Briginshaw v Briginshaw [2004] NSWSC 640 | Case summary

Briginshaw v Briginshaw [2004] NSWSC 640 | Case summary | Zoe

[62]

Dr Iannuzzi's statement that not recovering the $1M at all was "not something that I was factoring into my thinking" is contradicted by his analysis in the Deal Summary: "If the $1M is not recovered, we take some good land, wine or equipment very cheaply" , obviously meaning that all would not be lost if the $1M was not recovered because Mount Eyre would still be able to buy assets of Barrington very cheaply at a 'fire sale' . 103 Dr Iannuzzi, in his affidavits and in his evidence in chief, had been insistent that the discussion with Mr Lennon on 29 December had been straightforward and that Mr Lennon had given him the clear and unequivocal assurance that "we were in a safe position, that the $1M was not at risk" . He had said at the conclusion of the meeting with Mr Lennon: "I was happy that the transaction was safe" . The impression clearly sought to be given by the Plaintiffs' Statement of Claim and by their affidavit evidence was that it was a simple case of two doctors relying implicitly on unequivocal, straightforward assurances by Mr Lennon at one meeting that the transaction was "safe" , deciding to proceed, instructing solicitors merely to prepare the appropriate documentation, and then executing it. 104 Confronted with his own assessments of risk in the Deal Summary, Dr Iannuzzi could no longer assert that the case was quite so simple. He gave this evidence: "HIS HONOUR: Q. Just so that I understand your position, Dr Iannuzzi, are you saying that if you had believed that there was any real risk that the guarantee for $1m would actually be called upon, you would not have entered into the transaction? A. Called upon and lost, your Honour, rather than just called upon and then repaid. There's a distinction there and, as things progressed, the difference between being called upon, in my view, had changed. The implications of being called upon for the $1m had changed substantially between earlier on and then later, once it was all in concrete, the 'called upon' had quite a different significance to what it did earlier on.

[91]

Q. And the reason why it was necessary to obtain waivers was that Barrington Estates was in default, wasn't it, to your knowledge? A. Well, it must have been, but again the significance of all these things I'm not sure of, Mr McClintock. I'm not a trained banker or financier." 113 Again, this evidence struck me as most unsatisfactory. First, I simply cannot accept Dr Iannuzzi's assertion that he has a "very poor understanding" of the significance and meaning of the words "default" and "waiver of default" . His analysis in the Deal Summary and his correspondence with NAB (see e.g. Exhibit D2) show that he is very familiar indeed with all aspects of property dealing and investment financing and, indeed, he is often prepared to assert his own views in those areas aggressively and with complete self confidence. 114 Second, Dr Iannuzzi clearly endeavoured to suggest in his second affidavit that he had no idea prior to execution of the Transaction Documents that Barrington was in any sort of difficulty with BankWest by reason of default or otherwise. Yet his evidence in cross examination shows that this was not at all the true picture. 115 Third, Dr Iannuzzi's repeated insistence that, in all of his confusion and doubt, he simply trusted Mr Lennon to make sure that everything would turn out all right is simply unbelievable in the face of the evidence as to his own negotiations and enquiries, as emerges from the Deal Summary and the documents produced by Dr Iannuzzi's solicitors. 116 Dr Iannuzzi was cross examined about the statement in his second affidavit that he was not told by Mr Lennon or anyone else from BankWest that BankWest's interest, fees and other costs would rank ahead of the Plaintiff's letter of credit in the distribution of funds from asset sales. Dr Iannuzzi admitted that his solicitors had sent him a document on 10 January 2001 which summarised the proposed order of priority of distribution in the contemplated transaction. The relevant parts of the document are as follows: "Bank of Western Australia Ltd, Barry Thomas Morrison, Earl Frates Slick (trustee) and Perpetual Trustee Company Ltd (trustee) have taken security over Barrington Estates Ltd and its subsidiaries above (the "Group") and have previously agreed certain priority arrangements. They now propose regulating their priority position in accordance with the summarised priority order set out in the table below (although the final position is not yet agreed).

