Peters v Good

ex tempore Judgment 1Scott Good is the younger brother of Debra Peters. They were very close. Mrs Peters was like a mother, as well as an older sister, to Mr Good. 2Glenn Peters is Mrs Peters' husband. Mr Good had worked for Mr Peters' business after school and on weekends, and on the family farm. Mr Good knew that Mr and Mrs Peters trusted him. 3In 2007 Mr Good was living during the week in Young. He became acquainted with property developers named Ken Hancock and one John Gombos, an associate of Mr Hancock. Mr Hancock told Mr Good about a property that might be developed for rental accommodation in Young ("The Young development"). 4At some stage the land was bought by Hano Enterprises Pty Ltd ("Hano"). Mr Gombos and Mr Hancock were directors of Hano. In late 2007 Mr Good resigned from his employment and was retained through his company, Goodcull Pty Ltd ("Goodcull"), to work for Hano. Hano retained Goodcull to manage and market the Young development. 5Goodcull was to receive a fee of $300,000, payable on the successful conclusion of the development. Mr Good separately was also reimbursed his rent, his motor vehicle and other expenses, and received some fees. 6On several occasions in 2007, Mr Good and Mr and Mrs Peters had conversations about the Young development. 7In about September or October 2007, Mr Good visited Mr and Mrs Peters at their home in Kenmore, in Queensland. Mr Hancock accompanied him. Mr Hancock and Mr Good had previously agreed that Mr Good would present the Young development to Mr Peters. Mr Good was the spokesman for Hano and Mr Hancock during the meeting with Mr Peters. 8The content of the conversation is a matter of dispute. Mr Peters deposed to the conversation as follows: "...I asked them both, 'who is Hano Enterprises?' The defendant replied, 'Hano Enterprises is Ken Hancock, John Gombos and Scott Good'. The defendant further informed me, 'I am putting in $400,000.00. Ken is putting in the same amount and John Gombos is putting in $600,000.00. None of this money is borrowed money. If you put money in the development, you will get your money back after 12 months with 10% interest and the option to reinvest in stage 2 of the development'. The defendant further told us, 'I will oversee the entire project including all unit sales and daily visits to the site because I live in Young and I have many contacts in the local business community'. The defendant and Ken Hancock showed us a brochure about the 'proposed villa development' in Williams Street, Young and told us that the development was being done by a company called Hano Enterprises Pty Ltd. The defendant asked me, 'Do you want to invest in this development?'" 9If this conversation occurred it was misleading. Mr Good accepted that he was never a shareholder of Hano and that neither he nor his company, Goodcull, contributed money to the project. 10Mr Peters deposed to having relied on Mr Good's representations that Mr Good had invested $400,000 of his own money in the Young development and that Mr Good was a part owner of Hano. Mr and Mrs Peters transferred $260,000 to Goodcull in January 2008, and a further $70,000 in October 2008. These funds were transferred from Goodcull to Hano. 11In September 2008, Mr and Mrs Peters signed a contract to purchase one of the units in the Young development. Mr Peters said that they intended to use repayment of the $330,000 invested funds to pay for this purchase. However, the purchase did not proceed and the deposit was refunded. Neither party to the proceedings attributed any particular significance to this event. 12The development failed and no investment monies were repaid by Hano or Goodcull. Mr and Mrs Peters claimed $330,000 plus interest from Mr Good for damages for misleading conduct under s 42 of the Fair Trading Act 1987, as it then was. 13The defence denied all the allegations of the plaintiffs. However, in the hearing before me Mr Good accepted that the representations alleged were misleading, if said, and did not dispute any aspect of causation or quantum of damage. His defence is that he did not make the statements alleged. Thus, the only real issue was whether the asserted representations were made. Mr Good appeared for himself at the hearing. 14Mr Good gave a different account of what was said in the September/October meeting between him, Mr Peters and Mr Hancock. He deposed to having said: "Hano Enterprises Pty Ltd No 1 is putting in approximately $1.2 million. Ken and John are the directors of Hano Enterprises. There is room for another $400,000 of shareholder investment. Ken is the project manager and Goodcull is providing consultancy services to around a 1/3 share. Goodcull is assisting Hano because of my local knowledge and contacts. Hano has contracted Goodcull for its services and I am a director of Goodcull. ...The initial investment in the development is not being borrowed. Hano would prefer that any further investment by a shareholder is also not borrowed." 