Delaney v Delaney [2021] VSC 365

MISLEADING CONDUCT - Competition and Consumer Law Act 2010 (Cth) sch 2 ('Australian Consumer Law') (s 18) (s 4) - Representations as to turnover and profitability of business - Whether representations made relate to future matters - Alleged falsity of representations as to turnover and profit - Pleading requirements - Whether current representations made -Whether representations false or misleading - No falsity established - Many representations superseded by further information about turnover and profit.

EQUITY - Unconscionable conduct - Whether party under special disadvantage due to various factors - No special disadvantage established - In any event, no unconscientious advantage taken - Party has independent legal and accounting advice.

1 Sean Delaney ('Sean'), the first plaintiff, and Patrick Delaney ('Pat'), the first defendant, are brothers. In 1988, together with their brother Joseph, they established what has become known as the Delplant group. The Delplant group provides construction services on pipeline assets, in particular for land subdivision, predominantly in the Casey and Cardinia region of South East Melbourne. There are a number of companies and trusts within the Delplant group. Many are defendants to this proceeding, including Delplant Pty Ltd ('Delplant'), which is the third defendant.

2 Since 2007, when Joseph sold his interest, Sean and Pat have owned the Delplant group in equal shares. For the most part:

(1) the interests of Sean are held through Skildale Pty Ltd ('Skildale') as trustee of Sean's family trust called the Galway Family Trust; and

(2) the interests of Pat are held through Pat Delaney Constructions Pty Ltd ('PDC') as trustee of Pat's family trust called the Delway Family Trust.

Skildale and PDC are the second plaintiff and the second defendant respectively.

3 In addition to the Delplant group, Sean and Pat, through the Galway Family Trust and the Delway Family Trust, have interests in large tracts of land in Botanic Ridge near Cranbourne, Victoria.

4 Over time there has been a breakdown of the relationship between Sean and Pat. By a heads of agreement signed on 27 May 2020 (the 'HoA'), Sean agreed to buy Pat's interests in the Delplant group for $10 million. In this proceeding, Sean now seeks to enforce that HoA.

5 In his defence, Pat disputes that the HoA was intended to be legally binding or that the HoA is enforceable. Relevantly, Pat contends that key terms of the HoA are uncertain, including the identity of the parties to the HoA, the identity of the purchaser and the assets to be transferred, and cl 5 which proposed that the resolution of taxation and accounting implications would be settled in a 'mutually beneficial taxation outcome for both parties' by the accountants for each of Sean and Pat.

6 Further, Pat alleges that prior to entering into the HoA, Sean (on his own behalf and on behalf of Delplant) misrepresented the financial position of the Delplant group, in particular, its estimated net profit, turnover and profit margin for the financial year ended 30 June 2020 ('FY 2020'). He contends that, if he had known of the real financial position, he would not have entered into the HoA to sell his interests for $10 million. Pat also claims that it would be unconscionable to enforce the HoA. As a result of these claims, he seeks that the HoA be set aside or, alternatively, damages.

7 Finally, two days before the HoA was executed, Sean in his position as Managing Director of Delplant made Pat's position as Operations Manager redundant. This issue was addressed in the HoA. However, if the HoA is not enforceable, Pat seeks his proper redundancy entitlements from Delplant in the sum of $393,915.

8 For the reasons that follow, I have concluded that:

(1) the HoA was intended to be legally binding and is enforceable;

(2) the claims for misleading conduct and unconscionable conduct have not been established; and

(3) it is not necessary to consider the claim for a redundancy payment.

9 As a result, I will order specific performance of the HoA. However, as part of ordering specific performance, I consider that the accountants of the parties ought be given the opportunity to reach a mutually beneficial outcome for the resolution of taxation and accounting consequences of the sale for both Sean and Pat. I will hear from the parties as to the time within which this should take place.

10 As noted above, Sean and Skildale were the plaintiffs to this proceeding. They, along with Delplant, were also defendants to the amended counterclaim dated 30 July 2020 (the 'counterclaim') of the first and second defendants, namely Pat and PDC. However, no appearance was filed on behalf of Delplant. For convenience, I will refer to Sean and Skildale (including in their capacity as defendants to the counterclaim) as 'the plaintiffs' unless indicated to the contrary. Further, as noted above, in addition to Pat and PDC, the plaintiffs joined other entities in the Delplant group as the third to tenth defendants in this proceeding. However, no appearance was filed on behalf of those defendants. As a result and for convenience, I will refer to Pat and PDC as 'the defendants' unless indicated to the contrary.

(1) Sean, the first plaintiff;

(2) Zvonko Maric, the accountant engaged by Sean to assist him with the dispute with Pat and who was appointed the accountant for a number of companies in the Delplant group in November 2019;

(3) Jonathan Allen, the solicitor engaged by Sean to assist him with his dispute with Pat; and

(4) James Delaney ('James'), Sean's son who works for the Delplant group though employed by Skildale.

(1) Pat, the first defendant;

(2) Joseph Lidonnici, the former accountant of the Delplant group who was then engaged by Pat to assist him in the dispute with Sean; and

(3) Grant Darling, the solicitor for the first and second defendants.

13 It is appropriate that I say something briefly about each witness. However, before doing so, I note that many of the allegations in this case relate to statements not made by or to Sean or Pat, but made by professional advisers to professional advisers on behalf of each of them. As I set out below, many of the representations are based upon letters sent by Mr Maric or on meetings between Mr Maric and Mr Lidonnici. Further, at the meeting on 27 May 2020 when the HoA was executed, while Sean and Pat were present, they were never in the same room and only communicated through each of their solicitor: Mr Allen and Mr Darling. These unusual circumstances raise issues of not only whether the alleged representations were made but how they were understood and whether they were conveyed to, and relied upon by, the defendants.

14 Sean is a successful, shrewd and determined businessman. I formed the view that he is keen to display his authority within the Delplant group. As I set out below, he was very much involved in the negotiations for the purchase of Pat's interests, including through Mr Maric. In evidence, Sean was keen not only answer to questions but to argue his case. Further, on occasions I found his evidence unconvincing. For example, he made much of the fact that he was reducing his involvement and working hours in the Delplant group for health and other reasons during the period when he was negotiating the purchase of Pat's interests. For my part, I did not find convincing Sean's evidence that his involvement and working hours were reducing to the extent he claimed in correspondence during the relevant period in 2019 and 2020. This and other evidence caused me to view Sean's evidence with some caution.

15 As to Mr Maric, most of his evidence related to his attempts to negotiate an agreement with Mr Lidonnici. I formed the view that Mr Maric was an honest witness. However, consistent with my comments above, his role in negotiating for the purchase of Pat's interests was to act in accordance with Sean's instructions. By way of example, no letter was sent by Mr Maric without Sean's express approval. By way of further example, Sean gave Mr Maric talking notes for Mr Maric's meeting with Mr Lidonnici on 12 March 2020. These were produced in the course of Mr Maric's evidence. However, I have concluded that, for the most part, Mr Maric satisfied himself as to the basis of statements he made in relation to the future performance of the Delplant group in these negotiations.

16 Mr Allen gave evidence in relation to the events on the day the HoA was signed. I found Mr Allen to be an honest witness, although his recollection of the events of that day were far from clear.

17 James gave evidence about his and Sean's relationship with Pat when Pat worked at Delplant. He also gave evidence in relation to the events on the day the HoA was signed. James, like his father, sought to argue a case in his evidence. Of course, given that he continues to work at Delplant, he is very much interested in the outcome of this proceeding.

18 I found Pat to be generally an honest witness. While Sean's skills lay in co-ordinating the business and development of the Delplant group, Pat's skills lay in the operational side of the group. I formed the view that Pat was less shrewd than Sean. While Pat was an honest witness, I found that some of his evidence on key issues was unconvincing or at least inconsistent. For example, his evidence about whether he was informed at the 27 May 2020 meeting that the net profit of the Delplant group would be $2.4 million[1] was far from clear and at times inconsistent. He said that no figures were discussed on that day. He later said that Mr Darling told him that Sean was representing on that day that profit would be $2.4 million. However, Mr Darling did not give evidence that he was told on 27 May 2020 that the profit would be $2.4 million.

19 I also found Mr Lidonnici to be an honest witness. For the most part, his answers were straightforward and direct. If he disagreed with a premise, he could express the reason why in his answer. He was consistent in much of his evidence. However, there was one exception, namely in relation to the meeting with Sean and Mr Maric on 11 September 2019. His evidence in this regard was inconsistent with his contemporaneous file note and difficult to understand. It appears that he may have been conflating subsequent events with events which took place on 11 September 2019.

20 Mr Darling appeared defensive in his answers to questions, often providing very qualified answers to straightforward questions. I am unsure why this is so. It may be his manner. It may be that he was also acting for and advising the defendants in relation to this proceeding. However, I generally accept his evidence notwithstanding the way in which he gave it.

21 Documents referred to by counsel in the court book in the course of the trial were tendered into evidence unless objection was taken.

22 A list of issues was proposed by me during the course of the trial. The issues relating to claims under the Australian Consumer Law ('ACL') were not agreed between the parties in light of the pleadings and the way the case was conducted. As a result, I have not found it necessary to address all these issues. I will deal with these issues further below. However, it is appropriate I set out the list of issues with the areas of disagreement between the parties:

Does the heads of agreement dated 27 May 2020 ('HOA') give rise to a binding agreement, having regard of the third category in Masters v Cameron and the issues raised in Q2 (1) to (8)?

(1) the parties include South East Plant Hire Pty Ltd of which the signatories to the HOA are not directors;

(2) it fails to address the identity of the purchaser or purchasers;

(3) it fails to identify what is being sold and/or purchased;

(4) it fails to address the consequences of a failure to pay the amounts in cl 3 including which party is to make the payment;

(5) cl 2 is uncertain and it purports to bind Pat Delaney's 'family' who are not parties to the HOA;

(6) cl 4(b) is uncertain as any Further Agreement is to include 'any additional terms that the parties may reasonably require';

(7) cl 5 is uncertain as it provides that 'it is proposed' that tax and accounting implication[s] 'would be settled by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties';

(8) The date for the Further Agreement was suggested to be altered to 5 July 2020 (CB731).

Did the plaintiffs make the representations alleged in paragraph 22 of the Defence and Counterclaim dated 30 July 2020? [Noting the Plaintiffs' contention that only the representations alleged to be false in [25] are relevant for determination]

Did the representations in [22] of the counterclaim relate to future matters? [Noting the Plaintiffs' contention that this is not an issue for determination]

Were the representations false and untrue as alleged in [25] or, in so far as they related to future matters, were there no reasonable grounds for making them? [Noting the Plaintiffs' contention that the latter is not an issue for determination]

Did the first defendant act in reliance upon the representations in entering into the HOA, including having regard to the information in 5(k) of the reply?

If yes to 5 and 6, if the representations were not made, would the first defendant have entered into the HOA?

Is it unconscionable in equity to enforce the HOA by reason of the matters alleged in [29] of the counterclaim and [12] of the reply?

In the event that the HOA is not binding or enforceable, did Sean Delaney as Managing Director of Delplant wrongfully make Pat Delaney's position as Operations Manager redundant on 25 May 2020?

(1) is he entitled to be reinstated; or alternatively

23 As noted above, the Delplant group consists of a number of different companies and trusts. For the most part, the interests of Sean are held via the Galway Family Trust and the interests of Pat are held via the Delway Family Trust. The structure of the Delplant group is set out in Annexure A (the 'Delplant chart'). Both Sean and Pat accepted the structure in the Delplant chart as correct as at 27 May 2020. It was not in dispute at trial that each of Sean and Pat and their advisers were familiar with the structure of the Delplant group at all relevant times. I note for completeness that Sean and Pat each personally own shares in Delplant Properties Pty Ltd ('Delplant Properties'), Mt Salazia Developments Pty Ltd ('Mt Salazia Developments') and Hervet Pty Ltd ('Hervet').

(1) a civil construction company, Delplant;

(2) a heavy haulage company called Delplant Haulage Pty Ltd ('Delplant Haulage'); and

(3) a plant hire company called South East Plant Hire Pty Ltd (the 'SEPH Company').

25 Delplant was founded in 1988 and is the company that undertakes the civil construction and maintenance works.

26 Delplant Haulage was formed in the mid-1990s. At the beginning it provided transport services to Delplant. Now over 85% of its transport services are provided to third parties. Its Operations Manager, Michael Collins, has a 20% interest in Delplant Haulage.

27 The SEPH Company supplies plant and equipment to Delplant and Delplant Haulage. The SEPH Company was established in 2019. Previously, the plant hire business was conducted by a partnership between Sean and Pat, called the South East Plant Hire Partnership (the 'SEPH Partnership'). The assets of the SEPH Partnership were sold to the SEPH Company in 2019. The only asset of the SEPH Partnership is an outstanding loan from the SEPH Company for that plant and equipment.

28 In addition, and as is evident from the Delplant chart, the Delplant group (via Delplant) has an interest in a joint venture with Fulton Hogan, which is a large construction infrastructure business, and BECA, which is an engineering group (the 'JV' or 'FHDB'). Delplant has a 29% interest in the JV. The JV commenced in October 2013 when it was awarded a five year contract to undertake infrastructure works for South East Water in the Cardinia/Casey corridor. The contract was then extended by a two-year extension until 1 October 2020. Sean said that the JV has received 'tacit' approval for a further extension of 18 months until April 2021. Sean said the contract currently sits with South East Water's Managing Director and board.

29 There is also a company in the Delplant group called Delplant Properties. Its only asset is the property at 20 Vesper Drive, Narre Warren - the former business premises of the Delplant group - valued at $4-4.5 million (the 'Vesper Drive property').

30 Pat and Sean and their wider family also have interests in land in Botanic Ridge. These interests are set out in Annexure B.

31 Sean gave evidence that the Delaney family bought property in Botanic Ridge both on its own and in conjunction with the Torossi family. Two parcels of land were owned by the Delaney family, namely:

(1) 89 Browns Road, owned by Pat Delaney senior as trustee of the PJD Pastoral Trust (the 'PJD Trust'); and

(2) 99 Browns Road, owned by Derrymore Farm Holdings Pty Ltd as trustee for the Derrymore Farm Holdings trust (the 'DFH Trust').

32 Sean gave evidence that the PJD Trust is a discretionary trust of which Sean and Pat are both beneficiaries. The DFH Trust is a unit trust in which the units are held by Skildale and PDC.

33 Two properties were owned by the Delaney families and the Torossi families, namely at 101 Browns Road and 248 Smiths Lane. As a result of significant disagreements with the Torossi family, a settlement was achieved in 2019. I note that the settlement terms took the form of a heads of agreement dated 19 September 2019 (the 'Leederville HoA'). The Leederville HoA is relevant to this proceeding because it was subsequently used in preparing the HoA on 27 May 2020. In any event, the result of the settlement with the Torossi family was that these two properties were then transferred to Mt Salazie Pastoral Co Pty Ltd and Smiths Lane Pastoral Co. Pty Ltd.

34 None of these four properties (which I will refer to as the 'Botanic Ridge properties') have been developed. Their combined value exceeds $100 million.

35 Sean has been the Managing Director since 1992. As Managing Director, Sean has been and is responsible for the overall business of the Delplant group including administration, finance, tenders and contracts.

36 Pat was the Operations Manager from 1998 until Sean made him redundant on 25 May 2020. Pat is a registered plumber. Prior to establishing the Delplant group, he worked with his father who operated a civil engineering business. As Operations Manager, Pat was responsible for operations and maintenance of the Delplant group.

37 I note in passing that Pat and Sean drew low salaries. For FY 2019 and FY 2020, each claimed a salary of $80,000. It seems likely this was for taxation reasons, which appears of some significance in the structure and operation of the Delplant group. However, until late 2019, each took a monthly advance of distributions of $15,000 per month. I will deal with the circumstances in which these advances ceased further below.

38 Sean's son, James, has been working for the business since 2015. His services are provided via Skildale. James is responsible for managing plant and equipment. James was brought in to support Sean's role. Pat's son, Tom, also works for the business.

39 In addition to the directors, there has been an executive team of the Delplant group since at least 2017. As at 2017, the executive team comprised Steve Clowes, the Construction Manager, Phil Micah, the Construction Manager of the JV, and Tracy Maggs. Ms Maggs left in 2019.

40 The number of staff employed by the Delplant group has varied. In late 2018, it had around 61 full-time staff. In about February 2020, the Delplant group had approximately 40-43 full-time staff.

41 Sean gave evidence that from about 2015 or 2016, he planned to reduce his work hours to 2-3 days a week. He said his decision to scale back his work hours was related to some health issues, in particular, some heart issues. They were not identified in the evidence. No medical reports were tendered. Sean said that in practice he has not been able to achieve a real reduction in his working hours. He said that even when he is not at the office he is on call. However, this evidence is inconsistent with the letter written on his behalf dated 20 September 2019, which records his reduced role as: 'Sean already at .5 and looking to reduce further'. I note that letter was written in the context of Sean's attempts to pay a lower price for Pat's interests in the Delplant group.

42 As I set out above, I found Sean's evidence about the reduction in his involvement and hours working at the Delplant group unconvincing. I do not accept that he was only working .5 FTE (full time equivalent) in September 2019. In my view, his statements at the time were made to assist with the purchase of Pat's interests in the Delplant group for the benefit of Sean and his family. Further, in my view, they were made in a context where Sean's reduction in working hours was likely to have an effect on the value of the business of the Delplant group. This is because the value of the business would need to be determined on the basis that both Pat and Sean would leave soon after any deal was done.

43 Sean and Pat both gave evidence that, from at least 2016, the relationship between them was strained. The reason for this was not really identified in the evidence. Sean said that from 2016 the relationship between Sean and Pat got worse and worse. He said Pat blamed him for everything.

44 Further, from at least 2016, Pat was suffering from health issues. In 2017, he suffered two heart attacks and was subsequently diagnosed with a kidney disease called vasculitis. He gave evidence that the disease is still treated with medication which causes, among other things, mood swings and tiredness. I note that the minutes of a board meeting of Delplant dated 15 August 2017 record that Pat was having 'major surgery' in October 2017 and that post-surgery he would not be performing his role as Operations Manager.

45 Sean said that he was aware that Pat had heart issues. However, he did not have detailed knowledge. He said that whenever he asked Pat would always change the subject to something else.

46 Sean said that, from about 2016, Pat had indicated he wanted out of the business. It is recorded, in part, in an email from Pat to Sean dated 24 March 2016. I note that Pat stated in that email that Sean had forced such a decision on him. Further, in an email dated 28 March 2016, Pat stated that he would be the 'sacrifice'. That was consistent with the evidence Pat gave at trial. On the evidence before me, by 2019, Sean and Pat were not really speaking to each other at work. I accept that evidence. I also accept Sean's evidence that the breakdown of the relation between Sean and Pat was having an impact on key staff who indicated they would find it difficult to continue in the business if the issue between them was not resolved.

47 From at least 2016, there were discussions as to the basis upon which Pat might leave the business. Over time Mr Lidonnici took part in this process on Pat's behalf. Mr Lidonnici had been the accountant for the Delplant group and for both Sean and Pat from about 1996. From about 2014 or 2015, Mr Lidonnici was no longer engaged by some entities in the Delplant group or by Sean and his interests. However, he remained the accountant for Delplant until Sean decided to terminate his remaining engagement by Delplant in mid-July 2019. After that time, Mr Lidonnici continued to advise the Pat interests.

48 Those discussions from 2016 involved consideration of the value of the Delplant group, including plant and equipment, the Vesper Drive property and goodwill. For example, Mr Lidonnici received an email from Sean dated 27 October 2017, which suggested an agreed value for plant and equipment, a valuation of the Vesper Drive property at $2.8 million, and 50% of goodwill at $3.5 million or 25% of profits for 3 years. Sean suggested this would be payable from Delplant as a consultant fee to Pat. This offer was not accepted.

49 For the last 10 years, the bulk of the work of the Delplant group has been undertaken in the growth corridor that exists within the municipalities of Casey and Cardinia. That work constituted 90% of the business of the Delplant group. Sean described this area of greater Melbourne as Delplant's 'sweet point'. Sean used the term 'red 23' to refer to the concentration of the Delplant work in this area. Apparently, that is a reference to former cricketer Shane Warne's favourite gambling number.

50 Most of Delplant's work comes from five major clients, including Winslow, Tarmac, the Brown Property Group, and Lojac Constructions ('Lojac'). These clients comprise 80-90% of the Delplant group's turnover.

51 In early 2019, Mr Lidonnici prepared an estimated value of the business of the Delplant group based upon the financial data of the group for the period from 2009 and 2018. This was prepared for the purpose of discussions for the sale of Pat's interests in the Delplant group, which took place in March and April 2019 between Sean and Mr Lidonnici. Mr Lidonnici provided a copy to Sean in April 2019. There was no allegation that the financial data contained in this document was not accurate. The key financial data was as follows:

Maintainable Net Profit/-Loss before Income Tax

52 As is evident, there was a reduction in turnover and therefore profit in FY 2011 and FY 2012. However, there was a steady increase in turnover and profit from FY 2013 to FY 2018. Relevantly:

(1) the sales within the Delplant group, excluding the JV distribution and Delplant Haulage dividend, exceeded $14,000,000 each year from FY 2013, with sales for FY 2018 of $21,904,318; and

(2) the maintainable net profit for FY 2016 to FY 2018 ranges between $5,600,532 and $6,554,858; and

(3) through the entire period, the profit margin of the business was generally between approximately 20-30%.

53 Thus, in the period for FY 2016 to FY 2018, the profit of the business of the Delplant group was increasing.

54 However, Sean gave evidence that, from early 2019, he became concerned about the future profitability of the Delplant group. Sean said that the profitability of the Delplant business depended upon continuing land sales, in particular, in Cardinia and Casey. If sales dropped, then turnover was likely to decrease in the next two years. This is because it took 18 months to 2 years between the sale of land and the settlement of land. The work of the Delplant group was undertaken during this period after the sale had been made. As a result, he said that often the Delplant group might be busy at that point in time, but have a poor forecast for the future.

55 In this regard, Sean relied upon the program review and other documents he prepared in March 2019, which were circulated to Pat and the executive group by emails in mid-March 2019. Attached to those emails was an adjusted program of Delplant works. Also attached to those emails were tables which noted that land sales were decreasing while prices were increasing. One table prepared by the HIA Economics Group related to a similar situation in FY 2010, following the global financial crisis. Sean said that reduced sales in 2010 resulted in a reduction in Delplant turnover and profit in FY 2011 and FY 2012. Other tables prepared by Core Logic noted decreases in sales but increases in prices in 2018.

56 In his email dated 12 March 2019, Sean referred to this as a 'light globe moment'. He wrote:

'light globe moment' how is it that we are still somewhat busy yet poor forecast? We all know that property market is in the middle of the largest price adjustment since at least 91/92, we are currently busy due to sales locked away (Developer land sales office) dating back to 2017 and still early 2018. Economic analysts predict that the bottom for sales will be later this year, post settlements (how many defaults?) of record lot numbers July to October 2019. Post that land sales s [sic] is predicted to be flat for 2020 and 2021.

New business development, tendering and winning work is our number one priority.

57 These emails were prepared about the time that discussions were taking place between Sean and Mr Lidonnici about the sale of Pat's interests in the Delplant group. Indeed, by an email dated 8 March 2019, Mr Lidonnici requested an offer from Sean based upon Sean's statements that Sean would like Pat out of Delplant. Mr Lidonnici requested a proposal for an '[a]ll in number' for all of Pat's interests in the Delplant group. Sean replied by email dated 19 March 2019, only offering to acquire Pat's interest in the Vesper Drive property. By an email dated 24 March 2019, Mr Lidonnici rejected Sean's offer on Pat's behalf, noting that Pat was looking for an offer for the sale of all of Pat's interests in the Delplant group.

58 It was put by counsel for the defendants that Sean was not truly concerned about the future profitability of the Delplant group at this time and that the statements made by Sean in these emails were very much influenced by Sean's desire to purchase Pat's interests at the least possible price. While I am conscious that these emails were prepared at about the time discussions were taking place about the sale of Pat's interests in the Delplant group, I do not accept that Sean's concerns about the future profitability of the Delplant group were not honestly held. My view in this regard is confirmed by the business records of the Delplant group produced in the second half of 2019 set out below. Further and significantly, the defendants did not put forward any objective contemporaneous documentary or other evidence which would contradict the matters set out in Sean's program review and other documents prepared in mid-March 2019, including the adjusted program of Delplant works.

59 Following this email exchange, there were meetings between Sean and Mr Lidonnici on 29 March 2019 and 3 April 2019. The contents of those meetings are not directly relevant to the issues in dispute in these proceedings. However, it appears that the value of the Delplant group and, in particular, the value of its goodwill was an issue even at this time. For example, Mr Lidonnici's notes of the meeting on 29 March 2019 record, in the context of the issues between Sean and Pat, that:

6. JL [Mr Lidonnici] discussed that Delplant will always have a goodwill value

7. SD [Sean] not prepared to accept to pay Good will [sic] and will start a SD Constructions

60 I have understood the issue referred to in item 7 of these notes to be a reference to Sean leaving the Delplant group to start his own construction company. Further, Mr Lidonnici's notes of the meeting on 3 April 2019 record that:

14. SD [Sean] stated that he wouldn't consider paying for Goodwill after the last best 3 years as it would be a difficult period going forward.

JL [Mr Lidonnici] advised that the history of Delplant speaks for itself, and Delplant will always make money.

SD [Sean] stated that turnover would drop to $12-15M and Delplant will have net profit drop to 10-15%.

JL [Mr Lidonnici] suggested that Delplant would still make at least $2M per year

15. SD [Sean] did not make comment on the $2M profit per annum suggestion.

61 I note in passing that Sean sent an email to Pat and the executive team dated 29 May 2019. It provided an adjusted program of Delplant works to late May 2019. It recorded, among other things, that Delplant was running seven construction crews which included a crew for the JV. It also recorded that:

I expect that prior to Melb Cup our shape will be 6no total crew, 2 x water/gas, 3 x sewer and 1 x FHDB.

...

March industry reports are in and news is that annualised sales are running at circa 5,000 lots PA, industry needs min' 15,000 lots plus PA. ... We are now fully tied to the success within the land sales office.

...

New business development, tendering and winning work is our number one priority. Combination water/gas will be hard to secure, especially for 2 crews in a tight market place, need to secure 'gas only' opportunities.

62 As I have said, there were a series of negotiations between Sean and Mr Lidonnici on behalf of Pat in an attempt to resolve the dispute between Sean and Pat. By mid-2019, Pat had engaged solicitors, Andrew Gray & Associates ('Andrew Gray'), to assist in this process. These negotiations continued in the second half of 2019 and until the HoA was executed on 27 May 2020. These negotiations are most relevant to the claims made by the defendants under the ACL based upon representations as to the financial position of the Delplant group.

63 There are number of issues relating to the ACL claims, in particular for misleading conduct. I will address them in detail in section 10. For present purposes I wish to note them briefly.

64 First, the defendants relied upon 30 separate representations in [22] of the counterclaim, which took place on 10 occasions between 2 September 2019 and 27 May 2020 when the HoA was executed (the 'relevant period'). Many of the 30 representations alleged relate to representations of projected profit and turnover for FY 2020 made at various points during the relevant period (the 'FY 2020 projections').

65 Second, the plaintiffs admitted that many of those representations were made but denied that they were false (or were alleged to be false) or that the defendants relied upon them. As a result, in the following factual sections, I will only make findings about the representations that are not admitted.

66 Third, the alleged falsity of the alleged misrepresentations, as set out in [25] of the counterclaim, is quite limited. It is far less than the scope of the 30 misrepresentations alleged. Paragraph [25] provides that:

The representations were false and untrue in that:-

(a) the nett [sic] profit for year end 30 June 2020 was $5.1 million and not $1.5 million and/or $2.4 million;

(b) turnover was $18.8 million and not $12-14 million;

(c) the work had not dried up as sales revenue for the second half of the financial year ended 30 June 2020 was as a percentage marginally higher than in the corresponding period for year end 30 June 2019;

(d) profit margin was not 7-10% but 27.1%.

67 Fourth, the plaintiffs contended that many of the representations alleged, in particular the FY 2020 projections, related to 'future matters'. However, the defendants did not plead or rely upon s 4(1) of the ACL in seeking to establish the falsity of these representations. The plaintiffs submitted that, as a result, it was not open to make findings of breaches of the ACL in respect of any alleged representations which related to future matters.

68 Fifth and related to the fourth issue, the representations alleged relate to the FY 2020 financial information and projections for turnover, profit and profit margins at particular times during the relevant period. However, the plea of falsity in [25] of the counterclaim and the trial proceeded on the basis that, if the financial information or projection provided was not the same as that in fact achieved for FY 2020, then the relevant FY 2020 projection was false and misleading.[2] That premise is not consistent with liability for misleading and deceptive conduct under the ACL.[3] Indeed, it is the very reason for, and it highlights the significance of, pleading or relying on s 4(1) of the ACL.

69 Sixth and related to the fifth issue, as the alleged representations themselves reveal, updated FY 2020 financial information and projections were provided to the defendants over the course of FY 2020 up until the HoA was executed, as further financial information was available. On the evidence before me set out below, the plaintiffs provided updated financial information in addition to that pleaded and which materially affects the claims made.

70 For example, [25(b)] of the counterclaim alleges that turnover for FY 2020 was '$18.8 million and not $12-14 million'. As set out below, it is alleged in [22(b)(i)] of the counterclaim that the plaintiffs represented in September 2019 that that the turnover for FY 2020 would be $12-15 million. However, there is no dispute on the evidence that the defendants were provided with updated turnover projections of $16.7 million (excluding the JV) in early March 2020. As a matter of common sense and logic, and legal principle, it is difficult to understand how the defendants could rely upon projections provided in September 2019 when updated projections were provided in February and March 2020.

71 I will address the third to sixth issues further in section 10. I will now return to the events giving rise to the claims in this proceeding.

72 By letter dated 27 August 2019, Andrew Gray wrote to Sean, proposing that Sean acquire Pat's interests in the Delplant group for $19,292,752 (the '27 August 2019 letter'). This was on the basis that the Delplant group (comprising Delplant, Mt Salazia Developments, the Mt Salazia Development Unit Trust (the 'Mt Salazia Trust'), Protace Pty Ltd ('Protace'), SEPH, Delplant Haulage and the Vesper Drive property) was valued at $38,585,504. The 27 August 2019 letter noted that, while the affairs of the Delplant group involved a large and complex group of companies and trusts, the majority of Sean's interests were owned by Skildale in its capacity as trustee of the Galway Family Trust, and the majority of Pat's interests were owned by PDC in its capacity as trustee of the Delway Family Trust. A response was requested within 10 days of the date of the letter.

73 Mr Maric replied by letter dated 2 September 2019 (the '2 September 2019 letter'). Mr Maric advised that he did not consider that a value of $38,545,504 was reasonable. The letter stated that that Sean would be 'delighted to sell his 50% interest' in the Delplant group to Pat for $18,292,752, being $1 million less than Pat's offer.

With respect to Delplant Pty Ltd, I do understand there is an untenable daily working relationship between Sean & Patrick with no genuine prospect of reconciliation. Working together in this business, into the future or for much longer is not a viable option for Sean, this was clearly conveyed to Patrick in a meeting on 16 February 2019.

Mr Sean Delaney has indicated that these open tensions have played heavily in the resignation of key personnel of the business, including Alastair Garlick who has already departed and Tracy Maggs who tendered her resignation last week. He also advised that more recently, other key staff have indicated that they will leave the business if these matters are not quickly resolved between the Directors. He conveyed that key staff stated that 'they are tired of being caught up in the middle of these management disputes' and that 'it has become impossible for key staff to complete their job to their best ability with Directors having varying opinions of how serious matters should be dealt with', referring to employee relations, Occupational Health and Safety and the like.

I am also advised that there are no significant contract works scheduled and the volume of activity by the major customers has diminished rapidly with a substantial reduction in income and profit forecast for 2020 FY and beyond. Given the above circumstances I believe a speedy resolution is of paramount importance in order to preserve the value for all shareholders.

Please note, should agreement not be attainable in the near future and given the unworkable nature of their business relationship, the Directors will need to consider a scaling down of operations and an orderly cessation of the business. I expect this will have a detrimental financial impact on all parties.

75 The 2 September 2019 letter is relied upon in [22(a)] of the counterclaim. That paragraph alleges that, by this letter, Mr Maric represented to the solicitors for Pat that Sean, on his own behalf and on behalf of Delplant, had advised:

(i) that due to the tensions between Sean and Pat, key staff had indicated they would leave the business if matters were not resolved quickly between the directors;

(ii) there are no significant contract work scheduled and the volume of activity by the major customers has diminished rapidly, with a substantial reduction in income and profit forecast for 2020 FY and beyond;

(iii) should agreement not be attainable in the near future and given the unworkable nature of their business relationship, the directors will need to consider a scaling down of operations and an orderly cessation of the business.

76 I will refer to these as the '2 September 2019 representations'.

77 In their reply and defence to counterclaim dated 6 August 2020 (the 'reply'), the plaintiffs admitted that the 2 September 2019 letter contained the 2 September 2019 representations.

