Ahern v Associated Products Pty Ltd & Anor

Eventually there found its way into evidence a larger version of this document. It is exhibit 3. It contains this information: Month Sales Cost of Goods Profit Jan-12 $8,600.00 $3,620.00 $4,980.00 Feb-12 $11,850.00 $4,615.00 $7,235.00 Mar-12 $12,150.00 $5,355.00 $6,795.00 Apr-12 $11,785.00 $4,876.00 $6,909.00 May-12 $12,100.00 $4,863.00 $7,237.00 Jun-12 $12,863.00 $5,314.00 $7,549.00 Jul-12 $11,933.00 $4,650.00 $7,283.00 Aug-12 $13,444.00 $5,850.00 $7,594.00 Sep-12 $13,153.00 $5,685.00 $7,468.00 Oct-12 $14,100.00 $5,336.00 $8,764.00 Nov-12 $14,105.00 $5,532.00 $8,573.00 Dec-12 $14,985.00 $5,632.00 $9,353.00 Jan-13 $9,105.00 $4,005.00 $5,100.00 Feb-13 $14,150.00 $5,563.00 $8,587.00 Mar-13 $13,986.00 $5,535.00 $8,451.00 Apr-13 $14,666.00 $5,782.00 $8,884.00 May-13 $15,555.00 $6,010.00 $9,545.00 Jun-13 $13,150.00 $4,850.00 $8,300.00 Jul-03 $15,860.00 $4,532.00 $11,328.00 Aug-13 $14,896.00 $4,953.00 $9,943.00 Sep-13 $14,930.00 $5,314.00 $9,616.00 Oct-13 $16,050.00 $5,667.00 $10,383.00 Nov-13 $15,980.00 $6,324.00 $9,656.00 Dec-13 $14,755.00 $5,056.00 $9,699.00 Jan-14 $10,123.00 $3,099.00 $7,024.00 Feb-14 $17,332.00 $6,105.00 $11,227.00 Mar-14 $18,553.00 $5,875.00 $12,678.00 Apr-14 $15,855.00 $5,645.00 $10,210.00 May-14 $13,425.00 $5,055.00 $8,370.00 Jun-14 $14,125.00 $5,305.00 $8,820.00 Jul-14 $14,985.00 $5,564.00 $9,421.00 Aug-14 $15,300,00 $5,621.00 $9,679.00 Sep-14 $15,860.00 $5,931.00 $9,929.00 Oct-14 $15,300.00 $5,500.00 $9,800.00 Nov-14 $14,500.00 $5,300.00 $9,200.00 Dec-14 $7,850.00 $6,150.00 $10,195.00

One will note that the sales figures provided to the plaintiff at the meeting which was described in the evidence as "the spread-sheet", only contains the sales figures from January 2013 to December 2014. Exhibit 3 contains the sales figures commencing in January 2012 and ending in December 2014. The figures between January 2013 and November 2014 are the same, the one difference being that the figures for December 2014 are different but that is explicable by the fact that the "spread-sheet" that was provided to the plaintiff at the meeting on 19 December would have not had all the sales figures for that month.

1. Significantly, exhibit 3 also details the cost of goods and they were not supplied to the plaintiff at the meeting. They were not supplied to the plaintiff, according to Mr Sengos, because she did not ask for them. I find the failure to supply the cost of goods to the plaintiff somewhat surprising because they would have shown a much greater profit than what the plaintiff was led to believe, that the profit was about half of the value of sales. According to exhibit 3 the cost of goods was less than half of the sales made.
2. Paragraph [53] of the plaintiff's primary affidavit is this: "During the meeting as I looked at the spreadsheet containing the sales figures we had a conversation to the following effect: Paul: 'Its good money. Just look at the figures, they speak for themselves. This is a good business. There is no selling involved, the lollies sell themselves." Me: 'We'll take the figures home and discuss them. Do you have anything to support the figures?' Paul: 'They're the sales figures for Territory 4, I can't fabricate them. The sales are the sales and these are the sales for Territory 4.'" The words attributed to Paul "I can't fabricate them" are words which do not represent the idiomatic use of the English language. If one were to say something of that nature, one would idiomatically say, "I haven't fabricated them." However, the oral evidence establishes that Mr Sengos made no such statement at the time. At p 64 of the transcript the plaintiff is recorded as saying this in cross examination: "Q. Yes, you said they were the sales figure but there was no conversation about are they fabricated or are they not on that day, was there? A. That was the actual meeting. No, you're right, there was nothing about fabrication on that day. ... Q. It was only later, when you were challenging the figures, that the subject of fabrication came up in February the next year, correct? A. It came up at the second meeting at the coffee shop, correct." I appreciate that the transcript, as it currently stands, has, instead of the last full stop a question mark but that is a mistranscription of what the plaintiff actually said. She did not use a rising inflection to ask a question, she was in fact using a word to admit the proposition that the question put to her by the cross examiner was correct. The meeting at the coffee shop in 2015 occurred on 18 February 2015.
3. On the following page of the transcript the plaintiff indulged in what could be described as backsliding and then said she could not recall when fabrication was raised for the first time but she agreed it came up at the meeting on 18 February 2015. She then said she recalled it coming up "a few times" and that she knew it definitely came up in the conversation at the coffee shop on 18 February 2015. However, the probabilities favour the proposition that the question of fabrication was not raised until the plaintiff had suspicions about the truthfulness of the spreadsheet which she was given on 19 December 2014. It appears to me to be extremely unlikely that Mr Sengos himself would have said words to the effect that he did not provide fabricated figures at an initial meeting in which the plaintiff was showing eagerness to take up a distributorship for his company. Again, it appears to me that the plaintiff's recollection of what happened on 19 December 2014 has been coloured by her later relations and interactions with Mr Sengos, after she became suspicious of the accuracy of the sales figures provided to her at the meeting on 19 December 2014: the very sort of matter referred to by McLelland CJ in Eq in Watson v Foxman.
4. The next two paragraphs of the plaintiff's primary affidavit are these "[54] I wanted to know who was operating territory 4. Paul and I had a conversation to the following effect: Me: 'Who currently operates the territory?' Paul: 'Territory 4 is run by the company.' [55] I was very interested in finding out how flexible the business was. During the meeting we had a conversation to the following effect: Me: 'I'm looking for something that is flexible.' Paul: 'The company rep selling in the area now is only working two to four days per week. It's up to you how many days you work. The business is very flexible; you can work whenever you want.'" In [57] of the same affidavit, again referring to the conversation on 19 December, the company representative is described as "John" and it is common ground that the company representative was Mr John Kagelaris who was the vendor of Territory 3.
5. This should have raised alarm bells with the plaintiff because, according to the advertisement that she read for Territory 3, Mr Kagelaris was only working three days per week in that area and had been so working for the previous two years. Mr Sengos was telling her that Mr Kagelaris was the company representative and was working two to four days per week in Territory 4. It later came out at the end of the oral evidence that Mr Kagelaris was also the company representative in the Eastern Suburbs, so that Mr Kagelaris was selling in Territory 3, Territory 4 and the Eastern Suburbs and that, one would have thought, would have been fulltime work. However this was not raised with either Mr Sengos or Mr Kagelaris in cross examination. However, the plaintiff herself ought to have picked up the fact that Kagelaris was said to be only able to work three days a week in Territory 3 because of illness in the family but, nevertheless, was working between two and four days per week in Territory 4 as well as the company representative.
6. The price for which Mr Sengos was offering Territory 4 to the plaintiff was $108,000. She inquired what that in fact gave her. Mr Sengos told her that she was purchasing the goodwill of the first defendant company for discount confectionery in the Territory and she would also be obtaining the customer list. A representation was made that the territory had 106 existing customer accounts.
7. For each customer there was a card. The customer cards were later delivered to the plaintiff. Customer cards are annexed to the plaintiff's primary affidavit, they commence at p 99 of the annexure end at p 208. There are further customer cards between p 209 and 218 but they represent new customers acquired by the plaintiff and/or her husband. If my mathematics be correct, which is always problematic, the cards indicate that there were 110 customers, so that the representation about the number of customers is not erroneous.
8. In further conversation alleged to have taken place on 19 December, the plaintiff inquired as to how she would be introduced to customers and she was told that the company representative, that is Mr Kagelaris, would "introduce her to every customer". In [58] the plaintiff deposed to a conversation which indicated there were "no accounts" as such as the plaintiff would deliver goods to customers, the customers would pay for the goods in cash. Thus there were never any debtors nor any credit problems, for example, from cheques being dishonoured or by electronic debits being reversed by a bank. On the other hand it was pointed out to the plaintiff at the meeting that she was required to pay for stock delivered to her and that in fact the payment would have to be received before the stock was delivered to her and in that fashion the first defendant would not be out of pocket because of stock that had been delivered to a distributor.
9. Paragraph [63] of the plaintiff's affidavit records a conversation between the plaintiff and her father about whether the plaintiff should enter into the business. According to the plaintiff's affidavit, Mr Keyes thought that Mr Sengos was a "straight shooter" and there is no averment by the plaintiff that she disagreed with her father's assessment. The plaintiff went on to point out that she was happy with the area that might become hers because her two sons were at school at Trinity College at Summer Hill and that was in the area in question and she could drop them to school and collect them from school each day. The only doubt raised by the plaintiff's father was as to the size of the territory which he thought was smaller than the area of Territory 3. Nothing turns on that because what was important was the number of potential outlets rather than the geographical area in question, and also the density of the population. The inner west is generally more densely populated than what might now be described as the middle west and certainly the Sutherland Shire.
10. Later on 19 December the plaintiff sent to Mr Sengos an email asking for a copy of the purchase agreement. That was provided to her. However, she did not take any legal advice. The document was read both by her and by her husband, who himself is a businessman and the owner of a distributorship. However the plaintiff's husband's experience in the distribution of goods is essentially in the bicycle industry and there is a big difference between selling bicycles and selling lollies. However, one would think that Mr Ahern had some business acumen and experience, and could assist Mrs Ahern when reading the proposed purchase agreement.
