Forza Marketing Pty Ltd v Sie

THE SWISS MOTEL, ITS OWNERSHIP AND OPERATION: ANTHONY IANNELLI AND FORZA

1. The registered proprietor of the land upon which the Motel is constructed (Lot 1 in Deposit Plan 1009531), and from which the business of a motel has been conducted for some years, is Anthony Iannelli ("Anthony"), the second cross-defendant in the proceedings.
2. For some years also, Anthony has leased the land to Forza Marketing Pty Ltd ("Forza", the plaintiff/first cross-defendant in the proceedings), a company of which he is the sole director and he and his brother Marcus Iannelli are the shareholders in equal shares.
3. Anthony acquired the land in March 2010 by registered Memorandum of Transfer AF373879. In April 2016 Memorandum of Lease number AK141865 (dated 1 February 2014) was registered in favour of Forza with a term of five years commencing on 1 February 2014 with an option to renew for a further five years. At the time of hearing of these proceedings, in 2023, Forza is said to remain in occupation of the Motel as lessee.
4. The Iannelli family have business interests in southern New South Wales and the Australian Capital Territory. After Anthony's acquisition of the Swiss Motel the operation of its business came under the oversight of three different members of the family. Between about June 2011 (when the Motel opened for business for the start of a ski season) and April 2014 it was overseen by Anthony's father, Tony, the patriarch of the Iannelli family. Between about April 2014 and sometime in 2016 it was overseen by Anthony's brother, Frank Iannelli. Sometime in 2016 Anthony assumed oversight of the Motel from Frank. Within a few months, he delegated administrative tasks relating to management of the Motel to his mother, Rachel Iannelli ("Rachel"), the family matriarch.
5. When Anthony acquired the motel in 2010 it was in a state of disrepair and in need of renovation before the business of a motel could operate viably. Those renovations were completed over a protracted period during which, from at least June 2011 or thereabouts, guests were accommodated.

WITNESSES CALLED AT THE FINAL HEARING

1. On Forza's side of the record, evidence was given by Anthony and Rachel. No evidence was adduced from any other member of the Iannelli family.
2. On Mr Coote's side of the record, he alone gave evidence. No evidence was adduced from Lisa, a fact relied upon by Forza/Anthony in a Jones v Dunkel submission about the reliability of Mr Coote's evidence.
3. Anthony, Rachel and Mr Coote were each cross-examined on affidavits.
4. The cross examination was limited by the unavailability of business records of an every day character that might have cast light on the nature and purpose of particular transactions brought under controversy by Forza's claim against Mr Coote and Lisa. Forza/Anthony invited the Court to draw inferences against Mr Coote and Lisa by reason of the absence of such records as it endeavoured to construct a case against them based on higher level records such as bank statements and invoices.
5. The absence of records needs to be taken into account in assessing the whole of the evidence before the Court, but I am not inclined, as invited by counsel for Forza/Anthony, to attribute dishonesty to Mr Coote by reason of an absence of records. Nor do I attribute dishonesty to Mr Coote, despite submissions of Forza/Anthony that I should do so, in connection with Mr Coote's preparation of spreadsheets designed to provide an accounting for money flows in his negotiations with the Iannelli family designed to reach an agreement as to the state of the parties' accounts.
6. In my assessment, Anthony, Rachel and Mr Coote all gave their evidence honestly. Each might be criticised for endeavouring to present evidence in a light favourable to their cause, but there was nothing beyond a natural tendency in that direction. I decline to make adverse credit findings about them. Nevertheless, I am conscious that their evidence may be unreliable in some respects because of the informality of their dealings and the difficulty of reconstructing events from available records.

MR COOTE, LISA AND THE IANNELLI FAMILY

1. The Iannelli family was assisted, from the earliest days of Anthony's acquisition of the Swiss Motel, by John Coote ("Mr Coote"), the second defendant/cross claimant in these proceedings, a farmer by occupation and a person who had a long history of working for the Iannelli family on their rural properties.
2. Shortly after Anthony's acquisition of the Swiss Motel, Mr Coote and his domestic partner Aie Gek Sie ("Lisa", the first defendant/cross claimant in the proceedings) started living at the Motel with their two children in anticipation that Mr Coote would work on a farm of the Iannelli family at Dromore, near Cooma.
3. That work did not eventuate. Mr Coote was instead retained in a caretaker role at the Motel, performing odd jobs and, in time, performing administrative roles relating to management of business at the Motel, checking guests in and out, taking bookings and arranging for rooms to be cleaned. He was assisted in cleaning by Lisa who conducted her own independent business activities.
4. In time (in or about 2013), Lisa and the children moved to other accommodation in Cooma (because life at the Motel was not congenial for children) but Mr Coote remained in occupation as a caretaker, consultant or manager (without any generally accepted job description) until he and Lisa were evicted by Forza on 6 July 2020.
5. During his occupation of the Motel, at least during the period when the operation of its business was overseen by Anthony, Mr Coote was treated as a contractor, not an employee. He enjoyed none of the routine benefits of an employment relationship. During the course of the hearing of these proceedings, counsel for Forza and Anthony conceded that Mr Coote was not at any material time an employee of Forza or Anthony.

