Representation pleaded in [15(a)] of statement of claim - two year employment period
238 By [15(a)] of the further amended reamended statement of claim (statement of claim) the applicants plead that during the course of negotiations Mr Sim made the following representation to preserve the goodwill of the business:
(a) that if the applicants were to purchase the business, Mr Sim would remain on as an employee of the business for a period of at least two years following settlement.
239 By [40] of the statement of claim the applicants plead that this representation was misleading or deceptive or was likely to mislead in that:
(1) instead of remaining as an employee for two years Mr Sim left after a period of 10 months;
(2) by reason of the matters pleaded in [27]-[39ZD], concerning product substitution, it is to be inferred that Mr Sim at no material time had any intention of remaining on as an employee of the business for two years;
(3) at no material time did Mr Sim have reasonable grounds for making the representation;
(4) the representation is a representation as to a future matter and the applicants rely on s 51A of the TP Act or s 9 of the FT Act.
240 By [13] of the defence, the first and second respondents:
(1) say that at the meeting with the Metzes in April 2008 Mr Sim offered to remain as an employee for six months;
(2) say that the applicants asked Mr Sim to stay on for two years and he ultimately agreed;
(3) otherwise deny the paragraph.
241 As to [40] of the statement of claim, these respondents in [53] of the defence plead as follows:
(1) say that when Mr Sim agreed to the request for him to stay on for two years, he intended to do so;
(2) he left in the circumstances pleaded in [51] of the defence, that is to say he was sacked; and
(3) otherwise deny the paragraph and say that if any representations were made (which are denied) then they were not relied upon by the applicants by reason of the matters pleaded in [20] of the defence.
242 The representation is pleaded to be a representation as to a future matter. There is no pleading that it is a representation as to the present fact. Notwithstanding that on one view it may be said that a promise by a person that they will do something in the future, such as remain an employee for two years, constitutes an implied representation that as a matter of present fact they intend to do that and have the capacity to do so it seems to me that it is also open to construe the promise as a representation as to a future matter - that the person will do that thing - and have reasonable grounds for so representing. If the promisor is shown never to have had any such intention then that evidence would go to proving a lack of reasonable grounds. It appears that it is on this latter basis that the applicants put their case. Either way, the first and second respondents have never been in any doubt that the applicants alleged they never had the requisite intention.
243 In this regard I should make further reference to the effect and operation of s 51A of the TP Act and s 9 of the FT Act, which the applicants expressly plead and rely upon in relation to all pleaded representations as to future acts in this case.
244 At material times s 51A of the TP Act provided as follows:
(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
Section 9 of the FT Act, the State Act, in a similar but not identical way, provides:
(1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person.
(3) Subsection (1) shall not be taken to limit by implication the meaning of a reference in this Part to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
245 The point has been made often and is well understood that these provisions do not of themselves create a cause of action or define a norm of conduct. Rather, they respectively assist the application of s 52 of the TP Act and s 10 of the FT Act which proscribe misleading or deceptive conduct and so endeavour to stamp out unfair practices in consumer dealings.
246 Section 52(1) of the TP Act provides:
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 10 of the FT Act at material times was to similar effect, but applying to a "person" more generally, not just to a competitor.
247 On the face of it, there is an issue, where a person promises to do something in the future, whether the promise constitutes a representation that may be falsified, and thereby shown to be a misrepresentation at material times when it was made, by showing the promise was not met. However, it is well established that the non-fulfilment of a promise does not of itself establish that the promisor did not intend to perform it at the time it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, it is well understood now that because a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate foundation: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (Global Sportsman) at 88. In Global Sportsman, at 88, the Court went on to observe that an expression of an opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps there is basis for the opinion. At least if those conditions are met then an expression of opinion, however erroneous misrepresents nothing.
248 In Fubilan Catering Services Limited v Compass Group (Aust) Pty Ltd [2007] FCA 1205 (Fubilan) at [546], French J (as the Chief Justice of Australia then was), at first instance, acknowledging the authority of Global Sportsman, added that the making of a promise or prediction may, however, contain implied representations of present fact as to the promisor's intention or capacity to perform the promise and that such representations if false may be misleading or deceptive within the meaning of s 52 of the TP Act.
