Keeley & Ors v Horton & Anor [2016] QCA 68

SUPREME COURT OF QUEENSLAND

CITATION: Keeley & Ors v Horton & Anor [2016] QCA 68

PARTIES: WILLIAM IAN KEELEY LEANNE FAYE KEELEY (first appellants) MARINE WAREHOUSE PTY LTD ACN 066 954 112 (second appellant) v ROBERT WILLIAM HORTON DESLEY MARGARET HORTON (respondents)

FILE NO/S: Appeal No 12298 of 2014 / DC No 3231 of 2007

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: District Court at Brisbane – [2014] QDC 260

DELIVERED ON: 22 March 2016

DELIVERED AT: Brisbane

HEARING DATE: 9 June 2015, supplementary written submissions dated 18 June 2015

JUDGES: Holmes CJ and Peter Lyons and Burns JJ / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: (a) Varying paragraph A(1) of the judgment pronounced on 24 November 2014 by deleting “$100.00” and substituting “$96,367.00”; and / (b) Setting aside paragraphs B(1) and B(2) of the judgment pronounced on 24 November 2014. / (a) The interest to be awarded with respect to the judgment amount as varied by paragraph 2(a) above; / (b) The costs of the trial; and / (c) The costs of the applications for leave to appeal and the appeal.

CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL - GENERAL PRINCIPLES – EXCESSIVE OR INADEQUATE DAMAGES – DAMAGES INADEQUATE – where the first appellants purchased the issued share capital in the second appellant from the respondents – where in respect of that purchase the respondents breached a warranty that affected the calculation of the purchase price – where nominal damages were awarded for the breach on the basis that the appellants had suffered no actual loss – whether the damages assessed at first instance were inadequate / APPEAL AND NEW TRIAL – APPEAL - GENERAL PRINCIPLES – EXCESSIVE OR INADEQUATE DAMAGES – DAMAGES INADEQUATE – where the first appellants purchased the issued share capital in the second appellant from the respondents – where in respect of that purchase the respondents breached a further warranty by failing to disclose an unresolved claim for compensation made against the second appellant – where the loss claimed for that breach related to increased WorkCover premiums payable by the second appellant – whether the damages assessed at first instance were inadequate / APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – WHEN APPEAL LIES – FROM DISTRICT COURT – BY LEAVE OF COURT – where judgment at first instance was given for an amount less than the Magistrates Courts’ jurisdictional limit – where an error was made in the assessment of damages which, if not made, would have resulted in an award of damages to the first appellant in excess of that limit – whether the Court should exercise its discretion under s 118 of the District Court of Queensland Act 1967 (Qld) to grant leave to appeal / District Court of Queensland Act 1967 (Qld), s 118 / Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36, cited Butler v Egg & Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38, cited Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25, followed Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496; [2005] HCA 3, cited Clark v Macourt (2013) 253 CLR 1; [2013] HCA 56, followed Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54, followed EW Blanch Pty Ltd & Anor v Cooper & Anor [2005] NSWCA 217, cited Horton & Anor v Keeley & Ors [2013] QCA 161, cited HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54, cited Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64, cited Keeley & Ors v Horton & Anor [2014] QDC 234, considered Keeley & Ors v Horton & Anor (No 2) [2014] QDC 260, overturned Lion Nathan Ltd v C-C Bottlers Ltd [1996] 1 WLR 1438; [1996] UKPC 9, followed Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, cited Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1949] AC 196, cited Robert Bax & Associates v Cavenham Pty Ltd [2013] 1 Qd R 476; [2012] QCA 177, followed Robinson v Harman (1848) 1 Ex 850; [1848] EngR 135, cited Smith v Ash [2011] 2 Qd R 175; [2010] QCA 112, followed Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8, cited Trustee of the Property of Cummins v Cummins (2006) 227 CLR 278; [2006] HCA 6, cited Wenham v Ella (1972) 127 CLR 454; [1972] HCA 43, cited

COUNSEL: D A Skennar for the appellants / P P McQuade QC, with K C Kelso, for the respondents

SOLICITORS: Files Stibbe Lawyers for the appellants / Colville Johnstone Lawyers for the respondents

1. HOLMES CJ: I agree with the reasons of Burns J and the orders he proposes.

2. PETER LYONS J: I have had the advantage of reading the reasons for judgment of Burns J.

3. I am grateful to his Honour for his exposition of the law, and his analysis of the factual material in this matter. They enable me to state my reasons quite briefly.

4. I agree with his Honour that in this case, the damages suffered by the first appellants are to be assessed by comparing the position in which they found themselves on completing their contract with the respondents, with the position in which they would have been had the warranties as to the trading position of the second appellant been true.

5. The second appellant conducted a business. If that business had goodwill, that was an asset of the second appellant. The best evidence for determining whether there was goodwill associated with the business was the valuation of Mr Ham of 9 December 2004, on which the parties acted when entering into the contract¹. Mr Ham valued the business on the basis represented by the warranties. His valuation demonstrated a goodwill component of $96,367. That was because the capitalised value of its earnings before interest and income tax (EBIT) exceeded its relevant assets, being its inventory and fixed assets, by that sum.

6. Mr David Williams, an accountant whose valuation expertise was not in issue, reconsidered Mr Ham’s valuation in light of the second appellant’s true (ongoing) trading position. He demonstrated that, in those circumstances, the EBIT of the business would be less than the value of the relevant assets and accordingly the business had no goodwill. This was an asset the company would have had if the representations were true; but in reality it did not have it. There is no reason not to accept this evidence from Mr Williams.

7. As is apparent from the evidence of Mr Charlton, the accountant called to give valuation evidence on behalf of the respondents, the value of what the first appellants purchased might be determined by having regard to the difference between the value of the assets and the liabilities of the company². Absent the identification of some other adjustment to the assets and liabilities to be made when comparing the position in which the first appellants would have been if the representation was true, and the position in which they found themselves, the value of the goodwill identified by Mr Ham represents the difference in these values, and was the measure of their damage.

8. Accordingly, I agree with Burns J that the damage which the first appellants have suffered should have been assessed in the amount of $96,367.

Material facts

14. In late October 2004, Mr and Mrs Keeley learned that the business was for sale. At that time, Mr and Mrs Horton were the directors of the company and together owned 74 per cent of the issued capital. Two employees of the company, Mr Liu and Mr Smith, owned the remaining 26 per cent of the issued capital as to one-half each.