[111]

Q. I want to suggest to you that that is simply untrue, that Mr Lennon never said anything like that? A. I don't agree with that." 122 Dr Iannuzzi's explanation that he did not understand the plain meaning of a straightforward statement in the priority sheet, which he must have read carefully, because of what Mr Lennon had said in the meeting on 29 December is, to my mind, incapable of acceptance. 123 Dr Iannuzzi conceded that Mr Lennon said at the 29 December meeting that he and Dr Tsironis should look not only at the up-side of the transaction but also at the down-side. Dr Iannuzzi added: "In our conversation at Blue Bay this was the only cautionary remark that he made. Everything else was positive and comforting." He was then asked about the alleged Solvency Representation. 124 Dr Iannuzzi conceded that in the Plaintiffs' Statement of Claim he was alleging that he was not aware that Barrington was in financial difficulties. He was taken to paragraph 46 of his first affidavit in which he had said: "I was never under the impression that [Barrington] was in any sort of a precarious position." He was then taken to what he had written in the Deal Summary of 9 January 2002. 125 He admitted that he was of the view at the time that he wrote the Deal Summary that Barrington was in a "cash crisis" , however he said that "cash crisis" was a "poor choice of words" on his part and that he had "overstated" the position. I completely reject that explanation. Dr Iannuzzi is a highly articulate person who has no difficulty in expressing himself very clearly and forcefully in writing. There is no reason for him to have "overstated" the position in a document which he was preparing for his own legal advisers. 126 Dr Iannuzzi was asked directly whether he still said that what he had sworn in the first sentence of paragraph 46 of his first affidavit was true. He replied: "Yes" . There is no need to dwell at length on the manifest inconsistencies between Dr Iannuzzi's assertion that prior to his execution of the Transaction Documents he had no inkling that Barrington was "in any sort of precarious position" and the state of his knowledge as clearly revealed in his Deal Summary, his other evidence, and in documents produced from NAB and his solicitors. I will merely summarise some of the inconsistencies. 127 Dr Iannuzzi had said in examination in chief that Mr Lennon had told him that Barrington was trading well. When asked about the statement in the Deal Summary "sales have basically not hit projections" , he said that Mr Lennon had told him that. The two statements are inconsistent. 128 Dr Iannuzzi said in paragraph 46 that he was never under the impression that Barrington was "in any sort of precarious position" , yet the Deal Summary is riddled with statements such as:

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132 It must be remembered that the Plaintiffs, in their Statement of Claim, rely only upon express Representations alleged to have been made by Mr Lennon; there is no allegation of misleading, deceptive or unconscionable conduct by means of implicit representations or by failing to disclose what there was a duty to disclose. 133 As I have said at the commencement of this judgment, the case turns, first, upon whether the Plaintiffs have proved to the Court's satisfaction that the statements alleged to have been made by Mr Lennon to them were made and, second, whether the Plaintiffs relied to any extent at all on what was said by Mr Lennon in the two meetings. 134 I have come to the conclusion that the Plaintiffs have failed to prove that any of the Representations alleged in the Statement of Claim were, in fact, made by Mr Lennon. My reasons are as follows. 135 First, I must bear in mind that what is alleged against Mr Lennon, if true, brands him as a deliberate and blatant liar: it is quite clear from the evidence as to the discussions in which Mr Lennon had participated prior to 22 and 29 December 2001 that, if he made the statements about Barrington attributed to him, particularly those about the company's trading position, prospects and solvency, then he must have known that those statements were false. Further, if he had given any assurances to Drs Tsironis and Iannuzzi to the effect that the proposed letter of credit transaction with BankWest was "safe" or that he would not let them get into the deal "if he thought that [their] million was at all at risk" , then, not to put too fine a point upon it, he must have been a complete fraudster. That is a very serious allegation of misconduct to allege against a senior bank officer. 136 I find it inherently improbable that Mr Lennon, a senior officer of a major bank, would make such blatantly fraudulent representations in a commercial transaction which was clearly so fraught with risk of collapse and litigation that the probability of his exposure as a fraudster, to the ruin of his career, must have been seen as high. Mr Lennon must have been mindful of the risk of something he said to Dr Iannuzzi being used against him, if not from his own considerable banking experience, then because he was actually reminded before the meeting of 29 December. Mr McGarry gave evidence that on or about 28 December 2001 he had a conversation with Mr Lennon in which Mr Lennon told him that Mr Blom had arranged for him to go to Blue Bay to discuss with Dr Iannuzzi the "guarantee in support of Blom's funding in the package" . Mr McGarry said to Mr Lennon: "The deal with Iannuzzi is between them, not us. Blom's arranged this, let's not get involved. Issues can arise in these sorts of situations. Be careful of what you say to Dr Iannuzzi."

