[2001] NSWCA 61
Brown v Tasmania (2017) 261 CLR 328
(2021) 388 ALR 128
Fox v Percy (2003) 214 CLR 118
[2003] HCA 22
In the matter of Inmart Investments Pty Ltd
In the matter of Marynen Manufacturing Pty Ltd [2023] NSWSC 1257
Junker v Hepburn [2010] NSWSC 88
Masters v Cameron (1954) 91 CLR 353
Source
Original judgment source is linked above.
Catchwords
[2001] NSWCA 61
Brown v Tasmania (2017) 261 CLR 328(2021) 388 ALR 128
Fox v Percy (2003) 214 CLR 118[2003] HCA 22
In the matter of Inmart Investments Pty LtdIn the matter of Marynen Manufacturing Pty Ltd [2023] NSWSC 1257
Junker v Hepburn [2010] NSWSC 88
Masters v Cameron (1954) 91 CLR 353[1984] HCA 58
Smith v Rynne [2005] NSWCA 77
Toole v Flexihire Pty Ltd (1991) 6 ACSR 455
Twigg v Twigg [2022] NSWCA 68
Judgment (60 paragraphs)
[1]
Introduction
The first plaintiff, Tafemo Pty Ltd (Tafemo), and the second plaintiff, Bela Takacs (Mr Takacs), who is the sole director and shareholder of Tafemo, sue the defendant, Acoustica Pty Ltd (Acoustica), to recover monies said to be owing pursuant to a written agreement dated 5 April 2001 (April 2001 Agreement).
The April 2001 Agreement is disputed by Acoustica. Acoustica acknowledges that its then sole director, Philippe Pierre Doneux (Mr Doneux), signed a form of the April 2001 Agreement. However, it denies that any form of the April 2001 Agreement was signed by Tafemo. Instead, Acoustica claims that in November 2003 it entered into an agreement on different terms with Tafemo, arising from discussions that it says took place between Mr Doneux and Mr Takacs around that time (November 2003 Agreement).
In the alternative, Acoustica claims that, should the Court find that the parties did enter into the April 2001 Agreement, the parties conducted their business affairs on the basis of assumptions consistent with the terms, which I will outline below, of the oral November 2003 Agreement (estoppel claim).
Further, Acoustica claims that the plaintiffs' attempt to recover monies is statute barred.
In essence, the April 2001 Agreement has two aspects. First, it provides for a payment by Acoustica in consideration of the acquisition of plant and equipment from Tafemo. Secondly, it provides for the employment of Mr Takacs, and indeed other employees of Tafemo, at Acoustica.
The parties are agreed that a sum of $200,000 was to be paid by Acoustica to Tafemo and that that sum was not paid upfront. Rather, it was paid over time. The parties are agreed that there was an employment component to their respective arrangements. They dispute the precise terms of such employment, however there is no claim or counterclaim in the proceedings regarding the employment aspect of their arrangements.
In practical terms, the critical difference between the parties' positions relates to the nature and extent of the obligations arising out of the $200,000 sum.
Tafemo alleges that Acoustica's election not to pay the $200,000 sum upfront had the consequence that, under the terms of the April 2001 Agreement, Acoustica was required to allot and issue a redeemable preference share (RPS) to Tafemo and progressively pay the sum of $200,000 as part of a "redemption amount". It asserts that, under the April 2001 Agreement, during the "redemption period" it was entitled to dividends (calculated by reference to Acoustica's net profits) plus interest.
Meanwhile, Acoustica contends that, under the November 2003 Agreement, Tafemo agreed simply to accept the $200,000 sum without any rights to dividends and interest. Acoustica claims that it paid a final amount referable to the $200,000 in 2018, and it has no outstanding financial obligation to Tafemo.
The monetary difference between the two positions is a sum of approximately $1.4 million, being $1 million referable to the alleged dividend obligation (described in the evidence as the "Tafemo Dividend") and an amount of interest on the Tafemo Dividend approximating at least $400,000.
I have determined that the plaintiffs' claim is made out.
The document constituting the April 2001 Agreement is entitled "Income (Non-Capital) Redeemable Preference Share Agreement" and has 10 annexures. In the way the case was argued, the April 2001 Agreement was essentially divided into two aspects: the body of the agreement together with the first 9 of the 10 annexures (RPS Agreement); and the last annexure (Annexure H), which was a form of employment agreement between Acoustica and Mr Takacs (Employment Agreement). In litigating the matter, the parties distinguished between the RPS Agreement and the Employment Agreement for some purposes.
On the hearing, Mr Price of counsel appeared for the plaintiffs and Mr Hand of counsel appeared for Acoustica. Both counsel provided a written outline of submissions prior to the hearing and made oral closing submissions following the completion of evidence. I will cite the evidence in the proceedings by reference to the Court Book (CB), transcript pages and exhibit numbers, and cite the submissions by reference to Mr Price's opening written submissions dated 24 April 2024 (POS) and closing written submissions dated 3 May 2024 (PCS), Mr Hand's opening written submissions dated 26 April 2024 (DOS) and closing written submissions dated 3 May 2024 (DCS), and transcript pages.
Prior to the morning adjournment on the first day of the hearing, an application was made by Mr Hand on behalf of Acoustica to adjourn the hearing in order to afford it an opportunity to respond to "new evidence", being the documents annexed to the POS. I refused that application for reasons which are evident from the transcript.
[2]
Mr Takacs and Tafemo
Mr Takacs was born in July 1934 in Budapest, Hungary. At the time of the hearing, he was aged 89.
In 1975, Mr Takacs appears to have commenced business as a sole trader: CB 100.
On 22 May 1985, Tafemo was registered as a company in New South Wales: CB 292.
Mr Takacs was appointed as a director on 19 June 1985 and appears to have been the initial sole director of the company: CB 294. As matters presently stand, Mr Takacs is the sole director and shareholder of Tafemo. An ASIC search discloses that there were a number of other shareholders and directors of Tafemo in the 1990s. Relevantly, an accountant, John Crow (Mr Crow), was appointed as a director of Tafemo on 12 August 1994 and continued to hold that position until 6 August 2012: CB 294. He appears to have been a shareholder of Tafemo for some period of time, both through a number of corporate entities and personally: CB 297-298.
Contemporaneously with Mr Takacs' appointment as a director, Mr Crow was appointed as secretary of Tafemo: CB 295. He held that position until 6 August 2012. Mr Crow operated an accounting business, John C Crow Associates, which was appointed as auditor of Tafemo on 6 August 1994: CB 295.
Seemingly from March 1992 until July 2015, Tafemo had its principal place of business at a unit in York Road, Penrith: CB 294.
On 15 June 1995, Tafemo registered the business name "Polytak Plastic Industries" (Polytak): Exhibit D2. At the relevant times, Tafemo was involved in the manufacturing of plastics: see e.g. CB 38[9].
[3]
Acoustica
Acoustica is a noise control and acoustics specialist that provides soundproofing products and services to residential, commercial, marine and industrial sectors: CB 37[5].
Acoustica was registered as a company in New South Wales on 25 September 1986: CB 281. On 24 October 1986, Mr Doneux was appointed as one of Acoustica's initial directors and Victor Burley was appointed as its initial secretary: CB 283, 284. Mr Doneux was born in Belgium in April 1948. At the time of the hearing, he was aged 76.
On 19 June 1991, Philip Allan Stevens (Mr Stevens) was appointed as a director and secretary of Acoustica for a period of approximately two weeks, ceasing on 1 July 1991. On that date (1 July 1991), Bruce William Robins was appointed as a director and secretary of Acoustica for a period of eight years, with his appointments ceasing on 3 November 1999: CB 283-284. Mr Doneux continued as sole director of Acoustica for the time being: CB 283.
The current directors of Acoustica are Mr Doneux and Daniel Ciric (Mr Ciric): CB 283. Mr Ciric commenced working with Acoustica in September 2009 as a manufacturing manager. In April 2017, he became the general manager and, on 21 November 2019, he was appointed as a director (specifically, the managing director): CB 50[4], 283.
According to an ASIC search, Acoustica's principal place of business has varied over the years and has included locations at Surry Hills, Annandale and Glebe prior to 2001. According to Mr Ciric, Acoustica's factory was initially located at Penrith, prior to being relocated to St Marys in May 2011: CB 50[10].
[4]
Initial relationship between the parties
In respect of the initial relationship between the parties, Mr Doneux gave the following evidence: CB 37-38[8]-[12].
1. He and Mr Takacs appear to have known each other since around 1985.
2. At that time, Mr Doneux was the general contracts manager for an Australian public company called "LNC", which employed around 25,000 people. He was asked to develop an acoustic product and found a nearby plastics company, being Tafemo. Mr Doneux approached Tafemo to manufacture flexible acoustic materials.
3. Upon losing his job in 1986 when LNC sold its business, Mr Doneux set up Acoustica and came up with the idea of Tafemo manufacturing and supplying acoustic membranes to Acoustica. For that purpose, Tafemo had assembled a manufacturing line, which according to Mr Doneux was "primitive and looked like a Meccano set", but nonetheless "did an okay job" for manufacturing the acoustic membranes.
4. A short time after Mr Doneux says that he was informed by Mr Takacs that Acoustica had become Tafemo's principal client and represented around 70-75% of Tafemo's turnover.
However, according to Mr Takacs, his first contact with Mr Doneux was in or about 1993 or 1994 via a person named Doug Collins at Central Venture Capital: CB 31[3(a)].
The difference between the affidavit evidence of Mr Doneux and Mr Takacs as to when they first met, or were in contact with one another, was not resolved by subsequent evidence in the proceedings. In the early part of Mr Takacs' cross-examination, Mr Hand put to Mr Takacs, and Mr Takacs agreed, that as at April 2001 he had quite a long association with Mr Doneux: T 24.37-.43. Mr Hand did not at that point seek to identify whether their association dated from 1985-1986 or from 1993-1994. Likewise, in cross-examining Mr Doneux, Mr Price did not seek to resolve the conflict. In those circumstances, whilst acknowledging the conflict on the affidavit evidence, I do not propose to make any specific finding about the matter as I understand that neither counsel suggested that I should need to resolve it.
Either directly or through Polytak, Tafemo had been supplying Acoustica with insulating material for several years prior to 2001. At the commencement of his cross-examination, Mr Takacs indicated that as at April 2001 and in the years prior, a company referred to as "Pyrotek" was Tafemo's most important client, not Acoustica: T 25.4-.8.
As at early 2001, Tafemo appears to have had at least three employees, consisting of Mr Takacs, Barry Hillard and Neil Everson: CB 100. At that time, it produced a number of products, including polyclay, tubing and an acoustic barrier: CB 101.
[5]
Is Mr Takacs a necessary party to the proceedings?
In its defence, Acoustica took issue with the joinder of Mr Takacs as second plaintiff in the proceedings: CB 16[2]. Mr Price addressed the point in the closing submissions, noting (correctly) that Mr Takacs is a party to the RPS Agreement: PCS [2]; see also CB 66. He submitted that joint parties to a contract must be joined to a proceeding for the proceeding to be properly constituted, citing Smith v Rynne [2005] NSWCA 77. However, I note that whether the RPS Agreement ought to be properly considered a joint contract was not the subject of any detailed submissions.
Mr Hand did not at any point in his opening or closing submissions specifically contend that Mr Takacs was inappropriately joined to the proceedings. In those circumstances, I do not understand the joinder issue in the defence to be pressed.
However, if I be incorrect regarding that, I reject the contention that Mr Takacs was inappropriately joined. The presumption is that a contract made by two or more persons is joint, express words being necessary to make it joint and several: Junker v Hepburn [2010] NSWSC 88 at [52] per Hammerschlag J (as his Honour then was); see also Pet Tech Pty Ltd v Batson [2013] NSWSC 1954 at [9] per Young AJ. While I need not determine whether there was a joint contract in this case, having regard to the fact that Mr Takacs was a party to the RPS Agreement, it was not inappropriate that he was joined as a plaintiff, since all necessary parties ought to be joined and bound by the action: see e.g. Churchill v Connolly [2004] NSWCA 212 at [31]-[33] per Young CJ in Eq (Beazley JA (as her Excellency then was) agreeing); Burnside v Harrison Marks Productions Ltd [1968] 1 WLR 782.
In any event, whilst I will await submissions in relation to costs, it is not immediately obvious how the joinder of Mr Takacs caused any significant increase or wastage of costs in the proceedings.
[6]
Issues
Regrettably, the parties were unable to agree on a list of real issues in dispute (as directed). Acoustica provided a marked up version of the list of issues provided by Tafemo. Subject to the following matters, the competing versions were not substantively different, the difference being one of form.
[7]
Substantive issues
The substantive issues are as follows.
1. Did the parties sign and exchange counterparts of the April 2001 Agreement on or about 5 April 2001, creating a binding written agreement between them on the terms of the document which is Exhibit P1 (written agreement issue)?
2. Did Mr Takacs and Mr Doneux have discussions in the Blue Mountains in or about November 2003 which created a binding oral agreement between Acoustica and Tafemo on the terms of paragraph 4(c)(i)-(iii) of the defence (oral agreement issue)?
3. In the event that there was no binding oral agreement in either case, did the parties nonetheless adopt a common assumption consistent with the matters set out in paragraph 4(c)(i)-(iii) of the defence so as to create a binding estoppel is between them (estoppel issue)?
4. Is Tafemo's claim for recovery of money statute barred by s 14 of the Limitation Act 1969 (NSW) (Limitation Act) (limitation issue)?
5. What is the quantum of Tafemo's loss (loss issue)?
[8]
Comment regarding the substantive issues
Acoustica listed as an issue: "whether or not Completion occurred on the Completion Date, as alleged in paragraph 6 of the Amended Statement of Claim". Mr Hand clarified that there was no real issue that the completion date under the Exhibit P1 document was 5 April 2001. Rather, the contention is simply that no agreement was reached on 5 April 2001. That contention can be dealt with under what I have described as the written agreement issue.
Acoustica also listed as an issue: "whether or not the defendant allotted and issued a Redeemable Non-Capital Preference Share (with the rights set out in Annexure A to the alleged written agreement) to the first plaintiff, as alleged in paragraphs 5 and 7(b) of the Amended Statement of Claim". As will be seen below, Mr Hand acknowledged that the plaintiffs sued on the April 2001 Agreement and their loss, if any, flowed from that agreement rather than from the document described as the "Income (Non-capital) Redeemable Preference Share Certificate", being Exhibit P2 (Share Certificate).
Whilst Mr Hand maintained the position that Acoustica did not allot and issue any RPS by reference to the Share Certificate, he acknowledged that it may not, or rather did not, affect Tafemo's damages claim, because Tafemo sues on the April 2001 Agreement and not on the "share": T 168.42-.48.
Since Acoustica listed this matter as an issue and throughout the hearing Mr Hand made a number of submissions disputing that any such Share Certificate was properly issued, I will address the issue in these reasons.
In the parties' respective proposed lists of issues, the estoppel issue was broken down into the following components: (a) whether the parties adopted an assumption as alleged in paragraph 5 of the defence; (b) whether each party knew or intended that the other would act on the basis of the assumption; and (c) whether the parties conducted their relationship on the basis of the assumption. Ultimately, it is not necessary for me to explore the last two components, as I have found that there was no assumption mutually adopted.
Whilst Acoustica disputes that it is liable to the plaintiffs for moneys owing, the calculations of loss and damage performed by Tafemo are not relevantly in dispute.
A number of the submissions focused upon the credibility and reliability of the evidence of the respective witnesses. Mr Price submitted that the evidence of Mr Takacs ought to be believed and Mr Hand submitted that the evidence of Mr Doneux ought to be believed.
As with most commercial disputes, a proper understanding of the chronology of events, in light of their context, is important: e.g. ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; (2021) 388 ALR 128 (ET-China.com) at [25], [28] per Bell P (as his Honour then was).
Given there was strong dispute regarding what occurred on 5 April 2001 and at the alleged meeting in the Blue Mountains in November 2003, each of the parties deployed various submissions on a number of factual issues connected with the 5 April 2001 meeting and subsequently, with a view to establishing that it was more probable than not that the events occurred as they each respectively contended.
Counsel accepted that evidence of the parties' post-contractual conduct is admissible on the question of whether or not a contract was formed: e.g. DOS [10], citing Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25] per Heydon JA (as his Honour then was).
Having regard to the way in which the claim was argued, it is appropriate for me to address the particular matters raised as bearing upon the substantive issues. I deal with those below and make factual findings in respect of them.
[9]
Preliminary issues
The following issues attracted particular comment on the hearing and I will address them accordingly as preliminary issues, namely:
1. who retained Dibbs Barker Gosling?
2. what, if any, inferences should be drawn from the absence of evidence from certain potential witnesses?
Prior to dealing with these preliminary issues, it is appropriate to address fact-finding and witness credibility in respect of the three witnesses cross-examined.
[10]
Evidence, witness credibility and fact-finding
On the hearing of the matter, Tafemo relied upon three affidavits of Mr Takacs sworn respectively on 30 June 2022, 21 November 2022 and 15 April 2024.
Acoustica relied upon affidavits from Mr Doneux affirmed on 28 October 2022 and 12 April 2024 and from Mr Ciric affirmed on 12 July 2023 and 12 April 2024.
During the hearing, Acoustica also relied upon an affidavit of its solicitor Jimmy Gill, a partner of ClarkeKann, affirmed on 1 May 2024.