15. Mr Ham, a chartered accountant in private practice, had acted for the company as well as the Horton family for almost 40 years. Over much the same period, he also acted for the Keeley family. Mr Ham was a central figure in the case, and not only because he acted for all parties in the transaction. He also provided a written valuation of the business that the parties accepted and then relied on, in reaching agreement regarding the purchase price. So, too, did the parties accept Mr Ham’s advice that it was preferable for the share capital in the company to be acquired by Mr and Mrs Keeley, as opposed to a purchase of the business alone, along with advice as to the overall consideration to be paid for the shares and how it should be paid. Then, Mr Ham prepared settlement figures for the completion of the sale including details of the amounts to be paid, and to whom, and attended on the settlement on 4 January 2005 at the company’s premises. Despite all of this, however, Mr Ham was not called as a witness at the trial.

16. Be that as it may, Mr Ham’s valuation of the business was dated 9 December 2004 and was in the sum of $668,000.⁵ It was initially provided to Mr and Mrs Horton but, two days later, Mr Ham provided a copy of it to Mr and Mrs Keeley.⁶ In his covering letter dated 11 December 2004, Mr Ham recorded that he had met “with the parties concerned and they are happy to go ahead with the proposed sale using the Valuation figure” subject to adjustments for profits since 1 July 2004 as well as stock. He then advised Mr and Mrs Keeley that the sale could proceed in one of two ways; either by the company selling the business or by the shareholders selling their shares, with the latter being the “preferred option”. Under that option, Mr Ham advised that Mr and Mrs Keeley could acquire the whole of the issued capital for $663,744. This sum was said to have been comprised of $65,515 to purchase the shares and a loan to the company of $651,422 – a total of $716,937 – but it was then adjusted down for debtors, prepayments, creditors and taxation in amounts set out in Mr Ham’s letter. The primary judge found that, although Mr and Mrs Keeley were not constrained “to pay any specific sum”, the parties must be taken to have accepted “some advice to the effect of” the 11 December 2004 letter including the “specific stated figures” and to have acted accordingly.⁷

“[Mr and Mrs Horton] warrant that:

…

(h)the Company Records¹⁵ give and reflect a true and fair view of the financial, contractual and trading position of the Company;

…

(r)neither:

(i)the Company; nor

(ii)any person for whose acts or defaults the Company may be vicariously liable

is involved in any civil, criminal or arbitration proceedings, and there are no facts or circumstances likely to give rise to such proceedings, and no such proceedings are pending or threatened against such persons;

…

(yy)the Company does not have any actual, pending or threatened criminal or civil proceedings against it, and is not engaged in or threatened with litigation of any kind;

...

(jjj)there are no facts or circumstances known to [Mr and Mrs Horton] that are likely to result in any material pay claims against the Company;

…”

20. The agreement was completed on the day it was entered into – 4 January 2005. Prior to that date, Mr Ham advised Mrs Keeley of the amounts that would be required to be paid, and to whom, in order to complete the purchase.¹⁶ At settlement, Mr and Mrs Keeley paid $65,515 to the vendor shareholders, including $45,481.10 to Mr and Mrs Horton. In addition, Mr and Mrs Keeley advanced $651,422 to the company by way of loan. The sum so advanced was then combined with, in the main, cash at bank¹⁷ to allow for the immediate payment to the vendor shareholders of dividends totalling $835,170.

21. It will be seen that the sums paid by Mr and Mrs Keeley to purchase the shares and the amount advanced to the company by way of loan were respectively the same as those advised by Mr Ham in his 11 December 2004 letter. However, there was no adjustment for debtors, prepayments, creditors or taxation, whether in the amounts set out in Mr Ham’s letter or at all. Accordingly, the total paid by Mr and Mrs Keeley was not $663,744, but $716,937. The evidence at trial did not disclose why none of the adjustments contemplated in Mr Ham’s letter were made or how Mr Ham arrived at the figure he advised for the purchase of the shares ($65,515), but the amount of the loan ($651,422) would appear to have been calculated from the balance sheet for the company for the 2004 financial year. Mr Ham said as much in his 11 December 2004 letter,¹⁸ and the total advance otherwise seems to have been made up of the amounts included in the balance sheet for accounts receivable ($262,108), inventory ($555,243), prepaid expenses ($400), prepaid purchases ($2,997) and plant and equipment ($16,390) less the amounts for liabilities ($185,708) and share capital ($8).¹⁹ Be that as it may, after payment of the dividends, the shares in the company were transferred to Mr and Mrs Keeley, whereupon they took control of its assets including the business. Mr and Mrs Horton resigned as directors and Mr and Mrs Keeley took their place.

22. Subsequently, it emerged that Mr and Mrs Horton had received correspondence in late October 2004 from Hy-Drive (Qld) Pty Ltd indicating that, as from 1 November 2004, the company’s distributorship of Hy-Drive marine hydraulic steering kits and componentry would be cancelled. That distributorship accounted for a not insignificant proportion of the revenue generated by the business and, thus, the company. The primary judge found that, in breach of the earnings warranties, the loss of this distributorship had not been disclosed to Mr and Mrs Keeley prior to the purchase. As such, his Honour found, as a fact not disputed by the end of the trial, that the accounts and records of the company “did not show a true and fair view of the state of affairs” of the company or of the business as at 3 January 2005. Shortly stated, Mrs and Mrs Keeley were led to believe that the company and business were more profitable than they in fact were.

“Mr Ham was not aware of the cessation of the commercial arrangements with Hy-Drive when he completed his valuation. Mr Ham later states that, if he was aware of this fact then he would have amended his actions and advice in relation to the sale.

