- Baltic Shipping Co v Dillon

Supreme Court of NSW|2015-09-03|Before: Black J

Solicitors: Adams & Partners (Plaintiff) Clamenz Lawyers (Third and Fourth Defendants) File Number(s): 2014/86490

Judgment

By a Further Amended Statement of Claim filed on 26 August 2015 the Plaintiff, Ms Romona Kraissa, seeks damages for breach of contract and, alternatively, orders that the Third Defendant, Mr Steve Choukair and the Fourth Defendant, Mr Mohamad Choukair each repay all monies had and received by them from Ms Kraissa, and interest under s 101 of the Civil Procedure Act 2005 (NSW). The claims in breach of contract and restitution now pursued by Ms Kraissa are a subset of earlier claims which she pursued, which had included claims for oppression and orders rectifying the registers of two companies, Hair Industrie Penrith Pty Ltd ("HIP") and Hair Industrie Merrylands Pty Ltd ("HIM") to reflect her claimed interest in those companies, or alternatively orders that the Messrs Choukair purchase her shares in HIP and HIM at fair value.
It will be convenient to deal with the position in respect of HIP and HIM separately. Before doing so, I should refer to the evidence led in the proceedings. Ms Kraissa relied on her two affidavits and two affidavits of her brother read in the proceedings, including reply evidence read before it emerged that the Messrs Choukair would not give evidence in the proceedings. It is largely not necessary to address Ms Kraissa's or Mr Kraissa's evidence in reply, so far as they take issue with aspects of evidence that is now not led by the Messrs Choukair. I will refer to the detail of that affidavit evidence in setting out the events in respect of HIP and HIM below. Both Ms Kraissa and her brother were cross-examined. After Ms Painter, who appears with Ms Gatland for Ms Kraissa, closed her case, Mr Chan, who then appeared for the Messrs Choukair, sought judgment for want of evidence under r 29.10 of the Uniform Civil Procedure Rules 2005 (NSW). I dismissed that application, and the Messrs Choukair did not then seek leave to give evidence, and did not give evidence, in the proceedings.

Relevant events in respect of HIP

By way of background, Ms Kraissa's evidence, in her affidavit dated 8 July 2014, is that she left school at about 14 years of age and began work as an apprentice hairdresser, then working for Mr Steve Choukair and his former wife. She was subsequently employed, at various times, by Mr Choukair's former wife and as store manager at a store operated by a third party. Her evidence is that she was approached in about October 2011 by Mr Steve Choukair who invited her to work as manager at a new salon in Penrith operated by Blonds & Brunettes Penrith Pty Ltd, a company associated with him. She then worked as manager of that salon from January 2012 and gives evidence as to the business practices of that salon. It is not necessary or appropriate to deal with several aspects of that evidence, which are not necessary to a determination of the matters in issue in these proceedings.
There is a degree of common ground as to the relevant facts in respect of Ms Kraissa's subsequent acquisition of an interest in HIP, which is in issue in the proceedings. Ms Kraissa was at various times a director of HIP, the manager of its business and a shareholder of HIP, until its deregistration on 29 September 2014.
It is common ground that, in about June 2012, Ms Kraissa and Mr Mohamad Choukair (who, Ms Kraissa, contends, was acting as agent for Mr Steve Choukair) agreed that Ms Kraissa would become a part owner of HIP in consideration of a payment of $70,000. It is also common ground that Ms Kraissa was to receive one of the three shares in HIP and would become a director of HIP, although there is a contest as to whether she would manage the business conducted by HIP as an employee or in another capacity.
Ms Kraissa gives evidence of a conversation in June 2012 with Mr Mohamad Choukair in relation to the acquisition of an interest in HIP and a further conversation with him before HIP opened its business. Ms Kraissa's brother, Mr Raymond Kraissa, gives evidence of a discussion with Ms Kraissa in about June 2012, in which she informed him that she had been offered an opportunity to go into business with him and Mr Mohamad Choukair in Penrith Plaza, in addition to managing the Penrith store with which she was already involved. Mr Kraissa's evidence is that he borrowed $35,000 from his bank, which he deposited in Ms Kraissa's bank account, to fund that part of Ms Kraissa's initial payment in respect of HIP. On about 4 or 5 July 2012, Ms Kraissa paid $70,000 into the bank account of a business operated by the Messrs Choukair. The Messrs Choukair contended that was done on instructions of Mr Mohamad Choukair and not Mr Steve Choukair; however, that contention was not established where they did not lead evidence to support it. At about the same time, HIP commenced operating its hairdressing salon in Penrith, and, on 11 July 2012, Ms Kraissa was issued a share certificate for an ordinary share in the capital of HIP. Ms Kraissa managed the salon conducted by HIP at Penrith from July 2012. The Messrs Choukair had served, but ultimately did not seek to read, affidavit evidence which attacked the adequacy of her performance as manager of that store and the Merrylands store operated by HIM.
Ms Kraissa leads evidence as to the manner in which the hairdressing salons operated by HIP and HIM received income, both by cash and electronic funds transfer at point of sale (Kraissa 8.7.14 [25]-[28]) and as to the manner in which cash up sheets and cash were dealt with, and wages were paid to staff from the cash takings of the stores (Kraissa 8.7.14 [29]). Ms Kraissa's affidavit also exhibits some records from HIP and HIM, including handwritten notes as to turnover for HIM and HIP, bank statements of a St George bank account, the wages book, turnover book and cash up receipts for HIM, a columns book for HIP and a salon potential income report for HIP printed from its accounts system. Mr Kraissa also gives evidence as to various aspects of the accounting and taxation affairs of the hairdressing salons which it is largely not necessary to address for the purposes of this judgment.
Ms Kraissa's evidence is that she was generally paid by Mr Steve Choukair or Mr Mohamad Choukair in cash, comprising an agreed portion of the cash takings of the Blond & Brunettes Penrith salon, an amount which she understood to be one-third of the cash takings of HIP from 4 July 2012, and an amount which she understood to be one-third of the cash takings of HIM from 11 October 2012. Her evidence is that those payments were reduced and ultimately ceased after a dispute arose between her and the Messrs Choukair in 2013 (Kraissa 8.7.14 [99]-[115]; Kraissa 3.8.15 [11], [43]). Ms Kraissa does not have a record of the payments she received and complains that she did not receive group certificates from Blond & Brunettes Penrith or other records of her income from HIP or HIM (Kraissa 8.7.14 [54], [66]). It is striking, however, that Ms Kraissa also did not maintain any personal record of the cash payments made to her, as one would have expected she would have needed to do in order to comply with her taxation obligations if, as it appears, PAYG tax had not been deducted when amounts were paid to her.
Mr Kraissa gives evidence of having met with Ms Kraissa and Mr Steve Choukair in February 2013, and that Ms Kraissa then expressed concern that she was being excluded from the business, and Mr Steve Choukair responded that she was not doing things the way they wanted, and expressed concern that staff had not been taken "off the books" at the hairdressing salons. Mr Choukair did not give evidence contesting that conversation. Ms Kraissa also gives evidence of a discussion in early March 2013 concerning her potential exit from HIM (to which I will refer below) and of Mr Steve Choukair then saying he would not give her back the "full contribution" and that he would not give her a "fucking cent". Mr Kraissa also refers to attending a further meeting with Ms Kraissa and the Messrs Choukair on 11 March 2013. (That evidence was admitted subject to a limitation under s 136 of the Evidence Act that it was not proof of the asserted fact.) Mr Kraissa also gives evidence, consistent with Ms Kraissa's evidence, of Mr Steve Choukair having agreed that Ms Kraissa could leave HIM and only work at HIP, but that he would not give her back her "full contribution" because he did not want to. Mr Choukair did not give evidence contesting that conversation.
Ms Kraissa's evidence is that, after difficulties arose in her relationship with the Messrs Choukair, she kept working at HIP, and took money "in advance as profit/wages from cash takings out of the till" and claims that she left notes confirming the money she had "withdrawn" in that manner. Her evidence (Kraissa 8.7.14) is that she took in excess of $12,100 from HIM and about $6,700 from HIP totalling $18,837. The Messrs Choukair do not lead evidence to seek to establish that any larger amount was taken. The withdrawal of money from HIP was plainly unauthorised and inappropriate, and the amount of money which Ms Kraissa then received must be taken into account in respect of any relief to which she is entitled.
In about April 2014, after the proceedings were commenced, the Messrs Choukair sold the shares in HIP to third parties and resigned as directors of HIP.