Having regard to the fact that the relevant agreements alleged by each side took place over two decades ago, establishing a reliable account of what occurred was challenging but nonetheless critical in the proceedings.
When the Court is asked to find facts in relation to disputed events which occurred many years ago, contemporaneous documents generally furnish the most reliable source of evidence as to what occurred or, at the very least, provide a generally reliable reference point from which to assess the reliability of witness testimony: ET-China.com at [25]. That statement is particularly significant in this case since, as I will refer to below, an issue arose in relation to Mr Takacs giving evidence and his answers during cross-examination which raised a question as to his then competence as a witness.
In the context of commercial disputes, Bell P stated the following in ET-China.com at [26]-[29]:
26. In Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] (Fox v Percy), Gleeson CJ, Gummow and Kirby JJ, having referred to increasing judicial awareness of scientific research that cast doubt on the ability to distinguish between truth and falsity in witness testimony from the mere appearance of the witness in the witness box, said:
"Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical."
27. Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):
"the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth." (emphasis added)
28. Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.
29. Context is critical for at least two reasons. Documents and events take their meaning from their context. The context in which events occurred may not necessarily be apparent to a court many years later when hearing a case. A clear understanding of context, both commercial and cultural, is also important where, as in the present case, some or all of the events under consideration occurred overseas and in settings that may differ from those usually dealt with in domestic litigation.
In closing oral submissions, Mr Price also referred to the passage in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 cited by his Honour.
In support of the plaintiffs' version of events at the 5 April 2001 meeting, Mr Price advanced the proposition that in law, as in life, Occam's razor is often the best approach, quoting Edelman J in Brown v Tasmania (2017) 261 CLR 328; [2017] HCA 43 at [490].
Occam's razor is a problem-solving principle popularised by William of Occam (or "Ockham") in the 14th century to the effect that, for any given problem, the simplest solution is usually the best. Applied to science (and perhaps more generally), the principle says that if there are competing explanations, the one that makes the fewest assumptions is to be preferred. The principle was described as a razor from the notion that it cuts theories back to their simplest form: see Macquarie Dictionary, online ed.
As indicated by Bell P in ET-China.com, in resolving commercial disputes involving events which occurred many years ago, it is helpful to have regard to contemporaneous documents. There were some documents adduced which provided some context to the lead up to the meeting scheduled to occur on 5 April 2001. However, overall there was a paucity of documents adduced which bore directly upon the critical events at the meeting on 5 April 2001 and the alleged meeting on 9 November 2003.
Other than the written form of the April 2001 Agreement, the Share Certificate and some creditor's acknowledgements (which I will refer to below), no notes of the meeting or other documents evidencing the 5 April 2001 meeting were adduced. There were no documents bearing upon or referable to the meeting on 9 November 2003 said by Acoustica to give rise to the November 2003 Agreement.
[11]
Evidence in chief
Mr Takacs attended on the hearing and was confined to a wheelchair. When he was called to give evidence he had to be assisted into the witness box. That took some time and effort. In light of that, prior to the luncheon adjournment I raised for consideration by the legal representatives the possibility of Mr Takacs giving evidence whilst seated at the Bar table. Sensibly, the parties co-operated and upon resumption Mr Takacs continued to give evidence that way (seated at the Bar Table).
Mr Price adduced some evidence in chief from Mr Takacs to supplement some of the material that had been rejected from his affidavit evidence.
[12]
Cross-examination
Mr Hand cross-examined Mr Takacs. I should say immediately that he did so in a fair and appropriate manner, having regard to Mr Takacs' age. My impression is that Mr Takacs attended to Mr Hand's questions relatively well for a period of time, namely about 10 to 15 minutes. From that point, it became evident that Mr Takacs had difficulty recalling some material: T 28. The luncheon adjournment was taken and, on resumption, Mr Takacs was permitted to sit at the Bar table: T 30.
[13]
Dysphasia episode
Mr Takacs' difficulty with his recollection persisted. He readily volunteered that he had had a couple of strokes and heart attacks and stated "unfortunately, my brain just doesn't want to work very well, to be honest": T 31.3-.5.
His cross-examination continued for a short period. Ultimately, Mr Hand suggested that Mr Takacs might take a short break. The exchange was as follows (T 36.4-.18):
Q. Then after that, there was a second meeting at the solicitor's offices. Do you recall that?
A. No, sorry. No, I can't. If there was, I don't remember it - what I suppose with my memory, that doesn't mean very much.
Q. In preparing your evidence in reply to Mr Doneux, you read his affidavit, didn't you?
A. Yeah, yeah. But, look, I don't want to be difficult. But with - so I have a bit of a difficulty in talking. I came up with a sort of a sign to my condition is that I say that words go into my brain, but sometimes words just don't want to come out. So my understanding of the so many things, you know, like you're saying this and I'm trying to correlate and relate things together. But sometimes I just can't do it.
HAND: Your Honour, perhaps Mr Takacs might take a short break.
For his part, Mr Hand made the observation that Mr Takacs was rather distressed.
At that stage, my impression was that Mr Takacs was able to hear questions but had a form of dysphasia: T 39.
[14]
Competence issue
This episode led to some discussion as to whether Mr Takacs was competent within the meaning of s 13 of the Evidence Act 1995 (NSW) (Evidence Act).
I raised the possibility of the matter being adjourned to give Mr Takacs an opportunity to be examined by an appropriate medical professional so that everyone, and in particular the Court, would be better informed as to his competence to give evidence within the meaning of s 13: T 39.
The hearing was adjourned for the balance of the day.
On the resumption of the hearing on the second day, Mr Price informed me that Mr Takacs had attended Sydney Hospital and was examined. Two certificates were ultimately tendered. The first certificate was a report of Dr Mark Roebuck dated 19 April 2024, which became Exhibit P3. It stated in part as follows:
This patient has many chronic medical problems which can impact on his ability to communicate in a stressful situation. Previous strokes have left him with a speech impediment which is exacerbated by stress and tiredness. He is wheelchair bound as a result of these issues too plus severed [sic] arthritis. He has very little endurance these days.
The second certificate was a medical letter from Dr Sophie Whiteson-Glass, a medical officer at Sydney Hospital and Sydney Eye Hospital, who had reviewed Mr Takacs the prior evening. That certificate became Exhibit P4. Dr Whiteson-Glass stated as follows:
I reviewed Mr Takacs today in Sydney Hospital Emergency Department, on the request of the court after an episode in court of abnormal symptoms.
Mr Takacs was affected by dizziness, speech impairment, right arm and leg weakness, while undergoing questioning as a witness in a case.
The described symptoms are in keeping with his prior episodes of stress-induced "phantom strokes" (as described by Mr Takacs), and on my review were almost completely resolved, other than a subjective description of reduced speech (not overtly noticable [sic] on my review but noted by the patient).
I have reviewed his GP letter, which seems to corroborate his evaluation of the event, although given the time of day I was unable to talk with his GP or specialists to confirm other prior investigations and events.
Provided Mr Takacs is completely asymptomatic from this event tomorrow, he should be suitable to resume as a witness. If there are any residual symptoms he will require further medical examination.
In addition, given that the symptoms are triggered by stressful events, I cannot guarantee that the symptoms will not return when he does resume as a witness, given the stressful nature of the situation.
Mr Price indicated that Mr Takacs wished to resume giving oral evidence. Mr Hand opposed the resumption of Mr Takacs giving evidence on the basis that Mr Takacs was not competent. In particular, Mr Hand sought an adjournment to enable an assessment to be made as to Mr Takacs' competence by one of three proposed experts.
There was some discussion regarding that application, and I briefly adjourned to consider the matter.
After a period I was called back to court and informed by Mr Price that he had instructions to accept that Mr Takacs was not competent to continue being cross-examined: T 46.
In Clayton v Clayton [2023] NSWSC 399, I addressed competency to give evidence at [156]-[164] as follows:
156. A person is presumed to be competent to give evidence unless the contrary is shown: s 12 Evidence Act; R v Brooks (1998) 44 NSWLR 121.
157. A person is not competent to give evidence about a fact if, for any reason (including a mental, intellectual or physical disability), the person does not have the capacity:
1. to understand a question about the fact; or
2. to give an answer that can be understood to a question about the fact; and
3. that incapacity cannot be overcome: s 13 Evidence Act.
158. A lack of response per se or a nonresponsive answer to a question does not necessarily demonstrate a lack of understanding of the question nor inability to give up a comprehensible answer: The Recyclers (NSW) Pty Ltd v Ayoub [2016] NSWSC 144 (Ayoub) at [17]-[20] per Stevenson J.
159. The law distinguishes between competency to give sworn evidence or unsworn evidence and the provisions of s 13 Evidence Act address that distinction.
160. No party bears the onus of proving competence or lack of competence: R v Medich (No 40) [2018] NSWSC 374 (Medich) at [33] per Bellew J.
161. The issue is one for determination by the Court on the balance of probabilities: Medich at [33] and Ayoub at [24] both citing RA v R [2007] NSWCCA 251; (2007) 175 A Crim R 221 at [11] per Harrison J (McClellan CJ at CL and Howie J agreeing).
162. The fact that a witness suffers from a challenging mental condition may in any given circumstances be relevant or highly relevant to assessing competency. However, the mere fact that a witness has a mental health condition for example bipolar affective disorder or major depressive disorder does not necessarily preclude a finding of competency: Ayoub at [33]-[35].
163. Further, the fact that a person with any of those diagnoses might find answering questions in Court to be stressful or challenging does not per se preclude a finding of competency: Ayoub at [55].
164. Competency to give evidence may need to be monitored during the hearing and at times dealt with on a question-by-question basis: Ayoub at [55].
In determining the question of competency, the Court may inform itself as it thinks fit, including by obtaining information from a person who has relevant specialised knowledge based on the person's training, study or experience: s 13(8) Evidence Act. Whilst a concession by counsel on behalf of a party that that party is not competent to continue to give evidence is a relevant consideration, I do not regard it as being necessarily determinative of the question of competence.
I consider that Mr Takacs' presentation which led to the initial adjournment clearly demonstrated some abnormality in his giving of evidence. At the risk of being overly simplistic, his difficulty appeared to arise in the context of a stress inducement. I hasten to add that whilst it appeared that Mr Takacs was "rather distressed" (to use Mr Hand's expression at T 36.28) in giving evidence, there was nothing about Mr Hand's mode or expression of asking questions which I regarded as being in any way inappropriate. Indeed, it was Mr Hand himself who suggested that Mr Takacs be given a break.
Applying the provisions of s 13(1) of the Evidence Act, I considered that Mr Takacs' capacity to understand a question was not so much of an issue. Rather, his capacity to give an answer, which requires some thought about the question followed by the formulation of words and the expression of those words, appeared to be the difficulty, compromised by giving evidence in a courtroom environment. I determined that the process of Mr Takacs actually being asked questions had become sufficiently stress inducing to raise a sufficient doubt as to his capacity to give an answer that could be understood to such questions: T 47. Because the process of Mr Takacs being asked questions was part of the stress inducement, his incapacity to give an understandable answer could not be overcome by allowing Mr Takacs to take a break or a number of breaks. Accordingly, I accepted that Mr Takacs had become incompetent to give further evidence within the meaning of s 13(1) of the Evidence Act.
[15]
Assessment of Mr Takacs' evidence
Mr Hand submitted that there were "very significant and irreconcilable inconsistencies" in Mr Takacs' evidence in respect of the meeting that occurred at the offices of Dibbs Barker Gosling on 5 April 2001: DCS [17]. I will address this meeting below.
However, as will be seen, I do not accept Mr Hand's submission that Mr Takacs' evidence in respect of the meeting was inconsistent.
I consider that Mr Takacs' supplementary oral evidence in chief (T 19-24) and his initial cross-examination (T 24-27) was not obviously affected by stress and I am prepared to accept that evidence. I am not asserting that in any dogmatic or medically informed way.
It was only from about T 27 that Mr Takacs began to display at least some difficulties with recollection on his own admission.
Nonetheless, apart from the stress induced difficulty which led to my acceptance that Mr Takacs was no longer competent to give evidence, I am mindful of the caution, to which I have referred above, that ought to be had when relying on evidence as to the recollection of events which occurred several decades ago.
Mr Hand did not appear to assert that Mr Takacs had given any deliberately false evidence. Indeed, according to Mr Doneux, Mr Takacs is a trustworthy man. During Mr Doneux's cross-examination regarding certain payments made to Tafemo and the amounts which were said to still be owing, he highlighted his trust of Mr Takacs in the following evidence (T 82.3-.23, my emphasis):
Q. Why is it that you felt the need that you had to ask Mr Takacs as to how much was owing under the agreement?
A. Because Mr Takacs was running himself all the payments. He was dealing directly with our account department. So he was running the top. So I didn't know how much we paid, or - it was up to him. When he asked for some money towards the 200,000, I always trust Mr Takacs, and we never had any problem.
Q. Surely you had kept a record of what you were paying him?
A. Yeah, my accountant did, but I - I didn't look at that, because I - I trust Mr Takacs. We always work together all right. They never had any problem.
Q. So because you received an answer of $34,000 from Mr Takacs, you paid that amount to him without checking, is that right?
A. That is correct because I believed him all along, over 20 years.
Q. So if Mr Takacs had included an interest component, then you would have paid it, correct?
A. I would have trusted him to say how much money he still owed to [sic], and I ask him point-blank, "Okay Bel, calculate how much I still owe you, and I'll pay" as I always did.
Nonetheless, Mr Hand submitted that there were inconsistencies in Mr Takacs' evidence about matters other than the 5 April 2001 meeting which should lead me to not accept his evidence. In this regard, Mr Hand submitted that he would have explored a number of matters in cross-examination if Mr Takacs had been competent, including: (a) Tafemo's financial position as at 2000; (b) the terms of Mr Takacs' employment; (c) the creditors' acknowledgements; (d) the date on which Acoustica took over the business of Tafemo; (e) whether Acoustica took over the business name registration of Polytak; and (f) Mr Takacs' failure to make a complaint about non-payment of the Tafemo Dividend.
Because Mr Hand did not have the opportunity to develop any cross-examination of Mr Takacs beyond that which I have indicated above, it is not possible for me to know how Mr Takacs would have responded to those matters.
However, based on the evidence that has been received, I am not persuaded that there are matters that might inflict any mortally wounding damage to the reliability of Mr Takacs' evidence. I note the following.
First, it is not evident to me that a submission that Tafemo's financial position was "in disarray" in 2000 necessarily means that Mr Takacs' assertion that he attended the 5 April 2000 meeting is incorrect or that his evidence is unreliable: cf DCS [22(a)]. On one view, if Tafemo's financial position was parlous, there would have been incentive for Mr Takacs to finalise an agreement rather than to have Tafemo struggle on in such an alleged parlous state without a finalised agreement.
Secondly, Mr Hand submitted there was inconsistency regarding the amount of Mr Takacs' remuneration package. After referring to the gross salary of $60,000 (including tax and compulsory superannuation) stated item 1 of Sch 2 of the Employment Agreement (CB 124), Mr Hand submitted that the PAYG payment summary for the year ended 30 June 2002 (Exhibit P10 page 61) demonstrates that Mr Takacs' salary arrangements were otherwise: DCS [22(b)(i)-(ii)]. I am not convinced that the PAYG payment summary for the year ended 30 June 2002, which shows a gross salary of $60,453 with tax withheld of $17,662, demonstrates otherwise. The payment summary does not reflect the tax year in which the April 2001 Agreement was purportedly entered (i.e. the year ended 30 June 2001). If anything, the fact that the gross salary listed on the payment summary for the following financial year is $60,453 seems to me to be broadly (if not precisely) consistent with what was contemplated under the Employment Agreement.
In addition, Mr Hand submitted that there was no obligation on the part of Acoustica to increase Mr Takacs' salary, yet an increase did occur: DCS [22(b)(iii)]. The Employment Agreement contained a clause by which Mr Takacs acknowledged that Acoustica "is under no obligation to increase" his remuneration: CB 105 [cl 4.2]. However, the fact that (according to Acoustica) Mr Takacs' salary was increased per se does not demonstrate that his evidence is inconsistent. The Employment Agreement did not preclude Acoustica from paying Mr Takacs more money.
Thirdly, as to the submissions regarding the creditors' acknowledgements (DCS [22(c)]), I will address these specifically below as one of the matters said to bear upon the issues.
Fourthly, Mr Hand submitted that there were inconsistencies in Mr Takacs' evidence about the date on which Acoustica took over "the business" of Tafemo, indicating that it was variously stated to be April 2001 and October 2000: DCS [22(d)]. However, I do not regard that evidence as being of great moment. Clearly, the April 2001 date relates to the date of the RPS Agreement. The October 2000 date is possibly explicable by reference to the effective date on which Mr Takacs was to be employed under the Employment Agreement (6 October 2000): CB 104.
Fifthly, as to the submissions regarding the taking over and cancellation of the Polytak business name (DCS [22(e)]), I will address these specifically below as one of the matters said to bear upon the issues.
Sixthly, Mr Takacs' affidavit evidence of discussions with Mr Doneux about the payment of money owing under the April 2001 Agreement in October or November 2003 revealed that, according to Mr Takacs, Mr Doneux was the person who lacked money. Mr Takacs deposed that Mr Doneux had promised to pay him as much as he could, and Mr Takacs was seemingly resigned to the fact that "[t]hat is better than nothing": CB 23[14]. That evidence (which I accept) is rational and it suffices to nullify Mr Hand's submission that it makes "no sense, as a matter of human experience, that [Mr Takacs] would sit on his hands and not demand a payment of money to which he considered he was entitled for such a period of time": DCS [24].
