Rafidi: "My friend you've got my word. I have already told you that Premier Resources has got the capacity to have your guarantees released and that our shareholders will support us. We can amend the heads of agreement to provide for the extra things you want. Let's call in Marcello and then sign the heads of agreement."
217 Enzo then says that Mr Rafidi made some amendments to the heads of agreement, Marcello was called into the room and the agreement was signed.
218 I do not think that it is really necessary to go through paras 59, 61, 62 and 67 of Enzo's initial affidavit because they say similar things to that which I have already set out. Mr Lever says that no attempt was made during any of the defendants' cross-examinations of Enzo to challenge any of this material. Bearing in mind that Enzo was agreeing effectively to sell all his shares by four delayed instalments and to hand over the whole of the site and business to Marcello and the defendants, he was obviously relying on the defendants' representations that he would be paid. Mr Rafidi's version of what happened on 12 January I've already given. He also denies that any such conversation as set out in Enzo's affidavit took place.
219 However, the thrust of the submissions of the second and third defendants were not that the representations were not made (this was not admitted, but no submissions were made about it), but rather that they were not relied on by Enzo and in any event, were not false or misleading.
220 It will be remembered that Enzo had said in his evidence which I have set out above that by 12 December 2000 he had already made the decision to get out of the business and leave Marcello with the remaining 50%. In cross examination Mr Kaye elicited from Enzo that he had seen his solicitor Mr Ken Thomas in December 2000 and asked for advice in relation to the proposed purchase of his shares. He told Mr Thomas that the draft heads of agreement had been prepared and discussed it with Mr Thomas. He agreed also with Mr Kaye that he had told Susan Gray, who was Kurnell Recycling Park's business manager and accountant at the time, that he did not trust the behaviour of Mr Rafidi the way he was doing business. He also said that he didn't believe Mr Rafidi's word.
221 I do not really think it is necessary to look to Marcello's material on the representations that were made as to a great extent they cover the same ground as those in Enzo's case.
222 Nor do I think there is any great advantage to be gained by exhaustively reviewing the evidence and determining one way or another whether representations were made or not. I have already said that I have some doubts on accepting Mr Rafidi's evidence. I should also note that I am not completely happy with accepting Enzo's and Marcello's evidence as I gained the impression that they tended to remember only selectively those parts of the transactions which benefited them and sometimes had no memory at all of other things.
223 I will accept, and indeed, I think the balance of probabilities favours it, that something like what Enzo complains of was said. Indeed, cross examination of Enzo on this material was sparse.
224 The more difficult question is whether Enzo relied on these representations and whether they were false and misleading.
225 As to reliance, Mr Kaye submits that when one considers that Enzo did not trust Mr Rafidi's integrity, that he did not mention the alleged representations to his solicitor, and that he was ready to sell his shares in any event because he was both fed up with the way Marcello was acting in and about the business, and was fearful as to the position with the guarantees.
226 Mr Lever says that the virtually unchallenged evidence is that Enzo would not have signed the share sale agreement if it were not for the assurances given to him. For instance, in para 64 of affidavit PA01, Enzo said that from 12 February 2001 "I ceased all involvement in the management and administration of the Kurnell Recycling group of companies. On the basis of what I had been told by Rafidi and Costa, I believed that Hy-Tec would be acquiring my shares in the Kurnell Recycling group of companies, that Marcello and Hy-Tec would be taking over management and administration of the Kurnell Recycling group of companies and that I would be providing cartage services to Hy-Tec". Again, he says at para 78, "On the basis of what I had been told by Rafidi and Costa, I believe that Premier Resources or Hy-Tec would refinance the liabilities of the Kurnell Recycling group companies and have my personal guarantees released. I would not have signed the share sale agreement and the deed of distribution services if it were not for the assurances given to me by Rafidi and Costa."
227 As far as Mr Thomas is concerned, Mr Lever says that he was told about the conversation referred to in para 61 of Enzo's affidavits in which Mr Rafidi had said that he would be paying $400,000 for the shares, release the guarantees and giving Enzo a job.