The terms of the contract in respect of HIP

Ms Kraissa contends that the agreement in respect of HIP included a term that she was entitled to receive a one-third share of the profits of the business conducted by HIP, and pleads a claim in breach of contract in respect of HIP on the basis that the Messrs Choukair failed to pay her one-third of the profits of that business. That allegation falls to be determined on the basis that, as I noted above, it appears that the Messrs Choukair paid Ms Kraissa one-third of the cash takings of the business conducted by HIP, but did not pay any share of any further takings. I pause here to note that, throughout the proceedings, both parties appeared to use the term "profits" in a somewhat idiosyncratic sense, as referring to the takings of the business rather than its profits in the sense of revenue less costs.
The Messrs Choukair contend for an alternative version of that arrangement, to the effect that Ms Kraissa would receive a one-third share of the cash profits of the business on a weekly basis, and any other profits as dividends when declared. The Messrs Choukair admit that Ms Kraissa was removed as a director of HIP on 31 March 2013, and excluded from the management and premises of the business around mid-April 2013, and rely on an allegation that Ms Kraissa took $6,687 from HIP without consent for her personal use. They respond to the entirety of the claim by contending that they terminated the agreement between Ms Kraissa and them as to the acquisition of a share in HIP and a role as director and manager, on the basis of serious misconduct by her, by reason that she took money from HIP.
Mr Clark, who appeared for the Messrs Choukair in place of Mr Chan at the point of closing submissions, acknowledged that it was common ground on the pleadings that an agreement existed in respect of HIP, and the dispute related to the basis on which profits would be distributed to Ms Kraissa. Mr Clark submitted that there was no agreement as to the precise means by which profits were to be distributed or, if there was an agreement, it was as pleaded by the Messrs Choukair's Further Amended Defence, to the effect set out in paragraph 14 above. There is no evidence to support the Messrs Choukair's alternative formulation of the arrangement in respect of HIP. Ms Kraissa gave evidence of the conversation on which she relies to establish her version of the arrangement (Kraissa 8.7.14 [52], [54]); she did not accept the Messrs Choukair's alternative version of that arrangement, to the extent it was put to her in cross-examination; and the Messrs Choukair did not lead evidence to support their alternative version of that arrangement. As Ms Painter and Ms Gatland point out, in closing submissions, HIP was not a "sophisticated operation" and it seems to me highly unlikely, given the other evidence in the proceedings and the parties' lack of interest in legal formalities, that they would have considered or agreed the more complex agreement for which the Messrs Choukair now contend, distinguishing between cash profits and dividends.
Mr Clark also submitted that the evidence does not indicate a detailed discussion as to the manner in which profits of HIP were to be divided. I accept that proposition, but it seems to me to follow from that that the agreement between the parties was a straightforward one, consistent with Ms Kraissa's evidence, that HIP's profit, as ordinarily understood, would be divided in one-third shares between Ms Kraissa and each of the Messrs Choukair. Mr Clark pointed out, and I recognise, that the parties' practice of dividing cash takings of HIP after distribution of wages was not wholly consistent with the terms of that agreement. The alternative agreement pleaded by the Messrs Choukair has not been established, and the breach of contract for which Ms Kraissa contends has been established so far as it appears to be common ground that Ms Kraissa was not distributed half of the profits from HIP, but instead half of the cash takings of HIP.
The Messrs Choukair also contend that there were other express terms of the agreement, which have not been established where they did not give evidence, and an implied term that Ms Kraissa would not commit any act of serious misconduct against HIP. It is not necessary to determine whether that term existed, or whether it was breached, since termination of the contract on that basis would not deprive Ms Kraissa of an accrued right to damages arising from the Messrs Choukair's earlier breach of the contract and any claim to damages arising from any such breach would be available only to HIP, which has been deregistered and cannot now bring it, not the Messrs Choukair as former shareholders in that entity.