11. On the size of the area, I should cite [69] of the plaintiff's primary affidavit: "The business appeared to be a great opportunity and seemed to suit what I was looking for. As I was looking over the documents Paul had given my husband and I [sic], I noticed that territory 3, being the territory advertised by BCI Business Brokers was considerably larger than territory 4 but the sales figures for each were the same. I decided to question Paul about this before I made any final decision to sign the distribution agreement for territory 4." In oral evidence the plaintiff told me that the figures were not the same but they were similar. I raised that question with her myself because it appeared to me that if the sales figures for each of Territories 3 and 4 were the same that should have rang an alarm bell as it was highly improbable two separate geographical areas should return exactly the same sales figure month after month for a period of two years. However, the plaintiff said that they were not the same but similar.
12. The response to the plaintiff's email transmission concerning the size of the territories was a request by Mr Sengos that the plaintiff telephone him. According to [72] of the plaintiff's affidavit she could not recall if she then had any conversation with Mr Sengos about that issue. The next relevant communication was an email sent by Mr Sengos to the plaintiff and her husband at 7.40pm on 22 December 2014. The email appears to have been intended to be, and accepted as, a goad or stimulus to the plaintiff's entering into the distribution agreement. The email is this: "The agent that sold the Canterbury run has a couple of people who have showed interest in buying that run and I am sure that one of them would buy the Marrickville run that I have discussed with you guys. I am flexible with settlement date, I would like to have a signed contract and a deposit as soon as possible however. What stage are you both up to? I do not want to seem too pushy but at the same time I do not want to lose the other 'potential' buyers either. Can you give me an answer by the close of business tomorrow as to whether you wish to proceed?" The plaintiff's affidavit then continues thus: "[74] Before making any final decision, I looked over the sales figures Paul had given me for territory 4. At this time: (a) I had been provided with a spreadsheet setting up the revenue of the business for the past 2 years. I relied on the accuracy of the figures and did not make any independent inquiries as to their accuracy or authenticity at the time; (b) the revenue identified in the spreadsheets would greatly assist my family; (c) the location of the territory and the flexible hours I could work seemed fantastic; (d) I had been told that there was an existing customer base; ..." In [76] of her affidavit the plaintiff formally states that she relied on the revenues spread out in the spreadsheet in entering into the distribution agreement. I have no doubt about that.
13. The plaintiff, as I earlier indicated, signed the distribution agreement on 23 December 2014 and on the same day transmitted a deposit of $10,800 to the first defendant's bank account. The plaintiff let Mr Sengos know on the morning of 22 December 2014 that she wished to proceed and that she would email him a copy of the signed contract on the following day and confirmed by email on the following day the fact that she transferred the deposit to the first defendant's account.
14. There are some things about the contract which ought be noted. Most of those things to be noted are contained in Sch 1. The contract fee was, as I have indicated, $108,000. That is to be compared with the advertised fee for Territory 3 of $129,000, which would have included some commission payable to BCI Business Brokers. The term of the plaintiff's contract was two years with a renewal term of two years. That is to be contrasted with the term of the Territory 3 contract of four years with an option to renew for four years. Item 13 in the schedule refers to an administration fee of $2,500 plus GST which was an amount payable by the plaintiff to meet the first defendant's "reasonable costs and expenses for consenting to the transfer, including but not limited to legal fees to prepare all necessary documents."
15. Clause 35 of the agreement refers to a minimum monthly purchase. The minimum monthly purchase stipulated in Sch 1 was $5,000 and, according to cl 35, that minimum monthly purchase amount was to be increased by 10% each six months. An example is then provided in cl 35 of how the clause was intended to operate and it operated in this fashion: as at the commencement of the agreement, January 2015, the minimum monthly payment was $5,000; commencing on 1 July 2015 increased to $5,500; commencing in January 2016 it would increase to $6,050 and in July 2016 to $6,650. Were the contract still operative the minimum monthly purchase would have been in January 2017 $7,320.50.
16. One must contrast the term of the agreement entered into by the plaintiff for Territory 4 with the term offered for Territory 3. The term for Territory 3 was twice that for Territory 4. The purchase price was roughly the same, indicating that the distribution agreement for Territory 4 was not as favourable to the purchaser, in this case the plaintiff, than was the distribution agreement for Territory 3, the one that was in fact purchased by Ms Pia Arias.
17. As I have already mentioned, the plaintiff commenced working under the contract on 13 January 2015. She did not commence at the beginning of January because she and her family went on a planned annual holiday. The plaintiff appears to have last worked under the contract on or about 28 February 2015.
18. According to the plaintiff's written submissions, MFI 13, the plaintiff operated the business within Territory 4 until 25 February 2015. According to [322] of the plaintiff's primary affidavit, her son was sick on 26 February 2015 and at that time she did not think he would be well enough to leave him to go to see customers with John Kagelaris on 27 February 2015. On 26 February 2015 she sent to Mr Kagelaris a text message letting him know that she would not be able to meet with him and visit customers on 27 February 2015. On that day the plaintiff commenced receiving emails from Mr Sengos requiring her to purchase stock from the first defendant in accordance with the distribution agreement. According to the plaintiff's affidavit [326], she did not wish to purchase any more stock from the first defendant on that day because as far as she was concerned, the "customers" were not purchasing the stock that she had ready to sell to them and therefore she did not believe there was any need to purchase further stock albeit that she was required by the contract that she had signed to do so. In [326] of her affidavit the plaintiff also stated that she believed that Mr Sengos had "fabricated the sales figures and lied to me about the customer base for the territory". It appears to be common ground that the plaintiff did not work after 25 February 2015. The first defendant issued a breach notice to the plaintiff pursuant to the contract on 10 March 2015 and a termination notice on 22 March 2015. Those events led to the commencement of the current proceedings.
19. The evidence discusses at some length what happened between 13 January 2015 and 25 February 2015. I have been provided with a mountain of emails, the method of the collation of which makes it almost impossible to read with alacrity and the process of reading them is extremely time consuming.
20. However, one must go into the events immediately following 13 January 2015. It is common ground that the plaintiff paid to the defendant the full purchase price required by the contract, namely to $108,000. On 2 January 2015 the plaintiff received an email from Mr Sengos. Attached to that email were a tax invoice for the first lot of stock that she ordered from the first defendant and a spreadsheet identifying that stock. On 9 January 2015 the plaintiff paid the cost of the first order. The amount in question was $5,901.83. Later in the afternoon of that day a truck arrived at her home containing two pallets of stock together with the customer cards for Territory 4, product information sheets and business cards. The customer cards were in a box. The product information sheets which she received are annexed to her affidavit, between p 85 and 98 of the exhibit to the affidavit. They described a number of items of confectionery and the retail price, the cost price to the retailer and the amount of profit that the retailer could make by selling these items of confectionery to consumers at the recommended retail price. In [110] of her affidavit the plaintiff pointed out that each time the first defendant had new products on offer she would receive a product information sheet regarding the new products from the first defendant. On the evening of 10 January 2015, the plaintiff received another email from Mr Sengos, attached to which was what was called the "suggested car stock list". This was a list of stock that the plaintiff should take with her when she went out to transact business.
21. On 12 January 2015 the plaintiff unpacked the stock that had been delivered to her on 9 January 2015. She had placed shelving in the garage at her home and she placed the majority of stock on the shelves sorting the stock into different categories. She also placed the stock suggested by Mr Sengos in the email concerning the "car stock" in her motor vehicle. On 13 January 2015 the plaintiff met with Mr Kagelaris outside a shop of a customer. Much of what is said to have occurred on that day is disputed by Mr Kagelaris. Some of what the plaintiff says occurred on that day appears to me to have been reconstructed with hindsight and with the views that the plaintiff eventually formed about the defendant's business and the integrity both of Mr Sengos and Mr Kagelaris. Suffice to say that according to the plaintiff she and Mr Kagelaris visited about ten customers on that day.
22. On the afternoon of that day, at 4.03pm, Mr Sengos sent to the plaintiff a polite email. He asked of her, how was her first day and how much did she sell? The response sent by the plaintiff to Mr Sengos at 5.29pm that afternoon is this: "Wow, a lot to take in, but I enjoyed it. John made me laugh a lot. I did $310.00. There appeared to be a lot of "buyers" away. Hopefully tomorrow will be better in sales." One will note that the plaintiff said that she enjoyed her day's work. There is no suggestion in this contemporaneous email that the plaintiff had any concerns about things such as John's being known to the shopkeepers or about the shopkeepers not recognising him or about his being brusque or of his not introducing her to shopkeepers.
23. On Wednesday, 14 January, the plaintiff went out again with Mr Kagelaris. In [141] of her primary affidavit the plaintiff said, "I made very few sales on this day". When pressed in cross examination she could not remember how much was sold on that day. Eventually it was agreed that she in fact sold stock for $288.50 on that day. According to the same paragraph of her affidavit she visited about ten further customers on that day.
24. Thursday, 15 January 2014 ended up being a bit more profitable day. On Thursday, 15 January the plaintiff was accompanied by her husband, Tim. I trust he will not take it amiss if I so describe him for ease of reference. At [144] of her affidavit the plaintiff said that her husband sold about $600 worth of stock on that day. In the same paragraph she said, "about $300 of stock was sold to a brand new customer that he [Tim] had found (fruit shop)." The solicitor who appeared for the defendant, Mr Hassett, at the hearing prepared a document which was marked for identification 1 and eventually became exhibit 4. It contained his calculations of what was sold by the plaintiff or on her behalf during the four days commencing 13 January 2015. He looked at the sales recorded on each of the customer records and then placed the price of each item beside the item sold and that enabled him to make a calculation of the value of the sales. Mr Hassett brought the total value of the sales on that day to $667.80. However there were certain errors or things that were mistakenly or wrongly taken into account and, for example, Mr Hassett did not allow for specials. It was eventually conceded by Mr Hassett that he would agree with $600 worth of stock attested to by the plaintiff. However, on the new customer card there was not $300 worth of stock shown but only $91.80 of stock. However, Mr Ahern said this, at transcript p 87 "It was $91 but I delivered the stuff that they didn't have in the car the next day but failed to write it onto the sheet, which is my mistake." In answer to the next question he confirmed that it was around $300 of stock that had been sold to this new customer and he wasn't exactly sure about the value of the stock that he delivered but did not record, but, all told, it was worth approximately $300. He agreed that that indicated the sales on that day ought to have been recorded as being approximately $800 and that can be found in transcript p 88, question commencing at line 7.
