in the following terms: French: "What are your intentions with regard to Home?" Moshos: "I intend to continue operating Home in competition to Local Rentals. I want to keep Home for myself." 44A company extract in respect of Home Services Group (Qld) Pty Ltd does not indicate that Mr Moshos had any involvement as either an officer or shareholder in the company at any stage. However, the extract discloses that Mr Moshos' brother, Mr Antonis Moshos, held a shareholding in the company and was a director of it from 21 March 2006 until 17 November 2007, and it is clear that Mr Moshos had a sales and consultancy role with Home in the period November 2007 to April 2008. 45In about early May 2008, Local Rentals obtained a Centrepay facility. 46On 14 May 2008, Mr Moshos sent an email to Mr French which included the following: "can u organise the paperwork today, for the share allocation for the local company" 47On 19 May 2008, Mr Moshos sent a further email to Mr French which included the following: "when u get a chance, could u organise the papers to sign for the shareholding allocation ASAP" 48Later on 19 May 2008, Mr French sent an email in reply to Mr Moshos which included the following: "Sorry not to get back to you but I have not had time to scratch myself. As to the shareholding I have spoken to my solicitor and as your shareholding is really part of being a working partner rather than just a shareholder who has put up money for a true share he believes we need an agreement between us that is an agreement basically in his words as to 'who is going to do what and how each person is to be remunerated'. We obviously need to work on this. Also I am not going to do anything until we sort out the Ben Rentals mess. Everyday it seems to get worse, not better and we have had only one arrears come back on so far. The quicker we can get this under control the quicker we can move on. We must have the systems in place to handle any new contract so that we don't have the disasters that we have now." 49On 20 May 2008, Mr Moshos sent an email to Ms Perston concerning certain spreadsheets. It seems that Mr Moshos may not have read Mr French's email by that stage. His email to Ms Perston contained a postscript in the following terms: "we need to sort out promptly the LR Share holding situation asap. i have emailed ken, awaiting response" 50On 23 May 2008, Mr Moshos sent an email to Mr French stating that they needed to talk as soon as possible. Later on that day Mr French sent an email to Mr Moshos in which he indicated that he would call him on Sunday (25 May 2008) when he would have a chance to chat. Mr Moshos says that he did have a conversation with Mr French on about 25 May 2008 in which words to the following effect were said: Moshos: "Ken how come you haven't transferred my shares in Local Rentals. We agreed on this over six months ago." French: "I told you in my email. This Bens Rentals nightmare has to be sorted out before I do anything with the shares. Also, my solicitor told me that we have to have a proper agreement in writing before there's anything binding." Moshos: "Ken, we have an agreement and it's simple. We both own 50% of the company and now the Centrepay facility has been obtained, my share is to be reflected on the company register. We were supposed to have this all sorted." French: "Look Bill. You didn't pay anything for your share. We had a working partner arrangement. My solicitor told me it's completely different." Moshos: "You didn't pay anything for your share either Ken. I brought the rental business experience, the business model and the Centrepay facility to the company. You brought the finance part of it. That was the deal. That's it. I want my shares." French: "Well, I have been advised that we didn't have an agreement on the shareholders. I am prepared to agree to something on a working partner basis." Moshos: "We have an agreement Ken. You can't expect to simply own the whole company. That is simply not right." French: "Bill, that's my advice. I'll arrange for my proposal on how we progress from here to be forwarded to you." Moshos: "You can forward a proposal if you want Ken. Actually, do that. Be very aware though that we have an agreement and I will not vary that one bit until your proposal is consistent with what I should already have." French: "Don't worry about it Bill. I'll arrange for the proposal to be given to you as soon as I can mate, I have to really go now." 51Mr French denies that any such conversation took place. However, in his second affidavit, he stated that a conversation took place on the afternoon of 25 May 2008 which was to the following effect: Moshos: "Ken, we need to talk about this." French: "Bill, I made it very clear in my email to you. You are obviously going to keep "Home" for yourself and operate it in competition to the Local Rentals business. Look Bill, I have made my position quite clear. Phone me when you have made a decision. Until then there is no point talking round and round in circles." 