Ms Kraissa's claim for damages in respect of HIP

Ms Kraissa claimed damages for breach of contract in respect of HIP. Initially, Ms Kraissa also brought a claim in monies had and received in respect of HIP. The latter claim was ultimately not pressed.
The general approach in determining any damages to which Ms Kraissa is entitled, in respect of the breach of contract in relation to HIP, is that she should receive the monetary sum which, so far as money can, represents "fair and adequate compensation for the loss or injury" which she sustained by reason of the breach of contract in respect of HIP: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 116 per Deane J. There are, as I will note below, very substantial difficulties in quantification of damages for breach of contract in respect of HIP. Ms Painter and Ms Gatland acknowledged those difficulties but contended they should not prevent the Court from making an order for damages in Ms Kraissa's favour.
I recognise that the Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where the plaintiff has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd above at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. Ms Painter and Ms Garland also refer to Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], where Beazley JA observed that: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provides for breach of contract, an award of damages … . Such damages should not be nominal only, notwithstanding that the award may be difficult to assess. …" (Citations omitted)
On the other hand, Mr Clark refers to several authorities which support the proposition that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: State of New South Wales v Moss (2000) 54 NSWLR 536 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]. Mr Clark submitted that, even if the Court accepted that there was a breach of the agreement in relation to HIP, there was insufficient evidence to award Ms Kraissa anything other than nominal damages or, if she was to be awarded more than nominal damages, the amount sought must be reduced to take account of HIP's expenses. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not.
Mr Clark points out, correctly, that in principle Ms Kraissa's damages would be calculated as the total profits made by HIP over the relevant period, divided by three, less the amount of money that Ms Kraissa had already received from, or had taken from, HIP. Mr Clark submits, with substantial force, that the Court cannot undertake that calculation, because it does not know the amount Ms Kraissa received from HIP; or the total profit of HIP, because there is evidence of its revenue but not its expenses. It was common ground between the parties that there is sufficient evidence to calculate the total revenue of HIP (T91). Mr Clark submits, and I accept, that the amount of money which Ms Kraissa received from HIP is a matter within her knowledge, even if it is also a matter within the Messrs Choukair's knowledge, and a matter of which she would be expected to keep records for taxation purposes. Mr Clark also submits, and I also accept, that the expenses of HIP should also have been within the general knowledge of Ms Kraissa, to the extent that she ran the relevant shop until March 2013, and could have offered an estimate of those expenses. I recognise that Ms Kraissa issued a notice to produce calling for documents relating to the business, shortly before the commencement of the hearing, but no documents were produced. That notice to produce was, on any view, very late. Even if any inference were available that documents not produced were not of assistance to the Messrs Choukair, as to which I express no view, that inference could not substitute for evidence in respect of matters such as the expenses of HIP. I will address whether such evidence exists below.
Ms Kraissa sought damages in respect of breach of the agreement in respect of HIP which she initially quantified as one-third of the EFTPOS takings of HIP, as identified in the evidence (Kraissa 8.7.14 Ex P1, p 440) amounting to $108,477.48. That claim had insuperable difficulties. So far as the evidence goes, the cash takings of the business conducted by HIP were used to pay the wages of its staff, and were then distributed between Ms Kraissa and the Messrs Choukair. It is unclear whether stock purchased for the store was also funded from cash takings and the position in that respect is also complicated by transfers of stock between stores. There is, however, no suggestion that rent for the store premises or tax on HIP's profits were met from the store's cash takings, so the approach for which Ms Kraissa initially contended would have made no allowance for rent or other costs that had to be paid from EFTPOS takings before they could properly be treated as HIP's profit or tax on that profit payable by HIP before it could be distributed to shareholders.
Ms Painter and Ms Gatland acknowledged that there is no evidence as to the cost of rent for the store from which HIP conducted its business. They submitted that information was within the knowledge of the Messrs Choukair, and that is presumably the case. However, it would also have been readily available to Ms Kraissa by, for example, service of a subpoena upon the lessor. Even if I were to infer that the evidence of the Messrs Choukair as to that matter would not assist them, it is still necessary to take account of the rent payable by HIP in order to conduct a hairdressing business within a large shopping centre in calculating Ms Kraissa's damages. I also should not proceed on the basis that HIP did not meet taxation obligations in respect of its own profits, in quantifying Ms Kraissa's damages. I cannot award damages on the basis initially propounded by Ms Kraissa so far as it ignores both HIP's rental and its taxation obligations.
Ms Painter and Ms Gatland also acknowledge that there was no clear or complete evidence admitted as to the cost, or even the likely cost, of stock and other expenses. They submit that Ms Kraissa tendered such books and other records as she retained, but that the Messrs Choukair tendered no evidence as to those matters. While those propositions are correct, an inference that the evidence that the Messrs Choukair might have led would not have assisted them does not substitute for evidence as to the cost of those items. Mr Clark also identifies particular adjustments which would need to be made in a calculation of damages, if the Court were to find that Ms Kraissa had given sufficient evidence of quantum to be able to award greater than nominal damages, including taking account of evidence of stock purchased by HIP and making an estimate of other expenses such as rent, utilities, marketing expenses, insurance and bank fees. I need not address that submission given the claim for damages on this basis is unsustainable in more fundamental respects.