25. On Friday, 16 January 2015 it was eventually established that the plaintiff sold stock worth $389.20. The total for that week was, leaving aside the extra $200 that the plaintiff's husband did not record, $1,587.70. If one adds to that the $200 that the plaintiff's husband did not record, that indicates sales for the four days of $1,787.00 or almost $1,800. The significance of those figures is that in her affidavit the plaintiff said this at [151]: "The first week of trading I had sold about $800 worth of stock. I had seen about 15 existing customers each day. I had attempted to make sales on four week days. Either my husband or I visited almost all of the existing customers by the end of the first week. Although I had not made very many sales in the first week, I was still very optimistic and positive about my new business." To state that her sales for the first week "were about $800" is a gross under exaggeration. The sales were closer to $1,800. On 15 January the plaintiff visited about 15 customers. In [151], which I have already quoted, the plaintiff said that she saw about 15 customers each day. Assuming that she saw 15 customers on the Friday, then on her own evidence the plaintiff or her husband had visited 50 customers, which is less than half the customer base, although in [151] she attested to visiting "almost all of the existing customers", which is gross hyperbole.
26. Again this points to the plaintiff's reconstructing what actually occurred from her memory after her memory had been clouded by subsequent experiences with the business and with Mr Sengos and with Mr Kagelaris. It does suggest that the plaintiff's evidence is unreliable. The plaintiff agreed in cross examination that it was clearly incorrect to say that she'd actually seen almost all of the customers by the end of the first week. That concession is recorded on transcript p 49, line 32.
27. The cross examination of the plaintiff then turned to this, commencing at p 50: "Q. But my point is if you took a random four days in January, which this is [13-16 January] and you've made $1,600, these figures of $9,105 and $10,123 are more or less equivalent to that sample aren't they? A. For your example, yes." I should point out that $9,102 were the sales from January 2013 for Territory 4, according to the spreadsheet and $10,123 were the sales for January 2014 according to that spreadsheet. Of course, if the plaintiff could make sales of $1,600 over four days that would indicate that in five days she could sell $2,000 worth of stock and over a four week period she could sell about $8,000 worth of stock. If one adds the extra $200 of stock per week that the plaintiff's husband did not record, one can see that she could have earned in a four week period about $9,000 if those figures be accurate. I should indicate that it appears to be accepted that the sales for January in each year were down compared with other months of the year. For example, the sales for January 2012, in Territory 4 were $8,600 which is far less than the sales for each other month in that calendar year for that territory. Similarly the sales figures for Territory 3 for January 2013 were much less than for any other month in that calendar year and the same can be said for the sales in January 2014 for that territory compared to the records for the other nine months reported in the spreadsheet for Territory 3 contained in BCI Business Broker's advertisement for that territory. One could see therefore that there was no real reason to query the validity of the figures provided by the defendants to the plaintiff on 19 December 2014 based on the plaintiff's selling experience during the four days commencing on Tuesday, 13 January 2016.
28. I return to the cross examination that I just commenced quoting: "Q. Now you maintain this spreadsheet is a forgery, do you not? A. I never use the word forgery. Q. Well let me put to you there are two possibilities here. Either Mr Sengos recorded these figures in the manner that he says in his affidavit, which I'll come to in a minute, or he made them up. There's only two possibilities, aren't there? Option A or option B? A. Yes. Q. Not option C. No one else could have done this could they? You can't think of an option C? A. No. Q. So really, we're down to he forged them or he didn't. Is that what we're down to? A. I never used the word that they were forged. HIS HONOUR: Forgery has got a meaning in law that is incorrect. What you're saying is that these are just invented or concocted or incorrect? HASSETT: Yes. Thank you, your Honour. Q. They're concocted. Is that what you say in these proceedings? A. No. Q. But I thought that was your complaint? A. I said they were misleading. Q. Well they're only misleading if they're wrong aren't they? A. Yes. Q. If they're right they're not misleading? A. Correct. Q. The basis that you say they are wrong is what? A. Is from the figures of the sales. Q. On what basis do you assert that these figures are wrong? A. On the figures of the sales. Q. Your sales? A. Yes. Q. You say that because you couldn't subsequently make these kind of sales, the sales on p 17 [the spreadsheet] must be incorrect? A. Yes. Q. That's what you say? A. Yes. Q. But of course different people have different selling abilities, do they not? A. Of course. Q. And Mr Kagelaris may have been a better salesman than you. Might that not be possible? A. Sure. Q. And he's known these people, or many of them, for 13 years as we've talked about. Correct? A. Yes. Q. He may have simply been more successful at selling than you, might that not explain it? A. Yes."
29. The plaintiff gave up selling the defendant's products because she could not achieve the level of sales that had previously been achieved by Mr Kagelaris when he was operating this Territory 4 on behalf of the first defendant, that proposition, of course, being based on the accuracy of the sales figures contained in the spreadsheet. The defence case is that there is no hard evidence that the figures contained in the spreadsheet are incorrect, that they are misleading, that they are deceptive, that they are, so to speak, a thing of Mr Sengos' imagination, or wishful thinking. The plaintiff believes that the figures were invented, concocted, conjured out of nowhere because she could not reach them.
30. In these proceedings the plaintiff bears the onus of proof. She must prove to the Court's satisfaction that the figures are deceptive or misleading or likely to mislead or to deceive. The defendant bears no onus of proof. The defendant does not have to establish that the figures impugned were actually made. That is the legal position. The evidentiary position of course can change, depending on what evidence be adduced.
31. The evidence discusses in detail some other specific days of sales. The first to which I should turn is Friday, 6 February 2015. On that day the shops were visited by Mr Tim Ahern. On that day, at 5.54pm, the plaintiff sent an email to Mr Sengos. It says this: "Also Tim did 12 shops today with a total of $115.00. Hmmm!!!! And he has been in sales VERY successfully for 18 years." At 6.09pm Mr Sengos sent the plaintiff this email "Were these 12 new shops or existing?". At 6.22pm Mr Sengos sent a further email to the plaintiff "Can you please send your list of the 12 shops that Tim called on today for $115.00 in total sales." At 6.27pm the plaintiff sent Mr Sengos an email containing this list of businesses: "Houda mixed business -- Roselands Ezymart - Earlwood Croydon park petroleum - Croydon Park Van Pho - Dulwich Hill Izmir Market - Dulwich Hill Convenience store - Campsie Supermarket Beamish -- Campsie Mixed Business - Campsie King of the pac - Kingsgrove 5 star handy - Kingsgrove"
32. Mr Sengos on Monday, 9 February 2015, visited each of those stores. He then sent an email to the plaintiff at 4.34pm. The relevant part of the email is this "...I have today called on the outlets you mentioned with the following results below in [capital letters] - there are three orders can you please deliver these within the next 48 hours. The one with the * told me that the last rep they seen was John!! ... Houda mixed business - Roselands: ORDERED 3 CLASSIC POPS AND 1 GORILLA GUM Ezymart - Earlwood: CLOSED ON MONDAYS Croydon park petroleum - Croydon Park: SALES ARE VERY SLOW AND DOES NOT NEED STOCK Van Pho - Dulwich Hill: ORDERED 1 SPARK GUN AND 1 GRAPE ZAPPO Izmir Market - Dulwich Hill: HAS ENOUGH STOCK Convenience store - Campsie: PURCHASED FROM TIM LAST WEEK Supermarket Beamish -- Campsie: OWNER IS OVERSEAS FOR THE LAST MONTH AND NOT BACK FOR ANOTHER 3 WEEKS Mixed Business - Campsie: SHOP CLOSED King of the pac - Kingsgrove: SALES VERY SLOW AND HAS ENOUGH STOCK 5 star handy - Kingsgrove: HAS PLENTY OF STOCK" There is reference in this email in lines that I have omitted to a visit to Carlton Fresh at Carlton which doesn't advance the matter anywhere but also reference to a new shop owned by Patricia on top of Kingsgrove Station which placed an order for 1 Gorilla Gum. The email records three further orders that Mr Sengos was able to achieve, at least two of them being despite the visit of Mr Ahern on the preceding Friday.
33. Mr Ahern sought to fill the extra orders that had been obtained by Mr Sengos on Monday, 9 February. He went in particular to Van Pho at Dulwich Hill to deliver the Spark Gun and Grape Zappo. When one goes to the Van Pho card on p 142 of the annexure to the plaintiff's primary affidavit, one will see that the Spark Gun has been inserted but then deleted by being cancelled and the Grape Zappo, which was actually delivered by Mr Ahern.
34. In his affidavit of 22 July 2016, which is exhibit C, Mr Timothy Ahern said this: "[70] When I arrived at the Asian Grocer and handed the owner the lollies and toys, I observe the owner look over the lollies. The owner of the Asian Grocer then became very angry. He spoke to me aggressively and we had a conversation to the following effect: Customer: 'Where is the use by date? It has to have a use by date.' I then looked at the lollies and noticed that they did not have a use by date on them. I thought this was very strange. I had not previously realised that the lollies did not have a use by date on them. I apologised to the owner and left the shop promising to return with properly marked lollies. [71] Immediately after leaving the Asian Grocer I telephoned Paul. We had a conversation in words to the following effect: Me: 'The lollies the Asian grocer ordered do not have use by dates on them. That's not right.' Paul: 'Don't worry about it. I will send you some stickers with use by dates on them and you can put them on the lolly bucket.' Paul's response was alarming. I did not think that that was the right thing to do. [72] A few days later an envelope arrived in the post at our house. The envelope contained stickers with use by dates on them. My wife and I no longer have the envelope or stickers which were received. [73] At no stage did I place any of the stickers on the lollies, lolly buckets or boxes." When citing that evidence and other evidence concerning "use by" dates I have used deliberately the words "use by" rather than as typed in every document I have seen in this case "used by", which of course is the wrong appellation.