THE RELATIONSHIP BETWEEN ANTHONY/FORZA AND MR COOTE/LISA

1. The case advanced by Forza and Anthony is predicated upon a characterisation of Mr Coote simply as an agent of Forza throughout the time between 2010 and 2020 he occupied the motel. He was for some purposes an agent of Forza, but the nature and scope of the parties' relationship requires closer attention than a mere assertion of agency bearing in mind their common interest in preserving the business of the motel pending a sale and their mutual obligation to account for their dealings referable to the motel.
2. Characterisation of the relationship between Forza and Mr Coote merely as that of principal and agent is too simplistic to describe their relationship after Anthony took over oversight of the motel business and, more particularly so, after he came to an arrangement (falling short of a contract) with Mr Coote, in or about December 2017, for Mr Coote and Lisa to purchase the motel as a going concern.
3. The informality attending arrangements for Mr Coote and Lisa to perform services in the conduct of the business of the Motel, and the informality in arrangements for sale of the motel to them, lie at the heart of the disputation in these proceedings: essentially, disputation about accounting for monies received or paid by Mr Coote in circumstances in which (having paid funds to Forza/Anthony, and having submitted to a deferral of payments due to him and Lisa for the provision of services at the motel, on account of the purchase price of the Motel) Mr Coote and Lisa had an (ill-defined) interest in the motel, and the continuing operation of the motel as a going concern, which was independent of the interests of Anthony and Forza.
4. The terms upon which Mr Coote provided his services (for want of a better description, as a caretaker and manager), and the terms upon which Lisa provided her services (as a cleaner) at the Motel were never reduced to writing. They may be inferred from usual practices about how the Motel operated from time to time but business was conducted in a pragmatic fashion, depending on the availability of lettable rooms and customers, and the exigencies of maintenance issues associated with the state of repair of motel buildings.
5. Nor was there a written agreement (or any form of concluded agreement) recording the terms upon which Anthony and Mr Coote, in or about December 2017, agreed that Anthony/Forza would sell, and Mr Coote/Lisa would buy, the motel. Although solicitors were retained on both sides, Anthony never caused Mr Coote to be provided with a draft contract capable of reasonable negotiation. To save on legal expenses, he caused his solicitor to provide to Mr Coote's solicitor a poorly adapted document based upon an unconsummated deal that Anthony had contemplated doing with another purchaser.
6. At no time between December 2017 and 6 July 2020 was there a concluded agreement about whether the subject of the sale to Mr Coote and Lisa was to be the freehold of the motel land, an assignment of Forza's leasehold interest in the land or a grant of a fresh lease, in addition to the goodwill of the business.
7. Everything about the "arrangement" for a sale of "the Motel" and the terms upon which business was to be conducted at the motel pending negotiation and completion of the sale was affected, more or less, by uncertainty, if not confusion, attending the informality of the arrangement.
8. Unlike his father Tony and his brother Frank, Anthony was not diligent in his oversight of operations at the Motel or associated financial matters. He delegated administrative tasks to his mother Rachel, did not attend upon the motel in a regular fashion, and did not make himself routinely available to liaise with Mr Coote about day-to-day business. He was preoccupied with other business activities and financially hard pressed in his pursuit of them.
9. He was motivated to sell "the Motel" to Mr Coote rather than to his alternative purchaser, he says, because Mr Coote agreed to pay him a higher price: $1.25 million as opposed to $1.2 million.
10. He was also attracted by the willingness of Mr Coote (and Lisa) to pay him a "deposit" in advance of a formal contract and to defer Forza's payment of invoices of Mr Coote and Lisa (for work done at the motel) pending a set off against the sale price of the Motel.
11. A "deposit" of $40,000 was paid by Mr Coote and Lisa to Anthony, between 16 December 2017 and 26 June 2018, by instalments (of $10,000 on 16 December 2017, $10,000 on 17 December 2017, $4,000 on 31 May 2018 and $20,000 on 26 June 2018) to allow him to pay pressing debts pending the issue of an exchangeable form of contract and steps to be taken by Mr Coote and Lisa (in the sale of property and in arranging a loan as finance) to purchase the Motel. The $4,000 instalment was paid as a supplement to the deposit or as a loan. Its precise characterisation is debatable but it has been treated by the parties as part of the deposit.
12. Before Lisa would acquiesce in a prospective deferral of payment of invoices of herself and Mr Coote she insisted that outstanding invoices be paid, which was done in mid-2018, clearing the way for payment of the last deposit instalment on 26 June 2018.
13. The endeavours of Mr Coote and Lisa to arrange finance for their purchase of "the Motel" were frustrated by deferral of payment of invoices which would otherwise have been paid and by a failure on the part of Anthony to provide them with a form of contract to formalise their arrangement(s) and tax returns of Forza which prospective financiers of Mr Coote and Lisa called for as a condition of consideration of a loan application.
14. The frustrations of Mr Coote and Lisa were intensified by a falling away of business at the motel associated with covid restrictions.
15. Rightly or wrongly, Mr Coote came to believe that procrastination on the part of Anthony was a function of a desire on the part of Anthony to frustrate the sale arrangement, and to force Mr Coote and Lisa out of the motel, so as to reap benefits expected to materialise from development of the nearby "Snowy 2.0" development then underway.
16. That state of belief was based on reasonable grounds even if, as I suspect was the case, it did not accord with Anthony's subjective intentions. Anthony appears to have been neither diligent nor effective in his oversight of the motel operations. He was preoccupied by other business and unmindful of the effect upon Mr Coote and Lisa of his lack of attention to the motel and its prospective sale. He was stretched for money, and he sought to impose upon Mr Coote and Lisa the economic burden of maintaining the motel business as a going concern and sustaining themselves without an orderly regime for the payment of remuneration, maintenance of the motel property or the reimbursement of expenses.
17. Independently of the motel, from about 2013 Lisa (with assistance from Mr Coote) provided accommodation on a commercial basis from a residential property (adjoining the home of Mr Coote and Lisa) on the other side of Cooma from the motel in Walgarra Street.
18. Between about 2013 and 2016 (during which time Lisa worked at a local abattoir) she serviced a clientele drawn from employees of the abattoir who were on working visas and needed a room to stay near the abattoir. She generated rental income from letting out single rooms and serviced her clientele by the provision of meals and washing clothes.
19. In or about 2016 (after she stopped working at the abattoir) Lisa shifted the focus of her rental business to students attending Cooma TAFE who needed a room, let on a nightly basis, going home when they were not required to attend classes.
20. Lisa's business also attracted people who were staying in the Cooma area and who needed parking facilities for large trucks and machinery, and members of the Chinese and Indonesian communities in Sydney who knew her.
21. As her business expanded people staying at the Walgarra Street property increasingly requested to pay for their rooms using a credit card or a debit card.
22. At the suggestion of the accountant of Mr Coote and Lisa, in or about August 2016 Lisa opened a Commonwealth Bank account in the name of "Walgarra Enterprises" and obtained an EFTPOS machine connected to that account. "Walgarra Enterprises" was adopted by Lisa at about this time as a trading name in lieu of the trading name, "Lisa's Sewing" she formerly used.
23. Prior to late 2016 there was no EFTPOS machine attached to any account in the names of Mr Coote or Lisa or any business name associated with them.
24. Between August 2016 (when the Walgarra account was opened) and July 2018 Mr Coote did not use the EFTPOS machine connected to the Walgarra account and it was never taken onto the Swiss Motel premises. It stayed at the house of Mr Coote and Lisa in Walgarra Street where it was primarily used to receive payments for the renting out of rooms at the adjoining Walgarra Street property and to receive payments for house cleaning that Lisa did on occasion. It was also on occasion used to receive payments for vegetables that Mr Coote grew and sold from the Walgarra Street property and a block of land he rented in the Polo Flat locality in Cooma.
25. Anthony claimed not to know of Lisa's rental business, but he expected Mr Coote and Lisa to look to Lisa's business activities for the family's living expenses during the period after December 2017 when payment of invoices of Mr Coote and Lisa for work done or services provided at the motel was deferred pending set off against the purchase price of the motel upon completion of the prospective sale.
26. The arrangement made for the sale of the motel by Forza/Anthony to Mr Coote/Lisa was inherently open to misunderstandings and a deterioration in personal relationships. This was largely because Anthony did not attend diligently to preparation of a formal contract or the provision of information required by Mr Coote/Lisa to borrow funds and neither side of the transaction possessed the financial resources necessary to give full effect to the transaction, carrying the other.
27. In my assessment, it is more probable than not that Mr Coote did, from time to time and to an extent not now readily quantified, use the Commonwealth Bank EFTPOS machine attached to the Walgarra account after 1 July 2018 for the receipt of payments made by guests at the motel as well as for the receipt of income attributable to the non-motel income of himself and Lisa. He rationalised use of the machine in relation to motel receipts as necessary to provide funds to sustain the motel business as a going concern and as the only practical source of "petty cash" funds available to him. That state of mind was a product of the impractical informal arrangement for the sale of the motel by Anthony/Forza to Mr Coote/Lisa without workable financial arrangements for funding the transaction or conducting the business in the meantime.