Finally, Ms Kraissa's initial calculation also involved the difficulty that, so far as "profit" is used in the contract between the parties in an orthodox sense, as the amount of earnings less expenses of HIP, there is no calculation of what it was and no basis to determine what a one-third share of it would be, or whether that one-third share of it would exceed the amount of one-third of the cash takings of the business which, so far as the evidence goes, Ms Kraissa has already received. That is, of course, by no means impossible, if the EFPTOS takings of the store would have needed to be applied fully to meet HIP's rental, taxation and other obligations.
Alternatively, Mr Clark submitted that the amount of EFPTOS takings should be discounted by 70%, on the basis of what, he contended, was a generous profit margin for a hairdresser of 30%. Although that submission would to some extent assist Ms Kraissa in establishing her damages, I am not in a position to make an estimate of matters such as the level of rent, utilities or other expenses for a hairdressing salon at Penrith, nor to make an estimate of what would be a profit margin for a hairdresser, generous or otherwise, because those are not matters of general knowledge but matters of evidence.
Following the parties' written closing submissions, and brief oral closing submissions, I allowed Ms Kraissa a further opportunity to seek to quantify her claim for damages, and the Messrs Choukair to respond to that quantification, and then a third opportunity to seek to clarify an aspect of that further quantification. It seemed to me that she should be given a full opportunity to establish that calculation, if the Court might otherwise be required to hold that her claim failed by reason of a failure to establish those damages. By further submissions dated 10 September 2015, Ms Gatland provided a calculation sheet in respect of damages relating to HIP, which calculated a one-third share of EFTPOS profits payable to Ms Kraissa as $64,491.63. That calculation comprised elements (in dollar amounts only) of total takings of HIP quantified as $543,926, made up of cash takings of $201,252 and EFTPOS takings of $342,673. Total estimated expenses of HIP were $355,732.96, which included an allowance for rent of $93,887.50 and a tax liability for PAYG of $7,004, and also allowed for other expenses, including wages. Ms Gatland derived what was described as "net EFTPOS profit" of $193,474 from that calculation, leading to her calculation of the one-third share of that profit payable to Ms Kraissa as $64,491.63.
Mr Clark responded to Ms Kraissa's further damages calculation by contending that that calculation ignores evidence that does exist, impermissibly extrapolates from evidence and fails to take into account relevant evidence, and that the resulting figure has no foundation in reality. Mr Clark presses Messrs' Choukair's earlier submission that the evidence is insufficient to support a claim for damages, and that Ms Kraissa is only entitled to nominal damages, or the alternative calculation of $28,264 referred to in the Defendants' written closing submissions. Against the contingency that those submissions were not accepted, Mr Clark made further submissions as to the particular items included in Ms Kraissa's damages calculation. I address both that wider submission and the submissions as to particular items below.
Ms Kraissa's further calculation adjusted HIP's income records to deal with two relatively short periods in which income was not recorded. Mr Clark submits that it is not appropriate to adjust the figures contained in HIP's income report to adjust for the missing periods, where that income report appeared to record HIP's total income, and there was no evidence that the store was open over those periods. I accept that submission. If it were otherwise accepted, Ms Kraissa's calculation would need to be further adjusted to use the total figure contained in the income statement, rather than the figure as adjusted in her calculation.
Ms Kraissa's calculation in respect of the profit of HIP included some assumptions which seem to me to be reasonable, in circumstances that the Messrs Choukair had not led evidence, including estimates of electricity expenses by reference to the corresponding expenses for HIM; of insurance expenses using amounts disclosed in the bank statements of HIM; and of telephone and internet costs using amounts shown in HIM's bank statements. Mr Clark submits that it is not possible to extrapolate expenses of HIM in order to estimate the expenses of HIP, where Ms Kraissa's evidence was that the Penrith store operated by HIP was busier and sold more stock than the Merrylands store operated by HIM, and that an extrapolation from HIM would simply fill a gap of evidence that was created by Ms Kraissa. I do not accept that proposition. It seems to me that, in circumstances where the Messrs Choukair had not led evidence as to these matters, the Court ought more readily to accept inferences that may be drawn from other evidence, including evidence of the expenses of HIM, and I accept Ms Kraissa's estimate of those expenses. Mr Clark also advances various criticisms of the treatment of stock expenses. While there is some force in those criticisms, it seems to me that the Court need not adjust that calculation, where they are not supported by evidence of the Messrs Choukair. Ms Kraissa's calculation estimated rent payable by HIP using the amount for rent disclosed in the bank statements of HIM. I recognise that estimate may well be incorrect, in circumstances that stores in different shopping centres may well be subject to different rental obligations. However, it seems to me that the Court should accept that estimate, where no better estimate can be made on the evidence and the Messrs Choukair do not lead evidence as to this matter.
There is, as Mr Clark points out, a complexity with the wages figure used in Ms Kraissa's calculation, namely that (as I noted above in respect of the wider methodological issue) it exceeds the amount of cash takings, and to that extent is difficult to reconcile with the evidence that wages were paid from cash takings prior to cash distributions to Ms Kraissa and the Messrs Choukair. It is not possible to resolve that difficulty on the evidence, although it seems to me to suggest that the estimate of wages used in Ms Kraissa's calculation, which was made by averaging from two periods for which figures are known, is excessive and the calculation to that extent understates Ms Kraissa's damages. Mr Clark submits that the calculation of wages does not make allowance for any PAYG withholding obligations the business has in respect of its net wages, and submits that a further deduction should be made in respect of PAYG withholding obligations. The evidence indicates that there were significant issues in respect of the tax compliance of HIP, and that the Messrs Choukair perceived an economic advantage in employing staff in a manner that was described as "off the books", although they complained that Ms Kraissa had not delivered that result. The Messrs Choukair do not lead evidence to explain the extent of any PAYG which was not deducted from employees' wages, and it does not seem to me that I should speculate in their favour in that respect. On balance, it seems to me that Ms Kraissa has done the best that can be done with the available evidence in respect of this matter, and no further adjustment should be made.