35. An aside is here necessary. One of the documents sent by Mr Sengos to the plaintiff was a document produced by the NSW Food Authority. It is headed "Understanding Best Before dates & Use By/Expiry dates". It says this "Food labels have date marks to tell us about the shelf life of foods. These date marks help us tell how long food can be kept before it begins to deteriorate. All food with a shelf life of less than two years must be date marked. Many canned foods, such as bake beans etc are not date marked because they are safe and keep quality for over two years. USE BY or EXPIRY DATES: FOODS MUST BE EATEN or THROWN AWAY BY THIS DATE After this date foods may be unsafe to eat even if they look fine because the nutrients in the food may become unstable or a build-up of bacteria may occur. BEST BEFORE DATES: FOODS ARE STILL SAFE TO EAT AFTER THIS DATE The 'Best Before' date indicates that the product may have lost some of its quality after this date passes. FOODS CAN BE LEGALLY SOLD AFTER BEST BEFORE DATE You can expect these foods to retain their colour, taste, texture and flavour as long as they are stored correctly." The document from the food authority itself states that not all foods have to have either a best before, use by or expiry date. Only if the shelf life of the product is less than two years must such a date be marked. There is a clear differentiation between a use by or expiry date and a best before date. If the confectionery in question had no use by date or best before date that ought to have been explained to the shop proprietor by Mr Ahern but, clearly, he was unaware of the information contained in the document which I have just quoted. It appears that Mr Sengos himself may have been oblivious to the same distinctions.
36. Mr Sengos, however, flatly denied that he manufactured any stickers, that he sent to the plaintiff or Mr Ahern to be affixed to any buckets of confectionery that he had sold to the plaintiff for her to sell to retailers. Despite the averment by Mr Ahern in his affidavit that no stickers could be found, some were actually produced to Mr Sengos. There were four such stickers, each bore a best before date of 30 January 2016. Those stickers were marked for identification 5. There was clearly a dispute as to whether those stickers were produced by Mr Sengos and sent to the plaintiff. Eventually the plaintiff found an email. The email bears date Friday, 13 February 15 at 2.55pm. It is sent by the plaintiff to Mr Sengos. It says this. "Stickers received, with thanks. Please direct all future correspondence to our PO Box [...],Taren Point 2229." I have deliberately omitted to state the post office box number lest it still be in use by the plaintiff and/or her husband.
37. After that email was produced there was no objection to the tender of the stickers. A trivial dispute arose about this item of evidence, as to whether the bucket of lollies to which the sticker was to be affixed was a bucket of Spark Guns with candy, a promotion for which can be found on p 91 of the exhibit to the plaintiff's primary affidavit, or whether it was a Racing Car with candy, a promotion for which can be found on p 89 of the exhibit the plaintiff's primary affidavit. The contemporaneous documents indicate it was a Spark Gun with candy rather than a Racing Car with candy. Nothing turns on that at all. However, I am satisfied, on the balance of probabilities, by the evidence of Mr Ahern and by the stickers, which were MFI 3, which were tendered with the email I just quoted as exhibit J, that there was a conversation between Mr Ahern and Mr Sengos about a missing label, and that a tag was manufactured by Mr Sengos and sent by him to the plaintiff in the expectation that she and or her husband would attach such tags to any buckets of candy that did not have them, in order to facilitate the sale of such buckets of candy.
38. Clearly, Mr Ahern was taken aback by such behaviour, but, as I indicated at the time, it merely indicated that Mr Sengos might be an unscrupulous businessman. But, of course, there may not have been a need for the confectionery to have a best before sticker attached to it. However, it does nevertheless, in my view, point in the direction that Mr Sengos may be an unscrupulous businessman who did do anything which he could to promote the sale of product that he was in fact selling to distributors of his confectionery and that he might do so merely to obviate the need to explain the true position to the shopkeeper, to obviate any queries. However another thing it does tell me is that Mr Sengos was not a truthful witness. However, the mere fact that Mr Sengos may not have been a truthful witness does not mean that the spreadsheet, which has become the centrepiece of this case, was manufactured or concocted or was false, deceptive or misleading.
39. Although I like to describe events in chronological order, I have placed myself out of order because of the way in which the case was conducted. I had canvassed the four days commencing on Tuesday, 13 January. I then skipped to Friday, 6 February and Monday, 9 February. I return now to 19 January. On that day the plaintiff herself appeared not to do any canvassing of shopkeepers. In short, she did not go to work. However her husband did visit shops, that evidence to be found at transcript, p 58, line 15. However no sales were recorded on that date. That was admitted by Mr Hassett, p 58, line 11. On Tuesday 20 January 2015 the plaintiff worked. Sales appear for that day to have been about $170. The evidence refers to customer cards on pages 203, 99, 126 and 210 as recording purchases on that day. No sales were recorded on Wednesday 21 January, or on Thursday 22 January. Sales were recorded on Friday 23 January to customers whose cards are numbered 140 and 188, by the pagination of the annexure to the plaintiff's primary affidavit.
40. The plaintiff said that at the commencement she decided to mark each of the customer cards with an attendance even if no purchases were made so that she could ascertain when she had visited each customer. Unfortunately the evidence, without my having to undertake the role of lawyers for the parties does not enable me to ascertain whether the plaintiff physically attended other premises on Wednesday, 21 or Thursday, 22 January 2015. I am not going to go through 115 cards to try to find that myself when solicitors and barristers who can charge for doing so, fail to do so.
41. It is clear that the plaintiff decided not to continue with the contract because she could not achieve the level of sales that the figures provided to her on 19 December 2014 indicated that she should be able to achieve. From that experience she formed the view that the figures which she was given on 19 December 2014 must have been made up, concocted, doctored, exaggerated or in some other way inaccurately reflect the true position that existed between January 2013 and November 2014. The proceedings before me essentially are an attempt by the plaintiff to prove such contention or position.
42. The matter is complicated, quite clearly, by inaccuracies, exaggerations and reconstructions of the plaintiff herself, based, I formed the view, on a reconstruction of what happened after the event. There are a large number of inconsistencies, some of which have been explored by the parties' lawyers and some of which have not been. For example, Mr Tim Ahern said in evidence about the initial meeting on 19 December 2014 this about the stock held at the warehouse of the defendant, which was in fact a storage unit at Storage King at Homebush Buy, the size of a single car garage: "Q. When you were there meeting for the first time on the 19th, did you look over the stock that was there? A. The only stock that was there was some Gorilla Gum. Q. That was it? A. Pretty sure, yeah. There were a few of his might have been one other item but there wasn't much there because at the time he was refurbishing, was what he told us. Q. How long did you spend there? A. 45 minutes to an hour. Q. I suggest to you all the common items were there on display, available for you to look at? A. If you count on the floor, on a pallet, on display. No. Q. Well did you do any examination of any of the product at all? A. Yes. Looked over the Gorilla Gum. Q. What else? A. That's the only thing I can remember. He told me that that was the best-selling item. HIS HONOUR: Q. Sir, you're referring to -- what we're referring to at the moment is paragraph 32 of your affidavit. Mr Ahern you've got that there? A. Yes. Q. And he said, 'When I arrived at the storage unit I observed there were two or three pallets on the floor of the storage unit.' Now was there shelving as well as… A. No. Q. How big was the storage unit? About the size of a single car garage or double garage? A. Single car garage. Q. All that was in there was two or three pallets? A. Correct, your Honour. Q. You said on top of each of the pallets were boxes of Gorilla Gum. Could you see below the Gorilla Gum as to whether there were any other different packets beneath them? A. From what I can recall, your Honour, there was. It was shrink wrapped with plastic. Q. So does that mean you couldn't see what was behind the shrink wrap? A. Not very well, your Honour." However that evidence appears to be inconsistent with what both the plaintiff and her father said. At transcript p 75 the plaintiff gave this evidence: "Q. ...And when you went to the premises on 19 December for the first time, did you look around the shelves and see some of the stock? A. Yes." Her father said, in his affidavit sworn on 13 July 2016, exhibit E, at [22]: "At times when Paul, Tim and my daughter discussed the business I wandered around the storage cage and looked at the type of lollies that the business sold. I could still hear the conversation was taking place whilst I looked at the lollies."
43. Lest I be thought to be hypercritical I should record this. I formed a favourable impression of Mr and Mrs Ahern. I do not believe they intentionally set out to deceive me but I believe that their evidence has been coloured by their subsequent interaction with Mr Sengos and his business and by the course of conduct in which they have engaged since their relationship broke down, in particular the course of these proceedings. I have only thus far referred briefly to the evidence of Mr Sengos and pointed out that on one view of it he acted as an unscrupulous businessman and certainly he set out to tell me things which were blatantly untrue. The production by the plaintiff's Counsel to him of the "best before" stickers should have warned him that his evidence was being questioned. Nevertheless he persisted with a denial, a denial which I cannot accept. The email supports the authenticity of the stickers, as deposed to by Mr Ahern, and is borne out by the fact that the stickers were delivered to the plaintiff's home and she was in the email asking that any further postal communication be directed to a post office box at Taren Point, rather than her residence at Yowie Bay. That is a mere incidental thing but it corroborates the veracity of the email.
44. I turn now to the evidence of Mr Paul Sengos. I turn initially to his evidence concerning how he interacted with the various distributors who had been appointed by the first defendant. In his affidavit of 22 September 2016 Mr Sengos said this: "[11] From time to time my distributors sell their businesses. This was the case with 'Territory 3' (being the Sydney [Bankstown] area) referred to at pars 16 - 42 of Bronwyn's affidavit. As at December 2014, Mr John Kagelaris was my distributor for this area and he placed the business on the marked with business broker BCI." [12] An information memorandum was put together with the broker. Now exhibited to me and marked PS 1 is a folder of documents. Behind Tab 1 and at p 1 to 13 is a copy of that information memorandum. [Yesterday I referred to this as the BCI advertisement.] [13] At p 11 is the 'single page document' referred to in par 26(b) of Bronwyn's affidavit. I note from this page that monthly sales for the territory are set out. I know these figures to be correct. I supplied the stock for which these sales were made. I have checked them against my records. Moreover, I know from long experience and from the sales made by all my other distributors that this is the kind of sales level ($10,000 $15,000 per month) to be expected from the territory by somebody who diligently applies themselves to the task at hand. ... [17] As Tim [Ahern] sets out in par 24 of his affidavit, Territory 4 was 'a company serviced territory' and by this expression, I mean there was no independent distributor with a Distribution Agreement such as the one at p 20 64 of Exhibit BA 1 to Bronwyn's affidavit. John had asked if he could buy this territory for a low price years before but I wanted to preserve it for sale in due course. So I operated it on a different basis to the other areas. [18] For other areas, when my distributors placed orders, I issued invoices such as the ones I now place behind Tab 2 of exhibit PS 1 as examples. Records were thus kept as between the distributor and the first defendant as to sales made. These sales were totalled by me and kept on an Excel spreadsheet as per the examples I include behind Tab 3 of exhibit PS 1 which relate to those same invoices as I included behind Tab 2. These records were used to prepare the Information Memorandum behind Tab 1. I also include behind Tab 3 some blank order forms used by my distributors."