A RISING CRISIS IN A DETERIORATING RELATIONSHIP

1. Tensions between Anthony and Mr Coote came to a head in a dispute about arrangements for Mr Coote to fund the payment of invoices of himself and Lisa and the reimbursement of expenses of the motel from "petty cash" derived from the receipt of payments made by motel guests. Anthony intended, and expected, that the "petty cash" the subject of this arrangement would be limited to "physical cash" (notes and coins) received from motel guests. A problem with that was that "cash" payments by guests were usually made by electronic "point of sale" transactions, not physical cash, and there was no arrangement for the maintenance of a petty cash float.
2. Over several years "eftpos payments" by guests had been directed to an ANZ bank account of Forza. In order to provide a cash flow to meet payments not made by Forza, Mr Coote took it upon himself to channel some guest payments through the EFTPOS machine that directed payments to a Commonwealth Bank account of Lisa associated with her business name, "Walgarra Enterprises". When Anthony got wind of this, a deteriorating relationship between himself and Mr Coote rapidly deteriorated further. He accused Mr Coote of misappropriation.
3. By a date no later than about 4 February 2020 Anthony decided that he did not wish to proceed with the proposed sale of the motel.
4. The precise course of events between that time and 6 July 2020 (when Anthony caused Mr Coote and Lisa to be forcibly evicted from the motel) is not spelled out in the evidence. Letters of demand appear to have been exchanged in or about March or April 2020, at which time the parties stopped communicating with each other.
5. These proceedings were commenced by Forza on 3 July 2020, upon which date it obtained from a duty judge ex parte freezing orders against Mr Coote and Lisa which were from time to time continued until the parties apparently agreed upon an informal interlocutory arrangement in lieu of those orders.
6. According to Mr Coote, the freezing orders had a devastating effect on Lisa and himself, supporting an inference that the orders contributed to an inability on their part to resist Forza's re-entry into possession of the motel.

THE NATURE AND PARAMETERS OF THE PARTIES' DISPUTE

1. As it has unfolded, the dispute between the parties is essentially one of accounting for the receipt of monies, on both sides of the record, distinguishing between transactions attributable to the motel business and other transactions and working through the consequences of the failure of the arrangement for the motel to be sold to Mr Coote and Lisa.
2. In their competing contentions about the correct state of accounts between them the parties have paid scant attention to an analysis of legal relationships and competing rights and obligations, compounding the informality of all material business dealings.
3. Forza and Anthony have grounded all their submissions on a simple assertion that, at all material times, the critical fact is that Mr Coote was an agent of Forza and, as such, owed the obligations of a fiduciary to Forza.
4. An "agent" is commonly regarded as standing in a fiduciary relationship with a principal; but descriptive labels are not determinative, not all agents are fiduciaries, a person may be a fiduciary in some activities but not in others, and the duties owed by a particular fiduciary may vary with the circumstances which generate the relationship.
5. The existence, nature and scope of a fiduciary obligation depends upon the relationship between particular parties and the facts of the particular case.
6. The starting point for analysis of the parties' respective rights and obligations is not an intuitive characterisation of Mr Coote as an "agent", but a consideration of the factual circumstances in which he occupied the motel and conducted activities there.
7. Throughout Anthony's period of oversight of the motel business Mr Coote was not an employee of either Forza or Anthony. He was an independent contractor. He occupied the motel as licensee, on an implied, non-exclusive license that was determinable at will or, perhaps, on reasonable notice. It was on that basis that Forza/Anthony ultimately evicted him (and Lisa), rejecting an assertion then made by Mr Coote and Lisa that they had the benefit of an "equitable lease".
8. Neither Mr Coote nor Lisa were bound to serve only the interests of Forza or Anthony. Neither Forza nor Anthony paid them to do that. They were, in fact, expected to support themselves, at least to some extent, by sources of income other than the motel business.
9. In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-98, Mason J provided the following classic exposition of a fiduciary relationship: "The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations … , viz, trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility. … It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed. … Thus a mere subcontractor is not a fiduciary. Although his work may be described loosely as work which is to be carried out in the interests of the head contractor, the sub-contractor cannot in any meaningful sense be said to exercise a power or discretion which places the head contractor in a position of vulnerability. That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. Because I take a different view about the terms of the contract I do not share the Court of Appeal's conclusion that HPI was under a fiduciary duty to carry on the entire distribution business in the joint interests of USSC and HPI. That view, it seems to me, rested heavily on the suggested promise to carry on the business for the common benefit of the parties and on the implied term that HPI would do nothing inimical to USSC's interests. My conclusion that HPI was at liberty to make some business decisions by reference to its own interests, subject to the obligations arising under the best efforts promise and the other terms of the contract express and implied, presents an overwhelming obstacle to the existence of the comprehensive fiduciary relationship found by the Court of Appeal. This is because HPI's capacity to make decisions and take action in some matters by reference to its own interests is inconsistent with the existence of a general fiduciary relationship. However, it does not exclude the existence of a more limited fiduciary relationship for it is well settled that a person may be a fiduciary in some activities but not in others. …"
