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Supreme Court of Victoria |
Last Updated: 1 March 2012
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
LIST A
No. 3163 of 2010
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First Defendant
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AUSTOCK GROUP LIMITED (ACN 087 334 370)
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Second Defendant
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JUDGE:
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WHERE HELD:
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Melbourne
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DATE OF HEARING:
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CASE MAY BE CITED AS:
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CONTRACT – Trade Practices Act 1974 (Vic) s 52 – Whether silence or non communication of information constitutes misleading and deceptive conduct – Children’s Services Act 1996 (Vic) s 25R – Transfer of licence to operate childcare centre in Victoria.
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APPEARANCES:
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Counsel
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Solicitors
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For the Plaintiff
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Mills Oakley Lawyers
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For the Defendants
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Rigby Cooke as agents for ClarkeKann Lawyers
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1 The plaintiff claims damages under the Trade Practices Act 1974 (Cth) for misleading and deceptive conduct contrary to s 52 as at the time relevant to the proceeding. The statement of claim initially maintained two causes of action. The first was a claim in contract against the Bank of Western Australia Ltd (“BankWest”). That part of the proceeding was resolved and a settlement reached between the plaintiff and BankWest whereby the latter paid $100,000. The only remaining claim against the other defendants in the proceeding is that under s 52 of the Trade Practices Act 1974 (Cth) in which the plaintiff seeks to recover a deposit of $500,000 (less the $100,000 received from BankWest) plus legal costs incurred up to 16 May 2010 (being the date from which the plaintiff indicated that it no longer wished to proceed with Heads of Agreement entered into on 26 February 2010).
2 The plaintiff’s contention is essentially that it would not have entered into Heads of Agreement had it not been for what it contends to have been the misleading and deceptive conduct of the defendants. The plaintiff contends that it was not told, but that it ought to have been told, (a) about a dispute between Mr Frank Zullo of Neighbourhood Education Learning Centre (“NELC”) and the first and second defendants, and that (b) a deed (“the Casey Deed”) was unenforceable at least to the extent that a licence could not be transferred pursuant to the terms of the Casey Deed.
3 The Heads of Agreement was entered into on 26 February 2010. Its purpose was described in cl 3 as being to “set out the key commercial terms and conditions precedent” by which the buyer or a buyer’s nominee would acquire certain units, share capital, securities, agreements and would replace the first defendant, Austock Funds Management Ltd (“AFML”) as trustee of two trusts. The plaintiff (“Education Equity”) was the buyer as trustee for the Education Equity Property Trust. The underlying subject matter of the proposed purchase were the properties from which two independent colleges were conducted, respectively at, Narre Warren (“the Casey College”) and Caroline Springs (“the Melton College”) in Victoria.
4 The plaintiff is a company controlled by Mr Thomas Mould. He also controlled Education and Learning Services Australia Pty Ltd (“ELSA”). That company had a long term contractual arrangement with Independent Colleges Corporation Ltd (“ICC”). ELSA provided services in respect of the development and management of independent educational colleges and did so under long term contractual arrangements in respect of the Casey College and the Melton College. The properties at the two colleges were both owned by AFML in its respective capacity as trustee for the Austock Education Development Trust (Casey) (“AEDT Casey”) and the Austock Education Development Trust (Melton) (“AEDT Melton”). The units in the two trusts were held by custodians on behalf of ABC Learning Centres Ltd (in receivership) (“ABC Learning”). BankWest had (at the time) registered securities encumbering all of the assets and the undertakings of the trusts.
5 The Heads of Agreement were designed to permit the plaintiff to obtain the assets of the two colleges from AFML. Clause 5.1 of the Heads of Agreement provided for the payment of $21,481,787.26 by the plaintiff, or its nominee, to BankWest at completion and to assume the liabilities of AEDT Casey and AEDT Melton. At the same time BankWest was to release a rental deposit of $3,491,520 to ICC which ICC was to pay to ELSA as partial repayment under a facility agreement. The plaintiff was also to pay $2,000,000 in amounts as directed by the second defendant, Austock Group Limited (“AGL”), to be applied (a) in payment for the issued share capital of ELSA, (b) on behalf of ELSA in reduction of its indebtedness to AGL or related entities and in reduction of its indebtedness to ABC Learning or related entities, and (c) in reduction of the indebtedness to a Mr John Wheeler to ABC Acquisitions Pty Ltd or its related entities.