[119]

Mr Lennon replied: "I'm not stupid, Paul." Mr McGarry was cross examined about this conversation. I have no hesitation in accepting Mr McGarry's evidence that the conversation occurred as he said. 137 Second, I must bear in mind that Mr Lennon has not been able to give evidence or to defend himself in any way. The serious accusations of misconduct against him depend solely on the uncorroborated evidence of Drs Iannuzzi and Tsironis, both of whom have, of course, a strong motivation for accusing BankWest and Mr Lennon of wrongdoing and thus escaping their liabilities. 138 Third, I take into account that in the only document which Dr Iannuzzi brought into existence to record his analysis of the proposed transaction, i.e. the Deal Summary, there is no reference whatsoever to any assurances by Mr Lennon that the transaction was "safe" or that it had no risk or little risk, or that Dr Iannuzzi was relying on something said by Mr Lennon. There is no reference at all in the document to the meetings with Mr Lennon which occurred on 22 December and 29 December. This is surprising if, as Dr Tsironis and Dr Iannuzzi would have it, they made up their minds to enter into the transaction on the basis of what Mr Lennon had said at the meeting of 29 December. 139 Fourth, I take into account that I am unable to accept Dr Iannuzzi as a witness of any credit. 140 Fifth, I regard it as improbable in the highest degree that Dr Iannuzzi would have accepted trustingly and at face value anything that Mr Lennon had said at the meetings of 22 and 29 December. The content of Dr Iannuzzi's communications with NAB, with their valuers, and with St George immediately after his execution of the Transaction Documents, taken in conjunction with his demeanour in the witness box, convince me that he is the sort of person who takes nothing and nobody on trust in his business dealings, who regards himself as knowledgeable and experienced in business matters, who always makes his own enquiries to the fullest extent possible, who makes his own judgments and who is not backward in criticising in blunt terms those who do not agree with him. 141 Sixth, I take into account that Dr Tsironis' credit generally is adversely affected by the fact that, if her evidence in cross examination is to be believed, she falsely swore a statutory declaration as to the independent advice which she had received from Mr Belos prior to executing the Transaction Documents, knowing that the statutory declaration was to be relied upon by St George Bank. 142 Seventh, it is clear that at the time of the meeting on 29 December and thereafter Dr Tsironis was wholly and understandably preoccupied with the serious medical condition of her new-born baby. I think it highly unlikely that at the meeting on 29 December she was in a state of mind in which she could focus on what was being said between Mr Lennon and her husband or could afterwards retain an accurate recollection of it. 143 Eighth, it is clear that Dr Tsironis left implementation of the transaction entirely to Dr Iannuzzi. Her evidence generally and her demeanour, coupled with the very assertive manner of Dr Iannuzzi, leaves me with the strong impression that in matters of business Dr Tsironis is prepared to acquiesce in decisions made by Dr Iannuzzi and that she is very much directed by him in that regard. I am of the view that in business matters Dr Tsironis would be prepared to support Dr Iannuzzi to whatever extent he felt necessary, if he required it of her. 144 Ninth, I take into account generally as to the Plaintiffs' case that they have not been willing to call as witnesses those from whom they had received advice in connection with the transaction and who could have given direct evidence on the issue of reliance, namely, the NAB officers, Mr Coupe and Mr Leeson, their accountant, Mr Belos, and their solicitor, Mr Cheung. In my view, their evidence was required to explain what advice they gave to Dr Iannuzzi, if any, as to the subject matter of the Representations and as to what response Dr Iannuzzi made, if any, to that advice. Without their evidence, the inference is clearly open that Dr Iannuzzi discussed with them, or some of them, what he had been told both by Mr Blom and by Mr Lennon and sought their assessment. I conclude that the evidence of those witnesses would not have assisted the Plaintiffs' case. 145 Tenth, as against the foregoing, I take into account that BankWest has not called Mrs Lennon, who was present at the meeting of 29 December. Mrs Lennon could possibly have given evidence contradicting the evidence of Dr Iannuzzi and Dr Tsironis as to what Mr Lennon said at the meeting. However, I am not satisfied that the failure to call her has the same significance as the Plaintiffs' failure to call the four witnesses to whom I have referred above. The Plaintiffs' absent witnesses were all professional people directly involved in the transaction and must have had an intelligent understanding of what had been discussed between Dr Iannuzzi and themselves respectively. On the other hand, there is nothing to suggest that Mrs Lennon was knowledgeable in business affairs generally or about this transaction in particular so that she could be expected to have paid any particular attention to what was being said between Mr Lennon and Dr Iannuzzi. She was present at the meeting only because Mr Lennon was using the opportunity of taking her on a brief holiday. In view of what I regard as the overwhelming evidence as to the credit of Dr Iannuzzi and Dr Tsironis, and in view of the inherent improbability of their accounts of the 29 December meeting, I do not find that BankWest's failure to call Mrs Lennon has any great significance. 146 Eleventh, in addition to all of the foregoing reasons, I find it inherently improbable that Mr Lennon would have made the Balance Sheet Representation in light of the fact that the balance sheet being discussed was out of date and BankWest was then in the process of obtaining an urgent, up-to-date review of Barrington's financial position. 147 In summary, I must be satisfied on the balance of probabilities that Mr Lennon made one or more of the Representations, bearing in mind that a finding that he did so requires a finding of serious dishonesty on his part. I bear in mind also that before making a finding of fact that Mr Lennon made any of the Representations, I must feel "an actual persuasion" that he did so: Briginshaw v Briginshaw (1930) 60 CLR 336, at 361. 148 In Rhesa Shipping Co SA v Edmunds [1985] 2 All ER 712 at 718, Lord Brandon of Oakbrook said: "The judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take." Quoted with approval in Moukhayber v Camden Timber & Hardware Co Pty Ltd [2002] NSWCA 58 per Heydon JA, and in Timms v Commonwealth Bank of Australia [2004] NSWSC 76 per Barrett J. 149 In the present case I may well have been able confidently to make a finding of fact as to whether any of the Representations were made had Mr Lennon's evidence been available. In the absence of Mr Lennon, the state of the evidence generally is not nearly as satisfactory as it could have been. In those circumstances, I prefer to make a decision on the basis of whether or not the Plaintiffs have discharged the burden of proof which lies upon them. 150 For the reasons which I have given, I am very far from feeling any actual persuasion that Mr Lennon made any of the Representations. Accordingly, I hold that the Plaintiffs have failed to prove that any of the Representations were made.