10. At 156 CLR 102 Mason J wrote the following under the heading "The Scope of the Fiduciary Duty": "The categories of fiduciary relationships are infinitely varied and the duties of the fiduciary vary with the circumstances which generate the relationship. Fiduciary relationships range from the trustee to the errand boy, the celebrated example given by Fletcher Moulton LJ in his judgment in In re Coomber [1911] 1 Ch 723, in which, after referring to the danger of trusting to verbal formulae, he pointed out that the nature of the curial intervention which is justifiable will vary from case to case. … In accordance with these comments it is now acknowledged generally that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case . . . The rigorous standards appropriate to a trustee will not apply to a fiduciary who is permitted by contract to pursue his own interests in some respects. …"
11. In Breen v Williams (1996) 186 CLR 71 at 112-113 Gaudron and McHugh JJ wrote the following: "In [Australia], fiduciary obligations arise because a person has come under an obligation to act in another's interests. As a result, equity imposes on the fiduciary proscriptive obligations - not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach. But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed."
12. In my opinion, even if the label "agent" is attached to Mr Coote (as it may be) the commercial relationship between Forza and Mr Coote was not such as to impose upon Mr Coote general fiduciary obligations of the nature of those imposed upon a trustee, an employee or an agent fully dedicated to a principal. He was entitled to consult his own interests and those of Lisa, and to prefer them over those of Forza/Anthony, to the extent that it was reasonable to do so in pursuit of a common objective that the business of the motel be preserved as a going concern while arrangements for the motel to be sold to Mr Coote/Lisa were carried into effect, anticipating that accounts between the parties would be settled upon completion of the sale. This required both parties to act in good faith, using their best endeavours, not obstructing pursuit of the common object and acting reasonably.
13. The correctness of this approach can be tested against the rules governing the implication of an implied term in a contract as a matter of fact as stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283, restated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347, approved in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in Liq) (2000) 202 CLR 588 at 609 [44].
14. An implied term must be reasonable and equitable. It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it. It must be so obvious that "it goes without saying". It must be capable of clear expression. It must not contradict any express term of the contract.
15. It is not necessary to enter upon any controversy (such as that noticed in Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87 at [154]-[159] by reference, inter alia, to Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234) as to whether, in law, there is an implied contractual obligation of reasonableness and good faith of general operation. This case can be accommodated within a case-specific framework.
16. In my opinion, to the extent that the parties had a consensual arrangement that arrangement included implied terms that, acting reasonably: 1. each party to the arrangement would co-operate with each other party in the doing of acts which were necessary for the performance of the arrangement: Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 at 610 and 615; and 2. neither side of the arrangement would hinder or prevent the fulfilment of the arrangement: Service Station Association v Berg Bennett (1993) 45 FCR 84 at 92-94, citing Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359.
17. In adopting this approach I am mindful that Forza submits that any consensual arrangement between the parties included terms that mandated use by Mr Coote of an EFTPOS machine connected to its account for all transactions at the motel not effected by means of physical cash. In the absence of a written contract, and in circumstances in which Mr Coote was called upon to act pragmatically as an independent contractor, the parties' practice of using Forza's EFTPOS machine should not be elevated from the status of a convenient practice to that of a contractual term.
18. In the parties' presentation of their competing cases good faith considerations are implicit in each party's attribution of blame to the other about the breakdown of their relationship. Each side blames the other for not using best endeavours to consummate a sale of the motel. Each side blames the other for obstruction on the road to an orderly completion of a sale.
19. The fact that the parties agreed upon an arrangement for the motel to be sold by Anthony/Forza to Mr Coote/Lisa and, more particularly, the fact that Mr Coote and Lisa paid a deposit on account of the purchase price significantly affected the parties' relationship and the nature and scope of any duties they owed to one another.
20. Although care needs to be taken not to place undue weight upon descriptive labels of a relationship (whether as an "agent" or otherwise) Mr Coote and Lisa, on one view, assumed the character of purchasers in possession of the land upon which the motel is located. Counsel for the plaintiff conceded that, if the true character of the $44,000 deposit was a payment in the character of an instalment of the purchase price, it having been released to Anthony, Mr Coote and Lisa had, at least, an equitable charge over the land. In my opinion, that concession was properly made: Hewett v Court (1983) 149 CLR 639 at 645, 646, 649, 650, 654 and 663-664.
21. Counsel for the defendant suggested, without elaboration, that, at least from the time of the agreement for the sale and purchase of the motel in December 2017 the relationship between the parties is best analysed as a failed joint venture attracting, upon the parties' relationship breaking down, principles discussed in Muschinski v Dodds (1984) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137.