52On 27 May 2008, Mr Moshos sent an email to Mr French (using the "localrental" address) which was headed "Failed Local Plan" and included the following: "As to our discussions on sunday. the company wants a detailed plan as to when and how the local plan is goin to work, by tomoro. The start date was on the 26th May, it is now the 29th May, in keeping with the original plan. The co. wants a detailed explanation of the security of licences and areas and shares. As your record shows above these issues have not been adhered to, the company wants a commitment from you in writing of all of these issues. on behalf of the company Please respond by 12pm 28th May 2008." 53Mr Moshos did not receive any reply to that email. 54Mr French says that he had no further contact with Mr Moshos until the commencement of the proceedings in September 2013. Ms Perston also says that she had no further contact with Mr Moshos save for a telephone call from him which occurred in about late 2008 or early 2009. She says that during that conversation Mr Moshos asked her some questions about how the rental business was going. Mr Moshos denied that any such conversation took place. The witnesses 55Evidence was given by Mr Moshos, Mr Emmanouilidis, Mr French and Ms Perston. They were each cross-examined, although in Mr Emmanouilidis' case and in Ms Perston's case, only briefly. 56I have considerable reservations about the accuracy and reliability of the evidence given by Mr Moshos and, to a lesser degree, Mr French. 57As far as Mr Moshos is concerned, I note the following matters: (1)the agreement he propounds is said to have arisen in the course of discussions he had with Mr French that occurred in two meetings which took place more than six years ago. There is no suggestion that any notes were taken of what was said in the meetings, and the contemporaneous documents which are alleged to evidence the contract (being the emails of 1 November 2007) are sparse and open to various interpretations. In those circumstances, the accounts of the meetings contained in Mr Moshos' affidavit, which suggest that he possesses a detailed recollection of those events, have to be treated with some caution; (2)the evidence adduced by Mr Moshos in his affidavit, and the case advanced on his behalf accordingly, is that a very simple agreement was reached involving no more than the ownership structure of a company which would be the vehicle through which the parties' business relationship would be conducted. Yet in May of 2008, when Mr French was conducting himself in a manner inconsistent with the alleged agreement, Mr Moshos failed to take the simple expedient of stating his position in writing. The email he sent to Mr French on 27 May 2008 is difficult to understand, but it plainly lacks an assertion of the agreement now alleged by him; (3)I gained the impression during Mr Moshos' cross-examination that he was overly keen to downplay the level of his involvement in Ben Rentals. In the context of his evidence about "channelling" customers to the new rental company, he denied (on two occasions) that he would be channelling Ben Rentals customers, even though Ben Rentals was one of the companies he claimed he mentioned during his first meeting with Mr French. He also stated that the finance which Mr French (through Latitude Finance) provided to Ben Rentals "had nothing to do with" any arrangement between himself and Mr French. On this issue, I prefer the evidence of Mr French to the effect that the provision of finance to Ben Rentals was discussed with Mr Moshos at the meeting held on 5 November 2007; (4)Mr Moshos was somewhat evasive when responding to questions concerning Mr French's email of 7 April 2008, and in particular as to whether he had been involved in discussions with Mr French about a franchise or licence arrangement, with Mr French and Ms Perston providing the funds and doing administration, and "you guys each running your own shows". On more than one occasion, Mr Moshos claimed not to understand the question, but I gained the firm impression that Mr Moshos, who generally exhibited intelligence and an ability to follow the questioning, was trying to avoid giving a clear answer. I do not doubt that discussions along the lines described in Mr French's email of 7 April 2008 did in fact occur; (5)Mr Moshos' evidence as to whether there were discussions in early April 2008 about Home, including discussion about Mr French meeting half of the set-up costs, was also unimpressive. I prefer Mr French's evidence, which is consistent with his email to Mr Moshos of 15 April 2008, about those matters; (6)Mr Moshos' evidence that he was concerned, confused and disappointed about the contents of the 15 April 2008 email was unpersuasive in circumstances where he did not see fit to reply to it; and (7)the agreement alleged by Mr Moshos provided that his 50% shareholding would not be transferred to him until the new company had obtained a Centrepay facility. Mr Moshos conceded that the agreement he alleged would involve an attempt to deceive Centrelink. He could not accept, however, that such conduct was dishonest. 