78 Mr Maric said that the information relating to the Delplant group in the 2 September 2012 letter was provided by Sean. Sean gave evidence that the statements contained in the 2 September 2012 letter reflected the views he held at the time. As to current and future contract work, he gave evidence consistent with his belief set out in section 4.3 above. He also noted that during this period one of Delplant's major customers, Lojac, had been completing two significant projects called Brompton Estate and Pavillion Estate. Although his evidence was not entirely clear, I have concluded that his evidence was to the effect that Delplant had achieved sales to Lojac of $8 million in FY 2019, and that this would reduce significantly in FY 2020 and would reduce further in FY 2021. I generally accept this evidence. Further, the chart of the status of Delplant's top 10 projects attached to an email from Sean to Mr Maric dated 10 September 2019 indicated that, at this time, the Pavillion Estate and Brompton Estate projects were approximately 90% and 60% complete.

79 There was a meeting between Sean, Mr Maric and Mr Lidonnici at the offices of Delplant on 11 September 2019 (the '11 September 2019 meeting'). In [22(b)] of the counterclaim it is alleged that, at this meeting, Sean and Mr Maric represented on behalf of Sean and Delplant that:

(i) Delplant would achieve an annual turnover of $12-15 million for the 2020 financial year;

(ii) profit at best would be $2 million;

(iii) at best, a multiple of three times would be used for the calculation of goodwill;

(iv) good profit margins were over and they would only achieve margins in the range of 7-10% at best.

80 I will refer to these as the '11 September 2019 representations'. In the reply, the plaintiffs denied that these representations were made. As a result, it is necessary to make findings about what was said at this meeting.

81 Prior to the meeting, by email dated 10 September 2019, Sean provided Mr Maric and Mr Lidonnici with information for the meeting relating to projected sales. These included a:

(1) summary of project sales to August 2019 (the 'August project sales summary');

(2) summary of the status of work for each of the key clients of Delplant; and

(3) chart of the status works remaining for the top 10 projects as at September 2019.

82 As to the August project sales summary, Sean gave evidence that he prepared this in early September 2019. This summary excludes sales to the JV. It recorded as follows:

Month by Month Comparison - Calendar Years 2018 - 2019

83 As to the chart of remaining works, it indicated that the majority of projects were at least 75% completed, with only two projects less than 50% completed.

84 On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared. In my view, these contemporaneous documents are consistent with a substantial reduction in sales. Based on the calendar year from January to August 2019, there was a drop in sales of $3,149,251.61 or 20% compared to the previous year. More alarmingly, in June, July and August 2019 there was, on average, a reduction in sales of approximately 36% compared to the same months in the previous year. Unless this reduction was corrected, this would be likely to result in a substantial reduction in the sales and profit forecast for FY 2020.

85 I note at this stage that the information contained in the August project sales summary and subsequent project sales summaries compared the results for each month with the results of the previous year. Sean gave evidence that this was appropriate because the work undertaken by the business was affected by many matters, including the seasons and the time of year. I accept Sean's evidence that it was appropriate to compare the results for a month or period with the results of the same month or period in a previous year.

86 As is evident, the primary purpose of the 11 September 2019 meeting was to discuss the value of the Delplant group for the purposes of Sean purchasing Pat's interests. This was in light of the valuation of $38,585,504 referred to in the 27 August 2019 letter. This involved a consideration of the goodwill of the Delplant group.

87 At the 11 September 2019 meeting, Mr Lidonnici provided Sean and Mr Maric with his estimates of the value of the business to justify the offer contained in the 27 August 2019 letter. His estimate was based on a valuation of the business at two dates: one at 10 April 2019 of $32,019,330, and one at 12 August 2019 of $38,585,504. These valuations included a component of goodwill which was based upon the financial data for FY 2017 to FY 2019. Based on these three years, he calculated a three-year average maintainable net profit of $6,806,926.11. Using a multiple of 3 resulted in a goodwill of $20,420,778. This was included in the valuation as at 12 August 2019. Using a multiple of 2.5 resulted in a goodwill of $17,315.

88 Further, at the 11 September 2019 meeting, Sean produced a copy of the report of Cullen Capital dated 13 November 2007 (the 'Cullen report'), which provided a valuation for the Delplant group at the time Sean and Pat purchased Joseph's interest. It was submitted that this was relevant because it highlighted that goodwill consisted of both personal goodwill, attributable to the combined personal attributes of the directors, and commercial goodwill, which reflected the value of a business in excess of its tangible and identifiable intangible assets minus personal goodwill. Sean stressed that, if he bought Pat out, he would not remain in the Delplant group for long, which meant there was little personal goodwill. I note in passing that a copy of the Cullen report was sent by email by Sean to Mr Maric and Mr Lidonnici on 20 September 2019.

89 Sean prepared handwritten notes of that meeting. Those notes record that:

(1) Sean stated that moving forward sales would be in the range of $1-$1.5 million per calendar month, with a smaller market, increased costs, increased competition and margins under pressure;

(2) in this context, Sean provided copies of the ASIC reports of Jaydo Construction Pty Ltd ('Jaydo') and Califam Constructions Pty Ltd ('Califam'), noting that:

(a) the profits for 2016 and 2017 for Jaydo were 6.07% and 6.96%;

(b) the profits for 2017 and 2018 for Califam were 9.3% and 13.5%; and

(3) discussions then centred on 'FMEs' (future maintainable earnings) for Delplant. They note sales of $14.5 million and a margin of 12-15% with 'JL circa $2m x 3 years'.

90 Mr Lidonnici prepared typed notes based upon handwritten notes taken on that day. As I understood his evidence, it was his practice to prepare handwritten notes during a meeting and often have them typed soon after that meeting. His handwritten notes were not in evidence. The typed notes recorded, among other things:

1. If no resolution, SD [Sean] advised he would liquidate.

2. Delplant has no GW as per previous Valuation done by Cullen Capital - (Valuation to come).

3. Zvonko suggested valuation of goodwill to be all inclusive/no extra for P & E (JL [Mr Lidonnici] advised must have + P & E).

4. SD [Sean] suggested that Delplant will go to industry margins (7%-10%).

5. SD [Sean] not around, will look at putting in management.

6. Zvonko suggested that he has looked at business/construction sales and low multiples, hard to find buyers.

7. Zvonko believes Delplant cannot be valued on past due to work program ahead (no long term works planned).

8. Zvonko advised Delplant will produce $12 - $15M per year and achieve low margins/ say $2M - multiple at best 3x = $6M G/W.

91 The evidence before me was that Sean provided copies of the financial statements of Jaydo and Califam at this meeting. Sean's handwriting appears on the first page of each of these documents. The handwritten notes on the Califam financials record that for 2017 there was a profit of 9.3% and for 2018 there was a profit of 13.5%. The handwritten notes on the Jaydo financials record that for 2016 there was a profit of 6.07% and for 2017 there was a profit of 6.96%.

92 Sean gave evidence that he provided these financial statements to rebut any suggestion that Delplant should be operating in areas other than the Casey/Cardinia area. He said that it showed that the profits outside this area were less than profits within the area. By contrast, Mr Lidonnici gave evidence that these financial statements were provided to show that the maintainable profits of Delplant would be more like the industry margins reflected in these financial statements. Mr Lidonnici gave evidence, consistent with his file note, that Sean said those margins were in the range of 7-10%.

93 Mr Maric gave evidence that Sean presented these financial statements and referred to the percentages recorded on them in Sean's handwriting as examples of industry margins. He said that Sean said Delplant's margins would be difficult to achieve and would not be achieved moving forward in light of competitive pressures. However, he did not give evidence, and it was not put to him, that the range of 7-10% was referred to in the context of industry margins.

94 As to the purpose of which the Jaydo and Califam statements were provided, I prefer the evidence of Mr Maric and Mr Lidonnici. I do not accept the evidence of Sean that these financial statements were provided to rebut any suggestion that Delplant should be operating in areas other than the Casey/Cardinia area.

95 Sean gave evidence that his comments about sales moving forward were not directed at FY 2020 but the future maintainable earnings of Delplant moving into the foreseeable future. He gave evidence that he said that this was in the range of $1.2-1.5 million per month. He said that a future maintainable earnings of $2 million was discussed in this context. However, he acknowledged that this was less than the profit made in the last 10 years.

96 Mr Maric gave evidence that he and Mr Lidonnici agreed that a multiple of 3 would be appropriate. As to the future maintainable earnings figure of $2 million, at first, his evidence in chief suggested this figure may have been suggested by Sean. In cross-examination, he confirmed that he presented the future maintainable earnings figure of $2 million as plausible maintainable earnings going forward in a changed Delplant. This was in the context that Sean expressed his views at the meeting about the difficulty in achieving historic margins and the likelihood of returning to industry margins. However, he noted that future maintainable earnings were not necessarily the same as profit. Mr Maric said that the $2 million was based upon an expectation that the future revenue would be in the order of $15 million. He acknowledged that this was significantly less than the turnover of the previous year. However, this was in a context of calculating future maintainable earnings in light of the current and future prospects of the business of the Delplant group, including Sean and Pat leaving the business.

97 As to the reference to profit margins for Delplant, while Mr Lidonnici's notes suggest that Sean said that Delplant would go to industry margins of 7-10%, Sean denied that he stated at this meeting that profit margins of the Delplant group would go to industry margins of 7-10%. Rather, Sean gave evidence, consistent with his file notes, that a margin of 12-15% was discussed in the context of future maintainable earnings for the purpose of determining the goodwill of the Delplant group. In fact, he said that he initially talked about 13-16% as the appropriate profit margin.

98 Mr Maric gave evidence that, in the context of goodwill, Sean referred to an appropriate profit margin of 12%, 13% or 14%. He gave evidence that he suggested a margin of 11%. This is notwithstanding that Sean's notes refer to a margin of 12-15%. He said this was a professional judgment based upon his assessment of the current and future prospects of the business, including Sean and Pat leaving the business and a new management structure being required which would diminish a significant part of the profits. While I generally accept this evidence, I do not accept he referred to a profit margin of 11% at this meeting. As set out in section 5.3 below, it is the percentage referred to as the 'maintainable net profit' percentage in the letter from Mr Maric to Mr Lidonnici dated 20 September 2019 (the '20 September 2019 letter'). He may have been confused in this regard.

99 Mr Lidonnici gave evidence to the effect that, in his discussions with Mr Maric at the 11 September 2019 meeting, he was 'always talking profit... not an FME'. He said the discussions centred around how bad the Delplant group was going to be in FY 2020 and he was told 'if something can't get resolved, Sean's out'. He gave evidence, in substance, that he was told that, based upon a turnover of $14-15 million and a 7-10% profit margin, profit for the Delplant group for FY 2020 was only going to be $1.5 million.

100 The figure of $1.5 million as the yearly profit is not referred to in the notes of Mr Lidonnici or Sean. Indeed, it is inconsistent with the reference to future maintainable earnings in the notes of both Mr Lidonnici and Sean. Further, when it was put to Mr Lidonnici that if he applied a mid-range of 12-15% to $14.5 million (as set out in Sean's notes) he would achieve a figure of $2 million, he agreed. In cross-examination, Mr Lidonnici also agreed that where his notes refer to '$12-15M per year' he was being told this was for FY 2020 and future years. I note in passing that the figure of $1.5 million as the 'maintainable net profit' is referred to in the subsequent 20 September 2019 letter from Mr Maric.

101 In his evidence, Mr Lidonnici acknowledged that in order to determine future maintainable earnings it would be necessary to consider the profit a business was going to make over the ensuing years of the business in the hands of the purchaser. However, in the case of Delplant, he said the average profit over the past 20 years was $4 million and he could not accept a figure of $2 million. In my view, this evidence strongly suggests that it is more likely than not that a figure of $2 million was discussed at this meeting. This figure is also confirmed by the contemporaneous file notes.

102 Further, Mr Lidonnici acknowledged that they discussed at the meeting that, moving forward, Pat would not be at the Delplant group and Sean said he wanted to reduce his hours. However, he gave evidence that in his view, while this might cause some effect on Delplant's profit and profit margins, it was not going to drop by 40-50%.

103 I found Mr Lidonnici's evidence in relation to these aspects of the 11 September 2019 meeting both unclear and inconsistent with the contemporaneous documents. In my view, his evidence was consistent with his focus on the actual performance of the Delplant group based upon the financial statements which he had analysed for the purpose of the valuation he had prepared for Pat. However, that focus was inconsistent with his file notes and the file notes of Sean which record, in the context of estimating goodwill, future maintainable earnings of $2 million. It is also inconsistent, for the most part, with the evidence of Sean and Mr Maric in relation to these matters. As a result, I generally prefer the evidence of Sean and Mr Maric in relation to these matters.

104 In these circumstances, I have concluded that Mr Maric stated, in the context of calculating a goodwill value and the maintainable profits of the business in circumstances where a new management structure would be required, that, assuming a turnover of $12-15 million per year and a margin of 12%-15%, profit would be in order of $2 million per year which, with a multiple of 3, would result in a goodwill value of $6 million.

105 I have also concluded that Sean stated that Delplant's good profit margins would not be achieved moving forward and would likely return to industry margins in the range of 7-10%. In this regard, I prefer the evidence of Mr Lidonnici in relation to this issue. It is consistent with his file notes and oral evidence. Further, the statement is generally consistent with the handwritten percentages written by Sean on the Jaydo and Califam financial statements. It is also relevant to my finding that it was never directly put to Mr Maric that Sean made statements to this effect. However, my finding only relates to the discussion of the Delplant group in the context of it returning to industry margins in the future, not in the context of discussing goodwill which is the subject of my findings in the previous paragraph.

106 The statements which I have found are not the same as the 11 September 2019 representations. Relevantly, the statements which I have found to have been made by Mr Maric were made in the context of calculating the value of goodwill and the maintainable profits of the business, and not statements of predictions of the turnover, profit and profit margin for FY 2020. It is significant that these representations were made to Mr Lidonnici, who is a qualified accountant. I am not satisfied that a reasonable person in his position would have understood the statements made at this meeting in relation to turnover and profit as projections for FY 2020. Further, the statement which I have found to have been made by Sean was related to a future period and not FY 2020.

107 The evidence of Pat about what he was informed about this meeting was inconsistent. In evidence in chief, Pat gave evidence that Mr Lidonnici reported to him after that meeting what was said about expected net profit, namely that it would be 'in the high tens ... percentage wise' and that turnover would be down to $14 million. He said he was told that things were 'getting grim'. In cross-examination, Pat said his answers related to the 12 March 2020 meeting and that he had no specific recollection about Mr Lidonnici speaking to him about what was said at the 11 September 2019 meeting. Pat then said he recalled that Mr Lidonnici told him that Sean was reporting that things were 'not going very well'.[4] Mr Lidonnici did not give any evidence about what he reported to Pat.

108 After the 11 September 2019 meeting Mr Maric sent the 20 September 2019 letter. In that letter Mr Maric set out Sean's position in relation to the disputed valuation of the Delplant group. The letter addressed a number of different topics, including goodwill, plant and equipment, the JV, Delplant Properties, Delplant Haulage and cash reserves.

109 The letter contained four options for the realisation of the Delplant group, excluding Delplant Haulage, in an annexure. Those options were based upon a market valuation, an offer by Sean, an orderly wind up and/or liquidation.

110 Based upon a market valuation, the annexure stated that the total market value of the assets, excluding Delplant Haulage, was $14,896,235. This included a goodwill of $3,850,000. Based upon Sean's offer, the annexure stated that the total market value of the assets, excluding Delplant Haulage, was $15,796,235. This included a goodwill of $4,500,000. Based upon an orderly wind up or a liquidation, the annexure stated the total market value of the assets, excluding Delplant Haulage, was $10,075,878 and $9,125,878, respectively.

111 Under the heading 'Goodwill', the letter stated:

Please note, over recent years Delplant has enjoyed significant workloads and profits that coincided with the largest residential building boom in the State's history. The subsequent collapse in land sales numbers has had a significant adverse flow on effect to Delplant's current sales and profitability.

You may be aware of the reduced role of the founding directors, Sean already at .5 and looking to reduce further and with Pat exiting. The business faces difficult times re-adjusting, a new structure inclusive of senior executives is required moving forward. With the new structure in mind, it is expected that future profitability of the business would be at a minimum and in line with Delplant's peers. At the moment work in progress is basically 'hand to mouth', currently they have book work through to Christmas, as always business success is linked to the sales office.

Further to the Cullen Capital Valuation dated 13 November 2007 provided to you, where it was identified that the Delplant business has a high degree of personal goodwill (as opposed to commercial goodwill). We believe that still to be the case and diminishing rapidly.

As explained in the meeting, Delplant are at the end of the largest construction cycle the South East corridor has ever experienced and the recent history of profits have evaporated. The realistic projections for 2020 and beyond is significantly lower. I do not believe there is any Goodwill Value in the open market with this economic outlook and current market conditions.

Notwithstanding the above comments and recognising that Sean is the only realistic purchaser of the business, we acknowledge that there is some intrinsic value to him. I believe the best-case goodwill valuation scenario is calculated as follows:

112 In [22(c)] of the counterclaim, it is alleged that by the 20 September 2019 letter, Mr Maric represented on behalf of Sean and Delplant that:

(i) the collapse in land sales numbers has had a significant adverse flow-on effect to Delplant's current sales and profitability;

(ii) the business faces difficult times readjusting, a new structure inclusive of senior executives is required moving forward. With the new structure in mind, it is expected future profitability of the business would be at a minimum and in line with Delplant's peers;

(iii) at the moment, work in progress is basically 'hand to mouth';

(iv) profit projections for the year ended 30 June 2020 is $1,540,000.

113 I will refer to these as the '20 September 2019 representations'. In the reply, the plaintiffs admitted that the 20 September 2019 letter contained representations to the effect set out in [22(c)(i)]-[22(c)(iii)]. They denied that the letter contained the representation set out in [22(c)(iv)]. They alleged that the letter expressed 'the opinion that the best case goodwill valuation scenario should be calculated based on a Maintainable Net Profit of $1,540,000'. This is because of the context in which the statement about profit projections was made, in particular under the heading 'Goodwill'.

114 In this regard, Mr Maric gave evidence that the heading immediately above these figures entitled 'Revenue & Profit Projections For the Year Ended 30/06/2020' was a mistake. He gave evidence in effect that the figures under the heading related to his views about the maintainable base revenue and maintainable net profit expectations over an extended period of time. However, Mr Maric did not subsequently inform Mr Lidonnici of this mistake. Mr Lidonnici was not asked about his understanding of this part of the 20 September 2019 letter. However, he acknowledged that these figures related to maintainable base revenue and maintainable net profits.

115 Pat's evidence was unclear. Initially, he gave evidence that Mr Maric was conveying that the maintainable net profit over future years would be $1.54 million. However, he later gave evidence that he understood it to be referring to FY 2020. I will make findings in relation to the nature of the representation alleged in [22(c)(iv)] and whether that representation was made later in the reasons.

116 Mr Maric gave evidence that the figures entitled 'Revenue & Profit Projections For the Year Ended 30/06/2020' represented his assessment at the time based on the information provided to him by Sean. He was questioned, in particular, about his assessment of 11% and maintainable net profit of $1.54 million in light of previous years' profit. He said it was based on his estimate of future maintainable profits having regard to the business to date, the current state of the business (including that much of the contracted works had been performed) and the fact that going forward it was unlikely that both Sean and Pat would be involved in the business. He said that, if the two key personnel were no longer present, or were present to a reduced degree, the Delplant group would have to recruit senior managers and pay them a significant amount. This is in the context where Pat and Sean drew low salaries as set out in [37] above. I accept that evidence.

117 There was some communication between Sean and Mr Lidonnici between late September and late November 2019. Relevantly, on 18 October 2019, Mr Maric provided Mr Lidonnici with the project sales of Delplant for the period July 2019 to September 2019 (the 'September project sales summary'). Again, it excluded sales to the JV. Like the August project sales summary, it listed the monthly project sales for each month between July 2018 and June 2019 and compared them with the monthly project sales for each month between July 2019 and September 2019. It recorded as follows:

Month by Month Comparison - Financial Year 2019-20

118 A copy of this document and the 'Delplant AR Sales Reports' for the months of August and September 2019 were provided to Pat on 21 October 2019. On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared. In my view, these contemporaneous documents are consistent with a substantial reduction in sales, in particular, in July, August and September 2019 compared to 2018 of $2,445,357.58 or 37%. Once again, unless this reduction was corrected, this would be likely to result in a substantial reduction in the sales and profit forecast for FY 2020. Further, I note that the September project sales summary increased the actual sales figure for August 2019 from $1,001,434.89 (as included in the August project sales summary) to $1,429,896.23. Thus, updated figures, whether good or bad, were being provided.

119 In early November 2019, Sean determined to retain Mr Maric to act on behalf of a number of companies in the Delplant group: Delplant, Mt Salazia Developments, Protace, Delplant Properties and Hervet. Sean gave evidence that this appointment was in some way interim. This was not evident from any documents tendered. Nor was it suggested by Mr Maric in his evidence that the engagement of his firm to provide accounting services to these companies was in any way on an interim basis.

120 On 2 December 2019, Sean circulated by email to Pat and the executive team an adjusted program of works to 22 December 2019. The email recorded that:

... ATM Delplant is still running 7no construction crews. At this stage we should expect to reduce to 5no construction crews prior to the end of January

...

The work we have is all that we have, no tenders to speak of. We were unsuccessful with internal works at Balcon. Note we have had a golden run, especially given we still have work today, the reality now is that that work has dried up

New business development, tendering and winning work is our number one priority. Land development won't turnaround until lot prices substantially fall further, our works program is directly linked to success at the land sales office.

121 On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared. No contemporaneous documents indicating to the contrary were tendered. However, I note that the number of construction crews operating at this time was better than expected in Sean's email dated 29 May 2019, which forecasted that prior to the Melbourne Cup there would only be a total of six crews.

122 By email dated 4 December 2019 (the '4 December 2019 email'), Mr Maric sent Delplant's income statement for the period to 30 September 2019 (the 'September 2019 income statement') to Pat and Mr Lidonnici. A summary of the key findings was contained in the email. The email provided:

Overall for every $ of revenue reduction in FY2020 there has been an 85% loss in profitability.

Sean has advised that the full impact is yet to arrive as much of the YTD revenues are still 'run-off' sales from older projects.

The market has cooled off significantly, so the pricing & margins have to be very competitive going forward.

I strongly recommend an urgent Directors meeting pre-Christmas to work out the 2020 business strategy in light of bleak business conditions & prospects for Delplant Pty Ltd.

As you know, dysfunctional management will only further exacerbate the potential business distress in this economic climate, alternate plans need to be considered!!

123 In [22(d)] of the counterclaim, it is alleged that by the 4 December 2019 email, Mr Maric represented on behalf of Sean and Delplant that:

(i) sales were down by 30%;

(ii) profit margins down 20%;

(iii) there has been an 85% loss in profitability;

(iv) costs are increasing;

(v) the full impact is yet to arrive as much of the YTD revenues are still run-off sales from older projects;

(vi) there were bleak business conditions and prospects for Delplant Pty Ltd.

124 I will refer to these as the '4 December 2019 representations'. In the reply, the plaintiffs admitted that the 4 December 2019 email contained all these statements, save for the one in [22(d)(ii)]. In relation to that paragraph, they pleaded that the 4 December 2019 email contained a statement that profit margins were down 14%, not 20%. In final submissions, counsel for the defendants conceded this error. Thus, there is now no dispute about whether the representations in the 4 December 2019 email were made, and I will proceed on the basis that the percentage figure in [22(d)(ii)] is 14% and not 20%.

125 On the evidence before me, the statements made in the 4 December 2019 email were based upon the information in the attachments and other information Mr Maric had been provided by Sean. The statements reflected Mr Maric's views based upon his assessment of the September 2019 quarter. As to future work or contracts, Sean gave evidence that, consistent with his concerns from about early to mid-2019, at this time there were few future contracts or future bookings.

126 The information contained in the September 2019 income statement is consistent with the summary contained in the 4 December 2019 email. The September 2019 income statement set out, for each calendar month between July 2018 and September 2019, the sales revenue, net profit and net profit as a percentage of sales. At the conclusion of the document, it also included distributions received from the JV.

127 Relevantly, it recorded for the months of July, August and September 2019:

(1) the sales revenue, including sales to the JV, was in the order of $4,860,000;

(2) the net profit, including sales to the JV but excluding JV distributions, was $963,392, resulting in a profit margin of 19.8%; and

(3) the adjusted net profit was $887,260 (this results in a profit margin of 18.25% as recorded in the 4 December 2019 email).

128 The September 2019 income statement recorded that for July, August and September 2018, the net profit was in the order of $2.63 million, with a profit margin ranging between 32% and 42.8%. It also recorded that for FY 2019, the net profit, excluding JV distributions, was $7,772,178, with a profit margin of 31.9%. After including JV distributions, the net profit for FY 2019 was $8,062,178, with a profit margin of 33.1%. On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared. Further, it is generally consistent with the September project sales summary referred to at [117] above after taking into account the differences caused by the sales to the JV.

129 As to the statement in the 4 December 2019 email that there had been an '85% loss in profitability', Mr Maric gave evidence that this was based upon the fact that sales had dropped by $2 million in the September quarter and net profit had dropped $1.7 million, so that for every dollar of lost revenue there was an 85 cent drop in profit. I accept this evidence. This is in a context where the 4 December 2019 email recorded that profit margins were down by 14%.

130 There was a directors meeting of Delplant on 9 December 2019 (the '9 December 2019 board meeting'). This was attended by Sean, Pat and James. The agenda for the meeting records that the items for discussion included:

(1) the substantial reduction in forward works and future opportunities with likely field redundancies in the first quarter of 2020;

(2) the toxic relationship between the directors was apparent to those inside and outside the business; and

(3) verbal abuse complaints.

131 The evidence before me was that these issues were discussed at the 9 December 2019 board meeting. Minutes were prepared and were the subject of the next directors meeting on 10 March 2020 (the '10 March 2020 board meeting'). There was a dispute at the 10 March 2020 board meeting whether the draft minutes reflected the conversation that in fact occurred at the 9 December 2019 board meeting. However, I understood that dispute to relate to the details of the matters recorded, rather than the substance of the issues discussed. Relevantly, I am satisfied that the current and future work of the Delplant group and the relationship between Sean and Pat and its effect on the business of the Delplant group were discussed.

132 As to the relationship between Sean and Pat, the minutes record that that relationship was 'destroying the business ... Somethings needs [sic] to change'. The minutes record that the verbal abuse complaints were also discussed. Sean gave evidence that one of the clients of Delplant came to Delplant's office looking for James. He spoke to Pat and Pat said that James is 'down there sucking his dad's cock'.[5]

133 There was also in evidence a copy of the agenda for the 9 December 2019 board meeting with handwritten notes of Sean. In relation to the heading 'verbal abuse complaints', Sean noted that 'Pat doesn't really deny'. Those notes also record, among other things, that:

(1) there was a substantial drop off of works in the first quarter of FY 2020; and

(2) as to the item relating to the toxic relationship between directors, Pat chanted at the meeting 'I don't like you, I can't stand you'.

134 Further, there is in evidence James's handwritten notes of that meeting. They record that there was a substantial reduction in work. It included a note 'Toxic relationship - somethings needs [sic] to change!!'.

135 In all these circumstances, it suffices to say that I am satisfied that the relationship between Sean and Pat at this stage had irretrievably broken down and was very destructive to the business of the Delplant group and the morale of the staff.

136 There was also evidence before me that the directors discussed the cessation of the monthly payment of $15,000 (either as advances of distributions or dividends) to each of Sean and Pat. Pat gave evidence that Sean had unilaterally determined to cease these payments in the second half of 2019. He gave evidence that this was discussed at the 9 December 2019 board meeting, where Pat and Sean agreed to the continuous cessation of these payments in circumstances where Sean had already ceased the payments. I accept that evidence.

137 Further, at the 9 December 2019 directors meeting, Sean handed to James and Pat an updated Delplant project sales summary, which included the figures to November 2019 excluding sales to the JV (the 'November project sales summary'). It recorded:

Month by Month Comparison - Financial Year 2019-20

138 Further, the November project sales summary stated as follows

First 3 Months of FY20 (July, Aug, Sept) are down $2.445m OR 37%

First 5 months of FY20 (July to Nov) are down $3.251m OR 29%

At the moment, forecast project sales for last 7 months of FY2020 is $7m. Therefore projected sales for year is $14.9m V $22.55m for FY19 (down $7.65m or 33.9%)

139 On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared. Further, I have formed the view that the information contained in the November project sales summary was generally consistent with the 4 December 2019 email and the September 2019 income statement. In my view, all these contemporaneous documents are consistent with a substantial reduction in sales, profit and profit margin from July 2019 to November 2019 compared to the same period in 2018.

140 Mr Maric sent a letter to Pat and Pat's wife, Kathryn, dated 20 December 2019 (the '20 December 2019 letter'). It contained an offer to acquire Pat's interests in the Delplant group on the basis that Pat retained the Vesper Drive property. It estimated the maximum net market value as at 31 December 2019 of all the entities within the group at $17,650,000. As a result, it valued Pat's share at $8,825,000. On the basis that he retained the Vesper Drive property with a value of $4,500,000, Sean offered to pay Pat $4,325,000 in cash. A further sum of $150,000 was offered to cover all other employee entitlements.

141 The 20 December 2019 letter noted that the settlement would involve the acquisition of Pat's units in the Mt Salazia Trust, the acquisition of the shares and loan equity in the SEPH Company and appropriate trade restraints and confidentiality agreements.

142 The 20 December 2019 letter referred to the fact that Pat had consistently 'wanted out' since 2015. It noted that Sean conveyed to Pat in a meeting in February 2019 that both the relationship and the business was no longer a viable option for him. It also noted that Sean was taking extended personal leave when he returned from upcoming leave on the advice of his doctor. It also attached the draft financial statements for FY 2019 for the Delplant group. It recommended that Pat seek professional advice to better understand the nature of the offer.

143 The offer in the 20 December 2019 letter was only open for a limited period of time, namely until 3pm on 31 December 2019. The letter stated:

Please note, should agreement not be attainable by 31st December 2019 and given the unworkable nature of their business relationship, the Directors will need to consider appointing a Receiver Manager and an orderly cessation of the business. I expect this will have a detrimental financial impact on all stakeholders, none more so than loyal Delplant staff and their families.

144 The draft accounts for Delplant for FY 2019 recorded, among other things, that the profit before income tax was $8,064,026 (compared to a profit before income tax in FY 2018 of $7,201,785).

145 Pat replied by email dated 24 December 2019 to Mr Maric, advising that he was not in a position to reply to the offer until he could receive professional advice in mid-January 2020. Mr Maric replied by letter dated 6 January 2020, extending the offer until 3pm on 10 January 2020. The letter advised that some urgency and attention was necessary given the breakdown and volatility within the business, including the breakdown of trust between Sean, James and Pat.

146 Andrew Gray wrote a letter to Mr Maric dated 10 January 2020. In that letter, Andrew Gray rejected the offer contained in the 20 December 2019 letter. Further, Andrew Gray addressed a number of issues leading up to that offer. This included Mr Lidonnici's attempts to provide a rationale for the valuation contained in the 27 August 2019 letter at the 11 September 2019 meeting.

147 Further, it threatened oppression proceedings against Sean in the conduct of the Delplant group, including:

(1) by not consulting with or seeking the approval of Pat as a director in relation to a number of Delplant business decisions;

(2) relocating the offices of Delplant from the Vesper Drive property to a property owned by interests associated with Sean in circumstances where there was no written lease;

(3) the unilateral cessation of payments made to each of the directors of the trustee of the Mt Salazia Trust in the sum of $15,000 per month; and

(4) failing to provide access to information regarding the operations of the Delplant group.

148 Mr Gray's letter also highlighted the breakdown of the relationship, and the lack of trust, between Sean and his advisers on the one hand and Pat and his advisers on the other. The letter relevantly provided:

Allegations of collapses in land sales numbers and 'hand to mouth' work in progress in relation to Delplant Pty Ltd which cannot be sustained as current workload indicates that such allegations could not be further from the truth and do not support epithets such as the 'recent history of profits (of Delplant) have evaporated' ...

Whether it is on your instructions or otherwise, the content of your letter of 20 December 2019 reflects a marked lack of reality. Based on draft financial statements for 2019, your 'estimate' the 'Delplant Group maximum net market value as at 31 December 2019 to be approximately $17,650,000.00'. There is an obvious and yawning gap between the proposition put in our letter of 27 August 2019 whereby our client values the Delplant entities at $38,585,504.00 and your estimate. No attempt is made in your 20 December letter to reconcile or deal with the significant disparity between Mr Lidonnici's calculations which have been explained to you on a rational basis and, your estimate ...

Further, the assertion in your letter of 20 December suggesting that 'the directors will need to consider appointing a receiver manager and an orderly cessation of business' is nothing short to errant nonsense. ... Such measures, can only be described as unrealistic for an enterprise of the nature of Delplant Pty Ltd which is far from struggling and has some 56 employees.

149 At the time that this letter was sent, Sean was on holidays in North America. Mr Maric liaised with Sean during this period over the phone. Mr Maric drafted a letter in response dated 10 January 2020 (the '10 January 2020 letter'). Sean did not recall seeing a draft of this letter. Mr Maric gave evidence to the effect that he did not send any letter without Sean's approval. I accept that evidence. As a result, I have concluded that, even if Sean did not see a draft of the letter, he approved all of its contents before it was sent.

150 In the 10 January 2020 letter, Mr Maric advised that the offer in the 20 December 2019 letter was Sean's final offer. Mr Maric noted that historical performance of the Delplant group was largely irrelevant to determine its current market value. He noted that both himself and Sean fundamentally disagreed with Pat's goodwill estimation. The 10 January 2020 letter then addressed the 'present reality' of the business as follows:

For your information, the present reality of the Delplant Business is as follows:

1. First Quarter 2020FY, project sales down 30% and profit down 66% on the corresponding period for 2019FY.

2. First 6 months 2020FY, project sales down 29% on the corresponding period for 2019FY.

3. the 2020FY Sales are projected to be $14.7m down from $24.4m, whilst;

4. the 2020FY Net Profit is expected to be $2.4m down from $8.1m.