THE STATEMENT OF CLAIM

1. By its statement of claim (filed on 20 October 2020) Forza seeks a money judgment against Mr Coote and Lisa, claiming relief variously described as "damages", "an account of profits", "equitable compensation" or "moneys had and received". As pleaded, its claim focuses essentially upon an allegation that Mr Coote was its "agent to provide certain services to Forza as operator of the Swiss Motel". The claim against Lisa arises from allegations of fiduciary duty said to have been owed by Mr Coote and Lisa jointly and severally to Forza and their alleged participation in the other's alleged breaches of fiduciary duty.
2. The hearing of the proceedings was conducted, on both sides of the record, in a way that does not call for close attention of the different roles of Mr Coote and Lisa. In substance, theirs is a single case.
3. In essence, Forza seeks to recover from Mr Coote and Lisa compensation for five categories of monies received by them (totalling $286,883.57), allegedly on Forza's account, comprising: 1. A sum of $241,042.02 paid through the Commonwealth Bank point of sale (CBA POS) device to a Commonwealth Bank account in Lisa's business name "Walgarra Enterprises" in 571 transactions in the period between 8 September 2016 and 5 July 2020. 2. A sum of $24,600 paid into the Walgarra Commonwealth Bank account in 20 transactions by the company RD Miller Pty Ltd in the period between 6 February 2018 and 16 November 2018. 3. A sum of $13,415 for bookings paid in cash in the period between 4 May 2020 and 3 July 2020 which were not recorded in the Swiss Motel's "Guestpoint" booking system. 4. A sum of $4,400 for motel guest bookings which were transferred to the property of Mr Coote and Lisa (where they provided accommodation for guests) in Walgarra Street, Cooma. 5. A sum of $3,420.55 for motel guest bookings which were paid into an account of Lisa (associated with a company, Swiss Motel Pty Ltd, incorporated by Lisa in March 2019) using a point-of-sale device associated with the entity "Square Ltd AU".
4. On neither the statement of claim nor the statement of cross claim is there a challenge to the arithmetic of monies claimed, with the possible exception of Mr Coote's complaint that he could not verify the amount of the payments made into Lisa's "Square account" (quantified by Forza at $3,420.55) because when he was a evicted from the motel Anthony seized his records held at those premises.
5. Without the benefit of those records the Court has documents produced on subpoena by Square which verify the quantum of the bookings the subject of Forza's claim.
6. In cross examination Mr Coote conceded that, despite his inability to confirm the "Square" amount by reference to his own records, he does need to make an allowance in favour of Forza for the "Square" transactions. I propose to act on that concession, accepting the subpoenaed documentation as proof of quantum.