6 Clause 6 provided for the payment of a deposit in two amounts. The first was of $500,000 (“the initial deposit”) payable within two business days of the signing of the Heads of Agreement. The second was $1,600,000 payable on the satisfaction of the conditions listed in cl 7. The initial deposit was paid but the balance was not.
7 Clause 7 set out various conditions to which the completion of the transaction was subject and conditional. It included, by cl 7(c), a due diligence provision. The clause made completion of the agreement subject to and conditional upon:
(c) the Buyer carrying out such enquiries as it considers appropriate in its absolute discretion in regard to all matters listed in Annexure D, by the Due Diligence Date and which reveals no cause, or likely cause in the opinion of the Buyer acting reasonably, of the incurring a Liability or an aggregate total of Liabilities over the Threshold except as expressly disclosed in this Agreement.
The Due Diligence Date was initially defined to mean fourteen days from the date of the Agreement but was subsequently extended several times and ultimately meant 16 May 2010. Annexure D to the Heads of Agreement provided a list of due diligence matters, which, in broad terms, included the business and assets of the properties at which the two colleges were conducted, the last accounts of the trusts, various commitments, compliance with environmental legislation and other matters, taxation liabilities and risks, specific litigation and compliance by the parties of their respective obligations under leases connected with the colleges and in respect of the childcare centres at the two colleges.
8 Clause 9 of the Heads of Agreement set out the key commercial terms agreed between the parties. Clause 9.1 dealt with the liabilities which the buyer would assume at completion and contained a warranty by AFML that particular securities were the only ones encumbering AEDT Casey and AEDT Melton. Clause 9.5 was a provision included at the insistence of AFML to ensure that the buyer would not be associated with specified individuals who had been connected with ABC Learning. The defendants had taken the view that its connection with the failed ABC Learning Group was a matter of commercial embarrassment and wanted to ensure that there was no suggestion that it may have been selling to a buyer who might either directly or indirectly include some of the people connected with the failed enterprise which was then in administration. One of the people listed was Mr Zullo.
9 The plaintiff’s proposed acquisition was to be funded by investors. The plaintiff contended that critical to entering into the Heads of Agreement was an ability to achieve a return for investors on the amount to be invested through the proposed purchase of the assets. The plaintiff contended that critical to that return was the net returns from the operation of the childcare centres at Casey College (“the Casey Childcare Centre”) and Melton College (“the Melton Childcare Centre”). It was contended by the plaintiff that the necessary returns on the investment were, however, at risk because of matters that were not disclosed, and which the plaintiff maintains ought to have been disclosed, before entering into the Heads of Agreement. In particular it was contended that the dealings between AFML and Mr Zullo materially bore upon the decision to enter into the Heads of Agreement as did the potential problem with the enforcement of a term of the Casey Deed.
10 The particular relevance of any dispute between AFML and Mr Zullo was the potential risk that such a dispute might have on the cash flows from the assets to be acquired by the plaintiff under the Heads of Agreement. The Casey Childcare Centre was being conducted under an informal arrangement between AFML and Mr Zullo. A lease had previously been granted to College Early Learning Centres Pty Ltd (“CELC”) which also held a licence, issued by the Department of Human Services Victoria, to conduct a childcare centre. CELC was a company connected with a Mr Don Jones and had been unable meet its rent obligations. On 23 January 2009 CELC entered into the Casey Deed under which it was relieved of the obligation to pay rent subject to the terms of the Casey Deed. The position of the Casey Childcare Centre was something well known to Mr Mould before the Heads of Agreement were entered into. Mr Jones had spoken to Mr Mould about the former’s concerns about paying rent. Mr Mould was also aware of the existence of the Casey Deed before entering into the Heads of Agreement. He was aware that an arrangement had been reached whereby the lessee was not required to pay rent but that, informally, Mr Zullo was conducting the operations of the Casey Childcare Centre with the benefit of not paying rent and the right to retain any income from which other expenses might be paid.