249 On appeal, in Fubilan Catering Services Limited (Incorporated in PNG) v Compass Group (Australia) Pty Ltd [2008] FCAFC 53, the Full Court of this Court, at [91], similarly observed that it is clear that to make a promise which is not performed or a prediction which is not fulfilled is not, without more misleading or deceptive. The Court added that:
It is only where the making of a promise or prediction contains an implied representation of present fact, such as a representation that the promisor is capable of performing the promise, that the promise or prediction can be misleading or deceptive. Alternatively, if the promise can be construed as a representation with respect to a future matter, and the promisor does not have reasonable grounds for making the representation, it is taken to be misleading: TP Act, s 51A(1). In this case the promisor, unless it adduces evidence to the contrary, is deemed not to have had reasonable grounds for making the representation: s 51A(2).
250 In Fubilan at first instance, French J emphasised, at [547], that it is important to bear in mind that s 51A does not introduce a rule of law that a promise which is not performed or a prediction which is not fulfilled is thereby misleading or deceptive. Subsection (1) simply requires that a statement about a future matter made without reasonable grounds will be treated as if it is misleading or deceptive. His Honour there added:
It may be that in many if not most cases a person making a statement about the future will be treated as making the implied representation that he or she has reasonable grounds for the statement. If the reasonable grounds do not exist, the statement will generally be misleading or deceptive although that need not always be the case. Section 51A(1) may be said to involve a limited extension of the scope of s 52 to the extent that it transforms a logical proposition which is of broad scope into a rule of universal application.
251 Justice French went on, in [547], to emphasise that where a pleading of misleading or deceptive conduct relies upon s 51A it should make clear that it involves the allegation that the representor did not have reasonable grounds for making the statement alleged. Section 51A will then operate to require the conduct of the representor, if established, to be treated as misleading or deceptive, "for that is its substantive operation". His Honour added:
Its adjectival operation puts the evidential burden upon the representor and supports it with a powerful deeming provision. If a pleading of misleading or deceptive conduct based upon a statement about future facts does not expressly plead want of reasonable grounds, yet invokes s 51A, then it should be taken to so plead or if that implication is not open it should be regarded as deficient.
252 It also follows from what his Honour had to say about the evidential burden that his Honour considered that s 51A(2) casts an evidential burden on a respondent to adduce evidence, but not a legal onus (or persuasive burden) to prove that it had reasonable grounds for making the representations alleged. In this s 9(2) of the FT Act may be contrasted. It expressly provides that a respondent in some circumstances bears the legal onus of proving it had reasonable grounds for the representation made as to a future matter.
253 While the authorities for a period suggested an apparent difference of opinion as to the effect of s 51A(2) in this regard, with one view being that if a respondent adduces some evidence to the contrary the deeming provision in subs (1) will not apply (as to which see ACCC v Universal Sports Challenge Ltd [2002] FCA 1276 (Universal Sports Challenge) per Emmett J), a competing view was that the person making the representation can only avoid the deeming provision by establishing on the usual balance of probabilities that there were reasonable grounds for making the representation (as to which see Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 per Stone J). In Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199, the Queensland Court of Appeal (Keane JA (as his Honour then was), Williams JA and Atkinson J), at [127], considered the views of Emmett J in Universal Sports Challenge went no further than advancing the proposition that, when the representor adduces evidence of reasonable grounds it will be a matter for the court to determine whether that evidence establishes there were reasonable grounds and no automatic deeming arises.