Overall, Mr Hand submitted that the Court should treat Mr Takacs' evidence with great caution, such that the Court ought to attach no weight to Mr Takacs' evidence unless it is corroborated by incontrovertible contemporaneous objective evidence: DCS [21]. I reject that submission.
[16]
Mr Doneux
Mr Doneux gave evidence via audio-visual link as he was located in Belgium. My assessment of his oral evidence is that there was no obvious indication from his presentation or answers which tended to suggest that he was being dishonest.
Even prior to Mr Doneux being called, Mr Price made a pre-emptive submission in his POS regarding Mr Doneux's evidence. He submitted that, contrary to Mr Doneux's affidavit evidence that Acoustica did not receive certain documents from Tafemo on or about 5 April 2001, there were certain documents (some of which were annexed to the POS) which had been provided to Acoustica. Those documents included a consent for Mr Takacs to be appointed as a director and three creditor's acknowledgements. An extract recording Mr Takacs' wages and a group certificate issued by Acoustica to Mr Takacs were also annexed to the POS. Mr Price submitted that it is inherently improbable that Acoustica would have employed Mr Takacs without entering into an agreement and, in the circumstances, the conclusion to be drawn is that Mr Doneux's evidence is false: POS [8]-[12].
In closing submissions, Mr Price further submitted that Mr Doneux was not an honest witness: PCS [19]. In particular, he submitted as follows (at PCS [20]-[24]):
20. Mr Doneux would not make a concession in cross-examination unless he was faced with a document. In that regard, it was apparent he has placed great significance on the fact that a copy of the Agreement executed by Tafemo and Mr Takacs is not produced in these proceedings. See [T75.30-36]. Mr Doneux gave an equivalent answer in relation to the Employment Agreement [T72.10].
21. Mr Doneux acknowledged that he did not know what the word "counterparts" meant: [T75.38-39]; [T96.5-10]. His explanation of paragraph 51(a) of his affidavit affirmed 28.10.22 [CB 47] in response [T96.38] to the Court's question at [T96.37] demonstrates that his evidence does not address the correct issue. Alternately, his affidavit was drafted by someone else he did not question what he signed.
22. The evidence given by Mr Doneux in re-examination concerning the documents at [Ex P10, pp 58, 59, 60] needs to be treated carefully. He initially deposed that he had not received an executed creditor's acknowledgment at the meeting on 5 April 2001: P Doneux, 12.04.24, par 5(d) [CB 56].
23. In cross-examination at [73.44] he stated that he didn't recall the documents and at [T73.49], Mr Doneux said that "they could have been part of the bundle when had to sign all the paper work. That's something I'm not 100% sure. But I cannot remember all the pages when I sign the document with Steven" [T74.45-47]. His evidence to suggest that the first time he saw the documents was when they were shown to him by his lawyer, should not be accepted.
24. Mr Doneux was then emphatic that he had been shown the documents by his lawyer "a few weeks ago": [T74.23], [T74.39], [T74.44]. In re-examination, after speaking to counsel for the defendant, he asserted that the first time he had seen the documents was on 26 April 2024. The affidavit affirmed by Mr Gill on 1 May 2024, demonstrated that Mr Doneux's evidence at [T74] was wrong. As a consequence, it is apparent that Mr Doneux's recollections are not reliable.
For his part, Mr Hand submitted that although Mr Doneux's credibility was robustly challenged in cross-examination, he submitted that Mr Doneux was unshaken in his evidence and presented as a reliable witness who was doing his best to recollect the events of more than a quarter of a century ago: DCS [33].
For reasons that I articulate more particularly below, I reject Mr Doneux's evidence on the critical matters of whether there was an exchange of counterparts at the 5 April 2001 meeting and in respect of the alleged November 2003 Agreement.
[17]
Mr Ciric
Mr Ciric was cross-examined. He had given affidavit evidence that he habitually carried a notebook with him as part of his work at Acoustica and stated that his usual practice was to make notes in the notebook during the meetings that he attended: CB 50[6].
Mr Price called for Mr Ciric's notebook and two notebooks were produced. One was a green folder in which a booklet was held by a clamp, and the other was a smaller book with a blue leather cover: T 108.
Mr Ciric was asked a number of questions about those records: T 108. He accepted that the green folder was his original notebook and that he had (at least in part) copied verbatim notes from the green folder into the blue leather covered book. He further accepted that there were other notes in the blue book which he had handwritten which did not appear in the green folder. After a period of time, he had also ceased a practice of handwriting out the notes from the green folder into the blue book and decided to photocopy the notes from the green folder and stick those pages into the blue book. In that respect, Mr Ciric's intent was that the blue book would become his primary source of notes and records. He ceased using the green folder towards the end of 2019. During 2020, he stopped regularly recording notes in the blue book and from that point onwards he has sporadically recorded notes: T 109.
Whilst Mr Ciric accepted the proposition that he endeavoured to ensure the notes which he made gave an accurate reflection of meetings he attended (T 109.9-.13), it was evident that Mr Ciric gave some evidence which was not reflected in his notes. I address this more particularly below in relation to the 29 May 2019 meeting.
I consider that Mr Ciric attempted to give evidence honestly and to the best of his recollection. However, there are some aspects of Mr Ciric's affidavit and oral evidence which were not borne out by contemporaneous documents. This affected my assessment of his evidence, as I note below.
[18]
Conflicts between the evidence of Mr Takacs and Mr Doneux and fact-finding
For reasons which I outline below, I reject the evidence of Mr Doneux on a number of critical issues.
I am mindful of the particular limitations to assessing Mr Takacs' evidence that arose consequent upon him becoming incompetent during his cross-examination. Nonetheless, I am satisfied that his initial evidence, in particular in relation to his attendance at the 5 April 2001 meeting, was truthful and, having regard to the matters I outline below, accords with the inherent probabilities of the matter.
[19]
Exchange of counterparts
Whilst there is dispute as to what occurred on 5 April 2001, the parties litigated the matter on the basis that the case advanced by Tafemo involved a binding agreement by means of an exchange of counterparts.
Mr Hand submitted that the parties' proposed arrangement fell into the third category of Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72, being one in which the intention of the parties was not to make a concluded bargain at all, unless and until they execute a formal contract: DOS [6].
The April 2001 Agreement made provision for the contract to be executed by means of counterparts, but did not mandate exchange of counterparts: CB 74 [cl 17.7].
Sometimes in corporate deals or conveyancing transactions, the parties all sign a single document which forms the original agreement (of which copies may be made for each party to take away). In other cases, the agreement may be signed in counterparts such that each party signs a version of the final agreement which is then exchanged with the other party, resulting in each party holding a version of the final agreement signed by the other party.
When there is a form of physical exchange of agreements signed by each party, customarily the intention of the parties is that they do not contemplate the coming into existence of a binding contract before the exchange takes place. The exchange is said to be "the crucial and vital fact which brings the contract into existence": Sindel v Georgiou (1984) 154 CLR 661 at 666; [1984] HCA 58 (Sindel), citing Eccles v Bryant and Pollock [1948] 1 Ch 93 at 99 per Lord Greene MR. The ceremony of exchange constitutes a mutual acknowledgement that the bargain has been struck: Sindel at 666.
[20]
The April 2001 Agreement
The document constituting the April 2001 Agreement is approximately 50 pages in length. Leaving aside the cover sheet, the body of the agreement is 10 pages in length. There are 10 annexures as follows: A - Terms of Redeemable Non-Capital Preference Share; A1 - Dictionary; B - Tafemo Warrantees; B1 - Acoustica Warranties; C - List of Plant and Equipment Items; D - Accounts; E - (Tafemo) Employee Details; F - Product List; G - Creditor's Acknowledgement form; and H - Employment Agreement (as between Acoustica and Mr Takacs).
The original of the April 2001 Agreement was tendered on the hearing through Mr Takacs and became Exhibit P1. A copy of the April 2001 Agreement appears at CB 65-112.
The RPS Agreement (both in Exhibit P1 at page 10 and the copy at CB 75) is signed by Mr Doneux and his signature is witnessed by Steven Maarbani (Mr Maarbani). Mr Maarbani was a solicitor at the firm Dibbs Barker Gosling.
The Employment Agreement (specifically, the document forming Annexure H to the RPS Agreement) has not been separately signed by or on behalf of Acoustica: Exhibit P1 at page 35; CB 110. The evidence leaves unexplained why that is the case. Nonetheless, it may be that, because the Employment Agreement is an annexure to the RPS Agreement, those present at the signing considered it sufficient for the RPS Agreement to be signed on behalf of Acoustica.
The footers of the April 2001 Agreement and Share Certificate indicate that Mr Maarbani was either the initial author of those documents or at least had some involvement in their preparation.
The recitals to the April 2001 Agreement are as follows:
A. Tafemo is the owner of the Business;
B. Tafemo and Acoustica propose to merge their businesses into Acoustica;
C. Acoustica has agreed to acquire from Tafemo its Plant and Equipment;
D. Acoustica may not be able to pay for the Plant and Equipment on completion and until it does so the terms relating to a Redeemable Non Capital Preference Share in Acoustica apply.
Relevantly, the "purchase price" provides for two scenarios, requiring Acoustica to either pay a sum of $200,000 for what is described as "the Plant and Equipment" (set out in Annexure C) or allot and issue to Tafemo the RPS: CB 66 [cl 2].
The Agreement provided for completion to take place at the offices of Dibbs Barker Gosling: CB 66 [cl 3.1].
On completion:
1. Acoustica was obliged to either pay the $200,000 for the plant and equipment or allot and issue to Tafemo the RPS, and appoint Mr Takacs as a director of Acoustica: CB 66-67 [cl 3.2(a)];
2. Tafemo was obliged to deliver certain documents to Acoustica: CB 67 [cl 3.2(b)]; and
3. Mr Takacs was obliged to enter into the Employment Agreement: CB 67 [cl 3.2(c)].
Clause 17 of the April 2001 Agreement contains several general provisions which bear upon the matter, namely that:
1. the parties may only amend the Agreement if all parties sign the written amendment: CB 73 [cl 17.2];
2. the parties may execute the Agreement in one or more counterparts and all counterparts together constitute one instrument: CB 74 [cl 17.7]; and
3. the Agreement constitutes the entire agreement of the parties and supersedes all prior discussions, undertakings and agreements: CB 74 [cl 17.11].
Although the April 2001 Agreement provides that Acoustica will either pay the sum of $200,000 for the plant and equipment or issue and allot the RPS, the events leading up and subsequent to the agreement are entirely suggestive that none of the parties were expecting that the sum of $200,000 was going to be paid upfront.
[21]
November 2003 Agreement
Through Mr Doneux, Acoustica claims that the material agreement between the parties was reached at a meeting said to have taken place at Mr Takacs' house in the Blue Mountains on or about 9 November 2003: CB 43[33].
Mr Doneux asserted that he called the meeting and took some pastries or croissants to share with Mr Takacs. He indicated that it was common for him to meet Mr Takacs at his house to have meetings or discuss various things: CB 43[33].
Mr Doneux stated that when he arrived, Mr Takacs and he went to sit in the sunroom at the rear of the house, which they often did: CB 43[34]. He said that they had a conversation with words to the following effect (CB 43-44[34]):
Mr Takacs said: Philippe, I'm not going to sign the agreement that the lawyers prepared.
I said: What type of agreement would you like then?
Mr Takacs said: This will create big problems with my taxes. How about you continue to pay me my salary and a further $1,000 a month, on top of my salary, until we reach $200,000. If I need a higher monthly instalment to reach $200,000, I will let you know.
I said: The limit to the additional funds will have to be $10,000 a month as that is what I can afford. Under your proposal, it will take a long time to pay off the $200,000. So, I won't be paying any Interest on it. Also, this is then a new agreement between us, it has nothing to do with our previous one that is nowt [sic] irrelevant. So, no need to sign and return the agreement that I had signed and posted to you.
Mr Takacs said: Yes, agreed.
I said: Okay.
Mr Doneux said that when (as he asserts) Mr Takacs told him the above, he was surprised because in their initial discussions and meetings with the lawyers Mr Takacs never brought up taxes: CB 44[35].
Mr Takacs denied that any such meeting or conversation ever occurred: CB 31[3(h)].
[22]
Terms of the RPS
The terms of the Share Certificate as set out in Annexure A of the April 2001 Agreement correspond with the terms on the back of the signed Share Certificate (Exhibit P2), with the exception that there is a difference in the numbering of the clauses. On the back of Exhibit P2 Share Certificate, the definitions contain no clause number, nor does a sentence stating "During the Redemption Period Tafemo will be entitled to the Tafemo dividend". Thereafter, the clauses are numbered 1 through 19. Meanwhile, in Annexure A the terms of the Share Certificate contain 21 clauses, with the definitions being marked under cl 1 and the sentence which I have outlined above regarding payment of the Tafemo Dividend during the Redemption Period being marked as cl 2.
The terms of the Share Certificate (using the version in Annexure A to the April 2001 Agreement as distinct from the Exhibit P2 version) essentially give rise to the following structure:
1. the Redemption Amount is the sum of $200,000: cl 1;
2. the Redemption Amount is to be paid on the third anniversary of the Issue Date: cl 12;
3. the Issue Date is the date on which Acoustica resolves to issue the RPS: cl 1;
4. the Redemption Date is the date on which the Redemption Amount is paid to Tafemo by Acoustica: cl 1;
5. the period between the Issue Date and the Redemption Date is described as the Redemption Period: cl 1;
6. during the Redemption Period, Tafemo is entitled to the Tafemo Dividend: cl 2;
7. the Tafemo Dividend is defined to mean 50% of the net profit of Acoustica: cl 1;
8. the terms make provision for how the net profit of Acoustica is to be determined and verified, including giving Tafemo a right to verify it by means of appointment of an accountant: cll 3-8;
9. the Tafemo Dividend is payable no later than 30 October each year: cl 9;
10. until the Redemption Amount is paid, on each anniversary of the Issue Date the Redemption Amount will be increased in accordance with a specified formula: cl 11;
11. where Acoustica fails to pay the Tafemo Dividend, interest is payable on the dividend amount accruing at the rate of 7.5% per annum, calculated on a daily basis, until payment of the dividend is made: cl 10;
12. if Acoustica has not paid the Redemption Amount prior to the Redemption Date, Acoustica may give notice to Tafemo that it extends the time for payment of the Redemption Amount for a further period of two years: cl 14;
13. any such notice by Acoustica must be given within a certain period before the Redemption Date (cl 15) and, where such notice is given, the Redemption Period will be extended for a further two-year period: cl 16;
14. in the event that the Redemption Period has been extended by an additional two years and the Redemption Amount plus interest has not been paid at the expiration of those two years, the Redemption Amount will accrue interest at the rate of 8.5% per annum, calculated on a daily basis, until paid: cl 17; and
15. where the Redemption Amount together with any accrued interest is not paid at the expiration of the further two-year period, the Redemption Amount and any accrued interest become a debt immediately due and payable to Tafemo: cl 18.
The formula for the increase of the Redemption Amount is as follows (cl 11):
R = (r x N) / n where in this clause:
R = Increased Redemption Amount
r = Redemption Amount not paid during the Year just ended;
n = Index Number last published before the date of the anniversary of the Issue Date of the Year just ended.
N = Index Number last published before the expiration of the Year just ended or n, whichever is the greater.
"Index Number" is defined by reference to the Consumer Price Index, or alternatively the Average Weekly Earnings or some other cost of living index.
[23]
Evidence not in dispute
Mr Price submitted and, subject to the exceptions that I will note, Mr Hand accepted, that the following facts were not in dispute (PCS [3(a)-(l)]; T 148.39-149.1):
1. Mr Takacs has been a director of Tafemo since its formation in 1985, and Mr Crow was a director of Tafemo from 1994 until 2012 (CB 294);
2. Mr Doneux has been a director of Acoustica since 1986, and Mr Ciric has been director of Acoustica since November 2019 (CB 283);
3. Mr Stevens, a partner of the firm known as Barker Gosling in 2000 and Dibbs Barker Gosling subsequently, gave advice to Acoustica on 27 June 2000 as to a way in which the Acoustica and Tafemo businesses could be merged (Exhibit P10 at pages 15-16);
4. Mr Stevens prepared a draft of the April 2001 Agreement after giving the advice on 27 June 2000 (T 65.9);
5. the parties requested amendments to the draft agreement (Exhibit P10 at pages 22-51);
6. by 8 February 2001, the form of the agreement had practically been settled (T 67.20; Exhibit P10 at page 52);
7. a meeting was arranged for 11 am on Wednesday, 28 March 2001 for the execution of the RPS Agreement and the Employment Agreement between Acoustica and Mr Takacs (Exhibit P10 at pages 53-54; T 68.14-.18);
8. the meeting on 28 March 2001 did not take place, and was rescheduled for 5 April 2001 (CB 40[22]; Exhibit P10 at page 55);
9. Mr Doneux executed the RPS Agreement (CB 40[23]), the Employment Agreement (T 72.1-.3) and the Share Certificate on 5 April 2001 (T 72.13-.15);
10. Acoustica did not pay $200,000 to Tafemo on 5 April 2001;
11. Acoustica employed Mr Takacs from at least 5 April 2001 (T 77.6-.7; Exhibit P10 at page 61); and
12. Acoustica paid $200,000 to Tafemo in the amounts and on the dates set out by Mr Takacs in his affidavit at CB 23-28[15]-[17].