228 Paragraph 33 of the statement of claim alleges that the representations were made in order to induce Merkado and Enzo to enter into the agreement for sale of shares and to sell the shares in Mac-Cotta to Resource Developments. One probably can infer that it also intended to say that it in fact induced them to do so.
229 The representations were in very general terms and the gravamen of them was relayed to Mr Thomas who either drafted or settled the SSA and distribution agreement.
230 Dealing with the representations as to existing fact, the representations that Premier and Hy-Tec had the resources to upgrade the manufacturing plant of Kurnell Recycling and had the personnel and skills to improve the management and production of the trading companies, may well not have been false. Indeed, the reason why the defendants walked away from the project in November 2001 was not so much that they did not have the resources, but that they found difficulty in obtaining the anticipated production from the site and the solvency of the various trading entities.
231 It is hard to see how a man who has been the person who carried on the business for many years even though in latter years Marcello probably took a greater part than he did, can really say that he was induced to enter into a contract to sell his shares because of representations that the other parties had the financial capacity to improve things. Indeed, these financial resources are really linked to the representation of future conduct that Premier would have Enzo's guarantees released. Indeed, the last utterance on 8 March was "There is nothing to worry about" said Mr Costa, "You can have this letter and a cheque for $10,000. We will be signing the share sale agreement very soon and having your guarantees released."
232 There was no definition of "guarantees", but when one looks at what was incorporated into the SSA one can see that the guarantees were less than the whole of Enzo's guarantees. No-one raised any objection to this and it shows that the intention of the people who made the future representations that the guarantees, whatever that means, would be reduced was in fact incorporated into the agreement. In my view, on the material that I have, despite the paragraphs of Enzo's affidavits to which I have referred, he has not demonstrated that the representations were false or misleading or that they induced the contract.
233 The contract that was made is in fact being sought to be specifically performed by Enzo. One can thus conclude that he was content with its provisions. Indeed, although specific performance was refused, with the exception of the redefinition of the scope of the guarantees, he gets what he contracted for.
234 Accordingly, in my view, Enzo has not made out his case under the Trade Practices Act.
235 The case of Marcello under the Trade Practices Act is even weaker. Mr Raine in his submissions, devotes very little time to it, and Mr Kaye makes the telling points that the only damages that are sought are damages flowing from the fact that the heads of agreement did not become unconditional. There is nothing in the material to suggest that if there hadn't been the pre-agreement representations, what step, if any, Marcello would have taken. Again, much the same can be said about the pre and post-agreement representations as was said in the case of Enzo.
236 I now turn to the cross claims in so far as they rely on the Trade Practices Act.
237 The first cross claim seeks damages "for the time and money spent by the first, fourth and fifth cross claimants in reliance upon the representations embodied in the heads of agreement." The second cross claim seeks to set off against anything due to Enzo or Merkado anything otherwise due from Premier and Hy-Tec and damages. The fourth cross claim seeks to set aside the SSA.
238 There are corresponding cross claims in Marcello's action.
239 The defendants claim that they lost considerable sums of money as a result of these representations.
240 Mr Kikalis' affidavit is evidence that a total of $332,356.87 was paid by Hy-Tec to or on behalf of Kurnell Recycling Park or associated companies. However, of this amount $17,225.88 is for goods and services supplied by Hy-Tec to Kurnell. Of this amount, the great bulk is for amounts paid as "wages" or to "M Russo Consulting" or for products that were supplied by outsiders to Kurnell for which Hy-Tec paid.
241 Mr Kaye puts that but for the misleading and deceptive conduct, Hy-Tec would not have spent the $332,356.87 that I have mentioned earlier, and would not have entered into the agreement to purchase sand from S & P Equipment Pty Ltd which arrangement was made in order to assist KRP securing a lease with Parist Holdings.
242 Of course, so far as $210,000 is concerned, as this was paid for quid pro quo for the purchase of sand, at least the value of the sand needs to be deducted from the $210,000.
