Coastal Karts Pty Ltd v Bellandra Holdings Pty Ltd

MISLEADING OR DECEPTIVE CONDUCT - RELEVANT LEGAL PRINCIPLES 10 The legal principles do not seem to be in dispute between the parties. The summary below is largely taken from the submissions of Coastal Karts. No contrary view has been put forward by Bellandra Holdings. 11 Section 18 of Schedule 2 of the ACL provides that "a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive". 12 Section 4 of the ACL provides that, if a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act), and the person does not have reasonable grounds for making the representation, the representation is taken, for the purposes of the ACL, to be misleading. 13 Section 18 is not limited to misleading or deceptive representations. The question is whether the respondent's conduct, which may include acts, omissions, statements or silence, is misleading or likely to mislead or deceive: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 (TPG Internet) at [49] per French CJ, Crennan, Bell and Keane JJ. 14 As is obvious in considering whether conduct is misleading or deceptive, it is necessary to identify clearly the conduct to be characterised. 15 A misleading representation may be made by omission, including silence. However, mere silence does not amount to misleading conduct unless the circumstances are such as to give rise to a reasonable expectation that, if some relevant fact exists, it would be disclosed: Kimberley NZI Finance Ltd v Torero Pty Ltd (unreported, Federal Court of Australia, French J (as his Honour then was), 27 July 1989), approved in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 (Demagogue) at 41 per Gummow J (with whom Black CJ and Cooper J agreed). See also French CJ and Kiefel J (as her Honour then was) in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 (Miller) at [18]- [19]. 16 Spoken words must be proven with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances: Watson v Foxman (1995) 49 NSWLR 315 at 318-319, cited in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151 at [73] per Dowsett, Rares and Logan JJ. 17 The approach to characterising the conduct is an objective one and requires concluding whether, as a question of fact, the impugned conduct, viewed as a whole, has a tendency to lead a person into error: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (Campbell) at [25] per French CJ (who agreed with Gummow, Hayne, Heydon and Kiefel JJ); TPG Internet at [49]; and Miller at [15]. Conduct is likely to mislead or deceive if there is a real or not remote chance or possibility that it will have that effect: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87 per Bowen CJ, Lockhart and Fitzgerald JJ. It is insufficient for the impugned conduct to only cause confusion or wonderment. 18 The characterisation of the conduct is to be determined on the basis of the conduct of the respondent as a whole and by reference to the context of all relevant surrounding facts and circumstances: Campbell at [25]; TPG Internet at [49]; and Miller at [15]. As McHugh J stated in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 (Butcher) at [37], it invites error to look at isolated parts of the respondent's conduct. 19 The question involves the characterisation of the relevant conduct. Evidence that persons have in fact been misled or deceived by the conduct is not an essential element, however, it can in some cases be relevant and material: Parkdale Custom Built Furniture v Puxu Pty Ltd (1982) 149 CLR 191 at 198 per Gibbs CJ. 20 It is not necessary to prove that the respondent intended to mislead or deceive, however, evidence of such an intention may constitute evidence that the conduct was likely to succeed in being misleading or deceiving, and may make a finding of contravention more likely: Yorke v Lucas (1985) 158 CLR 661 (Yorke) at 666 per Mason ACJ, Wilson, Deane and Dawson JJ. 21 Where the conduct or representation is in the form of an advertisement, the "dominant message" or "general thrust" of the advertisement is important. It is nevertheless important to have regard to the whole advertisement because context is or may be important. It may also be relevant to have regard to the external context in which a consumer is likely to view an advertisement: TPG Internet at [45]-[49]. 22 In commercial dealings between individuals or individual entities, relevant circumstances include the knowledge of the person who claims to have been misled (in this case, Mr Wallent and Ms Hawkes) and any common assumptions or practices established between the parties or prevailing in the particular activity or business in which they are engaged: Miller at [20]; Butcher at [37]; and Campbell at [26]-[27]. 23 That is in contrast to the situation where the conduct is directed to the public or the market, in which case the assessment is by reference to a hypothetical ordinary person: Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 at [100]-[103] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ. 24 In cases relating to negotiations leading up to the execution of a private agreement for sale, it has been said that nothing in s 18 of the ACL (or its predecessor, s 52 of the Trade Practices Act 1974 (Cth) (the TPA)) strikes at the traditional secretiveness and obliquity of the bargaining process. Traditional bargaining may be hard, without being in the statutory sense misleading or deceptive. Full disclosure is not required in every situation and no one expects all the cards to be on the table. See also French CJ and Kiefel J in Miller at [21]; Gleeson CJ in Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 at 475; Macfarlan JA in Jewelsnloo Pty Ltd v Sengos [2016] NSWCA 309 at [86]; and Fraser v NRMA Holdings Limited (1995) 55 FCR 452 at 467 per Black CJ, von Doussa and Cooper JJ. The bargaining process is nonetheless not to be seen as a licence to deceive: Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 per Burchett J. 25 The particular facts must be considered in light of the ordinary incidents and character of commercial behaviour: General Newspapers Pty Limited v Telstra Corporation (1993) 45 FCR 164 at 178 per Davies and Einfeld JJ. 26 Authority is clear on the issue that, notwithstanding that a representation is false, if the representee does not rely upon it, the representee has no case: Gould v Vaggelas (1984) 157 CLR 215 (Gould) at 236 per Gibbs CJ. 27 If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract, there arises a fair inference of fact that they were induced to do so by the representation: Gould at 236. 28 That inference may nonetheless be rebutted, for example, by showing that: (a) before the representee entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true; or alternatively (b) it was plain that whether the representee knew the facts or not, the representee did not rely on the representation: Gould at 236. 29 In assessing or characterising the relevant conduct or representation, it is necessary to have regard to any relevant disclaimer. The substance, effect and prominence of the disclaimer must be considered in the context of the conduct or representation as a whole: Australian Competition and Consumer Commission v Telstra Corporation Ltd (ACN 051 775 556) (2007) 244 ALR 470; [2007] FCA 1904 at [116] per Gordon J, citing the judgment of the Full Court in Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) 67 LGRA 238. 30 The question must ultimately be whether any disclaimer communicates information in such a way or in such a manner that the effect of any otherwise misleading conduct or representation is reversed or erased: Butcher at [152]. 31 If the disclaimer actually has the effect of erasing whatever may have been misleading in the prior conduct, the clause will be effective, not by an independent force of its own, but by actually modifying the conduct: Benlist Pty Ltd v Olivetti Australia Pty Ltd [1990] ATPR ¶41-043 at 51,590 per Burchett J. 32 A disclaimer in a document or on a website may be more effective than one on, for example, a television advertisement as the latter is likely to be more transient, ephemeral or less noticeable: TPG Internet at [47].

Causation 33 In order to recover damages, Coastal Karts must prove that the loss or damage suffered was "because of" conduct in breach of the ACL: s 236. 34 The issue is to be approached in a practical or common sense way (Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514 at 525 per Mason CJ, Dawson, Gaudron and McHugh JJ), although it has subsequently been doubted whether there is any "common sense" notion of causation which can provide a useful legal norm: Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69 at [45] per Gummow and Hayne JJ. 35 As long as the breach materially contributed to the damage, or had a substantial effect on the person's considerations, causation will be established. The breach need not be the sole cause of the alleged loss or damage: I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109; [2002] HCA 41 (HTW Valuers) at [33] per Gleeson CJ, [57], [62] per Gaudron, Gummow and Hayne JJ and [90] per McHugh J; and Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [14] per Gleeson CJ, [61] and [63] per Gaudron J, subject now to statutory apportionment considerations (s 137B of the Competition and Consumer Act 2010 (Cth)). 36 Relevant to the sale of a business, if a material representation is materially likely to induce the representee to enter into a contract and the representee actually enters the contract, a fair inference arises that the representation operated as an inducement: Gould at 236-238. 37 The inference of inducement may be refuted by other relevant circumstances, with the respondent bearing the evidentiary onus as to why the inference ought not be drawn. One example of such circumstances is where the applicant either by his or her words or conduct, disavows any reliance on the misrepresentation: Gould at 238.

Accessorial liability 38 If a person suffers loss or damage by reason of the misleading or deceptive conduct of another person, s 236 of the ACL allows the claimant to recover the amount of the loss or damage by action against not only the person who engaged in the contravention, but also any other person involved in the contravention. 39 A person will only be regarded as "involved" in a contravention if the person intentionally participated in the contravention. This requires actual, not constructive, knowledge of the essential matters or facts that make up the contravention: Yorke at 667, 674; Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 4-5 per Finkelstein J; and Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1; [2004] FCAFC 175 at [9] per Heerey, Sundberg and Dowsett JJ. 40 Being "knowingly concerned" in a contravention requires association with, implication in, or a practical connection to the contravening conduct: Qantas Airways Ltd v Transport Workers' Union of Australia (2011) 280 ALR 503; [2011] FCA 470 at [324]-[325] per Moore J; Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299 at 357 per Wilcox J, citing Ashbury v Reid [1961] WAR 49 (Ashbury). 41 A person cannot become "involved" in an act merely by reason of his or her knowledge of the conduct pursued. There has to be something that implicates the person such that he or she becomes associated with the conduct: R v Tannous (1987) 10 NSWLR 303 at 307-308 per Lee J, citing Ashbury at 51. A close, rather than a remote, involvement in the contravention is required: Fencott v Muller (1983) 152 CLR 570 at 584 per Gibbs CJ. 42 The law is not in dispute between the parties. The dispute relates to the facts concerning the representations made and the outcome will turn upon the findings made. With that in mind, Coastal Karts was asked to outline the findings required in order for its claim to be successful.