Mr Hand did not accept that items (3) and (11) were not in dispute: T 148.44.
In relation to item (3), Mr Hand did not particularly identify what might be disputed about Mr Stevens giving advice to Acoustica on 27 June 2000. Mr Doneux was cross-examined regarding this document. He appeared to accept that advice had been given and did not dispute that the document had been sent: T 63.46-64.19.
In relation to item (11), Mr Doneux accepted in cross-examination that Mr Takacs was an employee from at least 5 April 2001: T 77.6-.8.
[24]
Who retained Dibbs Barker Gosling?
The affidavit evidence in the proceedings left somewhat unclear the question of precisely what role Dibbs Barker Gosling played in the arrangements between the parties. The retainer question arose by reason of the failure to call either Mr Stevens or Mr Maarbani as a witness, and thus against whom any inference should be drawn from the failure to call them.
Mr Takacs' evidence in chief gave no detail regarding the lead up to the 5 April 2001 meeting. Rather, his evidence effectively opened with the (purported) entry into the April 2001 Agreement at the time of that meeting: CB 22[2].
In his first affidavit, Mr Doneux asserted that, following some initial discussions he had with Mr Takacs in or around 2000, Mr Takacs and he then instructed lawyers at Dibbs Barker Gosling to prepare a document recording "the agreement": CB 39[13]-[16]. His evidence in this regard was as follows:
16. Mr Takacs and I then instructed Dibbs Barker Gosling Lawyers (the lawyers) to prepare a document recording the agreement. I do not recall how the lawyers were selected or who first contacted them, however Acoustica paid all their legal costs. The lawyers were responsible for preparing the terms of the agreement, including the redeemable preference share arrangement.
In a reply affidavit, Mr Takacs did not directly dispute the assertion that he and Mr Doneux had instructed Dibbs Barker Gosling: CB 34. However, he did dispute the location of what was described by Mr Doneux as the first meeting with the lawyers at their office in Sydney (CB 39[17]), asserting instead that the first meeting with a lawyer was at Mr Doneux's office at Marrickville: CB 34[3].
Whilst there are parts of Mr Doneux's first affidavit which refer to "the lawyers" (CB 40), there is no particular part of his affidavit evidence which expressly suggests that Dibbs Barker Gosling was acting only for Acoustica. Likewise, there is nothing in Mr Takacs' evidence which expressly indicates that Dibbs Barker Gosling was acting in the interests of Tafemo in respect of the agreement, in addition to acting for Acoustica.
I asked Mr Doneux who instructed Mr Stevens to work on the agreement and he gave the following evidence (T 65.40-66.2):
Q. Mr Doneux, do you recall giving instructions to Mr Stevens at this time?
A. We discussed the agreement, we changed--
Q. No, don't tell me what you discussed with him, but do you recall giving Mr Stevens instructions for the purposes of your negotiations with Tafemo?
A. Instructions about what?
Q. About anything to do with the negotiations?
A. Philip Stevens was working on the agreement, so when he asked me a question, I would have given him a reply. If you take that as a strict instruction‑‑
Q. Well, who instructed Mr Stevens to work on the agreement?
A. Both of us. So it's Tafemo and Acoustica, Bill, John Crow and myself.
Mr Price challenged Mr Doneux on this and he held to this evidence as follows (T 66.7-.11):
Q. I suggest to you, Mr Doneux, that Barker Gosling were retained only by Acoustica. Do you agree with that?
A. No, he was the link between the two parties. I was paying for Barker Gosling, but he was waiting on the agreement to come to an agreement between the two parties.
In his submissions, Mr Price referred to a fax from Mr Stevens to Mr Crow dated 23 March 2001, in which Mr Stevens asked Mr Crow to "advise us of the exact amount of our client's indebtedness to Tafemo Pty Ltd as of the date of this letter…": Exhibit P10 at page 54. Mr Price said that this suggests Dibbs Barker Gosling was acting for Acoustica only: T 181.40-.45.
Whilst I accept that Acoustica instructed Dibbs Barker Gosling and paid its fees, I do not consider that the evidence clearly establishes that Tafemo did not also instruct the firm.
The state of the affidavit evidence, particularly having regard to the evidence of Mr Doneux that Mr Takacs and he instructed Dibbs Barker Gosling (CB 39[16]), coupled with the failure of Mr Takacs to reply to or deny that statement, suggests to me that Tafemo had an opportunity prior to the commencement of the hearing to explore and seek to lead evidence regarding whether there was a form of joint retainer with Dibbs Barker Gosling.
Ultimately, I am not satisfied that the position regarding the retainer of Dibbs Barker Gosling is so clear as to conclude that the onus was on Acoustica to explain the failure to call either Mr Stevens or Mr Maarbani to give evidence.
[25]
What, if any, inferences should be drawn from the absence of evidence from certain potential witnesses?
There are a number of persons referred to in the evidence who were connected in some way to events relating to the meeting on 5 April 2001. The absence of some of those witnesses was explained, while for others it was not.
[26]
John Crow
On the plaintiffs' side, Mr Crow appears to have been involved in the lead up to the 5 April 2001 meeting and was one of the persons present on the day. However, he died in 2019 and was accordingly unavailable to be called to give evidence: CB 31[3(b)].
[27]
Karenne Crow
A person named Karenne M Crow had witnessed Mr Crow's signature on three creditor's acknowledgements directed to Tafemo, which were respectively signed on behalf of Datalink Pty Ltd (Datalink), Award Consultants Pty Ltd (Award Consultants) and Jonkro Pty Ltd (Jonkro) and all dated 5 April 2001: Exhibit P10 at pages 58-60. Whilst I am prepared to accept that Ms Crow was in some way related to Mr Crow, no further details were provided about her. Her involvement in relation to the matters the subject of these proceedings appears to have been confined to witnessing the three creditor's acknowledgements. There is no suggestion that she was present at the 5 April 2001 meeting. No submission was made that any Jones v Dunkel inference should be drawn from the failure to call her as a witness, if it be the case that she is still alive and otherwise available.
[28]
Philip Stevens
Mr Stevens was clearly involved in correspondence between the parties in the period leading up to the 5 April 2001 meeting. The letterhead of Dibbs Barker Gosling as at June 2000 (then called Barker Gosling) reveals that "Philip Stevens" was a partner of the firm at that time: Exhibit P10 at page 15.
I raised a query as to whether Mr Stevens was the same person that had been a director and secretary of Acoustica. Mr Hand did not accept that that was the case: T 183. Neither party adduced evidence to clarify the position as to whether the solicitor was the same person as the director and secretary of Acoustica. Although Mr Price commented that it is not necessarily unusual to come across a person with the same name (T 173.25-.27), he suggested that it appeared it was the same person: T 173.
There is at least one matter which suggests that the solicitor was one and the same person as the previous director of Acoustica. The solicitor's reference on correspondence was "PAS": e.g. Exhibit P10 at page 15. Given the ordinary practice for solicitor matter references to be the relevant solicitor's initials, this indicates that Mr Stevens' middle name commenced with an "A". That is consistent with the director of Acoustica, who had the middle name "Allan": CB 283. Ultimately, the most likely conclusion is that the Mr Stevens who was a partner at Dibbs Barker Gosling was also the person who had been a director and secretary of Acoustica.
Mr Stevens was born in February 1949 and at the time of the hearing would have been aged 75.
If alive, it appears that Mr Stevens could have given material evidence regarding the negotiations between the parties in the lead up to the 5 April 2001 meeting and what occurred thereafter. Initially, there was no particular suggestion from Mr Price that any Jones v Dunkel inference ought to be drawn from Mr Stevens' absence. However, when I raised it during closing submissions, Mr Price did say that a Jones v Dunkel inference should be drawn: T 181. That, in turn, led to some debate regarding for whom Dibbs Barker Gosling was acting and thus who more naturally might have called Mr Stevens as a witness.
In light of my finding that I am not able to affirmatively conclude that Dibbs Barker Gosling was not also retained in some way by Tafemo, I do not propose to draw any Jones v Dunkel inference from the absence of Mr Stevens. In any event, as I note below, the position that I accept is that Mr Stevens was not in attendance at the 5 April 2001 meeting.
[29]
Steven Maarbani
It is undisputed that another solicitor at Dibbs Barker Gosling, Mr Maarbani, was present at the 5 April 2001 meeting and in fact witnessed the signature of Mr Doneux on the April 2001 Agreement: Exhibit P1. There was no explanation from either party regarding the failure to call Mr Maarbani. I simply have no evidence as to whether he is deceased or unavailable. At one stage during Mr Doneux's cross-examination, he denied the suggestion that Mr Takacs was present at the 5 April 2001 meeting along with himself, Mr Crow, Mr Stevens and Mr Maarbani, stating "No. We can ask Steven Maarbani": T 75.28.
Mr Price essentially left the matter on the basis that Dibbs Barker Gosling was acting for Acoustica. Thus, he submitted that the onus was on Acoustica to explain the absence of Mr Stevens and Mr Maarbani from giving evidence, and that a Jones v Dunkel inference should be drawn that neither of those gentlemen would have assisted Acoustica: T 182.7-.10.
As with Mr Stevens, in light of my finding on the issue of Dibbs Barker Gosling's retainer, I do not propose to draw any Jones v Dunkel inference from the absence of Mr Maarbani.
[30]
The lead up to the 5 April 2001 meeting
The evidence regarding the lead up to the 5 April 2001 meeting was not greatly disputed. The following details emerge from the documentary evidence.
By 22 November 2000, Mr Stevens had provided Mr Doneux with a copy of the amended agreement for his consideration, noting that he had requested certain documentation for the annexures from Mr Crow which were being collated: Exhibit P10 at page 22.
On 8 February 2001, Mr Crow sent a fax to Mr Takacs saying that he had had another call from Mr Maarbani, during which Mr Maarbani indicated that "everything is complete and the documents are having a last minute review": Exhibit P10 at page 52.
On 2 March 2001, Mr Takacs and Mr Doneux signed an agreement to have their respective company accountants attend to the adjustments required under the RPS Agreement to be undertaken as soon as possible but no later than Friday, 9 March 2001: CB 64. On the same day, Mr Takacs also signed a consent to act as a director of Acoustica: CB 63.
There was a suggestion in Mr Doneux's cross-examination that a meeting had been arranged for 23 March 2001: T 67. Mr Doneux indicated that Mr Stevens was seemingly unable to attend at that meeting (or, if the meeting had commenced, was unable to stay at the meeting) "because his father was very bad [I infer ill] in hospital": T 67.45-.46.
On 23 March 2001, Mr Stevens sent a fax to Mr Crow, to which Mr Doneux was copied, confirming an appointment to meet on 28 March 2001 at 11 am for the purposes of executing the RPS Agreement and the Employment Agreement: Exhibit 10 at pages 53-54. In that communication, Mr Stevens also requested that Mr Crow provide him with certain documentation and information ahead of the meeting.
On 3 April 2001, Mr Stevens sent a fax to Mr Crow, copied to Mr Doneux, in the following terms (Exhibit P10 at page 55):
We note that the execution of the documentation in this matter has been schedule [sic] for Thursday, 5 April 2001 at 11:00am.
Given the extent of the previous delay in the settlement of the documentation we would be loathed to delay the matter further.
In order to ensure this matter can be finalised on Thursday we required you to provide us with the information and documentation outlined in our facsimile dated 23 March 2001. A further copy of that facsimile is attached for your reference.
We would be grateful to receive the requested information and documentation today.
On 4 April 2001 at 6:12 pm, Mr Crow sent a fax to Mr Maarbani in the following terms (Exhibit P8):
I refer to your letter/fax of 3rd April 2001. In response to your questions I reply as follows:-
Creditors' Acknowledgements will be brought to the meeting with the exception of Bela Takacs.
Polytak Plastic Industries is the only product or business owned by Tafemo Pty Ltd
Adjustment schedule is enclosed (with comments)
Holiday Pay would only relate to the three (3) mths to March 31 2001. This will be provided later.
Superannuation of all employees up to March 31 2001 is the responsibility of Tafemo. In respect of Year 2000 part of entitlement for Neil Everson is still owing and all entitlement for Bela Takacs has still to be paid.
No entitlement for year 2001 and up to March 31 2001 has as yet been paid. This is the responsibility of Tafemo. The entitlement will be calculated at the rate of 8%.
Neil Everson and Bela Takacs have their contributions paid into Commonwealth Life and Barry Hillard pays into AMP. Account details yet to be obtained.
A copy of the company's Debtors a/c for Acoustica follows. The listing includes two (2) invoices for March 31 2001 not yet forwarded to Acoustica.
See you at 11am tomorrow
At some time (which I infer was proximate to the 5 April 2001 meeting) Mr Doneux indicated that "the lawyers called me and arranged for a meeting for Mr Takacs and me to sign the agreement": CB 40[21].
[31]
The 5 April 2001 meeting
Mr Doneux did not recall the exact date of the meeting in which he signed the April 2001 Agreement but, by reference to that document, he believed that the meeting did take place on 5 April 2001: CB 40[22].
Mr Takacs agreed that a meeting had been arranged and indicated that he received a telephone call shortly prior to 5 April 2001 inviting him to go into the city to sign the agreement: CB 34[6].
Mr Takacs indicated that on 5 April 2001 he attended at the offices of Dibbs Barker Gosling. His affidavit evidence was as follows (CB 22[3]):
I signed the Agreement as the director of Tafemo and in my personal capacity. I observed Mr Phillipe Doneux sign the Agreement for Acoustica. Mr Doneux was the director of Acoustica. [The counterparts were exchanged]. I retained the copy of the Agreement signed by Mr Doneux. The Agreement was signed at a meeting at the offices of Dibbs Barker Gosling.
The italicised words were admitted as evidence of which part of the execution page was signed by Mr Takacs (noting that the signature page (CB 75) contains provision for execution by each of Acoustica, Tafemo and Mr Takacs): T 9.22-.43. The bracketed fourth sentence above was rejected with leave given to seek to supplement it: T 10.33-.34.
Mr Doneux gave very brief affidavit evidence regarding what occurred on 5 April 2001. His evidence was as follows (CB 40-41[23]-[24]):
23. After work on that day, I went to the lawyers' office for the meeting. I was very surprised to find that Mr Takacs was not there given the lawyers had told me that the purpose of the meeting was for Mr Takacs and me to sign the Alleged Agreement. So I was expecting him to be there. The lawyers did not give me an explanation why Mr Takacs was not there, but told me words to the effect of 'sign the agreement and we will also have Mr Takacs sign it, and we will then send you a signed copy.' I then signed the Alleged Agreement on page 10 (page 34).
24. Afterwards, I recall taking a copy of the Alleged Agreement that was signed by me and posting it to Mr Takacs for his signature and return to me. I posted the Alleged Agreement to him because Mr Takacs did not have a computer at that time so I could not email a copy to him, as I would have done now.
In his affidavit dated 21 November 2022, Mr Takacs stated in reply to Mr Doneux's evidence (at CB 40[22]-[25]) as follows (CB 31[3(e)]):
… I was present with Mr. Doneaux when we both signed separate copies of the Agreement in question. Present were both of us and a lawyer, who I believe signed as witness to Mr. Doneaux.
Mr Takacs said that apart from Mr Doneux and "their solicitor", Mr Crow attended at the meeting: T 20.30-.48.
Mr Takacs was asked about what happened to the copy which he signed. He stated (T 21.8-.10):
A. Well, I - I signed and Philip took it. Mr Doneux, that - that was his copy.
He was also asked about the form of the agreement signed by Mr Doneux and gave the following evidence (T 22.17-.25):
Q. Do you recognise that document, Mr Takacs?
A. Yes. The - it's the original signed document or the agreement and the trial balance of Tafemo which was prepared by John Crowe, my accountant.
Q. When did you receive that document?
A. When? What year agreement?
Q. Yes.
A. At the solicitors when we signed it.
Mr Price tendered the document identified by Mr Takacs and it became Exhibit P1: T 23.36-24.5.
Mr Takacs was also shown and identified the Share Certificate, albeit that he described it as "the income share agreement" (likely based on its title "Income (Non-capital) Redeemable Preference Share Certificate"). He confirmed that he received the certificate "[a]t the signing of the documents". It became Exhibit P2: T 24.13-.22.
Mr Price asked Mr Doneux about the above-mentioned evidence that he went to the lawyer's office "after work" on 5 April 2001. Mr Doneux volunteered that it took place at about 5 pm: T 68.39. He persisted in the notion that he went there after work: T 69.43-70.17. When it was put to him that he was mistaken, he asserted that if he was mistaken, he was the only one who attended: T 70.18-.22.
Mr Doneux was asked about others who did and did not attend. He asserted that only Mr Maarbani was there as "Mr Stevens couldn't be present": T 70.24-.46. He also denied that Mr Crow and Mr Takacs were present: T 70.48-71.2.
There are vital conflicts on the evidence as between Mr Takacs and Mr Doneux regarding this meeting, in particular the time of the meeting, who was present and what occurred.
First, in respect of who attended the meeting, I note the following.
1. Mr Takacs, according to Mr Doneux, was a man he trusted. Mr Takacs was not a man given to lying about whether he attended an appointed event where he signed and exchanged legal documents.