254 In McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230, a Full Court of the Federal Court comprising Emmett, Stone and Allsop JJ, had occasion to consider the effect and operation of s 51A(2). By a majority (Allsop J, Emmett J agreeing), and as the headnote puts it, s 51A(2) requires evidence "to the contrary" to be adduced, that is evidence that tends to establish, or that admits of the inference that there were reasonable grounds for making the representation before the deeming provision ceases to operate. If evidence is adduced by the representor that is said to be evidence to the contrary, it will be for the Court to determine whether it is adduced to the contrary in a sense just discussed. Section 51A(2) does not cast the legal or persuasive onus on the representor: see Emmett J at [6] and [44], Allsop J at [191]-[192].
255 Justice Allsop in his judgment analysed not only the text but also the legislative history leading up to the enactment of s 51A(2) and at [192] explicitly relied on that history, accepting that legislation in Territory and State jurisdictions in Australia created what he described, at [193], as "simpler onus-shifting provisions". His Honour considered that was as a result of clear Parliamentary choice, at least in respect to the Commonwealth Parliament, not any quirk or idiosyncrasy of judicial interpretation.
256 Justice Stone, in her Honour's dissent on this point at [72]-[74], was not persuaded that the legislative history indicated any clear Parliamentary intent and that the requirement that evidence "to the contrary" be adduced in order to counter the deeming provision concerning no reasonable grounds, required the representor to establish on the balance of probabilities that there were reasonable grounds for the representation as to a future matter.
257 Notwithstanding the observation of Stone J at [76] and the dicta of Allsop J on this critical point was obiter, and that the correct interpretation of s 51A(2) had not been the subject of full argument on the appeal before the Court, I consider I should follow the majority ruling as to the operation and effect of s 51A(2), even if it is open to argue that I am not bound to do so.
258 The result is, as explained by Allsop J, at [192], if evidence "to the contrary" is adduced by the representor, and the representee itself adduces evidence tending to the lack of reasonable grounds, the matter might be equally poised. In such a case, there has been evidence "to the contrary" adduced by the representee, thereby eliminating the operation of the deeming provision, and, on the totality of the evidence, the proof of the reasonableness (or lack thereof) of the grounds is evenly balanced. Section 51A(2) does not mean that in those circumstances the representor has not met an onus. The section does not cast a legal or persuasive onus, in such a case, on the representor. Plainly, however, it remains for the Court in those circumstances to decide whether, on the evidence, the representee, as applicant, has established on the whole of the evidence that there were not reasonable grounds for the making of the representation.
259 However, in relation to the application of s 9(2) of the FT Act at material times, the legislative intent of the Western Australian Parliament is clear, in that the representor carries the legal or persuasive burden of establishing that it had reasonable grounds for the representation as to a future matter that it made. In some circumstances, where, as Allsop J put it, the matter might be equally poised, the location of the legal or persuasive burden might make the difference in whether or not the Court ultimately determines that there were, or were not, reasonable grounds for the making of a representation as to a future matter.
260 There are then important distinctions to be made when a representation is pleaded between a representation as to present fact and a representation as to a future matter. The pleadings of the applicants in this proceeding explicitly choose to characterise some representations as to future matters only, some representations as to present fact only, and other representations as to, in part, present fact, and in part, future matters.
261 In some cases concerning representations as to future matters, where it is pleaded there were no reasonable grounds for the representation, the applicants rely on a range of evidence including that, taking into account evidence of later events, the Court might reasonably infer that, in the absence of other cogent evidence, there were no reasonable grounds. However, as noted above, the mere non-fulfilment of a promise or prediction made at an earlier time does not mean of itself that there were no reasonable grounds for the representation as to a future matter.
262 As noted, by [53(a)] of the defence, the first and second respondents plead that, when Mr Sim agreed to the applicants' request for him to work for the business for two years, he intended to do so. The applicants contend there is no evidence adduced to support such a plea. There is no doubt that such a representation as pleaded was made. As explained above, the background to the making of the representation was that the two brochures given by GMO to the applicants each represented that:
The Vendor is prepared to remain in the business for a period of twenty six (26) weeks on a full-time basis to help familiarise the Purchaser with the business.
As a result of negotiations, the parties agreed that Mr Sim would in fact remain employed with the business for a period of two years.
