Termine v Witches in Britches Pty Ltd [2015] VSC 66

For Witches in Britches Pty Ltd, Maurizio and Rosario Termine

1 The theatre restaurant, Witches in Britches, has operated in Dudley Street, West Melbourne, for a number of years. In large part, this proceeding concerns the underlying ownership of the theatre restaurant business. The dispute as to ownership is between two brothers, Maurizio Termine and his younger brother, Daniel. There is also a dispute which concerns moneys paid to Daniel and whether they are repayable as loans. The third dispute between the brothers arises out of a property development business that the brothers operated together. This dispute concerns what is to happen with the proceeds of sale of some properties.

2 Witches in Britches Pty Ltd ('Witches') operates the theatre restaurant. Maurizio and his wife, Rosaria, are the registered shareholders of Witches. Daniel claims that shortly after a fire in the restaurant in June 2006, Maurizio offered him a 50 per cent interest in the restaurant business, on the basis that Daniel would organise for the restaurant to be refurbished at a price which was less than the amount that Maurizio had been quoted and, in addition, Daniel would pay $150,000 to Maurizio. Daniel did assist with the refurbishment, did pay $150,000 to Maurizio and worked in the restaurant business. Daniel never became a registered shareholder in Witches. After an argument between the two brothers, Maurizio excluded Daniel from the business on 19 November 2012.

3 Maurizio denies that Daniel has any interest in the restaurant business. His case is that the $150,000 was repayment of a loan that had been made to Daniel to assist him in repaying debts associated with a failed furniture business venture.

4 For the reasons which appear in the following sections, I have concluded that there was an agreement between Maurizio and Daniel that Daniel would have a half share in the theatre restaurant business. Maurizio has breached that agreement and Daniel is entitled to damages of $500,000, being half the value of the business as at 19 November 2012, that being the date of the breach. In addition, Daniel is entitled to interest on that amount from 19 November 2012 to the date of judgment.

5 There are four amounts alleged by Witches to be owed to it by Daniel. They are:

(a) $71,500 which Daniel used as the deposit for the purchase of his home;

(c) $26,600 used for the purchase of a jet ski; and

(d) $70,000 which Daniel took from the Witches' bank account on the day that he was excluded from the theatre restaurant business by Maurizio.

6 For the reasons which follow, I have determined that Daniel must repay $164,800 plus interest, being all amounts he received other than $13,300 relating to the jet ski.

7 The property development business was operated through two companies, Termine Developments Pty Ltd and MM & JD Termine Holdings Pty Ltd. Maurizio and Daniel are each 50 per cent shareholders in each company. The only assets of the companies were properties which have been sold. The sum of $373,097.24 (being the balance of the sale proceeds after payment of all external creditors) is held in trust. The issue for determination is what should happen with that balance. Witches claims the whole amount as a debt due. This matter may be disposed of shortly.

8 The books and records of Witches and the property development companies disclose that the two companies in total owe it well in excess of the amount that is held in trust following the sale of the properties. Daniel gave evidence that the amounts paid to the property development companies were lent by Witches. There is no evidence to support one of his pleaded allegations that the moneys were advanced as a gift. The books and records of Witches and the property development companies record the amounts as debts. In this regard, Witches called in aid s 1305(1) of the Corporations Act. That section provides that:

A book kept by a body corporate ... is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.

9 Daniel submitted that the fact that the amounts were recorded in the books of account, did not mean that the transactions took place. He relied upon the decision in Livingspring Pty Ltd v Kliger Partners.[1] In that case, the Court of Appeal considered a submission by one of the parties that s 1305(1) established a presumption that company accounts are on the face of it true and correct and accurate. The Court stated:[2]

The provision does no such thing. All that s 1305(1) provides is that a company's books (relevantly, its financial reports and records) are admissible and are 'prima facie evidence of any matter stated or recorded' in them. As the Full Federal Court said in Whitton v Regis Towers Real Estate Pty Ltd, s 1305 does not elevate an entry in a book of account to the status of prima facie evidence of the transaction(s) which the entry purports to record. The same must be true of an entry purporting to record the existence, and value, of an asset. The entry in the accounts:

can be no more than prima facie evidence that an unknown person formed an opinion on an undisclosed basis that ... such a figure should appear in the accounts.

10 It is worth noting that in that case, there was evidence that showed that the accounts were not accurate.

11 In my view, weight should be given to what is recorded in the books of account as it is consistent with Daniel's own evidence that the amounts advanced were advanced as loans. Indeed, there is no evidence to the contrary.

12 In his written closing submissions, Daniel sought to argue various matters - some had no legal basis and all were in conflict with the evidence that he gave that the advances were loans. Further, none of the matters he sought to agitate had been pleaded. During closing submissions, he sought leave to amend his pleading. Leave was refused because the proposed amendments had no reasonable prospect of success. First, he sought to argue that there was no loan agreement because the requisite intention to create a contract was absent. Put in a slightly different way, but to the same effect, he contended that there was a lack of intention to be legally bound by the arrangement. These arguments rested largely on ignoring the separate legal entities involved and treating the funds as if they had been transferred between two accounts both owned by Daniel and Maurizio. In conclusion on this point, Daniel submitted that 'the proper characterisation of the arrangement is a mere arrangement to transfer monies between companies and not any arrangement with the character of a loan.' There is no such characterisation known to law. Where, as here, there is a transfer of money from one company to another without more, it is most likely a loan. Moreover, as I have said, Daniel's evidence was that the moneys were advanced as loans.

13 Secondly, Daniel sought to argue that there was uncertainty in the 'arrangement' such that it was unenforceable. He sought to argue that there was no timeframe for repayment nor any provision for interest nor security. However, when no time for repayment is specified, a debt is repayable immediately.[3] So the lack of reference to terms for repayment does not matter and, in my view, the absence of provision for interest and security does not make the terms uncertain. Many loans are unsecured. Whilst one might expect that a commercial loan would attract interest, its absence does not mean that the terms of the loan are uncertain. Again the argument flies in the face of the evidence that Daniel gave that the amounts were advanced as loans.