2. The parties negotiated a proposal for Tafemo's business to be merged into Acoustica and for Mr Takacs to be employed by Acoustica over a long period, from at least March 1997 (T 53), leading up to April 2001. In particular, as outlined above, a draft form of agreement had been substantially prepared by November 2000 and, in March 2001, the materials I have referred to above show the negotiations coming to a head.
3. Whilst there was an initial appointment to execute the RPS Agreement and the Employment Agreement arranged for 28 March 2001 (Exhibit P10 at page 53) which did not go ahead, by 3 April 2001 another meeting had been scheduled for 5 April 2001 at 11 am: Exhibit P10 at page 55. Dibbs Barker Gosling were intimately involved in that correspondence. There is not the slightest indication that Mr Takacs or Mr Crow would not attend at that scheduled meeting, and certainly not without any explanation.
4. From late November 2000, the correspondence between the parties points towards them working on a documented agreement without any particular suggestion that Mr Takacs (as contended by Mr Doneux) was dissatisfied with any aspect of the matter or had "cold feet" in consummating an agreement. The fax sent by Mr Crow to Mr Maarbani on 4 April 2001 at 6:12 pm, in which he provided the information sought by Mr Maarbani, concluded with the statement "See you at 11am tomorrow". That statement gives every indication that Mr Crow proposed to attend. Further, the third page attached to the fax is an adjustment schedule including calculations as to long service leave. Handwriting on the fax includes a statement to the effect "I NEED MY LSL TABLES - TOMORROW!". That annotation is strongly suggestive that Mr Crow was expecting to attend at the meeting. I reject Mr Hand's submission that Mr Takacs (and Mr Crow) did not turn up because "they got cold feet": T 154.19-.33.
5. Mr Doneux's evidence that there was no attendance by Mr Takacs or Mr Crow begs a number of questions. On Mr Doneux's evidence, he indicated that he was expecting Mr Takacs to be there: CB 40[23]. Mr Doneux stated that no explanation was given as to why there was a non-attendance by Mr Takacs and Mr Crow. He indicated that the lawyers told him nonetheless to sign the agreement that they would have Mr Takacs sign it, after which he would be sent a signed copy. In those circumstances, Mr Doneux said that he signed the agreement.
6. I consider it implausible, or at the very least unusual, that, in circumstances where the documentary materials indicate that Mr Crow was intending to be there and Mr Doneux expected Mr Takacs to be there and had not been told otherwise, Mr Doneux would simply have left the meeting having signed an agreement without any communication being made either by himself or the lawyers to Mr Crow or Mr Takacs to ask why they had not attended (if that be the case) or where they were.
I reject Mr Doneux's evidence that Mr Takacs and Mr Crow did not attend the meeting. Rather, I accept Mr Takacs' evidence that he attended as did Mr Crow, Mr Doneux and "their solicitor". I consider that the reference to "their solicitor" was singular and to Mr Maarbani. That is how Mr Hand understood it: DCS [17(b)].
There are some indicators which explain why Mr Stevens was not present at the meeting. First, I accept the evidence of Mr Doneux that Mr Stevens' father had been very ill in the lead up to the meeting. Mr Stevens was seemingly unable to attend the 23 March 2001 meeting for that reason: T 67.45. Secondly, the fax from Mr Crow to Mr Maarbani sent the evening before the 5 April 2001 meeting is addressed simply to Mr Maarbani (i.e. not to Mr Stevens and Mr Maarbani). Whilst that matter of itself might be explicable for various reasons (such as Mr Maarbani being the less senior lawyer tasked with correspondence duties), it is at least consistent with Mr Crow not expecting Mr Stevens to be there.
Having regard to all of the evidence, I find that Mr Stevens was not present at the meeting on 5 April 2001.
Mr Hand submitted that, in Mr Doneux's cross-examination, it was put to him that Mr Stevens was also present at the meeting: DCS [17(c)], citing T 70.24-.49 (I note also T 75.21-.28); see also T 186.34-.44. He submitted that this was (i.e. must have been) on the basis of instructions from Mr Takacs to Mr Price. There was said to be an inconsistency with Mr Takacs' evidence that there was only one solicitor at the meeting, and that (based on later cross-examination of Mr Doneux by Mr Price) Mr Takacs "now contends there were two solicitors at the meeting": DCS [17(c)]. It is true that Mr Price did put to Mr Doneux that Mr Stevens was present. However, I reject that Mr Price's questioning of Mr Doneux must have been on the basis of instructions from Mr Takacs that two solicitors, including Mr Stevens, were present. Neither Mr Takacs' affidavit evidence nor his oral evidence suggests that Mr Stevens was necessarily present. Self-evidently, not every question asked in cross-examination is based on express instructions. I do not accept the premise that Mr Price's question to Mr Doneux that Mr Stevens was present at the meeting was necessarily based upon Mr Takacs' instructions so as to demonstrate an inconsistency with his evidence that a solicitor in addition to Mr Maarbani was present.
Secondly, as to the time of the meeting, there is no suggestion on the evidence that the meeting had been scheduled for any time other than 11 am. I consider that it is likely that the meeting did take place at 11 am on 5 April 2001, rather than at some point of time after 5 pm. I find that the meeting did take place at 11 am on that day.
Thirdly, I accept that Mr Doneux took the copy of the April 2001 Agreement which Mr Takacs signed. I further accept that the original April 2001 Agreement (which is Exhibit P1) containing the signature of Mr Doneux was, as Mr Takacs says, received by him at the meeting on 5 April 2001.
[32]
Did Acoustica issue the RPS to Tafemo?
Acoustica denied that the RPS was allotted and issued to Tafemo on 5 April 2001: DOS [12].
Mr Hand submitted that there is no record that ASIC was notified of such a share issue taking place, as required by s 254X of the Corporations Act 2001 (Cth) (Corporations Act): DOS [13]. He stated that there is also no evidence that the RPS was validly issued under Acoustica's memorandum and articles of association: DOS [13]. In particular, he stated that the Share Certificate in its terms describes the Issue Date as the date on which the board of Acoustica resolves to issue the RPS, and that there is no evidence of any such resolution: DOS [14]-[15].
It is correct that the ASIC search for Acoustica does not record any RPS issue: CB 281-290. However, Acoustica did not tender in evidence its memorandum and articles of association. If it wished to make good the assertion that the RPS was not validly issued, it had opportunity to adduce the memorandum and articles of association but declined to do so. There is no indication of what was required under Acoustica's memorandum and articles of association in order to resolve to issue the RPS.
In response to Mr Hand's submissions regarding the lack of evidence of a resolution of Acoustica to issue the RPS and the failure to comply with s 254X of the Corporations Act, Mr Price submitted as follows (PCS [25]-[27]):
25. A party may not take advantage of its own wrong: Brothers v Park [2004] NSWCA 241 at [82]; Sydney Attractions Group Pty Ltd v Schulman [2013] NSWSC 858 at [188]ff.
26. The onus to comply with s 254X of the Corporations Act 2001 (Cth) and Acoustica's articles of association was on Acoustica. It is not open to Acoustica to rely on its own defaults.
27. Further, as these matters involved or were related to the internal conduct of Acoustica, the Court should infer that as Acoustica failed to adduce on the point, no evidence was available to assist Acoustica on the issue: Blatch v Archer (1774) 1 Cowp 63; 98 ER 969.
Generally, in the context of a statutory scheme regulating the issue of shares, "issue" is related to the act of entry of the allotee's name in the register rather than the prior contract of allotment and appropriation of the shares: Ford, Austin & Ramsay's Principles of Corporations Law (as at May 2024, LexisNexis) (Principles of Corporations Law) at [17.181.3]. Entry in the register of members completes the contract to take shares: Principles of Corporations Law at [17.170].
[33]
Applicable law
Mr Hand submitted that the applicable law regarding the issue of a share in April 2001 was the Companies (New South Wales) Code (the Code), which was in force at the time: DCS [34].
The Code came into force by virtue of the provisions of the Companies Act 1981 (Cth) as applicable as a law of New South Wales by the operation of the Companies (Application of Laws) Act 1981 (NSW). The Code applied in New South Wales until the commencement of the Corporations (New South Wales) Act 1990 (NSW) (Corporations (NSW) Act) on 1 January 1991, which, pursuant to s 7 of that Act, provided that the Corporations Law set out in s 82 of the Corporations Act 1989 (Cth) applied as a law of New South Wales: see In the matter of Inmart Investments Pty Ltd; In the matter of Marynen Manufacturing Pty Ltd [2023] NSWSC 1257 at [19]-[20] per Williams J.
As at 5 April 2001, s 85 of the Corporations (NSW) Act relevantly provided for co-operative scheme laws to be superseded by national scheme laws. The Code was one of the "co-operative scheme laws": see s 84 Corporations (NSW) Act read with s 3. "National scheme law of this jurisdiction" was defined in s 60 and relevantly included the Corporations Law of New South Wales which, in turn, was defined as the Corporations Law applied as a law of New South Wales: s 60 Corporations (NSW) Act read with s 7.
[34]
Was a resolution required for the issuing of the RPS?
Mr Hand submitted that the issue of the RPS required a resolution, by virtue of both the Code (specifically, cl 3 of Table A in Sch 3) and the definition of "Issue Date" in the terms and conditions of the Share Certificate: DCS [35]. Under those terms and conditions, "Issue Date" was defined as "the date when the Board of Acoustica resolves to issue the Redeemable Non Capital Preference Share".
A company may issue preference shares (including redeemable preference shares): s 254A(1)(b) Corporations Law (essentially replicated in the Corporations Act).
However, a company can issue preference shares only if the rights attached to the preference shares with respect to the following matters are set out in the company's constitution (if any) or have been otherwise approved by special resolution of the company: (a) repayment of capital; (b) participation in surplus assets and profits; (c) cumulative and non-cumulative dividends; (d) voting; and (e) priority of payment of capital and dividends in relation to other shares or classes of preference shares: s 254A(2) Corporations Law.
Redeemable preference shares are preference shares that are issued on the terms that they are liable to be redeemed. They may be redeemable: (a) at a fixed time or on the happening of a particular event; (b) at the company's option; or (c) at the shareholder's option: s 254A(3) Corporations Law.
Despite Acoustica's constitution or any memorandum and articles of association not being adduced in evidence, Acoustica did not appear to contend that it did not have the power to issue preference shares of the kind referred to in the Share Certificate and the RPS Agreement.
Assuming that Acoustica had the power to issue preference shares of the kind referred to in the Share Certificate, Mr Doneux, as the sole director of Acoustica in April 2001, had power to pass a resolution by recording it and signing the record: s 248B(1) Corporations Law (replicated in the Corporations Act). Directors must record in the company's minute books any resolutions passed by directors without a meeting: s 251A(1)(d) Corporations Law (replicated in the Corporations Act).
The record of a resolution by a sole director has "dual significance" as both the operative decision-making event and as a minute of the deemed resolution created by the recording of the decision: Principles of Corporations Law at [7.335].
Where there is a manifested meeting of the minds of all persons capable of participating in a resolution but they do not express it in such a manner as to constitute a "resolution", the failure to record the resolution is properly to be regarded as a procedural irregularity for the purposes of s 1322: Nagler v Volski (No 2) [2001] NSWSC 1106 (Nagler) at [6] Barrett J (as his Honour then was). Further, a resolution not inserted into the minute book is still effective: see Toole v Flexihire Pty Ltd (1991) 6 ACSR 455 at 462-463 per Demack J; Sheahan v Londish [2010] NSWCA 270 at [107] per Young JA.
Acoustica's minute book was not in evidence.
Applying Nagler, it is arguable that Mr Doneux's signing of the Share Certificate with the Acoustica company seal exhibited a "manifested meeting of the minds of all persons capable of participating in a resolution". Mr Doneux was the sole director of Acoustica at the time and thus was the only person whose consent was required to issue the RPS. The fact that there is no separate record of the resolution pursuant to s 248B(1) may be considered an irregularity of a procedural, rather than substantive, nature. However, I note that no application was made by the plaintiffs pursuant to s 1322(4) in respect of this issue.
In any case, given that the execution of the Share Certificate satisfied the requirements of s 127(2)(c) of the Corporations Law, it might be that the plaintiffs are able to rely upon certain statutory assumptions (see ss 128 and 129 of the Corporations Law) or otherwise the presumption of regularity (see Twigg v Twigg [2022] NSWCA 68; (2022) 402 ALR 119 at [26] per Brereton JA (as the Commissioner then was)).
These and other questions arise out of the purported issuing of the Share Certificate. However, it is not necessary to explore such questions as the plaintiffs' case for damages does not ultimately depend upon whether the Share Certificate had been effectively issued.
Whilst the Share Certificate was given to Tafemo, the evidence available indicates that Tafemo was never registered by Acoustica as the holder of the RPS. In that sense, it may be said that Acoustica is in breach of cll 2(d) and 3.2(a)(i)(B) of the RPS Agreement.
As will be seen below, I reject Mr Hand's submission that there was no completion of the April 2001 Agreement and the Share Certificate signed by Mr Doneux constitutes only a "preparatory" form pending completion: DCS [39].
[35]
Did Mr Doneux sign one or more counterparts of the April 2001 Agreement?
The affidavit evidence of each of Mr Doneux and Mr Takacs regarding signing of the April 2001 Agreement is relevantly extracted above at [174] to [177] (CB 22[3], 40-41[23]-[24], 31[3(e)]).
Towards the end of Mr Doneux's cross-examination, I asked him how Mr Takacs had received a signed original of the April 2001 Agreement. On one view, Mr Doneux had not previously asserted that several documents had been signed as originals.
At that point, Mr Doneux asserted that he had in fact signed two originals, sending one and retaining the other: T 95.38-.50.
Referring to Mr Doneux's previous affidavit evidence on this point, Mr Hand submitted that (T 151.47-152.3):
On one reading, one can see how that might be read as, "I took a photocopy of the alleged agreement that was signed by me", but, as I read it, he is saying, "I signed the documents, and I took one of those signed documents with me, and posted it to Mr Takacs." That's consistent with the evidence he gave in response to a question from your Honour, as to explain how a document bearing his signature, in its original form, could be in Mr Takacs' hands.
Mr Hand elaborated on this but essentially his submission was that two originals were signed by Mr Doneux at the meeting and one original remained with the solicitors: T 152.5-.11, 154.9, 154.44-.45. He asserted that there were four counterparts: T 154.8, 155.1.
Mr Doneux's affidavit evidence does not expressly indicate that he signed two forms of the April 2001 Agreement. My initial impression on reading Mr Doneux's evidence is that he signed one original. However, I accept that the wording of CB 40-41[23]-[24] is not sufficiently precise to decisively exclude the possibility that he signed two forms of the April 2001 Agreement.
There is no indication that Mr Doneux retained an original. Mr Ciric gave evidence that Acoustica did not have the RPS Agreement in its records (original or otherwise): T 122.10-.38.
Ultimately, I prefer the evidence of Mr Takacs. I do not accept Mr Doneux's evidence that he signed two (or more than one) original counterpart documents. However, even if he did, it does not deter me from finding that Mr Takacs and Mr Crow attended at the meeting and that there was an exchange of counterparts such that Mr Takacs took away a document only signed by Mr Doneux and Mr Doneux took away a document signed by Mr Takacs.
[36]
What is the significance of the lack of acknowledgements from all of Tafemo's creditors?
Mr Hand submitted that there was no evidence of the provision of creditor's acknowledgements from "each Tafemo creditor", as required by cl 3.2(b)(i)(E) of the RPS Agreement: DCS [22(c)]. Mr Hand drew particular attention to the fact that there was no creditor's acknowledgement from Mr Takacs, who was one of Tafemo's creditors.
In his affidavit evidence, Mr Doneux denied that he had received from Tafemo or Mr Takacs any executed creditor's acknowledgements on or about 5 April 2001: CB 55-56[5(d)].
Mr Price submitted that Mr Doneux was less dogmatic about this in cross-examination. Mr Doneux's attention was drawn to the three executed forms of creditor's acknowledgements in Exhibit P10 at pages 58-60. Initially, he asserted that the first time he saw the documents was when his lawyer (in context his current lawyer, Mr Gill) showed him the documents. However, when it was put to him that the documents were given to him at the meeting on 5 April 2001, he stated: "I don't recall, that bundle was quite big with all the pages": T 73.18, 73.44. He declined to affirmatively say that he did not receive the documents. Rather, he did not remember them when he prepared his affidavit: T 73.48-.50. Ultimately, Mr Doneux appeared to accept the possibility that the documents (T 74.45-.47):
… could have been part of the bundle when I had to sign all the paperwork. That's something I'm not 100% sure. But I cannot remember all the pages when I signed the document with Steven.
This evidence was not altogether clear. Mr Doneux's answers refer to "part of the bundle". I do not regard Mr Doneux's evidence as constituting any admission that he received the creditor's acknowledgements. However, I consider that he appeared to be uncertain as to the detail of what occurred.
The requirement for creditor's acknowledgements in the RPS Agreement was curious. Except as expressly provided otherwise, none of Tafemo's debts or liabilities as from the completion date were to be undertaken or assumed by Acoustica, and (subject to the terms of the agreement) Tafemo remained solely responsible for the payment, satisfaction and discharge of those debts and liabilities: CB 69-70 [cl 8.1]. In circumstances in which Tafemo's debts and liabilities were to remain with Tafemo and the acknowledgements were drafted to the attention of Tafemo, it is not clear to me why the RPS Agreement required the creditor's acknowledgements to be handed over to Acoustica. I raised this during submissions: T 159. While there was some debate regarding it, neither counsel (which I do not say critically) was able to identify any particular advantage to Acoustica in having the creditor's acknowledgements: T 159-163.
