Cloud Top Pty Limited & Anor v Toma Services Pty Limited & Anor

Cloud Top Pty Limited & Anor v Toma Services Pty Limited & Anor - [2008] NSWSC 568 - NSWSC 2008 case summary — Zoe

[41]

(c) a premium (attributable to the value of being able to obtain control of the statutory right to the hotelier's licence and the poker machine entitlements and the potential to relocate them to Kings Cross in the State of New South Wales) would have to be paid to purchase the hotel, (affidavit of Mr Pasfield 3/4/08 at [8] to [10] and affidavit of Mr Cooper at [7] to [10]). 17 On or about 20 October 2006, Mr Cooper met with Mr Pasfield at the Hotel, at which time Mr Pasfield provided Mr Cooper with: · the Hotel's building plans; and · the Profit and Loss Statement for the Hotel for the year ending 30 June 2006. 18 These two documents were sent by Mr Cooper to Mr Toma by fax on or about the same day (exhibit GC-1 at 21-30). 19 At the above-described meeting, Mr Pasfield informed Mr Cooper that the figures were the profit and loss figures for the management accounts and that he had taken out personal outgoings, depreciation, one-off expenses, interest and management wages. During the same meeting Mr Pasfield also gave to Mr Cooper a document titled, "Item Movement by Product Class with Costs" which expressed the sales for a one-week period from 12 October 2006 to 19 October 2006. 20 Mr Cooper's evidence, which is accepted as reliable, was that on or around 20 October 2006, he spoke to Mr Toma by telephone and advised him that the Profit and Loss Statement did not contain "all of the numbers" and was an estimated Profit and Loss based on management accounts. Mr Cooper's evidence was that he told Mr Toma that if he wanted to verify the trading figures and get the full set of accountant's figures he should have his accountant contact Mr Pasfield's accountant. Mr Cooper's evidence was that he advised Mr Toma that the Hotel was worth $5-$5.5 million based on those figures and that Mr Pasfield wanted $6 million and was not flexible (affidavit of Mr Cooper dated 5 May 2008, para 19). October - December 2006 21 During October to December 2006, there were discussions between Messrs Pasfield, Cooper and Toma in relation to the purchase of The Old Fitzroy Hotel during which various offers lower than $6 million were made by Mr Toma. In response to each of these offers, Mr Pasfield, whose evidence is accepted as reliable, informed Messrs Toma and Cooper that:

[44]

23 On 27 February 2007, Mr Cooper, at the instruction of Mr Toma, telephoned Mr Pasfield to enquire whether he was still open to offers in relation to The Old Fitzroy Hotel and the property and, if so, what the price was. Mr Pasfield informed Mr Cooper that he was prepared to sell for "$6 million in the hand, plus adjustments, and any commission to Mr Cooper had to be placed on top" (affidavit of Mr Pasfield 3/4/08 at [23], affidavit of Mr Cooper at [35] and [36] and affidavit of Mr Toma at [30] to [32]). Mr Cooper advised that he would reduce his commission by $100,000 and would go back to Mr Toma at $6.1 million. 24 Mr Toma advised Mr Cooper that he would pay $6.1 million but with a 5% deposit and settlement at the end of May. Mr Cooper then advised Mr Pasfield of this offer. Mr Pasfield then said he did not want an extended settlement but would take a 5% deposit on a normal settlement period. Mr Cooper then advised Mr Toma of this who said, "great". 25 On or about 27 February it was agreed between Mr Pasfield and Mr Cooper that the purchase price for the property and the hotel business would be $6,100,000.00 (which included a "selling fee", payable to Mr Cooper Hotel Brokers, of $100,000.00), plus stock and adjustments (affidavit of Mr Pasfield 3/4/08 at [23] and [24] and affidavit of Mr Cooper at [37] to [39]): cf the sales advice by Mr Cooper to Mr Ryan and then to Mr McDougall, advising of the agreement [Exhibit A1 at 140-141], the second last paragraph of which refers to a deposit of $305,000. 12 March 2007 26 On 12 March, Mr McDougall advised Mr Cooper that he had delivered a copy of the contract to Mr Ryan (affidavit of Mr Cooper dated 5 May 2008, para 43 and page 60 of Exhibit GC-1). 13 March 2007 27 On 13 March 2007, Mr Ryan, whose evidence is accepted as reliable, met with Mr Toma and took him through the important clauses of the contract, including the time for settlement and payment of the deposits (affidavit of Mr Ryan para 21). 14 March 2007 28 On 14 March 2007, Mr McDougall, the solicitor for Cloud Top and Dawcam, sent to Mr Ryan, a "final form" of the contracts (tender bundle 198). 15 March 2007 29 On 15 March 2007, Mr Ryan took Mr Toma in detail through the final form of contracts and explained the terms, including in relation to the guarantee and indemnity (affidavit of Mr Ryan, para 22). There was no provision for an upfront deposit of $50,000 at this stage.