151 The letter recorded that the September 2019 valuation provided by Mr Lidonnici at the 11 September 2019 meeting (which was attached to the 10 January 2020 letter) did not reflect current market value. Further, it noted that in the meeting on 11 September 2019, Mr Lidonnici conceded that the goodwill figure was in the order of $6 million. The letter continued:

Presently the situation that exists is one where the two directors (100% jointly owners) are unable and not prepared to work together to manage the Delplant business. This is clearly evident to parties other than Pat and Sean. If the parties are unable to resolve matters between themselves in the very near future (next 2 weeks) then the business must explore all options available to it. Most importantly, the first thing to do would be to brief staff of the breakdown of the relationship.

152 In [22(e)] of the counterclaim, the defendants alleged that the 10 January 2020 letter contained the following representations:

(i) for the first quarter 2020 FY, project sales were down 30% and profit down 66% on the corresponding period for 2019 FY;

(ii) for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY;

(iii) the 2020 FY sales are projected to be $14.7 million, down from 24.4 million;

(iv) the 2020 FY nett [sic] profit is expected to be $2.4 million down from $8.1 million.

153 I will refer to these as the '10 January 2020 representations'. In the reply, the plaintiffs admitted that the 10 January 2020 letter contained these representations.

154 On the evidence before me, Mr Maric drafted the 10 January 2020 letter on the basis of financial information available to him at the time, including the financial statements for the September 2019 quarter and the November project sales summary. He gave evidence that those statements reflected his views at the time.

155 I note in passing that it was put to Mr Maric on this and other occasions that, if one just multiplies the result of one quarter by four, one can get the likely annual result. Mr Maric did not agree with the assumption that one quarter would be the same as all other quarters, particularly given this was a business related to land development. He said that, to his knowledge, much of Delplant's revenue was made in the first six months. I accept that evidence, which was generally consistent with Sean's evidence that the work of the business was affected by the seasons and the time of the year set out in [85] above.

156 I note at this stage that the statements in the 10 January 2020 letter relating to the performance in the first quarter of FY 2020 were consistent with the 4 December 2019 email and the September 2019 income statement. The statements relating to the performance for the first six months of FY 2020 are consistent with the sales for October and November 2019 recorded in the November project sales summary, and for December 2019 recorded in the Delplant project sales summary for the period July 2019 to February 2020, which I address further in section 6.3 below. The statement that the projected sales for FY 2020 was to be $14.7 million is generally consistent with the November project sales summary, which recorded projected FY 2020 sales of $14.9 million. Sean gave evidence that this was accurate at the time.

157 As to the projected net profit for FY 2020 of $2.4 million, Mr Maric gave evidence that it was an estimate based upon the September 2019 quarter data that had a 65% drop in profit from the same quarter in the preceding year. When challenged in cross-examination, he maintained that estimate based upon the information available to him at the time. I accept that evidence.

158 I note that, in cross-examination, Sean appeared to concede that the projected FY 2020 net profit of $2.4 million was inaccurate and should rather have been $2.9 million. This was on the basis of estimated margins based upon projected sales of $14.7 or $15 million. However, he then said this related to operating margins on project sales, not net profit. I have carefully considered Sean's evidence in this regard. While his evidence at times was confusing, I am not satisfied that he intended to acknowledge that the projected FY 2020 net profit referred to in the 10 January 2020 letter was inaccurate at the time of the 10 January 2020 letter.

159 By letter dated 13 January 2020, Andrew Gray advised that the offer in the 20 December 2019 letter was not acceptable. Mr Maric replied on 14 January 2020. In that letter, Mr Maric conveyed that Sean would be prepared to sell his 50% interest in the Delplant group for $19,292,752, being half of the September 2019 valuation which Mr Lidonnici provided at the 11 September 2019 meeting. The offer was open until 3pm on 17 January 2020.

160 In that letter, Mr Maric also stated that Andrew Gray's response appeared 'to have overlooked the dire situation the Delplant business is currently in, a situation where the two directors responsible for effectively running of the Delplant business are unable to communicate and/or work together in any capacity. It is evident that an immediate solution is of paramount importance'. The letter continued '[i]n simple terms, Sean is ambivalent as to whether he stays or leaves the Delplant business, but either way, he wants to sever all ties with Pat'.

161 Andrew Gray replied by letter on 16 January 2020 declining that offer.

162 I note that on 29 January 2020, Sean sent an email to Pat advising that James had recently advised that he will no longer work with Pat. The email noted 'very poor unacceptable behaviour to your [Pat's] nephew and co-worker'. It noted that from 10 February 2020, James would only be available for Delplant work on Tuesday, Wednesday and Friday and, wherever practical, James would avoid getting involved with Delplant operations and field staff in an attempt to avoid conflict with Pat.

163 In late January or early February 2020, Sean retained Mr Allen of McKenzie Allen Lawyers ('McKenzie Allen') to act on his behalf in the dispute with Pat. At this time, Pat appointed Mr Darling of MW Law ('MWL') to act on his behalf in the dispute with Sean in lieu of Andrew Gray.

164 On 6 February 2020, MWL wrote to McKenzie Allen in relation to the dispute. MWL proposed further discussions regarding a way forward to address the concerns of both Pat and Sean. The letter noted that MWL had been retained, among other things, to obtain answers to various matters and concerns previously raised by Pat, to ensure either preservation or optimisation of the business value, and to identify a pathway to address and resolve the competing commercial interests of their respective clients with a view to a final commercial solution between them. The letter recorded that the present status quo was 'not workable, whether as shareholders, directors, or business owners. Some things therefore do need to change, with or without the threat of litigation, liquidation or closure all being in play'.

165 As a consequence, there was an email exchange between Mr Maric and Mr Lidonnici in mid-February 2020. This also related to the possibility of resolving the dispute between Sean and Pat. In an email dated 14 February 2020 from Mr Maric to Mr Lidonnici, Mr Maric stated that '[a]n indication of where Pat is at in terms of goodwill value would be beneficial to facilitate a solution, the rest is relatively easy. I'm certain you & I can work out the rest from there'.

166 On 24 February 2020, McKenzie Allen wrote to MWL with a revised offer to purchase Pat's interests in the Delplant group (the '24 February 2020 letter'). The 24 February 2020 letter noted that Sean believed that there were only three available outcomes, namely:

a. Your client buys out our client (our client has made an offer on this).

1. Our client buys out your client (again our client has made an offer on this).

1. There be an orderly shutdown and closure of the company and associated entities.

167 The 24 February 2020 letter referred to previous correspondence between the parties between 27 August 2019 and 16 January 2020. It also referred to the current situation of the business, noting there was 'no trust, respect or communication between the owners of this business'. That statement was not challenged in this proceeding. I have formed the view that the relationship of trust between Sean and Pat had broken down by, at the latest, mid-2019.

168 The 24 February 2020 letter noted that Sean and key executive management were no longer prepared to work in the current environment. Further, it stated that Pat had difficulty reconciling his positions as a director and as an employee in his role as Operations Manager. It listed a number of examples where Pat had failed to meet his employment responsibilities, including by using inappropriate language and abusive actions, failing to follow and enforce company procedures and failing to follow reasonable direction of higher management.

169 The letter then disputed any allegations of oppression on the part of Sean in some detail. In the context of staff, the letter stated:

Your client continues to ignore that the retention of key staff has being an ongoing discussion point between the Directors and has on numerous occasions been highlighted as a threat to the on-going sustainability of the business. Your client ignores that the retention of key staff is essential to the on-going success of a business. Since mid-2017 the business has lost the following key staff:

• Alastair Garlick, Construction Manager: 12 years' service

• Paul Bennett, Company Accountant: 12 years' service

• Tracy Maggs, Executive Assistant/Office Manager: 22 years' service

• Camille Tillotson, Accounts Payable Officer: 2 years' service

170 The 24 February 2020 letter suggested a way forward. It contained one 'final offer' as follows:

1. Our client shall acquire your clients' interests in the Delplant Group for a cash payment of $9,000,000.00.

2. So there is no misunderstanding, the assets to be acquired are:

a. Your clients' total interests in Mt Salazia Development Trust

b. Your clients' interest in Delplant Haulage Pty Ltd

c. Your clients' shares in Hervet Pty Ltd.

1. Your clients' interests (loan and equity) in South East Plant Hire Pty Ltd on the basis South East Plant Hire Partnership no longer exists.

e. Your clients interest in Delplant Properties Trust and its assets.

1. Patrick Delaney and/or his associates resign as Directors and company secretary of Delplant Pty Ltd, Delplant Properties Pty Ltd, Hervet Pty Ltd, Protace Pty Ltd, South East Plant Hire Pty Ltd Mt Salazia Developments Pty Ltd, Trenchbox Pty Ltd and any other associated and relevant company's [sic].
2. Your client resigns his employment position immediately and his employment entitlements including long service leave and a redundancy component are included in the offer

h. Mutual releases to be made between the parties.

3. Upon acceptance there would be accounting and taxation implications that it is proposed would be settled by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties inclusive of Beneficiary, Unitholder and Shareholder loans.

171 The offer was open for acceptance until close of business on 27 February 2020. The 24 February 2020 letter continued:

We are instructed, the personal risk in maintaining a relationship with your client in a high risk construction environment is no longer acceptable to my client. This is on top of the current toxic environment between directors that has been ongoing for too long (greater than 12 months) and is a disaster in waiting, the 'status quo' is not acceptable.

We are further instructed that if this offer is not acceptable to your client & no other agreement is reached; our client will have no choice but to move ahead swiftly with 'option c'. Once our client publicly announces his future plans he will have no further interest in acquiring your clients interest in the abovementioned entities.

172 The 24 February 2020 letter also attached the financial statements of Delplant, Protace, Mt Salazia Developments, Delplant Properties and Hervet for FY 2019. I note that the balance sheet of Delplant records the provision of long service leave for FY 2018 of $119,393 and for FY 2019 of $178,845. The financial statements also record for FY 2019 the following beneficiary loans:

(a) for Mt Salazia Developments, a liability apparently owed to beneficiaries of $2,342,884;

(b) for Hervet, a liability apparently owed by the beneficiaries of $4,247,936;[6] and

(c) for Delplant Properties, a liability apparently owed to beneficiaries of $3,796.

173 In addition, the financial statements also record unpaid trust distributions for Mt Salazia Developments and Delplant Properties, and retained earnings for Delplant, Mt Salazia Developments, Protace and Hervet.[7]

174 In [22(f)] of the counterclaim, it is alleged that by the 24 February 2020 letter, McKenzie Allen represented on behalf of Sean and Delplant that:

(i) unless an offer of $9 million was accepted, then Sean would swiftly move to an orderly shutdown and closure of the company and its associated entities;

(ii) key executive management are no longer prepared to work in an environment where the two directors are unable to work together in any capacity.

175 I will refer to these as the '24 February 2020 representations' In the reply, the plaintiffs admitted that the 24 February 2020 letter contained these representations.

176 I note that, on 26 February 2020, Mr Maric sent further financial information about the Delplant group to Mr Lidonnici, including the balance sheet as at 31 December 2019 and the income statement as at December 2019 (the 'December 2019 income statement'). Mr Maric said these were provided in the context of the dispute. In the covering email attaching the December 2019 income statement, Mr Maric noted that for the six months ending 31 December 2019 the net profit was $2,097,647 and the net profit after tax was $1,520,000. This did not include distributions from the JV.

177 Relevantly, the December 2019 income statement recorded, for the months of July to December 2019:

(1) the sales revenue, including sales to the JV, was in the order of $9,809,797;

(2) the net profit, including sales to the JV but excluding JV distributions, was $2,091,637, resulting in a profit margin of 21.3%; and

(3) the net profit after income tax was $1,520,400.

178 On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared.

179 The December 2019 income statement would indicate that there was likely to be a significant improvement on the estimates for sales, turnover and net profit, compared to that expressed in the 10 January 2020 letter, in particular, the net profit was likely to be more than $2.4 million. This is because the December 2019 income statement recorded that, for the six months to 31 December 2019, the net profit, including sales to the JV but excluding JV distributions, was $2,091,637. In my view, this evidences that the plaintiffs and their advisers were providing updated financial information so that the defendants and their accounting advisers could reach an informed view of the financial position of Delplant for the purpose of any negotiations in respect of the sale. Pat gave evidence that Mr Lidonnici provided him with this information from Mr Maric.

180 MWL wrote a letter to McKenzie Allen dated 3 March 2020. It referred to the 24 February 2020 letter. It noted that MWL had sought a 'mud map of the organisational terrain', i.e. the Delplant group. It noted the provision of the financials through to June 2019, but not for the intervening period since then. The letter continued:

To enable us to be fully informed of the matter, we then requested of you, current, year to date financials. Whilst initially considered, our request was subsequently turned down, with the suggestion made that we should instead revert to Pat Delaney's accountant concerning our information requests. With respect, we find this behaviour somewhat bizarre in circumstances where it is your client (and his accountant) who are in effective control of the financial records, not our client.

181 In the letter, MWL suggested an independent valuer be appointed by both Sean and Pat to determine the value of the Delplant group with submissions and/or supporting information by each of them. I am unsure if there was a formal response to this letter. On the evidence before me, Sean was not agreeable to the appointment of an independent valuer.

182 On 4 March 2020, Sean called a meeting of the directors of Delplant to be held on 10 March 2020 at the offices of Mr Maric (i.e. the 10 March 2020 board meeting). The agenda items included:

(1) approval of the FY 2019 financial accounts;

(2) fixing the remuneration of the Managing Director;

(3) fixing the contract rates of Skildale (in effect the rates at which James was paid); and

(4) the future of the company going forward.

183 Pat was in Thailand in early March 2020. It was necessary for him to cut short his visit to Thailand to attend this meeting. He sent an email to Mr Darling and Mr Lidonnici dated 4 March 2020 noting the short notice, that there were no minutes of the 9 December 2019 board meeting, and that the only real issue for discussion related to the remuneration of Sean and James. Pat noted that he was doing 60 hours per week while Sean was only doing 20 hours per week. It also expressed the view that Pat was unsure why the meeting was being held at Mr Maric's offices.

184 There are no formal minutes of the 10 March 2020 board meeting. On the evidence before me, the financial accounts for FY 2019 were not approved at that meeting. Further, issues relating to Sean's remuneration as Managing Director and the contract rates of Skildale (for James' services) were not discussed. Further, the directors were unable to agree on the minutes of the 9 December 2019 board meeting as Pat raised a number of issues in relation to them.

185 However, the evidence before me is that, at that meeting, Sean provided to Pat the updated Delplant project sales summary for the period July 2019 to February 2020 excluding sales to the JV (the 'February project sales summary'). It recorded:

Month by Month Comparison - Financial Year 2019-20

186 Further, the February project sales summary contained the following statements:

First 6 months of FY20 (July to Dec) are down $3.489m OR 29%

At the moment, forecast project sales for last 4 months of FY2020 is $4.85m. Therefore projected sales for year is $16.7m V $22.55m for FY19 (down $6m or 26.61%)

187 At the 10 March 2020 board meeting, Sean also provided Pat with a chart of the works remaining for the top 10 projects for FY 2018-2019, updated as at 10 March 2020. Seven of these 10 projects were completed or 98% completed. There were two projects with 60% and 55% remaining to be completed and one project, Brompton, with 30% to be completed. However, it says nothing about the projects for FY 2019-2020.

188 On the evidence before me, I have no reason to doubt the accuracy of the information contained in these documents at the time they were prepared. The financial information contained in these documents differs from the financial information set out in the 10 January 2020 letter. In particular, the projected FY 2020 sales increased from $14.7 million in the 10 January 2020 letter to $16.7 million in the February project sales summary. This no doubt would have had an effect on the projected net profit and net profit margin. Sean gave evidence, which was not challenged, that the projected profit margin based on these projected sales was in the order of 18-20%. Further, it records that sales for January 2020 were up 27.38% compared to January 2019.

189 Once again, in my view, this evidences that the plaintiffs and their advisers were providing updated financial information so that the defendants and their accounting advisers could reach an informed view of the financial position of Delplant for the purpose of any negotiations in respect of the sale. Pat acknowledged in his evidence that he was given both these documents. Mr Lidonnici also acknowledged he received these documents from Pat at about this time.

190 I note that there is in evidence handwritten notes of Sean of the 10 March 2020 board meeting. Those notes record that Sean advised of a significant decline in sales and corresponding profit. It noted that Pat was still to review the FY 2019 financial accounts and would return them to Mr Maric. As to the future of the company, the notes record, among other things:

PAT SAYS IT (DEAL) NEEDS TO BE EVERYTHING INCLUDING LAND DEVELOPMENT PROJECTS.

...

PAT TO GET JL TO CONTACT ZM,

...

SD ADVISED THAT PAT IS NOT UP TO SPEED IN REGARDS HIS DUTIES AS OPERATIONAL MANAGER. (DEFICIENT)

191 There is also in evidence the handwritten notes of James. They relevantly record:

Pat wants independent valuation - accept the call whatever it is.

Zvonko - company engage a valuer. A reality check

*ZM and JL to talk valuations* - JL to call ZM.

- JL was strung out by A.G.

Sean wont be in business with Pat come 1/7/2020.

192 Further, Mr Maric gave evidence that the document headed 'DELPLANT PTY LTD - SAME PERIOD COMPARISON (6 MONTHS)' was produced at the 10 March 2020 board meeting (the 'comparison chart'). In any event, the comparison chart was emailed by Mr Lidonnici to Pat on 11 March 2020. It is not clear who prepared this document.

193 Relevantly, the comparison chart set out the financial performance of the Delplant group (including the JV) for each six month period to 30 June 2017, 31 December 2017, 30 June 2018, 31 December 2018, 30 June 2019 and 31 December 2019. First, it recorded that the sales revenue for the six months to 31 December 2019 was $9,809,797, which was consistent with the sales revenue in the December 2019 income statement. This is compared to sales revenue for the six months to 31 December 2018 of $12,818,220, with the result that there was a drop of approximately 30% in sales revenue from the equivalent period in 2018. Second, it recorded the net income before tax for the six months to 31 December 2018 was $4,903,702 (including distributions from the JV), resulting in a net income percentage of 38.26%. By contrast, the net income before tax for the six months to 31 December 2019 was $2,176,629 (with no distributions from the JV), resulting in a net income percentage of 22.19%. Third, that net income percentage before tax was the lowest for any six month period recorded on the comparison chart, with the second lowest being for the 6 months to June 2019 of 27.29%.

194 The 2019 figures on this comparison chart were also generally consistent with the December 2019 income statement. As a result, on the evidence before me, I have no reason to doubt the accuracy of the information contained in the comparison chart at the time it was prepared.

195 There was a meeting between Mr Maric and Mr Lidonnici shortly after the directors meeting on 12 March 2020 (the '12 March 2020 meeting').

196 In [22(g)] of the counterclaim, the defendants alleged that Mr Maric, on behalf of Sean and Delplant, represented at this meeting that:

(i) the annual nett [sic] profit would be $2.4 million;

(ii) Sean would not be staying around if Pat did not sell out.

197 I will refer to these as the '12 March 2020 representations'. In the reply, the plaintiffs admitted that Mr Maric said in the 12 March 2020 meeting that the current situation between Sean and Pat was untenable for Sean and Sean would not continue as the situation currently stood and would explore alternative options, including the possibility of an orderly scale-down or a winding up of the business. They otherwise denied the representations alleged. As a result, it is necessary for me to review and form views about the statements made at this meeting. I note at this stage that, while it is not clear on the face of the pleadings, I understand the alleged representation as to the 'annual' net profit relates to the net profit for FY 2020.

198 Mr Maric did not prepare any notes of the meeting. However, prior to the meeting, he received briefing notes from Sean. The briefing notes record that the purpose of the meeting was 'about finding out what they are thinking and not to drill down into the detail'. However, they record that Sean wanted a 'full buyout' of Pat's interests in Delplant Haulage, the SEPH Company, Mt Salazia Developments and Delplant (including the JV), with Pat taking the Vesper Drive property. As to the goodwill of Delplant, the briefing notes record that Sean's first preference was an agreed figure, or failing that, an agreed goodwill range subject to determination by an expert valuer within that range.

199 Mr Lidonnici prepared handwritten notes of this meeting. The handwritten notes refer to the assets to be sold, including (1) goodwill '3 Yrs on revenue'; (2) Hervet 'min value - SD takes a tax issue'; (3) net assets as at 30 June 2020; (4) term deposits '50/50'; and (5) cash '50/50'.

200 Further, Mr Lidonnici sent an email dated 14 March 2020 to Mr Darling, copied to Pat, summarising what had occurred at the 12 March 2020 meeting.

201 First, that email recorded the assets that were to form part of Sean's current offer of $9 million, namely Delplant, Protace, Mt Salazia Trust, Hervet, Trenchbox Pty Ltd ('Trenchbox'), Delplant Haulage, Delplant Properties, the SEPH Company and the SEPH Partnership.

202 Second, that email recorded that most matters relating to the valuation of the Delplant group were agreed between Mr Maric and Mr Lidonnici except goodwill. I will deal with goodwill separately. However, the email records that term deposits, cash holdings and Delplant net assets would be apportioned '50/50'. There was an agreed range for the value of Delplant Haulage of between $700,000 and $1 million and of the Vesper Drive property of between $4.5 million and $4.6 million.

10. Delplant Goodwill

It was discussed that Pat's original offer to Sean in March 2018 was based on the average of 10 years (2009-2018) and was a major concession by Pat which we have forwarded to you. ($4M average)

However, again the non acceptance of the common methods on valuation of using the average of the last 3 years to arrive at a maintainable earnings base, and argument presented that there are no civil contractor businesses sold at multiples of more than 1, and then into the explanation about where the business is heading and low margins etc. again, I intervened and suggested, that then we look at the current year maintainable earnings which looked like being $4M for 2020, and stated, that if that was to be used, it would be argued that a higher multiple is applied as a concession was given for the average method, again met with argument, but we got to a point to agree at a multiple of 3.

Zvonko would not accept to lock in the $4M at a multiple of 3 ($12M Goodwill), but suggested a possible alternative as taking 2020 at $4M, and then Pat would be paid 50% of profits for 2021 and 2022, but I argued that would not work unless there was a min amount guaranteed for the 2 years, and it was bantied [sic] around and settled at 1.5M for 50% for both years, and tehn [sic] Zvonko suggested to lock in an upper limit also in case they were higher than a $4M annual profit, and the higher 50% target agreed was at $2.5M. (please note that the range changed after Zvonko went and spoke to Sean for approximately half an hour, where the $4M for 2020 was changed to either $3.8M profit or even 50% of actual and the minimum amounts changed to $1.25M, which I suggested wasn't acceptable.

Again, then the next option for Goodwill value was to have an independent valuation performed, but the proviso presented by Zvonko was that it would need to be agreed a min and max range, and Sean's max range was $12M was is [sic] not acceptable.

The final option again was to meet on March 26 and discuss the voluntary administration path where a much reduced result for Pat would occur as we have previously discussed. (again not an option)

11. We discussed the restraint of Trade value proposition for Pat and Zvonko dismissed it and advise that pat [sic] can do whatever he wants and Sean would not pay anything for it.

204 Mr Lidonnici gave evidence in accordance with this email. Mr Maric also gave evidence generally consistent with this email. In addition, Mr Lidonnici gave evidence that he asked for more up-to-date figures because the only figures he had at the time was the December 2019 figures. Mr Lidonnici said that Mr Maric advised that the figures for January and February were not available at that time. However, it is clear that Pat had the February project sales summary by this time, which was provided at the 10 March 2020 board meeting.

205 Mr Maric denied that he said at this meeting that the net profit for FY 2020 would be $2.4 million. Mr Maric said a figure of $4 million at a minimum was discussed as the profit for FY 2020. Mr Lidonnici did not give oral evidence that a statement to the effect that the net profit for FY 2020 would be $2.4 million was made at this meeting. In these circumstances, I am unable to conclude that a statement or representation to the effect that 'the annual nett [sic] profit [for FY 2020] would be $2.4 million' was made.

206 In any event, Pat received and read a copy of Mr Lidonnici's email to Mr Darling. He accepted that, in light of that email, Mr Maric could not have been referring to a likely profit of $2.4 million at the 12 March 2020 meeting. He agreed that, based on this email, Mr Maric was suggesting that the net profit for FY 2020 was looking at $4 million but might be higher. Pat's recollection of his discussion with Mr Lidonnici about the meeting with Mr Maric was very vague. Pat gave evidence that he was told by Mr Lidonnici that the meeting went well until the accountants started talking about goodwill. He was told that, at that stage, Mr Maric rang Sean and 'things went southwards from there'.

207 On 16 March 2020, a state of emergency was declared in Victoria in relation to COVID-19. From that time, due to medical reasons, Pat was required to work from home.

208 Sean gave evidence that the COVID-19 crisis had a large impact on the business of Delplant. He gave evidence that once the first level of State Government restrictions were imposed, the sales offices closed and there was a period where there was little or no contact with Delplant's customers in regards to purchase orders. One of Delplant's largest customers, the Brown Property Group, closed their doors for a period of time without notice. Pat agreed this was so.

209 While few documents were produced which evidence this, there is an email from Sean to Pat and the executive team dated 6 April 2020 noting that the 'slowdown in our sector is well underway, beyond that everything is simple "crystal balling"'.

210 Further, there is a repeating email for a meeting on 21 April, 29 April, and 5 May 2020 regarding the current and future work program. Sean gave evidence that it was an invitation to a meeting on those dates. The email is in identical terms. It reads:

Sean/Pat,

I have raised concerns separately with both of you recently regards our current and future works program, in the fact there doesn't appear to be any light at the end of the tunnel. Every week, our program shortening, with no new tenders to speak of and other active projects being shelved.

...

Key items to discuss:

1. Ensure we are all adequately informed regards current and future works program

2. Agree on what shape we want to see the business take into and out of this likely sustained recession

3. If FHDB resource requirements coming to an end for both construction and Maintenance/Testing - no future projects on the cards

...

5. Discuss and agree on immediate actions which will likely involve field staff redundancies in the coming week

6. This may need also need to extend to some office staff and/or reduced working arrangements

...

10. Staged approach seems like an appropriate action - discuss how we implement compassionately.

211 I accept Sean's evidence about the impact of the COVID-19 pandemic on the business of Delplant. It is important to recall the uncertainty in the community and, in particular, in the business community from March 2020 as a result of the COVID-19 pandemic. This is because the true effects of the pandemic on both social and business life were unknown. This was particularly so as, from late March 2020, Stage 3 restrictions were imposed in Victoria for the first time in living memory. Those restrictions only allowed people to leave their homes for four reasons: food and supplies; medical care; exercise; and work or education. While those restrictions were reduced over time in May 2020, they were re-introduced in June and July 2020 given the number of active COVID-19 cases in Victoria.

212 On 1 May 2020, Sean wrote to the executive team and Pat that, by the end of the next week, he would sign off on the first Delplant redundancies. There was evidence that three redundancies were made during this period. It appears that some of these related to the COVID-19 restrictions.

213 Sean sent an email to Pat, copied to James, on 22 May 2020 at 12:31pm (the '22 May 2020 email'). The subject heading was 'Delplant: plan for a different future'. The email read:

Pat,

Already pre COVID 19 situation relationship between us and throughout the business was toxic and untenable, this has been documented and agreed to by both parties. Right now the business is fast approaching 'rock bottom', virtually no work in hand and effectively no plan to turn that around. No surprise then to learn that our most senior managers are looking for fresh opportunities elsewhere, other civil sectors are active and will bounce shortly due to both Federal and State increased infrastructure funding.

1. Ownership aside Delplant as a viable business cannot continue with yourself and I in the same team.

2. In order for Delplant to survive the business, from the top down, requires strong effective leadership.

3. You have been threatening/promising to vacate your role since 2015.

4. If you weren't a shareholder then Delplant would today have someone else performing the role.

5. We are both employees of the business.

In order to save jobs we must develop a plan for a different future, a future that will see significant change for the business and its employees. To create change we require people who can work together to bring about such necessary change, unfortunately we both know that you resist change and fight those charged with the responsibility of driving change. In short you don't support team members, you blame them for changing things in Pat's world.

Now is the time for you to step aside (resign) and clear the path for others.

If you accept please confirm in writing by COB Monday.

214 In [22(h)] of the counterclaim, the defendants alleged that Sean, on behalf of himself and Delplant, made the representations set out in italics in the 22 May 2020 email (the '22 May 2020 representations'). In the reply, the plaintiffs admitted these representations were made.

215 Sean gave evidence that he sent the 22 May 2020 email because Delplant was struggling for work going forward and was fast approaching a point where the business would have to take a different direction. He said he believed that the statements in the 22 May 2020 email were true and that he held those beliefs at the time. In summary, he gave evidence that there were real concerns about the future of the Delplant group given the project sales to that time in FY 2020, the fact that no significant works were booked for July 2020, and concerns about the immediate, medium and long term effects of the COVID-19 pandemic on future work. I refer to my findings in [211] above.

216 In cross-examination, it was put to Sean that there were project sales of $2.3 million in March 2020 and that each of April and May 2020 had project sales of over $1 million (as recorded in the July 2020 draft statements and, in particular, the July project sales summary). In these circumstances, it was put to him that it was inaccurate to represent that the business was fast approaching 'rock bottom'. Sean said that, if one compared these months year on year, there was a drop in sales of 40%. As to the increase in sales of 41% in March 2020 (compared to March 2019), Sean gave evidence that the sales revenue in March 2020 (which was approximately $1 million more than the sales revenue in February or April 2020) was the result of substantial one-off work completed at pumping stations which formed part of the Brompton and Pavillion Estates for Lojac.

217 I accept this evidence. This evidence was consistent with Sean's earlier evidence that it was appropriate to compare the results for a month or period with the results of the same month or period in a previous year as set out at [85] above. Further, it is consistent with the July project sales summary for FY 2020. The July 2020 project sales summary is an updated version of the February project sales summary, updated to include the sales for March to June 2020. It also updated the figures for Fe[8]ruary 2020.8 Like the previous project sales summaries, it excluded sales to the JV. Those updated figures are recorded as follows:

Month by Month Comparison - Financial Year 2019-20

218 The July project sales summary also included the following notes:

1. FY2020 Project Sales are down $5,545,596.16 or -25% on 2019 Project Sales.

2. FY2020 Q1 - down $2,445,357.58 or -37%**

3. FY2020 Q2 - down $1,222,350.35 or -22%**

4. FY2020 Q3 - up $588,142.10 or +13%**

5. FY2020 Q4 - down $2,466,030.33 or -42%

**FY2020 included two 'one-off' projects with significant subcontractor/supplier contributions as follows - Brompton Lodge Pump Station and Outlet Works & Pavillion Pump Station = $2.418m of FY2020 Project Sales

FY2020 Q1 - $669,000

FY2020 Q2 - $552,000

FY2020 Q3 - 1,186,000

FY2020 Q4 - $11,000.

219 As is evident from the July project sales summary, there was a drop in sales of 40% in April 2020 (compared to April 2019) and of 52% in May 2020 (compared to May 2019). As to the increase in sales of 41% in March 2020 (compared to March 2019), the notes are consistent with Sean's evidence referred to above.

220 There was a further version of the July project sales summary in evidence which included sales to the JV. As a result, the percentage variation between FY 2019 and FY 2020 varied. Relevantly, it recorded a 38.8% increase in March 2020 compared to March 2019, and decreases of 36.1% and 47.1% in April and May 2020 compared to April and May 2019.

221 As noted above, Sean also gave evidence that, as at this time, Delplant did not have any significant works booked for July 2020. Delplant was having weekly meetings to discuss where the work would come from moving forward. In this regard, I refer to my comments in [210] above. Sean said that when he made the statement that the business was fast approaching 'rock bottom', he was looking at the future sales. Of course, this was in the context of the COVID-19 pandemic.

222 As noted above, the 22 May 2020 email requested a response by close of business on Monday, 25 May 2020. However, at 4:52pm on 25 May 2020 Sean sent Pat an email, attaching a letter advising that Pat's position as Operations Manager was redundant as of 5pm on 25 May 2020 (the '25 May 2020 letter'). The covering email noted that 'in the next hour or so' staff would be advised that Pat was no longer an employee of Delplant and requested he refrain from contacting other staff. The attached letter read as follows:

As you are aware the business has suffered a severe downturn in business and revenue since the onset of COVID-19. Revenue has already fallen in excess of 30% and drop in revenue is likely to exceed 50% by end of June, beyond that the picture is very bleak. The economic damage as a result of the COVID-19 crisis has caused a collapse within the property sector, current projections suggest it will led into as far as 2024.

This has led me as Managing Director to review the various roles within the business including yours. As a result of the review the company realizes and assesses that the role of Operations Manager is no longer required.

The company therefore makes your position as Operations Manager redundant as at 5.00pm tonight. You shall be paid all your entitlements, including eight (8) weeks redundancy payment and five (5) weeks pay in lieu of notice. Payment of all entitlements will be made to your nominated bank account.

As there is no requirement to work the notice period we request that you return all Delplant Property within the next two business days. At this stage we are happy for you to keep the vehicle which we can discuss later.

Please advise when you will be returning all equipment inclusive of keys, phone and computer.

We wish you all the best in the future.

223 In [22(i)] of the counterclaim, the defendants alleged that Sean, on behalf of himself and Delplant, made the representations set out in italics in the 25 May 2020 letter (the '25 May 2020 representations'). In the reply, the plaintiffs admitted these representations were made.