FINDINGS REQUIRED BY COASTAL KARTS 43 Coastal Karts has submitted that the following are the matters that need to be found for Coastal Karts' case of misleading and deceptive conduct to be made out. 44 In relation to the profitability representations, the required findings are that: i. At no time did [Mr] Bellingham inform [Mr] Wallent that what [Mr] Bellingham was seeking to sell was three separate and discrete businesses, being Eco Noosa, Nauticycles [Noosa] and Noosa SUP, which were to be combined together and sold as one 'package'; ii. At no time did [Mr] Bellingham inform [Mr] Wallent that the June 2018 Figures were an amalgamation of the trading performance of three separate businesses between October 2017 to June 2018, being Eco Noosa, Nauticycles [Noosa] and Noosa SUP; iii. At no time did [Mr] Bellingham inform [Mr] Wallent that removing Noosa SUP from the sale affected the accuracy of the June 2018 Figures in any way, or that the June 2018 Figures no longer represented the financial performance of the Business to be sold, in the telephone call on 5 October 2018, during the Inspection on 21 October 2018 or at all; and iv. [Mr] Bellingham did not provide [Mr] Wallent with the Amended June 2018 Figures, at the Inspection on 21 October 2018 or at all. 45 For the reasons that follow, the answers to the required profitability findings are as follows: (i) Mr Bellingham did inform Mr Wallent that the business being sold was three businesses (Eco Noosa, Nauticycles Noosa and Noosa Stand Up Paddle (Noosa SUP)) combined together and sold as one package. (ii) Mr Bellingham did inform Mr Wallent that the June 2018 Figures were an amalgamation of the three businesses. (iii) Mr Bellingham informed Mr Wallent that the removal of Noosa SUP would reduce the income generated by approximately $65,000. (iv) Mr Bellingham provided Mr Wallent with the Amended June 2018 Figures at the inspection on 21 October 2018. 46 Coastal Karts provided profitability representations which were derivatives of the above required findings. There were some profitability representations which were not specifically addressed in the list of required factual findings above which related to the representation that the business would make in excess of the June 2018 Figures, be profitable in future years, would provide steady and consistent income, and would be a "turn-key sale", and that there would be a "huge increase" in business since the Noosa airport opened and received direct flights from New Zealand. 47 There is no evidence to suggest that the business was not a "turn-key sale". As I understand it, a "turn key sale" is one where the purchaser can take over the business and commence trading immediately. That seems to have been what occurred. 48 In relation to the "business actually making in excess of the June 2018 Figures", the particularisation of that assertion was a reference to Mr Bellingham having said that the June 2018 Figures related only to seven months of trading and opening only five days per week. There was no suggestion that the business would provide a return in excess of the figures provided. 49 Mr Bellingham told Mr Wallent via email there had been a "huge increase" in business since there were direct flights out of NZ this year. The email sent actually said that "[w]ith the new international airport opening in 18 months … [t]he place is going to boom … [w]e have already seen a huge increase since direct flight out of NZ this year with tourism" (errors in original). The comments seem to be general comments about tourism in Noosa and nothing specific about Eco Noosa. 50 The assertions that representations were made regarding the future profitability of the business in circumstances where financial information had been provided do not appear to be substantiated, noting also that during the hearing an affidavit was tendered which showed that the business had made profits in recent financial years. 51 In relation to the plant and equipment representations, the required findings are that: i. During the inspection on 21 October 2018, [Mr] Bellingham did not inform [Mr] Wallent that he was inspecting a [D]uffy boat called "Lady Ann", which was not part of the plant and equipment that was being sold with the Business; and ii. The two [D]uffy boats, "Lady Mary" and "Lady Isabella", which were sold with the Business: A. were unreliable and not in good working order; and B. required significant repair so as to put them in good working order and available for hire. 52 With respect to the required plant and equipment findings, the answers are as follows: (i) Mr Bellingham did inform Mr Wallent that the Duffy boat he was inspecting was the "Lady Ann". (ii) Mr Bellingham's comments that the "Lady Mary" and "Lady Isabella" were in good working order were justified and the repairs alleged to have been required to put the boats in good working order were improvements of the design of the Duffy boats. 53 Coastal Karts also provided plant and equipment representations which were derivatives of the required plant and equipment findings. Not canvassed above is the allegation that Mr Bellingham told Mr Wallent that the Duffy boats were in Full Commercial Survey. As to that asserted representation, Mr Bellingham provided Certificates of Survey for each of the Duffy boats to Mr Wallent which showed that neither of the Duffy boats was in Full Commercial Survey prior to the Business Contract being entered into.

REPRESENTATIONS 54 Coastal Karts contended that Mr Wallent relied upon the profitability representations and plant and equipment representations made by Mr Bellingham in entering into the Business Contract and Vendor Finance Agreement. 55 Ms Hawkes was not involved with the negotiations and relied upon Mr Wallent conveying the information provided by Mr Bellingham. 56 There was a dispute between the parties as to what was said during various discussions. 57 Clearly, the contents of the contemporaneous documents which were circulating between the parties at that time have some bearing on what might have been discussed during the conversation as to which one participant to the conversation has a certain recollection which was rejected by the other participant to the conversation. 58 I will consider the contents of each of those contemporaneous documents when ruling on what was said. 59 The documents are also central because many of the written representations alleged by Coastal Karts are derived from those documents. 60 In fact, Coastal Karts alleged that, by providing the June 2018 Figures, identified as being the "trading figures of the business" (which Mr Wallent understood to be just Eco Noosa), and remaining silent about the fact that the figures included the three businesses, Bellandra Holdings represented that the business had generated those figures. The allegation was that, by silence, in failing to disclose that the June 2018 Figures were an amalgamation of three separate businesses' finances, being Eco Noosa, Nauticycles Noosa and Noosa SUP, the conduct was misleading or deceptive. 61 At a time prior to 18 September 2018, Mr Bellingham placed an advertisement on the internet site "Gumtree" for the sale of the business "Eco Noosa". The parties are not agreed as to whether the advertisement was first placed on Gumtree in May 2018 or September 2018, but, for present purposes, the exact date is not relevant. 62 The advertisement was not put into evidence. 63 On 18 September 2018, having seen the advertisement, Mr Wallent called Mr Bellingham to enquire about Eco Noosa. The parties did not agree on some aspects of what was said during that conversation. 64 Mr Bellingham told Mr Wallent that the purchase price was $365,000, that there were two other interested buyers and that Mr Bellingham would send through financials if Mr Wallent signed a confidentiality agreement. 65 Of relevance to the current issues, the area of non-agreement between the parties related to whether it was made clear by Mr Bellingham to Mr Wallent that the sale was to include "three businesses in one" - said to be because the owners of the businesses Nauticycles Noosa and Noosa SUP also wanted to sell their businesses and move on and they had packaged the businesses together as the combined business listed for sale. In the same vein, the parties were not in agreement as to whether it was made clear that the figures which were provided in the June 2018 Figures were for all three businesses or for just one business, Eco Noosa. 66 Just after the telephone discussion took place and before the date upon which the June 2018 Figures were sent, Mr Bellingham sent two documents on 18 September 2018 to Mr Wallent, namely the "Welcome to Eco Noosa" (the Welcome Document) and the "Eco Noosa Plant & Equipment List" (the Equipment List) that would be included in the sale, and which included a value attributed to each piece of plant and equipment, the total of which was $285,600. 67 Coastal Karts referred to the expressions used in the email from Mr Bellingham to Mr Wallent on 18 September 2018 (which included the Welcome Document and the Equipment List) in which Mr Bellingham stated: please find the attached information for Eco Noosa … this information will give your the nuts and bolts of it … I have supplied P&L figures based based on from when we purchased it up until June 30 2018, as well as plant and equipment list and /description of the business. In that time from Oct we closed the business for Dec for renovations and as it didn't work out with our son after January, I had to close it for February while I completed the build on The Drover,. We are currently running it 5 days a week, closing Monday and Tuesdays. This may sometimes vary depending on the weather and holiday periods. in a nutshell though its a fantastic business the offers steady consistent income (with benefits) as well as an awesome lifestyle. While we have done all the hard work to get it to where it is now , there is still so much room for potential growth and expansion. With how we have it set up now it would be a simple walk in turn key operation business. As i discussed with you over the phone we have 2 other genuine buyers, one of which have is made us an offer..... however as I said to you it is not just about the money and getting a sale for us. We want to see the business continue to grow and we need to be confident that the potential new owners will be capable of that. As we also have our other boat The Drover on the river and will be operating that as well as moving closer to the area, it is in our best interest and reputation to see it continue to be as successful with the new owners, as well as we would like to have the opportunity as I mentioned to you, that on weekends when we don't have bookings, that we could hire a berth at the jetty to sell woodfired pizzas from. (errors in original) 68 Coastal Karts submitted that the email: (a) referred to "Eco Noosa" and "the business" and, by reference to "the business", utilised the pronoun "it"; (b) did not refer to "businesses", "Nauticycles Noosa" or "Noosa [SUP]" and, by reference to the business, did not utilise the pronouns "they" or "them"; (c) did not state that the figures were "indicative" or that they were "an amalgamation of three separate businesses"; (d) referred to the "business" being closed, which Mr Bellingham accepted was not Nauticycles Noosa or Noosa SUP; and (e) referred to the "business" that "we" purchased, being the business purchased by Mr Bellingham, not Mr Howard-Clarke or Mr Van Der Vegt (the respective owners of Noosa SUP and Nauticycles Noosa). 69 Coastal Karts also pointed to the fact that the plant and equipment list referred only to "Eco Noosa" in the title and included 12 Nauticycle water spin bikes, stand up paddle boards and paddles, leashes and life jackets for stand up paddle boards. 