Ms Kraissa's revised calculation does not make adequate allowance for payment of tax by HIP at the company tax rate. On that calculation, HIP had total takings of $543,926, expenses of $355,732, and derived a profit of $193,474. Ms Kraissa's calculation has regard to a figure for tax liability in respect of PAYG, reflecting a single tax payment slip for HIP. Mr Clark points out that that payment slip does not indicate the period to which it applies, or whether it is directed to weekly, monthly or quarterly PAYG withholding, superannuation guarantee charges or GST. Mr Clark submits, and I accept, that I cannot assume that it covers all tax liability for the relevant period, even if it were possible to identify the period to which it attached or the nature of the taxation liability to which it attached. As Mr Clark points out, it is plain that the amount calculated by Ms Kraissa for tax of $7,004 does not, on any view, correspond to tax on HIP's profit as estimated by her. Mr Clark submits, and I accept, that it would be necessary to adjust the total profit figure by 30% to take account of HIP's liability for corporate income tax, before dividing it by three. An allowance for tax against that amount would significantly reduce the amount of any further profit payable to Ms Kraissa.
Mr Clark also submits that Ms Kraissa's damage calculation understates the impact of GST, where HIP collected GST on its revenue and would be entitled to an input tax credit on some but not all of its expenses. I accept that there is force in this criticism, but it must be weighed against the fact that the Messrs Choukair did not choose to give evidence in respect of the question of GST. On balance, it seems to me that, doing the best the Court can in the relevant circumstances, no further adjustment should be made for GST, which would reflect a position where GST payable and input tax credits were the same, while recognising that that position may have been shown to be incorrect had either party led better evidence as to quantification.
Mr Clark also points to other expenses which are not taken into account in the calculation. It does not seem to me that I need to adjust for such other expenses, since there is no evidence as to whether several of those expenses would be borne by HIP, other companies operated by the Messrs Choukair or the Messrs Choukair personally. In respect of annual leave liability for staff, there is again no evidence as to the basis on which such leave obligations arose, and it again does not seem to me that I should speculate in the Messrs Choukair's favour in that regard. Mr Clark submits that not making allowance for such expenses would effectively "reward" Ms Kraissa for not discharging her evidentiary onus. It does not seem to me that that approach has that effect, where the Court must seek to do the best it can with the evidence that is available, and the Messrs Choukair had the opportunity to lead evidence as to HIP's profitability. Where they chose not do so, perhaps in the hope that Ms Kraissa would ultimately fail to establish the amount of her damages, there is no injustice in the Court doing the best it can in the circumstances.
It is also important to recognise that Ms Kraissa's revised calculation treats her as having already been paid one-third of HIP's cash profits after payment of wages, and seeks to calculate her loss as one-third of EFTPOS takings less expenses that would have to be met from them. That revised calculation does not make any deduction for the cash distributions that Ms Kraissa has already received from HIP, and there is no evidence as to what they are. Ms Kraissa's final submissions as to damages, after I sought clarification as to that matter, recognised that point, acknowledging that Ms Kraissa's claim for damages in respect of HIP: "is made on the basis that she did not receive any amount of the distribution of profits from the EFTPOS takings. The cash takings or the allocation of any amount to [her] from cash takings does not form part of her claim for damages." In principle, it seems to me that that approach is open to Ms Kraissa. It was common ground, or at least the uncontested evidence was, that wages and distributions to Ms Kraissa and Messrs Choukair were made from HIP's cash takings, and it was open to Ms Kraissa to treat those distributions as correct, absent any suggestion to the contrary, and focus on the amount she claims not to have been paid by EFTPOS takings as her damages. That would have been a relatively straightforward approach if HIP's cash takings were, on the evidence, sufficient to fund the wages and cash distributions.
However, I have been troubled by the fact that, as Mr Clark pointed out and as I noted above, the wages estimated by Ms Kraissa exceed HIP's cash takings so, on her calculation, no funds would have been available for the cash distributions which the evidence indicates took place. It seems to me likely, as I noted above, that is likely to reflect an overestimate of the amount of wages where only limited records are available, which would be consistent with a balance of cash takings being available for distribution to Ms Kraissa and the Messrs Choukair after wages. Importantly, there is no suggestion in the evidence that such cash distributions to Ms Kraissa and the Messrs Choukair were funded from EFTOPS takings, so as now to have to be taken into account in determining any share of EFTPOS takings that was not distributed to Ms Kraissa. On balance, it seems to me that this issue does not indicate the approach adopted by Ms Kraissa should not be adopted, notwithstanding that it involves the making of possibly imperfect estimates in respect of matters where the evidence is limited.
It seems to me that, doing the best that I can with limited evidence, Ms Kraissa's damages calculation should be adopted, as adjusted to exclude the adjustment she made for the "missing" period of revenue and to allow for the fact that tax would have to be paid on the total profit derived by Ms Kraissa's calculation of $193,474.90 (prior to reversing that adjustment) at the corporate tax rate of 30%, reducing that profit to $135,431, and one-third of that amount would be $45,143 (prior to reversing that adjustment). That amount is less than the amount claimed by Ms Kraissa, but exceeds the Defendants' estimate of Ms Kraissa's profit share in their closing submissions of $28,264. The parties should be able to agree the necessary calculation to exclude the adjustment for the "missing" period of revenue and for tax to which I have referred in this paragraph.