…

Mr Ham [did] not know about the loss of the [Hy-Drive] sales when he prepared his valuation – but acknowledges that had he known about the loss of the [sales], then he would have made adjustments to his advice on the sale process.”²²

24. The report was tendered on behalf of Mr and Mrs Horton at the trial without any attempt to excise these paragraphs and, understandably, no objection made on behalf of Mr and Mrs Keeley to their admission. For the reasons expressed by the primary judge, although hearsay, those paragraphs could be taken into account as “evidence for all purposes”²³ and accorded such weight as the court considered appropriate.²⁴ His Honour did so, employing that evidence in support of his conclusion that the loss of the Hy-Drive distributorship had not been disclosed to Mr Ham.²⁵ Support for this conclusion was also found in two exhibits that do not form part of the Appeal Record Book,²⁶ but which are said to have made it “obvious [to his Honour] that Mr Ham, in his own words, confirmed his lack of knowledge”.²⁷

25. Because, for reasons to be developed,²⁸ the critical question for the primary judge in the assessment of whether loss was suffered by Mr and Mrs Keeley was the extent to which Mr Ham’s valuation of the business and subsequent advice as to price would have been affected by knowledge of the loss of the Hy-Drive distributorship, it is important to add that there were two additional sources of evidence that were admitted without objection and which further support the primary judge’s conclusion that there had been no disclosure of the loss of the Hy-Drive distributorship.

26. The first additional source was a letter from Mr Ham to the solicitors for Mr and Mrs Keeley dated 16 January 2006, a copy of which formed part of the third report prepared by the forensic accountant retained by Mr and Mrs Keeley for the purpose of the trial, Mr Williams, and admitted in evidence.²⁹ In that letter, the following appears:

“You have asked us to consider what would have been our Valuation of the Business had the loss of the [Hy-Drive] distributorship been taken into account.

Our valuation was based on a comparison of the capitalisation of maintainable earnings of the business and the Balance Sheet to determine the goodwill of the business.

It follows that if there was an event which changed any of the trading figures, then this would alter the maintainable earnings which after having the capitalisation rate applied thereto would result in either a greater or lesser valuation of the business, and therefore an increase or decrease in the goodwill figure.”³⁰

27. The second additional source appeared in Mr Williams’ first report, as follows:

“The fact that the [Hy-Drive distributorship] had been lost by [the company] was not disclosed to Mr Ham before he finalised his valuation, consequently he was unable to reflect this material fact in his valuation. In his letter to [Mr and Mrs Keeley] dated 3 November 2005 Mr Ham clearly indicated that had he have been aware of the loss of the [Hy-Drive] line of products his estimate of the [business’] maintainable earnings would have been impacted and that this would flow on to his valuation of the business and [the company]”.³¹

28. It also emerged subsequent to settlement that a claim for compensation had been served on the company on 10 December 2004 with respect to an injury that was sustained by one of the company’s employees on 1 May 2003. Mr and Mrs Horton accepted that their failure to disclose the claim breached the warranties under the agreement,³² but argued that Mr and Mrs Keeley had reached agreement with them with respect to this aspect of the matter in an exchange of correspondence and had, therefore, compromised their rights to pursue it any further. The primary judge rejected that argument,³³ but held that the evidence adduced at trial was insufficient to conclude that the making of the claim for compensation had the effect of increasing the workers’ compensation premiums payable by the company beyond a sum of $771.48, $500 of which had already been paid by Mr and Mrs Horton.³⁴ His Honour then found that this loss ($271.48) could “only be sheeted home to” the company.³⁵

29. On 9 November 2007, Mr and Mrs Keeley together with the company commenced the subject proceeding against Mr and Mrs Horton in the District Court at Brisbane, claiming damages for, relevantly, breach of warranty. Their principal complaint was that, by reason of the breach of the earnings warranties, Mr Ham overvalued the business and that this error affected the advice he subsequently gave regarding the purchase of the shares. In consequence, they argued, too much was paid by them for the acquisition of the company. So far as the claims warranties were concerned, Mr and Mrs Keeley alleged that the undisclosed claim made by the injured worker had the effect of increasing the workers’ compensation premiums payable by the company and that this was causative of loss. The trial proceeded for three days in October 2012³⁶ and five days in August 2014, with judgment handed down on 15 October 2014.

30. In the result, the primary judge concluded that Mr and Mrs Horton breached both forms of warranties but that Mr and Mrs Keeley failed to prove any loss with respect to the earnings warranties and only the relatively modest amount just discussed with respect to the claims warranties.³⁷ Submissions were then called for on the question whether nominal damages should be awarded with respect to the breach of the earnings warranties and, if so, in what amount as well as on the question of costs.

The earnings warranties

32. The failure on the part of Mr and Mrs Horton to disclose the loss of the Hy-Drive distributorship meant, as the primary judge found, that the accounts and records for the company including the business did not “give and reflect a true and fair view of the financial, contractual and trading position of the Company”.⁴¹ It also meant that the accounts could not be regarded as “completely true and accurate and not misleading in any way”.⁴² Specifically, his Honour found that the “combined effect” of clause 7.1 and paragraph (h) of Schedule 2 to the share sale agreement was such that Mr and Mrs Horton:

“ … represented, warranted and undertook, as an inducement to enter into the Agreement, and it was a condition of the Agreement, that, relevantly, every Vendor Warranty would, on the Settlement Date (4 January 2004), be ‘completely true and accurate and not misleading in any way’, in circumstances where the relevant warranty was that the Company Records ‘give and reflect a true and fair view of the financial, contractual and trading position’ of the second plaintiff (emphasis added).

…

It matters little whether that was triggered by the breach of the ‘completely true and accurate’ qualification or the ‘not misleading in any way’ qualification, as both would apply.”⁴³

33. Several grounds of appeal were advanced to challenge the primary judge’s finding that Mr and Mrs Keeley suffered no loss in consequence of the breach of the earnings warranties. However, those grounds, and the arguments on both sides of the record with respect to them, are more conveniently dealt with by reference to an analysis of the correct measure of damages for breach of warranty in a case such as this, an examination of what Mr Ham did when formulating his advice as to the purchase price for the company and a consideration of the valuation evidence before the primary judge as well as his Honour’s findings on the question of loss. But, first, some observations about the scope of the agreement between the parties need to be made.

What was agreed?