THE STATEMENT OF CROSS CLAIM

1. By their statement of cross claim (filed on 20 November 2020), Mr Coote and Lisa seek to recover the sum of $105,835.05 from Forza and Anthony, comprising: 1. The sum of $44,000 which Mr Coote and Lisa paid to Anthony, by instalments, in the period between 16 December 2017 and 26 June 2018 as a deposit to purchase the Swiss Motel; and 2. A sum of $61,835.05 which Mr Coote and Lisa claim as money owed to them by Forza for "administration expenses, administration commission, cleaning services, wages and petty cash" for their work at the Swiss Motel in the period between 1 July 2017 to 28 March 2020.
2. Forza does not dispute that the claim for $61,835.05 made by Mr Coote and Lisa represents an amount properly due to them, as claimed, for their work at the Swiss Motel.
3. In essence, the defence of Anthony and Forza to the statement of cross claim is as summarised in their "outline of closing submissions" (MFI P11) in the following terms: "[68] … [The] sum of $44,000 which was paid by Mr Coote and [Lisa] to [Anthony] was a non-refundable deposit to purchase the Swiss Motel and [Anthony] is not obliged to repay that amount to Mr Coote and [Lisa] in circumstances where they decided (for whatever reason) not to proceed with their purchase of the Motel. [69] As for the other amounts totalling $61,835.05 which Mr Coote and [Lisa] claim they are owed by Forza, the [position of Forza and Anthony] is that the parties agreed in about July 2018 that Mr Coote and [Lisa] would offset the amounts they charged Forza for their management and cleaning services which they provided to the Motel from July 2018 against the purchase price they paid to purchase the Motel. Forza is not obliged to pay these amounts to Mr Coote and [Lisa] in circumstances where they decided (for whatever reason) not to proceed with their purchase of the Motel."

ADJUDICATION ON THE CROSS CLAIM

1. Before proceeding to review the categories of claim made by Forza in its statement of claim, I record my determination that these defences to the statement of cross claim must fail.
2. The $44,000 paid as a "deposit" was not paid on terms that it would be "non-refundable". If it was the intention of Anthony that it be "non-refundable" he did not objectively convey that to either Mr Coote or Lisa. Although called a "deposit" the $44,000 was, in its essential character, a payment on account of the purchase price payable upon completion of a purchase that never eventuated.
3. Conceptually, the amounts totalling $61,835.05 (representing unpaid invoices of Mr Coote and Lisa) fall into the same class as "the deposit" because they were, according to the intention of the parties, prospective offsets against the purchase price payable on completion of the purchase that did not materialise.
4. The defence of Forza and Anthony to the cross claim, in each of its dimensions, is based upon a false assumption that Mr Coote and Lisa "decided (for whatever reason) not to proceed with their purchase of the Motel". In fact, they maintained their determination to buy the Motel until they were forcibly evicted by Forza (and Anthony) in circumstances in which their pursuit of the purchase transaction had been obstructed by Forza and Anthony in their failure to produce a form of contract capable of acceptance or negotiation and tax returns requested by prospective financiers.
5. That obstruction precludes a finding that Mr Coote and Lisa were materially at fault for the failure of the sale transaction: cf, Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246-247; Mahoney v Lindsay (1980) 55 ALJR 118; 33 ALR 601. In the absence of fault on the part of Mr Coote and Lisa, Anthony and Forza are not entitled to keep both the motel property and amounts paid or allowed by Mr Coote and Lisa on account of the purchase price for a purchase that was not completed: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 470 and 477-479.
6. Subject to a determination of such, if any, entitlements Forza may have on its statement of claim, I propose to enter judgment for Mr Coote and Lisa on the cross claim against Forza and Anthony in the sum of $105,835.05 together with pre-judgment interest under the Civil Procedure Act 2005 NSW, section 100, calculated from 6 July 2020, the date upon which Forza/Anthony evicted Mr Coote/Lisa from the motel.