Relevant events in respect of HIM

Ms Kraissa was the manager of the business conducted by HIM from September 2012 until March 2013. Ms Kraissa claims, and the Messrs Choukair deny, that she was also entitled to be a shareholder and director of HIM. Ms Kraissa contends, and the Messrs Choukair deny, that in about September 2012, Ms Kraissa and Mr Steve Choukair agreed that, in consideration for payment of $55,000, Ms Kraissa would become a part owner of HIM. Ms Kraissa contends that there were express terms of that agreement that the consideration was $55,000 payable by instalments; that she would be issued with one share in HIM and would become a director of HIM on making the first payment; that she would be allowed six months to pay the full amount of the purchase price; and that she would be employed as manager of the business conducted by HIM and would be entitled to receive a one-third share of the profits of its business.
The Messrs Choukair deny that such an agreement was reached, and contend that they were only in negotiations with Ms Kraissa in respect of part purchase of HIM. They accept that, during the course of the negotiations which they contend were taking place, it was agreed that Ms Kraissa would manage HIM's business, would receive one-third of the net profits from cash takings of the business on a weekly basis, and would have access to HIM's books and accounts and to its bank account, till and safe. They also contend that it was an implied term of the arrangement that Ms Kraissa would not commit any act of serious misconduct against HIM.
Ms Kraissa's version of the agreement in respect of HIM is supported by her evidence (Kraissa 8.7.14 [72]). Ms Kraissa gives evidence of a conversation in September 2012 with Mr Steve Choukair, in relation to the acquisition of an interest in HIM. Ms Kraissa's brother also gives evidence of a conversation with Ms Kraissa later in 2012 in relation to an opportunity to pay $55,000 for a one-third share in HIM, with six months to pay off that amount, on the basis that she would get one-third of the takings and manage the three stores. That evidence is now not controverted by any evidence led by Mr Steve Choukair. I am unable to accept the Messrs Choukairs' alternative version of the arrangement that they were in negotiations with Ms Kraissa in respect of a part purchase of HIM, because they do not give evidence to support that version of events, and Ms Kraissa did not substantially depart from her evidence as to the arrangement in cross-examination. As Ms Painter and Ms Gatland submit, it is by no means implausible that the parties would have entered substantially similar arrangements in respect of the two stores, and Ms Kraissa's involvement in managing HIM's business is consistent with the arrangement for which she contends, although it would also have been consistent with the arrangement for which the Messrs Choukair contend, had they established that arrangement.
Ms Kraissa's claim that she paid $30,000 (or $29,000) in respect of the purchase price for an interest in HIM, by way of $25,000 in cash, a set off of $1,000 by way of another loan, and a further $4,000 in cash depends wholly on the evidence of Ms Kraissa and her brother (Kraissa 8.7.14 [76]-[77]; Raymond Kraissa 4.9.14 [8]-[9]). Ms Kraissa's evidence is that, on 15 October 2012, she met with Mr Steve Choukair, together with her brother, at a coffee shop in Earlwood and gave Mr Choukair $25,000 in cash, and Mr Choukair agreed to set off an amount of $1,000 he owed her against the purchase price payable in respect of the interest in HIM. Mr Kraissa also gives evidence of observing Ms Kraissa handing Mr Choukair $25,000 in cash at a coffee shop in Earlwood in October 2012, and he says that he counted the money to double check it, and that the cash was in $100 or $50 notes in an unsealed envelope. It was put to Ms Kraissa in cross-examination that she ought prudently to have obtained a receipt for the payments which she claims to have made to Mr Steve Choukair. I accept that proposition, but it does not follow that Ms Kraissa did not in fact make those payments, without obtaining a receipt from them, where there were regular cash dealings between the parties, including in respect of the payment of Ms Kraissa's wages from the first store which she managed in cash, and the payment of her share of HIP's takings in cash.
I have given careful consideration to whether I can accept Ms Kraissa's claim that she paid $25,000 in cash to Mr Steve Choukair without a receipt or other documentation, in respect of the alleged contract to acquire an interest in HIM. I am conscious that many, or most, members of the community would not pay an amount of $25,000 in cash, without documentation, to acquire an interest in a business, and that course might seem highly imprudent. On the other hand, Ms Kraissa is plainly not a sophisticated businessperson, and her evidence suggests that employees of HIP and HIM and her share of the cash takings of HIP and HIM was paid in cash, so that cash dealings are not unfamiliar to her or the Messrs Choukair. She had left school at 14, had worked with the Messrs Choukair for a period after she left school and claims to have trusted them, so dealings in cash and a lack of documentation are not wholly implausible. The Messrs Choukair did not ultimately seek to give evidence to deny the fact of that payment, and I should infer that their evidence in that respect would not have assisted them. With some hesitation, I accept Ms Kraissa's and her brother's evidence as to this matter.
Ms Kraissa's evidence is also that, about two weeks later, towards the end of October, she gave Mr Steve Choukair a further amount of $4,000 in cash. With some hesitation, I also accept Ms Kraissa's and her brother's evidence as to this matter. The result of these transactions is that, of a proposed purchase price of $55,000 for an interest in HIM, Ms Kraissa paid $29,000 in cash and relied on a set off as to $1,000.
Ms Kraissa managed the salon conducted by HIM at Merrylands from October 2012. Her evidence is that she was not given a share certificate for HIM. She also refers to difficulties in obtaining information as to the financial return of the businesses and as to issues which arose in respect of the amount of money made by the businesses and the cost of staff at the businesses. I have referred above to her and her brother's evidence as to the manner in which the stores were managed and the manner in which she was paid, and as to discussions concerning her exit from HIM.
Ms Kraissa admits, in her affidavit, that she "withdrew" (or took) $10,000 from HIM's bank account, $810 from HIM's cash register and $1,340 from the safe at the Merrylands store and claims that she withdrew that money "with the intention of giving it back" once the Messrs Choukair had accounted to her for money which she claims was missing from HIM's bank account for February 2013. The withdrawal of money from HIM was plainly unauthorised and inappropriate, and the amount of money which Ms Kraissa then received must be taken into account in respect of any relief to which she is entitled.
In late January 2014, the shares in HIM were sold to a third party, and the Messrs Choukair resigned as directors of HIM.