15Mr and Mrs Peters submitted that I should accept Mr Peters' account of the conversation. They rely on the following matters. Firstly, an independent witness corroborated Mr Peters' account, one Andrew Costanzo. Mr Costanzo invested in the Young development by depositing $40,000 in Goodcull's bank account in February 2008. Mr Costanzo deposed that Mr Good and his wife stayed with Mr Costanzo and his wife on New Year's Eve 2007, and that Mr Costanzo told Mr Good that he had some funds to invest as a result of having sold a house. He said that Mr Good showed them "the prospectus and drawings", and asked them if they wanted to invest in the Young development. Mr Costanzo deposes that Mr Good said to him, among other things, "I am putting in $400,000.00 of my own money". 16Mr Costanzo was cross-examined by Mr Good who at the hearing was self-represented. Mr Costanzo was challenged in respect of the prospectus. Mr Costanzo had purported to annex the prospectus but in fact it was a series of drawings, plans and elevations of the proposed development. The annexure made no reference to any financial information. 17Mr Costanzo was also challenged about when he received the drawings. Mr Costanzo's answer was not definitive, however the drawings are dated 15 November 2007, which does not preclude them being provided on New Year's Eve 2007, as Mr Costanzo's affidavit deposes. Mr Costanzo was also asked whether he was, "totally convinced about the sum of $400,000." He conceded that he was, "not totally", convinced. 18I was unsure whether the lack of conviction was in respect to the sum invested or the statement by Mr Good. Mr Good's cross-examination of Mr Costanzo continued, "Actually, I said I invested $300,000. I am admitting I said $300,000." Mr Costanzo answered that the figure of $300,000 was never mentioned, it was $400,000 that was said. 19Mr Costanzo was not entirely convincing as a witness. I could not dispute his honesty but he was uncertain about the precise content of some conversations. This is not unexpected after more than five years. I concluded that his evidence gave some limited support to Mr Peters' account of Mr Good's representation. 20The second matter relied upon by Mr and Mrs Peters were two documents. The first was a letter from Mr Good to Mr Costanzo sent prior to Mr Costanzo's investment of $40,000, on 25 February 2008. The letter provided Goodcull's bank account details and included the following: "Andrew, The 31 villas/units as you know will be developed by Hano Enterprises P/L in which Ken Hancock & John Gombos are both directors. Goodcull P/L is my own company and is a 1/3 shareholder (only) in the development as is both Ken & John's own companies. In saying so, the construction/building costs will be 5.5 million to complete in which the above three shareholder have invested 2.5 million of, plus private investment of $800,000 and the balance [borrowed] by either a super fund/bank at this stage. We have allowed an approx 35 to 40% return on all moneys invested by private investors, which consists of family and close friends (only). There are no outsiders or financed money involved in the $800,000 of private investment. Effectively, the above details give the development minimum exposure and allow the construction to be built in one-hit so to speak rather than in stages. Coupled with financing of less than 50% of the total development we see the completion of the development to be November 2008 with investment pay-outs in approx January 2009." 21This letter contains a repeated assertion by Mr Good that Goodcull was a shareholder in the development. Mr Good, in evidence, regarded himself and Goodcull as indistinguishable. Thus, the letter shows that Mr Good represented to another potential investor that he or his company was a shareholder in the development. 22Mr Good sought to answer this evidence by tendering an undiscovered document he claimed to have received from Hano's accountant. The document, even if accepted as authentic, proved only that Goodcull became an owner in the "Hano Enterprise Unit Trust", not in Hano, and perhaps more importantly, not until 2009. The document's content shows that it must have been created after 14 January 2010. Mr Good gave evidence that he received it in 2008 23In any event, Mr Good, as I indicated above, accepted that to say he was a shareholder in Hano was misleading. Yet the letter to Mr Costanzo indicated a substantial investment by Goodcull. It was a one-third shareholding and the three shareholders had together "invested 2.5 million". Although the sum of $400,000 is not specified, this letter supplies some support for Goodcull having made a substantial investment in the Young development. 24Mr Good's answer to the statements in the letter he sent to Mr Costanzo was to assert that the references to the, "above three shareholders", was an error and it should have said effectively, "The two shareholders, excluding Goodcull." 25I did not find this evidence convincing. The letter is persuasive evidence that Mr Good made representations that his company was a shareholder and had made a significant investment of funds in the Young development. 26The second document relied upon by Mr and Mrs Peters is a text message in August 2011 to them from Mr Good. Mr Good admitted that he sent the text message. By the message Mr Good disputed that he ever said he was a director but admitted to having said he was a shareholder. This admission corroborates that he had represented that he was a part owner in the development. 