263 In the employment agreement subsequently made between the first applicants and Mr Sim, dated 23 June 2008, it is expressly stated in cl 6 that Mr Sim acknowledges and agrees that the first respondent purchase the business in reliance upon his representations that he would remain as a key employee of the business for a period of at least two years from the settlement date.
264 The applicants contend that the evidence adduced at trial is clearly at odds with any contemporaneous intent of Mr Sim to work for the business for 24 months. The applicants rely upon the following evidence to this end:
(1) The evidence of Derek Stone that, in a discussion with Mr Sim, in mid to late August 2008, Mr Sim told Mr Stone "that he wanted to be out of there within three to four months".
(2) On numerous occasions after settlement Mr Sim stated words to the effect that he wanted to be out of the business before the expiration of the 24 month employment term, including:
(a) Handwritten letter from Mr Sim to Farrel Metz, dated 30 October 2008 (exhibit 1, tab 45) stating "just another reason why I want out of here".
(b) Tape recording of a conversation (exhibit 11) track 3 at 6 mins 14 secs to 6 mins 35 secs - 31 October 2008:
That's fine, just pay me out and I will fuck off. Pay me out and I will go. Easy. Easy. Pay me out and I will go.
(c) Recording (exhibit 11), track 9 at 50 secs to 55 secs - 12 December 2008:
No. I don't need this kind of bullshit in my life. I want out of here because I can't put up with this sort of shit.
(d) Recording (exhibit 11), track 9 at 1 min 25 secs to 1 min 40 secs - 5 December 2008:
Pay out the two fifty grand or a bank guarantee and I'm out of here.
(e) Recording (exhibit 11), track 17 at 2 min 20 secs to 3 mins 20 secs - 20 April 2009:
You have got to find out for yourself from now on because I am not helping you. If you don't bloody well like it then I will piss off.
(f) Recording (exhibit 11), track 17 at 3 mins 50 secs to 4 mins 10 secs - 20 April 2009:
In the meantime, Wednesday night bank guarantees otherwise I am off to my lawyer. It will happen.
(g) Recording (exhibit 11), track 18 at 55 secs to 1 min 10 secs - 20 April 2009:
I am going, I am going, I am going. I am going alright because you haven't fulfilled your obligations.
265 The applicants say that, in this context, the reference to non-fulfilled obligations in the last mentioned recording, seem to have been to:
(1) The failure of the applicants to provide a bank guarantee to secure vendor finance in the sum of $250,000, even through there was no contractual obligation to do so, and, in any event, the first instalment of the balance of $250,000 had not fallen due at these times of demand.
(2) Failure to permit further annual leave entitlements - even though Mr Sim had already well exceeded his entitlements to annual leave.
(3) As to car expenses, even when Mr Metz had given Mr Sim a cheque for the March car expenses and his claim for April expenses was premature.
266 The applicants say none of the demands or accusations by Mr Sim had any substance and no cogent evidence was adduced to support any of his complaints. In any event, even if there were anything to those complaints, it was not a basis upon which he was entitled to terminate his employment.
267 The applicants say that no conduct on the part of Mr Sim during the nine month period after settlement evidences any intention to remain with the applicants for the 24 month period and to fulfil the obligations ancillary there to.
268 The first and second respondents draw attention to both the pleaded representation in [15(a)] and [12] which plead that the goodwill of the business and the value was inextricably linked with preservation of the knowledge and relationships pleaded in [6(f)(i)-(vii)] for the benefit of any third party purchaser who was to purchase the business, and then [13], which pleads that it was essential to the maintenance of the ongoing business and the preservation of goodwill, if a third party purchaser was to purchase the business, that Mr Sim, would, amongst other things, remain on as an employee for at least two years. The respondents submit, in my view correctly, that there is no direct evidence which in a temporal or causal sense attempts to make out these assertions, and that in initial discussions with the Metzes Mr Sim made it clear that he was prepared to remain for a period of six months and these were the instructions to the broker. What happened was that, arising out of discussions, he agreed to stay on as an employee for a period of two years. The agreed period was two years, not "at least" two years as pleaded in [15(a)].