Claim for restitution in respect of HIM

Ms Kraissa initially pleaded, but did not press, a claim for damages for breach of contract in respect of HIM on the basis that the Messrs Choukair failed to issue her with a share certificate for one share in HIM, failed to appoint her as a director of HIM, failed to allow her six months to pay instalments for the purchase of her share in HIM and failed to pay her one-third of the profits of the business conducted by HIM. The Messrs Choukair responded to the entirety of the claim by denying the agreement had the terms for which Ms Kraissa contended, and contending that they terminated the agreement between Ms Kraissa and them for her to manage the business of HIM as part of her review of the business, on the basis of serious misconduct by her, namely the allegation that she took money from HIM and HIP.
The Messrs Choukair's primary position in respect of HIM, as put in Mr Clark's closing submissions, was that there was no agreement between Ms Kraissa and Mr Steve Choukair in respect of HIM in the form pleaded by Ms Kraissa, and the arrangement was instead that Ms Kraissa was to have access to the books and records of HIM, to manage the business of HIM and be paid one-third of the cash profits in doing so. I have accepted Ms Kraissa's evidence as to the terms of that agreement and the payments she made above. Mr Clark also relied, in closing submissions, on the fact that Ms Kraissa plainly did not have a clear understanding of how the term of the agreement relating to her receipt of one-third of the profit of HIM was to operate, and to her re-examination which suggested that she may have assumed that that term contemplated the provision of a share of cash profits. It does not seem to me that that submission advances the Messrs Choukair's position, so far as the terms of the contract are to be objectively construed, rather than by reference to Ms Kraissa's understanding of them. Mr Clark conceded that Mr Steve Choukair had not met the terms of the agreement relating to HIM for which Ms Kraissa contended, which contemplated that Ms Kraissa would be issued with one share in HIM or would become a director of HIM.