27The third matter relied upon by Mr and Mrs Peters is the evidence of Mrs Peters. Mrs Peters was not cross-examined. I reminded Mr Good when he announced his intention not to cross-examine his sister that it may be adverse to his prospects if he did not challenge matters in his sister's affidavits that he disputed. He again asserted that he did not wish to challenge any matters in her affidavits. 28Mrs Peters gave evidence of what she was told by Mr Peters about the conversation with Mr Good and Mr Hancock in September/October 2007. This evidence was hearsay but was not objected to. As Mr Good was self-represented, I concluded I should not rely too heavily on this evidence. I indicated as much to the parties. 29In any event, there was obvious scope for an erroneous recollection to occur when Mrs Peters is recalling what Mr Peters told her (at some uncertain time) about what Mr Good had told him many years ago. 30However, Mrs Peters also gave evidence that on many occasions Mr Good said to her, "I am putting all my money into this development as this will set me up for the future. I will be in full control." 31I accept that this evidence supports a conclusion that Mr Good represented to Mrs Peters that he had made a significant investment in the Young development. 32Fourthly, Mr and Mrs Peters say that it is inherently likely that Mr Good would make such representations because he stood to gain $300,000 if the development succeeded, because Hano needed investors, and because Mr Good agreed with Mr Hancock that he would be the spokesman in the meeting with Mr Peters. 33I am not persuaded that this factor makes a representation likely, at least in the terms that were asserted. To me, these matters suggest that the circumstances do not render unlikely the prospect that the representations were made, but they also do not persuade me that they were made. All of these matters, apart from the text message and the hearsay evidence of Mrs Peters are not directly evidence about the representation made by Mr Good to Mr Peters, rather, they establish that Mr Good had a tendency to make representations about his investment and his shareholding. 34No objection was taken under s 97 of the Evidence Act 1995. I am inclined to give the matter some weight especially since Mr Good has disputed that he ever made such representations rather than admitting that the other representations were made, but denying they were made to Mr Peters in September/October 2007. 35I also considered the evidence given orally by Mr Peters and Mr Good. Neither were impressive witnesses. 36Mr Peters' memory appeared to me to be unreliable in several respects, although he was adamant that Mr Good had told him of his investment of $400,000. 37Mr Good appeared to be a more experienced and confident witness than Mr Peters, but several of his answers I found hard to believe. In a detailed affidavit prepared whilst Mr Good had legal representation, he deposed to having made arrangements with Hano as follows: "Being based on the Gold Coast, Ken and John wanted someone local to assist them with the development and in particular to: (a) manage the development application process as it progressed through Council; (b) project manage the development by being the developer's local representative; and (c) prepare and execute a local marketing plan. I agreed with Ken that Goodcull would contract with Ken's company Hano Enterprises Pty Ltd (Hano) to provide these services. For each of the three aspects of the engagement set out above, Goodcull would be paid a sum of $100,000.00 ($300,000.00 in total) at the conclusion of the development. Expenses incurred by Goodcull would be reimbursed on a regular basis." 38Yet Mr Good denied he was ever project manager of the development. He also disputed he had any real interest in the success of the development suggesting that although the $300,000 he would receive was twice his annual income and that he had just resigned from his previous job, nevertheless it was a matter of no significance to him. It was, he said, "no skin off my nose if the development did not go ahead." 39Further, although he agreed to, "prepare and execute a local marketing plan", and he agreed with Mr Hancock that he would present the project to Mr Peters, yet he was not engaged to "promote" it. 40Initially, Mr Good readily accepted that Mr and Mrs Peters trusted him as he deposed in his affidavit, but as cross-examination continued his answers tended to back away from that concession and ultimately he said he disagreed with the proposition that he knew Mr Peters would trust him. 41In response to his own account of the conversation at Mr Peters' home in September/October 2007, Mr Good deposed that he spoke of "shareholder investment", but conceded in evidence that he should not have used the word "shareholder". He deposed to stating that, "Goodcull is providing consultancy services to around a 1/3 share", but testified that Goodcull was not receiving a one-third share but a payment of $300,000, which he said was equivalent to the value of a one-third share. 42Mr Good accepted that although he presented the Young development to Mr Peters he did not fully understand the financial aspects of the Young development, who were the actual shareholders and how much actual funds were contributed apart from borrowings. Yet he asserted: "The initial investment in the development is not being borrowed. Hano would prefer that any further investment by a shareholder is also not borrowed." 