The making of the Matching Representation
199 I have already referred to the evidence of Mr Schirripa that, in March 2014, Ms Pinneri had told him that if he invested in the business to buy VTF panels, the Respondents would match his investment by putting in the same value of stock, and so provide the same number of VTF panels. He also said that, in about May 2014, Ms Pinneri had told him that "Status did not make any money off the fences". She explained that this was because the Respondents wanted "to get the VTF business going". In addition, Mr Schirripa deposed to having been told by Mr Nestorovic in August 2014, at a time when the Respondents were soliciting further investment by RRG, that "the deal would be the same as before, and … he would put in the same amount as me in stock".
200 Mr Schirripa said that, in relation to the investment in VTF (Tas) and VTF (NSW), Mr Nestorovic and the Respondents together had told him that his investment would be done in the same way as before ("everything is the same no matter where we go" and "everything is the same").
201 Mr Dimech, who was introduced to the VTF business before Mr Schirripa, gave a similar account. He said that in around September 2013, Mr Nestorovic had told him that he (Mr Nestorovic) "would put in the same amount as anything we put in".
202 The accounts of Mr Schirripa and Mr Dimech are supported by the evidence of Mr Falzon who said that, at his first meeting at the Prospect premises of Status, Mr Nestorovic had told him that "he would go 50/50 with any investment I got to buy fencing". Although, as already indicated, I am proceeding on the basis that caution should be exercised before acting on Mr Falzon's evidence, I consider that its consistency with the evidence of Mr Schirripa and Mr Dimech makes it appropriate to do so in this instance.
203 The oral evidence concerning the Respondents having made a form of the Matching Representation is also consistent with the documentary evidence. As noted earlier, shortly after RRG, Schnik and FSN made their respective initial investments into the State Companies, they entered into a SHA with VTF Aust and the State Company concerned. The SHAs were in template form and had been prepared by the Respondents or persons retained by them for that purpose. Clause 6.2 provided as follows:
[6.2] Initial Loan
[6.2.1] The Company acknowledges that each of the initial Members set out in clause 5.1.1 or their respective Related Entities have made the following loans to the Company on or about the Operative Date as follows:
…
204 Each SHA then recorded that VTF Aust and the investor or investors had made matching loans. So, for example, in the case of VTF (SA), it recorded that VTF Aust and RRG had each made loans of $107,000. The amounts recorded in cl 6.2 in each SHA are summarised in the table concerning the SHAs set out earlier in these reasons. It is pertinent that cl 6.2 recorded the contributions by VTF Aust and the investor in monetary terms, and not in terms of the number of VTF panels each had contributed. By including matching dollar figures, VTF Aust (and the Respondents) were representing that its contribution matched, in dollar terms, the contribution by the investor.
205 Clause 6.2 contained, in effect, an express representation that a contribution matching that of the investor had been made by VTF Aust. Although the representation was made after the initial advance of monies by the investor, its content is consistent with the Matching Representation alleged by the Applicants. It is appropriate to record, however, that the Applicants do not assert that they relied on the statements in cl 6.2 of the SHA. None of Mr Schirripa, Mr Falzon, Mr Dimech or Mr Frank Schirripa said that he had been aware of the clause. Nevertheless, those statements do form part of the circumstantial background by which the issue of whether the Respondents did make the pleaded representations is to be determined.
206 The Respondents also represented to the investors that the whole of their investment was used for the purchase of VTF panels or associated equipment. They did this by the invoices which Ms Pinneri caused Status to issue to the State Company involved. These indicated that the whole of the invested monies had been applied to the purchase of VTF panels or associated componentry at the identified prices. Coupled with the Manufacturing Representation, this was a representation that the whole of the monies had been used to pay for the manufacture of the VTF panels and associated equipment.
207 Much of the Respondents' own evidence also supports the conclusion that they had each made a form of representation that they, through VTF Aust or Status, would match the contributions of the Applicants, although not exactly in the form alleged by the Applicants. I list the following aspects of their evidence:
(a) Mr Nestorovic said that in meetings with Mr Falzon and Mr Stephens in mid to late 2013 "I also discussed how they would put in cash to purchase the fencing products from Status and I would arrange for a matching set of the fencing products to be provided. I mentioned that the price Status was going to charge for the fencing was about $200, plus GST, for one panel";
(b) later, Mr Nestorovic said:
Initially 1,000 fence panels were purchased from Status for [VTF (SA)] and 1,000 fences were purchased from Status for [VTF (WA)], with half [of] each amount being purchased using funds provided by RRG and the other half being procured by [VTF Aust]. Prior to making any payment, RRG was provided an invoice regarding, amongst other things, the portion of the fencing products that its funds were paying for. Upon making the payment, [VTF Aust] would procure for the VTF State/Territory company from Status a set of products that matched the products in the invoice sent to RGG.