45. The following paragraph, which I shall in due course cite, sets out the differences for the company serviced territory, being Territory 4 the Strathfield territory. When I go to Tab 2 I find formal tax invoices the first bearing number 0431, dated 10 September 2016, addressed to the distributor in South Australia. Behind that tax invoice is a list of all the items that the distributor had ordered. The next document under tab 2 is tax invoice number 0434, dated 13 September 2016, addressed to Tracey Johns but I do not know which distributorship belonged to Ms Johns. The tax invoice is for the sum of $979.77 representing sales of $890.70 together with GST of $89.07. Behind that formal tax invoice is also a list of the products that Ms Johns had ordered.
46. Behind Tab 3 is another tax invoice, numbered 0433, directed to the distributor in Christchurch, dated 11 September 2016, for a total of $23,404.22 for which there was free freight provided by the first defendant and for which no GST was payable. Behind that tax invoice is also a list of the products ordered by the distributor in Christchurch. Behind that tax invoice is tax invoice 0432 addressed to Mr Ferguson at Pottsville in this State who was the distributor for the Gold Coast in Queensland. That tax invoice was for $971.08 being product amounting to $882.80 plus the appropriate amount of GST. Again, behind that tax invoice, is a list of the products that had been ordered by the distributor for the Gold Coast.
47. Paragraph 18 of Mr Sengos's affidavit clearly indicates that such records were made in respect of the distributorship owned by Mr Kagelaris, being Territory 3. At least one ought be forgiven for thinking that from that to which Mr Sengos deposed in paragraphs of his affidavit that I have just quoted. However, the oral evidence indicates something else. Towards the commencement of the cross examination of Mr Sengos, the second defendant, Mr Klooster for the plaintiff drew Mr Sengos's attention to what he had deposed to in his affidavit, and at transcript p 103 line 40 the following question was put and the ensuing answer was provided: "Q. It's safe to say then that all these areas, other than area 4, operate on the same terms as the document that my client signed with your company? A. Correct." At transcript p 107, line 28, this evidence was given. "Q. You draw a distinction in your affidavit between territory 4 and, effectively, all the other territories? A. Yes." At the foot of transcript p 109 Mr Klooster took Mr Sengos to the question of records relating to Territory 3, the Bankstown area, that was the subject of the BCI advertisement which had been sold in December 2014. On transcript p 110 Mr Sengos agreed that he had provided information to BCI as had Mr Kagelaris. The evidence then continued thus:. "Q. You say in par 18 of your affidavit - you explain in par 18, effectively, what we have just discussed which is your company issues invoices when a distributor orders stock from it. Do you see that? A. Yes, I do. Q. You say that these tax invoices form records. In the second sentence you say, 'Records were thus kept as between the distributor and the company as to the sales made'? A. Correct. Q. Then you say, in the second last sentence you say you use these records to prepare the information memorandum behind tab 1, correct? A. Correct."
48. However at the foot of transcript p 111 the witness interjected to make a clarification. The clarification was that no invoices had been delivered by Mr Sengos to Mr Kagelaris for the product provided to him for Territory 3. That to which Mr Sengos deposed in par 18 of his affidavit is clearly wrong, false. There are no records in the nature of tax invoices behind tabs 2 and 3 of his affidavit which had been provided by him to Mr Kagelaris for Territory 3 which could have been used to prepare the BCI advertisement. The interjection by Mr Sengos, which is recorded at the foot of p 111 of the transcript results, in my view, from Mr Sengos seeing where the cross-examiner was heading and interjecting to try to cut off potential criticism of his evidence.
49. On the following page on the transcript, Mr Sengos said that excluding both Territories 3 and 4, which had a different method of operation, the other distributorships operated with the use of written records. This evidence was then given: "Q. What are you saying, sir? A. I'm saying it was a different method for area 3, different method for area 4 and a different method for all the others. Q. Lets break that down. What you do for area 4 is set out in par 19 [of your affidavit], correct? A. Correct. Q. Is it safe to say that what you do for any other area, except area 4 and 3, is effectively invoice them in the manner we were talking about before? A. Yes, it is, yeah. Q. Can you explain what you do for area 3, sir? A. Area 3 was an area that John serviced, it was his territory. He would come and pick up stock and I would keep a record of what stock he took and he wouldn't pay me for it, because he didn't have the ability to pay, and it wasn't invoiced because there was no payment made. Q. Is what you're saying, is there any difference between the process that you set out in par 19 and the process you use with John in area 3? A. Yes. Q. What are those differences? A. The difference is he would just place an order and come and pick up the stock, and I would keep a record of the money, of the stock he took. There was no cashing up as such. There was no bringing stock back and cashing up. It was splitting out how much he'd sold and all that for that particular territory at the warehouse. Q. If we go to p 11 behind tab 1 [the sales figures for Territory 3] his Honour has already identified that the cost of the goods is what the company sells the goods to John [for], correct? A. That's correct. Q. You're saying John doesn't give the company money, is that right? A. Correct."
50. It is now convenient to go back to what the second defendant said as to the way in which Territory 4 operated according to his affidavit. He said this in par 19 of that affidavit: "[19] For this company serviced territory, we did not have records in this form. Rather, the way I operated it was as follows: (a) John Kagelaris - as operator of Territory 3 - next door - operated this area; (b) Because he was selling company stock on consignment, rather than purchasing stock in his own name, he would come by the warehouse once a week and pick up what he thought he could sell for that week; (c) I would keep a note of what he took; (d) He would come back the next week with the stock he had not sold; (e) I would take that stock back and credit the return on my note; (f) I would then work out what he had sold to the customer as these sales wre the First Defendant's sales as opposed to wholesale sales to distributors; (g) I allowed John to keep the profit and recorded that as a selling expense in the First Defendant's books; (h) He would pay me for what he sold in cash and I would record that week's sales to the customer on an Excel spreadsheet; (i) The next week the process would begin again; (j) When he came in the next week, and I worked out what he had sold for the second week of the month, I would delete the first week's entry from the Excel spreadsheet and insert a new figure being the aggregate of the first and second week; (k) This process would continue for a calendar month. At the end of the month, I would retain the sales figures for the month on my spreadsheet and begin a new month." I shall very shortly make some comments about certain parts of what is set out in that paragraph. However, ultimately, the only difference between Territory 3 and Territory 4 prior to Mr Kagelaris's sale of Territory 3 was that Mr Kagelaris kept any excess stock that he had theoretically purchased from the first defendant without accounting for it to the first defendant, but that any stock that he took on consignment for Territory 4 he returned to Mr Sengos and the "profit" that was made from the sale of the stock was kept by Mr Kagelaris as either wages or an agency fee, but he also kept the actual money that reflected the value of the goods that were theoretically consigned to him in respect of Territory 4 by the first defendant. This is a distinction that depends wholly upon the credibility of Mr Sengos and Mr Kagelaris because the only way one knows what product was handed back to the first defendant by Mr Kagelaris in respect of Territory 4 depends upon the truthfulness of what Mr Kagelaris told Mr Sengos and an accurate recording of the stock. However, there are no stock records produced.
51. Turning then to what is said by Mr Sengos in par 19 of his affidavit, one will note in (c) and (e) that there was a physical note made. However, those physical notes were destroyed. This evidence was given at transcript p 125 of the transcript: "Q. Where are the notes? A. I never kept the notes, your Honour. What I would do this was a weekly ritual and it was done on an order form which is similar to the ones attached to the invoices in the affidavit and I would then go back to my home office, update onto the computer the figures and discard the note. I'd do that every week." One will note in (h) that Mr Sengos said that Mr Kagelaris would pay him for what he had sold in cash. However, as I have already alluded to, that is not accurate either. This evidence was given at transcript p 116: "Q. When he comes back, he gives the cash to you, correct? That's what you say, 'He would pay me for what he had sold in cash', do you see that? A. Yeah, that's what he would do, and then he would take all the money back again though." This procedure was adopted, according to Mr Sengos, because of, in essence, Mr Kagelaris' indigence: he needed the money himself because of a lack of income. One must deduce from Mr Sengos' oral evidence that there were no invoices delivered by the first defendant or Mr Sengos to Mr Kagelaris in respect of Territory 3.
52. However, when I go to the evidence of Mr Kagelaris, he asked me to believe that the position that actually occurred in respect of Territory 3 was the position suggested by Mr Sengos' affidavit. This evidence was given commencing at transcript p 168: "Q. Did you receive invoices from Mr Sengos' company for stock your company purchased for area 3? A. Area 3 was Bronwyn's area. Q. No. Area 4 was the area that my client purchased. A. Okay. Q. I'm talking about area 3? A. Yes, would've received invoices. I would've received an invoice for the stock I picked up for my area. Q. Right. And then for area 4 you wouldn't - you didn't receive an invoice when you ordered - when you acquired stock for area 4? A. No. That was completely different. I'd pick up stock. I'd pick stock up, I'd go out, service the area and then I'd come back and we'd pull up at the warehouse and he'd have some paperwork. We'd check the paperwork when I loaded, then he'd count the stock that I'd returned, balance what I owed. I put the money on the table, right, and then I'd take the money. Q. So you'd take the money? A. That's right. He'd never - he hasn't even invoiced me on - goes on my loan. I've got a loan agreement with Paul." A little later this evidence was given. "Q. You're sure when you collected stock for area 3 that you would receive a tax invoice from Mr Sengos' company? A. That's right. I just haven't paid him yet that's all." Mr Kagelaris is deposing to receiving invoices from the first defendant for goods supplied to him in respect of Territory 3, which invoices were never sent according to the final evidence on the subject given by Mr Sengos. Of course this gross inconsistency in the defence case could have been solved by the tendering of invoices, if they existed, but no attempt to do so was made.