11 The plaintiff’s case concerning the dealings between Mr Zullo and the defendants is that the plaintiff had a reasonable expectation of being informed by AFML and AGL prior to executing the Heads of Agreement of the nature and extent of what the plaintiff describes as a “dispute” between Mr Zullo and AFML and AGL. The plaintiff contended that Mr Zullo had refused to consent to the assignment of a service agreement between CELC and NELC to the plaintiffs and its nominees, and that Mr Zullo intended and “threatened” to vacate centres occupied by NELC and to “strip” them of their contents if the “dispute” with AFML and AGL had not been resolved by 31 May 2010. Mr Mould gave evidence that he had been told of such threats having been made and of being aware that Mr Zullo, through one of his companies, had “stripped” the assets of other centres. The preponderance of evidence, however, is plainly against there being a dispute of a kind which ought to have been conveyed to the plaintiff or that any threat of the kind alleged by Mr Mould was made by Mr Zullo to AFML, to AGL or to anyone relevant to the current proceedings. Mr Zullo gave evidence and was cross examined. His evidence was that he had removed assets from childcare centres when engaged by the owner of those assets to do so on their behalf. Nothing about Mr Zullo’s evidence, conduct or past history would justify me to conclude that he had made a threat which was, in effect, to convert, without authority or care, the assets belonging to some person other than those by whom he may have been engaged. No threat in the terms alleged was made and, therefore, no such threat was capable of being the subject of communication to the plaintiff prior to entering the Heads of Agreement.
12 The allegation of a threat in the terms alleged is also improbable in the context in which it is said to have occurred. ABC Learning was in administration. Its affairs were conducted by professional administrators. Other entities within the childcare industry were similarly being administered by professional administrators or receivers. The duty of such people was to take control of assets and was not to engage in conduct that might in any way create litigation or disputes. Mr Zullo gave evidence that McGrathNicol, administrators, had on occasion sought his services to remove assets from premises to return them to their owners. That, in part, was no doubt a matter which may have been required under leases and licences through which childcare centres may have been conducted. Mr Zullo had been in the industry for some time and was aware that neither he nor his company, NELC, owned any of the fittings or fixtures at the Casey Childcare Centre. His role at the Casey Childcare Centre had been to take over a fully operational centre as he had found it being operated by Mr Jones. It is unlikely that Mr Zullo, or a person in Mr Zullo’s position, would have said to Mr Mould anything to suggest that he would take the assets at the Casey Childcare Centre to which he was not entitled.
13 The specific terms of the statements particularised by the plaintiff as having been said by Mr Zullo were put to Mr Zullo. He denied that he said anything to the effect that would impact upon the assets or the conduct of the Casey Childcare Centre. His only requirement in respect of the Casey Childcare Centre had been a request that the buyer might assume the obligations he had incurred in respect of employees for such matters as superannuation and long service leave. The evidence of both Mr Craig Thompson and Mr Nicholas Anagnostou was consistent with that of Mr Zullo. Mr Thompson was the Chief Financial Officer of AGL and the person responsible for the Austock Property Group at the relevant time. He was the person with overall responsibility for the operations of AFML and had dealings with Mr Zullo and Mr Mould both in respect of the Heads of Agreement and in respect of Mr Zullo’s other dealings with AGL and related companies. Mr Anagnostou was the CEO of two funds at AGL and the Chief Operating Officer of two other funds. He too had dealings with Mr Zullo in the course of the administration of the businesses conducted by ABC Learning which had been the tenants of properties used as childcare centres owned by the funds within AGL. Accordingly, I find that the statements alleged to have been made by Mr Zullo were not made.