224 Sean gave evidence that the 25 May 2020 representations were made in the context of the uncertainties and difficulties being faced by the Delplant group, in particular in light of the COVID-19 pandemic. Sean gave evidence that his statement that revenue had already fallen in excess of 30% was based upon an analysis of each month 'year on year'. In my view, the month which was most relevant for the purposes of seeking to assess the impact of COVID-19 was April 2020, particularly given the 'one off' works in March 2020. As the July project sales summary including sales to the JV records (as set out in [220] above), there was a 36.1% drop of sales in April 2020 compared to April 2019. Further, it records a 47.1% drop in May 2020 compared to May 2019. Sean confirmed that it was those figures he was referring to in the 25 May 2020 letter. I accept this evidence.

225 Further, Sean gave evidence that Delplant was forecasting a 50% drop in revenue at that time. As noted above, he gave evidence that some of Delplant's clients had shut their sales offices so there was limited land sales which might lead to further work. He gave evidence that the industry had 'significantly shut down' in light of the COVID-19 pandemic and restrictions. He said that, while Delplant was seeking work, there were discussions within Delplant about what they were going to do with their workers. He gave evidence that Delplant was 'struggling ... to book our sites for our crews ... That's obviously why we had previous meetings in April and May in regards redundancies and ... what we were going to do in regards crews and what we were going to do with our workers. We didn't know. We didn't have those answers. We were seeking work'[9]. I accept this evidence.

226 Further, and consistent with the evidence, it is important to note that the 25 May 2020 representations are contained in a paragraph which addresses the state of the business since the onset of the COVID-19 pandemic. In my view, the 25 May 2020 representations must be read in this light.

227 Once again, it was put to Sean that the 25 May 2020 representations were false in light of the turnover and profit in fact achieved in May and June 2020, as recorded in the July 2020 draft statements. Sean did not agree given the real concerns about the future of the Delplant group in light of project sales to date for FY 2020, that there was no future work booked and concerns about the immediate, medium and long term effects of the COVID-19 pandemic on future work. I also accept this evidence. I refer to my findings at [208]-[211] and [224]-[225] above.

228 Further, Sean gave evidence that in early June 2020 the Federal Government announced a series of grants in response to the COVID-19 pandemic. This included a $25,000 building grant for new construction and significant renovations. Strict timelines were imposed to stimulate the economy. He said that, as a result, the impact on the land development industry was immediate. He said that, to ensure purchasers could take up the grants in light of the timelines, it required the lots to be constructed by the end of November 2020, contracts to be signed by the end of December 2020 and slabs to be poured by the end of March 2021. He said that this 'created this rush, like something we've never seen'[10] from the third week of June 2020. Sean was not challenged as to the substance of this evidence. Further, it was confirmed by Mr Maric who gave evidence of the positive impact on land development and land home sales of the Federal Government's home builder program, in particular in FY 2021. While I accept this evidence, I do not consider it relevant to whether or not Sean had a reasonable basis for the 25 May 2020 representations.

229 Sean denied that there was no proper basis to make Pat redundant. He said this was based upon the state of Delplant's business and the 'significant industry downturn'.[11] Further, he said change was needed and Pat had never been part of change. He said that Delplant did not need an Operations Manager and that Delplant has not had an Operations Manager since Pat left. However, he said that part of Pat's former role has been taken over by construction managers.

230 Sean denied that that the reason why Pat was made redundant was to force the sale of his interests in the Delplant group. Sean also denied that he did not want Pat in the business any longer. I found this evidence disingenuous. This is because it was clear that Sean did not want Pat in the business. Further, while it may be that Pat was not made redundant to force the sale of Pat's interests, at the very least, Sean must have known that Pat's redundancy would be likely to advance the sale of his interests in the Delplant group. It has caused me to review his evidence with some care. However, in this context, it has not caused me to doubt his evidence about uncertainties and difficulties being faced by the Delplant group, in particular in light of the COVID-19 pandemic.

231 Pat was both surprised and shocked to receive the letter. Pat gave evidence that he did not read the reference to revenue falling in excess of 30% as a reference to revenue falling since the onset of the COVID-19 pandemic. However, he conceded that it could be a reference to March or April 2020 when the COVID-19 pandemic began. I have formed the view that a reasonable person reading the letter would read the reference to the falling revenue as being in the context of, and in light of, the onset of the COVID-19 pandemic.

232 At the time he received the 25 May 2020 letter, Pat was still considering his response to the 22 May 2020 email. Pat sent a text to Sean at 4:57pm on 25 May 2020, after receipt of the 25 May 2020 letter, advising Sean that he was still waiting on advice from others in relation to the 22 May 2020 email. Notwithstanding this, at 5:13pm on 25 May 2020, James sent a text to all staff of the Delplant group stating:

Please note effective today, Pat is no longer an employee of Delplant, however remains as a non-executive director.

Effective immediately, in regards any Delplant matters please contact either Steve Clowes and/or James Delaney.

233 In my view, this email and text exchange indicates a ruthless side of both Sean and James. Further, the evidence before me discloses that, from this time, Pat was denied access to his office, other staff and even his work emails and phone. While I can understand the desire to end the ongoing business relationship with Pat, the way in which they went about making Pat redundant and announcing his departure to the staff after his long involvement with the Delplant group, and their conduct in denying Pat access to email, records and the like, does them no credit at all. In my view, they failed to treat him decently.

234 MWL responded to McKenzie Allen by email dated 25 May 2020 and a further email dated 26 May 2020. The first email asked whether McKenzie Allen had instructions to accept service of proceedings against Delplant, Sean and James for Pat's redundancy. It noted that the redundancy put Pat's insurance coverage 'seriously at risk'.

235 The second email dated 26 May 2020 (the '26 May 2020 email') was more detailed. There was much debate about the contents of this email at the trial. In particular, there was debate about whether the issues raised in that email related only to the decision to make Pat redundant or went beyond that. As a result, it is appropriate that I address this email in some detail.

236 First, the 26 May 2020 email disputed any power of Sean to make Pat redundant or to remove him from an executive role given that Pat was a director and 50% owner of the Delplant group. The email contended that Sean's conduct was unlawful.

237 Second, it expressed the view that the sole intention of sending the text to Delplant staff was to belittle Pat, including by referring to him as a non-executive director.

238 Third, it noted that that Sean had demanded the return of Pat's phone, car, keys and computer. It noted that he had been denied office access. It also noted that all email server and other access was cut off at approximately 11:30pm on 25 May 2020. This is notwithstanding that many personal files of Pat were contained on Delplant's email server.

239 Fourth, it sought assurance in relation to office access and access to bank accounts and the like.

240 Fifth, it referred to the fact that on 26 May 2020, Mr Lidonnici had requested accounting information from Mr Maric concerning the March 2020 quarter results, which were required by Pat for his ongoing insurance coverage. I will deal with Pat's insurance claim further below. It noted that the request that day was no different to previous requests made, except that, on this occasion, the information requested was withheld. This is notwithstanding that Pat remained a director and equal owner of the Delplant group.

241 Sixth, the letter raised a number of issues in relation to Sean's control of term deposits, the non-payment of dividends or distributions each month (the evidence records these are in the sum of $15,000) and Pat's insurance claim.

The unilateral actions that were taken shortly before 5pm on Monday evening have therefore caused irreparable harm and damage, not only to Delplant, but also to our client. To however prevent these actions (and the corresponding consequences of what has occurred) from spiralling out of control, we suggest that a meeting should be convened for later this week, from Wednesday PM, onwards, to address the clear breakdown in relationship, conduct and trust from a relationship, operational, employment and oversight perspective that has now occurred and is clearly evident. Please advise urgently as to whether such a meeting is to proceed and, if so, where and when.

243 As to the request for information, the evidence before me indicates that Mr Lidonnici contacted Mr Maric on a number of occasions on 26 May 2020 seeking financial information relating to Pat's insurance claim. It seems clear that the request was refused by Sean. By email dated 26 May 2020, Mr Lidonnici reminded Mr Maric that Pat was a director and 50% owner of the Delplant group and was entitled to the information requested and that there was no need for Sean to approve the release of the information. Mr Maric replied that it was not his 'call'.

244 As to Pat's insurance claim, on the evidence before me, Pat had an insurance policy on which he made a claim in 2016 or 2017 following his health issues. The insurance policy was not in evidence and its terms were not clear to me. However, on the evidence before me, the amounts received included payments reflecting losses associated with Pat's income and entitlements as a director and interest holder in the Delplant group. I reiterate that there was no evidence as to what amounts were received or what they related to. However, Pat gave evidence that the amounts he received included sums referable to the monthly advance of distributions of $15,000 per month. What those sums were and how they were calculated or payable under the policy was not explained.

245 On the evidence before me, there were then telephone communications between Mr Allen and Mr Darling. As a result of these telephone calls, a meeting was arranged at the offices of Mr Darling in Mitcham on 27 May 2020.

246 There was a meeting on 27 May 2020 at MWL's offices (the '27 May 2020 meeting'). Sean and James attended with Mr Allen. Pat attended with Mr Darling. The meeting commenced at approximately 10am and concluded at approximately 5:30pm with the signing of the HoA. During the course of the day, Sean and James on the one hand did not speak with Pat on the other. All communications were via Mr Allen and Mr Darling.

247 This is relevant because the defendants allege in [22(j)] of the counterclaim that, at the 27 May 2020 meeting, Sean, on his behalf and on behalf of Delplant, represented:

(i) the nett [sic] profit was still to be $2.4 million for the year ended 30 June 2020;

(ii) conditions were bleak;

(iii) that turnover and profitability were diminishing rapidly.

248 I will refer to these as the '27 May 2020 representations'. In the reply, the plaintiffs admitted that Mr Allen referred to the negative impact of the COVID-19 pandemic on the business and the general deterioration in conditions at Delplant at the 27 May 2020 meeting, but otherwise denied these representations. As a result, it is necessary for me to consider the 27 May 2020 meeting. However, I note that in final submissions counsel for the defendants did not submit that, at the 27 May 2020 meeting, the plaintiffs made the representation in [22(j)(i)] that the net profit would be $2.4 million for FY 2020.

249 On the evidence before me, Sean and James were located in the MWL conference room during the course of the day. Mr Allen stayed with them save for when he went to confer with Mr Darling. Pat was located in Mr Darling's office. Mr Darling stayed with him save for when he went to confer with Mr Allen. As a result, Sean and James on the one hand and Pat on the other did not speak to each other at any time during the course of 27 May 2020.

250 There are many issues in dispute as to what occurred during the 27 May 2020 meeting. These include:

(1) who first suggested in the course of the 27 May 2020 meeting that the parties should discuss the sale of Pat's interests in the Delplant group; and

(2) what, if anything, was said about the financial situation of the Delplant group in the course of the 27 May 2020 meeting by Sean, James or Mr Allen.

251 A number of written notes of that meeting were in evidence as follows:

(1) the handwritten notes of Sean prepared during the course of the meeting;

(2) the handwritten notes of James prepared during the course of the meeting; and

(3) the handwritten notes of Mr Allen prepared during the course of the meeting.

Mr Darling did not keep any notes of the meeting. Neither did Pat.

252 In addition, the telephone records of Pat for the period 27 May to late June 2020 were produced by the plaintiffs. They record telephone conversations between Pat and Mr Lidonnici on 27 May 2020. One conversation at 1.23pm went for 16 minutes and 52 seconds. Another conversation at 1.42pm went for 9 minutes and 22 seconds.

253 Before turning to the details of the 27 May 2020 meeting, it is important to note at the outset that the outcome of this meeting was the execution of the HoA.

(1) there was a pre-meeting between James, Sean and Mr Allen at 10:15am, at which they discussed that the 'situation can't continue as is' and 'everything is on red 23';

(2) there was a first conference at around 11:15am, at which Pat's employment was discussed. Pat wanted to resign 'given link to ... insurance' and wanted the effective date to be 30 June 2020, and there would be no redundancy sum. In addition, Pat wanted a 'buy out' from the Delplant group 'sorted & agreed today', and Sean was 'happy for Pat to buy me [Sean] out' but any deal would need to be post 30 June 2020;

(3) there was a second conference, at which the 'terms of resignation [were] agreed' and Mr Darling 'confirmed that you are already aware of Pat's health situation & that he isn't interested in buying you out';

(4) Pat would be asked 'for a figure that we will settle on'. Mr Darling came back with $12 million and Mr Allen went back with $7.8 million;

(5) Mr Darling said that Mr Lidonnici advised that Pat's tax on $10 million was $1 million to $1.5 million, and Pat and Mr Darling 'wanted to know what was my [Sean's] opinion. I [Sean] provided no opinion (Hello Pat has Joe L on the phone)';

(6) at 2:30pm 'after a lot of back & forth' $9 million was agreed on. However, 20 minutes later Pat 'wants more'. There are calculations for $9.5 million and $10 million; and

(7) the HoA was by drafted James, Mr Allen and Mr Darling. The final version was signed just after 5:30pm.

255 Sean gave evidence generally in accordance with his notes. In relation to the issue of tax, Sean gave evidence that at some point before lunch, Mr Allen told him that Mr Darling said that Pat and Mr Darling had been on the phone to Mr Lidonnici and Mr Lidonnici advised that Pat's 'likely' tax on a sum of $10 million would be in the range of $1-1.5 million. Sean said that Mr Darling asked Mr Allen to ask Sean for his opinion. Sean said he did not provide an opinion. This is consistent with Sean's file note set out above. Sean did not give any other evidence on this issue.

(1) there was a pre-meeting between James, Sean and Mr Allen at 10:15am;

(2) at 11:15am:

- dissolve all other relationships (i.e Delplant Group)

- last formal offer was from SD [Sean] to PD [Pat]. Pat can put forward price.

(a) Mr Darling made offers of $12 million, which included 'all items/assets', and $10 million. Mr Lidonnici indicated a $1-1.5 million tax liability on $10 million;

(b) Sean offered $8.5 million, which was '+700k on most recent offer'; and

(c) Mr Darling offered $9 million as one payment, or $9.5 million as two payments;

(4) at 2:30pm, $9 million was agreed with the payment terms to be confirmed: 'two payments';

(5) at 3:20pm: 'Pat $10M'; and

(6) a draft HoA was provided to Pat and Mr Darling at 4:40pm and James forwarded a final version to Mr Allen at 5:25pm. The HoA was signed at 5:45pm.

257 James gave evidence generally in accordance with his notes. James gave oral evidence that Mr Darling offered $10 million and advised of Pat's tax liability on this amount. James also agreed that he was aware that tax was an issue for Pat. He said that it was conveyed to him that Pat had a $1-1.5 million tax liability. He said that it was then agreed that a mutually beneficial solution ought to be worked out between Mr Maric and Mr Lidonnici. Further, in cross-examination, James agreed that this was an important matter for Pat and for Sean's interests.

258 Mr Allen prepared five pages of handwritten notes. The notes of Mr Allen are difficult to read. For the most part, they record a series of figures which were discussed throughout the course of the day and dates for payment. They also record that it was agreed that '(1) cannot work together (2) Pat needs to go as employee ... (3) Sean purchases Pat out. Valuation. Cannot work as co-directors. Only making prob [sic] worse'.

259 Mr Allen's notes provide little assistance in determining the course of events on 27 May 2020. It is difficult to know whether the figures are references to his discussions with Sean and Pat, or if they are references to offers made to, or discussions with, Mr Darling.

260 Mr Allen gave evidence that the 'agreement' referred to in his notes reflected his initial discussion with Mr Darling on 27 May 2020, but that he could not recall who suggested that Sean buy Pat out, what the reference to 'valuation' was for, or who said that Sean and Pat could not work as co-directors. Mr Allen also gave evidence that the figure of $12 million referred to in his notes was an offer by Mr Darling, and that the figures of $10 million, $7.8 million and other figures were rough figures that were thrown around while talking to Sean and James.

261 Further, Mr Allen gave evidence that there was a suggestion of a settlement of $9 million and that is when the issue of a restraint was raised. He said that ultimately led to a figure of $10 million being agreed. Mr Allen said that he had discussions with Sean and James regarding a figure of $10 million with a restraint and a figure of $9.5 million without a restraint. He gave evidence that the HoA was drafted with input from himself and Mr Darling.

262 As noted above, Pat did not take any notes on the day. Pat gave oral evidence that his first offer was for $12.5 million, and not $12 million as suggested by Sean, James and Mr Allen.

263 In relation to the issue of tax, Pat agreed that he had discussions with Mr Lidonnici throughout the course of 27 May 2020 about the tax that he might have to pay on the purchase price, but said that most of his discussions with Mr Lidonnici on that day related to insurance issues. Pat said that Mr Lidonnici advised him that the tax liability on a figure of $10 million would be in the range of $1.5 million to $2 million depending on how the deal was structured. Pat said that there was discussion on the day about whether Sean or his interests would indemnify Pat for the tax liability, and that Sean said he would not. Pat disagreed that he asked for Sean's opinion on the likely tax he would have to pay, and maintained that his question was about the tax indemnity and how the tax could be structured.

264 Pat's evidence was that tax on the purchase amount was a 'massive issue'[12] for him and he discounted his first offer because he was told that Mr Maric and Mr Lidonnici would strive for him to get as best they could to a 'zero tax payment'.[13] Pat said that he was trying to get an indemnity for tax and 'that's why I went back down to the offer of 10. To reduce my offer by a lot of money to try to get a deal'.[14]

265 Mr Darling gave evidence consistent with this. Mr Darling said that Sean made an initial offer of $6.75 million and that he responded with an offer of $12.5 million. In relation to tax, Mr Darling gave evidence that there was discussion about Pat being in the middle of a tax audit at the time and that a tax indemnity was stated to be both important and critical. He said that at first there was no consideration that was given to the discussion of a tax indemnity. Mr Darling said that Sean increased his offer in steps that transitioned through $7 million towards $8 million and $8.5 million. He said that from about $8.5 million, they were discussing the tax indemnity and the Sean interests started to say they will give an extra $500,000 on account of tax.

266 Mr Darling said he did not make offers of $9 million and $9.5 million on behalf of Pat, but then said he could not recall if he did or not. He also said he could not recall if a figure of $9 million was settled upon at any point in the course of the day. However, when asked again, he said he did not offer $9 million and $9 million was never tentatively agreed. Mr Darling said that it was $12.5 million 'take care of own tax' or $10 million with a tax indemnity, and that in between $12.5 million and $10 million, the tax indemnity 'starts to come in'.[15]

267 Mr Darling gave evidence that the bulk of Pat's discussions throughout the day with Mr Lidonnici related to insurance issues, but there were some discussions later on in the day about tax. He said that Mr Lidonnici was at times on loudspeaker so that Mr Darling heard his comments. Mr Darling ultimately agreed that Mr Lidonnici estimated tax on a purchase price of $10 million to be in the range of $1.5 million. He was asked whether Mr Darling asked Sean for his opinion on tax and whether Sean refused to do so. Mr Darling refused to accept that proposition, replying that 'tax was a very important matter' so he may have asked 'what's your view then'.[16] He ultimately agreed he did not think that Sean did provided any opinion on Pat's tax.

268 However, his evidence about how the tax issue was addressed was far from clear. Mr Darling said that he was not in the room when the HoA was being drafted, but that he went into the room toward the end. He said that a template HoA was provided by the Sean interests and, because a tax indemnity was not going to be provided, cl 5 was inserted. He said that was an alternative means of addressing tax concerns moving forward. He did not say give any context in which cl 5 was inserted.

269 Mr Lidonnici also gave evidence that he spoke to Pat about three or four times over the course of 27 May 2020, and that he advised Pat that his tax on $12.5 million could be as high as $2.5 million. Mr Lidonnici gave evidence that he suggested Pat consider a tax indemnity. I note at this stage that whether a tax indemnity was sought was not put to Sean, James or Mr Allen in evidence in chief or cross-examination.

270 As to the alleged 27 May 2020 representations, Sean and Mr Allen gave evidence that there was no discussion about a net profit figure of $2.4 million. However, Sean gave evidence that he spoke to Mr Allen about the state of the industry and the 'damaging'[17] impact of COVID-19, but that he did not discuss this with Mr Darling. Mr Allen gave evidence that he had some general discussions with Mr Darling regarding COVID-19 'causing some problems for ... Delplant and ... the Delaney Group',[18] and that COVID-19 'is a factor that is hitting the business'.[19] In cross-examination, Mr Allen also gave evidence that he had some discussions with Mr Darling to the effect that the company had to be wound up if an agreement could not be reached because Pat and Sean could not work together, but he could not recall who first raised this issue.

271 Pat's evidence regarding any representations made about profitability figures at the 27 May 2020 meeting was inconsistent. First, Pat gave evidence that there were no figures discussed in terms of Delplant's profitability on 27 May 2020. However, in cross-examination Pat said that Mr Darling told him on 27 May 2020 that Sean was representing on that day that the profit would be $2.4 million. Second, Pat said that nothing was said about turnover on this day, but when questioned again Pat said that the representation relating to turnover diminishing was made.

272 Pat also gave evidence that that Mr Darling told him on 27 May 2020 that Sean was representing that the conditions were bleak. Pat said that Mr Darling was reporting back to him that there was still 'doom and gloom'[20] and 'the work was drying up at a massive rate and ... we'd be lucky to get to the end of the June month'.[21]

273 Mr Darling gave evidence that Mr Allen said to him on 27 May 2020 that 'if things are not sorted out and sorted out now, that people are leaving and people will leave the business and it will close down or be at risk of closing down by the end of June, that receivers would have to be appointed and either a fire sale or a quick sale would have to be done'.[22] Mr Darling also gave evidence that Mr Allen made general comments about the business being in 'a bad operating state' and the 'dire straits' of the business.[23] However, Mr Darling said that Mr Allen did not make any specific comments about the finances of the Delplant group. Mr Darling agreed that Mr Allen did not tell him on 27 May 2020 that the net profit for FY 2020 would be $2.4 million.

274 As a result, I have concluded that, at the 27 May 2020 meeting, Sean or Mr Allen on his behalf, made statements to the effect that (1) there was a general deterioration in the conditions of Delplant as at 27 May 2020 due to external factors and also due to internal factors, namely, the breakdown of the relationship between Pat and Sean which was also affecting staff; and (2) there was a further negative impact because of the state of emergency due to the COVID-19 pandemic.

275 Further, I have concluded that, in the context of discussing the current situation of Delplant and, in particular, the internal factors, Mr Allen said words to the effect that Delplant might or would have to be wound up. I have also concluded that Mr Allen made general comments about the business being in a bad operating state.

276 However, on the review of the evidence before me relating to the 27 May 2020 meeting, I am unable to conclude that any of the 27 May 2020 representations as alleged in [22(j)] were made. First, as to the representation in [22(j)(i)], there is no evidence that a representation that the net profit for FY2020 would be $2.4 million was made at this meeting. Second, as to as to the representation in [22(j)(ii)], while I am satisfied that some statements were made by Mr Allen about the state of Delplant's business, I am not satisfied that the plaintiffs or Mr Allen on their behalf represented that 'conditions were bleak' as alleged. In this context, as I note in [440] below, in the case of oral representations, precision is required in identifying the representation alleged in order to determine whether it was misleading or deceptive. Third, as to [22(j)(iii)], for similar reasons, I am unable to conclude that a representation was made at this meeting that 'turnover and profitability were diminishing rapidly'.

277 I will deal with my conclusions in relation to taxation and accounting issues in section 9.3 below.

279 The evidence before me is that the skeleton of the HoA was prepared from the settlement agreement for the Leederville proceeding. James accessed this document during the course of the 27 May 2020 meeting. That document was then adapted during the course of the 27 May 2020 meeting. On the evidence before me, James typed the changes.

280 There is some dispute about the extent of involvement of Mr Allen and Mr Darling in the drafting process. However, it seems clear that various drafts during the course of the day were emailed to Mr Darling and printed for him to obtain instructions from Pat. I am satisfied that each of Mr Allen and Mr Darling was involved in the drafting of the HoA. In any event, it is clear that each of them was satisfied with its terms, with the result that each of Pat and Sean signed the HoA at the conclusion of the 27 May 2020 meeting.

SEAN ANTHONY DELANEY and his associated company's

PATRICK JOSEPH DELANEY and his associated company

DELPLANT PTY LTD

PROTACE PTY LTD

MT SALAZIA DEVELOPMENT TRUST

DELPLANT HAULAGE PTY LTD

DELPLANT PROPERTIES TRUST

HERVET PTY LTD

TRENCHBOX PTY LTD

SOUTH EAST PLANT HIRE PTY LTD

SOUTH EAST PLANT HIRE PARTNERSHIP.

282 However, the document is only executed by Sean and Pat. The relevant signing clause provides:

SIGNED for and on behalf of [Sean/Patrick] Delaney interests who warrants he has authority to sign by

[Sean/Patrick].

The parties have agreed to the sale of Pat Delaney's interest in the Delplant Group to Sean Delaney interests as set out in this Heads of Agreement.

AGREEMENT

1. SETTLEMENT

(a) Further to MKA Letter dated 24th February 2020 on the terms and conditions set out below, the parties agree to the following:

(b) Sean Delaney interests acquire all of Pat Delaney interests in the Delplant Group (the interests) for the sum of $10,000,000.00 (settlement sum) as outlined below

1. Pat Delaney interests in the total interests in Mt Salazia Development Trust inclusive of Delplant Pty Ltd and Protace Pty Ltd and associated companies;

2. Pat Delaney interests in interest and shares in Delplant Haulage Pty Ltd;

iii. Pat Delaney interests in shares and interest in Hervet Pty Ltd;

1. Pat Delaney interests interest in (loan and equity) in South East Plant Hire Pty Ltd on the basis South East Plant Hire Partnership no longer exists including the proceeds of any loans and liabilities that exists between the new South East Plant Hire and the old South East Plant Hire.
2. Pat Delaney interests shares and interests in Delplant Properties Pty Ltd and Delplant Properties Trust and its assets.
3. Patrick Delaney and/or his associates resign as Directors of Delplant Pty Ltd, Hervet Pty Ltd, Protace Pty Ltd, South East Plant Hire Pty Ltd, Mt Salazia Developments Pty Ltd, Trenchbox Pty Ltd and any other associated and relevant company's [sic].
4. Your client [sic] resigns immediately with his last day being 30th of June 2020. There is no applicable redundancy payment.
5. Any other company associated with the Delplant group or company.

ix. Mutual releases to be made between the parties.

2. NON-COMPETE CLAUSE

(a) Pat Delaney and his interests and family agree

(i) They shall not involve itself in anyway [sic] with any business or activity undertaken by the Delplant other than as an employee within the State of Victoria for a period until the 30/9/2021.

(ii) Have received valuable consideration for the restraint.

3. SETTLEMENT

(a) The settlement sum shall be paid as follows:

(i) $5,000,000.00 on 15 July 2020.

(ii) $2,500,000.00 on 16 November 2020

(iii) $2,500,000.00 on 15 July 2021

(b) On the payment of $5,000,000.00 on 15 july [sic] 2020 Pat shall hand to Sean all necessary share transfers, unit transfers, executed documents as drawn by Seans Solicitors [sic] to enable the transfer of the interests and resignation as director of all companies in the delplant group [sic].

(c) On execution of this heads of agreement Pat hereby resigns as an employee of Delplant group, with such resignation to take effect 30/6/20. Pat shall not attend the premises or any workplace of delplant group [sic] from the date hereon.

4. GENERAL

(a) These Heads of Agreement are intended to legally bind the parties.

(b) The parties agree to negotiate in good faith the terms of a formal agreement (Further Agreement) recording more fully and precisely the terms of this Heads of Agreement and any additional terms that the parties may reasonably require.

5. In respect of any accounting and taxation implications it is proposed would be settled by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties inclusive of Beneficiary, Unitholder and Shareholder Loans.

6. In the event that the Further Agreement cannot be concluded by 10 June 2020, and this time is not extended by agreement of the parties, then the terms of this Heads of Agreement will prevail.

7. The parties agree to take all steps and do all things necessary to give legal and commercial effect to the terms of this Heads of Agreement.

284 On 29 May 2020, Mr Darling sent an email to Mr Allen headed 'Several preliminary matters 29 May20' (the '29 May 2020 email'). In that email, he advised that he was putting together a list of likely clause headings which he aimed to provide to Mr Allen by Monday, 1 June 2020 so that the drafting of a more formal agreement could commence.

285 The 29 May 2020 email noted that, from a practical perspective, there were several points to work through, including that Pat is now effectively on leave until his resignation takes effect and will not, during this period, attend the office or the site unless specifically requested by Sean or James.

286 The email also noted a number of matters from a 'personal effects perspective', including Pat's access to retrieve/extract his personal information stored on the company's email servers, and retention of his telephone so that personal contacts or messages can be taken down and/or migrated to a replacement service. It also referred to the need for relevant financial information concerning Delplant '(re: the 31/3 financials)' so that Pat could address his insurance compliance issues.

287 The email also recorded that, for the restraint clause in the HoA, 'there will obviously need to be a relevant business description provided'. The email concluded:

There will likely be other matters to be raised (of course there will be) but these will come more to light as the clauses get identified and the agreement, drafted but these are a few of the points arising at the present time. Pending this and my next email to you, once again, I express my thank you to you, personally, Jonathon for your constructive, involved and guiding assistance over the course of this week, and to Sean, for all his assistance (as well as with patiently putting up with my one-track (one size fit for all the office floorplate) thermostat setting concerning the boardroom on Wednesday. You [sic] combined assistance was much appreciated.

288 Mr Allen replied that day noting that it was pleasing to see the issues worked through in a respectful and mature manner. He stated that he would read the email over the weekend for initial input and discussion.

289 On Thursday, 4 June 2020, Mr Allen sent the 29 May 2020 email to Sean and James for their instructions. It appears there was little urgency on his part to address the issues raised by Mr Darling, notwithstanding that the parties anticipated a more formal agreement by 10 June 2020.

290 Further, Mr Lidonnici called Mr Maric on 29 May 2020. He said they discussed Pat's insurance claim. He also said that during the course of that phone call he said to Mr Maric that they had to organise how the settlement sum will be paid. He said Mr Maric suggested that the two payments of $2.5 million could be paid as a consultancy service agreement. Mr Lidonnici replied that that would be the worst case scenario for Pat. Mr Lidonnici also said he asked Mr Maric for the up-to-date financial statements, which he needed in order to meet with Mr Maric.

291 Mr Maric gave evidence that he recalled speaking with Mr Lidonnici to get a feeling for what the Pat interests' attitudes were for certain things, but could not recall the exact dates. Mr Maric did not recall a discussion about Pat invoicing for services. Rather, he said it was a general discussion to see how the matter could be progressed.

292 Mr Lidonnici's version of his conversation with Mr Maric is consistent with an email he sent to Mr Darling and Pat on 2 June 2020. In that email he said there was a 'brief discussion' with Mr Maric regarding payment of the settlement sum. Mr Lidonnici stated that 'it seems straight off the bat that it would be difficult to find a position that suits both parties'. The email continued:

An example being that Zvonko quickly suggested that the 2 payments of $2.5M being invoiced by Pat for services, which would mean that it's all assessable income and Pat would lose approximately $2.5 M on the second $5M.

I have had the opportunity to look at alternative ways of getting the $10M out to Pat and ... would result in a possible at best position of $1.5M tax bill for Pat.

I have discussed this Pat [sic] and he advised that he was assured that he would get $10M after tax in his hands at mediation and he is not happy with paying any tax at all .

On top of this, initial communications with CommInsure are very uncertain on whether his claim would continue so that's another blow to Pat if that occurs with a potential claim of $1.5M being lost .

I suggest that we discuss this urgently tomorrow as Pat has stated that he definitely does not accept the outcome with a tax bill payable.

293 I note in passing that, on the evidence before me, there was no assurance given to Pat by Sean at the 27 May 2020 meeting that 'he would get $10M after tax' for the sale of his interests in the Delplant group, as suggested in Mr Lidonnici's email. In cross-examination, Pat did not accept that Sean did not give such an assurance. He gave evidence that 'it was implied that ... when we got the taxation side of it, to minimise tax to the best of everyone's ability, which means I would take the tax advantages over Sean'.[24] While that may have been Pat's subjective belief, there was no proper basis for it based on the evidence before me. Further, this belief is directly inconsistent with the words of cl 5 of the HoA which provides for a 'mutually beneficial taxation outcome for both parties'.

294 Mr Lidonnici said that on a couple of occasions he then tried to organise a meeting with Mr Maric but that they never met. Mr Maric said that he started sending information to Mr Lidonnici after he received a copy of the HoA from Mr Allen on 5 June 2020. He also said that he tried to contact Mr Lidonnici to confirm his availability for a meeting, but he did not get a lot of response. In cross-examination, Mr Lidonnici agreed that Mr Maric contacted him to organise a meeting. However, Mr Lidonnici disagreed that he did not meet with Mr Maric because Pat no longer wanted to proceed with the deal and said that he was waiting on information from Mr Maric before they could meet.

295 On Monday, 8 June 2020, Mr Allen wrote an email to Mr Darling advising he was going through the matters raised 'last week' and enquired whether Mr Darling had his headings ready. He noted that Mr Maric indicated that it was preferable that a final agreement be executed in July 2020. As a result, he said he suggested that the parties alter the time for the final agreement to 'say 5 July 2020'.

296 Mr Darling sent a further letter or email to Mr Allen on 11 June 2020 (the '11 June 2020 email'). It did not provide a list of headings for a further agreement. Rather, it purported to terminate the HoA with immediate effect.