53. It appeared to me that Mr Kagelaris was aware of what was contained in Mr Sengos' affidavit and decided to maintain that the first defendant delivered invoices to Mr Kagelaris in respect of Territory 3. In other words there may have been some collusion between Mr Sengos and Mr Kagelaris prior to Mr Sengos' giving oral evidence. However, it indicates to me that I can place no reliance on the evidence of either Mr Sengos or Mr Kagelaris.
54. Having said that, however, I have no doubt that the loan account which was deposed to by Mr Kagelaris actually exists. Exhibit 5 contains five deeds. The deeds are variously entitled. The first is entitled "Deed of Confirmation of Loan". The third deed is entitled "Deed of Guarantee". The fourth deed is entitled "Deed of Loan and Guarantee" and the fifth deed is entitled "Supplemental Deed of Loan and Guarantee". There are various parties to various deeds. The parties include Mr Sengos personally, Mr Sengos as the trustee of his superannuation fund, Mr Kagelaris and Mr Kagelaris' company. In essence, they record an ongoing indebtedness, leaving aside the company structures, of Mr Kagelaris to Mr Sengos.
55. The recitals in the first deed continue to be recited in the subsequent deeds. They indicate the indebtedness of Mr Kagelaris to Mr Sengos was longstanding. The first three recitals in the first deed are these: "A. The Lender is in the business practice of paying the Borrower's account's [sic], or accounts directed by the Borrower with Card Call Pty Ltd included but not limited to 'Mr Gifts', 'John Kagelaris Pty Ltd' and 'What's Brewing' to assist the Borrower to purchase phone cards and other telecommunications products from Card Call Pty Ltd B. The business practice involves the Borrower selling the phone cards and other telecommunications products and depositing the proceeds into bank accounts of the Lender, including but not limited to Commonwealth Bank accounts [two listed accounts] C. The Borrowers purchasers usually exceed the sums and places in the Lender's bank account. As at the date hereof the Lender has paid the Borrower's accounts, Card Call Pty Ltd, the sum of $125,420.37, and the Borrower has paid the Lender's bank accounts in the sum of $6,615.53, leaving a net sum owing by the borrower to the Lender of $118,804.84" It would appear that the indebtedness of Mr Kagelaris to Mr Sengos predates, at least, Mr Kagelaris' entry into the confectionery business, and the demise of phone call cards, or their falling into desuetude may, have led to Mr Kagelaris' entering the confectionery business.
56. Exhibits 7 and 12 are various title searches and security documents which indicate that Mr Kagelaris has given to Mr Sengos mortgages over his residential property at Arthur Street, Carlton and over an investment home unit in President Avenue, Monterey, but the mortgage given by Mr Kagelaris over his residential property is subject to a pre existing mortgage given by Mr Kagelaris to the National Australia Bank. The last bundle of exhibits to which I have referred clearly indicate the existence of the loan on an objective basis.
57. Exhibit 10 is a record of the loan commencing with an opening balance of $118,804 on 5 August 2010 and showing the extent of Mr Kagelaris's indebtedness to Mr Sengos as at February 2017 as being $1,289,234. However, there is evidence that the list may not be accurate. For example, Mr Kagelaris gave evidence that in recent months, he had repaid a substantial amount of the loan. There is no evidence on the running loan account to say that. Mr Kagelaris said at transcript p 170 that the current loan balance was around $1.2 million and that it had been $1.3 million but he had "knocked a bit off in the last couple of months". That evidence would indicate he had paid off $100,000 of the loan, but there is no evidence of that in exhibit 10 which shows an indebtedness, as I earlier mentioned, of $1,289,234 at, perhaps, the end of February 2017 although the document itself does not give me a terminal date.
58. At transcript p 176, Mr Klooster took Mr Kagelaris to a payment of $50,000 on 28 April 2015 which was clearly made by the first defendant to Mr Kagelaris allegedly for business he was transacting in Territory 4, but there is no record of that loan in the running loan statement. There are records for the payment made of $49,500 in January 2015 and a further advance of $50,000 in February 2017 but nothing which covers the payment of $50,000 on 28 April 2015. Exhibit 10, the running account for the loan between Mr Sengos and Mr Kagelaris, was put into evidence because, on the defendant's submission, it shows a debit being made monthly for "stock". During the relevant periods that is, in 2014 the total of the debit for stock, I am told, was the sum of the stock taken by Mr Kagelaris for his own territory, Territory 3, and for the company territory, Territory 4. Mr Hassett, for the defendant, pointed out this to me in respect of one month. I checked it for another month to see that it was accurate, and I invited Mr Klooster to go through the document over the weekend to ascertain whether in respect of the period from January 13 to November 14 that position was made out. I heard no submission to the contrary. This is said to be corroboration for the actual stock purchases made by Mr Kagelaris from the first defendant in respect of both territories 3 and 4.
59. There is, however, a complication arising from that. Mr Kagelaris sold Territory 3 in December of 2014. He was not operating it from January 2015 onwards. The plaintiff purchased Territory 4 and commenced operating it on 13 January 2015. Theoretically, there ought to have been no stock purchases by Mr Kagelaris after December 2014. However, exhibit 10 does show a debit for stock of $1,050 in January 2015 and a debit for stock of $2,450 in February 2015. It also shows a debit for stock for $2,000 in March 2015 and for $2,750 of stock in April 2015. I leave to one side the stock debited for January 2015 because it may represent stock taken by Mr Kagelaris and sold in Territory 4 - that is, the plaintiff's territory - prior to the plaintiff's commencing working the territory on 13 January. It might also represent some accounting for stock in January that had not been accounted for in December.
60. The interesting thing about the stock purchases after February 2015 is that the amounts were relatively modest up until August 2015. What might those stock purchases represent? In his affidavit, Mr Kagelaris deposed to starting work again in territory four on 24 March 2015. In [37] of his affidavit he said this: "After nearly a month of working the Territory, on Tuesday 14 April 2015, I had made sales in the Territory of $13,240.00. I sent Paul an email to this effect, which I annex and mark 'C'". The next paragraph of the affidavit, its final paragraph, commences with this sentence "I have been working the Territory ever since." This affidavit was sworn on 7 October 2016. One would think that Mr Kagelaris had been working Territory 4 between 25 March 2015 and 7 October 2016. However, that is not the position according to Mr Sengos. He said on oath that Territory 4 was sold in "maybe June 2015" to a Greek couple from Burwood whose Christian names were John and Eleni. They held the territory for about 12 months when it was sold by them to Mr Agha. He is also referred to in [5(b)] of Mr Sengos' affidavit of 22 September 2016. According to Mr Sengos' oral evidence, Mr Agha developed a medical condition and he only held the territory for a couple of months, after which he sold it to its current owners who are described by Mr Sengos as a couple whose first names were Kishore and Apana. If I were forced to make some decision as to whether I believe, on this issue, Mr Sengos or Mr Kagelaris, I would be more inclined to accept Mr Sengos because little would be served by his inventing the names of purchasers of the territory. However, again, it shows that the evidence of Mr Kagelaris, at least, is unreliable.
61. I return however to exhibit 10, the running loan account between Mr Sengos and Mr Kagelaris, which shows purchases of stock in February and March of 2015. Since Mr Kagelaris took back Territory 4 on 24 March 2015, the figure of $2,000 for March 2015 for stock purchased by Mr Kagelaris may represent stock purchased for that territory. However, there is nothing to explain the purchase of stock of $2,450 in February 2015 unless Mr Kagelaris had another area. It transpires that he did.
62. The existence of this area only came to light at the end of the oral evidence when Mr Sengos was giving evidence for the second time on Monday, 27 March 2017. At transcript p 211 this evidence was given: "Q. The first part of 2015 was there any other territory that was company serviced? A. I don't believe so, no. Q. What about in 2014, Mr Sengos, was there any area other than the Strathfield area that was company serviced? A. I don't believe so, your Honour." Mr Klooster then showed Mr Sengos an email which became exhibit M. It was an email sent by Mr Sengos to Mr and Mrs Ahern. It says this [I shall quote it using proper spelling rather than the spelling and abbreviations commonly found in text messages]: "Hi guys...hope you had a nice Christmas. You had asked me for first option if the eastern suburbs territory became available...We have about 35 shops in that territory that is company owned...I did the run before Christmas and sold $1,600 in two days...The broker has many people that missed out on the runs that I have been sold [sic] and I am sure I will get 60 65,000 [dollars]...The broker charges me 10,000 [dollars]...Do you want the eastern suburbs for 50,000 [dollars]? I would also throw in five days of canvassing for new shops to get the area up to about 60 plus shops. Regards Paul." According to that text message, the Eastern Suburbs Territory was a company owned territory that clearly had to be serviced by somebody.
63. Mr Klooster drew the attention of Mr Sengos to the text message and he then said that he had forgotten about that territory and then said, "We had a few shops over there". I would not categorise 35 shops as "a few shops" and Mr Sengos's statement was an attempt to downplay the extent of and, therefore, the significance of the Eastern Suburbs Territory. Mr Klooster then asked Mr Sengos, who was running that territory in December 2014, and he said that it was being run by John Kagelaris because he lived closer to it than did Mr Sengos. Mr Kagelaris was then living at Carlton and Mr Sengos was living at Strathfield. Mr Sengos was then asked whether the Eastern Suburbs Territory was being run the same as Territory 4 and said it was, and then also referred to it as being similar to Territory 3 which ties in with my analysis that there was little to differentiate between the way in which Territories 3 and 4 were being operated.
64. Mr Sengos confirmed that John Kagelaris when servicing the eastern suburbs would be acquiring product from the first defendant and that he could be acquiring product in any given week for that area and that there were no invoices being rendered by the first defendant for stock taken by Mr Kagelaris for the Eastern Suburbs Territory. In his evidence at transcript p 212, Mr Kagelaris was at pains to say that the area was small and the amount of product that was being provided for that territory was "very small" and to the extent that it could be "negligible". However, 35 shops is approximately one third the size of Territory 4, 106 shops or 110 shops. If the level of sales in the Eastern Suburbs were comparable with the level of sales in Territory 4, then one would expect the Eastern Suburbs to be generating one third of the sales of Territory 4.