14 Thirdly, Daniel sought to argue that the books of the three companies were inaccurate. Despite the evidence that he gave, he sought to argue that the payments were not loans. For the reasons already given, that argument must fail. He also suggested that the books did not establish that the transactions were loans. I will repeat again that his evidence supported that the moneys were advanced as loans, as recorded in the books. Finally, he contended that the books are not accurate as they have been prepared by Maurizio to suit his interests. Again though, Daniel's own evidence is not consistent with this submission, at least insofar as it concerns the property development loan entries in the companies' books.

15 It follows that even if leave had been granted to file a pleading to support any of these arguments, Daniel would have failed on all of them.

16 So far as the loans are concerned, the only remaining question is when they were repayable. As I have said, where no date for repayment is specified, loans are repayable immediately.[4] In this regard, Witches claims that the loans were repayable on demand. On the other hand, Daniel pleaded that the loans were repayable upon the sale of the properties. The properties were sold as a result of consent orders made in the proceeding. Daniel submitted that this was done with the net proceeds being paid into trust as a matter of expediency so that the funds were not dissipated before the Court determined the entitlement to the moneys. To my mind, it does not matter how or why the properties were sold. The fact is that they have been sold. Even on Daniel's pleaded case, the amounts are now repayable. As such, it is not necessary to determine whether the loans may have been repayable prior to sale or upon demand. In case I am wrong, my view is that no date for repayment having been specified, the loans were repayable on demand or a sale of the properties, whichever came first.

17 As I mentioned above, the sum of $373,097.24 is held on trust following the sale of the properties. After deduction of the amount of GST payable, $288,551.61 is available. Of that amount $139,841.75, belongs to MM & JD Termine Holdings Pty Ltd ('Holdings'). The amount owed by Holdings directly to Witches is $26,742.47.[5] In addition, there was an amount of $150,200 advanced by Witches to Termine Developments Pty Ltd ('Developments') which then on-lent that amount to Holdings. Consequently, the amount available to Holdings is less than the amount required to repay its debts to Developments and Witches, those debts exceeding $170,000.

18 The balance of the moneys held in trust, being $148,709.86, belongs to Developments. It owes Witches in excess of $600,000[6] (which includes the amount of $150,200 that it on-lent to Holdings).

19 Consequently, the debts owed by each of the property companies exceed the amount available to it to pay them. Ultimately, all of the available money would end up with Witches (the $150,200 payable by Holdings to Developments then being repayable by Developments to Witches, there being no other unaccounted for creditors).

20 As such, orders will be made for the payment of $373,097.24 to Witches with that amount to be released immediately from trust to it. The amount of GST will need to be paid and only the balance of $288,551.61 may be retained by Witches. Orders will also be made for the balance of the debt owed by each of Holdings and Developments to Witches together with interest at the statutory rate.

21 I will now consider in turn the two remaining disputes between the brothers - first, as to the ownership of the restaurant business and secondly, whether moneys paid by Witches to Daniel are repayable as loans.

Was there an agreement that Daniel would have a 50 per cent interest in the Witches restaurant business?

22 Originally, the theatre restaurant was operated by Mr Joe Fodera. Rosaria Termine is Mr Fodera's niece. Maurizio is her husband. In about 2000, Mr Fodera brought Rosario and Maurizio into the business. Some time later, a company now known as Old Witches in Britches Pty Ltd, started to operate the business. Mr Fodera held 51 per cent of the shares in that company, and the remaining shares were held by Maurizio and Rosaria. They paid $150,000 for their interest. It was paid over time out of the share of profits that they received from the business.

23 Maurizio and Rosaria are also equal shareholders in a company called Collessione Imports Pty Ltd. That company imported furniture and sold it. In about 2004, Daniel and his wife, Danette, opened a retail furniture business in Sunshine called Impressive Quality Furniture. There is a dispute between the brothers as to how this came about. For present purposes, that does not matter. Collessione Imports provided stock on consignment to Impressive Quality Furniture. The business of Impressive Quality Furniture was not successful. After six months, Daniel and Danette closed the business. There is a dispute as to what happened at that time. Daniel and Danette say that they paid a small amount to Maurizio for the stock that they sold and when the shop was closed, they returned the surplus stock to Collessione Imports. On the other hand, Maurizio says that Collessione Imports supplied them with $150,000 worth of stock and that they owed that amount when the Impressive Quality Furniture business closed. Daniel and Danette's version of events is more probable. There was no documentary evidence concerning the stock that was consigned: not as to the quantity of stock supplied, the value of that stock, the amount nor the sale price of stock that Impressive Quality Furniture sold, nor the type, quantity and value of any stock returned to Collessione Imports. Even accepting that the consignment of stock was a transaction for all practical purposes between brothers such that formal documentation may be lacking, one would nevertheless expect at the least that Maurizio would have retained some rudimentary paper work if the quantity and value of stock supplied was of the level asserted by him. Maurizio's evidence about the consignment of stock, particularly when and how much stock was consigned, was at best vague. In his evidence in chief, he said that he had paid about $40,000 towards the fit-out of the shop premises for Impressive Quality Furniture, that he had provided $50,000 to $60,000 of consignment stock initially, then batches of stock for $8,000 to $10,000, $6,000 to $7,000 and finally $4,000 or $5,000 and that no further stock was supplied because Daniel was not paying Collessione Imports. Even if the asserted fit out costs are included, that does not total $150,000. He gave similar evidence in cross examination.

24 According to Maurizio, the mark-up charged by Impressive Quality Furniture was 100 per cent so that if an item of stock was consigned for $200, the retail price would be $400. He also gave evidence that if Daniel sold all of the stock consigned (which he says was $150,000) then, given the margin charged, over the six month period that the furniture shop operated, Danielle and Danette would have made $150,000 (less expenses of running the business). In those circumstances, why would they shut the business?