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151 My conclusion as to the making of the Representations is sufficient to dispose of the case. However, for completeness, I should indicate my findings on the issue of reliance. 152 For the same reasons which I have given above in support of my conclusion as to the making of the Representations, I am far from feeling an actual persuasion that the Plaintiffs relied on anything said by Mr Lennon at the 22 or 29 December meetings pertaining to the subject matter of the Representations. My assessment of Dr Iannuzzi's willingness to rely on others has been given elsewhere. In particular, the Deal Summary shows that he made his own assessments and judgments, doubtless with the benefit of the advice of Mr Belos and Mr Cheung, whom he has not called to give evidence. 153 In particular, Dr Iannuzzi's assessment of the value of Barrington's assets was clearly his own opinion, not that of Mr Lennon. For example, he said in the Deal Summary that the Barrington Estates property was worth "$10M in my eyes" . He said: "My advice is that the company is worth $50-$70M if still trading" although neither Dr Iannuzzi nor Dr Tsironis said that Mr Lennon ever referred to a figure of $70M. 154 For the reasons which I have given, I cannot accept that Dr Tsironis, in making a decision to execute the Transaction Documents, relied upon anything other than Dr Iannuzzi's decision and his views. If it is true that she signed a statutory declaration that she had received independent advice from Mr Belos when she had not received that advice, or that she signed the statutory declaration without reading it, then she demonstrated thereby that she did not wish to take any active and informed part in deciding whether the transaction should proceed. I find it difficult to believe that she made up her mind that the transaction should proceed on the basis of what was said on 29 December and had no further discussion with Dr Iannuzzi about the matter between then and the time that she came to execute the Transaction Documents. 155 Aneve, of course, was merely the corporate manifestation of Dr Iannuzzi and Dr Tsironis. 156 Accordingly, if Mr Lennon said anything to the effect of any of the Representations, I conclude that the Plaintiffs have failed to discharge the burden of proving that they placed any reliance whatsoever on what was said in making a decision to execute the Transaction Documents. Orders

Briginshaw v Briginshaw

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Judgment (122 paragraphs)

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