297 The 11 June 2020 email set out in some detail the dealings between the Sean interests and the Pat interests since the HoA was executed. For example, it noted that none of the requests in the 29 May 2020 email had been granted or acted upon. In particular, it noted that financials to 31 March 2020 had not been provided despite repeated requests. It also noted that the 2019 tax information had not been provided despite repeated requests by Pat, Mr Lidonnici and MWL.

298 Further, the 11 June 2020 email sated that Pat had been requested to sign several term deposit releases. It advised that no further term deposits were to be entered into without the approval of Pat. It also noted that Pat had been told to sign the novated lease with reference to the FHDB JV entity. It also noted that there was a tax audit of Delplant, Hervet and the Leederville JV.

299 It referred to the suggestion of Mr Maric that Pat should invoice Delplant for his services in order to obtain the second and third instalments of the settlement sum. It noted that this would cause 'maximum (not efficient) tax damage' to Pat regardless of any programmed audit.

Simply put, Pat Delaney has now said, that enough is enough.

It's one thing that certain actions of a unilateral nature may have occurred but the basic decency, respect and professionalism that should have been shown in reference to the financials, email access (collection and extraction), and related matters, has taken this beyond the pale.

When this type of behaviour is taking place, is ongoing, and is being scaled up in its intensity, impact and outcome, there can be no meeting of the minds as between the brothers. I am therefore instructed that any exit deal between the parties is at an end.

Accordingly, we are instructed that the Heads of Agreement is, so far as Pat Delaney is concerned, terminated with immediate effect. We are further instructed that this is due to:

• the conduct, behaviour and engagement that has taken place since 27/5 in reference to Pat Delaney directly;

• the further actions and behaviours and engagement of your client's accountant; and

• the continuing failure to provide the various administrative outcomes that were set out in my email to you of 29/5. It does not take almost 2 weeks for such administrative actions to be attended to.

301 The 11 June 2020 email then mapped out a way forward. It noted the possibilities of a claim for oppression and litigation. It noted the possibility of a sale of the business to a third party. It conceded that there was no logical pathway forward for both brothers to be involved in operational management. It noted that the only outcome which Pat would accept was an exit price of $15 million. Further, it noted that Pat was prepared to accept the results of an independent valuation of the Delplant business subject to certain conditions. The email also noted that MWL had consents from Pitcher Partners to act as voluntary administrators of the Delplant group.

302 Mr Allen replied by letter dated 12 June 2020. That letter states that the 11 June 2020 email was without prejudice. I am unsure if this is so. Mr Allen stated that the allegations in the 11 June 2020 email were not correct.

303 As to the email issue, he noted this was not raised at the 27 May 2020 meeting. However, Mr Allen stated that he was prepared to recommend to his client that the company make Pat's emails available to him and a nominated representative in the presence of the IT Manager of Delplant.

304 As to the provision of the financials to 31 March 2020, Mr Allen advised that this did not form part of the HoA, with the result that there was no requirement to forward them to Pat. Mr Allen sought that Mr Darling 'indicate to us what specifically you require from the draft March results' in order for him to discuss that with his client.

305 As to the taxation issues, Mr Allen advised that he had been instructed that Mr Maric had not spoken directly with Mr Lidonnici since February 2020. Of course, this was not correct. They had met in March 2020 and had a telephone conversation in late May or early June 2020. Mr Allen advised that he understood that it was in those February 2020 discussions that the use of service agreements was raised as a discussion point only. Mr Allen advised that Mr Maric was currently obtaining the necessary information to enable him to be in a position not only to finalise the March results but also to do the necessary projections for him and Mr Lidonnici to discuss the payment of the settlement sum on 15 July 2020.

306 Otherwise, Mr Allen reiterated that there was a binding heads of agreement between the parties and that Pat could not unilaterally withdraw from it. He concluded by noting his instructions 'to have this matter ready for settlement as per the heads of agreement for the [sic] July 15 2020'.

307 After this time, it would appear that Mr Maric was instructed to provide some of the information requested by MWL to Mr Lidonnici. On 19 June 2020, Mr Maric sent to Mr Lidonnici the profit and loss and balance sheet as of June 2020. Mr Lidonnici sent these on to Mr Darling and Pat on 20 June 2020. Further, on 22 June 2020, Mr Allen wrote to Mr Darling noting that Mr Maric had forwarded 'the March figures as requested'.

308 On 23 June 2020 at 11:30am, Mr Maric sent an email to Mr Lidonnici enclosing the balance sheet to 31 May 2020. He sent a further email at 11:32am that day asking when he and Mr Lidonnici were meeting. He asked Mr Lidonnici to contact him if he required any further information. At 2:52pm, Mr Maric sent an email providing an updated income statement and balance sheet to 31 May 2020.

309 On 25 June 2020, Mr Darling wrote a long letter to Mr Allen. In that letter, he relevantly summarised the Delplant group entities. He referred to the March quarter 2020 accounts only being provided on 19 June 2020. It noted the flurry of emails with further financial information for April and May 2020 being provided on 23 June 2020.

310 It then provided a detailed summary of the business during the relevant period. I will go through the letter in detail. It asserted that the May 2020 meeting did not proceed in good faith and matters materially relevant were not disclosed or exchanged as they should have been. It asserted that the HoA had been repudiated by reference to Sean's conduct. Alternatively, it relied upon material non-disclosures and misrepresentations made leading up to the HoA as a basis for the termination of the HoA. I note that Mr Lidonnici agreed that after this letter was sent there was no point in meeting with Mr Maric from this point on, and that he was instructed not to contact Mr Maric from this time.

311 Significantly, there is the July 2020 draft statements for FY 2020. As noted above, these statements comprise of two documents: an income summary sheet (the '15 July 2020 summary') and an income statement for FY 2020 (the '15 July 2020 income statement'). The evidence before me was that the 15 July 2020 summary and the 15 July 2020 income statement were drafts prepared on or about 15 July 2020 by Delplant's accountant, Sally Hooft, and were subject to further adjustment. At the time of the trial, the financial statements of the Delplant group for FY 2020 had not been finalised. There is also the July project sales summary for the period ended 30 June 2020 referred to above.

312 The 15 July 2020 income statement records for FY 2019:

(1) the project sales of Delplant were $24,390,078;

(2) the net income before distributions from the JV and payments from the Australian Tax Office was $7,771,653 or 31.9%; and

(3) the net income before tax including payments from the JV was $8,061,653 or 33.1%.

313 The 15 July 2020 income statement records for FY 2020:

(1) the project sales of Delplant were $19,290,992;

(2) the net income before distributions from the JV and payments from the Australian Tax Office (including job keeper) was $5,080,680 or 26.3%; and

(3) the net income before tax including payments from the Australian Tax Office (including job keeper) was $5,376,680 or 27.9%.

314 The 15 July 2020 summary contains different figures, reflecting adjustments to both revenue and income. It records that:

(1) the adjusted operating revenue (or project sales) for FY 2020 was $19,290,992; and

(2) the adjusted operating net income was $4,465,065 or 23%. This excluded any job keeper income as a result of the COVID-19 pandemic.

315 As noted above, the 15 July 2020 income statement is significant because it was relied upon by the defendants, consistent with [25] of the counterclaim, to assert the falsity of the representations in [22] of the counterclaim. This is because there was a significant difference between the project sales, net income or profit and profit margin alleged in the representations and in the 15 July 2020 income statement.

316 The defendants sought to rely upon the July 2020 draft statements and, in particular, the 15 July 2020 income statement as proof that the representations alleged in [22] of the counterclaim were false. I will address this further below. However, I note at this stage that there was a significant decline in the performance of Delplant from FY 2019 to FY 2020. This is evident from the comparison of those years in the 15 July 2020 income statement set out in [312]-[313] above.

317 For completeness, I have reviewed the 'project revenue' on the 15 July 2020 income statement (which includes sales to the JV) as against the February project sales summary (which does not include sales to the JV). There is a general consistency between the project sales recorded for the moths of July 2019 to February 2020. On average, it appears that the amounts in the 15 July 2020 draft income statement are $200,000 to $300,000 more than the sales recorded in the February 2020 project sales summary for those months. In my view, this confirms my conclusion that I have no reason to doubt the accuracy contained in the project sales summaries referred to above.

318 It is appropriate that I note at this stage that it was faintly suggested at trial that the plaintiffs would have been aware of the project sales, at least of March and April 2020, by the time that the HoA was executed, but that this financial information was withheld from the defendants. However, this case was not alleged in the pleadings and I do not intend to further address it in these reasons.

319 In summary, the plaintiffs seek specific performance of the HoA to allow them to purchase Pat's interests in the Delplant group. Given that the defendants disputed that the HoA was binding or enforceable, it is appropriate that I set out first their basis for doing so. In summary, the defendants submitted that all essential elements necessary to give rise to a binding agreement are not met in the HoA, with the result that the HoA falls into category (iii) of the categories set out in Masters v Cameron,[25] namely that the terms of the agreement were not intended to have and do not have any binding effect on their own. They pointed, in particular, to cl 4(b) of the HoA, which provides for the parties to negotiate in good faith the terms of a formal agreement and 'any additional terms that the parties may reasonably require'.

320 Further, the defendants relied upon a number of matters in the HoA which they submitted needed to be clarified and the subject of further agreement and documentation. These are reflected in the matters raised in issues 1 and 2 of the issues for determination. These included:

(1) the parties to the HoA include the SEPH Company but no director of that company is a signatory to the HoA;

(2) the failure to identify the purchaser or purchasers of Pat's interests;

(3) the failure to identify Pat's interests in fact being sold pursuant to cl 1(b);

(4) the failure to address the consequences of non-payment of the amounts in cl 3 (linked to (2) above);

(5) the uncertainty of cl 2, including that it purports to bind Pat's 'family' who are not parties to the HoA;

(6) cl 4(b), which provides for the parties to negotiate in good faith the terms of a formal agreement and 'any additional terms that the parties may reasonably require';

(7) cl 5, which relates to a proposal for the settlement of accounting and taxation implications of the transfer of Pat's interests 'by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties inclusive of Beneficiary, Unitholder and Shareholder Loans'; and

(8) the fact that on 8 June 2020, Mr Allen, on behalf of the plaintiffs, suggested the date for the final agreement be altered to 5 July 2020.

321 I will deal with each of these in turn. However, I note that the defendants relied upon them individually and in combination to submit that, on an objective analysis, there was no intention for the HoA to have a binding effect despite the language of cl 4(a) and cl 6. In the alternative, they submitted that the HoA was unenforceable because cls 1, 2 and 5 were void for uncertainty.

322 In summary, the plaintiffs submitted that the words of the HoA, in the context surrounding its signing on 27 May 2020, lead to the conclusion that Pat and Sean intended to be immediately bound by it.

323 First, they paid particular attention to the structure and language of the HoA. They paid particular reference to cls 4(a) and 6 which provide, in summary, that the HoA is 'intended to legally bind the parties' and, in the event that no further agreement is concluded, then 'the terms of [the HoA] will prevail'. They also noted the overall language of the document, including phrases such as 'the parties have agreed to the sale' and 'the parties agree to the following...'. They also noted the execution clause which each of Sean and Pat signed in the presence of their lawyer.

324 Second, they submitted that the HoA included all essential terms necessary for the sale of Pat's interests in the Delplant group to Sean, including the price, the subject matter and the payments to be made. They disputed that each of the matters relied upon by the defendants were required to be the subject of express agreement. They submitted that any steps that remained to be undertaken, such as the manner of payment or the settlement of possible taxation implications, related to mechanical and non-essential matters, rather than fundamental ones upon which the parties were required to agree to give rise to an enforceable agreement.

325 In this context, I shall deal with each of the matters which the defendants submitted required further clarification. Before doing so, I will set out the relevant law.

326 The relevant legal principles for the most part were not in dispute. It was the application of those principles to the HoA where the parties were diametrically opposed. In this regard, the defendants generally agreed with the legal principles set out by counsel for the plaintiffs in [2] of their written closing submissions dated 23 November 2020 (the 'plaintiffs' written closing submissions'). I wish to acknowledge the assistance provided by counsel for the plaintiffs in distilling the principles in that paragraph. It provides as follows (citations omitted):

2. The applicable legal principles are orthodox, although their application will always depend on the particular circumstances and facts. Relevantly:

1. The issue of whether parties intended a document to be a binding contract is to be determined, objectively, from the text of the document, construed in the context of the circumstances of the parties at the time it was entered into.

2. It is relevant to take into account the commercial context and surrounding circumstances of the parties' dealings. The parties' pre-contractual conduct is also relevant and admissible on the issue of what each party by words and conduct would have led a reasonable person in the position of the other to believe.

   1. Generally speaking, it is not legitimate to use as an aid in the construction of the contract anything the parties said or did after it was made. However, regard may be had to the parties' subsequent communications in determining whether a binding contract was in fact formed and as admissions.

   2. In circumstances where the document to which the parties have agreed contemplates that they will enter into a further formal contract, the question of whether the first document constitutes a legally binding contract is also to be determined by reference to the objective intention of the parties. In Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360, Dixon CJ, McTiernan and Kitto JJ identified the following three categories which may arise in that situation:

      1. First, where the parties have reached finality in arranging all the terms of their bargain and intend to be bound immediately to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise, but not different in effect.
      2. Second, where the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.
      3. Third, where the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

   3. A fourth category has also been identified in the cases, namely: where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, while expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

   4. A document which falls in the first, second or fourth categories is an immediately binding contract, whereas a document which falls in the third category is not. However, the categories are not exhaustive or strict and the issue of classification should not be allowed to obscure the real task of ascertaining the intentions of the parties.

   5. The question whether the parties intended to reach a concluded agreement is not the same question as whether assuming such an intention they reached an agreement on sufficient terms to constitute a legally enforceable contract. However, where essential terms are uncertain or missing, inferences may be drawn that the parties lacked the requisite intention to contract. But a court is slow to conclude that the parties have not agreed because a term is vague or uncertain. Courts do their utmost to uphold commercial bargains even where there may remain uncertainties.

   6. In determining uncertainty issues, the task of the Court is to construe the document according to the ordinary canons of construction. Evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning and the Court may admit such evidence in the form of 'mutually known facts' to identify the meaning of a descriptive term. The fact that opinions may differ as to which of two possible meanings is to be given to the words of a clause in a contract does not mean that a clause is uncertain; it is only if the court is completely unable to put any definite meaning on the contract that it can be said to be uncertain. Put another way, an agreement will be enforced provided it is not 'utterly impossible' to place a reasonable meaning on the language used and to discern the parties' intention.

   7. The court have [sic] also acknowledged that 'business men often record the most important agreements in wide and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise'.

   8. In considering severability, the court will look to the objective intention of the parties as to whether the operation of the contract apart from the impugned part was to be conditional on the efficacy of that part, or whether it was to take effect notwithstanding the failure of that part. Severance may occur if it does not materially alter the nature of the bargain that the parties have struck.

   9. Once contractual intention is proven, courts are astute to adopt a construction which will preserve the validity of the contract. Thus, a court will generally give effect to the parties' intentions by overcoming difficulties said to result from uncertainty or incompleteness. As Kirby P observed in Geebung Investments v Varga Group Investments No 8 Pty Ltd: the courts should be the upholders of bargains and not their destroyers, and it should not be the purpose of the law to 'rifle through the terms to find some particular which has not been agreed, which a party later seeking to renege relies upon in order to escape its bargain.'

327 As noted above, the defendants did not dispute these principles but noted that the application of them depended upon the facts of each case. For example, they noted that in Nurisvan Investment Ltd v Anyoption Holdings Ltd ('Nurisvan'),[26] the Court found that there was no objective intention to create a concluded agreement notwithstanding that the written document in that case stated it was intended to be legally binding. However, the defendants did not agree that subsequent conduct cannot be taken into account in determining whether there was an intention to be bound. I will deal with this further below.

328 For my part, I am in general agreement with the principles summarised in [2(a)], [2(b)], [2(d)-(f)], [2(g)], [2(i)] and [2(j)] of the plaintiffs' written closing submissions.

329 As to the principles summarised in [2(b)] and [2(c)] of the plaintiffs' written closing submissions, the authorities make plain that, in determining whether the parties intended to create an immediately binding agreement, the issue is 'to be determined, objectively, from the text of the document, construed in the context of the circumstances in which it came into being'.[27] As the Victorian Court of Appeal noted in Molonglo Group (Australia) Pty Ltd v Cahill ('Molonglo'):

It is relevant to take into account the commercial context and surrounding circumstances of the parties' dealings. The parties' pre-contractual conduct is relevant and admissible on the issue of what each party by words and conduct would have led a reasonable person in the position of the other party to believe.

Post-contractual conduct can also be admissible on the issue of whether the parties intended a document to be a binding contract, but only in limited circumstances, such as where the conduct constitutes an admission against interest.[28]

330 As to the relevance of subsequent negotiations, the Victorian Court of Appeal in Nurisvan noted:

In a number of the authorities, it is suggested that evidence, of subsequent negotiations, is admissible to determining whether the parties intended that a particular document be a binding contract between them. However, that view has been expressed, principally, in cases involving contracts that are said to have come into existence as a result of an exchange of correspondence or other communication between the parties, as distinct from a case such as the present, in which the respondent relied on a single document concluded between the parties.[29]

331 With respect, I agree with those views. Thus, in Queensland Phosphate Pty Ltd v Korda, a case involving an exchange of emails, the Victorian Court of Appeal held that regard may be had to subsequent communications between the parties '(1) in order to see what was important or essential to the transaction; (2) as admissions; and (3) as probative of the parties' contractual intention'.[30]

332 As to the principles summarised in [2(g)] of the plaintiffs' written closing submissions, the Victorian Court of Appeal noted in Nurisvan that the question of whether the parties intended to reach a concluded agreement is not the same question as whether, assuming such an intention, the parties' agreement constitutes a legally enforceable contract.[31] In doing so, they adopted the following passage from the judgment of Gleeson CJ (with whom Hope and Mahoney JJA agreed) in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd:

It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that the parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.[32]

333 As to the principles summarised in [2(h)] of the plaintiffs' written closing submissions, I am in agreement with the principles summarised in the first two sentences. However, as to the last two sentences, I would prefer to express the principle in the more restrained terms expressed in The Interpretation of Contracts, namely that 'where parties have entered into what they believe to be a binding agreement, the court is most reluctant to hold that their agreement is void for uncertainty, and will only do so as a last resort'.[33]

334 As to the principles summarised in [2(k)] of the plaintiffs' written closing submissions, I am in agreement with the principles summarised in the first two sentences. However, I would, with respect, decline to adopt the language of Kirby P in Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd.[34]

335 I wish to say something further about agreements to agree. It is well established that the parties to a contract may leave terms - even essential terms - to be determined by a third person. For example, in Sudbrook Trading Estate Ltd v Eggleton ('Sudbrook'), an option clause on a lease provided the lessee with an option to purchase the reversion of the fee simple in the premises 'at such price not being less than £12,000 as may be agreed upon by two valuers one to be nominated by the lessor and the other by the lessees or in default of such agreement by an umpire appointed by the said valuers'.[35] The price was clearly an essential term. The House of Lords held that the option was enforceable as it contained the entire mechanism for determining the rental and did not depend upon the further agreement of the parties.

336 Further, as noted in Nurisvan, the fact that the parties might negotiate further additional terms, that were not included in the first agreement, is not necessarily inconsistent with a conclusion that the first agreement constituted a binding contract between them.[36] However, it seems clear that an intention to create legal relations will only be established in such circumstances if all the essential terms have been addressed between the parties, either in the agreement itself or by an agreed enforceable mechanism.

337 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd ('G R Securities')[37] was case involving an exchange of correspondence relating to the sale of land, buildings and equipment. The counter offer noted that, on receipt of acceptance, the client would consider there 'to be a legally binding agreement in principle ... until such time as formal Contracts were exchanged'.[38] There was no indication as to what the terms of the 'formal Contract' might be. The Court concluded that the parties were bound by the exchange of correspondence, notwithstanding that a further, more formal agreement was contemplated. McHugh JA (with whom Kirby P and Glass JA agreed) stated:

If the parties agreed on additional terms, they would be added to the formal contract. If they did not, the formal contract would give effect only to the agreed terms and conditions of the correspondence.[39]

338 This conclusion was predicated on the basis that all essential terms were contained in the exchange of correspondence (namely: parties, property and price), and that other terms could be implied, including that each party would do all things necessary to give the other the benefit of the agreement. Thus, the Court found an intention to create legal relations notwithstanding that there was no further agreement on non-essential terms between the parties.

339 Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd ('Air Great Lakes')[40] was a case involving one document headed 'Terms of Agreement' relating to the purchase of the business and assets of an airline operator. Those terms contemplated a further formal agreement. Clause 8 provided for the conditions of the sale to be the '[a]ppropriate conditions in the annexed form of contract of sale of business, together with any additional terms and conditions recommend by the parties' legal advisers'.[41] Further, cl 4(b) provided that the payment of the balance of the purchase price 'shall be the subject of a further agreement and secured by first legal mortgage'.[42]

340 The Court concluded that the Terms of Agreement constituted a binding agreement. Each member of the Court gave different reasons. Further, Mahoney and McHugh JJA had regard to the extrinsic evidence of the surrounding circumstances for the purpose of objectively determining whether there was an intention to create legal relations.[43]

341 As to the written terms, Hope JA (which whom McHugh JA relevantly agreed) considered that the test imposed by cl 8 for the 'appropriate' terms to be included in the contract of sale was objective, not subjective. Hope JA considered this pointed 'to an intention to contract rather than deny it' and was an attempt to address the 'machinery matters'.[44] Further, his Honour stated that the fact that cl 8 contemplates a more formal agreement containing terms not yet agreed did not preclude against the existence of a concluded contract.[45]

342 Mahoney JA dealt with the concept of agreeing reasonable terms in the context of both cls 4(b) and 8. As to cl 4(b), Mahoney JA concluded that the selection of security and the settlement of the terms of the mortgage were not an essential part of the agreement, but a subsidiary means of carrying it out, with the result that the court could determine the security and terms if need be.[46] However, there was oral evidence that it was agreed that the form of security would be left to the mortgagee's legal advisers. Mahoney JA considered that this fact did not tend against an intention to create legal relations.

343 In this context, Mahoney JA noted that the fact that the choice of terms in a lease may be 'reasonably' made by a party has been held not to prevent a binding contract arising.[47] In doing so, his Honour referred to the judgment of Walsh J (with whom Mason J agreed) in Godecke v Kirwan ('Godecke').[48] Walsh J referred in turn to the decision in Sweet & Maxwell Ltd v Universal News Services Ltd ('Sweet & Maxwell'),[49] in which an agreement contained a provision for a lease to be taken on certain terms; one of which was that 'the lease shall contain such other covenants and conditions as shall be reasonably required by Sweet and Maxwell'.[50] Walsh J continued:

In that case the Court of Appeal held that there was a concluded contract for the taking of a lease which was capable of specific performance. What the lessor could demand was limited by the requirement that it must be reasonable and in the event of a dispute between the parties as to the reasonableness of a requirement the court could decide whether it was reasonable or not.[51]

344 I note that Gibbs J in Godecke also referred to Sweet & Maxwell, noting that the Court of Appeal placed considerable reliance upon the fact that the parties had imported 'the familiar and objective standard of reasonableness'.[52]

345 Mahoney JA then considered cl 8 of the Terms of Agreement. His Honour noted that, in general, parties may not provide for the incorporation into an agreement of further terms which they themselves agree, as such an agreement would not constitute a legally binding agreement. His Honour continued:

But they may provide that the terms, or additional terms, of their agreement are to be settled by third a party. Clause 8, properly construed, is a provision of the latter kind. The legal advisers, in determining what is to be recommended to the parties, would be acting not, as such, as agents of the parties or either of them: they would respectively be exercising an independent judgment, committed to them by the clause. The clause contemplates, in my opinion, that those terms and conditions to be applied to the contract shall be those which the legal advisers of both parties recommend. I do not think that the clause was intended to operate upon, for example, a term which the legal adviser of one party might recommend and the legal adviser of the other party not recommend or even oppose. But, given agreement between the legal advisers, the terms and conditions agreed upon would be 'applied' to the agreement of the parties. To the extent that the legal advisers could not agree upon 'any additional terms and conditions' the agreement, and therefore the contract, between the parties would be that which they themselves had settled.[53]

346 It is appropriate to have regard to the nature of the terms of, and language used in, the HoA. Before doing so, I wish to note the context in which the HoA was executed. The parties had been negotiating for some time for the sale of Pat's interests in the Delplant group to Sean. Pat had just been made redundant and the parties and their legal advisers met on 27 May 2020, at which time the HoA was negotiated and executed.

347 I am conscious that the defendants contended that the original purpose of the meeting was to discuss redundancy issues only and that the plaintiffs disputed this. In my view, little turns on that matter given that it and the sale of Pat's interests were the subject of the HoA executed by the parties. What is of significance is that each of Sean and Pat had access to their legal advisers who assisted in the negotiation, drafting and execution of the HoA. In addition, Pat had the assistance of his accountant, Mr Lidonnici, during the course of the negotiations leading up to his execution of the HoA.

348 I will have regard to particular aspects of the surrounding circumstances of the parties' dealings later in these reasons.

349 First, the HoA looks like a formal agreement between the parties. It is headed 'Heads of Agreement' with 'Date: 27 May 2020' underneath. It contains the headings 'Parties' and 'Agreement'. It contains eight clauses, each with its own sub-heading. There is an execution clause at the end signed by each of Sean and Pat 'for and on behalf of the [Sean/Patrick] Delaney interests who warrants he has authority to sign by...'. There is a witness to each of their signatures. Thus, the form and structure of the HoA are consistent with an intention to create a concluded agreement.

350 Second, the parties to the HoA are listed under the heading 'Parties'. This includes 'Sean Anthony Delaney and his associated company's [sic]' and 'Patrick Joseph Delaney and his associated company'. It is clear that each of Sean and Pat are parties. This is so given, among other things, each personally owns shares in Delplant Properties, Mt Salazia Developments and Hervet. I have concluded that the reference to Sean's 'associated company's [sic]' is a mistake and should be a reference to his 'associated company'. Further, as I set out below, I consider that, in the context of the HoA and the Delplant chart, this is a reference to Skildale given that Skildale is the entity through which Sean holds most of his interests in the Delplant group. Further, and for similar reasons, I have concluded that Pat's 'associated company', in the context of the HoA, is a reference to PDC given that PDC is the entity through which Pat holds most of his interests in the Delplant group. The other parties listed under the heading 'Parties' are the other relevant companies in the Delplant group and also the SEPH Partnership.

351 Third, the recital to the HoA provides that the parties 'have agreed to the sale of Pat Delaney's interests in the Delplant Group to Sean Delaney interests as set out in this Heads of Agreement'. The words 'have agreed' are consistent with an intention to create a concluded agreement.

352 Fourth, cl 1(a) provides that 'the parties agree to the following...'. Once again, those words are consistent with a concluded agreement having been reached. Clause 1(b) then provides that 'the Sean Delaney interests acquire all of Pat Delaney interests in the Delplant Group (the interests) for the sum of $10,000,000.00 (settlement sum)', as outlined in that clause. The word 'acquire' is also consistent, in my view, with an intention to create a concluded agreement. Clause 1(b) then sets out the particular assets of Pat in the Delplant group which are to be transferred. In addition, cl 1(b) contains provisions for 'your client' (which I have understood to mean Pat) to resign immediately with his last day being 30 June 2020 and with no applicable redundancy payments, and that there are to be mutual releases made between the parties.

353 Fifth, the HoA contains a non-compete clause in cl 2. I will deal with this further below. For present purposes, I note that it commences 'Pat Delaney and his interests and family agree'. Those words are also consistent with a concluded agreement having been reached.

354 Sixth, the HoA then contains terms relating to payment of the settlement sum by instalments. Clause 3(a) provides that '[t]he settlement sum shall be paid as follows', and then sets out three instalments over 12 months of specified dates. In my view, the words 'shall be paid' are consistent with a concluded agreement having been reached. Relevantly, cl 3(b) provides that, on payment of $5 million on 15 July 2020, Pat 'shall hand to Sean all necessary share transfers, unit transfers, executed documents as drawn by Seans Solicitors [sic] to enable the transfer of the interests and resignation as director of all companies' in the Delplant group. In my view, this provision is also consistent with an intention to create a concluded agreement by the HoA.

355 Seventh, cl 4(a) expressly provides that '[t]hese Heads of Agreement are intended to legally bind the parties'. This is the clearest expression of an objective intention of the parties that the HoA was to be immediately legally binding.

356 Eighth, cl 4(b) recognises that there may be a need for a more formal agreement. It provides:

The parties agree to negotiate in good faith the terms of a more formal agreement (Further Agreement) recording more fully and precisely the terms of this Heads of Agreement and any additional terms that the parties may reasonably require.

357 Consistent with the authorities set out above, the inclusion of such a term is not necessarily inconsistent with an intention of the parties that there be an immediately binding agreement. This is particularly so in light of the terms of cl 4(a).

358 Ninth, and related to the eighth point, cl 6 provides that, in the event the Further Agreement cannot be concluded by 10 June 2020, then 'the terms of [the HoA] will prevail'. In my view, this term reinforces that the objective intention of the parties was that they intended the HoA to be binding in the event no Further Agreement is prepared or agreed.

359 Tenth, cl 7 provides that the parties agree to do all things necessary to give legal and commercial effect to the terms of the HoA. Once again, in my view, these words are consistent with an intention to create an immediately binding agreement.

360 Eleventh, there is cl 5 in relation to accounting and taxation issues. The wording of that clause is different to the rest of the HoA. It is not expressed in terms of an agreement. Rather, it provides:

In respect of any accounting and taxation implications it is proposed would be settled by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties inclusive of Beneficiary, Unitholder and Shareholder Loans.

361 I will deal with the significance, meaning and effect of this clause in detail below. However, I wish to note at this stage that the terms of cl 5, namely 'it is proposed', stand in contrast to the other provisions of the HoA which refer to the parties having agreed, or agreeing to, the sale of Pat's interests on the terms set out in the HoA. In my view, based upon my review of the structure and language of the HoA, it is only the language of this one clause that suggests the HoA was not intended to create a concluded and legally binding agreement.

362 However, based on the structure and language of the HoA alone, I have formed the view that:

(1) the language of the HoA is almost entirely consistent with an intention to create a concluded and immediately binding agreement; and

(2) save perhaps for cl 5, the HoA contains the essential terms of the bargain for the sale of Pat's interests in the Delplant group to Sean's interests, namely: the assets to be sold, the price to be paid, and the vendor and purchaser.

363 In light of these preliminary comments, I will then consider the individual matters relied upon by the defendants.

9.3.3 Identity of parties: submissions and analysis

364 The defendants submitted that, while the SEPH Company was expressed to be a party to the HoA, neither of its directors, James (the son of Sean) or Kathryn (the wife of Pat), executed the HoA. In these circumstances, the SEPH Company could not be a party to the HoA. As I understood the submissions, there was no dispute that the other Delplant entities listed under the heading 'Parties' were parties to the HoA given that each of Sean and Pat were directors of those other Delplant companies. In any event, I am satisfied that each of those other Delplant companies were parties given that the HoA dealt with matters that affected them and each of Sean and Pat were directors of them when the HoA was executed.

365 Further, the defendants noted that cl(1)(b)(vi) records that 'Patrick Delaney and/or his associates resign as Directors of... South East Plant Hire Pty Ltd'. They submitted that this clause would require Kathryn's signature agreeing to resign as a director of the SEPH Company. It would certainly need to be accommodated in a further agreement. Counsel submitted that this was an indicator that there was no intention to create legal relations and/or that the HoA was unenforceable.

366 The plaintiffs submitted that the facts and context known to both parties provide a sufficient basis for a finding that, to the extent it was necessary to do so, the SEPH Company was a party to the HoA. They noted that the SEPH Company was recorded as one of the 'Parties' and the object of the transaction was to separate out Pat's interests from Sean's interests in the Delplant group. This necessarily included the SEPH Company given that Pat and Sean were the ultimate owners of that company through Mount Salazia Developments.

367 The plaintiffs submitted that James and Kathryn had impliedly or ostensibly authorised Sean and Pat to negotiate on their behalf and on behalf of the SEPH Company. In this regard, the plaintiffs relied upon the fact that:

(1) earlier offers to buy Pat's interests had been addressed to both Pat and Kathryn and expressly referred to the SEPH Company: see the 20 December 2019 letter and the letter from Mr Maric dated 6 January 2020;

(2) James was present during the course of the negotiations on 27 May 2020; and

(3) the breadth of each execution clause is to the effect that each of Pat and Sean warranted that he has authority to sign for and on behalf of the 'Patrick Delaney interests' and the 'Sean Delaney interests' respectively.

368 The plaintiffs submitted that, even if the Court were to conclude that the SEPH Company was not a party to the HoA, this did not manifest an intention by the remaining parties not to be bound by it. Rather, the outcome is simply that the SEPH Company is not bound by the HoA, since no person may be subjected to contractual obligations unless that person was a party to the contract creating the obligations.

369 In my view, in light of the context known to the parties, the SEPH Company is a party to the HoA. It is included in the list of 'Parties' at the start of the HoA. Further, it is clear that the commercial intention of Sean and Pat, in the context in which the HoA was negotiated, was for all of Pat's interests in the Delplant group to be transferred to Sean. That included Pat's interest in the SEPH Company.