34. It is necessary to do so because, on the hearing of the appeal, senior counsel for Mr and Mrs Horton sought to confine the consideration paid by Mr and Mrs Keeley for the purchase of the share capital to the amounts specified in the respective share sale agreements (totalling $65,515). Put another way, it was submitted that the primary judge had not found that it had been agreed that the sum advanced by way of loan ($651,422) was part of the overall consideration for that purchase.⁴⁴

35. That submission should be rejected. On a plain reading of the reasons, there is little room for doubt that the primary judge found that the transaction was what his Honour described as a “multi-faceted share sale agreement” and that, under it, the parties agreed that the sums specified in the share sale agreements as well as the amount advanced by way of loan were to be paid by Mr and Mrs Keeley to acquire the shares in the company. His Honour said:

“[It] was agreed, by the time of submissions at the end of trial that: from the plaintiffs’ perspective, they ‘recognised the transaction as a multi-faceted share sale agreement’ (emphasis added) (T:8-36); and, from the defendants’ perspective, they accepted that the ‘commercial reality’ was that the transfer of shares was ‘ex dividend’ and that part of the non-written steps that were agreed to be undertaken – as was demonstrable by the conduct engaged in by both parties – was the funding of the second plaintiff by the first plaintiffs by way of company loans to permit dividends which were to be declared, together with previously declared dividends (or loans), to be paid out to various shareholders who were, thereafter or thereupon, to transfer all the shareholding to the first plaintiffs (T:8-24).

What has been so variously described is strikingly similar to that canvassed by the High Court in Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd.⁴⁵ In the majority judgment of Gummow, Kirby and Hayne JJ, it was held that it was accurate, for general purposes, to say that, in effect, the vendors (there) sold their shares ex dividend, noting that the consideration which moved the transfer by the vendors to the purchaser of the shares (which they owned in the company in question) was the performance by the purchaser of the several promises, in consequence of which the vendors received the sum attributed to the shares. But it was only in return for the total sum (to be paid by various steps and in the various forms required) that the vendors were willing to transfer to the purchaser the bundle of rights which their shareholding in the company represented: at 518-519 [73]-[75]. Although that was a revenue case, the description of the structure of the arrangement is not unfamiliar in such commercial agreements.

Once the conclusion is reached that the primary legal feature of the transaction was the sale of the shares in the second plaintiff, the sums paid and their purposes can be readily determined, even if, at the end of the day, there remained puzzlement on all sides (including on the part of the accountancy experts who gave evidence) about how the payments in final discharge of the shareholders’ ‘loans’ could have been met from available, liquid company assets. Nevertheless, to concentrate on that is simply to focus on an irrelevant distraction.”⁴⁶

36. Further, to the extent that it was suggested that all the primary judge was doing in the passages extracted above was recording the final position of the parties at trial without making an actual finding on the issue, that would be a pointless exercise unless his Honour also accepted as correct what became the consensus at trial as to the scope of the agreement. Indeed, not only was such a finding consistent with the evidence,⁴⁷ the primary judge went to some lengths to canvass the correct characterisation of the transaction with both counsel during their closing addresses.⁴⁸ Although the gist of the submissions made by both counsel is contained in the passages set out above, in the exchange with counsel for Mr and Mrs Horton, his Honour observed:

“The other thing that’s not set out in your pleadings at all is how one deals with the amount of money paid over above and beyond the $65,000. It seems to me that the – since it did happen, it’s conduct by your clients accepted by [Mr and Mrs Keeley]. The only inference, it seems to me, open from that conduct is that this was the method chosen by Mr Ham which was adopted by both parties in order to permit the share sale agreement which was in writing to take effect – that is, the payments would be made ... there would be declarations of dividend … there would be moneys loaned to the company, there would be payouts of the declaration of dividend and at that stage the shares would be transferred because they in fact would not have any dividend rights of declared dividends.

…

So it seems to me that’s the logical progression of the conduct. So while it might be said there’s no actual agreement, the only inference from the conduct that’s engaged in by both parties is that this is the process whereby eventually shares can be transferred legally. Because if all those steps had not taken place there was no way that your clients would’ve actually signed the transfer of the shares.

…

I mean, the commercial reality is that this kind of funding – I think the High Court’s called it ex dividend – the transfer of shares ex dividend – that is, part of the processes that are agreed to be undertaken are the funding of the company to permit the dividends declared to be paid to the various shareholders or people that hold the loans prior to the actual transfer.”⁴⁹

Counsel for Mr and Mrs Horton agreed with those observations, accepting that he could not “cavil with [the primary judge’s] assessment”.⁵⁰ When counsel for Mr and Mrs Keeley addressed, he referred to a comment made by his Honour at the commencement of the trial to the effect that the transaction appeared to be a “multi-faceted share sale agreement”.⁵¹ His Honour responded, “I think that’s the only way to describe it”, before remarking:

“Well, there’s – it’s in fact a case called Dick Smith in which a not dissimilar set of facts was analysed by the High Court exactly that way. They characterise it as an agreement to buy shares, ex dividend, it having been part of the agreement between the parties that a declaration of dividends would be made prior to the transfer of the shares. Funds will be put into the company to permit those particular dividends by way of loans, or by way of equity – right to be paid out. So I think that’s the only way to analyse it.”⁵²

37. The reference in the observations and remarks made by the primary judge to Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd as a case which provides a useful factual analogy so far as the transaction was concerned of course then finds its way into the reasons, and for that very purpose.⁵³ Hence, it is quite impossible to accept that his Honour did other than make findings in accordance with the analysis and conclusion he articulated during the closing addresses, that is to say, that part of the overall consideration for the purchase of the shares was the amount advanced by Mr and Mrs Keeley in the form of a loan. Furthermore, nothing in his Honour’s subsequent remarks to the effect that the “primary legal feature” of the transaction was the sale of the shares or that it was unclear how the final discharge of the shareholders’ loans could have been met from “available, liquid company assets” are inconsistent with such a finding having been made.⁵⁴ It follows that this appeal is to be decided in light of the parties having been found to have agreed that the shares in the company would be sold “ex dividend” and for an overall price of $716,937.