269 These respondents therefore submit that there is no factual or other basis for a contention that the period "of at least two years" was pivotal to the maintenance of the ongoing success of the business. Further, and in any event, if there was a breach by Mr Sim of the terms of the employment contract made, then the contractual consequences are to be measured in its own terms.
270 None of these submissions (which are all in the final written submissions of these respondents concerning the topic of Goodwill at [123]-[131]) deal directly with the pleading in [15(a)] of the statement of claim. The subject of the "Employment Contract" is however dealt with directly in these closing written submissions at [229]-[243]. These respondents draw attention to the fact that the employment agreement contains an entire agreement clause in cl 15.2 thereof, which materially provides that:
This contract constitutes the entire agreement between the parties with respect to the subject matter of it, and contains all the representations, warranties, covenants and agreements of the parties and there are no oral statements, representations, undertakings, covenants or agreements between the parties expressed or implied except as are contained in this contract.
These respondents also draw attention to cl 13 of the employment agreement that deals with termination, including by cl 13.2 the entitlement of either party on giving one month's notice in writing to the other to terminate the employment.
271 Put shortly, these respondents contend that either of the parties to the employment agreement if unhappy could terminate on one month's notice under cl 13.2. Similarly, if they believed there was serious misconduct or serious poor performance, they could terminate under cl 13.3. In other words, the only real employment security was a period of one month and there was no provision in the employment contract and no provision in the sale agreement which provided for any sort of claw back provision if Mr Sim left employment inside the two year period. There was no penalty, no sanction, no disincentive, no limitation in the employment agreement or in the sale agreement. The agreement was one which had been carefully crafted by the solicitors for the applicants on their specific instructions.
272 These respondents say further that, if s 52 of the TP Act is breached, then the respondents accept it is not possible to exclude liability for the breach of the TP Act, but it is possible by disclaimer or contractual clause, to prevent a breach arising by preventing the alleged "victim" of the conduct in question from being misled (by there being no reliance). By reference to Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131; (2005) 220 ALR 211, at [101]-[106] these respondents submit that it is impossible to see how, on any objective assessment, the applicants could have relied on any pre-contractual representations made by the first and second respondents given their legal and accounting advice, the previous experience of Mr Mervin Metz in business and the failure to make any issue of the forward orders or gross profit estimations by approaching Mr Sim during due diligence or whilst he was an employee. The respondents say that if the purchasers were truly reliant on the forward orders or other representations, then a reasonable person would have been appalled by the trading figures, lack of introduction by Mr Sim to customers of business and so on, and would have approached Mr Sim in the first nine months whilst he was there, for answers. This is especially so in the context of their being ongoing arguments, conflict and accusations between the parties. Not once in all the recorded conversations or other evidence was the allegations regarding forward orders, for example, or the other alleged misrepresentations specifically addressed.
273 Ultimately, these respondents submit that the applicants have failed to explain reasonably or at all the inconsistency in their pleadings by:
(1) claiming the employment agreement was collateral to the sale agreement ([25] of the statement of claim);
(2) that the applicants relied on a representation that Mr Sim would stay employed for two years ([25(c)(iii)] of the Statement of Claim) and then claiming what a disaster it was that he left and they had no technical knowledge and were relying on his contacts and ability to bring in orders ; but yet
(3) instructing their solicitors to prepare, draft and include a clause in the employment agreement to the effect that Mr Sim could terminate the employment agreement by giving one months notice,
274 The respondents say all of this must invite the drawing of the irresistible inference that there was never any actual reliance by the applicants on this or any other representation alleged.
275 The applicants respond to these submissions of the respondents by saying that the matters on which they are based were neither pleaded nor raised at trial. No attempt was made to cross-examine any of the applicants on the basis that they had had regard to any exclusion clauses contained in any of the agreements. It has not been demonstrated that any legal advice received or accounting advice given negatived the impact of the representation.