ADJUDICATION ON THE STATEMENT OF CLAIM

1. It is common ground between the parties that there is no overlap between the amounts claimed in the statement of claim and the amounts claimed in the cross claim. All parties are content that their competing claims to relief be dealt with, arithmetically, as separate claims.
2. That is not to say that the two sets of claims are analytically separate. The circumstances in which Mr Coote and Lisa paid or allowed sums in favour of Anthony and Forza on account of the purchase price of the Motel are substantially the same circumstances in which Mr Coote and Lisa received sums which Forza invites the Court to characterise as funds received on the account of Forza.
3. An integral aspect of the change in the nature of the relationship between Anthony/Forza and Mr Coote/Lisa in the payment, by instalments, of the $44,000 deposit was the agreement that payment by Forza of invoices of Mr Coote and Lisa would be deferred pending their set off against the purchase price upon completion of a sale of the motel.
4. In my assessment, Anthony and Mr Coote were at cross purposes about what was to happen in management of the motel business pending the preparation of formal documentation of the agreement for sale and confirmation of the finance available to Mr Coote and Lisa. Both camps anticipated, and expected, that the business would remain operative so that it would be sold, and purchased, as a going concern. Subjectively, Anthony imagined that the business could be run as if no arrangement had been made for the motel to be sold, with minimum cost to himself and at the cost of Mr Coote and Lisa drawing upon their own resources. Mr Coote imagined that, an arrangement for transfer of ownership of the motel having been made, he could and should do whatever was reasonably necessary in his assessment to enable the motel business to be preserved as a going concern and expenses to be paid in the meantime.
5. In so far as there was a common understanding between the parties it was, in my assessment, that there would be, upon completion of the sale of the motel, an accounting to ensure that Anthony/Forza received a reasonable allowance for the receipt of guest payments for accommodation at the motel and that Mr Coote/Lisa received a reasonable allowance for work done and services supplied at the motel, accepting that it was open to Mr Coote and Lisa, within the limits of what was reasonable, to pursue other business interests.
6. In my opinion, it is neither necessary nor appropriate to analyse the parties' relationship, or their common understanding about their mutual accounting obligations, in terms of a joint venture the failure of which attracts the intervention of equity in the imposition of a constructive trust governed by considerations of unconscionability. The parties were not engaged in a joint venture relationship. Mr Coote was an independent contractor managing the motel business as a non-exclusive licensee pragmatically according to exigencies of the day and, for the most part, working towards purchase of the motel. Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137 have no direct application, though they may provide a constructive contrast to the operation of the common law. In any event, it should be noted that no claim for proprietary relief is made in the proceedings. The only claims made, on both sides of the record, are claims for a money judgment.
7. In my opinion, the common law provides ample means for justice to be done between the parties by reference to considerations of reasonableness in the context of a relationship in which both sides, upon reasonable grounds, expected that each party would act in good faith and reasonably.
8. In the paragraphs that follow I deal with each of the five categories of monies received by Mr Coote and Lisa (totalling $286,883.57) in respect of which Forza claims compensation.
9. The First Category. Forza claims $241,042.02 referable to payments to Lisa's Commonwealth Bank "Walgarra Enterprises" account between 8 September 2016 and 6 July 2020 or thereabouts using a Commonwealth Bank point-of-sale (EFTPOS) device linked to the account. Of that amount $14,492.75 related to transactions between 6 September 2016 and 1 July 2018 (with the last transaction occurring on 29 April 2018) and $226,555.27 related to transactions between 1 July 2018 and 6 July 2020 or thereabouts (ending at about the time Forza evicted Mr Coote/Lisa from the motel).
10. The pattern of transactions is consistent with evidence of Mr Coote that the EFTPOS machine connected to the Walgarra account was never taken onto the motel premises until July 2018 or thereabouts. I accept that the sum of $14,492.75 represents transactions having no connection with the motel business and not requiring any adjustment in favour of Forza.
11. The difficulty is what to do with the $226,555.27 referable to the period following 1 July 2018, during which the Commonwealth Bank EFTPOS machine was used on the motel premises with a marked increase in the number of transactions, part (but unlikely all) of which might be referable to an increase in Lisa's business activity.
12. On the evidentiary material available to the Court (including spreadsheets prepared by Mr Coote and Anthony's reconstruction from available records) I am not confident about how the sum of $226,555.27 should be apportioned between the parties, although apportioned it must be.
13. I take Anthony's point that a Jones v Dunkel inference should be drawn against Mr Coote and Lisa arising from the absence of Lisa from the witness box but, by the same token, I regard Mr Coote as a witness who endeavoured to give his evidence honestly. Cross examination of him was limited by the informality of the parties' dealings and the availability of corroborative records. This cuts both ways. On the one hand, the cross examiner was constrained in challenges made to Mr Coote's explanation of particular transactions. On the other hand, it was not unreasonable for Mr Coote to protest that he could not answer some of the questions put to him without access, in court, to his computer.