The measure of damages for breach of warranty

38. The general principle governing the assessment of compensatory damages in both contract and tort is that the plaintiff should receive fair and adequate compensation for the loss or injury sustained by reason of the defendant’s wrongful conduct.⁵⁵ That ordinarily involves:

“[A] comparison, sometimes implicit, between a hypothetical and an actual state of affairs: what relevantly represents the position in which the plaintiff would have been if the wrongful act (i.e. the repudiation or breach of contract or the tort) had not occurred and what relevantly represents the position in which the plaintiff is or will be after the occurrence of the wrongful act.”⁵⁶

39. In a contractual setting, the application of what is often referred to as the “ruling principle” requires that an award of damages for breach of contract should put the promisee in the same situation, so far as money can do it, as the promisee would have been in had the broken promise been performed.⁵⁷ Damages are usually assessed at the date of breach of contract and, in this way, “captures for the purchaser the benefit of the bargain and so compensates the purchaser for the loss of that benefit”.⁵⁸ In the context of a share sale agreement, the usual or “immediate” measure of loss will be the difference between the price paid for the shares and their true value at the time of sale.⁵⁹ However, that will not always be the measure adopted because, as Keane JA explained in Clark v Macourt, the “practical operation of the ruling principle may vary depending on the commercial context”.⁶⁰ His Honour added that “the principle is always applied with a view to assuring to the purchaser the monetary value of faithful performance by the vendor of the bargain.”⁶¹

40. It is useful to keep in mind that price will not always equate with value. When not fixed in accordance with objective criteria, such as an independent valuation or an established market for the property that is sold, the consensus reached by the parties as to price will frequently be the product of a complex mix of factors, some of which may be entirely subjective and, for that reason, not capable of explanation by reference simply to the degrees of supply and demand for the subject matter of the contract. It follows that the objective value of what is conveyed will not in all cases accurately represent the full worth of the benefit secured by the wronged party under the terms of the contract.

41. Thus, in Campbell v Backoffice Investments Pty Ltd,⁶² the share sale agreement contained warranties that, to the best of the vendor’s knowledge, all information given to the purchaser or its advisers was “substantially accurate and complete and not misleading”.⁶³ Although the High Court remitted the issue of the breach of those warranties to the New South Wales Court of Appeal for further consideration, the plurality observed that, if a breach was then established, the purchaser would be “entitled to such damages as would put it in the position it would have been in if the contract had been performed according to its terms”. Importantly though for present purposes were these further observations:

“If there were one or more breaches of contractual warranties, there may well be questions presented by what appears to be the adoption of different bases for fixing the price of the share and for valuing the share. If the price paid by [the purchaser] was fixed by a method different from the method later used to assess the ‘true’ value it is not self-evident that damages for breach of warranty should in this case be assessed as the difference between the price paid and the value of what was bought.”⁶⁵

42. Of assistance also on this point is the decision in Lion Nathan Ltd & Ors v C-C Bottlers Ltd & Ors.⁶⁶ There, the Privy Council considered the liability of a vendor of the whole of the issued share capital in a company who gave a warranty as to the preparation of a profit forecast upon which the purchaser of those shares relied. Lord Hoffmann, delivering the judgment of the Privy Council, observed:

“The forecast, though prepared with reasonable care, may on account of unknown or unforeseeable factors turn out to be substantially inaccurate. It therefore does not warrant that the company has any particular quality. The prima facie rule for a breach of a warranty of quality of goods cannot be applied. One must therefore return to the general principle of which that rule is only one example, namely that damages for breach of contract are intended to put the plaintiff in the position in which he would have been if the defendant had complied with the terms of the contract. In this case the vendor represented to the purchaser that $2,223,000 was a figure upon which he could rely in calculating the price. The figure was in fact used in the calculation of the price. If the vendor had made a forecast in accordance with the terms of the warranty, he would have produced a lower figure and the price would have been correspondingly lower. The damages are therefore the difference between the price agreed on the assumption of $2,223,000 earnings and what the price would have been, using the same method of calculation, if the forecast had been properly made.”⁶⁷

43. Although aspects of what immediately follows will be discussed in slightly greater detail later, when Mr Ham valued the business and, two days later, advised as to the sum required to purchase the shares in the company, he relied on an earnings position for the business and, by extension, the company, which included the income generated from the Hy-Drive distributorship. Mr and Mrs Keeley accepted, and then acted on, the faith of that valuation as well as the advice Mr Ham gave as to price. If Mr Ham had been aware that the distributorship had been lost, both would have been affected in the sense that the valuation would have been lower and the advised price less. Moreover, Mr and Mrs Keeley did not agree to pay the true value of the shares as the price for their acquisition; instead, they acted on Mr Ham’s advice as to the sum required to purchase the shares, and so did Mr and Mrs Horton. That advice, although based on his valuation of the business, was not founded on a valuation of the company; it was a particular construct assembled from the business valuation, the balance sheet for the 2004 financial year and foreshadowed adjustments for a number of items that, in the event, were never made.

44. It follows from those facts and the principles just discussed that an award of damages measured by the difference between the price paid for the shares and their true value at the date of breach would be most unlikely to put Mr and Mrs Keeley in the position they would have been in if the agreement had been performed according to its terms. Rather, the preferable and, in my view, correct measure of damages will be the difference between the price paid and what price Mr Ham, using the same construct, would have advised if he had known of the loss of the Hy-Drive distributorship at the time he valued the business and gave his advice. That will then properly reflect the position Mr and Mrs Keely would have been in if the earnings warranties had not been breached; that is, if the accounts and records for the company revealed the actual earnings and not those that had been inflated by the inclusion of income from the lost distributorship. It is only in this way that the benefit of the bargain lost through the breach of the earnings warranties can be captured.⁶⁸

45. In any event, the primary judge appears to have come to the same view. After considering the different approaches to the question of loss revealed by the expert accounting evidence in the case, his Honour rhetorically asked:

“How can it be that, in such circumstances, any change in Mr Ham’s figures which can be found to result from any breach of the warranties in question can be calculated except by applying Mr Ham’s original approach and adapting it consistently with his methods?”

before continuing:

“The ‘ruling principle’ for damages for breach of contract is that the party sustaining loss is, so far as money can do it, to be placed in the same position ‘as if the contract had been performed’: see Tabcorp Holdings Ltd v Bowen Investments Pty Ltd⁶⁹ at 286 [13]. Necessarily, in the absence of Mr Ham giving any evidence himself, it can only be from a fresh analysis of that valuation by Mr Ham, in light of the actual figures originally agreed to by both the first plaintiffs and the defendants, that is relevant to the loss that flows from any established breach. It does not seem to me to be a proper approach in a case such as this to simply assume that the measure of damages is the difference between the ‘price’ paid (with some contest as to what that means in these circumstances) and the fair value of the ‘business’ [on the basis, for instance, discussed in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd].⁷⁰”⁷¹

46. The only difficulty to be foreshadowed is that, having reached that conclusion as to the correct approach, his Honour does not seem to have applied it to the facts of this case. But, that aside, there was no challenge to his Honour’s conclusion on this question of principle and, for that reason, much of the evidence and arguments in the court below, and to some extent the arguments in this Court, as to the value to be ascribed to the shares at the point of sale must be regarded as superfluous.