276 Ultimately, the applicants say that one cannot lose sight of the following facts:
(1) the applicants entered into the sale agreement based on a number of representations including a representation that Mr Sim would remain a key employee of the business for a period of at least two years;
(2) acting in reliance on that representation they entered into the sale agreement and associated agreements;
(3) the employment agreement clearly stipulated that the first applicants purchased the business in reliance upon the representation that Mr Sim would remain a key employee for at least two years;
(4) it was neither raised with the applicants nor pleaded that the notice provision contained in the employment agreement was a matter evidencing no reliance on the matters stated in [6] of the employment agreement;
(5) in any event the position is that as a matter of law a representation can remain an operative inducement to enter into a transaction, notwithstanding that a contractual provision may be ever so slightly at odds with the alleged representation made;
(6) for these reasons, as these matters were not dealt with at trial it is not open to the respondents to raise these matters now.
277 In my view, the submissions of the applicants to the effect that the respondents should not at this stage of the proceeding be entitled to raise the unpleaded inconsistency point based on cl 13 of the employment agreement should be upheld. The respondents at no time have pleaded the terms of the employment agreement as an answer to the applicants' claim based on the representation pleaded in [15(a)] and they should not be permitted to do so in this fashion in the closing of the case. Also, it was never put to Mervin Metz or Farrel Metz that they did not actually rely on the employment representation made but relied only on the basis of the terms of the employment agreement. The applicants may well have conducted their case, and their cross-examination of Mr Sim differently, if this had been a pleaded issue; they may even have considered seeking rectification of the employment agreement to reflect the common intention of the parties as to the two year period.
278 In any event, it is plain beyond any doubt, let alone on the balance of probabilities, that the Metzes fully acted on a representation that Mr Sim would remain as an employee of the business for at least two years. The fact that on close analysis of the employment agreement Mr Sim might have been in a position to leave his employment with the first applicants earlier than two years, on one month's notice, pursuant to cl 13.2 of the employment contract, is neither here nor there. It does not contradict a representation that Mr Sim would remain for two years if the sale agreement were made. Indeed, the acknowledgments in the employment agreement, in my view, confirm the substance of the representation pleaded and are an additional reason why there is no inconsistency between the representation pleaded and the employment agreement. Further, the evidence shows that Mr Sim himself was troubled by the fact that he had undertaken to remain with the business for two years at least. Indeed he asserted in evidence he did not quit his job on 20 April 2009, because he knew he had a two year contract. Certainly the Metzes believed that he would be there for two years and they were wanting him to improve his performance so that they could get the benefit of his continued employment during that period.
279 The question which remains however is whether the representation as pleaded was made and being as to a future matter, whether, having regard to s 51A(2) of the TP Act and s 9(2) of the FT Act, there were reasonable grounds for it.
280 So far as the terms of the representation are concerned, I find the representation as pleaded was made. The only point of apparent substance taken on behalf of the respondents is that the words "at least" were not part of the representation. For example, the employment agreement specifies a "two year" employment period. Notwithstanding that, on a proper understanding of the evidence, what was represented at the April 2008 meeting and indeed the terms of the employment agreement itself, the expectation was and the representation was that Mr Sim would be employed for at least two years. I note also that the acknowledgements in cl 6 of the employment agreement speaks of a period of "at least" two years. I consider it fairly reflects what was represented on 18 April 2008 by Mr Sim.
281 The background to the circumstances in which the two year employment representation was made have been set out above. Mr Sim, at all material times, plainly understood that it would be a necessary part of an agreement to sell the business owned by the first respondent, that he as its driving force remain on as an employee with the new owners for a period. The purpose of this was obvious - the applicants believed that without him as a key employee for two years they would not adequately learn the business, meet the clients and protect the $1.25 million investment they were proposing to make.
282 The employment period initially proposed by the two brochures was that he would remain for six months - 26 weeks. Following negotiations, as the respondents contend, the employment period of two years was struck. There is nothing up to that point to suggest that the two year agreement was not one that Mr Sim intended to comply with. However, the evidence concerning the circumstances of Mr Sim's departure from the business on 20 April 2009 and the evidence of a person Mr Sim considered a "close friend" - Mr Derek Stone - in my view significantly alters this view.