14 It is also my view that there was no dispute between Mr Zullo and AFML or AGL of a kind that needed to be conveyed to the plaintiff before entering the Heads of Agreement. The position was that Mr Zullo had been engaged in commercial negotiations with AGL to enter into a series of new relationships whereby his company might become a tenant of childcare centres. Those negotiations included the parties taking clear positions about the terms upon which they were prepared to contract. Mr Zullo maintained a negotiating position that he would not give cross guarantees. He maintained that position during a period including from before the Heads of Agreement were entered into and until the time when the plaintiff decided no longer to proceed with the Heads of Agreement. AGL maintained during the same period a strong position in response that more security was required from Mr Zullo. These negotiations led to what might be described as a “stand off” or in the negotiations being put on a “go slow”, with the terms insisted upon by both parties described as “deal breakers”. There was, however, no dispute. Indeed, there had been at the time, as Mr Anagnostou said, no agreement about which the parties could have been in dispute. What there was, rather, were negotiations. The negotiations may have reached a position that might be described as a standoff, but the parties were continuing in their discussions (albeit at times slowly) and otherwise maintained ongoing and cordial relations. Indeed the parties sought to secure agreement and did so amicably during the time the plaintiff contends that Mr Zullo was in dispute with AFML and AGL. No threats were made, and no threats could be made. The parties simply negotiated by putting clear positions in the expectation of securing the best deal each was able to achieve. In any event, the entire ambit of any disagreement Mr Zullo may have had with AFML and AGL excluded the particular circumstances of the Casey Childcare Centre and the subject matter of the Heads of Agreement. Mr Zullo’s position in the Casey Childcare Centre was under the specific and particular arrangement which existed in that instance.
15 The plaintiff also contended that it had a reasonable expectation of being informed by AFML and AGL prior to executing the Heads of Agreement that Mr Zullo refused to consent to the assignment to the plaintiff or its nominee of a service agreement between CELC and NELC. The evidence is clearly contrary to any such refusal ever having been made. Mr Mould accepted in evidence that Mr Zullo had told him that Mr Zullo expected a smooth transition of the business to the plaintiff upon completion of the Heads of Agreement. On Mr Mould’s version of events that position only changed on 6 May 2010 and, therefore, could not have been a matter about which he, on behalf of the plaintiff, ought to have been informed prior to the Heads of Agreement being entered into on 26 February 2010. Furthermore, the evidence of all other witnesses was to the effect that Mr Zullo was willing to assist in the transition to any nominee of the plaintiff. His one request had been that any buyer take up the employee entitlements of those who had been physically working at the Casey Childcare Centre. Mr Zullo gave evidence about this as a request rather than a condition and there is nothing in the evidence to suggest that he had any misapprehension of being able to impose it as a requirement upon anyone. I accepted his evidence that he made no demand, nor imposed any condition, upon any transfer that might affect the completion of the Heads of Agreement.
16 The plaintiff also maintained that it had a reasonable expectation of being informed by AFML and AGL, prior to executing the Heads of Agreement, that the Casey Deed was unenforceable, that the transfer of the licence to the buyer was unenforceable, and that the Casey Deed was unenforceable as it was not capable of being performed and was otherwise vague and uncertain, or was illegal and contrary to s 25R of the Children’s Services Act 1996 (Vic).
17 The Casey Deed had provided for CELC to transfer its licence to any person nominated by AFML. The plaintiff could expect to secure AFML’s right and become lessor by acquisition of its property upon completion of the Heads of Agreement. CELC operated the Casey Childcare Centre pursuant to a lease from AFML and a licence, with an identification number of 11077, issued by the Department of Human Services Victoria in relation to the premises at Casey College. CELC, as I have mentioned, had been unable to pay rent but AFML had refrained from taking action to enforce the obligation to pay rent in consideration of CELC agreeing in the Casey Deed that it would “transfer the Licence” to any person nominated by the lessor upon receipt of a written request. The problem, if there was one, was that the relevant legislation had changed and no longer permitted the transfer of licences. Section 25R amended the Children’s Services Act 1996 (Vic) by providing that a licence was not transferable to another person. An objective of the Casey Deed was to put AFML in the position of being able to substitute the licensee at its discretion but the means adopted to secure the outcome (namely by transfer of a specified licence) was not one provided for by relevant legislation.