The fax of Mr Crow to Mr Maarbani on the evening of 4 April 2001 expressly indicated that "Creditors' Acknowledgements will be brought to the meeting with the exception of Bela Takacs": Exhibit P8. On balance, I find that the creditor's acknowledgements from Datalink, Award Consultants and Jonkro, copies of which appear at pages 58-60 of Exhibit P10, were available to be handed over at the 5 April 2001 meeting and were likely handed over.
Although Mr Hand submitted that there was no evidence of the provision of creditor's acknowledgements from "each Tafemo creditor", there was no defence or submission that the failure to provide any particular creditor's acknowledgement was a matter precluding relief in favour of Tafemo. Rather, the submission seemed to be directed at the assessment of the likelihood of events occurring as Tafemo contends or perhaps bearing upon Mr Takacs' credibility.
[37]
Did Mr Doneux post a signed counterpart and Share Certificate to Mr Takacs?
As referred to above, Mr Doneux's evidence is that he posted Acoustica's signed counterpart of the April 2001 Agreement to Mr Takacs after the meeting on 5 April 2001, in the expectation of it being signed by Mr Takacs and returned: CB 40[24].
Mr Doneux says that he never received a copy of the April 2001 Agreement signed by Mr Takacs, either from him or from the lawyers, and for that reason Acoustica never issued any RPS to Tafemo and did not pay any amount to Tafemo for the Tafemo business: CB 41[25].
I reject Mr Doneux's evidence that he posted an original signed version of the April 2001 Agreement (or RPS Agreement) to Mr Takacs.
First, the notion that he posted an original signed version to Mr Takacs is somewhat unusual in the sense that, according to Mr Doneux, Dibbs Barker Gosling (or more particularly, I assume, Mr Maarbani) told him that they would arrange to have Mr Takacs sign the agreement. Mr Doneux's affidavit stated that (CB 40[23]):
The lawyers did not give me an explanation why Mr Takacs was not there, but told me words to the effect of 'sign the agreement and we will also have Mr Takacs sign it, and we will then send you a signed copy.' I then signed the Alleged Agreement on page 10 …
There is an unexplained tension between the course of action proposed in that evidence (whereby the solicitors would arrange for Mr Takacs to sign the agreement) and the course of action allegedly carried out by Mr Doneux (whereby he bypassed the solicitors' involvement and sent an original to Mr Takacs).
Secondly, there is no indication as to how Mr Takacs could have received an original signed version of the Share Certificate, as distinct from the April 2001 Agreement, other than by attending the meeting on 5 April 2001. Mr Doneux does not assert that he sent the signed Share Certificate to Mr Takacs. It seems to me highly improbable that, in circumstances where Mr Doneux asserts that Acoustica was not going to pay any of the $200,000 amount (as required under cl 3.2(a)(i)(A) of the RPS Agreement) until after he had received a signed copy of the April 2001 Agreement from Tafemo (CB 41[27]), he would have provided the Share Certificate, apparently duly executed by Acoustica, to Mr Takacs before receiving that signed counterpart from him.
Mr Doneux indicated that a couple of months went past without any mention of the April 2001 Agreement. He was busy on other projects but nonetheless visited Tafemo's factory once every two or so months, at which times he would ask Mr Takacs about whether he had signed the agreement. Mr Doneux stated that Mr Takacs gave vague responses such as "I will get back to you", "I have a couple of issues that I need to look into further before we can finalise the agreement" and "I need to speak with John Crow to go over some accounting matters about the agreement". According to Mr Doneux, given the long-standing relationship that he had with Mr Takacs and Tafemo, he did not insist too strongly for the immediate execution and return of the April 2001 Agreement. Specifically, he said that Mr Takacs was aware that Acoustica was not going to pay any of the $200,000 sum to Tafemo until after it had received a signed copy of the agreement: CB 41[26]-[27].
Mr Doneux claimed that, in the period between him posting the April 2001 Agreement to Mr Takacs and meeting with him on 9 November 2003, he followed up with Mr Takacs about nine times: CB 41[28].
In or around 2002, Mr Doneux asserted that he became aware of Tafemo starting to supply Acoustica's main competitor, Pyrotek, with the acoustic membranes that it had been supplying to Acoustica. For that reason, Mr Doneux says that he started to follow up with Mr Takacs more frequently in relation to his execution and return of the April 2001 Agreement: CB 42[29].
In or around October 2002, Mr Doneux asserted that he had conversation with Mr Takacs in words to the following effect (CB 42[30]):
I said: Bill, how are you going signing the agreement?
Mr Takacs said: I have been speaking with John Crow about the agreement. John said that I should be a director of Acoustica.
I said: I don't have a problem with that. Do you want to become a director straightaway?
Mr Takacs said: Yes.
I said: Okay. I will organise it for you. Please sign the agreement and send it back to me as soon as possible.
Mr Takacs said: Okay.
On or about 7 November 2002, Mr Takacs was appointed as a director of Acoustica. Mr Doneux says that he believed this appointment would fend off any possible purchase of the Tafemo business by Pyrotek: CB 42[31].
From 7 November 2002 to 11 April 2011, Mr Takacs was listed as a director of Acoustica (according to ASIC records). During that period and for a further three years until 2014, Mr Doneux asserted that he gave copies of Acoustica's financial statements to Mr Takacs and would sit down with him to review and discuss them each year. Despite having such meetings, Mr Doneux said that he never received any correspondence from Mr Takacs or Tafemo, nor did he have any discussion with Mr Takacs, about his alleged entitlement to interest over the sum of $200,000 or to the profits of Acoustica until 2019: CB 42-43[32].
I reject Mr Doneux's evidence that he followed up with Mr Takacs about signing the April 2001 Agreement in the months after the 5 April 2001 meeting.
[38]
Why was the registration of the Polytak business name cancelled (on 9 April 2001)?
One imponderable about the matter is that, according to Mr Takacs, Acoustica took over the business of Tafemo from about October 2000 and, as part of that process, took over the registration of the Polytak business name from 1 April 2001. In that regard, Mr Takacs produced a form under the Business Names Act 1962 (NSW) titled "Statement of Change in Persons": CB 35[8], 125.
The form is substantially completed. Tafemo's name has been inserted as the person who has ceased to carry on business under the business name on 1 April 2001. There is provision for Mr Takacs to sign as director of Tafemo, however there is no signature. Below there are typed details for Acoustica as the person who has commenced to carry on business under the business name on 1 April 2001. That section of the form has been signed by Mr Doneux on 5 April 2001. Dibbs Barker Gosling is nominated as the lodging party on the form.
The business name extract that was tendered as Exhibit D2 records only Tafemo as a holder of the name, starting from 15 June 1995 and ending on 9 April 2001, at which point of time the name registration is cancelled: Exhibit D2. The April 2001 Agreement required Tafemo to hand over on completion a duly executed Statement of Change of Business Name, effectively transferring to Acoustica the business name: CB 67 [cl 3.2(b)(i)(F)(i)]. In the lead up to the 5 April 2001 meeting, Mr Stevens had requested confirmation from Mr Crow on 23 March 2001 that Polytak was the only product or business name in relation to which Tafemo claimed ownership of intellectual property rights: Exhibit P10 at page 56.
In his fax dated 3 April 2001, Mr Stevens requested Mr Crow to provide the information and documentation outlined in the fax dated 23 March 2001: Exhibit P10 at page 55. In his response on 4 April 2001, Mr Crow confirmed that Polytak was the only product or business owned by Tafemo: Exhibit P8.
I infer that the "Statement of Change in Persons" document, if received by Acoustica (at the 5 April 2001 meeting or otherwise), was never actually lodged by Dibbs Barker Gosling.
Mr Price accepted that Acoustica would not have had authority to cancel the business name: T 164.12-.17. Only Tafemo, or someone authorised on its behalf, would have been able to cancel the registration.
Mr Takacs did not accept the proposition that he had cancelled the registration of the business name Polytak: T 25.1-.2. There is little doubt that Tafemo arranged for the cancellation of the name. One possibility is that it was not Mr Takacs who actually made the cancellation but rather Mr Crow, who was a director of Tafemo at the time.
Why the registration was cancelled is not clear. One possibility is that Acoustica never received a signed version of the Statement of Change in Persons from Mr Takacs. Another possibility is that Acoustica had received it but, for whatever reason, was indifferent to carrying on the name and, within a short time after the 5 April 2001 meeting, Tafemo cancelled the registration of the name.
The evidence does not enable me to make any clear finding as to why the registration of the Polytak business name was cancelled. However, to the extent it is relevant, I do not regard it as being a matter which precludes a finding in favour of Tafemo on the substantive issues.
[39]
Was Mr Takacs paid pursuant to the Employment Agreement?
Mr Price submitted that it is inherently improbable that Acoustica would have employed Mr Takacs but for having entered into the RPS Agreement, reasoning that there is no plausible and economically rational reason why Acoustica would pay Mr Takacs to run the business of another company (Tafemo). Indeed, Mr Price submitted that the most plausible reason for Acoustica having employed Mr Takacs was that they had both entered into the Employment Agreement, which was collateral to the RPS Agreement, and that performance of the Employment Agreement demonstrates on the balance of probabilities that the parties were also performing the RPS Agreement: PCS [14]-[15].
It is agreed between the parties that from at least 5 April 2001, Acoustica was paying Mr Takacs' wage: T 156.17-.18. However, Mr Hand disputed that Mr Takacs was being paid pursuant to the Employment Agreement. He stated that at one stage there was a pay increase for Mr Takacs (which was not expressly provided for in the Employment Agreement) and it is not clear that Acoustica was dictating the terms of his employment: T 156.14-.19.
The terms of the Employment Agreement provided for Acoustica to employ Mr Takacs from the "effective date", being 6 October 2000: CB 104 [cl 1.1], 105 [cl 2.1]. The Employment Agreement set out the functions and duties of Mr Takacs (cll 3.1, 3.2) and provided that he will receive from Acoustica by way of remuneration for his services the "salary", which is defined in item 1 of sch 2 of the Employment Agreement: CB 104 [1.1], 105 [cl 4.1]. Acoustica was under no obligation to increase Mr Takacs' remuneration: CB 105 [cl 4.2].
The Employment Agreement required Acoustica to reimburse Mr Takacs for expenses and provided that he will be entitled to 20 days annual holiday and sick leave: CB 106 [cll 5-7]. The salary specified in sch 2 of the Employment Agreement is $60,000 gross, including tax and compulsory superannuation contributions: CB 112. Schedule 2 also refers to a "benefit", being the payment of reasonable motor vehicle expenses incurred by Mr Takacs: CB 112. The plural "benefits" is defined in cl 1.1 of the Employment Agreement as meaning the benefits specified in item 3 of sch 2: CB 104. As there is no item 3 in sch 2, that appears to be a typographical error (which I note is corrected in another version of the Employment Agreement at CB 116, which is signed by Mr Doneux on behalf of Acoustica).
Apart from the definitions clause, there does not appear to be a substantive clause in the Employment Agreement which provides for Mr Takacs to be paid a "benefit" or "benefits". Whilst Mr Hand disputed that Mr Takacs was employed pursuant to the Employment Agreement which is Annexure H to the April 2001 Agreement (T 156), Acoustica did not attempt to prove exactly what salary Mr Takacs was paid as at 5 April 2001 and going forward. Mr Hand accepted that "at one stage" Mr Takacs' salary went up to $100,000 (T 156), seemingly based upon Exhibit P5.
Whether Acoustica was employing Mr Takacs precisely in accordance with the Employment Agreement seems to me to be less significant than the fact that Acoustica was employing Mr Takacs at all.
Whilst asserting in his affidavit evidence that neither Mr Takacs nor Mr Crow attended the 5 April 2001 meeting, Mr Doneux does not go into any detail or explanation in relation to Mr Takacs' employment with Acoustica from 5 April 2001. Put simply, he does not explain the reason or basis on which Mr Takacs was being employed by Acoustica.
In cross-examination, Mr Doneux gave evidence as follows (T 77.6-.13):
Q. Mr Takacs was your employee from at least 5 April 2001, wasn't he?
A. Yeah, he - I took the salaries of the factory people there. Either way, you can see it was an employee, yes.
Q. He was running the business that had formerly been owned by Tafemo for Acoustica in 2001 and 2002, wasn't he?
A. Yeah. I was not the one running it because I was working from an office in the city.
Mr Price submitted that this evidence constitutes an admission that Acoustica had acquired Tafemo's business before 2003: PCS [16]. The proper conclusion to be drawn from Mr Doneux's acceptance regarding Mr Takacs' running of the Tafemo business for Acoustica at that time might be debatable. However, whilst not decisive, it does seem to me to be a powerful indication, coupled with the other matters that I have mentioned, that it is more probable than not that there had been an exchange of counterparts of the April 2001 Agreement on 5 April 2001. The alternative is that there was no concluded agreement and, at least on Acoustica's version of the case, no agreed basis on which Mr Takacs would be employed by Acoustica or running for Acoustica the business that had been formerly owned by Tafemo. That alternative seems unlikely.
Specifically, in light of the particular circumstances of this case, I consider it improbable that Acoustica would have left undefined for a period of a little over two and a half years (5 April 2001 to 9 November 2003) the basis on which Tafemo's business was being merged into Acoustica and the basis on which Mr Takacs was being employed.
Mr Doneux accepted that he would go out to Tafemo's premises near Penrith during that time. He did not deny that a reason for him doing so was to ensure that the business was running properly, but also asserted that the "main reason" why he went was to "develop" a "system" for the New South Wales Government: T 77.15-.19. Mr Doneux denied that he was making up his evidence in respect of developing such a system: T 77.21-.26. However, the fact that he went to the business at all, and did not disavow the fact that a reason (as distinct from the main reason) why he attended was to ensure the business acquired by Acoustica was running properly, is at the very least consistent with an acquisition having taken place.
It is unclear precisely what happened in relation to Tafemo's other employees (being Barry Hillard and Neil Everson: CB 100) from 5 April 2001. Nonetheless, there is evidence that, apart from Mr Takacs, Neil Everson (though not Barry Hillard) was listed on Acoustica's payroll activity summary sheets for the period 1 July 2005 to 31 December 2006: CB 126-131. That is consistent with some formal arrangement being in place in relation to Neil Everson for which Acoustica was taking responsibility. Mr Doneux's evidence does not give any explanation as to why Acoustica would have paid Mr Everson without some formal arrangement being in place.
[40]
Subsequent alleged discussion about signing the April 2001 Agreement and the belated appointment of Mr Takacs as a director of Acoustica in November 2002
As noted above, Mr Doneux deposed that he had a conversation with Mr Takacs in or around October 2002 as follows (CB 42[30]):
I said: Bill, how are you going signing the agreement?
Mr Takacs said: I have been speaking with John Crow about the agreement. John said that I should be a director of Acoustica.
I said: I don't have a problem with that. Do you want to become a director straightaway?
Mr Takacs said: Yes.
I said: Okay. I will organise it for you. Please sign the agreement and send it back to me as soon as possible.
Mr Takacs said: Okay.
Mr Doneux further stated that (CB 42[31]):
31. I believed that appointing Mr Takacs as a director of Acoustica would fend off any possible purchase of the Tafemo business by Pyrotek, a USA based company with a turnover of around $500 million. So, on or about 7 November 2002, Mr Takacs was appointed a director of Acoustica.
Mr Takacs did not expressly deny in either of his responsive affidavits Mr Doneux's claim that in or around October 2002 he had a discussion with Mr Takacs about him signing the April 2001 Agreement. Why that is the case is not clear. Nonetheless, Mr Takacs' other affidavit evidence disputes the notion that he had not signed the agreement by October 2002.
I reject the evidence that there was a discussion at least in the precise terms alleged by Mr Doneux. It is unlikely that Mr Takacs would have said that he had been speaking with Mr Crow and that he told Mr Takacs to become a director of Acoustica, as if that was a new proposal which had not been previously discussed and settled. It is inconsistent with the fact that Mr Takacs had signed a consent to act as a director of Acoustica on 2 March 2001.
Further, I find it unlikely, on Mr Doneux's version of events, that Mr Takacs would have simply agreed to his request to "sign the agreement and send it back" to him as soon as possible if indeed Mr Takacs had previously been procrastinating and failing to sign the agreement despite Mr Doneux's follow up requests (which evidence I have rejected).
That still leaves somewhat unexplained why the appointment of Mr Takacs as a director of Acoustica was only formalised on 7 November 2002. I consider that it is likely that there was some discussion, perhaps in or around October 2002, about Mr Takacs' directorship in relation to Acoustica. Whilst I do not accept that the conversation was as Mr Doneux asserted, there is no need for me to make a precise finding about exactly what was said.
It may be that Mr Takacs had indicated to Mr Doneux that his consent to act as a director had not been formalised in the sense of being registered with ASIC. Perhaps all that can be said is that it is likely the discussion regarding Mr Takacs' directorship, whatever its content, was the catalyst for Acoustica formalising Mr Takacs' directorship on 7 November 2002. I reject Mr Doneux's assertion that the reason for the appointment of Mr Takacs as director on 7 November 2002 was to fend off the possible purchase of Tafemo's business by Pyrotek: cf CB 42[31].