370 While it is true that neither Sean nor Pat were directors of the SEPH Company, its shares are held by Mt Salazia Developments, a company in the Delplant group controlled by Sean and Pat. The transfer of Pat's interest in the shares of Mt Salazia Developments to Sean would also result in the transfer of control of the shares in the SEPH Company to Sean. Thus, in my view, there is no issue of an intention to create legal relations or of unenforceability in relation to the SEPH Company on this ground. A similar view was taken by the New South Wales Court of Appeal in Malago Pty Ltd v AW Ellis Engineering Pty Ltd.[54]

371 In the event I am wrong, and the SEPH Company is not a party to the HoA, I agree with the submissions of the plaintiffs that this does not manifest an intention by the other parties to the HoA not to be immediately bound by it or raise issues of unenforceability of the HoA as a whole.

372 As to cl 1(b)(vi), I have concluded that it is not inconsistent with an intention to create a legally binding agreement nor does it render the HoA unenforceable. It simply provides that, as part of the sale of Pat's interests in the Delplant group, Pat and his associates agree to resign as directors of companies in the Delplant group. In my view, it is not relevant to whether the SEPH Company is bound. On the assumption that Pat's 'associates' are not parties to the HoA, cl 1(b)(vi) does not, in my view, evidence an objective intention that HoA is not intended to be a binding agreement. Rather, it means on its proper construction that, as part of the agreement recorded in the HoA, Pat would do all things reasonably necessary to ensure that outcome and his associates themselves are not bound by this clause.

9.3.4 Identity of the purchaser: submission and analysis

373 The defendants submitted that the identity of the purchaser of Pat's interests is not made known in the HoA. This is because cl 1 of the HoA provides only that the 'Sean Delaney interests acquire all of Pat Delaney interests in the Delplant Group'. The defendants submitted that such a general description evidences that there was no objective intention for the HoA to be binding. They submitted this was reflected in a number of ways.

374 First, the defendants submitted it was relevant to payment of the settlement sum. If the purchaser was a two dollar shelf company, then it may be extremely difficult to obtain any commercial redress for the balance of the purchase monies under cl 3 of the HoA. Second, the defendants submitted that the identity of the purchaser was relevant to cl 5 of the HoA in respect of any accounting and taxation implications. The defendants noted that they were prevented by the Court from asking who the purchaser would be, with the result that the question remains unresolved.

375 The plaintiffs submitted that it was sufficiently clear from the HoA that it was Sean's interests who were to acquire Pat's interests in the Delplant group and who were to pay the settlement sum of $10 million. Counsel for the plaintiffs submitted that, based on the terms of the HoA in its context, the only real associated company was Skildale. As a result, counsel submitted that 'the purchaser or purchasers under this heads of agreement forever and a day unchangeably are Sean Delaney personally and Skildale'.[55] The plaintiffs submitted that, in the event of non-payment of the settlement sum, the Pat interests could sue Sean or Skildale under the HoA.

376 However, they submitted that it was possible, consistent with the terms of the HoA, that Sean could nominate a new corporate vehicle to acquire all or part of Pat's interests. I assume that might be for accounting and taxation purposes. They submitted that, the fact that a party is given a discretion as to how to comply with an obligation, does not give rise to uncertainty that renders the contract unenforceable not does it evince an intention that the parties never intended to be bound by it.[56]

377 In my view, the identity of the parties to the HoA is relevant to the determination of the identity of the purchaser. As set out above, I have concluded that it is clear that the reference to Sean 'and his associated company's [sic]' under the heading 'Parties' is, in the context of the structure of Sean's and Pat's interests in the Delplant group, a reference to 'Sean and Skildale'. Thus, Sean and Skildale are two legal persons who are parties to the HoA and who could be sued for breach of the HoA. Further, I have concluded that, for similar reasons, the reference to Pat's 'associated company' under the heading 'Parties' is a reference to PDC. Thus, I have concluded that there is no uncertainty about the principal parties to the HoA.

378 As to who the purchaser would be, cl 1(b) refers to the 'Sean Delaney interests acquir[ing] all of Pat Delaney interests in the Delplant Group'. In the context of the HoA, and the identity of the parties set out in the previous paragraph, I consider that the 'Sean Delaney interests' in cl 1(b) means Sean and/or Skildale, each of whom hold interests in the Delplant group. In my view, consistent with the submissions of the plaintiffs, no other conclusion is sensibly open. Thus, the obligation to buy Pat's interests and the obligation to pay the settlement sum must be read in that light to mean the obligation on Sean and/or Skildale.

379 For completeness, I do not agree with the submissions of the plaintiffs that, consistent with the terms of the HoA, Sean could nominate a new corporate vehicle to acquire all or part of Pat's interests. There is no general right to nominate a substitute purchaser absent an express contractual provision or subsequent agreement. Further, I do not consider that the terms of cl 3(b), which provide that Sean's solicitors may prepare the documents for the transfers of units and shares, vests in Sean's solicitors any such right of nomination. However, that issue may arise when consideration is given to a mutually beneficial taxation outcome in the context of cl 5. I will consider this further below.

380 As a result, there is no uncertainty about the parties to the HoA, the purchaser or payment of the settlement sum which might indicate an absence of intention to be bound by the HoA.

9.3.5 What is being sold and/or purchased: submissions and analysis

381 The defendants raised two issues in final submissions relating to the identity of the assets to be sold. First, they suggested that the HoA also encompassed Pat's interests in the Botanic Ridge properties. They relied upon cl 1(b)(viii), which provides that the Sean Delaney interests agreed to acquire the Pat Delaney interests in 'any other company associated with the Delplant group or company'. The defendants submitted this would include Pat's interests in the Botanic Ridge properties set out in Annexure B.

382 Second, they submitted that the HoA does not address the issue of loans owing to and from the Pat interests with the Delplant group other than the loans between the SEPH Partnership and the SEPH Company. They noted that the accounts of the Delplant group in evidence record that there are substantial beneficiary loans, including a loan from Mt Salazia Developments to the beneficiaries in the sum of $2,342,884 and beneficiary loans in Delplant Properties. The defendants submitted these issues would need to be addressed and clarified. This was in a context where they submitted that beneficiary, unitholder and shareholder loans were an important feature of the HoA. The defendants submitted this was evident by cl 5, which, in summary, provides that it was proposed that accounting and taxation implications would be settled by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties 'inclusive of Beneficiary, Unitholder and Shareholder Loans'. I will deal with this issue in the context of cl 5.

383 As to the first issue, the plaintiffs submitted that the HoA did not fail to identify what was being sold by Pat and purchased by Sean. It was clear from the HoA, in its context, that the sale was of Pats' interests in the Delplant group. This was for a number of reasons. First, the subject matter is listed in cl 1(b). Second, it was objectively apparent that the settlement was to achieve a separation of Pat's and Sean's interests in the Delplant group, including from the words of the recital and cl 1 of the HoA. This was confirmed by the Delplant chart. The meaning of the shorthand terms 'Sean Delaney interests' and 'Pat Delaney interests' was to be determined having regard to the known facts in the Delplant chart. Third, to the extent that there was any doubt, this was confirmed in the 24 February 2020 letter referred to in cl 1(a).

384 The plaintiffs rejected any suggestion that the subject matter of the sale included the Botanic Ridge properties. The plaintiffs noted the substantial value of these properties and that the settlement sum agreed under the HoA was woefully inadequate for the sale of the Botanic Ridge interests.

385 In short, I agree with the submissions of the plaintiffs. First, the context of the HoA related only to sale of the Delplant group for $10 million, not the Botanic Ridge properties which have a value significantly higher than the Delplant group. Second, all the entities listed under the heading 'Parties' in the HoA are entities within the Delplant group and not entities relating to the ownership of the Botanic Ridge properties. Third, and related to the second point, cl 1(b) sets out the companies in the Delplant group in which Pat has an interest and which he was selling to Sean under the HoA. Fourth, to the extent that there is any doubt, the relationship between those companies is made plain by the Delplant chart and is consistent with Pat's interests in the Delplant group being sold.

386 The defendants submitted that the restraint of trade in cl 2 of the HoA was unintelligible and unenforceable for a number of reasons. In oral argument, the defendants conceded that, if cl 2 was unenforceable, it could severed from the HoA. However, they submitted that the unenforceability of cl 2 was a matter to be taken into account in deciding whether there was an intention to be legally bound by the HoA.

387 First, they noted that cl 2(a) provides that 'Pat Delaney and his interests and family agree'. They noted that there is no definition of Pat's 'interests' or of his 'family' members who would be bound by this clause. In any event, neither those other interests nor his other family members were parties to the agreement.

388 Second, they noted that cl 2 restrains those persons from involving themselves 'in anyway [sic] with any business or activity undertaken by the Delplant other than as an employee within the State of Victoria for a period until 30/9/2021.' They submitted that:

(1) there is no indication of what is meant by any business or activity undertaken by 'the Delplant'; and

(2) if the word 'group' were inserted after the Delplant, then this would prohibit Pat and his family from purchasing any property that is the activity of Delplant Properties.

389 The defendants noted this issue was raised by Mr Darling in the 29 May 2020 email. They submitted that this demonstrates that matters needed to be further worked out and clarified.

390 The plaintiffs acknowledged that the HoA does not purport to list the family of Pat as parties. However, they noted that the question of who the parties are to an agreement is to be determined objectively, having regard to not only to the words of the contract but also the words and actions of the parties communicated to each other. The plaintiffs submitted that it may be inferred from the surrounding circumstances of the parties' dealings that Pat's family (namely his spouse and children, rather than his wider familial relations) were parties, and that those persons had impliedly authorised Pat to act on their behalf. This was in the context of the known purpose of the transaction to separate Sean and Pat from one another in respect of the business. This was also in the context where Kathryn was a director of the SEPH Company and Tom was an employee of Delplant.

391 They referred to cl 2(a)(ii) which states that that Pat's family agree that they 'have received valuable consideration for the restraint'. They submitted that this indicated that the family had agreed to the restraint and acknowledged that they were receiving valuable consideration for it.

392 The plaintiffs submitted that, if the Court concluded that Pat's family members are not parties to the HoA, the result is that they are not bound by cl 2.[57] Alternatively, to the extent there was any doubt, the plaintiffs submitted that, if the words 'and his interests and family' in cl 2 are uncertain, they may be severed leaving the rest of the HoA intact. They submitted that the restraint on Pat's interests and family was not an essential part of the transaction.

393 In my view, there are real issues about the enforceability of cl 2 as against Pat's 'family'. First, in the context of the HoA, I have understood that to mean his spouse and children. Second, Pat's spouse and children are not parties to the HoA. The result is that Pat's spouse and children are not bound by the HoA.

394 Further, in the context of the HoA, I have understood the reference to Pat 'and his interests' in cl 2(a) to be a reference to PDC. This is in light of the reference under the heading 'Parties' to Pat 'and his associated company'. PDC is the entity through which Pat holds most of his interests in the Delplant group. This is also in light of the reference to the sale of the Pat Delaney interests in the Delplant group in the recital and cl 1(b) of the HoA.

395 As to the meaning and breadth of cl 2, I reject any suggestion that cl 2, in its context, gives no indication of what is meant by 'any business or activity undertaken'. In my view, both the terms of the HoA and its commercial purpose indicate that it is the business and activities undertaken by the Delplant group as set out in section 3.1 above. Further, I am not satisfied that the limited nature of the restraint on Pat or PDC in cl 2 is not enforceable. Even if some aspects are not enforceable, in my view, that does not tend against an intention to create an immediately binding agreement by the HoA as a whole. It is not uncommon for courts to read down restraint of trade clauses.

396 As noted above, cl 4(b) provides that the parties agree to negotiate in good faith the terms of a Further Agreement recording more fully and precisely the terms of the HoA and any additional terms that the parties may reasonably require.

397 The defendants submitted that this was indicative that the HoA was not final and binding, likening this case to the facts in Nurisvan. The plaintiffs disputed this submission. They relied upon G R Securities and Molonglo. They noted that cl 6 in any event evinced an intention that, if no Further Agreement was reached for whatever reason, the HoA would prevail.

398 Based upon the authorities set out above, I do not consider that cl 4(b), in the context of the HoA as whole, indicates an intention not to be immediately bound. Rather, it provides a mechanism for the parties to prepare a more formal agreement which may include additional terms they may reasonably require. Further, and to extent there might be any doubt about the enforceability of such a clause, cl 6 makes clear that, if no Further Agreement is concluded by 10 June 2020 (or an extended time agreed by the parties), the terms of the HoA will prevail. In my view, this is consistent with an objective manifestation that the parties intended the HoA to be immediately binding.

9.3.8 Extension to deadline: submissions and analysis

399 Before addressing cl 5 of the HoA, the defendants submitted that the fact that Mr Allen suggested on 8 June 2020 that the parties amend the time for the 'Final Agreement' to 5 July 2020 was indicative that the HoA was not final and binding. The defendants' counsel submitted that this showed there was some fluidity in the terms of HoA and there was still some negotiation.

400 To the contrary, the plaintiffs submitted that the 8 June 2020 email was plainly referring to a suggested revised deadline for concluding the Further Agreement pursuant to cl 6 of the HoA. In short, I agree with that submission. I do not read the 8 June 2020 email as providing any indication of whether there was an intention of the parties on 27 May 2020 to be bound by the HoA. Rather, I read it, consistent with its terms, as a suggested revised deadline for concluding the Further Agreement pursuant to cl 6 of the HoA. This is in a context where cl 6 of the HoA expressly provided for the parties to agree to extend the time for concluding the Final Agreement beyond 10 June 2020.

401 The defendants submitted that cl 5 was an essential term of the HoA. This categorisation was based upon:

(1) the sophisticated structure of the Delplant group, including the unit trusts and the income structure which provided for a low salary and large distributions and/or dividends to directors; and

(2) the significance of the taxation consequences of the sale expressed during the discussions on 27 May 2020, namely that it was a 'massive issue' for Pat.[58]

402 The defendants disputed that cl 5 of the HoA was a matter of machinery. They submitted that the structure of the sale of Pat's interests in the Delplant group was a matter of complexity and importance to both Sean and Pat. This included 'Beneficiary, Unitholder and Shareholder Loans' expressly referred to in cl 5.

403 The defendants submitted that cl 5 was a clear indicator that the HoA fell within category (iii) of Masters v Cameron.[59] This is because, if there was no mutually beneficial taxation outcome agreed between Mr Maric and Mr Lidonnici, it could not be said that it was the objective commercial intention of the parties that the 'chips' (the taxation and accounting consequences) would lie where they fell.

404 Counsel for the defendants asked rhetorically 'where do the chips fall?'. Counsel noted that there are various shares in the Delplant group of companies, and units in trusts of the Delplant group of companies, which would need to have values ascribed to them: the units in the Delplant Properties Trust and the Mt Salazia Development Trust, and the shares in Delplant Properties, Mt Salazia Developments, Delplant Haulage, Hervet and Trenchbox. Further, the defendants noted that the 'Beneficiary, Unitholder and Shareholder Loans' were not provided for the in draft orders.[60]

405 Counsel for the defendants emphasised that this was why cl 5 was so important. It was for the two expert accountants to reach a mutually beneficial taxation outcome for both parties. Given the complex and varied nature of the interests in the various companies, it would not be possible to simply have these issues lie where they fell.

406 The defendants' submissions on the nature of Mr Maric and Mr Lidonnici's role in respect of cl 5 were not entirely clear. Counsel submitted that, under cl 5, the accountants were acting as agents for the parties, rather than as independent experts. He submitted that this was a distinction between this case and Air Great Lakes. This was no doubt based upon the words in cl 5 that that the settlement was to result in 'a mutually beneficial taxation outcome for both parties'. However, he conceded that, if the accountants reached such agreement, the clause had done its work.

407 In any event, the defendants submitted that the issue or issues in cl 5 were never resolved. Other than one phone call between Mr Maric and Mr Lidonnici, there appeared to be no effort made by the plaintiffs to arrive at a mutually beneficial outcome. They noted that the second and third payments as a consultancy fee would be most disadvantageous to Pat.

408 The plaintiffs submitted that no issue arose as to the meaning of cl 5 or its effect. They submitted that cl 5 could be construed in its context. It provided a mechanism for the resolution of taxation and accounting issues by the accountant of each Sean and Pat. The authorities, such as GR Securities, provide that such a mechanism is valid and enforceable.

409 They submitted that the substance of the defendants' contention was that, since the mechanism set out in cl 5 failed, the clause is uncertain and essential with the result that either the HoA is unenforceable or that the parties did not intend to be bound by the HoA if the mechanism did not result in an outcome.

410 In summary, the plaintiffs submitted that there is nothing uncertain in the parties leaving terms, even essential terms, to be determined by a third party. What was necessary was a concluded bargain: 'one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties'.[61]

411 Further, the plaintiffs submitted that, if a mutually beneficial taxation outcome could not be arrived at pursuant to cl 5, the taxation consequences and loans would lie where they fell. They submitted that, if a mutually beneficial outcome had been essential to the parties, one would have expected it to be a prominent part of the HoA. By way of contrast, they noted that the Leederville HoA (on which cl 5 was based) provided that 'subject to the receipt of tax advice that there is mutual benefit to all parties to pursue a different structure which retains either or both the Leederville Joint Venture and the Drouin Joint Venture on foot, the parties agree that the Leederville Joint Venture and the Drouin Joint Venture will terminate'. In this regard, they noted that cl 5 was not expressed in terms of an 'agreement' like the other clauses of the HoA, but in terms that 'it is proposed'. In this context, they stressed the significance of cls 4, 6 and 7.

412 The plaintiffs proposed two alternative constructions of cl 5 of the HoA. The first alternative was that, if the parties did not conclude the Further Agreement by the deadline of 10 June 2020 or such further period as agreed in accordance with cl 6 (the 'Deadline'), and if the accountants did not settle the taxation implications by the Deadline, the terms of the HoA would prevail based on cl 6 and the taxation issues would lie where they fell.

413 The second (and preferred) alternative construction was that there was no timing in respect of the settlement or determination of a mutually beneficial taxation outcome by the experts pursuant to cl 5. This is because cl 5, rather than containing a promissory term, simply contains a mechanism that the parties envisaged might be used in the future (i.e. 'it is proposed') to settle any taxation implications of the transaction once concluded. If no mutually beneficial taxation outcome could be reached, the taxation implications would lie where they fell.

414 Finally, the plaintiffs submitted that, if the Court were to find that cl 5 is completely devoid of meaning, then, in any event, the clause is not an essential one and can be severed from the HoA. They submitted that:

(1) the question of whether a term is so important or essential that its omission renders a contract incomplete is a question of degree, depending upon the nature of the circumstances surrounding the pre-contractual negotiations and the contract itself;

(2) essential terms in an agreement for a sale such as this are usually the parties, subject matter and price;

(3) mechanical matters are not essential even where they pertain to advice, such as in Sudbrook; and

(4) the language of cl 5 that 'it is proposed' suggests the parties did not assign great importance to this clause.

415 Further, they submitted the Court could not be satisfied from the objective surrounding circumstances that the parties viewed the settlement of a mutually beneficial taxation outcome as an essential part of the bargain. They noted that:

(1) there was no evidence that Pat's subjective desire to minimise tax was shared by the other parties; and

(2) Sean expressed no view on Pat's tax liability on 27 May 2020.

416 In any event, whether cl 5 is enforceable in its terms or severable, the plaintiffs submitted that the practical outcome is the same: there is nothing left for the parties to do under cl 5. Nor is there anything that arises from the clause that would prevent the performance of the HoA.

9.3.9.2 Analysis: clause 5 and intention to be bound

417 In this section, I will consider whether cl 5 manifests an objective intention of the parties as to whether the HoA was to be a binding agreement. I will also consider the meaning and effect of cl 5 given the submission of the defendants that it constitutes an agreement to agree within category (iii) of Masters v Cameron.[62] I will consider these issues in light of the words used in cl 5 in the context of the HoA as a whole, and the relevant surrounding circumstances of the parties' dealings.

418 As to the relevant circumstances of the parties' dealings, I accept that taxation consequences were of some importance to the operations of the Delplant group. It is reflected in the structure of the Delplant group. It is also reflected in the fact that Sean and Pat each year received low salaries but obtained benefits by way of dividends, distributions and/or loans from the companies and trusts with the Delplant group. In this regard, I refer to the summary of the accounts of the relevant Delplant companies in [172] and [173] above, in particular, the beneficiary loans in [172].

419 There were discussions on 27 May 2020 about Pat's potential tax liability on the sale of his interests in the Delplant group. However, based on the evidence of Pat, Mr Lidonnici and Mr Darling set out in section 7.3 above, I have concluded that Pat spoke to Mr Lidonnici predominately about insurance issues and not taxation issues on 27 May 2020. As set out above, the evidence of the events on that day was far from clear, particularly in relation to taxation issues. On the evidence before me, I am able to conclude that:

(1) based on a settlement in the order of $10 million, a potential tax liability in the in the range of $1.5 million was raised with Pat and Mr Darling by Mr Lidonnici;

(2) this was raised with Sean by Mr Darling on behalf of Pat who sought Sean's opinion, but Sean declined to provide his opinion;

(3) at some stage during the day, the idea of an indemnity for Pat's tax liability on the sale of his interests in the Delplant group was discussed, but it was rejected by Sean; and

(4) the parties subsequently agreed to include cl 5 which was based upon, but not identical to, the Leederville HoA.

420 As to cl 5 which was agreed between the parties on that day, the words used in cl 5 are far from precise. Clause 5 is expressed to relate to the 'accounting and taxation implications' of the sale. It provides that 'it is proposed' these implications would be 'settled by Mr Maric and Mr Lidonnici in a mutually beneficial taxation outcome for both parties'. That outcome is to be 'inclusive of Beneficiary, Unitholder and Shareholder Loans'.

421 Notwithstanding the lack of precision in the words used in cl 5, I have concluded that this clause is consistent with an objective intention to create a binding agreement by the HoA. This is in light of the other provisions of the HoA and the relevant surrounding circumstances of the parties set out above. In this regard, I have relied in particular on the structure and form of the HoA and the words used, in particular, in cls 4, 6 and 7.

422 I have concluded that, viewed objectively, cl 5 was included to give the accountants of the parties the opportunity to agree on a mutually beneficial taxation outcome for both parties, including the treatment of any beneficiary, unitholder and shareholder loans. That opportunity is consistent with the use of the words 'it is proposed'. That opportunity is also consistent with the fact that there is no express default position in cl 5 should such an agreement not be reached.

423 In substance, the defendants submitted that, in the absence of a default position, it could not be objectively intended by the parties to be bound by the HoA. This is in light of the significance of taxation implications to the parties. While I understand the basis for that argument, I am unable to accept it. Clause 5 is couched between cls 4 and 6, each of which emphasise the binding nature of the HoA. In my view, those clauses indicate an objective intention that, if the mechanism for resolution of the accounting and taxation implications in cl 5 fails, the terms of the HoA are binding and will prevail.

424 Further, and in this context, I am not able to conclude that the resolution of taxation implications was an essential element of the sale of Pat's interests in the Delplant group. This conclusion is based, for the most part, on the words used in cl 5 itself. I refer again the use of the words 'it is proposed' in cl 5 and the absence of any express default position in cl 5 should such an agreement not be reached. I am conscious that the taxation consequences of the sale was an important issue for Pat on 27 May 2020, particularly in light of Mr Lidonnici's advice about his potential tax liability. But the importance of that issue to Pat was not reflected in the words used in cl 5. Further, I am unable to conclude that cl 5 was an essential term to Sean, either from the surrounding circumstances leading to the execution of the HoA or from the terms of the HoA. While James gave evidence that tax was an important matter for Pat and for themselves, no such evidence was given by Sean who was the relevant party to the HoA. I refer to Sean's evidence set out in [255] above.

425 There is then the question about the categorisation of cl 5, namely whether it falls within category (iii) of Masters v Cameron[63] as contended for by the defendants. This in turn relates to the meaning and enforceability of cl 5.

426 As noted above, the plaintiffs put forward two alternative constructions. The defendants did not engage with these two alternatives, maintaining that the absence of any default position rendered cl 5 unenforceable. This was on the basis that the defendants submitted that it could not have been the intention of the parties that the taxation and accounting implications would lie where they fell. However, counsel for the defendants conceded that the two accountants named in cl 5 would be acting as agents of their clients for the purpose of reaching a 'mutually beneficial outcome' under that clause.

427 I have found the construction of cl 5 a difficult one. There are different aspects of cl 5 which require consideration. The first is the nature of the accountants' exercise. The second is how it operates with the rest of the HoA.

428 As to the first, as set out above, I have concluded that cl 5 was included to give the accountants for the parties an opportunity to agree on a mutually beneficial taxation outcome. That opportunity was incorporated as a term of the HoA. As a result, on its proper construction, cl 5 requires the accountants to meet in a good faith attempt to reach a mutually beneficial outcome on taxation and accounting issues relating to the sale of Pat's interests in the Delplant group to Sean's interests.

429 As to the nature of that exercise, the plaintiffs submitted that the accountants would not be acting as agents of their respective clients in reaching a mutually agreed outcome. In doing so, the plaintiffs relied upon the judgments in Air Great Lakes. This was because, in recommending the terms to be included, the accountants in this case would be 'exercising an independent judgment, committed to them by the clause'. By contrast, as noted above, the defendants submitted that the experts were acting as agents of their clients and not as independent experts. They noted the particular nature of the obligation imposed upon them under the clause, namely to reach a mutually beneficial taxation outcome for both parties. They contrasted this with the relevant clause in Air Great Lakes.

430 In my view, the issue is not determined by whether the accountants are acting as agents of their clients or otherwise. What is important is that, by cl 5, the parties agreed to give to their respective accountants the opportunity to reach a mutually beneficial taxation outcome for both parties. That process necessarily involves the exercise of independent judgment by each accountant having regard to his clients' particular interests. There is no guarantee that, as a result of this process, any mutually beneficial outcome would in fact be reached. However, the parties agreed that the accountants were to have the opportunity to reach such an outcome.

431 As to the role of the accountants, for my part, I consider that on its proper construction cl 5 imposes on them an obligation to exercise independent judgment to reach a mutually beneficial taxation outcome. Of course, that would involve having regard to their respective clients' interests in order to reach a 'mutually beneficial taxation outcome for both parties'. However, in my view, on the proper construction of cl 5, the accountants are to exercise that judgment in good faith to reach such an outcome and are not to act on the direction of, or solely in the interests of, their respective clients.

432 I am conscious that there may be competing versions between the accountants as to what constitutes a mutually beneficial outcome. This is particularly so in light of the treatment of beneficiary, unitholder and shareholder loans, some of which I have referred to in paragraphs [172]-[173] above. However, I have formed the view that, on the proper construction of cl 5, should the accountants fail to agree on a mutually beneficial taxation outcome then the taxation consequences lie where they fall. This is in light of the use of the words 'it is proposed' in cl 5, the absence of any express default position in cl 5 should such an agreement not be reached and cl 5 in the context of cls 4, 6 and 7.

433 As a result, I have formed the view that each of the particular matters relied upon by the defendants in issues 2(1) to (8) of the list of issues for determination, and addressed in this section, is not a basis for concluding that there was no objective intention that the HoA would be immediately binding. This is based, for the most part, on the form, structure and language used in the HoA set out above.

434 In my view, there is no substance to any concerns about the identity of the purchasers, the assets to be sold or the sale price which might affect whether there was an intention to be bound. I acknowledge that there are issues regarding:

(1) whether the directors of the SEPH Company authorised that company to enter into the HoA, with the result that the SEPH Company may not be a party to the HoA;

(2) Pat's wife and son not being parties to the HoA, with the result that they may not be bound by cl 2;

(3) the enforceability of cl 2, including against Pat's family members and/or certain aspects of cl 2 as against Pat; and

(4) the meaning and effect of cl 5 of the HoA.

435 However, none of these issues, in isolation or in combination, cause me to conclude that the parties did not objectively intend to be bound by the HoA.

436 As set out above, there are a number of issues about the way in which the defendants' counterclaim against the plaintiffs for misleading conduct in contravention of s 18 of the ACL was pleaded. These are reflected in issues 3 to 7 of the list of issues for determination. The issues which I will now address include:

(1) representations pleaded where there is no allegation the representation was false (which is reflected in issue 3 in the list of issues for determination); and

(2) whether some or all of the representations relate to 'future matters' and, if so, the consequence for the purpose of this proceeding and findings of liability (which is issue 4 in the list of issues for determination).

437 Further, there is the issue as to whether representations relating to FY 2020 financial information or projections made at particular times during the relevant period were superseded by subsequent updated information and projections. This is relevant to issue 6, namely whether Pat relied upon the representations alleged.

438 I will deal with each of these issues in turn. However, as is evident from these reasons, I have not addressed these issues in accordance with the list of issues for determination. Rather, I will first address issues 3 and 4 at a level of principle. I will then consider issues 3 to 7 in the context of the particular kinds of representations in this case which are alleged to be false in [25] of the counterclaim.

439 Further, I wish to state at the outset that the way in which the misleading conduct case was both pleaded and conducted was far from clear. Counsel for the defendants maintained that the representations, particularly those relating to FY 2020 projections, were continuing representations and not representations as to future matters. Further, the case pursued failed to address that, just because a FY 2020 projection as to turnover or profit conveyed at some point in time in FY 2020 was not achieved, does not mean that the relevant FY 2020 projection was false at the time it was made as alleged in [25] of the counterclaim. This important distinction in cases of representations relating to future projections highlights the importance of s 4(1) of the ACL to establish the falsity of such allegations.

440 In addition, counsel for the defendants did not take the Court to any relevant authorities on liability under s 18 of the ACL. By contrast, counsel for the plaintiffs set out the relevant principles to be applied in determining claims for contravention of s 18 of the ACL in [55] of the plaintiffs' written submissions. I generally agree with the principles set out in that paragraph. I do not propose to set it out in these reasons. However, by way of summary, the relevant principles are:

(1) whether conduct (including a representation) is misleading or deceptive, or likely to mislead or deceive, is a question of fact to be assessed objectively;

(2) where representations are alleged, the question is how the representation would have been understood by a reasonable person in the representee's position having regard to the representor's conduct as a whole;

(3) the effect of statements made in the course of complex negotiations must be assessed by examining the conduct in its entirety, rather than determining the truth or falsity of individual statements in isolation, as later statements may replace or modify earlier statements in some way;

(4) while there is no legal distinction between puffery and misleading conduct under s 18 of the ACL, 'in the ordinary course of commercial dealings, a certain degree of "puffing" or exaggeration is to be expected',[64] and such statements will not generally be taken to be a representation in order to find liability under s 18;

(5) where the representation arises from spoken words they must be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading;[65]

(6) the characterisation of a statement as an opinion on the one hand, or fact on the other, is to be viewed from the perspective of a reasonable person in the representee's position;[66] and

(7) statements of opinion or prediction will not be misleading or deceptive, or likely to mislead or deceive, because the opinion turns out to be incorrect or the prediction does not come to pass.[67] I will deal with representations relating to predictions or future matters in section 10.3 below. However, a statement of opinion which conveys that there is a basis for that opinion may be misleading if it is established that it was not genuinely held or there was no adequate or reasonable basis for it.[68]

441 As to statements of opinion, the defendants did not allege or submit that any of the representations relied upon were statements of the opinion of its maker as opposed to statements of fact. For the most part, the plaintiffs also did not allege or submit that any of the alleged representations were representations as to an opinion. Rather, they submitted that the representations alleged were statements of fact or statements of future matters. However, the plaintiffs relevantly submitted that the representations relating the current state of Delplant's business, namely doom and gloom and bleak conditions, were truthful statements or opinions.[69] As a result, other than for these representations, I will proceed on the basis that the alleged representations relate to statements of fact as to current and/or future matters.

442 As to questions of causation and reliance under the ACL, s 236 relevantly provides that, if a person (the 'claimant') suffers loss or damage 'because of' the conduct of another in contravention of ch 2 or 3 of the ACL, then the claimant 'may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention'.

443 Thus, the relevant question is whether there is a sufficient connection between the relevant conduct and the damage suffered for the latter to be regarded as 'because of' the former. That inquiry is informed by common sense, value judgments and policy considerations. It generally involves a two stage process: first, it must be shown that the misleading conduct resulted in particular acts being done or refrained from being done, and second, a sufficient link between that reliance and the loss suffered as a result must be proved.[70] While the misrepresentation need not be the sole cause of the particular acts done or refrained from being done, it must have played some part in contributing to that conduct.[71] Of course, if the person knew that the misrepresentation was false or did not believe it, relief would not be granted.[72]

444 As set out above, the plaintiffs placed much emphasis on the limited allegations of falsity in [25] of the counterclaim, namely:

(1) the net profit for the year ended 30 June 2020 was $5.1 million and not $1.5 million and/or $2.4 million;

(2) turnover was $18.8 million and not $12-14 million;

(3) the work had not dried up as sales revenue for the second half of the financial year ended 30 June 2020 was as a percentage marginally higher than in the corresponding period for the year ended 30 June 2019;

(4) the profit margin was not 7-10% but 27.1%.

(1) the consequence is that almost all of the representations alleged in [22] of the counterclaim do not arise for determination, although they may form part of the context in which the events and conduct took place;[73] and

(2) it is only in respect of the matters alleged to be false in [25] of the counterclaim that there can be a claim for misleading and deceptive conduct.