243 There is no doubt at all that in the heads of agreement which were signed by Enzo and Marcello, there was a clause which provided that mandatory to this agreement KRP and its directors and share-holders will inter alia maintain production of recycled concrete aggregates for Premier's use at a minimum rate of 140 tonnes per hour 15 hours per day 205 days per annum, and there was also an acknowledgement by KRP (but not the directors and shareholders), that it was presently trading solvently.
244 However, a considerable amount of time was spent during the evidence in an effort to demonstrate, and I believe, successfully demonstrate, that the real position was known to the defendants all along.
245 The case of Enzo and Marcello need to be considered separately because the evidence clearly was that at the relevant times Enzo and Marcello were not on speaking terms, most of the material on which the defendants rely was evidence of conversations between Marcello and various representatives of the defendants which was not admitted as against Enzo. Further, Mr Rafidi's affidavit deposes to him being told by Marcello: "The business is my baby and I'm the managing director. I make all the decisions. My father simply drives trucks and never has any input in the day to day management of the business and anyway it is better that way because we always fight."
246 However, the representations relied on by the defendants are the representations made in the heads of agreement.
247 Mr Rayment puts that the development approval imposed a limit of 25,000 tonnes per annum on production at the relevant site. It is common ground that such a limit on production would render the business valueless. Enzo had been aware of those limitations since 1997 when he read the terms of the development approval.
248 Back in April 1999 when Hy-Tec was first considering purchasing material from KRP the minimum tonnage of production envisaged was 47,000 tonnes. This had increased to 75,000 tonnes of aggregate by May 2000. The letters containing those figures never mentioned the restrictions on production in the development approval. The Russos never advised the finance companies to whom these letters were written that the proposed productions contravened the conditions of the development approval.
249 Quantity of production was of prime importance to PRL if it was going to purchase a share in Kurnell Recycling Park. This is made clear in the mandatory provisions of the heads of agreement,a document that was prepared over a two month period. The heads of agreement in their mandatory provisions make it clear that a minimum production of 400,000 tonnes is required. There is no mention of the requirement of obtaining an "upgrade of the DA".
250 The allegation by the Russos in the witness box that the defendants had known that the DA was restrictive and needed to be upgraded right from the beginning is said by Mr Rayment not to be consistent with the common evidence that in November 2001 Mr Rafidi accused Enzo of deceiving him about the DA and the great amount of heat about the matter that was generated at that time.
251 Mr Lever in reply says that it may be that Robert Proctor, Ronald Sturgiss and Dick and Richard Austen were not aware of the development consent, but that at the end of the day is irrelevant. On Hugh Williamson's evidence, Mr Costa was given a copy of the development consent prior to the execution of the share sale agreement. He says that the evidence about Enzo being party to a conversation in which Mr Rafidi said that Enzo deceived him must be viewed in the context of the whole of the evidence, and that was:
"Rafidi said to me that I deceived him about the DA so can you believe it and when I went and saw him the next morning with the summons from the landlord because Mr Rafidi didn't pay any bill because he Mr Rafidi was broke and was living in my house he said to me Marcello deceived me about the DA. I said excuse me you knew about the DA very well Placido Costa, everyone knew about the DA. You deceived yourself. Rafidi said no chance."
252 It is thus necessary to turn to the evidence of Mr Williamson. He swore that he has been a solicitor for many years, originally in England, but since 1990 in Sydney. He swore that he received instructions to send a copy of the occupation agreement in respect of Lot 6 Captain Cook Drive, Kurnell, to Mr Costa. He had a clear recollection of obtaining an envelope of suitable size and shoe horning the documents into an envelope which was slightly too small, and as a precaution binding the edges with cello-tape. Mr Williamson was retained by Marcello. What was in the envelope was the first 30 pages of Exhibits SX1001-1945 being a licence agreement in favour of Emplas International guaranteed by Enzo and Marcello. That is common ground.
253 Despite some initial lapses of memory, as cross examination progressed, Mr Williamson was quite sure that he sent the permissions as well. Mr Kaye asked him, "What do you mean by permissions?"
"A. DA and EPA.
Q. Was this the development consent was it that you sent?
A. Yes."