[41]
The alleged November 2003 meeting
The parties agree that, at least in or about October or November 2003, there was a discussion between Mr Takacs and Mr Doneux regarding monies to be paid to Mr Takacs (or Tafemo) by Acoustica. Mr Takacs said that a discussion took place at the factory at York Road, Penrith as follows (CB 23[14]):
Me: "Phillipe I am owed payments under the agreement."
Mr Doneux: "Bill, I know, but I don't have the money at the moment."
Me: "Can you at least pay me $1000 per month owing on the principal so I can pay my mortgage?"
Mr Doneux: "I will pay you as much as I can, how about that?"
I said: "That is better than nothing."
For his part, Mr Doneux identified a more specific date for a discussion, being on or about 9 November 2003, and that it took place at Mr Takacs' house in the Blue Mountains. Mr Doneux stated in his affidavit (CB 43[33]):
33. On or about 9 November 2003, I called a meeting which was at Mr Takacs' house in the Blue Mountains. I took some pastries or croissants to share with him, which was something I did almost every time I went to visit him. Mr Takacs was around 65 at that time and it was common for me to meet him at his house to have meetings or discuss various things.
He said that they went to sit in the sunroom at the rear of Mr Takacs' house, which they often did, and had a conversation with words to the following effect (CB 43[34]):
Mr Takacs said: Philippe, I'm not going to sign the agreement that the lawyers prepared.
I said: What type of agreement would you like then?
Mr Takacs said: This will create big problems with my taxes. How about you continue to pay me my salary and a further $1,000 a month, on top of my salary, until we reach $200,000. If I need a higher monthly instalment to reach $200,000, I will let you know.
I said: The limit to the additional funds will have to be $10,000 a month as that is what I can afford. Under your proposal, it will take a long time to pay off the $200,000. So, I won't be paying any interest on it. Also, this is then a new agreement between us, it has nothing to do with our previous one that is now irrelevant. So, no need to sign and return the agreement that I had signed and posted to you.
Mr Takacs said: Yes, agreed.
I said: Okay.
Both versions of the conversations include Mr Takacs referring to a payment of $1,000 per month. As is evident from the above versions, that is where the commonality ceases. Mr Takacs denied that there was ever any meeting at his house in the Blue Mountains in November 2003.
I reject Mr Doneux's version of events. It is predicated on the basis that Mr Takacs asserted that he was not going to sign the agreement that the lawyers had prepared (I infer the April 2001 Agreement). I consider that the conversation was likely closer to the version that Mr Takacs gave, namely, that he raised with Mr Doneux the fact that monies were owing under the April 2001 Agreement: CB 23[14].
Mr Doneux asserted that Mr Takacs had indicated that (in context) the lawyer-drafted April 2001 Agreement would create "big problems" with his taxes and requested that he be paid $1,000 a month on top of his salary. There is no prior suggestion in the materials that there was any issue with the lawyer-drafted April 2001 Agreement creating any problems with Mr Takacs' taxes. Mr Hand frankly indicated that he did not know, or could not proffer any clear reason as to, precisely what would "create big problems" with Mr Takacs' taxes. Mr Doneux accepted in his affidavit evidence that, in their initial discussions and meetings with the lawyers, Mr Takacs had never brought up any issue regarding taxes: CB 44[35].
I reject Mr Doneux's evidence that Mr Takacs told him that he was "not going to sign the agreement that the lawyers prepared".
As I note further below, Mr Doneux referred to payments that he made subsequent to November 2003. He indicated that after the initial payment, Mr Takacs phoned him and told him not to make any more payments as it could interfere with his taxes and pension, and that he would check the matter with Mr Crow and get back to him with an amount to be deposited.
I reject the assertion that there was any such contact from Mr Takacs. The payments of the monies to Tafemo would not self-evidently have caused any particular problem with Mr Takacs' taxes. Certainly, as I have noted, there is no suggestion that it was an issue in the period leading up to the 5 April 2001 meeting.
In explaining the context of the alleged November 2003 Agreement in his affidavit, Mr Doneux made the (somewhat unusual) observation that Mr Takacs was around 65 at that time: CB 43[33]. I have an impression that Mr Doneux has tailored his affidavit evidence to give rise to some plausible issue about Mr Takacs being concerned about taxes and pensions as a pretext for explaining why Acoustica did not make immediate payments.
Whether it was a comment embedded to give some sort of credence to Mr Takacs being around retirement age and obtaining a pension is something that I do not need to ultimately determine. However, Mr Takacs was not around 65 at the time. Rather, he was aged 69 in November 2003. If there were any issue with Tafemo receiving payments that could interfere with Mr Takacs' pension, I consider that it would have been far more likely to have been raised at the time that Mr Crow and Dibbs Barker Gosling were engaged in the negotiations about the April 2001 Agreement.
[42]
Payments
In his initial affidavit, Mr Takacs set out a table of payments that were made from Acoustica to Tafemo over the period from November 2003 through to November 2018: CB 24-28[15]. There are 84 listed payments, the dates and amounts of which are not in dispute: PCS [3(l)]; T 148.39-149.1.
On Mr Takacs' version, the catalyst for the commencement of payments in November 2003 was in the context of Acoustica having made no payments to Tafemo and was tied to his discussion with Mr Doneux in October or November 2003 regarding monies owed at the factory at York Road, Penrith (CB 23[14]). I accept that evidence.
In November 2003, Mr Doneux stated that he arranged for an initial payment of $10,000 to be made to Tafemo "towards the purchase price of $200,000 for the Tafemo business", which was in addition to Mr Takacs' salary payments: CB 44[36].
Approximately one week later, Mr Doneux asserted that he received a call from Mr Takacs whilst he was at his office. According to Mr Doneux, Mr Takacs said to him words to the following effect (CB 44[37]):
Don't make any more payments to me as it could interfere with my taxes and pension. I will check the amount with my partner and accountant, John Crow, and come back to you with the amount to be deposited into my account.
Thereafter, Mr Doneux asserted that he arranged for payments of $1,000 per month to be made to Mr Takacs, in addition to his usual salary payments: CB 44[38].
Mr Doneux did not make payments of $1,000 per month. The payments which were made (as set out in Mr Takacs' evidence, which Mr Hand did not dispute) show that, after November 2003, the next payment was made 16 months later in March 2005. Rather than there being payments of $1,000 per month, the first payment of $1,000 in any given month does not occur until approximately seven years later in January 2011.
I accept Mr Takacs' version of what occurred regarding the payments.
[43]
The employment of Mr Ciric
In or around September 2009 when Mr Ciric was employed by Acoustica, he stated that he had a conversation with Mr Takacs to the following effect (CB 51[11]):
I said: How did the business start?
Mr Takacs said: There is an agreement between Philippe and me about the purchase of the Tafemo business by Acoustica.
At that stage, Mr Ciric seemingly did not ask for a copy of the April 2001 Agreement or any details of it: CB 51[12]. Relevantly, that is consistent with other evidence that Mr Ciric did not find a copy of the April 2001 Agreement in Acoustica's records.
[44]
The alleged August 2010 meeting
In or around August 2010, Mr Doneux asserted that he picked up Mr Takacs in his car and drove him to Mr Crow's house near Cessnock for a meeting. At the meeting, he stated that there was a conversation to the following effect (CB 44-45[39]):
I said: Bill and John, here's your copy of Acoustica's financials [sic] statements for the year ended 30 July 2010 for our planning for the year ahead.
I said: Bill, your bank will show I have been paying off the $200,000 to you in instalments as per your directions and requests and as per our gentleman's agreement. Remember, there is no interest payable on this amount and no dividend from Acoustica.
Mr Takacs said: Yes, thanks Philippe.
Mr Crow said: That's correct.
In relation to this evidence, Mr Price put to Mr Doneux in cross-examination that it was "absolutely absurd" that he would have driven to Cessnock for a meeting: T 81. Mr Doneux elaborated on the alleged meeting, asserting that they were at Mr Crow's house for about an hour and a half and that Mr Crow showed them the vineyard behind his house and the winery region. For his part, Mr Takacs denied that any such conversation occurred: CB 31[3(j)].
I admit of the possibility that there may have been some meeting with Mr Crow in Cessnock, although there is no separate independent verification of it. However, I do not accept that any conversation between the men included the statement that Mr Doneux alleges he made as follows:
I said: Bill, your bank will show I have been paying off the $200,000 to you in instalments as per your directions and requests and as per our gentleman's agreement. Remember, there is no interest payable on this amount and no dividend from Acoustica.
Mr Takacs said: Yes, thanks Philippe.
Mr Crow said: That's correct.
That particular quote of direct speech seems to me to be contrived. It is hardly the case that Mr Doneux would have needed to inform Mr Takacs, in the presence of Mr Crow, that his bank (statement) would show that Mr Doneux had been paying instalments of the $200,000 amount. I also consider that the use of the words "gentleman's agreement" is contrived on the part of Mr Doneux. On his version of events, there would have been no need to state anything about a dividend from Acoustica because, according to Mr Doneux, there was no such agreement. Even on his version of the discussion he allegedly had with Mr Takacs on 9 November 2003, no reference was made to any obligation to pay any dividend.
[45]
The resignation of Mr Takacs in April 2011
In or around April 2011, when Mr Takacs resigned as a director of Acoustica, Mr Ciric said that he had a conversation with Mr Takacs as follows (CB 51[13]):
I said: How much more does Acoustica owe in order to pay you out for the purchase of the Tafemo business?
Mr Takacs said: There is not much left on that.
The reason for Mr Takacs' resignation as a director was not explained on the evidence. However, it is not suggested that the resignation at that time had any particular significance on the substantive issues in the proceedings.
[46]
The 27 November 2018 meeting
It is common ground between the parties that a meeting occurred on 27 November 2018 between Mr Takacs, Mr Doneux and Mr Ciric: PCS [3(m)]; CB 265.
Mr Doneux stated that the meeting occurred at Acoustica's factory at St Marys and Mr Takacs had called for the meeting: CB 45[40]. In his evidence in chief, Mr Doneux indicated that he had a conversation with Mr Takacs at the meeting as follows (CB 45[41]):
Mr Takacs said: I want the balance of what is owed to me for the Tafemo business to be paid to me.
I said: What is the total final amount?
Mr Takacs said: I will have to check. I will get back to you with the final figure.
I said: Okay. As per our agreement, you will continue to receive your salary, car and expenses until your death.
Mr Takacs denied that the conversation was to that effect: CB 35[11], [13]. Rather, Mr Takacs said that the conversation was as follows (CB 28[16]):
Me: "I want to clear this whole thing up."
Mr Doneux: "How much is owing?"
Me: "I think about $34,000.00 is owing on the principal."
According to Mr Ciric, the catalyst for the November 2018 meeting was a discussion with Mr Takacs in which Mr Takacs said that he wished to organise a meeting with Mr Ciric and Mr Doneux "to go through a few matters": CB 51[15]. Mr Ciric organised a meeting and deposed that the following was said (CB 51-52[16]):
Mr Doneux said: I'm planning to move to Belgium soon.
Mr Takacs said: I don't want to be forgotten about when you move. I want to finalise the amount owing to me for the purchase of the Tafemo business.
Mr Doneux said: How much is owing under the agreement?
Mr Takacs said: I will let you know the final payout figure.
Mr Doneux was cross-examined about the meeting. It was suggested to Mr Doneux that he had called the meeting as he was in the process of getting ready to leave Australia at that time. Mr Doneux indicated that he was thinking about getting ready to leave, but denied that his intention was to finalise matters with Mr Takacs before leaving. He asserted that the main reason for the meeting was that Mr Takacs wished to discuss his final payment: T 86. According to Mr Doneux, the meeting lasted about three quarters of an hour. He was asked about other topics discussed at the meeting and proffered that there was always discussion about machinery and ideas for new products, but appeared to accept that he did not have a clear recollection of the other topics. Nonetheless, Mr Doneux asserted that he was certain that the meeting was called because Mr Takacs wished to have a final payment: T 86.
In relation to this (27 November 2018) meeting, I accept that Mr Takacs wished to be paid the balance of what was owed. I otherwise reject Mr Doneux's evidence as to what was said at the meeting.
[47]
The December 2018 meeting and final payment
According to Mr Doneux, on or about 10 December 2018 he had a further meeting with Mr Takacs in the conference room at Acoustica's factory at St Marys. He said that Mr Ciric was also present and the conversation was as follows (CB 45[42]):
Mr Takacs said: Philippe, I calculated that you still owe me a balance of $34,000 under our agreement. That payment will settle our agreement.
I said: Okay. I'll organise payment over the next few days.
On or about 11 December 2018, Mr Doneux said that he arranged to pay $34,000 to Mr Takacs: CB 45[43]. A few days after making that payment, he said that he received a call from Mr Takacs and had a conversation to the following effect (CB 46[44]):
Mr Takacs said: You shouldn't have put all that money in one account. I would have given you 2 or 3 accounts instead. This will cause tax problems.
I said: You asked for the money to be paid, so I did it straight away.
Mr Takacs acknowledged that he received the sum of $34,000 in December 2018: CB 28[17]. However, he denied that he had any such conversation with Mr Doneux a few days after the payment was made: CB 32[3(k)].
I reject Mr Doneux's evidence that Mr Takacs yet again allegedly raised an issue that the payments would cause tax problems or complained about receiving "in one account" all of the money that he had asked Mr Doneux to pay. No rational explanation has been given as to why Mr Takacs would have been upset about receiving the final payment or had any motive to receive the money into two or three different accounts. If the implication is that Mr Takacs was having difficulty with tax or had any motive to hide the receipt of a large amount of money by having it dispersed into a number of different accounts, I reject such a notion.
[48]
The 29 May 2019 meeting
The parties are in agreement that there was a meeting on 29 May 2019 between Mr Takacs, Mr Doneux and Mr Ciric: PCS [3(n)].
For his part, Mr Doneux asserted that in 2019 he attended more meetings with Mr Takacs and Mr Ciric, and that one of those meetings occurred several months after he made the final payment of $34,000: CB 46[46]-[47]. At that meeting (which I consider is likely to be the 29 May 2019 meeting), Mr Doneux asserted that there was a conversation to the following effect (CB 46[47]):
Mr Takacs said: You owe me interest in accordance with the agreement.
I said: That was not our agreement. You didn't want to sign the agreement and you asked me to pay you $1,000 a month plus your salary and car and expenses.
Mr Takacs said: Then I will take you to court.
I said: Send me your copy of the agreement.
Mr Takacs said: Okay.
Mr Takacs denied that the conversation was to that effect: CB 32[3(l)].
According to Mr Ciric, the following was said during the 29 May 2019 meeting (CB 52[18]):
Mr Takacs said: Acoustica has not paid me interest under the agreement.
Mr Doneux said: No, we had a meeting at your place and we agreed to pay you $1,000 a month plus your salary until we had paid the $200,000 purchase price for the Tafemo business. Paying you interest was not part of the agreement.
Mr Takacs said: That's not correct. I have a copy of the agreement. I will bring it in to the factory.
Mr Ciric said that at no time before the 29 May 2019 meeting did he ever hear Mr Takacs make any demands for payment of the Tafemo Dividend or interest: CB 52[20]. That included a period in or about 2015 and 2016 during which there was a potential sale of Acoustica's business to Pyrotek: CB 56[1]-57[15]; 60[4]-61[7].
In cross-examination, Mr Ciric gave evidence that, during the 29 May 2019 meeting, Mr Doneux had mentioned "that the agreement had changed": T 112.31. He was challenged on that by Mr Price, but nonetheless asserted that he recalled Mr Doneux saying those words. His evidence was as follows (T 112.30-113.11):
Q. So he wasn't wanting to pay any interest to Mr Takacs; is that right?
A. He mentioned he - that the agreement had changed.
Q. I suggest to you that he didn't say that at that meeting. What do you say to that?
A. No, I recall that he mentioned that.
Q. I suggest to you that there was no assertion at that meeting that there had been a change of the agreement or that the agreement wasn't valid in any way?
A. My recollection of that meeting was the disagreement between the two in the agreement, where Philippe mentioned that it would - it was changed in 2003.
Q. Is it possible that you are confusing this meeting with another meeting?
A. I don't believe so.
Q. I suggest to you that after Mr Doneux had said that the $200,000 had been paid, that Mr Takacs said that he wanted a satisfactory arrangement in respect of the moneys that were owed to him and his entitlements, et cetera. And that's the effect of the note that you've made in about the middle of the page on 268?
A. That's correct.
Q. I suggest to you, if Mr Doneux had said anything about the agreement being changed at this meeting you would have recorded it in this file note, wouldn't you?
A. There was a lot of talking between the two of them, I might have missed it.
Q. So is it the fact that we can't rely upon these notes as an accurate record of the meetings?
A. I tried to capture the essence of that meeting.
There is nothing on Mr Ciric's handwritten record of the meeting on 29 May 2019 which indicates that there was a dispute between Mr Doneux and Mr Takacs about the terms of an agreement, nor that the April 2001 Agreement (or some other agreement) had changed: CB 268.
Further, Mr Ciric accepted that there was no writing on his note which recorded Mr Doneux disputing Mr Takacs' entitlement to interest: T 114.36-.43.
In relation to this (29 May 2019) meeting, I reject the notion that there was any assertion made that the April 2001 Agreement (or some other agreement) had changed. I also reject the notion that there was any dispute by Mr Doneux about interest being owed in accordance with said agreement.