What Mr Ham did

47. Mr Ham arrived at the valuation of the business in his report of 9 December 2004⁷² by capitalising the average maintainable earnings before interest and income tax.⁷³ To do so, he had recourse to the company’s financial accounts for the 2002 and 2003 financial years as well as its trial balance for the 2004 financial year. Using a 25 per cent capitalisation rate and an average EBIT of $167,000, Mr Ham arrived at the advised value of $668,000. But that is not all Mr Ham did. Using the balance sheet for the company, he also determined an amount for the goodwill of the business.⁷⁴ To calculate goodwill in the usually accepted way, the amount by which the capitalised value of the business exceeds its net tangible assets is ascertained, and if there is a positive differential, that becomes the figure for goodwill. However, as senior counsel for Mr and Mrs Horton highlighted in his submissions to the Court, Mr Ham did not do that. Rather, the amount for goodwill was determined by him to be that amount by which the capitalised value of the business exceeded the value of two categories of assets of the business – the inventory and the fixed assets – but he ignored all other assets of the business. Accordingly, from the capitalised value ($668,000) were deducted amounts for the book value of the inventory ($555,243) and the written down value of the fixed assets ($16,390) to arrive at an amount for goodwill of $96,367. That was Mr Ham’s methodology and, however unorthodox, it is that methodology which is to be applied to the calculation of loss in this case.

48. As earlier stated,⁷⁵ in Mr Ham’s letter to Mr and Mrs Keeley of 11 December 2004,⁷⁶ he advised that the “preferred option” was the purchase of the shares. In accordance with the primary judge’s findings, the way in which it was agreed that the consideration for that purchase was to be paid was through sums totalling $65,515 under the share sale agreements and a loan to the company of $651,422. This was of course in accordance with the advice in the same letter that the primary judge accepted the parties had acted on in reaching agreement as to price, although it was contemplated that those sums would be adjusted for debtors, prepayments, creditors and taxation to reduce the overall outlay to $663,744. Because there were no adjustments, Mr and Mrs Keeley paid a total of $716,937. Again as earlier stated,⁷⁷ although the evidence does not disclose how Mr Ham arrived at the figure he advised for the purchase of the shares ($65,515), the loan amount ($651,422) would appear to have come from the company’s balance sheet for the 2004 financial year.

“[It] is clear on the evidence that all parties accepted, if not the actual valuation of the business at $668,000.00 as contained in Mr Ham’s report of 9 December 2004, at least the consequences that flowed from that valuation as he applied them to the acquisition of the corporate entity, and that such acceptance was influential, if not decisive, in the final sums agreed. That is clear, for example, from such documents as Mr Ham prepared which were used by the parties on 3 January 2005 - such as the two page ‘Income Statement’ which dealt with the period from 1 July 2004 through to 3 January 2005 and, in particular, Mr Ham’s actual figures for settlement which all parties either accepted or did not dissent from as the basis for the payments (designated as ‘banking transactions’ to occur on 4 January 2004). Although no witness purported to explain how all of those figures had been derived, it was common ground that it was Mr Ham who provided those figures which were eventually, as just indicated, the figures actually used for all payments by the first plaintiffs and payments out to, amongst others, the defendants.”⁷⁸

51. The corollary to the primary judge’s finding that the consequences flowing from the business valuation as they applied to the acquisition of the company were “influential, if not decisive, in the final sums agreed”⁷⁹ is that if, as his Honour also found, the business valuation was premised on an inflated profitability scenario, Mr Ham would have arrived at a lower valuation and advised lesser amounts for the purchase of the shares had he known that the Hy-Drive distributorship had been lost. That this would have occurred not only accords with logic, it is confirmed by the hearsay accounts from Mr Ham that were admitted into evidence without objection. In Mr Charlton’s first report, Mr Ham’s statements that, had he been aware of the loss of the distributorship, he would have “amended his actions and advice in relation to the sale” and “made adjustments to his advice on the sale process” are recorded.⁸⁰ In the letter from Mr Ham to the solicitors for Mr and Mrs Keeley dated 16 January 2006, he stated that, if any of the trading figures were changed, that would have resulted “in either a greater or lesser valuation of the business, and therefore an increase or decrease in the goodwill figure.”⁸¹ In Mr Williams’ first report, he recorded that Mr Ham had indicated in his letter to Mr and Mrs Keeley of 3 November 2005 that, had he been aware of the loss of the distributorship, his estimate of the business’ maintainable earnings would have been impacted and that this would have flowed on to his valuation of the business as well as the company.⁸²

The valuation evidence

52. Mr Williams produced three reports,⁸³ and gave evidence in support of each.⁸⁴

53. In his first report,⁸⁵ Mr Williams’ approach to calculating the loss was to adopt the valuation method used by Mr Ham, namely, capitalisation of future maintainable earnings, and to use it to value the business on the footing that the Hy-Drive distributorship had been terminated. He did not value the company. Using the same capitalisation rate as Mr Ham had adopted, and an average EBIT of $134,000, Mr Williams arrived at a capitalised value for the business of $536,000. This was $132,000 less than the value arrived at by Mr Ham ($668,000) with the distributorship income included in the EBIT. Because of that, the two categories of net tangible assets identified by Mr Ham (totalling $571,633)⁸⁶ exceeded the capitalised value of the business and, therefore, the goodwill identified by Mr Ham of $96,367 was reduced to nil. Mr Williams accordingly adopted the sum of the included net tangible assets as the value of the business, which he rounded down to $570,000. The difference between that value and Mr Ham’s valuation was $98,000 which, Mr Williams opined, represented the loss suffered by Mr and Mrs Keeley in consequence of the non-disclosure of the loss of the Hy-Drive distributorship.

54. In his second report,⁸⁷ Mr Williams used the financial information that was before Mr Ham on 9 December 2004 but his “own preferred methodology” was to value the shares in the company as well as the business. In respect of the shares, he produced two valuations; one with the distributorship income included in his assessment of the EBIT (a valuation of $667,562) and one without that income included (a valuation of $548,000). The difference – $119,562 – was the sum that Mr Williams considered on this alternative view represented Mr and Mrs Keeley’s loss. In an approach that did not find favour with the primary judge, in order to do so Mr Williams added the “vendor shareholder loan accounts back into the value of the business to reflect the true nature of the working capital”.⁸⁸ In his third report,⁸⁹ Mr Williams critiqued the second report of Mr Charlton, the forensic accountant retained on behalf of Mr and Mrs Horton.