65. The question that immediately comes then to mind is how were the sales for the Eastern Suburbs being "recorded"? Since the purchases for Territories 3 and 4 combined accounted for all purchases recorded on the loan account, the purchases for the eastern suburbs, unless they were free gifts from Mr Sengos to Mr Kagelaris, must in some way be reflected in the loan account. The only way they could be reflected in the loan account is by their being included in sales of either Territory 3, Mr Kagelaris's personal area, or Territory 4, the other company area being serviced by Mr Kagelaris. The probability, in my view, is that the sales for the Eastern Suburbs were included in the sales recorded for Territory 4 because the stock for the Eastern Suburbs would have been dealt with in the same way as the stock for Territory 4. Although Mr Sengos would have me believe that the Eastern Suburbs sales were a mere bagatelle, the sales in the Eastern Suburbs could be one third the sales in Territory 4 and that would indicate that if the Eastern Suburbs figures were included in those for Territory 4 that the Territory 4 figures were inflated by 25%. Unfortunately, that is not an area that was canvassed in evidence. It arose at the end of the evidence, evidence which by that stage had been going for four days when the estimate of the hearing was three days, which of course would include addresses. Addresses stretched the hearing of this matter into five days.
66. It is perhaps convenient to further consider some questions of credibility. In her affidavit, the plaintiff said this: "[157] In late January 2015 I sat down at home and looked at the customer cards in detail for the first time. After not making very many sales I wanted to review the sales history for each customer. I also wanted to compare the customer cards with the sales figures in the spreadsheet. I arranged the customer cards into month of order for each customer's last order. After reviewing each customer card, I noticed that the records only dated back to June 2015. I also noticed that the majority of sales had been done the month before I started operating the business and that there were very few sales to any customers in early January 2015. [158] Most of the customer cards indicated that prior to December 2014 very little to no sales had been made. I suspected someone had gone from store to store in December 2014, making sales to customers in circumstances where no sales had been made to the customers prior to December 2014. I also noticed that the sales recorded on the customer cards did not compare to the sales figures, particularly when I also took into account the selling price for the products. [159] I spent a few hours reviewing the customer cards. [160] Upon conducting a review of the customer's cards I rang Paul [Sengos] and we had a conversation to the following effect: Me: 'I have noticed that the customer cards only date back to June 2014. Can you please give me the customer cards prior to June 2014?' Paul: 'No. I can't do that.' Paul did not give me any explanation as to why he would not give me any customer information prior to June 2014."
67. In his affidavit, Mr Sengos said this: "[41] As to par 160 I do not have customer cards prior to June 2014. I told Bronwyn that. They did exist, but had been lost." That however is not evidence to which Mr Sengos adhered when giving oral evidence. After what he said in [41] of his affidavit was read to him this evidence was given: "Q. You're saying that, obviously, there were customer cards for the period before June 2014 but you weren't able to provide them to Mrs Ahern, correct? A. From memory, I think she was looking for a customer or two that the cards weren't there as opposed to customer that I would have given her. I don't think this was talking about all the customer cards. HIS HONOUR: "Q. No. All the cards in 2000 and A. There's no date on the cards. Q. In 2014, right? A. From memory the customer card system was only introduced by me in 2014. I think it was around June or May but I think my answer as to par 160 I'd need to look at what I was answering here. Can I look at par 160?" I then read that paragraph to him. Mr Sengos then said, "From the best of my memory she was relating to a couple of the cards that were missing out of the bundle of cards I gave her and my answer would have been 'Well if you don't have them they've been lost'." In answer to a question put to him by Mr Klooster Mr Sengos again said that according to his memory the plaintiff was "chasing a couple of cards in and around June 2014 or thereabouts" and that he didn't understand she wanted every card for every shop for the period prior to June 2014 which even he could not provide because the card system did not exist prior to that time.
68. This evidence of Mr Sengos can only be described as mendacious. I quoted extensively from the plaintiff's affidavit because it showed the context of the conversation that she had with Mr Sengos. She wanted the cards that existed for customers prior to June 2014. Mr Sengos could not provide them to her. He could not provide them to her because they did not exist. However, according to the plaintiff, he did not tell her that at the time. When he saw what she said in her affidavit, he said in his affidavit that the documents did exist, but they had been lost. However, in oral evidence he said they could not have existed because the system only commenced in the middle of 2014. The two are completely inconsistent.
69. Furthermore, the way that Mr Sengos sought to escape from the inconsistency is without any merit. How could the plaintiff know that there were missing customer cards without knowing who the customer was? She had been delivered a bundle of cards. The only way she could ascertain that there was an established customer for whom there was not a card was to learn that from Mr Kagelaris, or to have come across an established customer accidentally. There is no evidence that Mr Kagelaris introduced the plaintiff to an established customer for whom there was no card, either from Mr Kagelaris or from the plaintiff herself, or that she accidentally came across an established customer for whom there was no card. I am afraid that Mr Sengos would appear to say anything which he thought could get him out of an awkward position as far as the credibility of his evidence was concerned.
70. I should indicate, before leaving this subject, that the defence case to the observations of the plaintiff about an inconsistency between the customer cards and the sales figures was an averment by Mr Kagelaris in [13] of his affidavit of 7 October 2016 that he had told the plaintiff that he did not write down on the customer cards all the orders that the customer made but what he liked to record was the sort of products that the customer was interested in buying in order to provide him with "a lead in" when he returned to see the customer on another occasion. As I have grave reservations about the evidence of both Mr Sengos and Mr Kagelaris, I must take that with a very large grain of salt.
71. Furthermore, the form of the customer cards themselves and the way that they had been used prior to the plaintiff's purchase of Territory 4 is not consistent with what Mr Kagelaris deposed to in [13] of his affidavit. For example, if I merely pick one customer card, that customer card numbered 103 in the pagination of exhibit BA 1 to the plaintiff's primary affidavit of 26 July 2016, I find the outlet name which appears to me to be 7-Day, although I am not confident about the word "Day". The proprietor of this business was Nasser and it was a business situated on the corner of Dowling and Wollongong Road, Arncliffe. On 1 August, this business purchased one item of each of six products. On 21 August, it purchased one item of three further products. On 14 October, it purchased one item of three further products and two items of one further product. On 3 November, it purchased three items of another product and one item of yet another product. On 10 December, it purchased one item of yet another product. In other words, on five different visits, the business purchased 16 different products and the purchase of no product was duplicated. The products also appear to have been very different. None of the lawyers have sat down and performed the task to which the plaintiff herself deposed in [157] to [159] of her affidavit which I have recently recited. However, I accept what the plaintiff said therein, that there was no consistency between the sales figures in the spreadsheet that she was given on 19 December 2014 and the customer cards that were later given to her and which she sat down to study in late January 2015.
72. At transcript p 118, Mr Klooster commenced to cross-examine Mr Sengos about the trinity of triliteral acronyms designed to dishearten those involved in the cash economy: BAS, GST, and ATO. Eventually the material upon which Mr Sengos was being cross-examined was admitted into evidence as exhibit K. Exhibit K contains BAS of the first defendant for the quarters ending 30 September 2013, 31 December 2013, 31 March 2014, 30 June 2014 and 30 September 2014. For the quarter ending 30 September 2013 the BAS indicates nil sales. Mr Sengos agreed that Mr Kagelaris had, during that quarter, made sales of approximately $45,000. However eventually the negative BAS was "explained" on the basis that as no invoices had been delivered by the first defendant to Mr Kagelaris, no income was actually received. Whether that be a correct accounting procedure when cash was actually received is an interesting question which I do not need to determine. However, the intriguing thing is that during this quarter the first defendant had no receipts at all from anybody, made no sales at all to anybody including established distributors.
73. The BAS for the quarter ending 31 December 2013 shows total sales $659. The BAS for the quarter ending 31 March 2014 shows total sales of $452. The BAS to 30 June 2014 shows total sales of $56,077 and the BAS for the quarter ending 30 September 2014 shows total sales of $10,346. When cross-examined about the BAS Mr Sengos said that there was another company in whose BAS returns such sales may have been reported. The existence of the other company was raised by Mr Sengos in his evidence at the foot of transcript p 121. The company was described as Wholesale National Pty Ltd of which Mr Sengos was the director, the company secretary and the shareholder, just as he was of the first defendant. Inquiries were then made as to who the accountants were and Mr Klooster indicated that he was seeking time in order to try to obtain records from this other company, or to at least examine and digest such records of that company that Mr Sengos had brought with him to court.
74. Eventually Mr Hassett conceded that no BAS returns for either company would ever show "sales" made through Mr Kagelaris or to Mr Kagelaris because no formal invoices had ever been raised. Any attempt by the plaintiff to obtain any documentary corroboration for the sales figures met a complete brick wall, to use the vernacular. Every attempt to find corroborative evidence was thwarted by either the destruction of records or the lack of records. All that one is left with is a large number of inconsistencies and the distinct impression that there had been attempts made to lessen the revenue of the Commonwealth of Australia, both by GST and income tax.
75. I trust I have said enough to indicate my view of the credibility of the witnesses. However, the real issue remains whether the plaintiff has been able to adduce evidence which would persuade me, on the balance of probabilities, that the sales figures given in the spreadsheet provided to the plaintiff by Mr Sengos at the meeting on 19 December 2014 are either false or misleading or inaccurate or are likely to mislead or are likely to deceive. Suspicion is not proof of anything. Although Mr Sengos' credibility has been successfully attacked on behalf of the plaintiff that does not necessarily mean that the sales figures are false or misleading. I have recently in these reasons averted to the plaintiff's comparison of the sales figures with the sales cards but that may indicate the sales cards are inaccurate rather than the sales figures.
76. However, I am persuaded that at the relevant time - that is, prior to the plaintiff's purchasing Territory 4, during the period when the sales figures contained in the spreadsheet were collected, that Mr Kagelaris was operating both Territory 4, the Strathfield area, and the Eastern Suburbs as the agent of or employee of the first defendant, that these were still company territories being worked by Mr Kagelaris. The place which the evidence suggests the sales figures for the Eastern Suburbs would be contained are in the sales figures for Territory 4, because those two areas were being dealt with on the same basis, to use the discrimen used by Mr Sengos, the stock taken by Mr Kagelaris for those areas was on consignment compared to the stock given to Mr Kagelaris for his own area which was not on consignment.