25 Taking the lack of any supporting documentary evidence and the vagueness of Maurizio's oral evidence into account, it seems improbable to me that his version of events is accurate.

26 After the furniture business failed, Daniel returned to his trade as a tiler. In addition, he sometimes worked as a security guard at the theatre restaurant.

27 In 2006, Mr Fodera agreed to sell his interest in the theatre restaurant business to Maurizio for $300,000. Mr Fodera was to continue to own (through a company he controlled) the theatre restaurant land and buildings. Settlement of the sale of Mr Fodera's interest in the business was to take place on 30 June 2006. However, a few days before that on 26 June, there was a fire at the restaurant and the sale of Mr Fodera's interest did not proceed. Mr Fodera did not know what he was going to do. There were many things to consider. There was an insurance claim made in respect of the fire damage and there was also the possibility of doing something else with the land other than re-establishing the theatre restaurant business.

28 Some time after the fire at the restaurant, most likely towards the latter part of 2006, Maurizio asked Daniel if he would be prepared to be a partner in the business with him and to fix up the restaurant. Maurizio told him that there was a quote for about $600,000 to $620,000 to restore the restaurant. Daniel told Maurizio that he could do it for about half that amount.

29 Daniel was to take responsibility for refurbishment of the restaurant and was to pay $150,000 to Maurizio. Maurizio told Daniel that he would ask their father to lend them Daniel's share with the money to be repaid by Daniel out of the profits of the business over time. Maurizio said that he was going to do what he did with Mr Fodera but he would give Daniel a 50 per cent not 49 per cent interest. After Daniel spoke to his wife, Danette, he agreed to go ahead with Maurizio on the basis that they had discussed.

30 Maurizio denies that these discussions took place. He says that he wanted to help his brother who had been unsuccessful in the furniture business and that around December 2006, he agreed with Daniel that Daniel would refurbish the restaurant and once the business was up and running again, Daniel would be paid a weekly wage of $2,000.

31 In my view, it is more probable that the discussions were about going into business together. It plausibly explains why Daniel subsequently paid $150,000 to Maurizio. Whilst Maurizio tried to explain the payment as being in respect of the consignment stock supplied by Collessione Imports to Daniel's failed furniture business, for the reasons that I have given, I do not accept that evidence. Whilst the payment of money (and other evidence to which I will refer shortly) post-dates the time at which an agreement was reached between the brothers, it is probative of the existence of the agreement.[7]

32 My conclusion that the discussions between Daniel and Maurizio took place and that an agreement was reached between them is also consistent with evidence given by Witches' current external accountant, Mr Kevin Lucas. He took over that role in 2008. The accounts that he prepared for the year ending 30 June 2010 contain an entry showing a shareholders' loan of $81,500 in the name of Daniel and Danette. Mr Lucas could not explain why that entry was made describing Daniel and Danette as shareholders. In the 2012 set of accounts the debt was recorded as 'Loans to employees' but this was only after Mr Lucas had obtained a company search for Witches that showed only Maurizio and Rosaria as shareholders. Moreover, Mr Lucas gave other evidence that was consistent with Daniel's case. In 2011 the brothers sought advice from him about setting up the property development business together. They told Mr Lucas that they wanted to buy a number of properties, some to be held longer term and others to be developed. They said that they were each to hold 50 per cent equity in that business. They told Mr Lucas that the money for the property purchases would flow through Witches and from bank borrowings. They wanted to use Witches as the vehicle for the purchases and they wanted to shift profit out of Witches and use tax losses in Collessione Imports. Mr Lucas recalled that Daniel told him that once the tax losses had been used, he would become a director and shareholder of Witches. Mr Lucas gave the brothers advice that the Collessione Imports tax losses could not be used in the manner that they proposed and that as Daniel was not a shareholder in Witches, they could not use it if their intention was that the equity holding was to be between them. I do not accept Maurizio's evidence that the offloading of tax losses in Collessione Imports was not raised with Mr Lucas. Mr Lucas is independent of the two brothers. He had no vested interest in giving partisan evidence. I prefer his evidence to that of Maurizio.

33 The evidence of Mr Lucas was not all one way - he said that Daniel had never told him that he was a shareholder, never enquired about the financial state of Witches and never asked about dividends and the like. However, none of that is surprising. In the main, Daniel left it to Maurizio to deal with Mr Lucas. He had been given a reason by Maurizio as to why he was not registered as a shareholder and he was receiving significant amounts of cash from the business. I will say more about the cash later. It is true that the reason that Maurizio had given him as to why he could not be a registered director and shareholder fell away after the meeting with Mr Lucas in 2011. However, taking the evidence as a whole (including the payment of the $150,000 and the documentary evidence about which I will say something shortly) I am persuaded that it is probable that there was an agreement between the brothers that Daniel would receive a 50 per cent interest in the theatre restaurant business.

34 Maurizio also contended that the situation with Witches is to be contrasted with the two property development companies in which the brothers were both shareholders with neither making a financial contribution. However, that is explained by the story that Maurizio told Daniel that Collessione Imports tax losses would be used to reduce the tax payable by Witches. It is also consistent with the initial plan of the brothers to use Witches as the property development vehicle.

35 In addition to the evidence of Mr Lucas, there was some documentary evidence that was consistent with Daniel's case about the agreement. Maurizio signed three letters that Daniel could use to obtain finance. The first letter dated 7 September 2009 'certified' Daniel as becoming a director and 50 per cent shareholder of Witches from 1 November 2009. The two later letters described him as a director and 50 per cent shareholder of Witches. Each letter specified his earnings. I do not accept Maurizio's evidence that the letters contained false information and that he only signed them to help his brother get a loan. It seems to me that if they were used to support applications for finance, all that Maurizio had to do was to state what Daniel's income was and it was not necessary to go a step further and describe him as a director and shareholder if that were not true.