446 In relation to the falsity alleged in [25] of the counterclaim, the defendants submitted that many of the representations in [22] of the counterclaim related directly to the falsity in [25], in particular, [25(c)] which alleged that it was false to say that the work had dried up. Further, in oral closing submissions, counsel for the defendants sought to identify each allegation in [22] and the corresponding allegation or allegations of falsity in [25] of the counterclaim. I then asked counsel for an email identifying these paragraphs. As a result, by email dated 1 December 2020, counsel for the defendants set out 22 of the 30 representations in [22] of the counterclaim, which the defendants submitted directly related to the allegations of falsity in [25]. The following eight representations were not submitted to relate to the allegations of falsity:

(1) the representations in [22(a)(i)] and [22(a)(iii)];

(2) the representation in [22(b)(iii)];

(3) the representation in [22(d)(iv)];

(4) the representations in [22(f)(i)] and [22(f)(ii)];

(5) the representation in [22(g)(ii)]; and

(6) the representation in [22(j)(i)].

447 As a result, I do not intend to further address these representations, save to the extent they are relevant to the context in which the events and conduct alleged to be in contravention of the ACL took place.

448 As set out above, the plaintiffs asserted that there was no issue at trial as to whether the representations related to future matters or that the plaintiffs lacked reasonable grounds for making them, as would be needed to invoke the application of s 4(1) of the ACL. This is because s 4(1) of the ACL was not relied upon by the defendants. The plaintiffs submitted that s 4 of the ACL was required to be pleaded.[74]

449 Section 4(1) provides, in summary, that if a person makes a representation with respect to any future matter, and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. Further, s 4(2) provides, in summary, that, for the purposes of s 4(1), a person is taken not to have had reasonable grounds for making the representation unless evidence is adduced to the contrary. Whether there were reasonable grounds is to be judged as at the date of the representation.

450 A 'future' matter is not defined in the ACL. The plaintiffs submitted, consistent with authority, that it means anything that is to occur in the future, including a prediction or projection. However, predictions or projections may represent the maker's present state of mind, depending on the words used and the context.[75]

451 The plaintiffs noted that s 4(1) was not alleged or referred to in the counterclaim. This is notwithstanding the fact that [9(c)] of the reply pleaded as follows:

Further or alternatively, they say that if the alleged representations were made by or on behalf of Sean and were representations as to future matters, there were reasonable grounds for the same within the meaning of section 4 of the Australian Consumer Law in that:

(i) Delplant had experienced a downturn and deterioration in business since mid 2019 and was (and continues to be) negatively impacted by the Covid-19 pandemic;

(ii) Key staff at Delplant had indicated that they would leave the business because of the unworkable relationship between the two directors and staff had previously left the business for this reason; and

(iii) Sean intended to pursue options to exit from the business, such as a winding up or sale if he and Pat could not reach agreement on separating their interests in the business.

452 The plaintiffs relied upon the allegations of falsity in [25] of the counterclaim. As noted above, that paragraph did not seek to set out that the representations relating to FY 2020 information or projections were false at the time they were made because the plaintiffs lacked reasonable grounds for making them. Rather, [25] of the counterclaim alleged that the representations relating to FY 2020 information or projections were false because the actual turnover and profit for FY 2020 was less than what was represented at certain times.

453 In opening their case, in this context, counsel for the plaintiffs expressly raised the defendants' failure to allege s 4 of the ACL:

And the law on this is quite clear, you don't make out a misleading and deceptive conduct case simply by saying that what happened when the future became known was different to what was represented. There's no attempt in this pleading to advance a conventional - where there's a mixture of past tense representations, factual representations and representations as to the future, but so far as representations as to the future are concerned, there's no attempt to plead that what was represented lacked reasonable grounds.[76]

454 They noted that counsel for the defendants did not raise objection to this and instead characterised the alleged representations as continuing ones. Relevantly, counsel for the defendants said in opening:

[We have] heard what my learned friend has said in respect of the pleadings. What is important to understand is that this was a continual process in which doom and gloom was emphasised and highlighted by Sean Delaney and his respective advisers.[77]

455 Consistent with [25] of the counterclaim, for the most part, counsel for the defendants based cross-examination on the July 2020 draft statements as the basis for contending that the representations were false, rather than referring to contemporaneous documents or evidence. This was consistent with the defendants' closing submissions.

456 The s 4 issue was not expressly addressed in the defendants' written closing submissions. Indeed, the way those submissions addressed s 18 of the ACL was far from clear. By contrast, in their written closing submissions, the plaintiffs maintained that the defendants had not pleaded or alleged, in submissions or at trial, that any of the alleged representations related to 'future matters'. They referred to r 13.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the 'Rules') and the authorities referred to above in support of their submission that, if a claimant intends to rely upon s 4(1) of the ACL, it must be pleaded. The plaintiffs submitted that, as result of the comments of counsel for the defendants in opening set out above, they did not seek to pursue the matters alleged in [9(c)] of the reply. They contended that they would have led additional evidence if counsel for the defendants had maintained in opening that the defendants sought to rely upon s 4(1) of the ACL, and that it would be prejudicial to the plaintiffs if the Court were now to consider such a case.

457 As a result, in closing argument, I raised the issue directly with counsel for the defendants. Counsel appeared to accept that a statement made in the course of FY 2020 about what the income would be for FY 2020 was a statement about a future matter. However, he maintained that some representations were not of that kind, referring to the alleged falsity in [25(c)] of the counterclaim that the work of the Delplant group had not dried up.

458 I pressed counsel for the defendants about the particular representations relating to projected turnover and profit, which were alleged to be false in [25] of the counterclaim. Counsel for the defendants appeared to accept that, if I were to conclude that one or more of the representations related to future matters then, by reason of s 4(1) of the ACL, the defendants were not entitled to rely upon them. This is because, while counsel for the defendants did not concede any of the alleged representations related to future matters, he did concede in final submissions that, if s 4(1) of the ACL applies, then the falsity alleged in [25(a)] and [25(b)] of the counterclaim must fall. However, counsel for the defendants then sought to contend that the representations made in September 2019 and December 2019 were in fact representations which were known to be false at the time.

459 In response, and in light of the concessions of counsel for the defendants, the plaintiffs in oral argument sought to identify those representations in [22] of the counterclaim which related to future matters. Counsel for the plaintiffs contended that the following representations of the 22 representations in [22] of the counterclaim, which the defendants now assert to be false, related to future matters:

(1) the representation in [22(a)(ii)] in so far at it alleges a substantial reduction in income and profit forecast for FY 2020 and beyond;

(2) the representations in [22(b)(i)], [22(b)(ii)] and [22(b)(iv)], which relate to the annual turnover, profit and profit margin which Delplant would achieve for FY 2020;

(3) the representation in [22(c)(ii)], which alleges that the business faces difficult times readjusting and it is expected the future profitability would be at a minimum and in line with Delplant's peers;

(4) the representation in [22(c)(iv)], which relates to profit projections for FY 2020;

(5) the representation in [22(d)(v)], which alleges that the full impact of the current situation is yet to arrive as much of the year to date revenues are still run-off sales from older projects;

(6) the representations in [22(e)(iii)] and [22(e)(iv)], which relate to the projected annual sales and profit which Delplant would achieve for FY 2020;

(7) the representation in [22(g)(i)], which relates to the projected net profit which Delplant would achieve for FY 2020; and

(8) the representation in [22(i)] in so far as it alleges that a drop in revenue is likely to exceed 50% by the end of June 2020.

460 For the most part, I agree with the submissions of the plaintiffs and their analysis, both in respect of the law and the way in which the case was pleaded and conducted. First, in my view, the representations alleged during the relevant period concerning FY 2020 projections of turnover, profit or profit margin relate to future and not current matters. Second, it is clear that the defendants did not plead or rely upon s 4(1) of the ACL in the counterclaim notwithstanding the nature of the representations alleged. Nor did they plead that there were no reasonable grounds for the relevant alleged representations. Third, and related to the second point, the allegation of falsity in [25] of the counterclaim proceeded on the basis that representations relating to FY 2020 financial information or projections of turnover, profit or profit margin were false because each of the turnover, profit and profit margin in fact achieved in FY 2020 was different to the projections.

461 Fourth, notwithstanding the matters alleged in [9(c)] of the reply, the defendants did not rely upon s 4(1) at trial. Indeed, they maintained that the representations related to current, and not future, matters. As noted above, counsel for the defendants characterised the representations as continuing, saying that it was a 'continual process' of 'doom and gloom' and that 'what was being said was what the conditions were at the time'.[78] For completeness, I wish to note that the defendants did not submit that it was implied on the pleadings that a representation related to a future matter.

462 Fifth, although it is not necessary to my conclusion, I accept the submission of the plaintiffs that they would have led further evidence from the witnesses on facts relevant to the s 4 issue if the case had been made on that basis.

463 The Rules and the authorities make plain that a party's pleadings must contain, in summary form, a statement of all the material facts on which that party relies.[79] I respectfully adopt the comments of French J in Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd about the significance of pleading the predecessor to s 4.[80] Of course, a case may be conducted in a way which is different to the pleadings if the parties agree or on occasions if no objection is taken and no prejudice is caused. That was not the case here. As a result, to the extent a representation relates to a future matter, I do not consider that it is open to me to consider that representation. Further, I generally agree with the plaintiffs' classification of the representations which relate to future matters. However, I will deal with this when I deal with each group of representations.

464 As the alleged representations themselves reveal, updated FY 2020 information was provided to the defendants over the course of FY 2020 up until the HoA was executed, as further financial information was available. Nevertheless, the defendants pleaded and relied upon outdated and superseded FY 2020 financial information as at 27 May 2020.

465 For example, the 11 September 2019 representations alleged in [22(b)] include that Sean and Mr Maric represented on behalf of Sean and Delplant that: (1) for FY 2020 Delplant would achieve an annual turnover of $12-15 million; (2) profit at best would be $2 million; and (3) Delplant would only achieve margins in the range of 7-10% at best. The 11 September 2019 representations seem directly relevant to the allegations of falsity in [25(a)], [25(b)] and [25(d)] of the counterclaim, which allege that the net profit for FY 2020 was '$5.1 million and not $1.5 million and/or $2.4 million', turnover was '$18.8 million and not $12-14 million', and the profit margin was 'not 7-10% but 27.1%'. I note that the defendants also rely upon other representations that were made in September 2019, December 2019 and January 2020 relating to turnover and profit projections.

466 However, as set out in sections 6.2 and 6.3 above, on the evidence before me, there is no dispute in this case that updated financial information and projections were provided to the defendants in February and March 2020. Relevantly, as set out in section 6.2, on 26 February 2020, Mr Maric sent Mr Lidonnici Delplant's balance sheet as at 31 December 2019 and the December 2019 income statement. The cover email to the December 2019 income statement recorded that the 'net profit' was $2,097,647 for the 6 months to 31 December 2019 and the 'NPAT' (net profit after tax) was $1,520,000. This excluded distributions from the JV. The December 2019 income statement recorded that the project sales from July 2019 to December 2019 was $9,809,797, and the net income percentage before tax (i.e. profit margin) was 21.3%. As also noted in section 6.2 above, Pat agreed he received this information from Mr Lidonnici.

467 Further, as set out in section 6.3, Mr Lidonnici also emailed Pat the comparison chart on 11 March 2020. This recorded that the net income before tax as at 31 December 2019 was $2,176,629 and the net income percentage before tax (i.e. profit margin) was 22.19%.

468 Finally, as set out in section 6.3, Pat was provided with the February project sales summary at the 10 March 2020 board meeting, which stated that:

(1) the profit for the first six months of FY 2020 (July to December) was down $3.489 million or 29%;

(2) forecast project sales for the last four months of FY 2020 was $4.85 million;

(3) project sales from July 2019 to February 2020 were $11,717,843.95; and

(4) therefore, projected sales for FY 2020 was $16.7 million compared to $22.55 million for FY 2019, a reduction of 26.61%.

It also provided an update on the works remaining for Delplant's top 10 projects. It recorded that most of these projects were completed.

469 As also noted above, Pat acknowledged in his evidence that he was given this updated financial information at this time. Mr Lidonnici also acknowledged he received this information from Pat at about this time.

470 In these circumstances, I am unable to accept that any statements made about turnover, sales margins or profit projections, which were made prior to provision of this updated information and which were superseded by this information, could have been relied upon by the defendants on 27 May 2020.

471 In light of this analysis set out above, I have decided it is appropriate to address the issue of whether the plaintiffs engaged in conduct in contravention of s 18 of the ACL by reference to the categories of falsity alleged in [25] of the counterclaim, namely the alleged misrepresentations relating to turnover, profit, profit margin and sales (or that the work had not dried up). This is in light of the similar subject matter of many of the representations alleged throughout the relevant period in [22] of the counterclaim, which is reflected in the categories of falsity alleged in [25] of the counterclaim. It is also in light of the email from counsel for the defendants linking each of the representations in [22] with the allegations of falsity in [25] of the counterclaim.

472 Further, I consider that it is appropriate that I adopt this course in light of the fact that the defendants have alleged a series of representations over the relevant period from September 2019 to 27 May 2020, which caused or induced Pat to sign the HoA on that day. I intend to deal first with the representations relating to turnover, then profit, then profit margin and finally the sales or that the work had not dried up. For the most part, I have relied upon the categorisation of the representations in counsel's email dated 1 December 2020. Where the defendants have relied upon more than one allegation of falsity for a representation, I have considered the relevant representation more than once where appropriate.

473 The defendants submitted that the following representations were false because, as alleged in [25(b)] of the counterclaim, the turnover of the Delplant group was $18.8 million and not $12-14 million:

(1) the representation alleged in [22(a)(ii)], made in the 2 September 2019 letter, that 'there are no significant contract work scheduled [sic] and the volume of activity by the major customers has diminished rapidly, with a substantial reduction in income and profit forecast for 2020 FY and beyond'. The plaintiffs admitted that this representation was made;

(2) the representation alleged in [22(b)(i)], made at the 11 September 2019 meeting, that 'Delplant would achieve an annual turnover of $12-15 million for the 2020 financial year'. The plaintiffs denied that this representation was made;

(3) the representation alleged in [22(d)(i)], made in the 4 December 2019 email, that 'sales were down by 30%'. The plaintiffs admitted that this representation was made;

(4) the representation alleged in [22(e)(i)], made in the 10 January 2020 letter, that 'for the first quarter 2020 FY, project sales were down 30% ... on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(5) the representation alleged in [22(e)(ii)], made in the 10 January 2020 letter, that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(6) the representation alleged in [22(e)(iii)], made in the 10 January 2020 letter, that 'the 2020 FY sales are projected to be $14.7 million, down from 24.4 million'. The plaintiffs admitted that this representation was made;

(7) the representation alleged in [22(i)], made in the 25 May 2020 letter, that 'revenue has already fallen in excess of 30% and drop in revenue is likely to exceed 50% by end of June, beyond that the picture is very bleak'. The plaintiffs admitted that this representation was made; and

(8) the representation alleged in [22(j)(ii)], made at the 27 May 2020 meeting, that 'conditions were bleak'. The plaintiffs denied that this representation was made.

474 I will first address whether each of these representations was made, given that some are denied by the plaintiffs. I will then consider which of the representations that were made relate to future matters as alleged by the plaintiffs. [81] These have been identified in italics in the previous paragraph. I will then consider the falsity of the relevant representations. Finally, to the extent necessary, I will then consider whether the defendants have established that any of these representations were relied upon by Pat and/or caused Pat to enter into the HoA.

475 First, as to the representations which the plaintiffs denied making, the defendants alleged in [22(b)(i)] of the counterclaim that the plaintiffs represented at the 11 September 2019 meeting that 'Delplant would achieve an annual turnover of $12-15 million for the 2020 financial year'. As set out in section 5.2 above, I have not concluded that a statement to this effect was made at the 11 September 2019 meeting. Rather, I have concluded that Mr Maric stated, in the context of calculating a goodwill value and the maintainable profits of the business, that, assuming a turnover of $12-15 million 'per year' and a margin of 12-15%, profit would be in order of $2 million 'per year'. This is different to the representation alleged in [22(b)(i)] that Delplant would achieve an annual turnover of $12-15 million 'for the 2020 financial year'. As a result, the defendants have not established on the evidence before me that the representation in [22(b)(i)] was made.

476 As to the representation in [22(j)(ii)], made at the 27 May 2020 meeting, that 'conditions were bleak', for the reasons set out in section 7.3 above and, in particular, [270]-[276], I have concluded that the defendants have not established on the evidence that this representation was made at the 27 May 2020 meeting. This is particularly so in light of the principle set out in [440(5)] above. Further, I have formed the view that such a statement is puffery and is not an actionable representation.

477 As a result, for convenience, I will refer to the representations relating to turnover which were either admitted or established as the 'turnover representations', being the representations alleged in [22(a)(ii)], [22(d)(i)], [22(e)(i)], [22(e)(ii)], [22(e)(iii)] and [22(i)].

478 Second, the plaintiffs submitted that the turnover representations in italics in [473] above relate to future matters, namely the representations alleged in [22(a)(ii)], [22(e)(iii)] and [22(i)] (the 'future turnover representations'). I agree with this analysis. I am conscious that the representation alleged in [22(i)], made in the 25 May 2020 letter, that the 'drop in revenue is likely to exceed 50% by end of June' was close in time to the month of June 2020. However, in my view, it was still a representation as to a future matter. As a result, for the reasons set out in section 10.3, it is not open for me to make any findings of contravention of s 18 of the ACL based upon the future turnover representations.

479 Third, I will now address the turnover representations which do not relate to future matters (the 'current turnover representations'). The defendants alleged in [25(b)] of the counterclaim that the turnover representations were false and untrue in that 'turnover was $18.8 million and not $12-14 million'. The reference to $18.8 million was supported by the reference to the actual turnover for FY 2020 of $19,290,992 in the July 2020 draft statements. As set out above, this allegation proceeds on the false premise that the representation as to the projected turnover at a particular time was false because the turnover subsequently and actually achieved for the relevant period was different.

480 Relevantly, the defendants have not established on the evidence before me that each of the current turnover representations was false or misleading at the time each of them was made. As set out in the detailed chronology in sections 5 to 7 above, the plaintiffs produced and relied upon contemporaneous financial documents in support of statements about the financial affairs of Delplant and projections at the time those statements were made.

481 In respect of the current turnover representation made in the 2 September 2019 letter, relevantly, the representation in [22(a)(ii)] that 'there are no significant contract work scheduled [sic] and the volume of activity by the major customers has diminished rapidly', the defendants have not satisfied me that it was misleading or deceptive, or likely to mislead or deceive, at the time it was made. I refer to my comments and findings in [56]-[58], [61], [78] and section 5.2, in particular, at [81]-[85] relating to the August project sales summary and the chart of remaining works.

482 Further, in the event that I am wrong and a representation was made to the effect alleged in [22(b)(i)], and that representation did not relate to a future matter, for similar reasons, I am not satisfied that it was misleading or deceptive, or likely to mislead or deceive, at the time it was made.

483 In respect of the current turnover representation made in the 4 December 2019 email, relevantly, the representation in [22(d)(i)] that 'sales were down by 30%', the defendants have not satisfied me that it was misleading or deceptive, or likely to mislead or deceive, at the time it was made. The 4 December 2019 email recorded that the sales were down by 30% for the same time last year i.e. based upon the September quarter. On the evidence before me, that was not false. I refer to my findings in section 5.4 above and, in particular, the September 2019 income statement referred to at [125]-[129], and the November project sales summary referred to at [137]-[139]. I also refer to the September project sales summary referred to at [117]-[118].

484 In respect of the current turnover representations made in the 10 January 2020 letter, relevantly, the representations in [22(e)(i)] that 'for the first quarter 2020 FY, project sales were down 30% ... on the corresponding period for 2019 FY', and [22(e)(ii)] that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY', the defendants have not satisfied me that they were misleading or deceptive, or likely to mislead or deceive, at the time they were made. I refer to my findings in section 6.1 and, in particular, at [154]-[157] relating to the September 2019 income statement and the November project sales summary.

485 In respect of the current turnover representation made in the 25 May 2020 letter, relevantly, the representation in [22(i)] that 'revenue has already fallen in excess of 30%', the defendants have not satisfied me that it was misleading or deceptive, or likely to mislead or deceive, at the time it was made. I refer to:

(1) my findings in relation to the information provided in the February project sales summary and the chart of remaining works as at 10 March 2020 in [185]-[189], and the email from Mr Lidonnici to Pat dated 11 March 2020 attaching the comparison chart in [192]-[194]; and

(2) the evidence concerning the position and future of the Delplant group at the time these representations were made in light of the effect of the COVID-19 pandemic on the Delplant business, as set out in [208]-[211], section 7.1, in particular at [215]-[221], and section 7.2, in particular at [224]-[227].

486 In all these circumstances, I am not satisfied on the evidence before me that the current turnover representations were misleading or deceptive, or likely to mislead or deceive. To the contrary, I am satisfied that it is more likely than not that the current turnover representations were true at the time each of them was made.

487 In addition, in the event that I am wrong and the representation in [22(j)(ii)] that 'conditions were bleak' was made and is actionable, I am satisfied that this representation was true at the time or, to the extent the it might constitute an expression of opinion, I am satisfied it was honestly held and there was a reasonable basis for it at the time. I refer to my findings in [485] above.

488 Further, even if I am wrong in my conclusion that it is not open for me to make any findings in respect of the future turnover representations, I am satisfied that the matters set out in [481]-[485] above provide a reasonable basis for each of the future turnover representations at the time each of them was made.

489 Fourth, in light of these findings, it is unnecessary to deal with issues of reliance and causation. As a result, I do not intend to do so. However, I wish to note two things. First, many of the turnover representations relate to the period up to and including January 2020. As noted in section 10.4 above, updated financial information and projections, including as to turnover for FY 2020, were provided in late February and early March 2020.

490 Second, by reason of the breakdown of the relationship between Sean and Pat, Pat and his advisers were distrustful of the opinions and forecasts relating to the Delplant group offered by Sean and his legal representatives. This was in a context where Pat had been a director of the Delplant group from its inception and Mr Lidonnici had been the accountant of Delplant for nearly two decades. I refer, by way of example only, to Mr Gray's letter to Mr Maric dated 10 January 2020 set out in [148] above.

491 There is a close relationship between the representations relating to projected profit for FY 2020 and representations relating to projected profit margins for FY 2020. However, given that separate representations were alleged by the defendants in relation to each of them, I will deal with them separately.

492 The defendants submitted that the following representations were false because, as alleged in [25(a)] of the counterclaim, the net profit for FY 2020 was $5.1 million and not $1.5 million and/or $2.4 million:

(1) the representation alleged in [22(b)(ii)], made at the 11 September 2019 meeting, that 'profit at best would be $2 million'. The plaintiffs denied that this representation was made;

(2) the representation alleged in [22(c)(iv)], made in the 20 September 2019 letter, that 'profit projections for the year ended 30 June 2020 is $1,540,000'. The plaintiffs denied that this representation was made;

(3) the representation alleged in [22(e)(i)], made in the 10 January 2020 letter, that 'for the first quarter 2020 FY ... profit [was] down 66% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(4) the representation alleged in [22(e)(ii)], made in the 10 January 2020 letter, that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(5) the representation alleged in [22(e)(iv)], made in the 10 January 2020 letter, that 'the 2020 FY nett [sic] profit is expected to be $2.4 million down from $8.1 million'. The plaintiffs admitted that this representation was made;

(6) the representation alleged in [22(g)(i)], made at the 12 March 2020 meeting, that 'the annual nett [sic] profit would be $2.4 million'. The plaintiffs denied that this representation was made; and

(7) the representation alleged in [22(j)(ii)], made at the 27 May 2020 meeting, that 'conditions were bleak'. The plaintiffs denied that this representation was made.[82]

493 Consistent with my analysis of the turnover representations, I will address:

(1) whether each of these representations was made, given that some are denied by the plaintiffs;

(2) whether any of these representations relate to future matters as alleged by the plaintiffs. These have been identified in italics in the previous paragraph;

(3) whether any of these representations were false; and

(4) to the extent necessary, whether the defendants have established that any of these representations were relied upon by Pat and/or caused Pat to enter into the HoA.

494 First, the plaintiffs denied making four of these representations. As to the representation alleged in [22(b)(ii)] that the plaintiffs represented at the 11 September 2019 meeting that 'profit at best would be $2 million', as set out in section 5.2 above, I have not concluded that a statement to this effect was made at the 11 September 2019 meeting. Rather, I have concluded that Mr Maric stated, in the context of calculating a goodwill value and the maintainable profits of the business, that, assuming a turnover of $12-15 million 'per year' and a margin of 12-15%, profit would be in the order of $2 million 'per year'. This is different to the representation alleged in [22(b)(ii)] that the profit 'at best' would be $2 million. As a result, the defendants have not established on the evidence before me that the representation in [22(b)(ii)] was made.

495 There is then the representation in alleged [22(c)(iv)], made in the 20 September 2019 letter, that 'profit projections for the year ended 30 June 2020 is $1,540,000'. As set out in section 5.3 above, the plaintiffs denied a representation in the terms alleged was made given the context of, and in which, the 20 September 2019 letter was sent. They submitted that the reference to $1.54 million was made in the context of discussions of the value of goodwill of the Delplant group and, in particular, maintainable net profits for the purposes of calculating that goodwill. However, immediately above the reference to this figure is the heading 'Revenue & Profit Projections For the Year Ended 30/06/2020'.

496 In my view, it is likely that Mr Lidonnici, to whom the 20 September 2019 letter was addressed, understood this figure to be a reference to future maintainable net profit in the context of the goodwill discussions, given that he was an accountant and involved in discussions with Mr Maric about valuing the business at this time. However, in my view, the reference to this figure in the 20 September 2019 letter would have been understood by a reasonable person in Pat's position to be that the projected profit for the year ended 30 June 2020 was $1.54 million. I make this finding notwithstanding that Pat's evidence about his understanding of this aspect of the letter was unclear as set out in [115] above. As a result, I have concluded that the representation in [22(c)(iv)], as alleged, was made.

497 There is then the representation alleged in [22(g)(i)], made at the 12 March 2020 meeting, that 'the annual nett [sic] profit would be $2.4 million'. For the reasons set out in section 6.3 and, in particular at [205], I am not satisfied that this representation was made.

498 There is then the representation alleged in [22(j)(ii)], made at the 27 May 2020 meeting, that 'conditions were bleak'. As set out in [476] above, I am not satisfied that this representation was made or is actionable.

499 As a result, for convenience, I will refer to the representations relating to profit which were either admitted or established as the 'profit representations', being the representations alleged in [22(c)(iv)], [22(e)(i)], [22(e)(ii)] and [22(e)(iv)].

500 Second, the plaintiffs submitted that the profit representations in italics in [492] relate to future matters, namely the representations alleged in [22(c)(iv)] and [22(e)(iv)] (the 'future profit representations'). I agree with this analysis. They relate to future projections of likely profit for the full FY 2020. As a result, for the reasons set out in section 10.3, it is not open for me to make any findings of contravention of s 18 of the ACL based upon the future profit representations.

501 Third, I will now address the profit representations which do not relate to future matters (the 'current profit representations'). The defendants alleged in [25(a)] of the counterclaim that the profit representations were false and untrue in that 'the nett [sic] profit for year end 30 June 2020 was $5.1 million and not $1.5 million and/or $2.4 million'. The reference to $5.1 million was an approximation of the profit in the July 2020 draft statements of $5,080,680. As set out above, this allegation also proceeds on the false premise that the representation as to the projected profit at a particular time was false because the profit subsequently and actually achieved for the relevant period was different.

502 Relevantly, the defendants have not established on the evidence before me that each of the current profit representations was false or misleading at the time each of them was made. As set out in the detailed chronology in sections 5 to 7 above, the plaintiffs produced and relied upon contemporaneous financial documents in support of statements about the financial affairs of Delplant and projections at the time those statements were made.

503 In respect of the current profit representations made in the 10 January 2020 letter, relevantly, the representations in [22(e)(i)] that 'for the first quarter 2020 FY ... profit [was] down 66% on the corresponding period for 2019 FY', and [22(e)(ii)] that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY', the defendants have not satisfied me that they were misleading or deceptive, or likely to mislead or deceive, at the time they were made. I refer to my findings in section 6.1 and, in particular, at [154]-[157] relating to the September 2019 income statement and the November project sales summary.

504 In all these circumstances, I am not satisfied on the evidence before me that the current profit representations were misleading or deceptive, or likely to mislead or deceive. To the contrary, I am satisfied that it is more likely than not that the current profit representations were true at the time each of them was made.

505 Further, even if I am wrong in my conclusion that it is not open for me to make any findings in respect of the future profit representations, I am satisfied that the matters set out in [503] above provide a reasonable basis for the future profit representation made in the 10 January 2020 letter. In addition, any representation as to the future profit made in the 20 September 2019 letter was overtaken by subsequent statements relating to future profit. I refer to my comments in section 10.4 above.

506 Fourth, in light of these findings, it is unnecessary to deal with issues of reliance or causation. As a result, I do not intend to do so. However, in so far as the current profit representations were made in January 2020, as noted in section 10.4 above, updated financial information and projections, including as to profit for FY 2020, were provided in late February and early March 2020. I also refer to my comments in [490] above.

507 The defendants submitted that the following representations were false because, as alleged in [25(d)] of the counterclaim, the profit margin for FY 2020 was not 7-10%, but 27.1%:

(1) the representation alleged in [22(a)(ii)], made in the 2 September 2019 letter, that 'there are no significant contract work scheduled [sic] and the volume of activity by the major customers has diminished rapidly, with a substantial reduction in income and profit forecast for 2020 FY and beyond'. The plaintiffs admitted that this representation was made;

(2) the representation alleged in [22(b)(iv)], made at the 11 September 2019 meeting, that 'the good profit margins were over and they would only achieve margins in the range of 7-10% at best'. The plaintiffs denied that this representation was made;

(3) the representation alleged in [22(c)(ii)], made in the 20 September 2019 letter, that 'the business faces difficult times readjusting, a new structure inclusive of senior executives is required moving forward. With the new structure in mind, it is expected the future profitability of the business would be at a minimum and in line with Delplant's peers'. The plaintiffs admitted that this representation was made;

(4) the representation alleged in [22(d)(ii)], made in the 4 December 2019 email, that 'profit margins [were] down 20% [14%]'. The plaintiffs admitted that this representation was made;[83]

(5) the representation alleged in [22(d)(iii)], made in the 4 December 2019 email, that 'there has been an 85% loss in profitability'. The plaintiffs admitted that this representation was made;

(6) the representation alleged in [22(e)(i)], made in the 10 January 2020 letter, that 'for the first quarter 2020 FY, project sales were down 30% and profit down 66% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(7) the representation alleged in [22(e)(ii)], made in the 10 January 2020 letter, that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(8) the representation alleged in [22(j)(ii)], made at the 27 May 2020 meeting, that that 'conditions were bleak'. The plaintiffs denied that this representation was made; and

(9) the representation alleged in [22(j)(iii)], made at the 27 May 2020 meeting, that 'turnover and profitability were diminishing rapidly'. The plaintiffs denied that this representation was made.[84]

508 Consistent with my analysis above, I will address:

(1) whether each of these representations was made, given that some are denied by the plaintiffs;

(2) whether any of these representations relate to future matters as alleged by the plaintiffs. These have been identified in italics in the previous paragraph;

(3) whether any of these representations were false; and

(4) to the extent necessary, whether the defendants have established that any of these representations were relied upon by Pat and/or caused Pat to enter into the HoA.

509 First, the plaintiffs denied making three of these representations. The plaintiffs denied making the representation alleged in [22(b)(iv)], made at the 11 September 2019 meeting, that 'the good profit margins were over and they would only achieve margins in the range of 7-10% at best'. There are a number of issues to address in respect of this representation. The first issue is that, in the context of the allegation of falsity in [25(d)] of the counterclaim and the way in which the proceeding was conducted, I have concluded that the alleged representation was to the effect that the profit margin would be 7-10% at best in FY 2020.

510 The second issue is that it is important to distinguish what was represented at the meeting and what was reported to Pat about that meeting. It is important to recall that Pat was not present at the 11 September 2019 meeting. As set out in section 5.2 above, I have concluded that Sean stated at the 11 September 2019 meeting that Delplant's good profit margins would not be achieved moving forward and would likely return to industry margins in the range of 7-10%. As a result, I have found that a representation to the effect alleged in the first part of [22(b)(iv)] was made i.e. good profit margins were over. By contrast, I have not found that Sean made a representation to the effect that 7-10% would be the 'best' that could be achieved in FY 2020. However, for the reasons set out in [107] above, I am not satisfied that Mr Lidonnici reported to Pat that Sean or Mr Maric represented at this meeting that 'the good profit margins were over'. I am conscious that the defendants pleaded in [22(b)] of the counterclaim that Sean and Mr Maric made representations to Mr Lidonnici 'for Pat' at the 11 September 2019 meeting. However, this issue was not further addressed in written or oral submissions. Nor did the defendants address how any such representation to Mr Lidonnici could establish the necessary issues of causation and reliance on the part of the defendants under s 236 of the ACL. In these circumstances, the defendants have not established that Pat was informed of a representation to that effect. As a result, I do not intend to consider further the representation alleged in [22(b)(iv)].

511 There is then the representation in [22(j)(ii)], made at the 27 May 2020 meeting, that 'conditions were bleak'. As set out in [476], I am not satisfied that this representation was made or is actionable.

512 There is then the representation in [22(j)(iii)], made at the 27 May 2020 meeting, that 'turnover and profitability were diminishing rapidly'. For the reasons set out in [274]-[276], I am not satisfied that this representation was made.

513 As a result, for convenience, I will refer to the representations relating to profit margins which were either admitted or established as the 'margin representations', being the representations alleged in [22(a)(ii)], [22(c)(ii)], [22(d)(ii)], [22(d)(iii)], [22(e)(i)] and [22(e)(ii)].