283 I have come to the view and find, having regard to all of the evidence including that of Mr Stone, that Mr Sim never intended remaining in the applicants' employment for two years at any material time from and including 18 April 2008. I have also concluded and find that on 20 April 2009, Mr Sim of his own volition decided that he would terminate his employment with the first applicants and would cease working for the business.
284 As I have just stated, if the evidence in this proceeding concerning the circumstances in which Mr Sim conducted himself as an employee of the first applicants between 4 July 2008 and 20 April 2009, and the circumstances in which he left the business premises on 20 April 2009, and the question of whether Mr Sim, at all material times, actually held the intention of remaining an employee for two years were to be adjudged on the evidence absent that of Mr Stone, I would be inclined to the view that the applicants had not adduced evidence sufficient to satisfy the Court on the balance of probabilities that Mr Sim, as of 18 April 2008 did not have that intention. On that evidence, one might construe the appalling behaviour of Mr Sim for much of the employment period up until 20 April 2009, as conduct that became increasingly curmudgeonly, to put it generously, as his concerns about the financial health of the first applicants' business and his frustration with the Metzes increased. That view, for example, may be supported by the fact that it was not until November 2008 - four months into the employment period - that Mr Sim first made the express threat that if the Metzes did not give him bank guarantees he would leave.
285 But the evidence does not rest there. The applicants called Mr Derek Stone to give evidence at the hearing. At the time he gave evidence, Mr Stone was employed by Phillips Lighting. Before that he had worked for Lamp Replacements Australia for about three years between about 2008 and 2010. Prior to that he had worked with Osram Australia for about eight years. Both Osram and Lamp Replacements were suppliers of lamp and electronic control gear to Illumination Services WA when the first respondent owned the business and in his employment he had had regular dealings with Mr Sim.
286 Mr Stone met Farrel and Mervin Metz after they acquired the business of Illumination Services WA. Mr Stone in examination in chief explained that approximately six weeks after the "changeover" - which in context means about six weeks after 4 July 2008, in mid to late August 2008 - he met the Metzes at the business premises. Prior to that he had been asked to stay away (he did not say by whom, but I infer by Mr Sim) because the Metzes were finding their feet. On the occasion of his visit in August he caught up with Paul Sim in his office at the business and had a private conversation with him. Mr Stone was asked by counsel for the applicants what the conversation was he had with Mr Sim, to which Mr Stone replied as follows:
MR STONE: The conversation was that - I was surprised that he was still there, okay, I thought that he was going to move on, but he told me that he was under contract to stay there for a period of two or three years, from memory.
COUNSEL: Right, and did he say anything else to you at that time?
MR STONE: Yes, he did, he said but he had a - he said to me that he wanted to be out of there within three to four months.
COUNSEL: That's what he said to you?
MR STONE: He said it to me verbally, yes.
COUNSEL: How clear is your recollection?
MR STONE: Very clear.
COUNSEL: Did Mr Sim express anything else to you in terms of other plans that he wanted to do at that time?
MR STONE: He used to always speak about his overseas interest, which was his coconut tree plantations in Papua New Guinea, and also his farming. It was just general conversation.
COUNSEL: And where did you have those sorts of conversations, where he discussed those interests?
MR STONE: Paul used to always advice of - Paul used to like talking to me about other things besides work, because our relationship was at that level. So anything he had purchased with regard to housing or farms, or anything of that nature, we generally spoke about.
287 Counsel for the first applicants and Mr Sim cross-examined Mr Stone about this evidence and asked whether he had any axe to grind with Mr Sim, to which Mr Stone replied, "Not at all, no". Counsel then asked Mr Stone:
COUNSEL: Well, I've got to put it to you that he did not say to you at any stage, and certainly not within 2008 that he planned to be out of there in three to four months?
MR STONE: Sorry, are…
COUNSEL: I'm putting to you that you didn't have that conversation?