43Again, the reference in this passage to "shareholder" is inconsistent with Mr Good's evidence about the entitlements of investors. Further, Mr Good's affidavit asserted that he told Mr Peters that Mr Hancock and Mr Gombos were contributing $1.2 million and other private investors $400,000, whereas his letter to Mr Costanzo asserts (if the reference to his company contributing funds is deleted as he submitted), that Mr Hancock and Mr Gombos were contributing $2.5 million and private investors $800,000. 44I found Mr Good's explanation that the different representations were made on different dates to be an unsatisfactory explanation of the large difference between those representations. 45Mr Good submitted that I should accept that he did not make the representations because Mr Hancock was present and would have corrected any error he said. Mr Hancock did not give evidence in the proceedings. No party made a Jones v Dunkel submission so I do not think Mr Hancock's absence favours either party. The only evidence I have about Mr Hancock is that he is a Gold Coast developer who has a significant interest in the failed Young development. I cannot conclude from that that he would have corrected any error made by Mr Good in his presentation to Mr Peters. 46Mr Good also relied upon his assertion that he received no commission from funds contributed by Mr Peters. I do not regard this matter as significant in circumstances where he stood to gain substantial amounts on the success of the project, and also had a not insignificant amount of expenses, as he called them, reimbursed. 47All of these matters persuade me that I should be very cautious about accepting Mr Good's evidence. 48His oral evidence persuaded me that his answers were motivated by what he thought would assist him. Sometimes those answers were contradicted by his affidavit or earlier evidence. Whilst Mr Peters' recollection was less than perfect, on balance I favour it over Mr Good's in relation to the two representations alleged. 49In all these circumstances, I am satisfied on the balance of probabilities that Mr Good did make the alleged representations. 50Mr Good also raised an issue about whether the representations were in trade and commerce. I do not think this matter is in any doubt. He had an interest in the proposed development, and attended with Mr Hancock, a director of Hano, the developer, to present it to Mr Peters. A presentation in relation to a commercial opportunity, a property development, is a presentation in trade and commerce. 51As I indicated earlier, it was accepted by Mr Good in his submissions that the representations, if made, were false, that Mr and Mrs Peters relied on them and the investments of a total of $330,000 were made, which monies were lost. The evidence of those matters was not challenged. Mr Good did question Mr Peters as to why he did not get financial advice, which Mr Peters accepted that he should have, although Mr Good attributed no significance to this matter. 52I readily infer that the decision Mr and Mrs Peters made to invest was imprudent. They transferred the money to Mr Good's company without receiving any document recording their entitlements, whatever those entitlements were. However, I was reminded of the words of Gleeson CJ in Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at pp 468-469 [13]: "It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage. The respondents knew the purpose for which their representations were being relied upon by the appellants. The Full Court accepted that the making of the representations amounted to engaging in misleading or deceptive conduct in trade or commerce. There was no warrant for a conclusion that the negligence of the appellants in relation to the feasibility study was the sole cause of the decision to undertake the project." 53These comments have application in the present case. It is no defence for Mr Good that carelessness may also have caused the loss. As Wilson J stated in Gould v Vagellas (1985) 157 CLR 215 at p 236: "The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract." (See also Henville at [60] and [107]). 54No defence of contributory negligence was pleaded so I could not fairly consider that matter when evidence concerning it has not been fully ventilated. Further, any claim for contributory negligence seems only to be available under the apportionment legislation in the Civil Liability Act 2002, including s 34. There may be a real question as to whether the damage in this case arose from a failure to take reasonable care by Mr and Mrs Peters, but as this is not a matter that was pleaded I am not at liberty to decide it. 55For these reasons, the plaintiffs are entitled to judgment in the sum of $330,000. 56Interest should be awarded from the date of the investment since I have found that the investment would not have been made if not for the misleading representations. Interest to date amounts to the sum of $154,583.15. 57 When invited to address on costs during the hearing, neither party made submissions contrary to the usual costs rule. 58Accordingly, the orders of the Court are: (1)Judgment for the plaintiffs against the defendant in the sum of $484,583.15. (2)Defendant pay the plaintiffs' costs.