[63]

23 March 2007 36 On or around 23 March 2007, Mr Cooper provided, on the request of Mr Toma and/or his business associate Mr Wan, various documents relating to the hotel including business plans, a title search and an estimated profit and loss statement. Mr Cooper gave evidence that each of these documents had already been provided. 27 March 2007 37 On 27 March 2007, Mr Toma requested that Mr Cooper provide him with the trading figures for the hotel (affidavit of Mr Cooper dated 5 May 2008, para 58 and 61 and pages 85-99 and 101 of Exhibit GC-1). 38 On 27 March 2007 and again on 3 April 2007, Mr McDougall advised that the next payment of $255,000.00 was due on 4 April 2007. 30 March 2007 39 On 30 March 2007, Mr Ryan reminded Mr Toma that he had to pay the deposit monies to ensure that the contract stayed on foot, and that if he did not he could be sued by Mr Pasfield and would be liable for the 10% deposit and possibly for damages (affidavit of Mr Ryan para 36). 31 March 2007 40 By 31 March 2007, Mr Toma was under considerable financial pressure. He was attempting to obtain finance from various financial institutions for both his redevelopment of the Barclay Hotel and the purchase of the Old Fitzroy Hotel (T120.50 - T121.34). He also sought money from his managers of the Barclay Hotel, Leisure Inn, saying that he needed $250,000 to "pay some money for the Fitzroy" (tender bundle 379-381). He was under financial pressure from the builder at the Barclay Hotel which communicated, on 2 May 2007, that it would stop work until outstanding moneys were paid, and this was a source of considerable concern for him at the time (T122.40-.50). 2 and 3 April 2007 41 Mr Ryan reminded Mr Toma on 2 and 3 April 2007 that the deposit was due on 4 April 2007 (affidavit of Mr Ryan paras 38-39). 4 April 2007 - new proposal 42 On 4 April 2007, Mr Ryan attended on Mr Toma to obtain the cheque for the second tranche of the deposit. The amount due was $255,000, but Mr Toma provided a cheque for only $150,000. Mr Ryan said that this 'was not going to cut it'. Mr Toma said that it would 'do for a start', and that the vendor would accept it because Mr Pasfield was getting a premium price. Mr Ryan said:

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Dealing with Mr Toma's credit 53 Mr Toma represented himself during the hearing. He has no legal training. He was opposed by three counsel. Obviously one may expect that he would have had difficulty in presenting his case. 54 His evidence was clearly unreliable unless corroborated by the contemporaneous documents. There were very many occasions when under cross-examination he gave inconsistent answers. He contradicted himself on matters of particular importance. Accepting that the courtroom context would have been difficult for him, nonetheless his performance as a witness can only be described as extraordinarily weak in terms of any cogent or ordered rendition of the events which had happened. 55 The transcript at pages 73 and following records a reasonably detailed cross-examination of Mr Toma in relation to a resume which he had prepared. Mr Toma had obviously had considerable experience in and about property development, property investments, purchases through family trusts and companies which he controlled. He had purchased, through a trust, houses and apartments in Brisbane or had been involved in the purchase. He had purchased in his own name a residential unit in Sydney for approximately $350,000 and through a company he had purchased a beachfront bungalow hotel in the northern beaches of Cairns. The purchase was for approximately $1.6 million. He had also worked on a proposal to develop the combined site into a significant property holding with many units and 3500 square metres of retail development, but the development application had been rejected. Later, the development application had been approved but the development had not gone ahead. He had also, through a family trust, purchased an 18 hectare beachside cane farm in Port Douglas [or been involved in the purchase of that property] and had handled it. He had also purchased the Barclay Hotel through companies associated with him. All of this had occurred at various stages, as I understood it, prior to January 2006 or March 2006. Mr Toma also gave evidence that Toma Services had purchased a 90 square metre corner unit, being an office suite, in approximately 2005 or 2006. His evidence in relation to four lots in Queensland was as follows:

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ii. in New South Wales, it is established that a deposit of 10% of the purchase money is an exception from the law relating to penalties ( Luong Dinh Luu v Sovereign Developments Pty Limited & Ors [2006] NSWCA 40): [24] Where parties make an agreement for a sale which is to be completed at some time in the future it is unremarkable and only to be expected that the vendor will require the purchaser to pay some part of the purchase money straight away so as to show that the purchaser is in earnest in committing himself to pay the rest, on the understanding that the purchaser will not get his earnest money back if he does not complete the sale. For contracts of sale of land it has long been customary practice and established law that the purchaser pays a deposit on account of the purchase money when the contract of sale in writing is made, and cannot recover that deposit if he later fails to complete the bargain and pay the rest; whether or not the vendor's losses are actually more or less than the amount of the deposit. Notwithstanding the apparent inconsistency the invalidity of contractual penalties does not apply to contractual provisions for forfeiture of reasonable deposits in sales of land. In New South Wales it has long been usual to require a deposit of 10% of the purchase money, and this practice has not encountered challenge; on the other hand provisions relating to forfeiture of purchase moneys other than a reasonable deposit should be regarded as open to challenge. The assumption that provisions for forfeiture of deposits of reasonable amount are effective underlies statutory provisions for relief against their forfeiture; see s 55 of the Conveyancing Act 1919. The exception from the law relating to penalties relates and relates only to deposits, that is, to payments which truly have the character of earnest money paid on or in relation to entering into the Contract, and although provisions of contracts almost always establish what the deposit is, it is not open to parties to avoid the operation of penalties law by designating a payment or an obligation as a deposit if it does not otherwise have that character. [25] This following passage from Mehmet v Benson (1963) 81 WN (Pt 1) (NSW) 188 at 191 (Jacobs J) shows the view which has long been held and acted on in New South Wales: In my view a provision for forfeiture of instalments under a contract for the sale of land, even when possession has been given under the contract, is in the nature of a penalty and the person penalized will be entitled to relief in equity unless there are contrary circumstances which would make it inequitable to grant such relief even upon terms.

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v. Such a clause is binding: Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131. 94 The allegation that there was a contractual obligation between Mr Cooper and Toma Services and/or Mr Toma is without foundation. 95 Ultimately "Coopers Hotel Brokers" [not Mr Cooper personally], was described by the parties to the Sale of Land Contract and the Sale of Business Contract as the "Vendor's agent". Further, clause 32.1 and 32.2 of the Sale of Land Contract reinforces this role. Any suggestion that Toma Services or Mr Toma did not know that Mr Cooper's company had become the agent or representative of Cloud Top or Dawcam is contrary to the evidence contained in those contracts. 96 Prior to exchange of contracts Mr Cooper was simply a facilitator between Mr Toma and Mr Pasfield. He communicated the offers that were made and the responses to those offers. He handed over documents that he obtained to Mr Toma and/or his legal representative. 97 There is no evidence that Mr Cooper or his company failed to act in good faith; failed to maintain confidentiality; failed to act with reasonable skill, care and diligence; or failed to act in the interests of Mr Toma or Toma Services. Mr Toma utilised the services of Mr Ryan in relation to the conveyance of the property and the business and it was Mr Ryan's evidence, accepted as reliable and dealt with below, that he explained the terms and conditions of the relevant contracts to Mr Toma. 98 Mr Cooper gave to Mr Toma all relevant information that he had been given concerning the financial performance of the Hotel. Mr Toma was informed by Mr Cooper that Mr Pasfield wanted $6 million for the Hotel. He was also correctly advised that there were other parties dealing with Mr Pasfield. Mr Toma negotiated knowing the price and the conditions that were set down by Mr Pasfield. Further, Mr Toma conducted negotiations over several months in relation to the Hotel and in those circumstances his case that he or Toma Services were compelled to enter the contracts is rejected. No reliance 99 Reliance upon the alleged representation was not established as:

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