Claim in monies had and received in respect of HIM

Ms Kraissa ultimately pressed a claim in monies had and received, and not for breach of contract, in respect of HIM. She claims that Mr Steve Choukair directed her to pay an amount of $29,000, and she paid that amount in cash at his direction to him. She contends that those amounts were received by Mr Steve Choukair, Mr Mohamad Choukair or both of them and applied jointly or severally to their benefit and claims that the Messrs Choukair are liable to repay her the amount of $29,000 being the total of the monies had and received. The Messrs Choukair deny that she paid the amount of $29,000 in cash and repeat their denial of the agreement in respect of HIM.
Mr Clark submitted that any failure of consideration in respect of HIM was, at most, partial and that Ms Kraissa's claim for money had and received must fail. Mr Clark points out, and I accept, that a claim for money had and received is only available where there is a total failure of consideration, or at least any consideration received could properly be described as de minimis: see K Mason, JW Carter & GJ Tolhurst, Mason & Carter's Restitution Law in Australia, (2nd ed 2008, LexisNexis Butterworths) at [926]. The relevant principle was summarised by Mason CJ in Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 at 350 as follows: "When, however, an innocent party seeks to recover money paid in advance under a contract in expectation of the entire performance by the contractbreaker of its obligations under the contract and the contractbreaker renders an incomplete performance, in general, the innocent party cannot recover unless there has been a total failure of consideration. If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration." Deane and Dawson JJ similarly noted (at 375) that: "… the receipt of a payment of money for a consideration which wholly fails 'is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution ... to the person who has sustained the countervailing detriment'." McHugh J similarly noted (at 388-389) that, where a payment of the fare for a cruise had been made in advance: "Because the common law has no doctrine of apportionment in respect of a partial failure of consideration, [the plaintiff's] remedy in respect of [the defendant's] failure to complete the cruise was an action for damages for breach of contract and not an action for partial restitution of the sum paid as the price of the fare."
As I noted above, it seems to me that Ms Kraissa's version of the contract in respect of HIM has been established, where the Messrs Choukair have not led evidence to seek to contradict it. It seems to me that there has been a substantial failure of consideration in respect of that contract, so far as Ms Kraissa was not issued a share in HIM or appointed as a director of HIM. Mr Clark submits that there is no evidence that the further term that Ms Kraissa would be given six months to pay the full purchase price under the alleged Merrylands agreement was not met. I do not accept that submission, since it seems to me that the evidence of Ms Kraissa's exclusion from the relevant businesses amounted, in substance, to exclusion of an opportunity to pay the full purchase price.
Mr Clark points out that the terms of the agreement in respect of HIM as pleaded by Ms Kraissa included terms that Ms Kraissa would be employed as the manager of HIM and would be entitled to receive a one-third share of the profits of the business conducted by HIM, and that those terms are consistent with the evidence. Mr Clark submits that, given Ms Kraissa's evidence that she was the manager of HIM, the term requiring that she be "employed" as the manager of HIM was partly performed. I also do not accept that proposition, because that term (as pleaded) contemplated at least a continuing status as manager of HIM and a relationship characterised as one of employment. It seems to me that neither was established.
Mr Clark contends that the term that Ms Kraissa would be entitled to receive a one-third share of the profits of the business conducted by HIM was at least partly performed, where she received a portion of the cash takings of HIM. I must accept that submission. It does not seem to me that a total failure of consideration has been established, where Ms Kraissa was paid a portion of HIM's cash takings for a period, which seems to me to have at least partly discharged the obligation to pay one-third of HIM's profits. An order for restitution of the amount of the purchase price paid by Ms Kraissa therefore cannot be made.
Alternatively, Mr Clark submits that, if there is to be restitution of the amounts received by Ms Kraissa, there must be restitution of the profits and other money taken or received from HIM by Ms Kraissa. I will address that issue for completeness, although it does not strictly arise where a claim for restitution has not been established. Mr Clark submits that, had I determined that there has been a total failure of consideration in respect of HIM, Mr Steve Choukair must return $29,000 against which the amount of $12,150 in cash taken by Ms Kraissa from HIM and the cash profits which Ms Kraissa had received from HIP. Ms Painter responded that it would be unfair to Ms Kraissa to make a deduction for the monies which she had taken from the HIM business, where she would be left unremunerated for the work performed. There is some force in that submission. However, the fundamental answer to any claim for return of those amounts is that put by Ms Painter in closing submissions (T89), that any monies taken from HIM, and any share of cash takings paid to her, are matters relating to HIM and not to Mr Steve Choukair. It may be that HIM, which is now owned by third parties, or its creditors, may have an interest in the recovery of those amounts. Mr Choukair does not have such an interest and there is no reason why any amount that he had been ordered to pay by way of restitution should be reduced by reason of amounts that are due to HIM and not to him. There would be no unjust enrichment of Ms Kraissa if Mr Steve Choukair had been ordered to repay her the entire amount she paid to him, had a total failure of consideration been established, leaving HIM to take such steps as it wished in respect of any monies which she may owe to it.

Orders and costs

Accordingly, Ms Kraissa succeeds, in a lesser amount than she initially claimed, in her claim for contractual damages against the Messrs Choukair in respect of HIP. Ms Kraissa fails in respect of her claim for restitution in respect of HIM against Mr Steve Choukair because I am not satisfied that a total failure of consideration was established. There should be judgment for Ms Kraissa against the Messrs Choukair in an amount to be calculated by the parties in accordance with this judgment together with interest under s 101 of the Civil Procedure Act. In relation to the question of costs, my preliminary view is that Ms Kraissa has been partially successful in the claim; the issue as to restitution as to which she was unsuccessful is a discrete and substantial issue, which took up less than half of the hearing, and a proper order as to costs would be that Messrs Choukair should pay half of Ms Kraissa's costs of the proceedings, as agreed or as assessed. However, I will allow the parties an opportunity to make submissions as to costs.
The parties should bring in agreed Short Minutes of Order to give effect to this judgment, including as to costs, within fourteen days. If there is no agreement between the parties, including as to costs, they should submit their respective draft Short Minutes of Order within that time, together with short submissions not exceeding 10 pages as to the differences between them, indicating whether an oral hearing is requested.

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: 30 October 2015

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