70 The four page Welcome Document outlined the history of Eco Noosa, which had been known as Malu Os between August 2013 and October 2017 before being rebranded in October 2017 when it was purchased by Bellandra Holdings. In the Welcome Document, Bellandra Holdings said: After consideration we decided that we would look at purchasing the Nauticycles and incorporating them with Eco Noosa … In May of this year after incorporating the Nauticycles … The last and most recent addition to the jetty is that of Noosa Stand Up Paddle boards, hire & lessons … we have now incorporated Noosa Stand Up Paddle as part of Eco Noosa's Eco friendly river adventures as well. 71 As to Nauticycles Noosa and Noosa SUP, it said the following: Over the Christams period we met and became friends with Mark from Nauticycle Noosa who had his water bikes located down at jetty 186 . After discussions we started putting a couple of his nauticycles up on the jetty at Eco Noosa to see if better exposure would increase the hire volume with them. It worked great, we continued promoting the nauticycles from Eco Noosa until April when after talking with Mark, he informed us that due to Family circumstances he was looking at moving back to Adelaide . After consideration we decided that we would look at purchasing the Nauticycles and incorporating them with Eco Noosa as they complemented the Eco aspect of the business perfectly . In May of this year after incorporating the Nauticycles and installing a new modular jetty system to allow for emarking and disembarking of the Nauticyles, we decided to do the second stage of the facelift by firstly replacing the old deck area ledge with a new timber deck area and handrail … The last and most recent addition to the jetty is that of Noosa Stand Up Paddle boards, hire & lessons. While we were reluctent to introduce SUP's to our jetty as they were located directly next door to us, we approched the owner to find out his long term plans for his business. As it turned out he had recently listed it for sale as he has another business in Seychelles in East Africa specialising in surfing which he is looking to put in efforts into. So we have now incorporated Noosa Stand Up Paddle as part of Eco Noosa's Eco friendly river adventures as well. So Eco Noosa is not just the only 100% Eco Friendly jetty now in Noosa, but also has the largest range of Sup's , Kayaks, and only hirer of Nauticycles, Electric Eco Boats and bikes along the foreshore. … (photographs omitted; errors in original) 72 The text of the Welcome Document has a bearing on what was meant by the words used in the email and the discussions between the parties. The document seemed to be in the nature of a "promotional" or "marketing" document. It opened with a history of Eco Noosa, including the decision to change the name to Eco Noosa from Malu Os. The document also referred to the decision to increase the offering by acquiring kayaks and good quality bikes and the decision to close the business for a month to enable a "much needed facelift". 73 This document is unambiguous in saying that "Eco Noosa is not just the only 100% Eco Friendly jetty now in Noosa, but also has the largest range of Sup's , Kayaks, and only hirer of Nauticycles, Electric Eco Boats and bikes along the foreshore" (errors in original). 74 From the Welcome Document, it was clear that Bellandra Holdings regarded the inclusion of the other businesses as a positive aspect of his business. It was a "selling point". That seemed to be a major focus of the Welcome Document. Its emphasis was on the benefits of diversification and what the expanded entity (the business as described) was able to achieve. 75 The list of plant and equipment included in the sale also pointed to the inclusion of Nauticycles Noosa and Noosa SUP with Eco Noosa. It included the following: (a) "12 x Nauticycle Water Spin Bikes, spare drive shafts, pumps, steering ru"; (b) "22 Stand Up Paddle Boards"; (c) "24 Stand Up Paddles"; (d) "24 Stand Up Leg Leashes"; (e) "10 Life Jackets for Stand Up Paddle Boards". 76 The total of the plant and equipment list value was $285,600. Of that, $118,400 comprised $108,000 for the nauticycles; $8,000 for the stand up paddle boards; $2,000 for the stand up paddles; $200 for the stand up leg leashes; and $200 for the life jackets for stand up paddle boards. 77 With the contents of the Welcome Document, the fact that the plant and equipment of Nauticycles Noosa and Noosa SUP was included in the list of plant and equipment which were part of the sale supports the conclusion that Coastal Karts must have been aware of the nature of the business being sold - that Nauticycles Noosa and Noosa SUP were part of the business described as "Eco Noosa". 78 The contents of the documents also are consistent with Mr Bellingham having said, during the discussions, that the three businesses were included in the sale. His evidence was that this took place; and there was no logical reason for Mr Bellingham not to have mentioned what was being sold during the conversation, given that this was made obvious in the documents which were to be circulated immediately after the conversation and which was promoted as a benefit. The contents of the documents support the recollection of Mr Bellingham. 79 In those circumstances, it would be consistent for Mr Bellingham to have referred to the incorporation of the new businesses into what was being sold, "Eco Noosa". Indeed, it would have been at odds with the promotional document if the topic was not raised, as a benefit, during that first conversation. Bellandra Holdings would, logically, and likely, be aiming to emphasise those aspects. 80 Again, given the thrust of the Welcome Document, it would be consistent for Bellandra Holdings, which was promoting that theme, and plainly doing so with a view to boosting the attractiveness and value of the combined business to a prospective purchaser, to have prepared indicative figures to demonstrate what the business being sold could achieve. By their nature, those would be composite figures. 81 There was no reason not to inform Coastal Karts of what was being proposed and of the nature of the figures provided. 82 Consistent with what was said in the Welcome Document regarding incorporation of the businesses into Eco Noosa, and that the list included the plant and equipment from Nauticycles Noosa and Noosa SUP, if Mr Wallent was not aware that he was being provided with the figures for the businesses being sold, it would reasonably be expected that he would seek figures which included the contribution from these businesses which were offered as part of the transaction. The fact that no such enquiry was made (in any level of detail) supports a conclusion that Coastal Karts was aware of the fact that the June 2018 Figures included the figures for Nauticycles Noosa and Noosa SUP. It is consistent with Mr Wallent not needing to ask because he was aware the figures were included. 83 Mr Bellingham said in evidence that he was expecting that he would be contacted by accountants who would seek additional information and undertake due diligence. Mr Paul Green (an expert witness called by Coastal Karts) pointed to the fact that generally a purchaser would undertake such due diligence. In those circumstances, with the expectation that Mr Bellingham said he had (which was not challenged by Coastal Karts and was consistent with the view of Mr Green), there would have been no point in not disclosing that the figures provided were an amalgamation of the figures from the three businesses, which was an estimate of what could be achieved in the business which was being sold. To hide the fact that the figures were amalgamated figures would have been counterproductive as the fact that the figures were an amalgamation would have become obvious when the expected due diligence occurred. 84 On 19 September 2018, at 9:57 am, Mr Wallent sent an email in reply to Mr Bellingham's email as follows: Thanks for sending through all that without the confidentiality agreement, it was an interesting read last night. You're information is pretty safe with me over here in the West. Unfortunately the P&L didn't come through on the second email that you sent. Any chance you can resend it please? One more question, how do you enjoy living on the Sunshine Coast? (errors in original) 85 On 19 September 2018, at 10.55 am, Mr Bellingham sent the first of two emails. The first referred to living on the Sunshine Coast and spoke in glowing terms about the opportunities in Noosa. Mr Bellingham also referred to other interested buyers: You sounded genuine when we spoke and I figured as much with you living in WA. Like living on the Sunshine Coast … it's terrible With the new international airport opening in 18 months . The place is going to boom. We have already seen a huge increase since direct flight out of NZ this year with tourism . If you are looking to move to the coast you are better to do it sooner than later …. Noosa has just had the best house sales in Qld !! Beating Gold Coast !! It is really starting to go off,hence why why won't be able to run both businesses. We have been made an offer from the other couple , an hour ago in regards to the business. However before we make a decision would like to see where you're at after viewing financials , as well as have a father and son from NSW looking at coming to have a look. As I said , we don't just want to sell but want to sell to the best suited , so the business keeps growing . Will send financials shortly. (errors in original) 86 The second email, at 1.28 pm, which attached a document referred to as the "June 2018 Figures", was as follows: Please find the following information. Keep in mind we only purchased the business Oct 1 and then closed for all of Dec and most of January. So in reality these figures are applicable to 7 months trading. We are only operating 5 days due to my other work commitments. (error in original) 87 The June 2018 Figures was a single page document containing income, expense and combined profit figures and was headed: Bellandra Family Trust Eco Noosa Income Statement for the year ended 30th June 2018 (bold omitted; underlining in original) 88 Mr Bellingham said he had received financial information from Nauticycles Noosa and Noosa SUP which he combined with the existing financial statements to create the June 2018 Figures document. Mr Bellingham said that he considered it necessary to combine the three businesses as Nauticycles Noosa and Noosa SUP were, at that point, still being operated separately. Mr Bellingham removed expenses from Nauticycles Noosa and Noosa SUP which he considered would not be incurred after the purchase as these expenses would already be incorporated in the Eco Noosa figures. The trading figures of Noosa SUP were from July 2017 to June 2018 and were reduced by Mr Bellingham from $74,614 to $65,378.66 to better reflect the income generated between October 2017 and June 2018. The adjustment to the sales was calculated by adding up the individual sales that occurred during that period. The Nauticycles Noosa sales figure was calculated by adding together the three quarters from October 2017 until June 2018 for a total of $15,250.99. The adjusted operating expenses for Nauticycles Noosa and Noosa SUP were $4,788.01 and $3,957 respectively. The operating expenses for Eco Noosa was $48,616.08. The Eco Noosa sales figure was $79,339.98. For the period of October 2017 to June 2018 the calculated profits were: (a) Eco Noosa had a profit of $21,723.90. (b) Nauticycles had a profit of $10,462.98. (c) Noosa SUPs had a profit of $61,421.66. (d) The combined profit was $93,608.54. 89 These calculations were contained in a handwritten document said to have been prepared by Mr Bellingham at the time of the discussions. The figures matched those in the June 2018 Figures. 90 The document which was prepared by Mr Bellingham at the time seems to have been the product of a methodical process to assess what the combined result would be. The document must have been prepared contemporaneously as the figures fed into the June 2018 Figures. He viewed the separate figures for Eco Noosa, Nauticycles Noosa and Noosa SUP and made the calculations deriving a total profit of $150,969.63 and a net profit of $93,608.50, which were used in the June 2018 Figures. 91 All of these factors support a conclusion that Mr Bellingham is to be believed as to his evidence that he informed Mr Wallent of the incorporation of the two businesses into Eco Noosa and that the figures were amalgamated figures and related to the total business being sold. 92 Coastal Karts pointed to the fact that Mr Bellingham said that he sent the June 2018 Figures because he did not want to miss a sale. The submission continued that he considered it a waste of time to provide full financial documents at the outset. That approach is not misleading provided that it was explained to Mr Wallent that the figures were amalgamated figures. If the incorporation of Nauticycles Noosa and Noosa SUP into the Eco Noosa business made financial sense, and was done with a view to enhancing the value of the three components, Bellandra Holdings might understandably in those circumstances wish to put forward the figures that could be achieved with the combined business actually being sold (including the removal of any duplicated expenses such as rent, insurance, electricity, IT and the like). Bellandra Holdings might take the view that doing so would highlight what was possible, and so not "miss a sale". The figure achievable would not be the same as the figures individually from the three separate entities. Such a statement does not adversely reflect on Mr Bellingham. 93 It would, of course, be a matter for the purchaser to undertake the due diligence described by Mr Green. 94 Coastal Karts noted that the Welcome Document referred to "incorporating" Nauticycles and Noosa SUP into the business whilst, at the time of the preparation of the June 2018 Figures, Eco Noosa, Nauticycles Noosa and Noosa SUP were all trading under separate Australian Business Numbers (ABNs). 95 This fact would not have been relevant to Mr Wallent's evidence. It is not suggested that he was aware of the ABN structure for Eco Noosa, Nauticycles Noosa or Noosa SUP. 96 Rather, it seems to be directed to the credibility of Mr Bellingham. 