58As far as Mr French is concerned, I note the following matters: (1)Mr French did not seem to have a good recollection of the events of late 2007 and 2008. That is not surprising, but it means that his evidence also needs to be treated with some caution; (2)Mr French's evidence given in cross-examination that there were never any negotiations with Mr Moshos in relation to a shareholding in Local Rentals struck me as implausible in the light of the reference in the 15 April 2008 email to wanting to have Mr Moshos aboard "as a 50/50 partner in Local Rentals", and the references in the emails exchanged in May 2008 to a shareholding. The clear likelihood is that there were discussions between Mr Moshos and Mr French which included discussion about Mr Moshos becoming a shareholder in the company; and (3)Mr French conceded that he was willing to engage in prevarication concerning the shopfront location of Local Rentals in making the application to Centrelink for a Centrepay facility. 59As noted earlier, Mr Emmanouilidis gave evidence about the discussion at the meeting held on 5 November 2007. The version he sets out is almost identical to that given by Mr Moshos in his affidavit. Mr Emmanouilidis had Mr Moshos' affidavit available to him when he prepared his own affidavit. He agreed that he had read Mr Moshos' affidavit before he prepared his own. Mr Emmanouilidis prepared his affidavit at a time when Mr Moshos did not have a solicitor acting for him in the proceedings. He denied that he had, in effect, copied his version of the discussion from a soft copy of Mr Moshos' affidavit. Whether that is so or not, in my view, in circumstances where the meeting took place so long ago, the high degree of similarity between the versions means that Mr Emmanouilidis' account must be treated with considerable caution. 60A similar point can be made about the close similarities which exist between portions of the affidavits sworn by Mr French and Ms Perston on 29 April 2014. I also treat with considerable caution the versions of conversations which they have set out in practically identical terms in those affidavits. 61However, Ms Perston created a favourable impression in the relatively short time she was in the witness box. She gave her evidence clearly and directly. Apart from the reservation just referred to, I generally accept her evidence as reliable. In particular, I accept her evidence (in preference to Mr Moshos' denial) that there was a conversation between Mr Moshos and Mr French in March 2008 in which Mr Moshos asked Mr French whether there was any possibility of working with him only "rather than with all the current partners". That evidence was not directly challenged, and I accept that Ms Perston has a recollection of such a conversation. Determination 62The success of Mr Moshos' claim that a binding agreement was reached with Mr French concerning the shares in Local Rentals, and his alternative claim that Mr French holds 50% of the shares in the company on trust for him, depends upon an acceptance of the thrust of Mr Moshos' accounts of the meetings of 31 October 2007 and 5 November 2007. Having regard to the considerable reservations I have as to the accuracy and reliability of Mr Moshos' evidence (see above at [57]), and for the reasons which follow, I am not prepared to accept the key parts of those accounts, and I have therefore concluded that Mr Moshos' claims must fail. 63I do accept that when Mr Moshos made contact with Mr French, Mr Moshos had an interest in getting involved in a business model which would entail a rental company which had a Centrepay facility and had access to finance whether directly or through a related entity. Mr Moshos no doubt saw Mr French as a potential source of such finance. Moreover, it is likely that Mr Moshos, who had experienced difficulties in obtaining a Centrepay facility himself, would have seen Mr French as someone who may be able to obtain such a facility. 64At the same time, Mr French had an interest in a business model which would entail the establishment by him of a company which would finance and enter into rental contracts with customers, and make payments to an outside entity with responsibility for the sales force. 65It is likely, in these circumstances, that when Mr Moshos and Mr French met on 31 October 2007, there was a discussion about the establishment of a company which would operate in the rental goods industry. Indeed, there does not seem to be any real dispute that there was discussion at that meeting about setting up a new business in that industry. 66In his email of 1 November 2007, Mr French referred to "thinking about names for the business". Mr French gave evidence in cross-examination that the business he was referring to in his email was "a business we had discussed setting up so that Ben Rentals could get finance". He also stated that the business he was referring to, which needed a name, was Local Rentals. 67Mr French's evidence that the purpose of the business was to provide finance to Ben Rentals was heavily attacked in cross-examination. It was pointed out that Latitude Finance provided finance to Ben Rentals, and Mr French conceded that the purpose of incorporation of Local Rentals itself was to conduct a business of entering into rental contracts with consumers. 