(c) at [96] of his affidavit, Mr Nestorovic said "[t]he arrangement was always the same. RRG would provide funds to purchase half the amount from Status, and then [VTF Aust], [VTF (WA)] and [VTF (NT)] would procure from Status the provision of the other half";
(d) Mr Nestorovic made other statements to like effect, at [116], [118], [121], [133] and [145] of his affidavit;
(e) in his cross-examination, Mr Nestorovic accepted that he had told Mr Falzon, at the time that VTF (SA) was being established, that he would "go fifty-fifty on any money that Mr Falzon or his colleagues contributed" and that he had told Mr Dimech that, if he brought 1,000 fences, he (Mr Nestorovic) would also buy 1,000 fences;
(f) Mr Nestorovic admitted in cross-examination that he had told Mr Schirripa in relation to his investments in VTF (WA) and VTF (NT) that the money he invested would be used to buy half of the fencing panels required by the business and that he (Mr Nestorovic) would match that by putting in the other half. He agreed that he had wanted Messrs Falzon, Stephens and Dimech to believe that all of the money they invested would be used to pay for half of the fences; and
(g) Mr Nestorovic agreed in his cross-examination that he had wanted "the RRG investors" to believe that he would be matching them dollar for dollar with their investment.
208 In her affidavit, Ms Pinneri deposed that, at the meetings in 2013 in which she participated with her father, Mr Falzon and Mr Stephens, "it was discussed and agreed that to obtain fencing and related products for the business, Glen, Rob and David would provide cash to purchase products from Status and my father [and] I would produce a matching set of the products from Status. This was always how the arrangement was". In several other places in her evidence, Ms Pinneri referred to the procuring or the provision of matching sets of fencing products. See for example, [31], [33], [39], [41], [46], [50] and [53]-[55].
209 The Respondents submitted that they had represented only that they would, through VTF Aust, procure the same number of VTF panels as purchased with the investors' funds and, further, that they had honoured that commitment. That is to say, for each VTF panel acquired with the investors' funds, VTF Aust had supplied, or procured the supply of, a matching panel. The Respondents denied that they had said anything about providing panels to a value equivalent to those funded by the Applicants. They submitted that it had been a matter for them how they acquired the matching panels, whether by inter-company loans with Status, or otherwise. Ms Pinneri acknowledged that she had not told Mr Schirripa the amount which Linhai Hedda was charging to Status for each panel.
210 The Applicants accepted that matching numbers of VTF panels had been received by each State Company, but did not accept that they had been "provided by" either VTF Aust or Status. Instead, the Applicants contended that the matching panels had been provided using the funds which they themselves had advanced for the acquisition of the VTF panels whose purchase they were to fund. That is, they contended that the funds advanced by the investors had paid for all the VTF panels acquired by the State Companies.
211 The unit prices which Linhai Hedda charged Status for the VTF panels contrast with the unit prices which Status charged the State Companies for the VTF panels. I summarise the latter prices, derived from the Status invoices in evidence, in the following table:
Date State Company No of Units Price per 2.1 m VTF $ Price per 1.8 m VTF $ Price per 1.2 m VTF $
09/10/2013 VTF (SA) 500 203.50
08/11/2013 VTF (WA) 500 203.50
03/04/2014 VTF (SA) 500 246.40
03/04/2014 VTF (WA) 250 246.40
03/04/2014 VTF (WA) 250 246.40
23/06/2014 VTF (NT) 500 224.00
23/06/2014 VTF (NT) 250 224.00
23/06/2014 VTF (WA) 750 224.00
18/08/2014 VTF (Tas) 750 224.00
18/08/2014 VTF (Tas) 250 224.00
21/08/2014 VTF (WA) 500 246.40
21/08/2014 VTF (WA) 250 246.40
17/11/2014 VTF (SA) 97 224.00
06/02/2015 VTF (SA) 1,350 246.40
06/02/2015 VTF (SA) 250 246.40
06/02/2015 VTF (NT) 575 246.40
06/02/2015 VTF (NT) 150 246.40
01/07/2015 VFT (Vic) 1,250 253.00
01/07/2015 VTF (Vic) 500 253.00
01/07/2015 VTF (NSW) 2,500 253.00
01/07/2015 VTF (NSW) 500 253.00