97 There is no reason why, even with separate ABNs, Nauticycles Noosa and Noosa SUP could not have been incorporated into the business which was being offered for sale. The fact that there was a discussion of "incorporating" Nauticycles Noosa and Noosa SUP in circumstances where there were separate ABNs does not reflect on the credit of Mr Bellingham in an adverse way. 98 Coastal Karts pointed to the fact Mr Bellingham proposed that Mr Wallent purchase the water spin bikes (nauticycles) but then, in oral evidence, Mr Bellingham said that he did not pay for the nauticycles until after the sale of the business. Again, this is a matter which was raised by Coastal Karts in relation to the credit of Mr Bellingham. There is no legal difficulty in effectively on-selling a business where the price on the original sale might come from the final sale. This does not reflect adversely on Mr Bellingham's credit. 99 It was submitted that Mr Bellingham had previously deposed to the fact that Nauticycles Noosa and Noosa SUP owned their respective assets. This fact does not seem to be relevant to the transaction contemplated between Coastal Karts and Bellandra Holdings. There is no legal reason why those assets could not be offered for sale, by arrangements with the owner, to a prospective buyer. Again, this does not reflect on Mr Bellingham's credit. 100 It was submitted that, overall, the separate financial accounting and ownership of assets by each of Nauticycles Noosa and Noosa SUP was inconsistent with those businesses being "incorporated" into the Eco Noosa business. The fact that there may have been separate financial accounting and ownership of assets by each of Nauticycles Noosa and Noosa SUP was not inconsistent with Bellandra Holdings acquiring the assets (regardless of when payment was to be made) and incorporating those assets into an entity to be sold. The separate financial accounting and ownership of assets is not inconsistent with each of Nauticycles Noosa and Noosa SUP being incorporated, for sale, into the Eco Noosa business. 101 The assertions made by Mr Bellingham in relation to what was said as to the incorporation of the businesses, and what was said as to the June 2018 Figures, are consistent with the contemporaneous documents. 102 I conclude that Mr Bellingham did inform Mr Wallent that the sale was of a business in which Nauticycles Noosa and Noosa SUP was incorporated and that Mr Wallent was aware that the June 2018 Figures were an estimate made by Mr Bellingham of what the combined business would achieve. 103 The fact that Mr Wallent made no further enquiries is also consistent with what Mr Bellingham said was discussed. By the time Mr Wallent received the June 2018 Figures, he had received both the Welcome Document as well as the summary of the plant and equipment. Leaving aside my finding as to what Mr Bellingham informed Mr Wallent of during the conversations, after receipt of the documents, it must have been clear that the business being sold included Nauticycles Noosa and Noosa SUP. This was obvious from the text of the Welcome Document as well as the equipment which was included in the list which was provided. 104 Coastal Karts pointed to the discussions concerning a confidentiality agreement as an inconsistency with Mr Bellingham's evidence that should be taken into account in relation to Mr Bellingham's credit. Coastal Karts pointed to the fact that neither Nauticycles Noosa nor Noosa SUP required that financial information not be released. It was submitted that Mr Bellingham's own evidence was that he would send full financial information only after he received the signed confidentiality agreement from Mr Wallent in circumstances where Mr Bellingham accepted that he had not sent Mr Wallent any confidentiality agreement to sign. 105 It was accepted by both parties that Mr Bellingham did not provide Mr Wallent with a confidentiality agreement to sign. It was also accepted by both parties that Mr Bellingham did not provide the full financial information, with the June 2018 Figures being described as "indicative figures". As the transaction progressed, Mr Wallent did not ever request any full financial records nor did he pursue the request for this information. It was clear that Mr Bellingham was confused about the release of the information, even thinking that his provision of the "indicative figures" of the June 2018 Figures did not reveal confidential information of the other two businesses. It was also the case that Mr Wallent did not press the supply of that information. At a later point, Mr Wallent asked about entire year figures and again did not press supply of this information as he indicated that his "reason for asking for the updated figures became less important as part of funding". In terms of whether this factor would cause me to have sufficient doubt so as to disregard Mr Bellingham's evidence, the fact that the contemporaneous documents all support what was said by Mr Bellingham is of much greater significance and so would not impact upon the findings I have made. 106 Between 21 September 2018 and 29 September 2018, Mr Wallent and Mr Bellingham exchanged a number of telephone calls. It was not disputed that during this time they discussed: Mr Bellingham's desire to sell and focus on his other business "The Drover"; that Mr Bellingham expressed interest in leasing a berth on the Eco Noosa jetty; the condition of the Duffy boats and that they should be capable of running for at least six hours; that Mr Wallent had previously looked into Duffy boats; sunset cruises and their popularity; that Mr Bellingham thought that Noosa was a wonderful place to live and offered an amazing lifestyle; Mr Wallent's workplace injury; Mr Wallent's desire to find a business that offered a "health and family-oriented lifestyle" while also supporting his family; and Mr Wallent's experience in the marine industry and Ms Hawkes' experience in the hospitality industry. 107 On 30 September 2018, the following text messages were sent: [At 11:56 AM, Mr Bellingham sent the following text message to Mr Wallent] Hi Michael, … Had a talk last night with my wife and also discussions with the other interested buyers. The offer the other couple have put to us is this : Purchase price$330k Not including the sups. $100k vendor finance . Therefore making it $230k up front and vendor finance of $100k. However they cannot commit to a time as yet . If this would make a difference to your position we are happy to offer you the same deal. As I said to you time is the main factor for us due to to other commitments with The Drover . Would also be happy to negotiate leasing of the Berth area for The Drover as well. Let me know your thoughts. Cheers Shane (errors in original) [At 6:49 PM, Mr Wallent sent a reply] Hi Shane, Thanks for extending your existing offer to us. This would certainly make financing the deal easier for us and puts us in the position where we are likely to be able to obtain the funds. Just a quick question, why are the sups not included? Would you be willing to accept a contract subject to finance and viewing? We are hoping to get over in the next week or so. Regards Michael [At 8:12 PM Mr Bellingham responded] We have aggreed to purchase the sup business from the business next to us on the sale of the business ( for $35k) however the other buyer did not want to be doing sup lessons or school groups of up to 20 per group . As that is the bulk of his hires. They felt for $35K they would rather put that money into the business and could buy a few sups later if needed. But as he had been operating for 12+ months and had solid financials we just felt it helped with the overall package of the business . And I agree with them so am happy not to include it . Also I can discuss it more if or when you come over , but an opportunity has come up over the past few days giving us the chance to expand The Drover. If we choose to go with it we would be looking to lease the half of the jetty where we Berth the Drover now on a permanent basis . This will also have a huge impact on the jetty for attracting more clientele and customers , as well as be a constant rent for the new owners of the business . As I said the jetty has so much potentional and is only going to grow with the increasing tourists coming to Noosa . So I want to not only see it grow but still want to be involved on the river with The Drover … Noosa is just growing week by week, so when the new airport opens tourism is going to go off ! Cheers Shane (photographs omitted; errors in original) 108 The exchange of text messages on 30 September 2018 raised the topic of the amended offer. The purchase price was reduced to $330,000 with $100,000 vendor finance and "not including sups". Mr Wallent asked, in a text at 6.49 pm, "Just a quick question, why are the sups not included?". 109 By this stage, I have concluded that Mr Wallent must have known of the incorporation of the two businesses, Nauticycles Noosa and Noosa SUP. 110 As to that question regarding the "sups not [being] included", Mr Bellingham responded indicating that Bellandra Holdings had agreed to purchase the Noosa SUP business for $35,000 and indicated the reasons why the other buyer did not want to acquire that business. Mr Bellingham continued: "But as he had been operating for 12+ months and had solid financials we just felt it helped with the overall package of the business". 111 Clearly, Coastal Karts knew of the incorporation of Noosa SUP and, further, was told that Noosa SUP had "solid financials", "had been operating for 12+ months" and that its inclusion helped "the overall package of the business". 112 On 2 October 2018, at 10.37 pm, Mr Wallent sent an email to Mr Bellingham indicating: After plenty of discussions, we are excited about the prospect of potentially moving to the Sunshine Coast and operating a business on Noosa River. Arahina and I have previously owned businesses, have plenty of tourism and hospitality experience which we hope to bring to the business and after working on luxury yachts for years, the idea of owning my own little luxury boat, is awesome. We agree the SUPs are not really required at this moment, especially considering we have some other ideas we would like to investigate that may require some additional capital. On that note, we would be happy to work with your offer of $330k for the business, with $100k vendor finance, after a few details have been agreed on. Could you please let me know what terms for the finance you would like to offer? A few other questions; • Are there any permits, or licenses that need to be transferred over? • Can you provide the contact details for the Landlord so that we can have a chat about the lease? • Do you have a date that you want to be out of the business? … We are planning to come over to look at the business in the coming weeks, but would like to secure our finance before we come so that we can move to contract should everything be okay after the viewing. I'd actually like to be there before the school holidays finish and give you hand for a day if that's ok? I have meetings tomorrow and Thursday regarding finance, I can't see any problems, it's just a matter of time as it involves an insurance settlement. Before we book flights, we would also appreciate some sort of assurance that we're in the running and the business won't be sold before we get there. It's pretty difficult for us over here, we're keen as but we're on the opposite side of the country! 113 There was a further discussion between Mr Bellingham and Mr Wallent on 5 October 2018. Mr Bellingham recalled that: (a) he "discussed the Noosa SUP business further and the income that related to the June 2018 Figures" that he had sent to him; (b) he "also explained what would not be included as part of the [Equipment List he] had also previously sent" to Mr Wallent; (c) he said to Mr Wallent then "that it would reduce the amount of income from the $150,000 by approximately $65,000"; (d) he stated that "the Noosa SUP business was included as part of the financials as it made it a much better package not only financially but also to obtain finance and the Noosa SUP business had a solid 12 month's figures"; (e) in response, Mr Wallent stated that "removing the Noosa SUP business was not an issue for them and that they would rather put that capital into ideas they had of their own to build the business up"; (f) Mr Wallent said "he would be purchasing his own stand-up paddle boards for the business anyway"; (g) Mr Wallent said that he "had a pedal kart business concept of which he wanted to bring over to Noosa as he felt it would work well there, but had not worked in Western Australia because of the position it was located in"; (h) Mr Wallent said that "he had new ideas for the business and that he would reconfigure the business and the direction to further enhance the Eco-friendly concept of it"; (i) he also remembered explaining to Mr Wallent that "the reason [he] had made the offer to him was due to the vast amount of experience he had told me that he had in boats, as well as he was familiar with the Duffy Boats"; (j) he told Mr Wallent that the "sale of the business was not just about the sale, but it was about someone buying it who could continue to grow the business"; and (k) he told Mr Wallent "his experience made him someone [he] would like to have purchase the business". 