36 Other documentary evidence also supported Daniel's case. Maurizio signed a credit application in respect of a supplier that listed Daniel as a director of Witches. Although I accept that Maurizio may have signed the document without noticing this, nevertheless, the document was signed by him and taken with the other evidence is supportive of Daniel's case.

37 Finally, there are some early pay records which indicate that Maurizio, Daniel and their wives each received the same weekly wage and that subsequently Daniel and Maurizio were for some time paid the same amount each week. Taken with the other evidence, these pay records are consistent with the brothers sharing money generated by the restaurant business on an equal basis.

38 By late 2006, Mr Fodera and Maurizio came to an arrangement. Maurizio was to reestablish the theatre restaurant and Mr Fodera was to receive the insurance proceeds and would take no further part in the business. Mr Fodera's company was to continue as the landlord of the theatre restaurant premises. As part of the arrangement, Mr Fodera agreed that no rent would be payable for 12 months. So far as Mr Fodera was concerned, the cost of refurbishing the building after the fire fell to Maurizio.

39 Maurizio submitted that on the evidence, any alleged agreement (as contended for by Daniel) must have been made by no later than August 2006 and, looking objectively at the chronology of events, that could not have happened. At this time, Maurizio contends that the state of the building was in limbo and that the only works that had been done were asbestos removal works. As I have said above, in my view it is likely that the discussions about going into business together were not concluded until later in the year. There was a lot going on in July and August and there was some uncertainty as to what would happen. However, I do not accept that Maurizio could not have reached an agreement with his brother until everything had been finalised with Mr Fodera. Maurizio knew that Mr Fodera did not want to continue in the business for he had agreed to sell his interest to Maurizio with settlement having been scheduled for shortly after the date that the fire occurred. Whilst the business could not be resurrected until a final arrangement had been reached with Mr Fodera who controlled the restaurant's landlord, that did not prevent Maurizio from planning for the future and reaching an agreement with his brother, albeit conditional upon Mr Fodera stepping away from the business and leasing the property to Witches. Maurizio submitted that one would expect that if Daniel's version of events were to be believed that Mr Fodera would have given evidence that Maurizio would tell him of his plans. However, there would be no need for him to do so if Mr Fodera was not going to be involved in the future business. Maurizio also submitted that there is an objective difficulty with Daniel being his partner and that is that the purchase price that Maurizio had agreed to pay Mr Fodera for his 51 per cent interest was $300,000. However it seems to me that the difference can be explained because at the time of the agreement between Maurizio and Daniel there was no operating business and also the agreement was that Daniel would arrange the refurbishment of the restaurant at a significantly reduced figure which was a real cost saving to Maurizio.

40 Maurizio also pointed to evidence of Mr Luigi Gullaci, who was in the tiling business with Daniel at the time of the fire. Mr Gullaci's evidence was that Daniel told him later in the year after the fire had occurred at the restaurant that he was going to get involved helping to clean up the premises and that in February 2007, Daniel told him that he was going into a partnership with his brother at Witches. Maurizio asked rhetorically why Daniel would not tell his then business partner that he was leaving the tiling business if the agreement was made some months earlier in 2006. Mr Gullaci's evidence was that in February 2007 he asked Daniel why he could not have told him earlier that he was leaving the tiling business if he knew about it from 2006 to which Daniel responded that he was not sure of his position and if he was going to take it on. Mr Gullaci's evidence is broadly consistent with the finding that I have made that an agreement between the brothers was reached later in 2006. In any event, it is perfectly understandable that Daniel would not finalise his tiling business interest with Mr Gullaci until the restaurant works were underway.

41 Returning then to the events as they unfolded, towards the end of 2006 Maurizio approached his father to lend them the money for Daniel's share. His father refused. He did not have cash available for the loan and, given his age, he did not want to put the family home at risk by mortgaging the property. As his father was not prepared to lend, Maurizio and Rosaria sold the matrimonial home and obtained a line of credit from a bank to fund the refurbishment works. Maurizio did not deny that he had approached their father to help him. He said that he knew his father had $50,000 to $60,000 which he asked his father to lend to him until the business was up and running again. He said that this was in case he had insufficient money to finish the refurbishment. I do not accept his evidence as to the discussion that took place between Maurizio and his father. It seems inherently improbable that he would make a request for that amount which would be significantly less than was required to complete the works. Funding of $300,000 was obtained from an external financier so that the refurbishment could be undertaken.

42 Maurizio also submitted that an agreement with Daniel (as alleged by him) does not make sense from a financial point of view. Maurizio borrowed $300,000 from a bank so that the refurbishment works could be undertaken. In that circumstance, he says that it makes no sense for him to then give his brother 50 per cent of the business. However, he was not 'giving' his brother the half share for nothing. Daniel ensured that much less would need to be spent on the refurbishment than would otherwise be the case and he paid the $150,000 to Maurizio. Further, the repayments for the bank loan came from Witches such that Daniel effectively contributed 50 per cent of the repayments with money that would otherwise have been paid to him as his share from the business.

43 Once arrangements had been finalised between Maurizio and Mr Fodera, they went to an accountant who arranged for the company name to be changed to 'Old Witches in Britches Pty Ltd.' The new Witches in Britches Pty Ltd was established the following day in late January 2007. The registered shareholders were and remain Maurizio and Rosaria. Maurizio is registered as the sole director and secretary. Daniel did not know that the new Witches in Britches Pty Ltd existed until some time later.

44 The theatre restaurant re-opened in April 2007. In October that year, Daniel started paying off the $150,000 that he had agreed to pay to his brother. Each time he paid an amount, he recorded it in a 'Debt Book' on a page headed 'BUSINESS REPAYMENT'. Maurizio signed each entry.

45 Everything seems to have gone well with the brothers and the restaurant until about September 2012. At about that time, a health inspector required some work to be done on the restaurant, including some tiling works. Daniel was responsible for seeing that this work was done. At about the same time, the brothers' father was hospitalised. Daniel spent time visiting his father and less time than he had previously at Witches. He did not get around to doing the tiling work that was required.