77. That finding is obviously based on the fact that each debit made in the loan account of Mr Sengos to Mr Kagelaris for stock represented the total of areas 3 and 4, and only when areas 3 and 4 were removed from Mr Kagelaris's supervision does a debit show up for stock that is in February of 2015 when there was a debit for stock for $2,450 which stock can only have been for the Eastern Suburbs on the evidence before me. It would appear that antecedent to that time, the Eastern Suburbs stock was taken in with the Strathfield area stock and the two were melded. That indicates to me that the sales figures for Territory 4 could have been exaggerated by 25%, but even if they were only exaggerated by 10% or 15% it is still, in my view, probable that such figures would mislead or deceive. For example, the total sales for area 4 for the financial year ending 30 June 2014 were $181,884. According to exhibit 3, the actual cost of goods for the same period was $62,930, but the plaintiff did not know that and was not told that at the meeting on 19 December. What she was told was that approximately half of the total sales represented profit. That would indicate that profit was about $90,000.
78. However, the plaintiff was paying $108,000 for two years of the distributorship. That indicates roughly that from a potential profit of $90,000, $50,000 would need to be deducted, being the capital she was paying for the distributorship in respect of the one year period. That will reduce the gross profit to about $40,000 from which would need to be deducted things such as motor vehicle expenses, and the like, before any tax would have to be taken into account. Even if those other overheads were negligible, say $5,000, that would reduce income to $35,000 before tax. If such figures were inflated by a quarter, that would mean that a $35,000 would be reduced to about $26,000. If it were reduced by 20%, it would reduce the income to $28,000. If it were reduced by 15%, that would indicate that the income was reduced to under $30,000. Those reductions may be seen to be modest, but that much can turn upon a reduction in income of between $5,000 and $10,000, especially at the lower end of the income range.
79. I am accordingly persuaded on the balance of probabilities that the sales figures provided to the plaintiff by the first defendant at the meeting on 19 December 2014, including as they do on my assessment of the evidence the figures for the Eastern Suburbs, were likely to mislead the plaintiff. The plaintiff is accordingly entitled to succeed in her statutory cause of action.
80. The Australian Consumer Law provides in sec 18(1): "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Section 236 of the same statute provides that If a claimant suffers a loss or damage because of conduct contravening a provision of Ch 2 or Ch 3 of the Law, which includes s 18, the claimant may recover the amount of the loss or damage by action against the other person, or against any person involved in the contravention of the statute. There is no dispute that the interaction of the plaintiff, the first defendant, and, indeed, the second defendant, was in trade or commerce. They were in fact engaged in a commercial undertaking. I have found that the delivery by the second defendant to the plaintiff, on behalf of the second defendant, of the spreadsheet on 19 December 2014 was likely to mislead her or to deceive her as to the extent of the profitability of the distributorship by making a misleading statement as to the extent of sales made in Territory 4 prior to December 2014.
81. The plaintiff's other cause of action is in the common law tort of deceit. That tort has a number of elements. (1) Deceit requires that the defendant make a false representation. False in this context means "inaccurate" and whether a representation is inaccurate does not depend on the defendant's state of mind. It is an objective inquiry. The plaintiff has made out that element. (2) The second element is that the false statement must be made by the defendant knowingly or recklessly. A defendant who does not honestly believe the representation to be true has knowledge that he is making a false representation. An honest belief is not necessarily a reasonable one, although the greater the departure from what is reasonable the stronger the inference that the belief is not in fact honestly held: Krakowski v Eurolynx Pty Ltd (1995) 183 CLR 563. No distinction appears to be made between knowingly making a false statement and recklessly making a false statement. In Edgington v Fitzmaurice (1885) 29 Ch D 459, Bowen LJ said, "it is immaterial whether the defendants made the statement knowing it to be untrue, or recklessly, without caring whether it was true or not, because to make a statement recklessly for the purpose of influencing another person is dishonest." However there is important distinction between on one hand knowledge of or recklessness as to the falsity of a statement and on the other hand carelessness as to whether the statement be true or false. Carelessness is consistent with an honest belief and is thus insufficient to establish this element of deceit.
82. There is no direct evidence of the state of mind of Mr Sengos whose mind also must reflect the mind of the first defendant as he was its brain, so to speak. The plaintiff has the onus of proving that Mr Sengos knowingly made a false statement or recklessly made a false statement. The evidence of course is also consistent with his making a false statement by carelessly overlooking at the time he made the spreadsheet that was given to the plaintiff on 19 December 2014 that the figures for Territory 4 included the figures for the Eastern Suburbs. I am not persuaded on the balance of probabilities that the plaintiff has discharged the onus of proving that Mr Sengos deliberately made a false statement or recklessly made a false statement. The evidence is consistent with carelessness and therefore the plaintiff has not discharged the onus of proving this element of the tort.
83. (3) The next element is that the defendant intended the plaintiff to rely upon a false representation. That obviously was here intended. That element has been made out. There are two other elements of the tort. (4) The next is that there was reliance on a false representation as intended by the defendant. Clearly Mr Sengos and his company intended that the plaintiff rely on the representations made to her on 19 December 2014 and that the plaintiff did rely upon. I accept that that element has been made out. (5) The final element of the tort is that the plaintiff suffered damage as a result of the tort. The tort of a deceit is an action in case rather than trespass and therefore damage is an essential element of the tort. Here that also has been established. However because the plaintiff is unable to prove all the elements of the tort of deceit her action based on that tort must fail.
84. This leaves me of course with a question of damages. The plaintiff claims the return of the purchase price. I accept that if the plaintiff knew that the sales figures were inflated by their including sales for another area, that is the sales from the Eastern Suburbs, she would not have entered into the contract which she did. She paid the purchase price of $108,000 and received in essence no consideration for that sum. The period in which she held the distributorship from 13 January 2015 until 27 February 2015 when she ceased to operate it, or alternatively until 22 March 2015 when the first defendant issued a termination notice was short. I am prepared to allow the plaintiff the sum of $108,000.
85. The plaintiff purchased total stock of $7,644.23. She made sales of $3,680.20. There is a difference between those two of $3,964.03. The plaintiff claims that sum. The problem with it is that the plaintiff still has that stock. What has become of it the evidence does not disclose. She may still have it. She may have given it to her children or neighbours or friends or the like. I have no idea what its actual value is worth as distinct from its retail value. I am prepared to allow the sum of $2,000 under that heading. I did quip during the hearing that perhaps the excess stock was consumed by the plaintiff's sons and that was the cause of some dental damage but there is no evidence as to what became of the stock. It must have some value and therefore, in essence, I am halving the sum claimed and reducing it to $2,000.
86. The plaintiff claims interest on the sum of $111,964.03 amounting to $13,842.51, calculated pursuant to s 100 of the Civil Procedure Act 2005. Of course that calculation was made up until 22 March and it is now 30 March and I have disallowed part of the claim. However, necessarily the amount would be small. I am prepared to allow $12,000 for interest. The total of those sums is $122,000. The plaintiff also claims exemplary damages but bearing in mind that the plaintiff has not made out one of the elements of the tort of deceit I find it difficult to understand how the claim for exemplary damages is pressed since this is not the subject of any submissions other than the making of the claim. I shall hear the parties on that question. I am now told the plaintiff no longer presses the claim for exemplary damages.
87. The plaintiff is clearly entitled to a verdict in her favour for $122,000 against the first defendant. The remaining question is whether the plaintiff is entitled to a verdict in that sum or in some other sum against the second defendant, Mr Sengos, personally. Section 236 of the Australian Consumer Law provides in subs (1): "If: (a) a person (a claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention." The past participle "involved" is defined in sec 2(1) thus: ""involved": a person is involved in a contravention of the provision of this schedule or in conduct that constitutes such a contravention, if the person; (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect contravention."
88. The plaintiff's written submissions continue thus: "[16] The principles applicable to section 2(1) of the ACL (definition of involved) and thus to s 236 of the ACL, are the same as those applicable to s 75B of the Competition and Consumer Act 2010 (Cth) as the terms in s 75B are identical to s 2 of the ACL. [17] For a person to aide, abet, counsel, procure or be knowingly concerned, in a relevant contravention under s 2(1) he or she must have knowledge of the essential elements of the ACL contravention and intentionally participate in or assent to the proscribed act in question. The essential elements are: (a) that the representation was made; (b) that the representation was: (i) misleading or deceptive; or (ii) likely to mislead or deceive; or (iii) false. [18] "Knowledge" must be actual and not constructive and may be considered to include wilful blindness, but it does not include recklessness or negligence."
89. Mr Klooster provided me with two authorities to support the propositions in par 18 of his written submissions, namely King v GIO Australia Holdings Ltd [2001] FCA 238 and Keller v LED Technologies Pty Ltd [2010] FCFCA 55 [335]. I have pointed out that the plaintiff has failed to prove on the balance of probabilities one of the essential elements of the tort of deceit and that is the knowledge of the falsity of the representation made. I pointed out that carelessness is consistent with an honest belief and is insufficient to establish that element of the tort of deceit. In essence I have found that the plaintiff has failed to prove recklessness and I have found that it is likely that the carelessness was involved. Carelessness is negligence. Accordingly the plaintiff has not made out a case against Mr Sengos for personal accessorial liability.
90. As Mr Klooster pointed out in [19] of his written submissions, the requirement of the intention to be involved in the contravention cannot be dispensed with even if the provision in question requires no actual intent. Section 18 requires no actual intent. In the written submissions Mr Klooster accepted that the plaintiff bore the onus of proof to establish that the second defendant had the requisite knowledge and intention to engage in the contravention and since my finding is merely of carelessness or negligence the plaintiff has not established that Mr Sengos is personally liable because of accessorial liability.
91. I have inquired of the representatives of the parties whether any further reason for judgment required. I am told that no such reason is required.
92. For those reasons, I give verdict and judgment for the plaintiff against the first defendant for $122,000.
93. I give verdict and judgment for the second defendant against the plaintiff.
94. I order the first defendant to pay 90% of the plaintiff's costs on the ordinary basis until 27 February 2017 and 90% of the plaintiff's costs on an indemnity basis from 28 February 2017.
95. I have made no costs order in favour of the second defendant because of the reduction of the plaintiff's costs by 10%, and bearing in mind Mr Hassett's concession that no additional evidence was adduced because of the joinder of the second defendant.

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: 18 July 2017