114 As to that conversation, Mr Wallent recalled: (a) Mr Bellingham stressed the urgency of the sale and the need to progress quickly, given there was another interested party and his need to concentrate on his other business, The Drover; (b) Mr Bellingham referred to the removal of the stand-up paddle boards and related stand up paddle equipment from the original plant and equipment list he had provided to him; (c) they discussed Mr Wallent's experience and qualifications in boats and the marine industry; (d) they discussed the progress of financing. Mr Wallent explained to Mr Bellingham that he had approached a finance broker and was working with the broker to achieve finance; (e) they further discussed the option of vendor finance; and (f) Mr Wallent mentioned that he could use the $30,000 reduction in sale price to invest in other ideas for Eco Noosa like, for example pedal go-karts, purchasing his own stand up paddle boards or as working capital. 115 In a subsequent affidavit, Mr Wallent said: (a) Mr Bellingham never said anything to me about the impact of removing the paddleboards from the plant and equipment in the proposed sale and the reduction to that would have on the income identified in the June 2018 Figures. (b) I never told Mr Bellingham that I would 'reconfigure business'; I said during this conversation, words to the effect, that my intention was to build on what was already there. 116 As can be seen, Mr Wallent and Mr Bellingham broadly agreed as to the discussion concerning the removal of the stand up paddle boards and related stand up paddle equipment from the original plant and equipment list provided to Mr Wallent. However, Mr Wallent said that Mr Bellingham did not say anything regarding the impact on turnover of removing the paddle boards in the proposed sale. 117 I have found that Mr Bellingham told Mr Wallent of the fact that the June 2018 Figures included the incorporated businesses. Consistent with that fact, there would be no reason for Mr Bellingham not to have informed Mr Wallent of the impact on profit. This would not have risked the sale as it would have been open at that time to Mr Wallent to include Noosa SUP if he wished and the information would be useful as a guide to possible revenue if Mr Wallent decided to acquire his own stand up paddle boards for the business. 118 It seems implausible that Mr Wallent himself would not have considered the issue of revenue reduction. He was being told the price would be reduced due to Noosa SUP being removed. At that point, Mr Wallent had been told by email and during a telephone conversation that Noosa SUP had solid financials, been operating for 12+ months and helped the overall package of the business. It seems implausible that, knowing this information and being told that Noosa SUP would be removed, Mr Wallent did not, himself, ask questions about the financial impact of Noosa SUP being removed. The logical conclusion is that he did not ask as he was told of the financial impact by Mr Bellingham. Whilst I have found that Mr Wallent was told of the inclusion of the three business in the sale at an earlier date, regardless, by this time, it must have been obvious that the three businesses were included. 119 Consistently with what had occurred, and logically associated with a discussion concerning the fact that equipment would be excluded, I conclude that, during the conversation on 5 October 2018, Mr Bellingham also told Mr Wallent that the exclusion of Noosa SUP would reduce the potential income by a figure of $65,000. 120 As I observed earlier, regardless of what was discussed in the first conversation, certainly by this stage it was clear that the Nauticycles Noosa and Noosa SUP businesses had been included in what was being offered for sale. 121 What was also clear from the emails which were exchanged on 30 September and 5 October 2018 was that Noosa SUP was excluded. It was not disputed between the parties that there was a discussion about the equipment which would be excluded as a result of Noosa SUP no longer being included in the transaction. 122 In early October 2018, Mr Wallent was in communication with a number of relatives and Mr Brook Picken from Finlease (Australia) Pty Ltd, a business finance broker, regarding obtaining finance. 123 On 5 October 2018, Mr Wallent sent an email to Mr Picken. Mr Wallent recalled that Mr Picken informed him that it would be difficult to obtain a business loan if the business had only been in operation for nine months (as per the June 2018 Figures). Mr Wallent prepared a number of documents for Mr Picken - "Business Plan 2018/19 dated 1/10/2018 (version 1)", "Cash flow for Eco Noosa Nov 2018-19" and "Eco Noosa Cashflow Assumptions". 124 The "Cash Flow for Eco Noosa" document was a spreadsheet prepared by Mr Wallent with columns for each month from November 2018 to October 2019. Under the heading "Cash incoming (EX GST)" were the sub-headings "Hire of Equipment", "Berth Hire" and "Kiosk income". The figures of $21,571, $2,000 and $3,500 respectively were shown in each month's column with a "Total incoming" figure of $324,852.00. There were then a number of entries under the heading "Cash outgoing (EX GST)" with a "Total outgoing" figure of $127,118.66. The yearly "cash balance" was $197,733. 125 The "Eco Noosa Cashflow Assumptions" document stated that Mr Wallent calculated the monthly "Hire of Equipment" amount by rounding up the gross income figure to $151,000 before dividing it by seven (as Eco Noosa had "been operating in its current form for 7 months up to EOFY 2018"). The document also stated that any "[Berth hire] to client vessels has been included, although not currently included in the P&L". Kiosk income, a recent inclusion post EOFY 2018, was not included in the June 2018 Figures. These figures had been added to the "Cash Flow for Eco Noosa" document. 126 On 6 October 2018, at 9.45 am, Mr Wallent sent an email to Mr Bellingham, as follows: We're excited to hear that you're keen to have us purchase the business, but also understand about the other couple. Hopefully we can secure finance in time. To make that obtainable Shane I'm going to need a bit more information as discussed last night. I figured it's easier to put it in an email for you to work through. I've got a great guy helping me, but he was only able to start the process on Friday so we're a bit behind the ball. He'll get through it quickly he said, but he needs the following information before he can make it happen. • Can you please provide at your first available convenience • Your last name!! :) • Boat survey certificate • Previous financials to prove the business has been operating for more than 24 months. • Any valuations of the boats and equipment that you may have, recent or not. • Details of the lease and landlord. As I explained yesterday, we'll likely get approval without the lease and contract, but will need them to finalise the finance. Also for my own interest. • Are there any permits, or licenses need to be transferred over? • Do you have a date that you want to be out of the business? • When were the boats last out of the water? Thanks Shane, I really appreciate your assistance and patience, hopefully we'll have something for you soon. Also, I'll let you know about Joel's visit on Wednesday once I've spoken with him. Kind Regards Michael Wallent … 127 On 7 October 2018 at 10.45 am, the parties exchanged text messages which were: [Mr Bellingham to Mr Wallent] Hi Michael, Received your email, will get onto that information you require today sometime. There are no licenses or permits required or that need transferring, and all equipment is owned outright. As for the time .… I needed to be out now ! Lol. If your mate is coming this week I will more than likely not be there as I have put all my work back till October. As it is now October I have to have these kitchens installed as well as have the drover slipped for survey inspection and antifoul this month. So I will be concentrating mainly on the weekends on the jetty. I have just had one of the Duffy's out last week and has been cut ,polished ,waxed , antifouled and fully detailed. And the other one will be coming out this week so when new owners take over they will be like new. All other equipment is only 12 months old and still like new . As I said , I take a lot of pride in the presentation and condition of our equipment and we have a really good reputation for it . I am happy to arrange lease and contract once you know finance has been pre approved and inspected , but have been caught out and stuck with solicitors bills before once engaging them. Only to have buyers not be able to obtain or not have the finances to purchase . Cheers Shane [Mr Wallent to Mr Bellingham] Hi Shane, I totally understand about the contract and lease and I wouldn't be asking for everything else if it wasn't necessary at this end. But that shouldn't be a problem for pre-approval. Yeah I can see on your social media the condition of your equipment and it's one of the reasons we feel the business is a good buy. And I respect that, as presentation and attention to detail are values hold strong myself. Good news everything is in order as if it goes ahead we'll be able to step straight in and get you out as soon as possible. Not sure it's worth Joel driving from Ipswich if you're not going to be there, but I'll discuss that with him today. Cheers mate, have a great day. Michael [Mr Bellingham to Mr Wallent] I have full pics and documentation when out of the water . I give them a full pressure wash and rub down to a totally clean hull then they get a primer coat and I give 3 coats of Jotun Antifoul. See if Joel can come up next Sat or Sun. Can give him the full guided tour also if he came up on the sat arv , I have a sunset cruise going out on the Drover … he's more than welcome to come along , he'll get to see the river as well then Did you say you have a master 5 ?? [Mr Wallent to Mr Bellingham] Master 4, MED 2 and a stack of other safety and operational certs. I've been working superyachts and marine tourism for most of my adult life. I'm trying to get out of it as it usually means extended periods away and that doesn't sit well with a family. This business potentially gives us the opportunity to move forward. While still holding an interest in the water and boats. [Mr Bellingham to Mr Wallent] Well we will definately have to have some serious discussions when you're over, with what I am planning for the Drover it could work out very beneficial for both of us . If all goes as planned, when are you likely to be flying over to have a look ? [Mr Wallent to Mr Bellingham] The day after I get finance Pre-approval I'm hoping by the end of the week What's your last name please Shane? [Mr Bellingham to Mr Wallent] Sir Bellingham [Mr Wallent to Mr Bellingham] Excellent thanks [Mr Bellingham to Mr Wallent] Doing a FB stalk ? Lol [Mr Wallent to Mr Bellingham] Hahaha no mate, I've done that already … well your business social media anyway. No, just filling out documents Also, is the business called Eco Noosa River Adventures, or just Eco Noosa? [Mr Bellingham to Mr Wallent] Eco Noosa is the Registered trading name . Have just sent through 2 lots of previous P&L we had from the previous owners [Mr Wallent to Mr Bellingham] Great thanks [Mr Bellingham to Mr Wallent] [A Certificate of Operation for the "Lady Isabella" as well as one for the "Lady Mary" was sent - not reproduced here] Cert of operations for the Duffy's . Max Ruster is the Landlord . However his agent John is the one who will be handling the lease. I will forward you his details. [Mr Wallent to Mr Bellingham] Thanks again. Also do you have any valuations on your equipment? Old or new [Mr Bellingham to Mr Wallent] No as the bikes, kayaks, pedal boats, and water bikes were all new . We didn't need a valuation on any of the equipment The Duffy's are approx. $62k new here in Australia plus an additional $5-$7k to have them put into survey with a cert of operations. Prices new are : Waterbikes $10-$11kea Bikes $450ea Kayaks 500-1000 ea depending on size Pedal boats $1800 ea Floating pontoon dock is around $25k and fingers $2000k ea … [Mr Wallent to Mr Bellingham] Ok thanks. They may want to do an evaluation on the Duffy's, how old are they? 2013? [Mr Bellingham to Mr Wallent] 2010 [Mr Wallent to Mr Bellingham] Cheers … [Mr Bellingham to Mr Wallent] If there's anything else just let me know 👍 [Mr Wallent to Mr Bellingham] Awesome thanks Shane. It may just be getting some valuations from our end then. Any chance you have receipts that may help? For the new equipment [Mr Bellingham to Mr Wallent] I would have them but they should be able to valuate without them. I'm sure you can appreciate that would open my business up with my suppliers/ sources etc … which obviously I want to protect as I'm sure you would if it were yours . Example is the water bikes : [he then named the website, described them and quoted an approximately price, plus shipping , gst and import taxes]. But they should be able to work all that out anyway. [Mr Wallent to Mr Bellingham] Ok great thanks. Are the Duffy's the 18 Snug Harbour model? Don't worry, found it. 16 Back Bay [Mr Bellingham to Mr Wallent] Yep 👍 They are around $40k US plus shipping and import taxes . Work out around $62-65k AUS then they have to be certified for commercial use which is around another $5-7k to have done. [Mr Wallent to Mr Bellingham] Yep great thanks. I'm just passing this on to my broker to make it easier. I've found them online too 👍 (errors in original) 128 Of significance from these text messages is that: (a) Mr Bellingham referred to two Duffy boats which had been taken "out" and were being cut, polished, waxed, antifouled and fully detailed. (b) Mr Bellingham sent copies of the Certificates of Operation for the "Lady Mary" and "Lady Isabella". (c) Mr Bellingham said that he sent two sets of "P&L" from the previous owners. 129 The Certificates of Operation were a one page document for each of the Duffy boats the "Lady Mary" and the "Lady Isabella". Each Certificate of Operation listed the "Date of Issue" as "02 March 2017" and stated "[u]nless suspended or cancelled, this certificate shall remain current from 02 March 2017 to 11 February 2022". The Certificates of Operation listed the Service Category as "4E" and contained a number of "Limits and conditions of operations and maximum persons permitted to be carried" as follows: S.Cat 4E - SHELTERED WATERS HIRE AND DRIVE VESSEL FOR USE IN SMOOTH WATERS ONLY. TO CARRY A MAXIMUM OF 8 PERSONS. TO OPERATE IN DAYLIGHT HOURS ONLY. All S.Cat - THE VESSEL MUST BE OPERATED IN FULL COMPLIANCE WITH THE NATIONAL STANDARD FOR COMMERCIAL VESSELS PART F-SPECIAL VESSELS. All S.Cat - THIS CERTIFICATE HAS BEEN ISSUED FOR A NEW VESSEL AS DEFINED IN MARINE ORDER 504