68However, Mr French maintained that when he was first approached, Mr Moshos said that he wanted funds for Ben Rentals. Mr French also stated, in effect, that Local Rentals was set up as a vehicle so that Mr Moshos and his "partners" in Ben Rentals could go out and be the sales people and run their own businesses under the umbrella of Local Rentals which would be the provider of finance. Mr French denied that he was happy in November 2007 to offer Mr Moshos half of the shares in the company because he did not want to do the work of bringing in the customers. 69I accept the evidence of Mr French which is referred to in the preceding paragraph. I do not accept Mr Moshos' evidence that on 31 October 2007 Mr French accepted a proposal that involved the incorporation of a company in which Mr Moshos would, after the company obtained a Centrepay facility, hold 50% of the shares. Specifically, I do not accept that a conversation occurred to the effect of that which is set out above at [14]. 70It is, of course, possible that an immediately binding agreement as to the ownership of a structure through which a new business is to operate might be reached in discussions separately and in advance of any agreement about other important and related matters, including the respective roles to be played by the participants in the business. On Mr Moshos' case the two participants were Mr French (whose area was finance), and Mr Moshos (whose area was sales). However, I am not satisfied that this occurred in this case. 71An agreement to that effect is not supported by the terms of the emails exchanged on 1 November 2007. The language used in those emails is imprecise and open to various interpretations. However, the emails do not in their terms indicate that any binding agreement had been reached. To my mind, they are consistent with Mr Moshos and Mr French wishing to continue their discussions at a further meeting to be held on 5 November 2007. Moreover, the two references in Mr Moshos' email to "all of us", and the reference in Mr French's email to "the guys", suggest that the subject matter of the discussions that were held on the previous day and were to continue on 5 November 2007 involved more than just Mr Moshos and Mr French. Viewed in that light, the obscure reference in Mr Moshos' email to "the shareholdings" is more likely a loose reference to the interests of Mr Moshos and his colleagues ("the guys") in whatever ventures they were then involved in, than it is to a shareholding to be taken by Mr Moshos in a new company or the shareholdings to be taken in that company by Mr Moshos and Mr French. Mr Moshos' email was an indication that all who were concerned on his side were happy for the discussions to continue, and Mr French's response was an indication of a similar willingness on his part. 72I also do not accept Mr Moshos' evidence (or Mr Emmanouilidis' evidence to the same effect) that on 5 November 2007 Mr French said, in the context of the incorporation of the new company, "As agreed, I'll be the sole director and shareholder listed on the register until the Centrepay facility is obtained and then your shareholdings will be shown", or that Mr Moshos replied, "That's what we agreed." 73I am satisfied that there was discussion at the 5 November 2007 meeting about the name of the new company and its business, the incorporation of the company, and the obtaining of a Centrepay facility. I do not think it is necessary to resolve the disputes over who thought of the name "Local Rentals", and whether Mr French had previously heard of a Centrepay facility. I am also satisfied that, as deposed by Mr French (and as referred to above at [25] and [26]), there was discussion about the provision of finance and the payment of an agent's fee to Ben Rentals, as well as the provision of finance on a trial basis until the new company had a Centrepay facility. Even if Mr Moshos was not an officer or shareholder of Ben Rentals he clearly had some role in the company, and finance was in fact provided by Mr French (through Latitude Finance) to Ben Rentals from December 2007 until February 2008. 74As noted earlier, I consider it likely that the discussions which occurred between Mr Moshos and Mr French included some discussion about Mr Moshos becoming a shareholder in Local Rentals. It is very likely that there were such discussions in March to April 2008. Mr Moshos had indicated in March 2008 that he was interested in entering an agreement on his own with Mr French, and the terms of the email sent by Mr French on 15 April 2008 which refers to having made progress and reached an agreement, and to wanting to have having Mr Moshos on board as a 50/50 partner in Local Rentals, suggests that there was discussion about the shareholding. So, too, do Mr Moshos' emails of 14 May, 19 May and 20 May 2008. 75Nevertheless, I do not think it likely that there was any such discussion at the meetings held in October and November 2007. Even if there was, I am not satisfied that any concluded agreement was then reached as alleged by Mr Moshos. 