The primary judge’s findings on loss

58. The primary judge eschewed reliance on all but the opinions expressed in the first reports prepared by Mr Williams and Mr Charlton. In the case of Mr Williams, his Honour rejected any reliance on “an approach to valuation” which includes shareholder loans in the calculation of “business operating assets” or “business net tangible assets”.¹⁰⁵ As for Mr Charlton, his Honour did not accept as correct a valuation based on a “notional ‘liquidation’ of an ongoing business” or that “it was open to [Mr Charlton] to not attempt to value goodwill”.¹⁰⁶

59. After rejecting those parts of the accountants’ opinions, the primary judge then considered what remained of the expert evidence:

“Intriguingly enough, the approach by both experts in their early reports was to look at what Mr Ham had done and to express an opinion as to what, if any, effect the newly acquired knowledge by Mr Ham of the loss of the Hy-Drive distributorship would have had on the calculations that formed the basis of Mr Ham’s Valuation. It is my view that that is the only approach that has merit in this case for reasons that I will canvass later.¹⁰⁷ In doing so, I acknowledge the limitation inherent in Mr Williams’ instructions to value the business only.”¹⁰⁸

60. His Honour went on to explain, in a passage to which I have already made reference,¹⁰⁹ that the initial approach undertaken by Mr Williams and Mr Charlton had the “greater merit” for the reason that the “parties accepted, if not the actual valuation of the business at $668,000 … at least the consequences that flowed from that valuation as [Mr Ham] applied them to the acquisition of the [company], and that such acceptance was influential, if not decisive, in the final sums agreed”. For this reason, his Honour concluded that any loss was to be measured by “applying Mr Ham’s original approach and adapting it consistently with his methods”.¹¹⁰ Specifically, his Honour then set about determining “what, on a notional basis, Mr Ham’s valuation would have been if [Mr and Mrs Keeley], and Mr Ham, had been informed about the loss of the Hy-Drive distributorship”.¹¹¹

61. The primary judge had regard to the opinion expressed by Mr Williams in his first report to the effect that, without the distributorship income included in the EBIT, there would have been no goodwill. His Honour then adopted the analysis contained in Mr Charlton’s first report to decide that there would be “no loss established regarding the price paid for the shares”.¹¹² Later, his Honour observed that it “can only be from a consideration of the Valuation of Mr Ham and its effect on the agreement … to the nature of payments made on 4 January 2005 that relevant loss can be established …”.¹¹³ His Honour then said:

“Because of the way which the case was run on both sides, the Court is left in doubt, since it has not been established what Mr Ham would have done if he had taken the figures relevant to the loss of the Hy-Drive distributorship into account – not only as to the details of any ‘new’ valuation of the Business but also as to the revised set of figures that would have thereby been applicable to the share sale Agreement (in contradistinction to the purchase of that business which was so conducted by the [company]).

For reasons that I explained when considering the possible re-evaluation of Mr Ham’s Valuation (see paragraph [70]), starting with Mr Charlton having directed his mind to the issue of the value of the shares (taking his first report as relevant to this matter for reasons that I have also canvassed), and then moving to that part of Mr Charlton’s report which deals with an acceptance of Mr Williams’ valuation of the Business (after applying adjustments for the loss of the Hy-Drive distributorship), I accept that the figure of $82,097.00 thereby achieved shows that $17,412.00 was the difference between the actual value of the shares (after a proper accountancy adjustment for the breach) and what was paid.

Accordingly, there is no causative loss established. I have already dealt with the irrelevance, for present purposes, of the $651,422.00 also paid by [Mr and Mrs Keeley] – which, of course, was paid to the [company] only – and which became their asset.

It matters not that Mr Williams did, in his second report, focus on calculations of what the ‘true’ value of the shares of the [company] were as at 4 January 2005. This is because I have rejected the methodology used by Mr Williams in his determination of that particular value. In any event, it does not address the fundamental issue of how Mr Ham’s Valuation, as re-evaluated, would have affected the sums paid by [Mr and Mrs Keeley] for their shareholding in the [company].”¹¹⁴

Discussion

62. In my respectful opinion, the primary judge was wrong to conclude that Mr and Mrs Keeley suffered no loss in consequence of the breach by Mr and Mrs Horton of the earnings warranties. Although it is quite apparent that the assessment of loss was made difficult by a lack of focus on the real issues in the evidence and arguments in the court below, his Honour’s ultimate findings on that question were unfortunately affected by what seems to me to have been three errors.

63. First, it was not correct in my view to hold that it had not been established what Mr Ham would have done if he had “taken the figures relevant to the loss of the Hy-Drive distributorship into account”.¹¹⁵ The hearsay accounts from Mr Ham which were in evidence sufficiently establish what he would have done. Those accounts confirm that Mr Ham’s assessment of the EBIT would have been “impacted” and, further, that this would have had a “flow on” effect to his valuation of the business as well as the company, and the primary judge found the existence of such a relationship between the valuation and the advice Mr Ham gave to the parties regarding the sums to be paid to purchase the shares. Of particular relevance in this regard is the letter from Mr Ham to the solicitors for Mr and Mrs Keeley dated 16 January 2006 in which he stated that, if any of the trading figures were changed, this would have resulted “in either a greater or lesser valuation of the business, and therefore an increase or decrease in the goodwill figure.”¹¹⁶ Although the evidence did not reveal how Mr Ham arrived at the figure he advised for the purchase of the shares ($65,515), the methodology he adopted for the calculation of goodwill was clear. Using that methodology, the calculations performed by Mr Williams for the purposes of his first report disclosed that removal of the distributorship income from the assessment of future maintainable earnings would have reduced the EBIT from $167,000 to $134,000. In consequence, the capitalised value of the business would have reduced from $668,000 to $536,000. When the net tangible assets identified by Mr Ham were then taken into account, their value ($571,633) exceeded the capitalised value of the business without the benefit of the income stream represented by the distributorship. As such, the goodwill actually assessed by Mr Ham in the sum of $96,367 would have been reduced to nil.