MR STONE: I'm under oath, I heard it, and I'm prepared to do a lie detector test, or anything to confirm that; if that exists.
288 I consider Mr Stone to be a direct and honest witness. Plainly he did not have an axe to grind, as he directly indicated to counsel for Mr Sim when cross-examined on this point. He indicated that he was a person who had something of a more personal relationship with Mr Sim. Thus, they spoke about things other than business and that is how he came to know about such things as Mr Sim's coconut palm plantation and farming and the like. Incidentally, at another point of the evidence Mr Sim denied the suggestion that he had a coconut plantation in the Philippines, something Farrel Metz had stated. Whether or not he has a coconut plantation, clearly enough he informed Mr Stone at some point that he had one, albeit in Papua New Guinea. When Mr Sim was later cross-examined about his dealings with Mr Stone, he observed (transcript 689) that "Derek and I were close friends. He used to come and see me fairly regularly".
289 Mr Stone's evidence was unhesitating and unambiguous. I have absolutely no hesitation in accepting his evidence as honestly given and utterly truthful. I use the adverbs deliberately. Mr Stone's evidence in this regard was denied by Mr Sim. No evidence was ever adduced by the first and second respondents to suggest any basis upon which Mr Stone had some axe to grind. I find that, when Mr Stone, during a private conversation in mid to late August 2008 with Mr Sim, expressed surprise that Mr Sim was still in the business, Mr Sim told him that he "wanted to be out of there within three to four months", or words very much like that.
290 What significant is to be placed on this evidence? On the one hand, one might say that all Mr Sim was doing was expressing his feelings, his growing frustrations to the effect that he "wanted to be out of there within three to four months". On the other hand, there is no evidence that he had any discussion to that effect with Mr Stone. And we are all here speaking if only six weeks after settlement, long before November when Mr Sim first demanded bank guarantees or he would "walk". Indeed, when one has regard to the detailed evidence recounted above, that includes the facts that:
the first and second respondents through the GMO brochures initially indicated that Mr Sim would be prepared to stay on in the business for six months following sale;
that Mr Sim, on his own evidence, strongly took the view that he never represented at the March meeting that he was prepared to extend the six months to one year, because he always considered that six months for the new owners to learn the business was plenty;
but as of 18 April 2008 Mr Sim represented in negotiations that he was prepared to stay for two years after sale if the applicants paid $1.25 million for the business; and
then take into account the utterly appalling manner in which Mr Sim conducted himself through much of the employment period up until 20 April 2009;
then the unguarded statement made by Mr Sim to Mr Stone, a person he (Mr Sim), without prompting, described in evidence as a "close friend", in my view takes on considerable significance. Taking all of this evidence into account I infer that it is more probable than not that at no material time from and including 18 April 2008 did Mr Sim intend to remain an employee of the applicants for two years, and that his unguarded comment to Mr Stone, a person he considered a close friend, betrays Mr Sim's true intentions throughout this period. This finding also emphasises that Mr Sim simply decided on 20 April 2009 that it was the right time for him to leave the business - he was not "sacked".
291 I find that the representation made by Mr Sim was, as pleaded by the applicants, made on his own behalf and also on behalf of the first respondent. While on one of the pleadings in the defence, the first and second respondents deny that Mr Sim acted on behalf of the first respondent at material times, no evidence was led to that effect on behalf of these respondents, and no submissions to that end were advanced on behalf of these respondents in closing. In all the circumstances I am satisfied that at all material times Mr Sim acted on his own behalf and for and on behalf of the first respondent in making all representations during the negotiations as well as subsequently during the due diligence period leading up to the settlement of the sale agreement. Having made that finding I will not repeat it in any detail in relation to the subsequent findings about pleaded representations and similar pleadings concerning collateral oral warranties.
292 Accordingly, I find the representation pleaded in [15(a)] was made, that Mr Sim did not have reasonable grounds for it, and so it was misleading or deceptive, and that the applicants relied on the representation when they entered into the sale agreement.