However, I think it is likely that Mr Doneux did request a copy of the agreement. That is supported by Mr Ciric's file note. I think it is highly improbable that, if there had been no attendance by Mr Takacs or exchange of counterparts at the 5 April 2001 meeting, Mr Doneux would have asked him to "send me your copy of the agreement".
[49]
The 10 July 2019 email
On 10 July 2019, Mr Ciric sent an email to Mr Doneux attaching a scanned copy of the April 2001 Agreement which Mr Takacs had provided: CB 46[48], 279. In his affidavit, Mr Doneux asserted that Mr Takacs did not provide him with a copy of the April 2001 Agreement signed by him, or signed by both him and Mr Doneux.
Further, Mr Doneux asserted that Mr Takacs had never contacted him, or anyone else at Acoustica, claiming or seeking the issuance of the RPS to Tafemo: CB 47[49].
I consider that what is likely to have happened is that, on or about 10 July 2019 when Mr Doneux received the email from Mr Ciric attaching the scanned copy of the April 2001 Agreement which Mr Takacs had provided, Mr Doneux observed that, whilst it had been signed by him (apparently binding Acoustica), it was not signed by Tafemo or Mr Takacs. In those circumstances, I think it is likely that Mr Doneux opportunistically devised the notion that he would assert that there had been no exchange of counterparts.
[50]
Written agreement issue
I am persuaded that there was an exchange of counterpart agreements on 5 April 2001. In this regard, I have considered the totality of the evidence. I refer to my findings above regarding: the 5 April 2001 meeting; whether Mr Doneux signed another counterpart of the April 2001 Agreement and posted such document to Mr Takacs; and subsequent events, in particular the alleged meeting at Mr Takacs' house in November 2003, the 27 November 2018 meeting, the 29 May 2019 meeting and the 10 July 2019 email.
As noted above, I reject Mr Doneux's claim that no one on behalf of the plaintiffs attended at the 5 April 2001 meeting.
Thus, I find that a binding written agreement came into effect between the parties on 5 April 2001 in the form of the April 2001 Agreement that is Exhibit P1.
[51]
Oral agreement issue
Mr Price submitted that, if the Court found that the parties had entered into the April 2001 Agreement, there could be no oral agreement as asserted by Acoustica. In support of that submission, Mr Price referred to cll 17.2 and 17.3 of the RPS Agreement, which provide that the agreement may only be amended if all parties sign the written amendment and any provision or right under the agreement may not be waived except in writing signed by the party granting the waiver: PCS [29]-[33].
In Australia, it has been said that a "no oral modification" clause cannot prevent the parties to a contract containing it from agreeing to vary it: see e.g. Cenric Group v TWT Property Group [2018] NSWSC 1570 at [102]-[103] per McDougall J and the authorities cited therein; cf MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119. Even if not necessarily preclusive of oral modifications, such clauses provide important context in considering whether the requisite contractual intention to modify or vary a written contract, objectively ascertained, exists: White v Philips Electronics Australia Ltd (t/as Philips Healthcare) [2019] NSWCA 115 at [43] per Bell P (as his Honour then was) (Basten and Gleeson JJA agreeing). However, based upon the facts as I have found them, I need not venture into such issues.
For the reasons that I have outlined above, I reject the assertion of Mr Doneux that there was a specific meeting at Mr Takacs' house in November 2003 and that an agreement was reached on that occasion to the effect contended for by Acoustica and Mr Doneux.
[52]
Estoppel issue
Mr Hand submitted that, if the Court determines that the parties were bound by the terms of the April 2001 Agreement, a conventional estoppel arises from the parties' conduct at the alleged November 2003 meeting and subsequently.
Mr Hand asserted an estoppel in the following terms (DOS [22]):
(a) in November 2003, the parties adopted the assumption that:
(i) the defendant would make regular payments at the direction of Mr Takacs until the sum of $200,000 had been paid;
(ii) the plaintiffs had the right to call for payments up to $10,000 a month; and
(iii) the plaintiffs' right to call for up to $10,000 a month accrued each month;
(b) the parties conducted their relationship on the basis of the assumption, in that:
(i) the defendant made regular payments to the first plaintiff from December 2003 to November 2018, and made a final payment of $34,000 in December 2018;
(ii) the plaintiffs accepted each of those payments;
(iii) the parties did not refer to the terms of the April 2001 agreement during the period of its currency; and
(iv) the plaintiffs did not seek to invoke any rights under the April 2001 agreement until 2019;
(c) each party knew or intended that the other would act on the basis of the assumption; and
(d) in the circumstances, departure from that assumption now by the plaintiffs would occasion detriment to the defendant co-extensive with the amount claimed by the plaintiffs in these proceedings.
In his opening submissions, Mr Price submitted as follows (POS [19]):
19. Second, estoppel by convention requires a finding that the parties had an agreed or mutually assumed state of affairs upon which they acted: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244. There was no agreed or mutually assumed state of affairs and there is no evidence of an agreed or mutually assumed state of affairs.
Mr Price further submitted the following in closing (PCS [35]-[39]):
35. As a rejection of Mr Doneux's evidence concerning the execution of the Agreement on 5 April 2001 requires a rejection of his evidence concerning the alleged conversation in November 2003, it follows that there can be no factual basis for the defendant's conventional estoppel argument.
36. The rejection of that evidence leaves no basis on which to find that the parties had adopted a common assumption.
37. In any event, to succeed with such a claim, the defendant had to establish that each party knew or intended that the other acted on the common assumption: Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at [200] per Tobias JA (with whom Mason P and Campbell JA each agreed).
38. The fundamental difficulty facing the defendant is that Acoustica did not comply with the common assumption it has pleaded. In paragraph 5(a) of the defence, it is pleaded that the parties adopted an assumption consistent with the matters pleaded in paragraph 4(c): [CB 17]. The pleading in paragraph 4(c) of the defence was that the defendant would pay $1,000 per month from December 2003. The evidence establishes that Acoustica did not commence regular monthly payments of any amount until March 2005 [CB 24]. That is 16 months after the alleged commencement of the assumption. No application has been made by the defendant to amend its defence.
39. In the circumstances, there is no evidence to establish the alleged common assumption.
I reject the estoppel claim. The claim fails largely for the reasons submitted by Mr Price. Based on my findings as to the alleged November 2003 meeting and the parties' subsequent conduct, I reject the notion that any mutual assumption was formed between the parties in November 2003 or that the parties subsequently conducted their relationship on the basis of such an assumption.
[53]
Limitation issue
In response to the plaintiffs' pleading of the April 2001 Agreement's formation, Acoustica claimed in its defence that the plaintiffs' claim was barred by operation of s 14 of the Limitation Act: CB 18[6].
Mr Price submitted that s 14 of the Limitation Act is subject to s 54 of the Limitation Act: POS [21].
Relevantly, s 14(1)(a) of the Limitation Act provides as follows:
(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims -
(a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,
…
The relevant parts of s 54 of the Limitation Act are as follows:
54 Confirmation
(1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.
(2) For the purposes of this section -
(a) a person confirms a cause of action if, but only if, the person -
(i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or
(ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made,
(b) a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and
(c) a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account.
…
(4) An acknowledgment for the purposes of this section must be in writing and signed by the maker.
(5) For the purposes of this section a person has the benefit of a confirmation if, but only if, the confirmation is made to the person or to a person through whom the person claims.
(6) For the purposes of this section a person is bound by a confirmation if, but only if -
(a) the person is a maker of the confirmation,
…
[54]
Claim for recovery of the Redemption Amount
Mr Price submitted that the Redemption Amount was to be paid on the third anniversary of the Issue Date. As the Issue Date was 5 April 2001, the Redemption Amount was to be paid on 5 April 2004: T 179. Thus, in the first instance, he submitted that the limitation period required commencement of proceedings within six years of 5 April 2004. However, he then submitted that there were part payments of the Redemption Amount which constituted confirmations, the first of which occurred in November 2003. As the initial part payment was within the limitation period (i.e. within six years of 5 April 2004), that extended the operation of the limitation period for another six years, with each subsequent part payment having a similar effect: T 179.
Accordingly, as payments were made commencing in 2003 and indeed in every year other than in 2004, with a final payment being made in December 2018, the consequence was that by operation of the confirmations by part payment, the limitation period would ultimately expire six years after December 2018, being December 2024: T 179.
As the proceedings were commenced in 2021, Mr Price submitted that Tafemo was within time to sue in respect of the cause of action to recover the Redemption Amount: T 179.
In his DOS, Mr Hand submitted that, on Tafemo's case, Acoustica's non-payment of the Redemption Amount on 5 April 2004 was a breach of contract. He submitted that this was the date on which the cause of action accrued to Tafemo, and accordingly submitted that the limitation period had long since expired: DOS [26].
However, in the final oral submissions, Mr Hand accepted that in the event the Court found that the payments, which Mr Takacs asserted were made and which Acoustica does not dispute making (being the 84 payments listed as being made between November 2003 and November 2018, together with a final payment of $34,000 in December 2018: CB 24-28), were made pursuant to the April 2001 Agreement, Acoustica would accept that there was confirmation of a claim for recovery of the Redemption Amount: T 180.13-.16.
I accept that the claim for recovery of the Redemption Amount is not barred.
[55]
Claim for recovery of the Tafemo Dividend
In respect of the claim for recovery of the Tafemo Dividend, I note (as I have done earlier) that it is ultimately not necessary to determine whether the RPS was actually issued to Tafemo. That is because Tafemo is claiming the Tafemo Dividend in a form of action for breaches of the April 2001 Agreement (Acoustica's breaches being the non-payment of the dividend). The Tafemo Dividend is not being claimed by virtue of any purported rights of Tafemo as a shareholder of Acoustica.
Mr Price accepted that the position in respect of payment of the Tafemo Dividend was different to the claim for recovery of the Redemption Amount: T 179. As there were no dividends paid, there was no confirmation.
In the DOS, Mr Hand raised an issue regarding the proper construction of the April 2001 Agreement: DOS [27]-[32]. The question of construction is not obviously raised by the defence. Nonetheless, it is appropriate to deal with it.
The terms of the April 2001 Agreement contemplate that the RPS will be redeemed: CB 76-78.
Mr Hand submitted that Tafemo was only entitled to receive the Tafemo Dividend during the initial three-year Redemption Period: DOS [27], [30]. He submitted that any action on a cause of action for breach of contract by Acoustica's failure to pay the dividend in respect of the financial year ended on 30 June 2004 (being the financial year in which the third anniversary of the Issue Date occurred) first accrued to Tafemo on 30 October 2004 (citing cl 9), and the limitation period for an action on that cause of action had long since expired: DOS [31], [32].
I am not persuaded that Mr Hand's submission regarding the construction of the payment of the Tafemo Dividend is correct. It is correct that Tafemo is entitled to the Tafemo Dividend during the Redemption Period: CB 76 [cl 2]. However, the Redemption Period is defined by reference to the Redemption Date, which is the date on which the Redemption Amount is paid to Tafemo by Acoustica: CB 76 [cl 1] (Definitions). Clause 3, which deals with the determination of Acoustica's net profit for the purposes of calculating the Tafemo Dividend, provides that "[t]he net profit of Acoustica until the Redemption Date is to be determined using the same or similar methods as used by Acoustica to determine the net profit for the year ending 30 June 2000": CB 76 [cl 3].
I consider that the natural construction of the obligation to pay the Tafemo Dividend is that it is payable during the period from the date of the issue of the RPS until the Redemption Amount is paid. Whilst cl 12 provides an obligation for the Redemption Amount to be paid on the third anniversary of the Issue Date, the Tafemo Dividend is not payable by reference to that obligation. Rather, the Tafemo Dividend is payable by reference to when the Redemption Amount is actually paid to Tafemo by Acoustica.
As the Redemption Amount has not ultimately been paid in full by Acoustica, and the plaintiffs commenced these proceedings in August 2021, Tafemo is entitled to recover payment of the Tafemo Dividend from August 2015, which includes the dividends for the 2015 financial year onwards (given that the obligation to pay the dividend falls on 30 October each year).
[56]
Loss issue
Mr Price made the following submissions regarding the quantum of damages and interest payable on the Tafemo Dividends (PCS [44]-[51]):
The quantum of damages
44. The Redemption Amount using the formula in clause 11 of Annexure A to the Agreement [CB 76-77]: R = (r x N) / n
45. The calculation of "R" after 1 year of the Agreement uses the following inputs:
(a) r is $200,000 - the initial Redemption Amount. See cl 1 Definitions [CB 76];
(b) N is 77.0 - see [CB 305, March 2002]
(c) n is 74.8 - see [CB 305, March 2001]
46. The formula produces a result of R = $205,882.35.
47. That exercise for each year since then but replacing "r" with the amount calculated for "R" for the previous year, less any payments made in that year, results in the calculation of "R" as of 5 April 2021 of $61,240.71.
48. The calculation of the Redemption Amount to 5 April 2024 is:
(a) As of 5 April 2022, R = $63,928.07
(b) As of 5 April 2023, R = $68,579.26
(c) As of 5 April 2024, R = $71,163.26
49. The evidence establishes that the defendant made the following profits:
Financial Year Ended Net Profit CB Ref Tafemo Dividend
30 June 2015 $62,017 [CB 163] $31,008.50
30 June 2016 $401,390 [CB 214] $200,695.00
30 June 2017 $480,026 [CB 246] $240,013.00
30 June 2018 $247,011 [CB 255] $123,505.50
30 June 2019 $384,954 [CB 270] $192,477.00
30 June 2020 $210,409 Ex P13 $105,204.50
30 June 2021 Loss Ex P13 $0.00
30 June 2022 $51,224 Ex P13 $25,612.00
30 June 2023 $122,464 Ex P13 $61,232.00
Total $979,747.50
[57]
Interest
50. The plaintiffs are entitled to interest at the rate of 7.5% per annum calculated daily on the amounts outstanding under clause 10 of Annexure A of the Agreement [CB 76].
51. The interest payable on the Tafemo Dividends set out above is calculated to 2 May 2024 in the table below:
Financial Year Ended Tafemo Dividend Interest Payable
30 June 2015 $31,008.50 $19,796.59
30 June 2016 $200,695.00 $113,035.27
30 June 2017 $240,013.00 $117,178.95
30 June 2018 $123,505.50 $51,034.84
30 June 2019 $192,477.00 $65,099.41
30 June 2020 $105,204.50 $27,670.22
30 June 2021 $0.00 $0.00
30 June 2022 $25,612.00 $2,894.51
30 June 2023 $61,232.00 $2,327.65
Total $399,037.44
[58]
In relation to the calculation of the Tafemo Dividend, Mr Price provided an Excel spreadsheet and summary page which set out his calculations. It was marked as MFI-1. Mr Hand and those instructing him had an opportunity to check those calculations. Whilst disputing liability, Mr Hand did not dispute Mr Price's calculations of damages and interest (T 171.44-.49) and confirmed as much by email to my Associate.
[59]
Conclusion
There should be judgment for Tafemo in the sum of $1,050,910.76 (being the total of the Redemption Amount to 5 April 2024 in the sum of $71,163.26 and the outstanding amount due in respect of the Tafemo Dividend of $979,747.50).
Although Mr Price has calculated some interest amounts, there should be a recalculation to the date of these reasons for judgment.
I direct the parties to bring in short minutes of order to give effect to those findings and calculations.
Mr Price submitted that the plaintiffs wish to be heard on costs following delivery of the reasons for judgment. Although submitting that the Court should dismiss the plaintiffs' claims with costs, Mr Hand did not particularly contend that the Court should not hear Mr Price on the issue of costs. Accordingly, I propose that the parties should, in light of these reasons, seek to agree on the question of costs. In the absence of any agreement, they should provide to my Associate a form of proposed orders in respect of costs and any evidence in support of such orders.
[60]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 11 July 2024
Parties
Applicant/Plaintiff:
Tafemo Pty Ltd
Respondent/Defendant:
Acoustica Pty Ltd
Legislation Cited (9)
Business Names Act 1962(NSW)
Companies (Application of Laws) Act 1981(NSW)
Companies (New South Wales) Code Corporations Act 1989(Cth)
In the matter of Inmart Investments Pty Ltd; In the matter of Marynen Manufacturing Pty Ltd [2023] NSWSC 1257
Junker v Hepburn [2010] NSWSC 88
Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72
MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119
Nagler v Volski (No 2) [2001] NSWSC 1106
Pet Tech Pty Ltd v Batson [2013] NSWSC 1954
Sheahan v Londish [2010] NSWCA 270
Sindel v Georgiou (1984) 154 CLR 661; [1984] HCA 58
Smith v Rynne [2005] NSWCA 77
Toole v Flexihire Pty Ltd (1991) 6 ACSR 455
Twigg v Twigg [2022] NSWCA 68; (2022) 402 ALR 119
White v Philips Electronics Australia Ltd (t/as Philips Healthcare) [2019] NSWCA 115
Texts Cited: Ford, Austin & Ramsay's Principles of Corporations Law (LexisNexis)
Macquarie Dictionary, online ed
Category: Principal judgment
Parties: Tafemo Pty Ltd (First Plaintiff)
Bela Takacs (Second Plaintiff)
Acoustica Pty Ltd (Defendant)
Representation: Counsel:
D C Price (Plaintiffs)
D Hand (Defendant)