130 It is clear that Certificates of Operation were not for full commercial survey and had conditions placed upon them. During cross-examination, Mr Wallent was asked about the Certificates of Operation and the following exchange took place between Mr Wallent and counsel for Bellandra Holdings: [COUNSEL]: So when - when did you get the certificates of operation? [MR WALLENT]: Certificate of operation was - I can't recall the exact date but - - - It was prior to contract though wasn't it? Yes. Yes. So prior to contract you get the certificates of operation. They tell you what the government will allow the vessel to do under that certificate of operation. Correct? But you say you thought that the vessel could do more than what was in the certificate of operation? Yes. Correct? Did you question that? I will admit I thought it was a clerical error that I could resolve after settlement. Did you query that clerical error with Mr Bellingham? No. You accept don't you that certificates of operation told you what those vessels could lawfully do in connection with the business? Yes. That is, the business that you were purchasing? Yes. 131 As to the issue of full commercial survey, Coastal Karts asserted a written representation contained in the Equipment List provided on 18 September 2018, which included "2 x Luxury electric eco boats in full commercial survey". Relevant to that representation was the fact that before settlement a Certificate of Operation was provided for each Duffy boat. In cross-examination, Mr Wallent conceded that, when he received the Certificates of Operation and the boats were not in full commercial survey, he realised that the Duffy boats could not do what he had understood. He did not raise the matter with Mr Bellingham. He said he thought it was a clerical error which could be resolved after settlement. 132 The effect of this was to alter the representation which was originally made to reflect the contents of the Certificates of Operation. This matter also goes to the question of reliance. Having understood the information contained in the Certificates of Operation, Mr Wallent nevertheless proceeded to enter into the Business Contract. 133 As indicated in the text messages, Mr Bellingham sent an email to Mr Wallent attaching copies of Malu Os' profit and loss statements for the 2014/2015 and 2015/2016 years (Malu Os Statements). 134 The Malu Os Statements were two documents created by the previous owners. Each statement listed the income and expenses of the business. The 2014/2015 Profit & Loss Statement showed the total income as $84,868.57, total expenses (including general, payroll, motor vehicle and insurance expenses) as $113,121.95 and the total other expenses as $4,080, with an overall Net Loss of $32,333.38. The 2015/2016 Profit & Loss Statement showed the total income as $92,978.21, total expenses (again including general, payroll, motor vehicle and insurance expenses) as $94,828.33 and the total other expenses as $9.45, with an overall Net Loss of $1,859.57. 135 Mr Wallent said he was concerned when he reviewed the figures as they revealed net losses for the periods in question. Mr Wallent called Mr Bellingham to discuss them. 136 Mr Wallent recalled that Mr Bellingham indicated that the previous owners "also managed a resort", that they "did not operate the business to its potential", that they "used the business as a tax write off against the resort", that Mr Bellingham had "since operated the business properly and more effectively, turning the business around" and that "[o]bviously, the figures were not great but not to look too deeply into them for the reasons he mentioned" above. Mr Bellingham disputed using the words "tax write off" in respect of his comments regarding the profit and loss statements and the losses it showed. Mr Bellingham had no recollection of Mr Wallent being too concerned about any of the figures or losses on those profit and loss statements, recalling that Mr Wallent only wanted to show that there was a longer trading period for the business. 137 Mr Wallent did not make any further enquiry of Mr Bellingham. Mr Wallent did not undertake any due diligence, including by way of seeking any expert advice, as was contemplated by Mr Green. Mr Wallent said that he accepted, and believed, what Mr Bellingham said in relation to Malu Os' figures, particularly given the June 2018 Figures and the turnaround that demonstrated. 138 On 7 October 2018 at 2.58 pm, Mr Wallent sent to Mr Picken the Malu Os Statements, an Individual Application for Finance, a Company Finance Application, the two Certificates of Operation for the Duffy boats, an "Executive Summary" document including Cashflow forecast and Assumptions, Mr Wallent's personal resume and a document titled "Duffy 16 Back Bay info.pdf". The email also stated that Mr Bellingham did not have any useable valuation, was not prepared to give any of the receipts for the equipment and would prefer a valuer to value the equipment. The email also stated that if the Duffy boats were new, they would cost approximately $70,000, including being brought into commercial survey. The email went on to state that: "These were new in 2010 but have been maintained well, they're hard to come by and he's valuing them at $45k each". 139 The "Executive Summary" document was an eight page document prepared by Mr Wallent. The cover page shows a Duffy boat with the name "Lady Ann". The Executive Summary discussed the Eco Noosa business under the headings "Overview", "Business Services", "The Market", "Competition", "Opportunity and Risk", "Management", "Operations", "Capital Requirements", "Feasibility and Sales Projections" and "Summary". The Executive Summary then attached the Cash Flow Assumptions and Cash Flow for Eco Noosa documents from 5 October 2018 and the June 2018 Figures. 140 The "Executive Summary" document included, under the heading "Business Services", the comment that "Eco Noosa rents environmentally sensitive boats and recreation equipment. It's [sic] product range includes the following types of equipment". The following equipment of note were included: "2x Duffy 18 foot Snug electric boats", "12 x Nuaticycle [sic] water spin bikes" and "24 x Stand up paddle boards". It was noted that "Eco Noosa is the only business in Noosa providing water bikes" (that is, the nauticycles). By this stage, the stand up paddle boards were excluded from the sale but the "Executive Summary" document did not include this up-to-date information. No explanation has been provided for this. However, it is possible that the inclusion of Noosa SUP may have arisen because the preparation of the document pre-dated the email of 7 October 2018. 141 The Duffy boats are not referred to as being in Full Commercial Survey in the Executive Summary. Additionally, Mr Wallent referred to the Duffy boats as "18 foot Snug electric boats". As the text messages between Mr Wallent and Mr Bellingham show, the Duffy boats were in fact the "16 Back Bay" model. This appears to have been updated in a later version sent on 10 October 2018. 142 Under the heading "Feasibility and Sales Projections", the following comment was made: Since then the company has continued to capitalise on it's new image and product range. It has introduced additional sources of revenue such as berth rental, the kiosk and vending machines have resulted in a 20% increase in monthly revenue of $5,500, taking the total monthly gross income to $27,000. Annually this equates to $324,800 gross and $181,900 net profit. (error in original) 143 In the "Cash Flow Assumptions", the following comment was made: Kiosk income is a recent inclusion post EOFY 2018 and is therefore not included in the P&L. A coffee machine has been added to the business, supplying additional income of approx. $750 net p/w. Additional items including dog treats etc are currently netting approx. $125 a week. The business also has bait and ice vending machines, this income has not been included in the cashflow income. (error in original) 144 As to the monthly figures, it was noted that, whilst reference was made to the figures provided by Mr Bellingham: Some have been altered for a more realistic representation, based on knowledge and research. Any additional figures have been collected through research. 145 Mr Wallent said that he was preparing the cash flow forecasts from 1 October 2018. 146 In both of the Cash Flow Assumptions and also the "Executive Summary" documents, nauticycles and paddle boards are included. Specifically, where revenue figures were known not to be included in the June 2018 Figures, it was noted that they have been added and the figures are included in that way. An example is the coffee machine generating approximately $750 per week and "items including dog treats etc" said to be netting approximately $125 per week. As well, the "Executive Summary" document talked about the introduction of "additional sources of revenue such as berth rental, the kiosk and vending machines" resulting "in a 20% increase in monthly revenue of $5,500, taking the total monthly gross income to $27,000" which was said to annually equate to $324,800 gross and $181,900 net profit. 147 If Mr Wallent was not aware that the figures for the two businesses incorporated into Eco Noosa were included in the June 2018 Figures, consistently with the approach just described, those figures would have been separately accounted for and included. Whilst I have already made findings based upon contemporaneous documents at the time as to the position with respect to the June 2018 Figures including the three businesses, the treatment of this information in the Cash Flow Assumptions document is consistent with those conclusions I have reached. 148 On 10 October 2018, Mr Wallent sent an email to Mr Picken which attached, among other documents, an updated Executive Summary. Although the Executive Summary was still dated 6 October 2018, the reference to the Duffy boats was updated to "2 x Duffy 16 Bay Back electric boats" and the reference to the nauticycles was updated to "12 x Schiller water spin bikes". Notably, the Business Services section continued to include the "Stand Up Paddle board equipment" and there was no reference to the Duffy boats being in Full Commercial Survey. 149 On 11 October 2018, Mr Wallent sent a text to Mr Bellingham asking for a profit and loss statement for the last 12 months, that is October 2017 to October 2018. Mr Bellingham replied that he "[c]an get last quarter done but wouldn't be till next week some time". Mr Wallent said that he did not follow up on this request further and, as he was "aware that business finance was unlikely due to the short operating time", and as the process went on his "reason for asking for the updated figures became less important as part of funding". It was agreed that a profit and loss statement for 12 months was not provided. 150 On 18 October 2018, Mr Bellingham sent a text message to Mr Wallent requesting an update on whether Mr Wallent had secured finance and whether he would be flying to the Sunshine Coast to inspect the business. Mr Wallent replied that he had secured $285,000, was just waiting to hear about the final $45,000 and was looking to book a flight to inspect the business on 21 October 2018. 