18 The potential problem of transferability seems not to have been known to any of the relevant participants for some time. Indeed, it seems not to have been of much concern even when discovered. The plaintiff seems to have become aware of the details of the new process required by s 25R around 16 April 2010. On about that date a Ms Beth Britton was asked by Mr Mould to find out about the transferability of a childcare licence in Victoria. At that point she discovered that the Victorian licensing requirements had been changed so that the transfer of an existing licence had been removed and that the new process required the current licence holder to cancel a licence and a new licence holder to apply for a new licence. Ms Britton committed the results of her inquiries to writing. It is possible that the new process had been known to the plaintiff’s lawyers at least two days previously. On 14 April 2010 Holding Redlich Lawyers, acting for the plaintiff, had written to BankWest’s lawyers (with a copy to AFML’s lawyers) raising an issue about non payment of rent by CELC since December 2008. In that context a resolution of the issue was proposed in language suggesting that the author appreciated that a change in licensee required the steps to be taken of an existing licensee relinquishing an existing licence and another entity obtaining a new licence. In any event, it is clear that by 16 April 2010 the plaintiff became aware that the process for a nominee to become licensed was not one of “transfer” as provided for by cl 3.3 of the Casey Deed but by the cancellation of a licence and the acquisition of a new one.
19 The defendants did not inform the plaintiff of s 25R or that the right under the Casey Deed to secure a licence could not be performed by transfer. Mr Thompson gave evidence that he did not know of the effect of s 25R until the due diligence process after entering into the Heads of Agreement. Mr Anagnostou may also have had no knowledge of the national legislation. However, lack of knowledge will not assist the defendants if they had a duty to disclose something,[1] and it is not an answer to the plaintiff’s claim that the defendants were able to make their own enquiries if the defendants had a duty to make a disclosure.[2] Silence or non communication of some information will not always be actionable. Silence may constitute misleading and deceptive conduct even if the silence was innocent or without fault.[3] In Aliotta v Broadmeadows Bus Service Pty Ltd[4] silence was found to be actionable because the context had conveyed an impression which gave rise to a duty or obligation “to complete the picture by communicating also” matters that might otherwise not have been necessary to convey. In that case Gray J said:
In the present case, Mr D’Aprano communicated to the applicant, by telling him, or showing him the contents of portions of the proposed lease and by including the details of that proposed lease in special condition 3, the fact that the proposed lease was for a particular purpose. This was sufficient to convey to an ordinary potential purchaser, and did convey to the applicant, an impression that the property could be used lawfully for that purpose. Once that impression was created it became the duty or obligation of Mr D’Aprano to complete the picture by communicating also that the purpose was one for which the land could not be used lawfully, in the absence of a permit from the city of Broadmeadows. Mr D’Aprano’s conduct amounted to a partial truth, which conveyed a representation that the property could properly and lawfully be, and would be, put to the use of a truck depot, workshop and office.[5]
20 Silence will be actionable when what is not said ought to have been said in the particular context in which the silence occurred. It will be the particular circumstances of each case that will determine whether an act or omission is likely to be misleading or deceptive.[6]
21 Whether the plaintiff had a reasonable expectation of being informed that the method to secure substitution of licensee by transfer provided for in the Casey Deed was not in conformity with s 25R of the Children’s Services Act 1996 (Vic) depends upon a consideration of the impact of any such failure in its circumstances and context. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd[7] the High Court explained that the language of reasonable expectation in this context is a means by which the impact of an omission is to be judged and analysed in its circumstances and context. French CJ and Keifel J said in a joint judgment:
The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus.In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52.