46 At about the same time in 2012, Daniel paid the last instalment of the $150,000 due to Maurizio. After this, Daniel noticed that Maurizio's attitude towards him changed for the worse.

47 The ill health of their father continued and he died on 11 November 2012. The funeral was held on Friday, 16 November 2012. By the following Monday (19 November 2012), the tiling repair work had still not been done. Daniel and Maurizio had an argument about it, the result of which was that Maurizio excluded Daniel from the business.

48 I would note at this stage that other family members gave evidence which broadly accorded with Daniel's evidence, although there were some differences between them as to when any agreement was entered into between the brothers. I do not place weight on their evidence. None of the other family members were present when the alleged ownership agreement was made between the brothers. Further, there is no doubt that the brothers did operate the property development business together and I am not satisfied that family discussions about the brothers' 'business' related to the restaurant rather than to the property development business. Finally, there is no common language used by the family members in which they are each fluent. This may well have led to miscommunication or, at least, some confusion. Whilst Maurizio and Daniel are both fluent in Spanish and English, their mother is not. Rather, her primary language is Italian. Rosaria does not speak Spanish but is fluent in English and Italian.

49 There is a question about the role of Rosaria and the effect of her involvement. She was also a shareholder in Old Witches Pty Ltd and later in Witches. At this point, I would interpolate that the pleading of the claim leaves a lot to be desired. Daniel pleads that between April and July 2007 the agreement to which I have referred was varied or novated 'so as to carry on the business of the theatre restaurant using the corporate structure of Witches in Britches Pty Ltd'. Suffice to say that whatever other difficulties Daniel may face with this part of his claim, it relies upon Rosaria's involvement. In her evidence, she vehemently denied any knowledge of an agreement between her husband and Daniel and she also strongly denied that she would part with any interest in the business. It is clear that she leaves many business matters to her husband and, in her words, her husband handles all the finance. Rosaria put full trust in her husband. Nevertheless, in my view, Rosaria did not authorise her husband to act on her behalf in respect of the divestment of an interest to Daniel. To my mind, Rosaria was content to leave financial management and the conduct of the business day to day to her husband but did not empower him to dispose of what she saw as her family's business, it having been derived from her uncle. Her evidence about ownership of the business and keeping it in her family (as opposed to Maurizio's family) was convincing. I do not think that Maurizio told her of the agreement he had made with Daniel. I also do not accept that her attendance at Termine family functions where the 'business' was discussed means that she must have known of the agreement. As I said above, there were language difficulties and the brothers had the property development business together. These discussions were frequently conducted in Spanish, a language which Rosaria does not understand.

50 None of this detracts from my finding of an agreement between the brothers. It was for Maurizio to ensure that all necessary steps were taken with the result that his brother would have a 50 per cent interest in the business, however that might be achieved.

51 Daniel performed his part of the bargain by arranging for the refurbishment works and paying the sum of $150,000 over time. In breach of the agreement with Maurizio, he did not receive a 50 per cent interest in the business.

52 The damages to which Daniel is entitled are those caused by the breach of contract. So far as money can compensate him, he is entitled to be placed into the same position that he would have been in had the contract been performed. Daniel's loss is therefore the loss of a half interest in the business. In money terms, he is entitled to 50 per cent of the value of the business as at the date of the breach, that being 19 November 2012 when he was excluded from the business by Maurizio. In addition, Daniel is entitled to interest on the damages from that date to the date of judgment.

53 A court ordered valuation was prepared by Mr Timothy Bow, a partner of PKF Lawler Melbourne. The valuation was conducted in 2014. However, as Mr Bow considered it appropriate to use the average of the normalised EBITDA[8] for the 2008-2013 years as indicative of maintainable earnings of the restaurant business, it seems to me that it may be taken into account in considering the value of the business in November 2012. The figure that he arrived at for maintainable earnings was $113,583. Mr Bow then applied two alternative capitalisation rates (or earnings multiples) of 2.5 and 3.5 to arrive at a fair market enterprise valuation in the range of $285,000 to $399,000. He adopted the midpoint of those figures for his opinion as to value of the restaurant business; that is, approximately $342,000.

54 In preparing his report, Mr Bow relied upon company tax returns, bank statements, the lease documentation for the premises in Dudley Street where the restaurant is situated and other information provided. Mr Bow noted that not all information that he sought had been provided. Mr Bow's report does not take into account any unrecorded cash takings of the business.[9]

55 It is necessary at this point to delve into the evidence about cash takings. Daniel's evidence (which I accept) was that the Witches' business had a large cash component with that cash being generated through the bar. The cash receipts were recorded in a cash book. Most of the cash was generated from payments made in the bar at the theatre restaurant. There were also some cash sales for tickets. These ticket cash payments were paid into the Witches' bank account. The cash takings from the bar were stored in the upstairs safe. Some staff were paid in cash from the safe moneys as were some of the tradesmen who carried out refurbishment works following the fire. In addition to the amounts recorded in the weekly wage records that I have discussed above when the brothers are shown as receiving a weekly wage of $650, they would each receive $1,350 in cash. The rest of the cash would build up in the safe and every couple of months or so Daniel and Maurizio would divide the bulk of the accumulated cash between them. The amount would vary ranging between $40,000 and $60,000 each time. So if $40,000 was in the safe, they would leave $10,000 in the safe and split the remaining $30,000 equally between them. Daniel estimated that the weekly cash takings were between $11,000 to $18,000. The takings were higher in the months leading up to Christmas when the restaurant was at its busiest. Daniel paid the $150,000 to Maurizio out of the cash that he received from the business.

56 Juan Termine, who is the brothers' nephew, worked in the bar two or three nights a week. He gave evidence about cash payments at the bar and payment of some wages in cash which was consistent with Daniel's evidence.