151 On 21 October 2018, Mr Wallent inspected Eco Noosa with Mr Bellingham. 152 As part of the purchase of Eco Noosa, Mr Wallent purchased two Duffy boats named the "Lady Mary" and the "Lady Isabella", of which one was green and the other red. The two Duffy boats were referred to as "2 x Luxury electric eco boats in full commercial survey" on the Equipment List. Neither the "Lady Mary" nor the "Lady Isabella" was in Full Commercial Survey but they were, instead, exempt from the requirement to have a Certificate of Survey in place. The Certificates of Operation of each of the "Lady Mary" and "Lady Isabella" had previously been forwarded to Mr Wallent by text on 7 October 2018. 153 A third Duffy boat, the "Lady Ann", was used by Eco Noosa, but was not included as part of the sale. The "Lady Ann" was also green. 154 The Duffy boat inspected was the "Lady Ann". It was in dispute whether Mr Wallent was aware that the Duffy boat was the "Lady Ann" at the time of the inspection. Mr Bellingham said that he had only returned the "Lady Ann" to the water that day. It was in dispute between the parties whether Mr Bellingham advised Mr Wallent that two boats, the "Lady Mary" and the "Lady Isabella", were out of the water or just one boat was out of the water. It was in dispute whether Mr Bellingham offered for Mr Wallent to inspect the other boats. 155 Coastal Karts submitted that Mr Wallent was misled during the test drive on 21 October 2018 as Mr Wallent was not informed that the Duffy boat they were test driving was not being sold. Mr Wallent said he did not see the name of the Duffy boat being test driven. 156 Mr Bellingham said that he informed Mr Wallent that the boat he was driving, the "Lady Ann", was not being sold and that the two boats he would be buying were the "Lady Mary" and the "Lady Isabella". 157 Mr Wallent had been informed by Mr Bellingham by text message on 7 October 2018 that the "Lady Mary" and the "Lady Isabella" were being taken out of the water and were being cut, polished, waxed, antifouled and fully detailed. This fact is consistent with Mr Bellingham having confirmed this during the inspection. 158 Mr Bellingham said that he offered Mr Wallent the opportunity to inspect the "Lady Mary" and the "Lady Isabella", but that Mr Wallent declined as he wanted to "look around Noosa". Mr Wallent conceded that he could not recall whether that had occurred, but that it was possible. 159 Mr Wallent was aware that he was purchasing two Duffy boats - that is clear from his Executive Summary. Mr Wallent, even if under the impression that the Duffy boat he was inspecting was one of the Duffy boats he was purchasing, did not request to inspect the second Duffy boat. 160 Mr Wallent's evidence was that he did not recall whether there was an offer to inspect the other Duffy boats, but said that it may have been possible. There was no reason why Mr Bellingham would not have shown the other two Duffy boats to Mr Wallent. In the circumstances I accept the evidence of Mr Bellingham, that Mr Wallent was informed that the "Lady Ann" was not a Duffy boat being sold and that he was offered, but declined, the opportunity to inspect the other two Duffy boats. 161 It is not in dispute that, while inspecting the electric paddle boats, Mr Bellingham explained that the electric motors had been removed as they were designed for freshwater and the Noosa River was saltwater. 162 It was agreed that, after the inspection, Mr Bellingham and Mr Wallent went to the jetty office. It was not in dispute that Mr Bellingham showed Mr Wallent brochures and marketing materials. It was in dispute whether Mr Bellingham gave Mr Wallent a document referred to as the "Amended June 2018 Figures". 163 The Amended June 2018 Figures is a copy of the June 2018 Figures, with the addition of several handwritten annotations. The handwritten annotations amended the sales income, excluding Noosa SUP income of $65,378.66 and excluding several expenses which would not be incurred. The notes also listed equipment which would be removed from the list supplied. 164 Mr Wallent said that the first time he saw the Amended June 2018 Figures was when they were in evidence in these proceedings. 165 Mr Bellingham said that he created two copies of the Amended June 2018 Figures prior to the meeting, having photocopied the original. 166 Mr Bellingham said that he handed the Amended June 2018 Figures to Mr Wallent at the time Mr Bellingham showed Mr Wallent the brochures and marketing materials. 167 In relation to this evidence, a submission was made as to Mr Bellingham's credit which was essentially that, when asked during cross-examination whether or not he had provided the Amended June 2018 Figures, he had responded "why wouldn't I", which was submitted as evasive or argumentative, as in not a direct yes or no answer. Mr Bellingham's answer was in response to matters being put to him using language with which he would not have been familiar, such as "I suggest you didn't give this document that you're talking about - these adjusted figures - to Mr Wallent". In the context of that answer, it also should be noted that Mr Bellingham went on to explain the position in evidence immediately following. I conclude that Mr Bellingham's response does not reflect adversely on Mr Bellingham's credit. 168 Coastal Karts submitted that it was inherently implausible that the course of events occurred as Mr Bellingham claimed it did, as, if Mr Wallent was provided with a document which showed the combined profit of Eco Noosa and Nauticycles Noosa as $32,000, he may have negotiated a lower price. 169 Mr Bellingham had previously discussed the removal of Noosa SUP with Mr Wallent. I have found that, after the offer was made to exclude Noosa SUP from the sale, Mr Bellingham told Mr Wallent of not only the price reduction, but also the reduction in income. In those circumstances it would not be inherently implausible for Mr Bellingham to produce a document which reflected what he had earlier said. Indeed, to have produced the Amended June 2018 Figures is consistent with Mr Bellingham's earlier evidence. As to the suggestion that the production of the document may have led to a negotiated lower price, it was the case that Mr Wallent had already been informed of a reduction in price as a consequence of the removal of Noosa SUP. 170 I accept the evidence of Mr Bellingham and find that Mr Wallent was provided with the Amended June 2018 Figures during the inspection. 171 On 30 October 2018, Mr Wallent sent an updated cash flow document to Mr Picken. The updated cash flow document largely resembled the original cash flow document - the Amended June 2018 Figures had not been incorporated and it was dated 1 October 2018. The significant changes appear to involve applying a multiplication factor to each month to simulate that some months would be busier than others. 172 Coastal Kart submitted that Mr Wallent would have incorporated the Amended June 2018 Figures had he been given them. The Cash Flow document was dated 1 October 2018 and changes were only made to one aspect, namely the weighting for busier months. Mr Wallent had previously not updated the Executive Summary submitted to Mr Picken which continued to refer to Noosa SUP at a time after Noosa SUP had been removed from the transaction. Mr Wallent also did not alter the date on the updated cash flow for Mr Picken. The submission concerning the lack of incorporation of the Amended June 2018 Figures does not outweigh the other factors which I have identified as to my findings concerning the Amended June 2018 Figures. 173 Between the end of October and early November 2018, the parties negotiated the terms of the sale through their lawyers. Of note, Clause 7.2 stated: The Seller does not provide any warranty in relation to any of the items listed as Plant & Equipment and the Buyer should make its own investigations and should satisfy themselves/itself as to the working order and condition of each of the items listed therein prior to entering into the contract. 174 Mr Wallent's lawyers requested that Clause 7.2 be removed, which Mr Bellingham's lawyers rejected. Ultimately, the clause was accepted in the Business Contract entered into. It is not possible to contract out of the obligations under the ACL. However, such a clause may have an impact on the nature of any representation which may have been made. Clause 7.2 makes it clear that no warranty is provided and the buyer should make its own investigations and should satisfy itself as to the working order and condition of the plant and equipment. This clause was significant because Coastal Karts' lawyers requested that it be removed, and this request was rejected. Therefore, it was specifically discussed as a term between the parties. It impacts upon the significance of the discussions which may have taken place during the negotiations. 175 Despite this contractual provision, Coastal Karts undertook only a superficial inspection of the Duffy boats. 176 On 22 November 2018, Coastal Karts entered into the Business Contract to purchase the Eco Noosa business and a Vendor Finance and General Security Agreement. Settlement of the Business Contract occurred on 26 November 2018. 177 The Business Contract included a Schedule "A" titled "unencumbered plant & equipment" which listed plant and equipment to be included in the sale. The Duffy boats were listed as "2 × Luxury electric eco boats in full commercial survey". As I concluded earlier, Coastal Karts was aware from 7 October 2018 that the two Duffy boats were not in Full Commercial Survey and entered into the contract with that knowledge. 178 On 27 November 2018, Mr Wallent asked Mr Bellingham to provide him with the Certificate of Survey for each of the boats. Mr Bellingham provided photographs of Exemption Certificates for the two vessels. 179 Between 27 November 2018 and 31 March 2019, Mr Wallent deposed to taking 41 bookings for the "Lady Mary" and/or the "Lady Isabella". Mr Wallent said that there were issues with approximately 16 of the 41 bookings due to the Duffy boats failing to last the entire hire period. Of those 16 bookings, approximately 11 refunds were issued. Mr Wallent said that he identified two types of issues when the boats failed: either the battery was flat or some other error caused the boats to stop. 180 The "Lady Mary" was out of commission from 24 January 2019 until mid-April 2020 and the "Lady Isabella" was out of commission from 9 March 2019 until 7 April 2021, approximately 15 months and 25 months respectively. During these times, Mr Wallent was unable to take bookings. Consequently, neither boat was able to generate any revenue during those periods. 181 Mr Bellingham gave evidence that the Duffy boats had in the past experienced overheating issues and that the battery drained too fast. To solve these issues, Mr Bellingham said that he had installed a speed limiting pin, in the form of a plastic cylinder secured in front of the throttle to prevent the driver from pushing the throttle fully open. He said that this had solved the issues. Mr Wallent conceded he had removed the limiting pin. 182 Mr Wallent engaged Mr Malcolm Betts, a marine electrician, in July 2019 to inspect the "Lady Mary" and, on 11 July 2019, Mr Betts sent an email to Mr Wallent summarising his findings and the work required. Ultimately, Mr Betts rebuilt the drive components of the "Lady Mary" in April 2020. 183 Mr Wallent engaged Mr Lionel Allison, a marine engineer and electrician, in April 2020. Mr Allison stripped the "Lady Mary" of the old wiring and parts and installed any components that Mr Betts had not installed. 184 Both Mr Betts and Mr Allison also completed repairs to the "Lady Isabella" on 7 April 2021. Fixing both Duffy boats ultimately cost a total of $6,914.70. Mr Wallent said he could not afford this payment at the time the Duffy boats initially required the repairs. 185 The experts identified the issues with the Duffy boats to be with the batteries generally, the charging of the batteries, overheating, corrosion and water damage. 186 Mr Betts was asked about the limiting pin solution adopted by Mr Bellingham. Some of his evidence was as follows: [COUNSEL]: To adopt that analogy, though, that - putting that block underneath the accelerator, would you accept - reduce the overheating likelihood, and reduce the power consumption? [MR BETTS]: The less you … It certainly would reduce the power consumption, and - and if you don't power a motor up as much, then you must then, obviously, not use as much heat, yes. So what you did, really, is you improved the old system to avoid having to do that? Yes. So it works properly. 