To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute. In that connection, Robson AJA in the Court of Appeal spoke of s 52 as making parties "strictly responsible to ensure they did not mislead or deceive their customer or trading partners". Such language, while no doubt intended to distinguish the necessary elements of misleading or deceptive conduct from those of torts such as deceit, negligence and passing off, may take on a life of its own. It may lead to the imposition of a requirement to volunteer information which travels beyond the statutory duty "to act in a way which does not mislead or deceive". Cicero, in his famous essay On Duties, seems to have contemplated such a standard when he wrote:
"Holding things back does not always amount to concealment; but it does when you want people, for your own profit, to be kept in the dark about something which you know and would be useful for them to know."
It would no doubt be regarded as an unrealistic expectation, inconsistent with the protection of that "superior smartness in dealing" of which Barton J wrote in W Scott, Fell & Co Ltd v Lloyd, that people who hold things back for their own profit are to be regarded as engaging in misleading or deceptive conduct. As Burchett J observed in Poseidon Ltd v Adelaide Petroleum NL, s 52 does not strike at the traditional secretiveness and obliquity of the bargaining process. But his Honour went on to remark that the bargaining process is not to be seen as a licence to deceive, and gave the example of a bargainer who had no intention of contracting on the terms discussed and whose silence was to achieve some undisclosed and ulterior purpose harmful to a competitor.
However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case.[8]
In that case the Court held that a failure to inform a lender that a policy was not cancellable was not misleading. Nothing was said on the facts in that case to have given rise to a reasonable expectation in the circumstances of a dealing between an insurance broker and an experienced premium lender that the broker would not have supplied the certificate without disclosing that the policy was not cancellable.[9]
22 In my view the same conclusion must be reached in this case. There is an air of unreality about the proposition that the plaintiff ought to have been told that the Casey Deed was unenforceable, that the transfer of a licence to a buyer was unenforceable, or that the Casey Deed was unenforceable as it was not capable of being performed and was otherwise vague and uncertain and was illegal and contrary to s 25R of the Children’s Services Act 1996 (Vic). The mechanism for achieving an objective adopted in the Casey Deed may not have been in conformity with the terms of s 25R but there seemed no doubt that all of the parties were always ready, willing and able to ensure that the objective sought to be achieved would in fact be achieved. The person operating as licensee, Mr Zullo, made it clear to the plaintiff that he would stand aside in favour of a subsequent purchaser, including the plaintiff. There was no suggestion at any time by anyone that the objective sought to be achieved by transfer would not be achieved under the new regime. An obligation upon the defendants to reveal any defect or disconformity between the Casey Deed and the terms of the legislation might have arisen if the defect or disconformity might have had some effect, but it was not and none was suggested by anyone at any stage until the plaintiff raised it as a reason not to proceed with the Heads of Agreement.
23 The circumstances by which the plaintiff’s submissions on this issue are to be evaluated include Mr Mould’s experience and particular knowledge of the facts and circumstances bearing upon any omission by the defendants. Mr Mould was an experienced company director and was intimately aware of the financial performance of the assets that he had agreed to purchase on behalf of the plaintiff from AFML. He knew that the Casey Childcare Centre was generating no rent. He was the person principally responsible for discharge ELSA’s responsibilities under the management agreement and of the development services agreement. He attended board meetings of ICC which owned both of the colleges and was aware of the Centre’s financial performance. He had had a primary role with a proposal for a group in Dubai called the Global Education Management System (“GEMS”) to expand its business by purchasing a controlling interest in ELSA and to provide working capital sufficient to enable the schools to pay rent to AGL. Mr Mould had travelled with Mr Thompson and a Mr Ryan Whitelegg to Dubai in relation to that proposal and was involved in conversations with AGL about these matters from about May to December 2009. He had provided information for the GEMS data room and had also been involved in three prior recapitalisation proposals. Indeed, GEMS had wanted to employ him if the proposed deal with GEMS went ahead. He also had a network of relationships with other parties including Mr Jones and knew Mr Zullo. He knew of the arrangements concerning the Casey Childcare Centre under the Casey Deed and that Mr Zullo was in occupation of the Centre. He had a copy of the lease and of the Casey Deed. It was, indeed, Mr Mould who had played the crucial role as the “go between” in the dealings at the suggestion of Mr Jones between AGL (through Mr Thompson) and CELC (through Mr Jones).