57 Sally Kenyon works at Witches as a supervising waitress. She has done so off and on for some time. She has some familiarity with the operations of the bar but she does not work in it. She gave evidence that 75 per cent of people opened a bar tab in the office and paid that tab by credit card. She confirmed that only cash payments were taken over the bar. In my view, Ms Kenyon is not in a position to confirm what proportion of payments were in cash and what were put on tabs. She does not work in the bar and therefore has not observed what goes on and how much is paid in cash. Her other evidence was consistent with that of Daniel.

58 Maurizio claimed that 80 per cent of the bar takings were by credit card, usually on a bar tab. Maurizio claimed to have left all the cash accounting to Daniel and says that he trusted him to account for it properly.

59 Whatever the percentage of payment by cash at the bar as opposed to tabs paid by credit card, I am satisfied that the cash takings were significant and that Daniel and Maurizio shared them after payment of staff and some tradesmen. Daniel deposited almost $115,000 into his bank account in cash in a five month period in 2009. There is no other apparent explanation as to the source of the cash. He also paid the $150,000 with no other apparent source to do so.

60 That being so, it is clear that Mr Bow's valuation figure for the business needs adjustment to take into account the unrecorded cash takings. In this regard, Daniel claims that the correct damages figure is $515,371.50. He arrives at that figure on the following basis. Fifty per cent of the $342,000 valuation figure arrived at by Mr Bow is, $171,000. Between 30 June and 30 November 2009, the cash takings of the business received by Daniel totalled $114,999 so that the total cash takings for that period were $229,998 (because Maurizio also received an equivalent amount to Daniel). Daniel submitted that that figure should be added to the normalised pre-tax earnings figure of $113,583 that Mr Bow had arrived at to establish a figure of $343,581 for the real normalised pre-tax figure. He then contended that the multiple of three (that is, the mid-point of the two multipliers that Mr Bow had used) should be applied to that figure to give an enterprise value of $1,030,743. Half of that amount is $515,371.50.

61 I accept Daniel's evidence that before his exclusion, he recorded the bar cash takings in a cash book. Despite requests made by his lawyers, no cash book was produced by Witches, on the basis that it did not exist. Without the cash book, it is difficult to assess accurately the average yearly cash takings. Nevertheless, that does not mean that the amount to be calculated as damages to Daniel should be limited to the valuation figure arrived at by Mr Bow. The Court must do the best that it can with the evidence before it to make an assessment of damages.[10] In this case, although there is not much evidence, there is some evidence upon which to base an award of damages. It is not a matter of mere speculation[11] nor is this a case where there is no evidence.[12] The evidence as to the amount of cash takings is that given by Daniel. His estimate that there were weekly cash takings of between $11,000 and $18,000 would give a yearly range over $500,000 (less amounts paid in cash to staff, tradesmen and the like). The accumulation every couple of months of $40,000 to $60,000 gives a yearly range between about $240,000 and $360,000. The cash payments deposited by Daniel into his account between 30 June and 30 November 2009 and the amount paid to Maurizio in that period give a figure of approximately $230,000 for that five month period (which excludes December that being the busiest month of the year). Although if that were extrapolated to arrive at a much higher yearly figure, it is only that amount that Daniel seeks to add to Mr Bow's normalised pre-tax earnings figure of $113,583. I am inclined to begin with the figure of $230,000 that Daniel submitted should be used. That amount is more modest than or falls within the lower end of the range of the methods of calculating the yearly net cash that I have described. Secondly, Maurizio is the sole director of Witches. Information about the quantum of cash takings could have been supplied by him.

62 Using rounded figures of $110,000 and $230,000 gives a total of $340,000. To that must be applied the multiplier. Mr Bow used alternatives of 2.5 and 3.5 and then chose the midpoint figure. Using similar methodology by applying a multiplier of three gives the business a value of $1,020,000. The damages to which Daniel is entitled is half that amount which I would round down to $500,000. He is also entitled to interest on that amount since 19 November 2012.

63 In addition to those damages, Daniel sought an additional amount of $711,071.91 made up as follows:

Capital contribution to Witches in Britches Pty Ltd

64 The first item is the $150,000 that Daniel contributed to purchase his interest in the business. Daniel is not entitled to that amount in addition to 50 per cent of the business value. It was necessary for him to pay the $150,000 to have any entitlement under the agreement.

65 The second item set out in the table above is for wages foregone from the time he was dismissed from Witches. However, he gave evidence that after he was forced out of the Witches restaurant, he started a new restaurant in Carlton. I am not satisfied that he has forgone any wages.

66 The third item of loss claimed is based on the figure of $114,000 which Mr Bow concluded represented the estimated maintainable earnings. Daniel submitted that he is entitled to half of this amount pro rata for each financial year from the date of his exclusion from the restaurant business. The final component of loss claimed by Daniel is of a similar vein. It is for 50 per cent of the cash takings from the business from the date of his expulsion. His claim is calculated using the figure of $114,999 for the 30 June to 30 November 2009 period as if it was the amount received over a 12 month period and applying that on a pro rata basis from the time of his exclusion from the business. However, in respect of both these items, his damages are what he lost which is his half interest in the business. He is not entitled to that and to the future profits that the business makes.

Is the $150,000 repayable as money had and received?

67 An alternative claim to the breach of contract claim by Daniel is for money had and received. The defendants accepted that if, as I have found, the $150,000 was not used for the repayment of debts incurred by Daniel's furniture business to Collesione Imports, then the relief sought by him as money had and received would be appropriate. If I am wrong and there was no agreement, then I would nevertheless order that Maurizio repay $150,000 on this basis.

Estoppel, unconscionable conduct, constructive trust

68 In addition to the breach of contract and money had and received claims, Daniel makes various other allegations, but the pleading is poor and confusing. Whilst in one paragraph in the middle of the pleading of the contract claim he uses terms and concepts that are well known to law (estoppel, unconscionable conduct, constructive trust) to allege that he is entitled to a 50 per cent interest in Witches, there is no properly pleaded claim based on any of those principles. He submitted that based on estoppel, the Court could recognise him as a shareholder on the basis that 50 per cent of the shares in Witches are held on constructive trust for him.