187 Both experts were critical of the design of the Duffy boats and in evidence acknowledged that a significant number of the repairs to the Duffy boats were improvements on already existing systems which were inherent to the design of the Duffy boat. This was revealed in the following cross-examination: [COUNSEL]: That's right. So what you did was you changed what's appearing in that diagram there to now draw power off all six batteries rather than just the one, and then you had a step down to step it down from 36 down to the 12? [MR ALLISON]: Correct, yes. So you agree that, once again, what you're doing is you're effectively upgrading the design that the Duffy already had in place? Yes. I - it's hard to see how they - how they managed the 36. I think there's a wire or two missing in this diagram. But yes, pretty much upgraded what - what - if - if that was correct, the wiring that came out, then yes, we've upgraded it. … [COUNSEL]: Did the boat already have that - - -? [MR ALLISON]: There was no isolation switch on board. So you installed that as well? Correct. So you would agree, then, that this is also is an upgrade of what Duffy provide, according to that manual? Correct. … [COUNSEL]: I see. So when you say in your email, "You can't tap off two of the batteries for a lower voltage without damaging the system", what you're talking about really is the inherent Duffy design there, aren't you? [MR BETTS]: Correct. Okay? I - Duffy use lead acid batteries - what we call wet lead acid batteries. And in their instructions, they ask you to monitor the cells with a hydrometer. So as they become out of balance, as I speak about, you can top-up the other batteries with fluid when they get overcharged. The batteries in the Duffys that I saw were not wet lead acid batteries. They were sealed. So that ability to correct that was not possible. So what you were proposing to do was improve on the system that Duffy had? Improve on the system, yes. … [COUNSEL]: When you say you can't tell what killed the controller, you can only guess it's poor wiring and heat stress, that finding doesn't appear in your subsequent reports, does it? [MR BETTS]: No. I - looking at the way they were mounted, and how the boat was - how the motor controllers were wired, it would have been the most obvious fault with the system. I couldn't see how it - the way it - how it was - how it was mounted. But heat wasn't being dissipated effectively. So at the bottom of that email, you talk about what you've been told about the Duffy system? Yes. So again, are we talking here about improvements that you want to do, compared to what's in the Duffy system? I suppose you could say improve. It was certainly install the system, so it was more durable, and was offering him - yes. Battery chargers, DC converters, and heatsinks, which would help get rid of the heat. And, yes, re-think the ventilation system, because it - it certainly wasn't clearing heat out of the system, as you can see on the second Duffy boat that was physically melted. 188 The expert evidence appears to conclude that the issues identified were inherent to the Duffy boats design and typically unidentifiable except by an expert. Mr Betts acknowledged that running the equipment at lower power (as would occur in circumstances where Mr Bellingham's solution was in place) would manage the power consumption of the boat and additionally reduce the heat load of the equipment. It would not solve the underlying issues but would deal with the issues experienced. 189 Bellandra Holdings also submitted that any inspection which had occurred by Mr Betts or Mr Allison was well after the purchase date (and therefore did not speak to the condition of the Duffy boats at the time of purchase). I accept that submission. Of course, at that time, the limiting pins installed by Mr Bellingham were in place. Whilst the evidence did not address this, it seems likely that the overheating and battery charging problems would have become evident after the limiting pins had been removed. 190 Coastal Karts acknowledged that when Mr Wallent inspected the green Duffy boat, he did not inspect any of the electronical components or controller panels. Such inspections may have required more invasive inspections which were not carried out. Coastal Karts did not engage any person more qualified to undertake such inspections prior to entering into the Business Contract. None of problems claimed to exist was identified by Mr Wallent during the inspection. 191 I accept that the reports do not provide an insight as to the condition of the Duffy boats at the time of the sale in November 2018 as any inspection occurred well after settlement. 192 Mr Bellingham previously had an arrangement with a Mr Slaven, a semi-retiree, where Mr Slaven could moor his boat at the jetty for $125 per week. When Mr Wallent purchased the business, Mr Slaven continued to moor his boat at the jetty without payment in exchange for lending his car to Mr Wallent. This arrangement lasted for approximately a year. During cross-examination, Mr Wallent said that he was happy to forgo the income that he could have received for the jetty rental as it was only a small amount of income and that he needed a car. Bellandra Holdings calculated the income which could have been received for the jetty rental at $125 per week or $6,500 per year, which counsel for Bellandra Holdings noted was largely sufficient for Mr Wallent to fix the Duffy boats. 193 As to the conditions of the Duffy boats, I am not satisfied that the evidence supports a finding that, in the state in which they were sold, they were unreliable and not in good working order. In summary, my reasons are: (a) Neither of the expert reports speak of the condition of the Duffy boats at the time of the sale. (b) It seems that the problems ultimately identified with the Duffy boats related to overheating and flattening of the batteries and that Mr Bellingham had put in place a solution which Mr Betts said would limit the overheating and the excessive flattening. (c) The work undertaken by the experts seems to have been more directed at changing the design of the Duffy boats than fixing aspects of poor condition. (d) As to the solution put in place by Mr Bellingham, it seems that Mr Wallent unwittingly disabled this solution. Based on the expert evidence, that would have led to overheating and excessive battery discharge. (e) The repairs had been described as extensive. However, the cost was only $2,560.55 for the "Lady Mary" and $4,354.15 for the "Lady Isabella". This could have been covered by the business had the monies not been diverted to the provision of a family car. (f) In terms of presentation, Bellandra Holdings had taken both Duffy boats out of the water to be cut, polished, waxed, antifouled and fully detailed. In fact, Mr Wallent acknowledged that from his inspection on social media, the condition of the equipment was one of the reasons he thought the business was "a good buy". 194 In those circumstances, the comments made by Mr Bellingham that the Duffy boats were in good working order was justified. Of course, in relation to this aspect, the clause in the Business Contract made it clear that no warranty was given and Coastal Karts should have undertaken its own inspection, which was not done.

BROWNE V DUNN OBJECTIONS 195 Coastal Karts raised two objections against Bellandra Holdings' submissions, relying upon the principles of Browne v Dunn (1894) 6 R. 67 (Browne v Dunn). The Browne v Dunn rule was summarised by Newton J in Bulstrode v Trimble [1970] VR 840 at 846: A typical formulation is that set out in Cross on Evidence, 3rd ed, pp 211, 212, which is in the following terms: In the cross-examination of a witness "any matter upon which it is proposed to contradict the evidence-in-chief given by the witness must normally be put to him so that he may have an opportunity of explaining the contradiction, and failure to do this may be held to imply acceptance of the evidence-in-chief" (italics are mine). (italics in original) 196 The Browne v Dunn rule is flexible and designed to promote and achieve procedural fairness (see Gleeson CJ and Heydon J at [18] in MWJ v The Queen (2005) 222 ALR 436; [2005] HCA 74). The rule is not absolute and matters which are "clearly at issue in the proceedings" do not need to be put to a witness, as Hill, O'Connor and Moore JJ held in Stern v National Australia Bank Ltd (2000) 171 ALR 192; [2000] FCA 294 at [42]: The rule that in cross-examination it is necessary to put to an opponent's witness the nature of the case proposed to be relied upon in contradiction of his or her evidence, referred to as the rule in Browne v Dunn, is, as the submissions suggest, essentially a rule of fairness. The rule is not however an absolute one. So it will not ordinarily be necessary to put to a party matters which are clearly at issue in the proceedings; see Thomas v van den Yssel (1976) 14 SASR 205 at 207, Phipson on Evidence, 14th edn, 1990 at [12-13] and cf Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (1999) 87 FCR 134 at 148-9. 197 The first objection relates to Bellandra Holdings' submission that Mr Wallent did not identify additional income of Nauticycles Noosa or Noosa SUP in his cash flow projections, Cash Flow Assumptions and Executive Summary, which would suggest that Mr Wallent considered any income figures to be inclusive of all three businesses. This suggestion was not put to Mr Wallent during cross-examination for him to refute or answer it. 198 Bellandra Holding submit that this was at the heart of their case and that Mr Wallent had every opportunity to respond to the allegation. 199 The second objection relates to the inspection of the Duffy boats during Mr Wallent's visit to Eco Noosa. Bellandra Holdings suggested that Mr Wallent would have, or ought to have, taken notice of name of the green Duffy boat (being the "Lady Ann"). This was also not put to Mr Wallent during cross-examination for him to refute or provide an answer. 200 Bellandra Holdings submit that it was put to Mr Wallent, referring to the transcript: [COUNSEL]: Mr Bellingham showed you a Green Duffy boat that he referred to as Lady Ann? [MR WALLENT]: He showed me a Green Duffy boat. Yes. Well, what do you disagree with in that sentence? I disagree that he said that it was Lady Ann. All right. I would suggest to you that he did and he was very clear that you were inspecting Lady Ann, and I would suggest that why you would recall that is because he pointed out the deckle on the back of the boat which had the words "Lady Ann" and the picture of a turtle under it. Do you recall seeing that? No. I don't. He then explained to you that Lady Mary and Lady Isabella also had similar deckles with their names on them? Well, that's incorrect. 201 The Browne v Dunn rule is, of course, discretionary. With respect to the first objection, as is clear from the reasons, the conclusions I reached regarding the fact that the June 2018 Figures included income from the three businesses was based upon a consideration of the circumstances at the time the discussions took place. The information regarding the cash flow projections was regarded as consistent with the findings I had already made. As for the subject matter of the second objection, it was clearly put to Mr Wallent. There does not appear to be any reason to apply the Browne v Dunn rule with respect to the objections.

CROSS CLAIM 202 The cross claim alleged that Coastal Karts has only repaid the sum of $15,099.00 and has otherwise failed to repay the Principal Sum and applicable interest and, accordingly, is in breach of the terms of the Vendor Finance Agreement. 203 Coastal Karts contended that the Vendor Finance Agreement was validly rescinded and is therefore not required to pay Bellandra Holdings any further amounts under the Vendor Finance Agreement. 204 In written submissions, Coastal Karts noted that "[t]he cross claim filed by Bellandra Holdings for damages for breach of the Vendor Finance Agreement will turn on determination of [Coastal Karts'] claim". That position is not contested by Bellandra Holdings, which submitted that "[Bellandra Holdings'] cross-claim should be found to be established, and orders made for [Coastal Karts] to pay the balance of the Vendor Finance amount to [Bellandra Holdings], together with applicable interest". 205 In the circumstances where Coastal Karts has not been successful in its claim and has therefore not validly rescinded the Vendor Finance Agreement, Bellandra Holding is successful in its cross claim. 206 I am minded to make the following orders, but will hear from the parties whether further submissions are necessary in relation to the cross claim:

1. The first cross-respondent pay $89,003.95 to the cross-claimant, being the amount of Principal Sum and Interest payable under the Vendor Finance Agreement.
2. The first cross-respondent pay interest calculated at the rate of 5% per annum accruing monthly to the cross-claimant.

CONCLUSION 207 I will dismiss Coastal Karts Amended Originating Application filed on 18 October 2019. I will order that Coastal Karts pay Bellandra Holdings' costs of the application, to be taxed if not agreed. I certify that the preceding two hundred and seven (207) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thomas.

SCHEDULE OF PARTIES QUD 478 of 2019 Cross-Respondents Second Cross-Respondent MICHAEL PAUL WALLENT Third Cross-Respondent ARAHINA EUNICE HAWKES