24 It may be that any omission by Mr Thompson to say anything about the mechanical operation of the Casey Deed was due to him not being aware of the terms of s 25R, and it may also be that Mr Mould did not know about the matter in terms until the middle of April, but it was a matter of no impact in view of the circumstances existing at the Casey Childcare Centre. The actual operator was Mr Zullo and I accept his evidence that he had indicated a willingness to step aside in favour of a purchaser. No one had suggested that the outcome intended to be achieved through transfer under cl 3.3 could not be achieved by that means because cl 3.3 had been drafted in ignorance of s 25R. The error, and its omission in the circumstances of this case, however, were of no relevance or impact.
25 Mr Mould gave evidence that he would not have entered into the Heads of Agreement on behalf of the plaintiff had he been informed of the matters complained of including the matters said to have been omitted. I am unable to accept this subjective evidence as sufficiently reliable in the face of all of the evidence before me. Care must be taken when evaluating the subjective evidence of a witness especially where the subjective evidence relates to a hypothetical course of conduct.[10] Mr Mould’s evidence in this respect was about what he would have done upon the hypothesis of the facts being as they were alleged. In part I have found that the facts alleged were not proven and, to that extent, Mr Mould’s subjective evidence of what he might have done in those circumstances is of no value. I have found, for example, that there was no dispute between Mr Zullo and AFML or AGL, and certainly no dispute affecting the Casey Childcare Centre or any of the assets which was the subject of the purchase contemplated by the Heads of Agreement. In such circumstances Mr Mould’s answer to a question upon the hypothesis that he had been informed about “the dispute between Frank Zullo and Frank Zullo’s companies and the Austock Group” is of no bearing. I have also found that the complaint about the legal position concerning the licence under the Casey Deed was immaterial to the conduct of the parties to the Heads of Agreement in light of the position taken by Mr Zullo and known to Mr Mould. Furthermore the subjective evidence of Mr Mould is not supported by contemporaneous documents and is inconsistent with the evidence of Messrs Zullo, Thompson and Anagnostou.
26 The plaintiff relied upon a summary profit and loss statement projecting income from 2010 to 2015. That showed that it was important to its economic investment that it secure rent and fees from the Casey Childcare Centre, and rent from the Melton Childcare Centre. That may be assumed and it may be accepted that it was important for the plaintiff, and to Mr Mould, that it was able to secure the substitution of the licensee under the Casey Deed. That objective, however, was not defeated or affected by the negotiating position adopted by Mr Zullo and AGL in relation to the properties not contemplated by the Heads of Agreement, nor defeated or affected by the terms of the Casey Deed in light of the position of Mr Zullo, as caretaker was willing to ensure a smooth transition of the Casey Childcare Centre to a new purchaser.
27 It is unnecessary for me to consider the additional questions about any quantum of damage had the plaintiff succeeded on liability. It will be sufficient to say that the plaintiff has otherwise made out the case for the amounts claimed as damage and, had the plaintiff succeeded on liability, would otherwise have been entitled to a repayment of the $400,000 plus the legal costs as incurred.
28 In the event, I will dismiss the plaintiff’s claim and hear argument on costs.
[1] Fraser v NRMA Holdings Ltd (1995) 55 FCR 452, 467 (Black CJ, von Doussa and Cooper JJ); Johnston Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; (2000) 104 FCR 564, 591 (French J).
[2] Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40; (1988) 79 ALR 83, 95 (Lockhart J).
[3] Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR 40-873.
[4] Ibid.
[5] Ibid 49,444.
[6] Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477, 489-90 (Bowen CJ), 508 (Jackson J).
[7] (2010) 241 CLR 357.
[8] Ibid 369-371 (citations omitted); see also Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31.
[9] Ibid 384-386 (Heydon, Crennan and Bell JJ).
[10] Riley v Penttila [1974] VicRp 67; [1974] VR 547, 572 (Gillard J).
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