69 In view of the conclusion that I have reached about the existence and breach of an agreement, and that Rosario was not party to that agreement and also the alternative claim for money had and received, I will not consider these alternative allegations.

Breach of fiduciary duty and breach of statutory duties

70 Another alternative claim by Daniel is for breach of fiduciary duty arising out of a joint venture between him, Maurizio and/or Rosaria and Witches. The loss claimed by Daniel for this alleged breach is the same as that alleged in respect of the breach of contract claim. If I am wrong and there was no agreement as I have found, then there could be no joint venture either. If, on the other hand, the agreement is properly characterised as a joint venture and there has been a breach of the fiduciary duties owed to Daniel, then he would be entitled to an amount equivalent to the damages for breach of contract that I have discussed above. Whilst the prayer for relief seeks wide-ranging forms of relief, including declaratory relief and orders for the transfer of shares to Daniel, none of that relief is appropriate in this case where the brothers simply could not work together.

71 Daniel also alleges that Maurizio and/or Rosaria acted in breach of their fiduciary duties and/or their duties owed pursuant to ss 180-183 of the Corporations Act. His closing submissions made no reference to this part of his claim. In any event, it is not clear to me that Rosaria owed any such duties. She was not a director or other officer and if she was an employee at any stage, it was only for a few months after the restaurant re-opened. As for this type of claim against Maurizio, there are a number of difficulties including that the duties that he owed as a director were owed to Witches (not Daniel). The evidence does not establish any breach of those duties.

72 A further alternative claim (dependent upon there being no agreement between the brothers, which I have found there was) is for quantum meruit for the services that Daniel rendered as 'refurbishments coordinator and refurbishments supervisor.' Even if this claim could be made out and, on the evidence it was not, there is no evidence of the amount that would constitute reasonable compensation for the work performed by Daniel.

73 A further claim made by Daniel is for misleading or deceptive conduct. The allegation is that Maurizio made representations that Daniel was entitled to be registered as equal shareholder and director of Witches. I am satisfied that those representations were made by Maurizio on multiple occasions once Witches was established and after Daniel became aware of its existence sometime in the first few months of 2007. I accept Daniel's evidence that Maurizio told him that he wanted to offload the tax losses from Collesione Imports into Witches so that it would not pay tax and that he could not do that if Daniel's name was on the records of Witches. Whilst the losses could not be used in that way, that does not detract from the fact that Maurizio used this as an excuse for not registering Daniel as a shareholder and director. Daniel's evidence about this is consistent with the evidence of Mr Lucas that the brothers wanted to use Witches as the property development business vehicle and to use the tax losses. In this regard, I prefer the evidence of Daniel to Maurizio. However, the making of these representations, and assuming for the purposes of the argument that the other statutory elements were made out, does not lead to orders that Daniel be registered as a shareholder and director. That is, Daniel is not to be put in the position that he would have been in had the representation been true, but rather he would be entitled to be in the position he would have been in had he known that the representation was false. There is no direct evidence about this. However, from the totality of his evidence, I would infer that he would not have paid the $150,000. Consequently, if all the elements of the claim were made out, he would be entitled to the return of that amount. Indeed, in closing submissions, Daniel's solicitor accepted that that was the only amount that could be ordered in respect of this aspect of his claim. Of course, it is not additional relief to what he has been awarded as damages. Those damages are based upon him having purchased his interest by payment of the $150,000.

74 The final claim alleged by Daniel is based on ss 232 and 233 of the Corporations Act. Among other things, s 233 empowers the Court to make orders to redress conduct of a company's affairs that is contrary to the interest of the members as a whole, or is oppressive to, unfairly prejudicial to or unfairly discriminatory against a member of the company.[16]

75 Whether conduct is 'oppressive to, unfairly prejudicial to or unfairly discriminatory against' a shareholder within the meaning of s 232 is assessed objectively through the eyes of a commercial bystander.[17] If the conduct is so unfair that reasonable directors would not have thought it fair, then relief will be granted.[18] The section is aimed at 'commercial unfairness' which must be judged in the context of the particular relationship which is in issue.[19]

76 Daniel alleges that if he is entitled to be registered as a member of Witches then it and/or Maurizio and Rosaria have acted in a manner that is oppressive and unfair to him by refusing to register him as a member and excluding him from the premises of Witches from 19 September 2012. He alleges that he is entitled to orders under s 233 of the Corporations Act 'for shareholder oppression in relation to Witches.' Again, the pleading is poorly drafted. Daniel did not seek specific performance of the agreement that he would be a 50 per cent owner of the business (other than reference to this in his closing submissions). Had he done so, it is most unlikely that the Court would make such an order given the animosity between the brothers and that damages would be an adequate remedy. In this regard, I do not accept Daniel's contention that damages would not be an adequate remedy. He submitted that this was so because property in issue (that is, the shares in Witches) is not 'readily available'[20] and is 'limited'[21] in nature. Secondly, he submitted that an order for specific performance was appropriate because the value of the company was in dispute. However, as can be seen from what I have said above, the fact that it is difficult to value the company with precision does not mean that the Court would not undertake that task for the purpose of awarding damages.

77 The alternative claims to his breach of contract claim do not give a proper foundation for him to be registered as a shareholder.

78 In any event, had he been entitled to be registered as a shareholder and had the oppression claim been made out, Daniel did not seek the type of order that is commonly sought for the purchase of the oppressed party's interest in the company. Rather, he sought orders for the transfer or allotment of shares to him, 'regulation of the affairs of Witches' including the sale of the company. Formulated in that way, I would not make orders of those types. The business appears to be viable. It is clear that the dispute between the brothers is deep seated and that there is an irretrievable breakdown between them. It would not be appropriate to make orders that would see the brothers in business together again (even if, which I doubt, appropriately fashioned orders could be made to regulate the company's affairs), nor would it be appropriate to wind up the business, nor to order that it be sold. The business was operated by Maurizio before the fire and also since Daniel was excluded in November 2012.