64. This conclusion as to the effect that removal of the distributorship income would have had on Mr Ham’s calculation of the goodwill was really beyond dispute. Moreover, not only did Mr Williams reach that conclusion, but Mr Charlton accepted it for the purposes of his first report and the primary judge adopted it as correct for the purposes of his analysis. Accordingly, had Mr Ham been aware of the loss of the distributorship at the time he valued the business and gave advice concerning the sums required to purchase the shares in the company, it cannot sensibly be thought that any allowance at all would have been made for goodwill. On the other hand, acting under the belief that the distributorship income was maintainable into the future, Mr Ham must be taken to have made proper allowance for the conveyance of the goodwill in the amount he assessed and in the advice he gave the parties as to the overall consideration to be paid. Mr Ham was acting for all parties in the transaction and they, in turn, were fully accepting of his advice. In such circumstances, there could be no reason to think that the allowance made by Mr Ham in the advice he gave as to the sums required to purchase the shares was anything other than the full amount calculated by him for goodwill – $96,367. Consequently, if Mr Ham had been aware that the distributorship had been terminated at the time he valued the business and gave advice as to the sums required to purchase the shares, not only would his valuation have been lower, but no allowance would have been made by him for goodwill in the advice he gave as to the overall consideration to be paid. In that event, the overall consideration advised by Mr Ham, paid by Mr and Mrs Keeley and accepted by Mr and Mrs Horton would have been $96,367 less than the consideration actually advised, paid and accepted. In my view, this represents the position Mr and Mrs Keely would have been in if the earnings warranties had not been breached.

Conclusion

69. It follows that the nominal award of damages for breach of the earnings warranty cannot stand. It should be set aside and, in lieu thereof, damages in the sum of $96,367 substituted.

The claims warranties

70. As already stated, Mr and Mrs Horton accepted that their failure to disclose the existence of the workers’ compensation claim that was served on the company on 10 December 2004 constituted a breach of the claims warranties, and their argument to the effect that Mr and Mrs Keeley had compromised their rights with respect to this breach, was rejected by the primary judge.¹²¹ What then needed to be determined by the primary judge was whether any loss was suffered in consequence of the breach of those warranties.

71. At trial, and in this Court, it was contended that the company had suffered loss by reason of increased WorkCover premiums, but very little evidence was adduced at trial in support of that claim. Notably, no witness from WorkCover was called to support the proposition that the making of the claim by the injured worker led to increased premiums. Nonetheless, the primary judge carefully considered what evidence did exist in support of the claim along with the relevant statutory provisions. His Honour found that the making of the claim by the injured worker had the effect of increasing the premiums payable by the company by an amount of $771.48. Of this sum, $500 had already been paid by Mr and Mrs Horton.¹²² Although allowing for increases in premium up to and including the 2008 – 2009 insurance period, his Honour considered that it would have been speculative to allow recovery with respect to any later insurance periods.

72. In written submissions on behalf of the company, it was submitted that the primary judge should have found that increases in the premium payable by the company to WorkCover beyond the 2009 – 2010 insurance period were attributable to the claim made by the company’s injured worker. It was submitted that his Honour’s finding “overlooked the fact that prior to the WorkCover claim the company enjoyed premiums at significantly lower than industry rates” and that it was “only after the claim that the premiums significantly increased.” It was then submitted that “[t]he only inference is that the rate has increased by reason of the claim.”¹²³

73. Those submissions cannot be accepted. As the primary judge observed, there were a “number of competing inferences” to explain why the premiums increased with “none of them … more probable than any other”.¹²⁴ In the absence of any direct evidence on the point, all the court was left with were those competing inferences. His Honour was right to decline to draw the inference sought on behalf of the company. No error has been demonstrated in the award of damages assessed for the breach of the claims warranties.

Leave to appeal

74. By s 118(2) of the District Court of Queensland Act 1967, a party dissatisfied with a final or interlocutory judgment of the District Court in its original jurisdiction may appeal to this Court as of right provided, relevantly, the judgment is given for an amount equal to or more than the Magistrates Courts’ jurisdictional limit. Here, the judgment amounts entered for the company as well as for Mr and Mrs Keeley were less than that limit and, accordingly, leave to appeal is required: s 118(3).

75. The discretion conferred on this Court by s 118(3) of the District Court of Queensland Act 1967 is a general one that is exercisable according to the nature of the case.¹²⁶ Where an error has been made in the assessment of damages which, if not made, would have allowed an appeal as of right, such a case will usually be an appropriate one for a grant of leave. This is the position so far as the judgment entered in favour of Mr and Mrs Keeley is concerned and, for that reason, I am of the opinion that they should have leave to appeal. It is not, however, the position so far as the judgment entered for the company is concerned, and nor was there any merit in the argument advanced to the Court in support of its application for leave to appeal. I would refuse the company leave to appeal.

Orders

76. For these reasons, it should be ordered that:

Leave be granted to the first appellants to appeal.

The appeal by the first appellants be allowed in part by:

(a) Varying paragraph A(1) of the judgment pronounced on 24 November 2014 by deleting “$100.00” and substituting “$96,367.00”; and

(b) Setting aside paragraphs B(1) and B(2) of the judgment pronounced on 24 November 2014.

The application by the second appellant for leave to appeal be refused.

Within 14 days, the parties file and serve written submissions with respect to:

(a) The interest to be awarded with respect to the judgment amount as varied by paragraph 2(a) above;

(b) The costs of the trial; and

(c) The costs of the applications for leave to appeal and the appeal.

Footnotes

1. AR p 1008. ↩

2. AR p 1058 at paras 28 and 29. ↩

3. Keeley & Ors v Horton & Anor [2014] QDC 234 (“Trial Judgment”). ↩

4. Keeley & Ors v Horton & Anor (No 2) [2014] QDC 260. ↩

5. ARB 1003. ↩

6. ARB 1012. ↩

7. Trial Judgment at 6 [16]. ↩

8. Clause 3.1. ↩

9. Clause 3.2. ↩

10. Schedule 1. ↩

11. ARB 561. ↩

12. ARB 574. ↩

13. Clause 1.1. ↩

14. Schedule 5 (ARB 696). ↩

15. “Company Records” were defined in clause 1.1 of the agreement to mean the “accounts, ledgers, financial records, constituent documents and other material records of any kind of the Company.”