14. I am mindful that the precise character of that part of the receipt of $226,555.20 to be apportioned to Forza is unclear because, in some cases, money was received from guests who were redirected by Mr Coote from the motel to Lisa's Walgarra Street property because (accepting Mr Coote's evidence) they could not reasonably be accommodated on site at the motel. In any event, the evidence does not address whether any (and, if so, what) allowance should be made in favour of Mr Coote/Lisa for expenses incurred by them in providing accommodation and services at the Walgarra Street property.
15. Some of these difficulties might have been overcome if I had found that the relationship between the parties could properly have been characterised as a fiduciary relationship, imposing upon Mr Coote and Lisa an obligation to account for business opportunities "diverted" to the Walgarra Street property and away from Forza. However, for the reasons I have given, I am not prepared to embrace the fiduciary analysis embodied in the statement of claim.
16. In the absence of a firm evidentiary foundation for a precise apportionment of the sum of $226,555.27 the conclusion I have reached is that a fair and reasonable apportionment of that sum is one that, in substance, divides it equally between the parties. On that basis, I propose to allow in favour of Forza in a judgment on the statement of claim the sum of $113,278, near enough to one half of the disputed sum, without any allowances being made for unclaimed expenses incurred in generating the sum of $226,555.27.
17. The Second Category. Forza characterises the sum of $24,600 paid into the Walgarra Commonwealth Bank account as income diverted from itself because RD Miller Pty Ltd was a customer of the motel. Mr Coote's explanation is that the sum of $24,600 represented payments for accommodation provided by Lisa at the Walgarra Street property; that that accommodation was provided for employees of RD Miller Pty Ltd who had stayed at the motel but who preferred to stay at the Walgarra Street property because they were able there to enjoy a personal friendship that they had with a son of Mr Coote/Lisa and to leave their personal belongings there over weekends when they returned to their homes.
18. Had the relationship between Forza and Mr Coote/Lisa materially been characterised as a fiduciary relationship there may have been substance in Forza's claim to recover the $24,600, subject to an allowance being made in favour of Lisa (and/or Mr Coote) for the cost of providing the services for which the $24,600 was paid.
19. Viewing the parties' relationship through the prism of a need for adjustments that are fair and reasonable, the conclusion I have reached is that no allowance should be made in favour of Forza for any part of the sum of $24,600.
20. I note, in passing, that the principal of RD Miller Pty Ltd knew that his employees had expressed a preference to stay at the Walgarra Street property and he was content for them to do so at the company's expense. Mr Coote's evidence to that effect was not challenged. No party adduced evidence from a representative of the company.
21. The Third Category. Forza's claim of $13,415 for bookings paid in cash relates to a period (between 4 May 2020 and 3 July 2020) during which time the relationship between the parties had totally broken down and arrangements for Mr Coote to account for such funds were no longer workable.
22. The conclusion I have reached is that, on the parties' settling their accounts, it is fair and reasonable that an allowance of $13,415 be made in favour of Forza.
23. The Fourth Category. Forza's claim of $4,400 for motel guest bookings transferred to the Walgarra Street property could be characterised as a claim for income diverted from Forza by Mr Coote and Lisa on the face of the records adduced in evidence, but allowance needs to be made for the evidence of Mr Coote that such transfers occurred in circumstances in which guests could not conveniently be accommodated at the motel and, in any event, services were provided at the cost of Lisa at the Walgarra Street property.
24. In the absence of a firm evidentiary foundation for a precise apportionment of the sum of $4,400 between the parties, the conclusion I have reached is that a fair and reasonable apportionment of that sum is one that, in substance, divides it equally between the parties. On that basis, I propose to allow in favour of Forza in a judgment on the statement of claim, the sum of $2,200.
25. The Fifth Category. As has been previously noted, the sum of $3,420.55 is to be allowed in favour of Forza in a judgment on the statement of claim in circumstances in which Mr Coote conceded in cross examination that some allowance should be made and there is evidence, from subpoenaed records, that permits the disputed sum to be quantified as claimed.
26. Subject to any agreement by the parties for a set off of judgments (taking into account a lack of a formal identity between parties to the statement of claim and parties to the cross claim), I propose to enter judgment for Forza against Mr Coote and Lisa, on the statement of claim, in the sum of $132,313.55, together with pre-judgment interest under the Civil Procedure Act 2005 NSW, section 100, calculated from 6 July 2020.

CONCLUSION

1. In summary, subject to allowing the parties an opportunity to make submissions about the form of the Court's orders and costs, I propose to make orders to the following effect in disposition of the proceedings: 1. Judgment in favour of Forza, and against Mr Coote and Lisa, in the sum of $132,313.55 (plus pre-judgment interest) on the statement of claim. 2. Judgment in favour of Mr Coote and Lisa, and against Forza and Anthony, in the sum of $105,835.05 (plus pre-judgment interest) on the cross claim.
2. Subject to allowing the parties an opportunity to make submissions about costs, I am presently minded to make no orders as to costs, to the intent that each party pay its, his or her own costs.
3. Whether that prima facie view might be displaced by evidence of an exchange of offers of settlement, or other considerations, remains to be seen.
4. For completeness, I invite the parties to consider whether any (and, if so, what) orders should be made in respect of undertakings given by Forza in support of freezing orders obtained against Mr Coote and Lisa.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 June 2023