76I do not think that Mr French's email to Mr Moshos of 15 April 2008 which refers to having "reached an agreement", or his email of 19 May 2008 which refers to "your shareholding" and being a "working partner" leads to any different conclusion. I would not construe those words as references to the meetings held in October and November 2007. It is more likely that they refer to the discussions which occurred from March 2008 after Mr Moshos had expressed a desire to reach an agreement with Mr French on his own. In this regard, I accept Mr French's evidence that the reference to an agreement in the 15 April 2008 email, and the reference to "working partner" in the 19 May 2008 email, were both intended as references to the discussions about Home. Those discussions occurred in early April 2008. 77I am fortified in my conclusions by the failure of Mr Moshos to assert, in writing, that a binding agreement had been reached. The alleged agreement was simple in its terms and there is no reason why Mr Moshos would not have clearly put his position in writing, at least in response to Mr French's emails of 15 April 2008 and 19 May 2008. 78I note in this context that I do not accept Mr Moshos' evidence concerning the conversation of 25 May 2008. I prefer Mr French's evidence about that conversation. 79The above findings and conclusions are sufficient to dispose of the claims made by Mr Moshos. Each of the questions to be determined at the separate hearing will be answered "No". I think it must follow that the proceedings should be dismissed with costs. However, as there was no agreement that such result should follow if the questions were answered in the negative, the Court will refrain from making such orders at this stage. Amended defence 80One matter remains to be dealt with. It is whether the defendants should have leave to file an Amended Defence. The proposed Amended Defence includes an additional paragraph which identifies four particular grounds in opposition to the plaintiff's claim for specific performance. The conclusions I have reached on the separate questions make redundant the issue of specific performance. Nevertheless, in case those conclusions are erroneous, I will deal with the defendants' application for leave to amend. 81The amendments which the defendants now seek to make were first raised on the second day of the hearing. It was not then clear whether the issue of specific performance would be dealt with in the initial hearing. It was submitted on behalf of the defendants that if the issue was to be so dealt with, the defendants wished to raise the new matters as discretionary reasons why specific performance should not be ordered. 82However, I decided that the order made for separate hearing did not require the Court, in the initial hearing, to determine whether a decree of specific performance should be made (see Vasilis Floros Moshos v Kenneth Geoffrey French [2014] NSWSC 549). 83At [22] of my reasons, I stated: "In those circumstances, it is not necessary that the defendants' application for leave to amend be dealt with immediately. The defendants may, however, renew their application at a convenient time ... ." 84At the conclusion of final addresses, the defendants sought leave to file the Amended Defence. The application for leave was opposed by the plaintiff on the basis that my decision concerning the meaning of the order for separate hearing was wrong, and that the issue of specific performance should have been the subject of the initial hearing. That submission is noted. However, proceeding on the assumption that my decision concerning the order for separate hearing is correct, and in the absence of any further suggestion that allowing the amendments now would cause prejudice to the plaintiff, I consider it appropriate that the defendants be permitted to file the Amended Defence. If the issue of specific performance is later enlivened, the defendants should, in my view, be able to rely on the four matters raised in opposition to the claim, which seem to me to be clearly arguable. 85The orders of the Court are: (1)pursuant to Uniform Civil Procedure Rules r 28.2, the following questions are answered as follows: Question 1: Did the plaintiff and the first defendant enter into a binding contract as alleged, and if so, on what terms? Answer: No Question 2: Is the first defendant in breach of any such contract? Answer: No Question 3: Was any trust created in respect of the first defendant's shares in the second defendant as alleged, and if so, on what terms? Answer: No Question 4: Is the first defendant in breach of any such trust? Answer: No (2)grant leave to the defendants to file in Court the Amended Defence dated 8 May 2014 which was provided to the Court on that day; and (3)direct the parties to bring in Short Minutes which deal with any further orders for the disposition of the proceedings, and 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. 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: 27 June 2014