514 Second, the plaintiffs submitted that the margin representations in italics in [507] relate to future matters, namely the representations alleged in [22(a)(ii)] and [22(c)(ii)] (the 'future margin representations'). I agree with this analysis in respect of the representation in [22(a)(ii)]. In my view, it is only the last sentence in [22(c)(ii)] that relates to a future matter, namely 'it is expected the future profitability of the business would be at a minimum and in line with Delplant's peers'. As a result, for the reasons set out in section 10.3, it is not open for me to make any findings of contravention of s 18 of the ACL based upon these aspects of the future margin representations.

515 Third, I will now address the margin representations which do not relate to future matters (the 'current margin representations'). The defendants alleged in [25(d)] of the counterclaim that the margin representations were false and untrue in that the 'profit margin was not 7-10% but 27.1%'. The reference to the 27.1% profit margin was based upon the actual profit margin for FY 2020 of 27.9% set out in the 15 July 2020 income statement. As noted in [314], the adjusted profit margin in the 15 July 2020 summary was 23%. As set out above, this allegation also proceeds on the false premise that the representation as to the projected profit margin at a particular time was false because the profit margin subsequently and actually achieved for the relevant period was different.

516 Relevantly, the defendants have not established on the evidence before me that each of the current margin representations was false or misleading at the time each of them was made. As set out in the detailed chronology in sections 5 to 7 above, the plaintiffs produced and relied upon contemporaneous financial documents in support of statements about the financial affairs of Delplant and projections at the time those statements were made.

517 In respect of the current margin representations made in September 2019, relevantly:

(1) the representation in [22(a)(ii)] that 'there are no significant contract work scheduled [sic] and the volume of activity by the major customers has diminished rapidly'; and

(2) the representation in [22(c)(ii)] that 'the business faces difficult times readjusting, a new structure inclusive of senior executives is required moving forward',

the defendants have not satisfied me that any of these representations was misleading or deceptive, or likely to mislead or deceive, at the time each of them was made.

518 I refer to my comments and findings in [56]-[58], [61], [78] and section 5.2, in particular, at [81]-[85] relating to the August project sales summary and the chart of remaining works. In addition, in light of the breakdown of the relationship between Sean and Pat, I am satisfied that it was unlikely that both Sean and Pat would be involved in the business in the medium term, which would result in a new structure moving forward, particularly given the salaries each of Sean and Pat were paid at this time. In this regard, I refer to my comments in [116] above.

519 In respect of the current margin representations made in the 4 December 2019 email, relevantly, the representations in [22(d)(ii)] that 'profit margins [were] down [14%]', and [22(d)(iii)] that 'there has been an 85% loss in profitability', the defendants have not satisfied me that they were misleading or deceptive, or likely to mislead or deceive, at the time they were made. I refer to my comments and findings in section 5.4 and, in particular, the September 2019 income statement referred to at [125]-[129] above, and the November project sales summary referred to at [137]-[139] above. I also refer to my findings in relation to the September project sales summary referred to at [117]-[118], and the email dated 2 December 2019 circulating the adjusted programme of works referred to at [120].

520 In respect of the current margin representations made in the 10 January 2020 letter, relevantly, the representations in [22(e)(i)] that 'for the first quarter 2020 FY, project sales were down 30% and profit down 66% on the corresponding period for 2019 FY', and [22(e)(ii)] that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY', the defendants have not satisfied me that they were misleading or deceptive, or likely to mislead or deceive, at the time they were made. I refer to my findings in section 6.1 and, in particular, at [154]-[157] relating to the September 2019 income statement and the November project sales summary.

521 In all these circumstances, I am not satisfied on the evidence before me that the current margin representations were misleading or deceptive, or likely to mislead or deceive. To the contrary, I am satisfied that it is more likely than not that the current margin representations were true at the time each of them was made.

522 Further, even if I am wrong in my conclusion that it is not open for me to make any findings in respect of the future margin representations, I am satisfied that the matters set out in [517]-[518] above provide a reasonable basis for each of the future margin representations made in September 2019. In addition, any representation as to future profit margins made in September 2019 was overtaken by subsequent statements relating to future profit and future profit margins. I refer to my comments in section 10.4 above.

523 Fourth, in light of these findings, it is unnecessary to deal with issues of reliance and causation. As a result, I do not intend to do so. However, in so far as the current margin representations were made in the period up to and including January 2020, I note that updated financial information and projections, including as to profit and profit margins for FY 2020, were provided in late February and early March 2020 as set out in section 10.4 above. I also refer to my comments in [490] and [510] above.

524 The defendants submitted that the following representations were false because, as alleged in [25(c)] of the counterclaim, the work had not dried up as sales revenue for the second half of FY 2020 was, as a percentage, marginally higher than in the corresponding period for FY 2019:

(1) the representation alleged in [22(a)(ii)], made in the 2 September 2019 letter, that 'there are no significant contract work scheduled [sic] and the volume of activity by the major customers has diminished rapidly, with a substantial reduction in income and profit forecast for 2020 FY and beyond'. The plaintiffs admitted that this representation was made;

(2) the representation alleged in [22(c)(i)], made in the 20 September 2019 letter, that 'the collapse in land sales numbers has had a significant adverse flow-on effect to Delplant's current sales and profitability'. The plaintiffs admitted that this representation was made;

(3) the representation alleged in [22(c)(iii)], made in the 20 September 2019 letter, that 'at the moment, work in progress is basically "hand to mouth"'. The plaintiffs admitted that this representation was made;

(4) the representation alleged in [22(d)(i)], made in the 4 December 2019 email, that 'sales were down by 30%'. The plaintiffs admitted that this representation was made;

(5) the representation alleged in [22(d)(v)], made in the 4 December 2019 email, that 'the full impact is yet to arrive as much of the YTD revenues are still run-off sales from older projects'. The plaintiffs admitted that this representation was made;

(6) the representation alleged in [22(d)(vi)], made in the 4 December 2019 email, that 'there were bleak business conditions and prospects for Delplant Pty Ltd'. The plaintiffs admitted that this representation was made;

(7) the representation alleged in [22(e)(i)], made in the 10 January 2020 letter, that 'for the first quarter 2020 FY, project sales were down 30% and profit down 66% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(8) the representation alleged in [22(e)(ii)], made in the 10 January 2020 letter, that 'for the first 6 months 2020 FY, project sales down 29% on the corresponding period for 2019 FY'. The plaintiffs admitted that this representation was made;

(9) the representation alleged in [22(e)(iii)], made in the 10 January 2020 letter, that 'the 2020 FY sales are projected to be $14.7 million, down from 24.4 million'. The plaintiffs admitted that this representation was made;

(10) the representation alleged in [22(h)], made in the 22 May 2020 email, that 'right now, the business is fast approaching rock bottom, virtually no work in hand and effectively no plan to turn that around. No surprise then to learn that our most senior managers are looking for fresh opportunities elsewhere, other civil sectors are active and will bounce shortly due to both Federal and State increased infrastructure funding... Now is the time for you to step aside (resign) and clear the path for others'. The plaintiffs admitted that this representation was made;

(11) the representation alleged in [22(i)], made in the 25 May 2020 letter, that 'revenue has already fallen in excess of 30% and drop in revenue is likely to exceed 50% by end of June, beyond that the picture is very bleak'. The plaintiffs admitted that this representation was made;

(12) the representation alleged in [22(j)(ii)], made at the 27 May 2020 meeting, that that 'conditions were bleak'. The plaintiffs denied that this representation was made; and

(13) the representation alleged in [22(j)(iii)], made at the 27 May 2020 meeting, that 'turnover and profitability were diminishing rapidly'. The plaintiffs denied that this representation was made.[85]

525 As is evident, I have addressed a number of these representations in the context of the turnover representations, the profit representations or the margin representations. It is unnecessary to consider those representations again in the context of the allegation in [25(c)] of the counterclaim. Rather, I will only address the representations which are underlined above. Consistent with my analysis above, in respect of these representations I will address:

(1) whether each of these representations were made;

(2) whether any of these representations relate to future matters as alleged by the plaintiffs. These have been identified in italics in the previous paragraph;

(3) whether any of these representations were false; and

(4) to the extent necessary, whether the defendants have established that any of these representations were relied upon by Pat and/or caused Pat to enter into the HoA.

526 First, all of the underlined representations are admitted by the plaintiffs.

527 Second, as to future matters, the plaintiffs submitted that the representation in italics extracted from [22(d)(v)] of the counterclaim relates to future matters. I disagree. On balance, I consider that this is a representation of current matters, namely the current opinion of Mr Maric.

528 Third, I will now address the falsity of the underlined representations (the 'current work representations'). The defendants alleged in [25(c)] of the counterclaim that the current work representations were false and untrue in that the 'work had not dried up as sales revenue for the second half of the financial year ended 30 June 2020 was as a percentage marginally higher than in the corresponding period for year end 30 June 2019'. As set out above, this allegation also proceeds on the false premise that the representation as to the projected sales prospects at a particular time was false because the sales revenue subsequently and actually achieved for the relevant period was different.

529 Relevantly, the defendants have not established on the evidence before me that each of the current work representations was false or misleading at the time each of them was made. As set out in the detailed chronology in sections 5 to 7 above, the plaintiffs produced and relied upon contemporaneous financial documents in support of statements about the financial affairs of Delplant and projections at the time those statements were made.

530 In respect of the current work representations made in the 20 September 2019 letter, relevantly, the representations in:

(1) [22(c)(i)] that 'the collapse in land sales numbers has had a significant adverse flow-on effect to Delplant's current sales and profitability'; and

(2) [22(c)(iii)] that 'at the moment, work in progress is basically "hand to mouth"',

the defendants have not satisfied me that any of these representations were misleading or deceptive, or likely to mislead or deceive, at the time they were made.

531 I refer to my comments and findings in [56]-[58], [61], [78] and section 5.2, in particular, at [81]-[85] relating to the August project sales summary and the chart of remaining works. I also refer to my findings in section 5.3, in particular, at [116]. In this context, I wish to note that I consider that a representation to the effect that work is basically 'hand to mouth' is in the nature of puffery in the context of the information provided to the defendants, both in correspondence and in the course of meetings during this period, as set out in sections 5.2 and 5.3 above. As a consequence, I consider that this representation does not give rise to an actionable representation.

532 In respect of the current work representations made in the 4 December 2019 email, relevantly, the representations in:

(1) [22(d)(v)] that 'the full impact is yet to arrive as much of the YTD revenues are still run-off sales from older projects'; and

(2) [22(d)(vi)] that 'there were bleak business conditions and prospects for Delplant Pty Ltd',

the defendants have not satisfied me that any of these representations were misleading or deceptive, or likely to mislead or deceive, at the time they were made.

533 First, in my view, they are either statements of current fact or current opinion. In either event, I am not satisfied the statement of fact was false or the opinion was not honestly held or did not have a reasonable basis.

534 To the contrary, I have formed the view that the full impact of market changes was yet to arrive on the business of Delplant generally and conditions were far from good for the Delplant group. I refer to:

(1) my comments and findings in [56]-[58], [61], [78] and section 5.2, in particular, at [81]-[85] relating to the August project sales summary and the chart of remaining works;

(2) my findings in section 5.3, in particular, at [116] and at [117]-[118] in relation to the September project sales summary;

(3) my findings in section 5.4 and, in particular, the September 2019 income statements referred to at [125]-[129] above, and the November project sales summary referred to at [137]-[139] above; and

(4) my findings in relation to the September project sales summary referred to at [117]-[118], and the email dated 2 December 2019 circulating the adjusted programme of works referred to at [120].

535 Further, and in any event, I consider that the representation in [22(d)(vi)] that business conditions and prospects were 'bleak' is puffery and is not an actionable representation.

536 In respect of the current work representation made in the 22 May 2020 email, relevantly, the representation in [22(h)] to the effect that the business was fast approaching rock bottom with virtually no work in hand and effectively no plan to turn that around, the defendants have not satisfied me that it was misleading or deceptive, or likely to mislead or deceive, at the time it was made. I refer to:

(1) my findings in relation to the information provided in the February project sales summary and the chart of remaining works as at 10 March 2020 in [185]-[189], and the email from Mr Lidonnici to Pat dated 11 March 2020 attaching the comparison chart in [192]-[194]; and

(2) the evidence concerning the position and future of the Delplant group at the time these representations were made in light of the COVID-19 pandemic on the Delplant business, as set out in [208]-[211], section 7.1, in particular at [215]-[221], and section 7.2, in particular at [224]-[227].

537 It is important to note that, as set out in [187] above, the chart of works as at 10 March 2020 recorded that a significant proportion of the work for Delplant's top 10 projects had been completed by 10 March 2020. Significantly, it was not put to Sean that there were other works in the pipeline between February and May 2020 other than those recorded in that chart of remaining works. There was much uncertainty created by the COVID-19 pandemic in the business community, including Delplant, during this period. As set out in [224] above, that uncertainty remained throughout May 2020 including at the time of the 25 May 2020 and 27 May 2020 representations. On the evidence before me, it was the Federal Government's announcements in response to the COVID-19 pandemic in early June that lead to an increase in the projected works for Delplant.

538 Further, and in any event, I consider that the representation in [22(h)] that the business was fast approaching 'rock bottom' is puffery and is not an actionable representation.

539 In all these circumstances, I am not satisfied on the evidence before me that the current work representations were misleading or deceptive, or likely to mislead or deceive.

540 Fourth, in light of these findings, it is unnecessary to deal with issues of reliance and causation. As a result, I do not intend to do so. However, I refer to my comments in [490] above. I also refer to my comments in [531] and [538] above.

541 In [29] of the counterclaim, the defendants alleged that the behaviour of Sean, Mr Maric and/or Mr Allen makes it unconscionable to enforce the HoA on the following grounds:

(a) the matters pleaded in paragraph 22 herein;

(b) the fact that Pat was suffering from illness and was obtaining treatment;

(c) that on 25 May 2020 Sean unilaterally and without notice retrenched Pat after more than 30 years in Delplant;

(d) that Sean then called a meeting on 24 hours notice for 27 May 2020 and refused to allow the accountants to attend;

(e) that despite repeated requests by Pat and/or his advisors Sean refused to provide up to date financials of Delplant and the Delplant group;

(f) threatened to liquidate Delplant and the Delplant group if Pat didn't sell his interest.

542 Little was said in final submissions by the defendants in respect of the claim that the HoA should not be enforced on grounds of unconscionability. I was not taken to any authorities which would support a finding of unconscionable conduct in these circumstances. However, the submissions proceeded on the basis that Sean was acting in a superior bargaining position and took advantage of Pat's disadvantaged position.

543 The plaintiffs submitted that, in order to set aside a contract based upon unconscionable conduct, the Court needs to find that the claimant 'by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created'.[86] The plaintiffs submitted that the circumstances of this case did not establish either any special disadvantage or that the plaintiffs took unfair or unconscientious advantage of any special disadvantage.

544 As to the factors relied upon by the defendants:

(1) first, the plaintiffs denied the representations alleged in [22] of the counterclaim were misleading or deceptive for the reasons set out above;

(2) second, insofar as the defendants relied upon Pat's health issues, there was no evidence that those conditions affected his mental capacity or will. The plaintiffs noted that Pat had been a director and the Operations Manager of the Delplant group for a considerable period and there were no issues about his ability to function in these roles;

(3) third, insofar as the defendants relied upon Pat's redundancy, the plaintiffs submitted that the redundancy was genuine and, in any event, did not give rise to any special disadvantage of a kind that is relevant to a claim for unconscionable conduct;

(4) fourth, the plaintiffs disputed that the evidence was that Sean refused to allow the accountants to attend the 27 May 2020 meeting;

(5) fifth, the plaintiffs denied any refusal by Sean to provide financial records. In any event, they submitted Pat had acquired considerable knowledge of the business of the Delplant group in his capacity as director; and

(6) sixth, the plaintiffs denied that any threats to liquidate were unfounded. They submitted that any such 'threats' were merely expressions of opinion as to the likely outcome if the brothers did not resolve their differences.

545 The relevant principles relating to equitable unconscionability were restated by the High Court in Thorne v Kennedy ('Thorne').[87] Unconscionable conduct in equity arises where the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he or she is placed and the other party unconscientiously takes advantage of that position.[88]

546 In Thorne, the majority stated that it was necessary to establish that:

(1) the innocent party was subject to a special disadvantage 'which seriously affects the ability of the innocent party to make a judgment as to the innocent party's own best interests'; and

(2) the other party must unconscientiously take advantage of that special disadvantage: this has been variously described as requiring 'victimisation', 'unconscientious conduct' or 'exploitation'.[89]

547 It is also generally necessary to establish that the other party knew or ought to have known of the existence and effect of the special disadvantage.[90]

548 The nature of the special disadvantage will depend upon the facts of each case. In Commonwealth Bank of Australia Ltd v Amadio ('Amadio'), the special disadvantage was of elderly migrant parents with limited education who trusted their son: the Court concluded the special disadvantage was the 'outcome of their reliance on and their confidence in their son'.[91] In other cases factors such as sickness, age, infirmity and lack of assistance where assistance is necessary have also been held to constitute a special disability.[92]

549 As to the requirement to not unconscientiously take advantage of a plaintiff's special disadvantage, Deane J in Amadio (with whom Mason and Wilson JJ agreed) noted that, where it was evident to the defendant bank in that case that the transaction was prima facie unfair and 'unconscientious' for the defendant to proceed with it, the onus was cast upon the defendant to show that the transaction was 'in point of fact fair, just and reasonable'.[93] Deane J reiterated this in Louth v Diprose where he said:

It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disability was sufficiently evident to the other party to make it prima face unfair or 'unconscionable' that that other party procure, accept or retain the benefit of, the disadvantaged party's assent to the impugned transaction in the circumstances in which he or she procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: 'the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain' or retain the benefit of it.[94]

550 In my view, the defendants have not established either that Pat was under a special disadvantage on 27 May 2020 or that the plaintiffs took advantage of any such disadvantage. This is substantially for the reasons advanced by the plaintiffs. However, there are a few issues I wish to emphasise.

551 As to the alleged special disadvantage, to the extent that the defendants rely upon the fact that the representations alleged in [22] of the counterclaim were misleading and deceptive, for the reasons set out in section 10 above, I am not satisfied that any of the representations alleged in [22] of the counterclaim, if made, were misleading or deceptive or likely to mislead or deceive.

552 Second, on the evidence before me, Pat was not suffering from any physical or mental condition which affected his ability to make a judgment as to his own best interests about entering into the HoA. Nor do I consider that his redundancy in the lead up to the 27 May 2020 meeting gave rise to a special disadvantage, let alone one which seriously affected the ability of Pat to make a judgment in his own best interests about entering into the HoA. In addition, I am not satisfied that any threats to liquidate were unfounded in light of the breakdown of the relationship between Sean and Pat.

553 Further, to the extent that it is relevant, I am unable to make any finding on the evidence before me that there was any refusal to allow accountants to attend the 27 May 2020 meeting. In any event, as set out above, Pat was represented by an independent legal adviser at the 27 May 2020 meeting and had access to his independent accountant, Mr Lidonnici, during the course of that day. In all these circumstances, I am unable to conclude that Pat was under any special disadvantage which affected his ability to make his own decisions in his own best interests as he saw them on 27 May 2020 in relation to the HoA.

554 As to any alleged unconscientious exploitation by the plaintiffs of Pat on 27 May 2020, I reject that submission on the basis that there is no evidence to support it. As set out above, Sean is a shrewd and determined businessman. However, that is far from concluding that he took unconscientious advantage of Pat on 27 May 2020, let alone with knowledge of the special disadvantage alleged. I note again that Sean did not speak to Pat during the course of the meeting on 27 May 2020: they each communicated through his respective independent solicitor. Further, to Sean's knowledge, Pat consulted with his solicitor and accountant during the course of that day.

555 As a result, the claim in equity to refuse to enforce the HoA due to unconscionable conduct must be dismissed.

(1) Delplant wrongfully made Pat's position redundant and Pat should be reinstated as the Operations Manager of Delplant;

(2) further, insofar as the HoA purports to deal with redundancy payments, it is not enforceable as Delplant is not a party to the HoA; and

(3) Pat is entitled to proper redundancy payments (which were not quantified in the counterclaim).

557 Issues 9 and 10 of the issues for determination at trial were framed in light of these allegations. However, in the course of the trial, the defendants did not pursue a claim that Pat be reinstated. Thus, the only claim was for Pat's proper redundancy entitlements.

558 Further, in final submissions, the defendants did not contend that the provision of the HoA relating to redundancy payments was unenforceable on the basis that Delplant was not a party to the HoA. In any event, for the reasons set out in section 9.3.3 above, I am satisfied that Delplant was a party to the HoA. In summary, this is because Delplant was named as a party to the HoA and the HoA dealt with matters which affected Delplant. Each of Sean and Pat were directors of Delplant at the time the HoA was executed. As noted above, cl 1(b)(vii) of the HoA expressly provided that Pat 'resigns immediately with his last day being 30th of June 2020. There is no applicable redundancy payment'. The defendants accepted that, if the HoA was enforceable, then by reason of cl 1(b)(vii) Pat could not pursue his claim for redundancy payments. As I have concluded that the HoA is enforceable and Delplant is a party to it, it is unnecessary to consider Pat's claim for redundancy entitlements.

559 However, for completeness, I note that at trial the defendants relied upon a summary of redundancy entitlements of Pat prepared by Mr Lidonnici, totalling $393,915 (the 'defendants' redundancy calculation'). The basis upon which the defendants' redundancy calculation was prepared by Mr Lidonnici was not made clear on the evidence or in submissions. Relevantly, the defendants' redundancy calculation was based on a notice period of five weeks and a redundancy period of 52 weeks. It also proceeded on the basis that Pat's redundancy entitlements were to be calculated based not only on Pat's salary at the time he was made redundant of $69,160, but also on the monthly payments of $15,000 to Sean and Pat which ceased in late December 2019.

560 There are three matters to note in relation to these calculations. First, the appropriateness of a 52 week period was not made clear in evidence (other than the fact that Pat had worked at Delplant for 37 years) or in submissions. Second, it is not clear why payments of $15,000 per month were included. Mr Lidonnici conceded that this had 'nothing to do with law' but was based upon what he considered Pat and Sean were supposed to earn to bring them to a 'market salary'. The appropriateness of proceeding in this way was not made clear in the evidence or submissions. Third, and related to the second point, on the evidence before me, the payments of $15,000 per month were dividends or distributions to each of Skildale and PDC. This is based upon the Westpac payment statements, dated December 2017 and August 2019, from the account of Mt Salazia Developments relevantly recording payments to Skildale and 'Pat Delaney Investments' and 'P & K Delaney'. On this basis, I am unable to conclude that these payments form part of Pat's income as Operations Manager. Further, Mr Lidonnici acknowledged that these payments were not made to reflect personal exertion income but for tax minimisation purposes.

561 By contrast, the plaintiffs contended that any redundancy entitlements of Pat were to be based upon the Building and Construction General On-site Award (the 'Award') tendered by the plaintiffs, which applied in substitution of the Fair Work Act 2009 (Cth) ('Fair Work Act'). While counsel for the defendants did not contend that the Award did not apply, the plaintiffs did not make clear to me the basis upon which they contended the Award applied. While I am prepared to accept that the work of the Delplant group relates to the 'on-site building, engineering and civil construction industry' referred to in cl 4.1 of the Award, it is not clear to me how the Award applied to Pat given the provisions of cl 4 and the classifications in sch B of the Award.

(1) under the Award, Pat was entitled to a notice period of five weeks and a redundancy period of eight weeks, totalling $17,290; and

(2) under the Fair Work Act, Pat was entitled to a notice period of five weeks and a redundancy period of 12 weeks, totalling $22,610.

563 Given that it is not clear to me whether the Award applied to Pat, I would have ordered five weeks' notice and 12 weeks redundancy.

564 Further, the plaintiffs submitted that Pat was not entitled to long service leave under the Award or the Fair Work Act. This was because the plaintiffs contended that Pat's long service leave entitlement was held by CoINVEST Limited ('CoINVEST'), the trustee of many long service leave funds. By contrast, Mr Lidonnici calculated Pat's long service leave entitlement at $120,797 based upon a reference in the balance sheet of Delplant for FY 2019 to a liability for 'Provision for Long Service Leave'. The precise basis upon which this amount was calculated was not made clear in the evidence or in submissions. However, as set out above, it would appear to include the payments of $15,000 per month.

565 The provision for long service leave in the FY 2019 balance sheet of Delplant was recorded as $119,393 for FY 2018 and $178,845 for FY 2019. The amount for FY 2018 corresponded with an extract from the books of Delplant entitled 'Long Service Leave Provision - June 2018' (the 'June summary') produced by Mr Lidonnici. It included an amount for each Delplant employee including Sean and Pat. It recorded a liability to Pat of $33,791, based on 29 years of service with 965.47 hours or 25.2 weeks of long service owing.

566 Sean gave evidence that the reference to long service leave in the FY 2019 balance sheet and in the June summary was an error. He said it was a provision only and not an entitlement. He said that Delplant had made quarterly contributions to CoINVEST since 1989, which included the contributions for Pat and a partial contribution for Sean. As a result, he gave evidence that Pat's only entitlement to long service leave is against CoINVEST.

567 Mr Lidonnici, who was the accountant of Delplant for many years until mid-July 2019, and was thus familiar with both its accounting and business practices, said that this entitlement was separate to the contributions made by Delplant to CoINVEST. He also said that any CoINVEST entitlements would be separately recorded in the books of Delplant. The plaintiffs put to Mr Lidonnici that the reference to the provision for long service leave in the FY 2019 accounts was an error. He disputed this, replying that, if it was an error, it was an error that has been included in the accounts of Delplant for 20 years. He said that Sean went to great lengths to be able to qualify partially for CoINVEST and for Pat to be able to qualify, and to continue to qualify, for the normal long service leave from Delplant.

568 I am satisfied on the balance of probabilities that Pat is at least entitled to the long service leave amounts referred to in the June summary. It is supported by the balance sheet of Delplant for FY 2019. I am unable, on the evidence before me, to conclude that those accounts were in error. To the extent that Sean gave evidence to that effect, I do not accept it. It is a liability owed to Pat according the records of Delplant. I can see no provision of the Award which would prevent Pat's entitlement to that sum.

569 Thus, if it were necessary, I would have determined Pat's proper redundancy entitlements as a payment of $22,610 and a payment of $33,791 for long service leave.

570 As a result, the plaintiffs have been successful not only in relation to the contractual issues which are the subject of the statement of claim but also in respect of the claims that were the subject of the counterclaim.

571 However, there is one final matter I wish to address. I am not satisfied that prior to the termination of the HoA the accountants for the parties were given a proper or adequate opportunity to reach a mutually beneficial taxation outcome for both the plaintiffs and the defendants. As set out in section 8 above, while some information was exchanged for the purpose of reaching such an outcome, particularly after 5 June 2020, no detailed consideration of a mutually beneficial taxation outcome ever took place. I am conscious that this may have been because the defendants purported to terminate the HoA. However, in the circumstances of this case, I consider that it is appropriate that the accountants for the parties are given a proper and adequate opportunity to reach a mutually beneficial taxation outcome as envisaged by cl 5 of the HoA. As a result, I intend to impose such a condition as part of the order for specific performance.

572 In my view, a reasonable period of time needs to be provided not only for the exchange of relevant information but also for the accountants to attempt to reach such an outcome. I note that the HoA provided in effect for a 14 day period between execution and the date in cl 6 of the HoA. However, in my preliminary view, given the passage of time and the time of year of this judgment, equity would impose a period in the order of 28 days. I will hear further from the parties in this regard.

573 I wish to emphasise, consistent with my comments in section 9.3.9 above, the accountants in taking part in this process are to exercise independent judgment. They may have regard to their clients' particular interests but not solely their clients' interests. The accountants are to exercise that judgment in good faith to reach a mutually beneficial taxation outcome and not act on the direction of their respective clients.

574 For completeness, and for the avoidance of doubt, I do not consider that cl 3(b) of the HoA provides a general discretion to Sean's solicitors to identify the purchaser of Pat's interests in the Delplant group. Absent any resolution of these issues between the accountants pursuant to cl 5 of the HoA, or other agreement between the plaintiffs and the defendants, the purchaser is Sean and/or Skildale.

575 In the absence of agreement between the parties, I will list the matter to address the form of order in the proceeding (including any timetable for the provision of necessary and relevant information in order for the accountants to undertake the task entrusted to them by cl 5 of the HoA) and any issues of costs.

[1] One of the representations alleged in [22] of the counterclaim.

[2] Relevantly, counsel relied upon the draft statement and financial summary for FY 2020 prepared in early to mid-July 2020 (the 'July 2020 draft statements') both in cross-examination and final submissions to establish that FY 2020 financial information and projections provided in September 2019, December 2019 and January 2020 were false: see, eg, [66], [68] and [70] in the defendants' written closing submissions dated 23 November 2020 (the 'defendants' written closing submissions'). Counsel also relied upon a Delplant project sales summary dated 8 July 2020 (the 'July project sales summary').

[3] Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2007] FCA 1205, [546] (French J) ('Fubilan').

[6] Although treated under the heading 'liabilities', this sum is bracketed and on a reading of the balance sheet as at 30 June 2019 as a whole it appears that it is a liability owed to Hervet by the beneficiaries.

[7] The retained earnings of Hervet total $4,250,851.

[8] The July project sales summary also recorded that the November figures were 'adjusted for Works In Progress'. The sales for November 2019 were reduced from $1,759,750.78 to $1,581,250.78. This resulted in a difference for November 2019 compared to November 2018 of -$557,455.08 or -26.07%.

[25] [1954] HCA 72; (1954) 91 CLR 353.

[26] [2017] VSCA 141 ('Nurisvan').

[28] [2018] VSCA 147, [131]-[132] (Maxwell ACJ, Whelan and Kyrou JJA) (citations omitted).

[29] Nurisvan (n 26) [109] (citations omitted).

[30] [2017] VSCA 269, [37].

[32] (1988) 18 NSWLR 540, 548, quoted in Nurisvan (n 26) [108].

[33] Sir Kim Lewison, The Interpretation of Contracts (Thomson Reuters (Professional), 6th ed, 2015) 466 [8.13] and cases referred to therein.

[34] [1995] NSWCA 166.

[35] [1983] 1 AC 444, 475.

[37] (1986) 40 NSWLR 631.

[40] (1985) 2 NSWLR 309 ('Air Great Lakes').

[43] Ibid 334 (Mahoney JA), 334, 337 and 338 (McHugh JA).

[48] [1973] HCA 38; (1973) 129 CLR 629 ('Godecke').

[49] [1964] 2 QB 699 ('Sweet & Maxwell').

[50] Ibid 704, quoted in Godecke (n 48) 642.

[53] Air Great Lakes (n 40) 329 (citations omitted).

[54] [2012] NSWCA 227, [25]-[26] (Macfarlan JA, Bathurst CJ and Meagher JA agreeing).

[56] Relying upon Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597, 605.

[57] Relying upon Justice Dyson Heydon, Heydon on Contract (Thomson Reuters (Professional), 2019) [12.10].

[59] [1954] HCA 72; (1954) 91 CLR 353.

[60] Counsel for the defendants referred to CB 569, CB 575, CB 589, CB 594 and CB 601.

[61] Relying upon O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 37, quoting May and Butcher Ltd v The King [1934] 2 KB 17, 21.

[62] [1954] HCA 72; (1954) 91 CLR 353.

[63] [1954] HCA 72; (1954) 91 CLR 353.

[64] General Newspapers Pty Ltd v Telstra Corporation [1993] FCA 473; (1993) 45 FCR 164, 178.

[65] Watson v Foxman (1995) 49 NSWLR 315, 318-319.

[66] Ireland v WG Riverview Pty Ltd [2019] NSWCA 307; (2019) 101 NSWLR 658, 666 [30].

[67] Fubilan (n 3) [546] (French J).

[68] Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193, 242 (Gummow J).

[69] See [74]-[75] of the plaintiffs' written closing submissions.

[70] See, eg, Colin Lockhart, The Law of Misleading or Deceptive Conduct (LexisNexis Butterworths, 5th ed, 2018) (online) [10.9] and the cases referred to therein.

[71] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 469 [14] (Gleeson CJ), 480 [59]-[61] (Gaudron J), 493-4 [106]-[109] (McHugh J), 509 [163] (Hayne J).

[72] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, 320 [28] (French CJ).

[73] Relying upon Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364.

[74] Relying upon Fubilan (n 3) [547]; AGC Industries Pty Ltd v Karara Mining Ltd [2019] WASC 140, [183]-[184].

[75] See, eg, Digi-Tech (Aust) Ltd v Brand [2004] NSWCA 58.

[79] Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 13.02(1)(a).

[81] I have placed in italics the representations which the plaintiffs alleged relate to future matters.

[82] Once again, I have placed in italics the representations which the plaintiffs alleged relate to future matters.

[83] See [124] above.

[84] Once again, I have placed in italics the representations which the plaintiffs alleged relate to future matters.

[85] Once again, I have placed in italics the representations which the plaintiffs alleged relate to future matters. I will address the underlined representations in the following paragraph.

[86] Relying on Commonwealth Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, 462 (Mason J) ('Amadio').

[87] [2017] HCA 49; (2017) 263 CLR 85, 102-4 [37]-[40] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ) ('Thorne').

[88] Thorne (n 87) 104 [40], quoting Amadio (n 86) 461 (Mason J).

[91] Amadio (n 86) 464 (Mason J). See also 476-7 (Deane J, Wilson J agreeing).

[92] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 405 (Fullagar J), 415 (Kitto J).

[94] [1992] HCA 61; (1992) 175 CLR 621, 637.