79 Rather, the appropriate order would be for Maurizio to purchase Daniel's interest. In effect, the same amount would be payable as the amount that I have determined should be paid for his breach of contract claim. Whilst he sought the taking of an account 'in order to ascertain damages suffered by [him] under s 233,' I do not think that that is necessary given that it has been possible to assess his damages.

Are funds that Daniel took from Witches repayable as loans?

80 There are four amounts that Witches claims are repayable to it by Daniel. There is no dispute that Daniel received the funds. Daniel claims that they were paid to him as part of the 'cash-sharing agreement' between him and Maurizio. That is, that they agreed that they would split the cash from the business equally between them. The first amount paid to Daniel is a sum of $71,500 which he used as a deposit for the purchase of his home in Templestowe. The second is a sum of $10,000. The third is the sum of $26,600 used for the purchase of a jet ski. The last is a sum of $70,000 which Daniel took from Witches' bank account on the day that he was excluded from the theatre restaurant business. I will deal with each of these in turn.

The deposit for Daniel's house and the additional funds - $81,500

81 Daniel does not deny that he used the sum of $71,500 for a deposit on his house in Templestowe and that he received a further $10,000 that was sourced from Witches. The deposit moneys were paid from the company's bank account rather than being sourced from the cash takings of the business. When Mr Lucas asked about these withdrawals, he was told by Maurizio that they related to Daniel for various matters. Mr Lucas asked Maurizio if it was anticipated that the moneys would be repaid. He confirmed that it was. For this reason, Mr Lucas classified the amounts paid to Daniel as a loan. The company accounts for 2010 and 2011 record the amount of $81,500 as owing by Daniel and Danette. The 2012 and 2013 accounts record a higher amount as owing, but that takes into account the amount claimed in respect of the jet ski about which I will say more later.

82 Daniel recorded the $71,500 and $10,000 in the debt book to which I have referred above. These amounts are recorded under the heading 'Back to Witches - for house loan.' The debt book is the contemporaneous record of what was intended. Daniel endeavoured to explain the note by suggesting that although he had originally intended to repay the moneys to Witches and had recorded the advances in the debt book, Maurizio had told him that he did not need to do that and that he would take a similar amount from the company's funds. Maurizio denies this. Unlike other amounts, the deposit was paid from the company's account rather than from the company's cash takings and was advanced for that specific purpose. In those circumstances, it seems to me likely that the moneys were advanced as a loan. In addition, further down the page, is a notation '$10,450 Maurizio - Bank Account.' Daniel's evidence was that the note about the $10,450 was to record that that amount had been given to Maurizio as a loan. If that was a loan and recorded on the same page of the debt book, it seems improbable that the other amounts recorded as loans to Daniel were not repayable.

83 Witches purchased a jet ski for $26,600 on the basis that it would carry some advertising for the theatre restaurant and that the brothers would each use it from time to time. Maurizio and his family used the jet ski once on a family holiday. They did not like it and did not want to use it in future. Consequently it was decided that Daniel would purchase the jet ski from Witches. Although the jet ski was transferred into Daniel's name and later sold by him, he did not pay any money to Witches. Daniel claims to have paid half of the amount to his brother for what he considered was his share of the boat out of his share of the cash takings of the business. I accept Daniel's evidence about this.

84 Although the books of account for Witches include the $26,600 as part of the debt owing by Daniel and Danette, in my view, he ought only pay $13,300 so that the amount that he paid to his brother is taken into account.

Cash taken on exclusion from business - $70,000

85 On the day that Daniel was excluded from the Witches business by Maurizio, Daniel attended at the company's bank and withdrew the sum of $70,000. He did this because that was half the amount in the account and he believed that he was entitled to it. In his eyes, he was a half owner of the business. Even if Daniel was a shareholder in Witches (which I have determined he was not), there is no basis upon which he was entitled to withdraw the funds for his own benefit. He must repay that amount to Witches.

86 Maurizio breached the agreement with his brother that they would own the Witches in Britches theatre restaurant business equally. Daniel is entitled to damages of $500,000 together with interest on that amount since 19 November 2012.

87 The amount of $373,097.24 (being the balance of the sale proceeds from the sale of properties owned by Termine Developments Pty Ltd and MM & JD Termine Holdings Pty Ltd) should be released from trust to Witches. GST will need to be paid from that sum and only the balance of $288,551.61 may be retained by Witches. Orders will also be made for the balance of the debt owed by each of the property development companies to Witches together with interest at the statutory rate.

88 Daniel will be ordered to pay Witches the sum of $164,800 together with interest in respect of moneys advanced to him which have not been repaid.

89 I will ask the parties to bring in minutes of orders to reflect these reasons and I will hear from them as to costs.

TERMINE DEVELOPMENTS PTY LTD (ACN 150 422 754) & ORS

[1] [2008] VSCA 93; (2008) 20 VR 377.

[3] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041, 1043.

[5] This figure does not include amounts that Daniel disputes are owing to Witches.

[6] This figure does not include amounts that Daniel disputes are owing to Witches.

[7] Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68, 78 (Griffith CJ).

[8] Earnings before interest, taxation, depreciation and amortisation.

[9] Daniel relied upon the evidence of Mr Garry Oder of BGO Accounting & Business Solutions. Mr Oder provided two letters, the nub of which was to the effect that he had been provided with insufficient information to verify some aspects of financial information concerning Witches and that there seemed to be information that was missing and some discrepancies in some of the company's financial statements. He also gave oral evidence which did not take matters further. Mr Oder's evidence did not assist in determining issues as to value in the case, nor did it affect the evidence as to value in Mr Bow's report.

[10] Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64.

[11] Narni Pty Ltd v National Australia Bank Limited [2001] VSCA 31, [31]-[32].

[12] Longden v Kenalda Nominees Pty Ltd [2003] VSCA 128 [38] (Chernov JA).